Court File and Parties

CITATION: Tassone v. 407 ETR, 2019 ONSC 6999 COURT FILE NO.: CV-12-4868-00 DATE: 2019 12 04

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Luigi Tassone v. 407 ETR Concession Company Limited, Fluxgold Izsak Jaeger LLP and A. Izsak

BEFORE: LeMay J.

COUNSEL: A. Jarvis, counsel for Luigi Tassone A. Parley and J. Flood, Counsel for the Defendant, 407 ETR Concession Company Limited

ENDORSEMENT

[1] The Plaintiff, Mr. Tassone, brought an action against the 407 ETR Concession Company Limited (“407 ETR”) and against its outside lawyers, the firm of Fluxgold Izsak Jaeger LLP, and Mr. Robert Izsak. Although Mr. Izsak and his firm did not act for Mr. Tassone, he claimed that they breached a duty of care that they allegedly owed to him.

[2] The action between Mr. Tassone and the 407 ETR was resolved in 2013 by way of minutes of settlement. The action between Mr. Tassone and Mr. Izsak and his law firm was originally supposed to proceed before me in September of 2018. It was proceeding as a Simplified Rules trial.

[3] At the time of the scheduled trial, an issue came up because Mr. Tassone’s counsel had subpoenaed representatives from the 407 ETR’s legal department to provide testimony about the 407 ETR’s interaction with its counsel, Mr. Izsak. I made an oral mid-trial ruling striking those subpoenas and denying Mr. Tassone the right to call representatives from the 407 ETR to testify at the trial.

[4] Ultimately, the issues between Mr. Tassone and Mr. Izsak’s law firm resolved. I am not aware of the basis on which those issues resolved. However, the costs of the motion that 407 ETR was required to respond to were reserved until the end of the trial.

[5] Given that the trial has now ended, it is time to fix the costs for this motion.

Background

a) The Litigation and the Agreement Between the Parties

[6] There was a dispute between the 407 ETR and Mr. Tassone over some allegedly unpaid tolls. The 407 ETR commenced a small claims Court action in Court File No. SC-12-5010 to recover these amounts. Mr. Tassone brought his own action against the 407 ETR and Mr. Izsak in Court File No. CV-12-4868.

[7] Ultimately, the issues between the 407 ETR and Mr. Tassone were resolved with a full and final mutual release (‘the Release”) signed in late 2013. This release did not provide for the payment of any amounts to or from either party.

[8] The relevant provisions of the Release read as follows:

1. Tassone and 407 ETR hereby release, remise and forever discharge each other from all manner of actions, causes of action, suits, debts, dues, accounts, bonds, complaints, claims and demands for damages, monies, losses, indemnity, costs, interest in loss, or injuries howsoever arising which hereto may have been or may hereafter be sustained as a consequence of the claims raised or which could have been raised in the Ontario Small Claims Court action, Court File No. SC-12-00005010-0000, and in Ontario Superior Court of Justice Court File No. CV-12-4868-00 (collectively, the “Claims Released”) by Tassone and 407 ETR against each other.
2. It is expressly understood and agreed that this full and final Release is intended to cover and does cover not only all known losses and damages but any future losses and damages not now known or anticipated but which may later develop or be discovered, including all the effects and consequences thereof.
3. In the event that either Tassone or 407 ETR should make hereafter any claim or demand, or commence or threaten to commence any action of proceeding, or many any claim against the other arising out of or in any way connected to the Claims Released, this document may be raised as an estoppel and complete bar to any such claim, demand, action, or proceeding.

b) The Subsequent Motion

[9] As I noted above, this matter was to come to trial before me in September of 2018. Shortly before the trial, Mr. Tassone’s counsel advised the 407 ETR that he was seeking to have several employees from the 407 ETR’s legal department summonsed as witnesses.

[10] The basis for the summonses was twofold. First, Mr. Tassone took the position that the 407 ETR had relevant information about whether there had been a breach of the duty of care that was allegedly owed by Mr. Izsak and his law firm to Mr. Tassone.

[11] Second, Mr. Tassone argued that any claim of privilege was defeated because of illegal conduct. The illegal conduct that was alleged was that Mr. Izsak’s law firm had made a suggestion that part of a settlement should be the dismissal of a law society complaint that had been made against Mr. Izsak’s firm. Mr. Tassone argued that this “illegal conduct” had been permitted by 407 ETR as the client and resulted in the solicitor-client privilege being waived.

[12] Prior to the motion, counsel for the 407 ETR attempted to narrow the issues by identifying one person from the legal department who had carriage of the matter and who could testify. Counsel for Mr. Tassone required that all three of the subpoenaed witnesses be prepared to testify on a half hours’ notice at the outset of the trial.

[13] In addition, the materials on the motion confirm that a law society complaint was made against one of the lawyers in the 407 ETR’s legal department.

[14] As a result, on the first day of trial counsel for the 407 ETR attended and we discussed the issues to be resolved. In essence, the 407 ETR sought to have the subpoenas quashed. Mr. Tassone opposed the 407 ETR’s position.

[15] I provided counsel for both the 407 ETR and Mr. Tassone with the opportunity to make oral submissions immediately or to argue the matter on a motion record. Mr. Tassone’s counsel elected to argue the matter on a motion record.

[16] The trial was postponed, and the motion was heard two days later, and argued on a full record. At the conclusion of argument, I provided oral reasons quashing the subpoenas on the basis that the evidence sought from the witnesses at 407 ETR was both irrelevant and privileged. I viewed the position of Mr. Tassone on the motion as being devoid of merit.

The Positions of the Parties

[17] 407 ETR takes the position that it should be entitled to substantial indemnity costs in the amount of $26,501.33 inclusive of HST and disbursements. In the alternative, 407 ETR takes the position that it should be entitled to partial indemnity costs in the sum of $16,840.62, again inclusive of HST and disbursements.

[18] 407 ETR advances this position on the following grounds:

a) The successful party usually recovers costs and there is no reason to depart from that rule in this case. b) Mr. Tassone’s conduct unnecessarily lengthened the proceeding, and the steps taken by Mr. Tassone’s counsel were improper, vexatious and unnecessary. c) The allegations made by Mr. Tassone against the 407 ETR and its legal department went to the root of their honesty and were unsubstantiated. As a result, substantial indemnity costs are justified.

[19] Mr. Tassone argues, on the other hand, that the passages of the agreement between the parties that I have set out above preclude any claim of costs from being made at all by 407 ETR. In essence, Mr. Tassone’s argument is that he and the 407 ETR signed mutual releases that released them from all manner of actions and other proceedings that were or could have been raised in the two actions, and that this release included any future losses that were not known or anticipated.

[20] In the alternative, Mr. Tassone argues that the costs incurred by the 407 ETR are excessive and not within the reasonable expectation of the parties. In that regard, Mr. Tassone points to his own bill of costs, amounting to approximately $5000.00, inclusive of disbursements and HST, as demonstrating what the quantum of reasonable costs would be in this case. Finally, Mr. Tassone opposes the 407 ETR’s position on substantial indemnity costs.

The Issues

[21] The issues that arise on this motion are as follows:

a) Does the release bar the 407 ETR’s claims for costs for this motion? b) If not, are the costs claimed by the 407 ETR reasonable? c) If the 407 ETR is entitled to costs, what scale should costs be awarded on?

[22] I will deal with each issue in turn.

Issue #1 - Is the Release a Bar to the Costs claim?

[23] No.

[24] There are four separate reasons why I conclude that the Release is not a bar to the costs claim. Each of those reasons is, on its own, sufficient to support my conclusion. I will address each issue in turn.

[25] First, the language in the release relates to the “claims raised” in the action “by Tassone and the 407 ETR against each other”. The language specifically references (and is limited to) the claims that each party was bringing against each other. Given that the action against the 407 ETR had settled in 2013, it is clear that the subpoenas were issued in order for Mr. Tassone to pursue his claims against Mr. Izsak and his law firm. Therefore, the subpoenas relate to a different action - the action against Mr. Izsak and his law firm. As a result, the release is insufficiently broad to cover the costs relating to the subpoena motion.

[26] Second, a subpoena is not a “claim” against the subpoenaed party. It is a demand to compel a witness to testify at trial. If the subpoenas were a “claim” against the 407 ETR, then the release itself would have precluded Mr. Tassone from issuing the subpoenas in the first place.

[27] Third, the subpoenas went beyond the 407 ETR and encompassed relief from individual members of the 407 ETR’s legal team. I understand that they were summonsed as representatives of 407 ETR. However, these individuals had separate interests in the outcome of the motion. Most importantly, as will be discussed below, issues about their conduct had been raised that engaged their personal reputations and gave them a separate right to be represented. As a result, the Release does not apply to the subject of the motion because it goes beyond the 407 ETR.

[28] Finally, I am of the view that the interpretation of the agreement advanced by Mr. Tassone is not in the interests of justice. If I accepted the interpretation advanced by Mr. Tassone, he could have brought motion after motion against the 407 ETR relating to his claims against Mr. Izsak and his law firm without cost consequences. In my view, such a significant change to the Court’s usual rules of costs would require specific language that was not present in this case.

[29] On this point, I also note that the Court should have regard to the reasonable expectations of the parties when interpreting agreements such as these. Absent explicit language, costs incurred by the 407 ETR five years after the release was settled in relation to Mr. Tassone’s action against Mr. Izsak and his law firm cannot be viewed as being part of the items that the parties intended to cover with the Releases.

[30] For the foregoing reasons, I conclude that the Releases do not preclude the 407 ETR from claiming costs in this case.

Issue #2 - Are the Costs Claimed by the 407 ETR Reasonable?

[31] In my view, the costs claimed by the 407 ETR are reasonable. I reach that conclusion for five reasons.

[32] First, I am not prepared to put any reliance on the bill of costs submitted by Mr. Tassone’s counsel as an indicator of what the reasonable expectations of the parties were. There are four problems with relying on this bill of costs, as follows:

a) Mr. Tassone’s counsel was in the middle of preparing for a trial on the very issues raised by the motion. As a result, he would have been far more familiar with the issues. In addition, there was bound to be overlap between the trial preparation and the preparation for this motion. b) Mr. Tassone’s counsel did not make any claim for costs associated with either appearance at the motion. His bill of costs for his own work is limited to the time to “prepare motion record and amend factum.” Mr. Tassone’s counsel may have claimed the attendance at the motion as part of his trial costs, but I have no bill of costs for the trial preparation. However, I do know that Mr. Tassone’s counsel was present on both days. Counsel for the 407 ETR, on the other hand, was attending on both days to deal exclusively with the subpoena issue. As a result, all of the time he spent on both days is related to this motion and only this motion. c) Mr. Tassone’s counsel does not make any claim for either the preparation of the costs submissions or the appearance on this motion. These submissions were moderately complex. As a result of this omission, Mr. Tassone’s bill of costs is again understated. d) Mr. Tassone’s counsel did not make any claim for the correspondence that took place before the motion was served. This again reduces Mr. Tassone’s costs below what they would otherwise have been.

[33] This final point brings me to the second reason why I am of the view that the costs incurred by the 407 ETR are reasonable costs. In his materials, Mr. Tassone’s counsel submits that the amount of time spent by 407 ETR’s counsel on correspondence prior to bringing the motion was an “astonishing” 7.3 hours. I have re-reviewed the correspondence in the motion record. In my view, the amount of time spent by 407 ETR’s counsel on this correspondence was entirely reasonable.

[34] I reach that conclusion for the following reasons:

a) Counsel would have had to take time to familiarize himself with the matter and obtain instructions on how to proceed. This is time that Mr. Tassone’s counsel would not have had to spend, as he was already preparing for trial. b) There were more than one conversation between counsel over the matters. These conversations would have taken time. c) There were a number of letters and e-mails exchanged between counsel over this issue. Each of them would have taken time to consider and draft. d) One of the issues raised in Mr. Jarvis’s August 30th, 2018 letter to Mr. Parley was a claim that there were inconsistencies between the Affidavits of Documents of Mr. Izsak and his law firm on the one hand and the Affidavit originally filed by 407 ETR on the other hand. Mr. Jarvis does not identify these inconsistencies. As a result, Mr. Parley or one of his staff would likely have had to consider the entire set of Affidavits of Documents to be able to respond to this question. e) Counsel for Mr. Tassone originally insisted on subpoenaing the General Counsel of 407 ETR even though there was no evidence that this individual had any knowledge of Mr. Tassone’s case. This is an issue that would have required close consideration on the part of counsel for the 407 ETR.

[35] Third, I view the costs incurred as reasonable because the questions of solicitor-client privilege that were raised by this motion were complex, and would have required a detailed understanding of the file before counsel for the 407 ETR was able to respond to the motion. Given the timing of when this motion arose, counsel for the 407 ETR had to gain an understanding of the motion and prepare his motion materials in a very short period of time.

[36] Fourth, I am of the view that counsel for Mr. Tassone unnecessarily increased the time spent on this file both by the positions that were taken in the correspondence (the inconsistencies in the Affidavits for example) and by his insistence on arguing the motion based on a full record rather than simply making submissions at the opening of trial. In terms of his insistence on arguing the motion on a full record, it clearly increased the expenditure of time and money in a substantial way and I am not persuaded that it was a necessary use of Court time.

[37] Finally, the issues were of critical importance to the 407 ETR and to the three witnesses that had been summonsed. Mr. Tassone was seeking to breach 407 ETR’s privilege and was seeking to do so based on claims of unlawful conduct against 407 ETR, Mr. Izsak’s law firm and against the three witnesses that were summonsed. As a result, it is neither unexpected nor unreasonable for the 407 ETR to have vigorously pursued the issues in this motion.

[38] I should also note that I have reviewed the bill of costs as well as the detailed list of disbursements. I do not see any significant duplication in the time spent by Mr. Parley and Ms. Flood, with one exception.

[39] There is a charge for both Mr. Parley and Ms. Flood to attend at the trial and to prepare witnesses. While Ms. Flood’s presence at trial (and in the interview process) is an important part of her education as a young lawyer, and to be encouraged, Mr. Tassone should not pay for this time. This results in a deduction from the costs sought of $855.00 plus HST on a partial indemnity basis and $1,282.50 plus HST on a substantial indemnity basis.

Issue #3 - What Scale of Costs Should be Used?

[40] The final issue is what scale the costs should be awarded on. In the absence of an offer to settle, substantial indemnity costs are very much the exception rather than the rule. Outside of an offer to settle, substantial indemnity costs are only awarded where there is reprehensible conduct on the part of a party that deserves chastisement from the Court (see Davies v. Clarington (Municipality) 2009 ONCA 722 at paras 28 and following).

[41] There are two parts of the conduct of Mr. Tassone that could arguably be viewed as reprehensible, and therefore attract chastisement:

a) The allegations made by Mr. Tassone that 407 ETR engaged in unlawful conduct. b) The efforts made by Mr. Tassone to breach 407 ETR’s solicitor-client privilege.

[42] Counsel for the 407 ETR argues that the allegations of unlawful conduct were serious and unfounded allegations that should attract substantial indemnity costs. Counsel argues that, at root, the allegations that were made against 407 ETR and the three potential witnesses were rooted in claims of dishonesty and deceit and went to the heart of their integrity. In support of that position, counsel for the 407 ETR directs my attention to Industrial Alliance Securities Inc v. Kunicyn (2019 ONSC 3331).

[43] The allegation of unlawful conduct arose because of an e-mail sent by Mr. Philip Polster (one of Mr. Izsak’s partners) on Monday, July 9th, 2012 at approximately 10:00 am. In that e-mail, Mr. Polster lists one of the terms of the 407 ETR’s offer as a requirement that a Law Society complaint be withdrawn against Mr. Izsak.

[44] In response to this e-mail, Mr. Tassone’s then counsel (Ethan Rogers) raises questions about whether this request was ethical. Mr. Polster withdrew the request approximately three hours after receiving Mr. Rogers’ email without the need for any further correspondence between the parties.

[45] At the hearing of the motion, counsel for Mr. Tassone argued that the request to abandon the Law Society complaint was made “multiple times in ‘clear and definite terms’ blatantly, in breach of their professional obligations.” The “their” in this passage from counsel’s factum means Mr. Polster and Mr. Izsak.

[46] In addition, counsel for Mr. Tassone argued that Mr. Polster and Mr. Izsak were being instructed by their clients in the 407 ETR’s legal department. On the basis of this “illegality”, counsel for Mr. Tassone took the position that all of the instructions provided by 407 ETR to Mr. Izsak’s firm needed to be disclosed.

[47] In support of his position, counsel pointed to a series of earlier e-mails. I have re-reviewed those e-mails in preparing this endorsement. None of them contain any specific reference to a Law Society complaint. There is one mention of a dismissal of “claims, complaints or actions” on April 5th, 2012. The meaning of complaints is not specified, and there is no reason based on the context of the correspondence to conclude that complaints relates to a law society complaint. Instead, complaints could relate to a Human Rights complaint, a Better Business Bureau complaint, or any one of a number of other adjudicative bodies that accept complaints from citizens.

[48] I also note that the e-mail of July 9th, 2012, even if it was established that the 407 ETR provided these instructions, was not necessarily “unlawful”. It might have been contrary to the Law Society’s Rules, and it might also have been a term that the Courts have prohibited in settlements. However, Mr. Sheldon Lazarus, the person who was likeliest to have provided the instructions was not even a member of the Law Society at the relevant time.

[49] In short, there was no more than one breach of the Law Society’s Rules, and the subpoenas should not have been pursued by Mr. Tassone as a way of obtaining otherwise privileged information. I also note that, in any event, this information was irrelevant.

[50] The second issue, Mr. Tassone’s efforts to breach 407 ETR’s privilege, is related to the first issue. The only way that Mr. Tassone could force representatives of 407 ETR’s legal department to testify was by persuading the Court to permit a breach of solicitor-client privilege. Mr. Tassone alleged that 407 ETR had engaged in unlawful conduct and substantially expanded the scope of these allegations without any reasonable basis for inferring that the request for the Law Society complaint to be abandoned had been made more than once.

[51] As I have noted, the e-mail from Mr. Polster on July 9th, 2012 might very well have been a breach of the Rules of Professional Conduct. However, when the issue was raised with him by Mr. Tassone’s then counsel, the breach was immediately remedied by Mr. Polster. The matter should have ended then, at least as far as the Courts and privilege are concerned. Mr. Tassone was, of course, free to pursue a Law Society complaint over this issue.

[52] In my view, substantial indemnity costs are appropriate in this case. Mr. Tassone’s allegations of and egregious, blatant and ongoing course of unlawful conduct were not supported on the facts. As I noted in my decision on the motion itself, there were only five hours in which the request to have a law society complaint abandoned was outstanding from Mr. Izsak’s law firm. The efforts by Mr. Tassone and his counsel to claim that this offer was outstanding for a much longer period of time had no basis in fact and was an unjustified attempt to obtain the 407 ETR’s legally privileged communications. It also resulted in significant allegations being made against members of the 407 ETR’s legal department that touched on their honesty and integrity.

[53] In addition, the information sought was (as I ruled in my oral reasons) irrelevant to the issues in the action. Both Mr. Tassone’s insistence on pursuing these issues to a motion and the aggressive manner in which an ongoing and blatant breach of the Rules of Professional conduct was alleged as against the 407 ETR should result in chastisement by the Court. The way for the Court to provide that chastisement is to order substantial indemnity costs.

[54] As a result, I am of the view that Mr. Tassone should be required to pay the substantial indemnity costs, less only the amount set out in paragraph 39, above.

Conclusion

[55] I have concluded that substantial indemnity costs are appropriate in this case. As a result, the amount sought is $26,501.33. From that amount the sum of $1,449.23 should be deducted on account of the duplicate student time in interviews and at Court.

[56] Therefore, I order that Mr. Tassone is to pay costs to the 407 ETR in the sum of $25,052.10 inclusive of HST and disbursements. Those costs are to be paid within thirty (30) calendar days of the release of these reasons.

LeMay J. DATE: December 4, 2019