Court File and Parties

COURT FILE NO.: CV-18-603242 DATE: 2020 01 08

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: 8657181 CANADA INC., Plaintiff - and - MEDHI AU LLP, CHUN YU AU also known as SCOTT AU, ANTHONY D’AMICO carrying on business as FLETT BECCARIO, CLARK PEDDLE and CARLO GUALTIERI, Defendants

BEFORE: Master Todd Robinson

COUNSEL: M. Kestenberg / K. Schoenfeldt, for the moving defendants, Medhi Au LLP and Chun Yu Au also known as Scott Au P. Starkman, for the plaintiff, 8657181 Canada Inc. G. Tighe, for the defendants, Anthony D’Amico carrying on business as Flett Beccario, Clark Peddle and Carlo Gualtieri

HEARD: In writing

COSTS ENDORSEMENT

[1] On August 2, 2019, I heard the motion of the defendants, Medhi Au LLP and Chun Yu Au (the “Au Defendants”), for an order removing the plaintiff’s lawyers, Paul Starkman and Starkman Barristers LLP, from the record and for production of certain portions of Mr. Starkman’s litigation files. For reasons released November 1, 2019, I granted the Au Defendants’ motion, in part, ordering removal of Paul Starkman and Starkman Barristers LLP from the record as lawyers for the plaintiff, 8657181 Canada Inc. (“865 Canada”), but dismissing the motion for production of Mr. Starkman’s litigation files without prejudice to moving again following completion of at least documentary discovery. I invited the parties to make written submissions as to costs if they could not reach agreement.

[2] I have received and considered each party’s costs submissions. The Au Defendants seek their costs of the motion and their costs submissions on a substantial indemnity basis in the amount of $35,730.53 or, in the alternative, on a partial indemnity basis in the amount of $27,046.82. The non-moving defendants, Anthony D’Amico carrying on business as Flett Beccario, Clark Peddle and Carlo Gualtieri (the “Flett Beccario Defendants”), seek costs of $1,000 on a partial indemnity basis in respect of the examination by 865 Canada of Clark Peddle pursuant to Rule 39.03 of the Rules of Civil Procedure, RRO 1990, Reg 194 (the “Rules”).

[3] I deal first with the costs sought by the Au Defendants. The Au Defendants submit that substantial indemnity costs are warranted since the motion was “entirely avoidable”. They argue that reasons given by Mr. Kestenberg in letters sent to Mr. Starkman seeking his voluntary withdrawal are the same reasons relied upon by the court in ordering removal of Mr. Starkman and Starkman Barristers LLP, and that Mr. Starkman’s reasons for refusing voluntary withdrawal in correspondence were all arguments rejected by the court. The Au Defendants submit that Mr. Kestenberg’s letters should be considered in a similar fashion to Rule 49 offers to settle. They further argue that success was not divided, since the dismissal of the portion of the motion dealing with production of Mr. Starkman’s litigation file was without prejudice to moving again. That relief also represented only a small portion of the materials filed and was the subject of limited written and oral submissions. Finally, the Au Defendants argue that the costs claimed by the Au Defendants are within the reasonable expectations of 865 Canada, since its own costs outline indicates higher costs of $27,909.68 on a partial indemnity basis and $35,269.37 on a substantial indemnity basis would have been sought.

[4] In response, 865 Canada submits that there is no conduct warranting substantial indemnity costs, and that the partial indemnity costs claimed by the Au Defendants should be reduced to account for several factors, including untenable arguments advanced by the Au Defendants regarding Mr. Starkman’s involvement in steps relevant to the underlying litigation, divided success given dismissal of the Au Defendant’s relief for production of Mr. Starkman’s litigation files, costs claimed by the Au Defendants being excessive and duplicative, and excessive process server and photocopying disbursements. 865 Canada further argues that the similar dollar amounts in the costs outlines of 865 Canada and the Au Defendants is explained by different hourly rates of lawyers, and that time claimed by the Au Defendants should be reduced by half to account for the duplicate time and lawyers performing clerk work. 865 Canada submits that a recalculation of partial indemnity costs in the amount of $13,188.08 is appropriate.

[5] In determining costs, Section 131 of the Courts of Justice Act, RSO 1990, c. C.43 and Rule 57.01 of the Rules afford broad discretion to fashion a costs award that the court deems fit and just in the circumstances. The general principles applicable when determining costs are well settled. Costs are discretionary. Rule 57.01 sets out factors to be considered by the court in exercising that discretion, which are in addition to considering the result of the proceeding and any written offers to settle. The court must also consider the overall objective of fixing an amount that is fair and reasonable in the particular proceeding, having regard to the expectations of the parties concerning the quantum of costs: Boucher v. Public Accountants Council for the Province of Ontario (2004), 71 OR (3d) 291 (CA) at paras. 26 and 38.

[6] I have considered all relevant factors in exercising of my discretion regarding costs. Without going through every factor in detail, I note the following:

(a) I find no basis to award substantial indemnity costs in favour of the Au Defendants. The Supreme Court of Canada has held that substantial indemnity costs are not to be awarded unless special grounds exist to justify a departure from the usual partial indemnity scale, and are generally only warranted were there has been reprehensible, scandalous or outrageous conduct on the part of a party: Young v. Young, [1993] 4 SCR 3 at p. 134. I do not agree that either Mr. Starkman declining to voluntarily withdraw or 865 Canada opposing the Au Defendants’ motion to remove its lawyers from the record was unreasonable in all the circumstances, or that those positions constitute reprehensible, scandalous or outrageous conduct. In my view, Mr. Kestenberg’s letters requesting Mr. Starkman’s voluntary withdrawal are not akin to Rule 49 offers to settle this motion, as submitted by the Au Defendants.

(b) I agree with 865 Canada that there is some divided success with the dismissal of the Au Defendants’ production motion, but also agree with the Au Defendants that the production relief represents a much smaller portion of the overall motion materials and legal submissions than the removal relief.

(c) The Au Defendants were completely successful in their primary relief, which was the focal point of the majority of motion materials and legal submissions. I see little merit in engaging in the exercise proposed by 865 Canada of qualifying the extent of that success by assessing which arguments were successful or unsuccessful, which positions were tenable or untenable, and what positions were ultimately pursued or withdrawn.

(d) I have found the conduct of 865 Canada’s counsel during cross-examinations to be a relevant consideration. For example, responsibility for strategic decisions on the appeal previously argued by Mr. Starkman for 865 Canada was squarely at issue on this motion. However, as I found at paragraph 26 of my reasons for decision, cross-examination of Ms. Pearce on that matter was stonewalled.

(e) Given the costs outline of 865 Canada, I agree that the costs claimed by the Au Defendants are within the reasonable expectations of 865 Canada. Had 865 Canada been successful, its own costs outline indicates that it would have sought higher costs from the Au Defendants than they are seeking.

(f) 865 Canada notes that the Au Defendants claim an aggregate of 121.7 hours for two lawyers as compared to 865 Canada’s claim for an aggregate of 81.5 hours for one lawyer and a clerk. However, I do not find the time spent or the rates claimed for the Au Defendants’ lawyers to be unreasonable when compared to the time spent and rates claimed by the lawyer and clerk for 865 Canada, particularly when considering the experience of the parties’ lawyers. Notably, the partial indemnity rate claimed for 865 Canada’s more senior lawyer, Mr. Starkman, is $135 per hour higher than the rate claimed for Mr. Kestenberg, and the rate claimed for Mr. Starkman’s clerk is only $38 per hour lower than the rate claimed for Mr. Kestenberg’s associate lawyer, who is a 2016 year of call. I find no reasonable basis to support 865 Canada’s position that it is a fair conclusion that, since no clerk time is claimed, the Au Defendants’ lawyers were performing clerk work within the hours claimed. There is nothing in the description of claimed work clearly indicating work that ought reasonably to have been performed by a clerk.

(g) I agree that disbursements claimed by the Au Defendants for photocopying and process servers appear high. Absent particularization or supporting documents, which are not included in the costs outline, I accept that these disbursements should be discounted.

[7] Having weighed the factors in Rule 57.01 and the principles in Boucher, I find that the fair and reasonable amount of partial indemnity costs payable by 865 Canada to the Au Defendants in respect of this motion is $22,000, inclusive of HST and disbursements.

[8] I deal next with costs sought by the Flett Beccario Defendants. In my reasons for decision, at paragraph 51, I directed that 865 Canada’s responding costs submissions should address the submissions of both the Au Defendants and the Flett Beccario Defendants. 865 Canada’s responding submissions do not respond to the submissions of the Flett Beccario Defendants. I have accordingly considered their submissions on an unopposed basis.

[9] In my view, Mr. Peddle is entitled to costs of his Rule 39.03 examination. The Flett Beccario Defendants took no position on the motion and, in my view, it would be inequitable to hold that a party who has taken no position on a motion may be forced to participate in that motion by another party’s decision to examine without compensation for litigation costs incurred as a direct result. I also accept the submission of the Flett Beccario Defendants that many questions put to Mr. Peddle were beyond the scope of the motion and are properly discovery questions and, further, that Mr. Peddle’s evidence ultimately had little relevance to arguments made or disposition of the motion. Only $1,000 is sought, which I accept is a fair and reasonable partial indemnity amount for preparation and attendance at the examination. However, although the Flett Beccario Defendants are commonly represented, a costs award is properly in favour of only Clark Peddle as the party examined.

[10] I accordingly order as follows:

(a) 865 Canada shall pay to the Au Defendants costs in the amount of $22,000, inclusive of HST and disbursements, within thirty (30) days; and

(b) 865 Canada shall pay to Clark Peddle costs in the amount of $1,000, inclusive of HST and disbursements, within thirty (30) days.

(c) This order is effective without further formality.

MASTER TODD ROBINSON DATE: January 8, 2020