Court File and Parties
COURT FILE NO.: 95/19 and 117/19 DATE: 2020/03/31 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: LOIS STRUTHMANN and TANSY SEREDIAK, Applicants AND: ALOYSIUS (AL) STRUTHMANN, Respondent
AND RE: ALOYSIUS (AL) STRUTHMANN, Applicant AND: LOIS STRUTHMANN and TANSY SEREDIAK, Respondents
BEFORE: Justice I.F. Leach
COUNSEL: Benjamin G. Blay, for the Applicants and Respondents to Counter-application Richard Macklin, for the Respondent and Applicant in Counter-application
HEARD: In writing
Endorsement
Costs of application and counter-application
Introduction
[1] On February 4, 2020, I released my decision concerning an application brought by Mrs Struthmann and Ms Serediak, and a counter-application brought by Mr Struthmann, seeking relief in relation to various related Ontario corporations informally referred to as “the Tetra group”, which collectively participates in a successful business operation that produces, mixes, sells and distributes chemicals.
[2] The nature and background of the litigation, including the precise relief being sought, and the evidence and reasons offered in support of the parties’ competing positions, (including allegations of oppressive, unfair and inappropriate conduct by each side, and an irreparable breakdown in the relationship of the parties rendering their continued mutual operation of the Tetra group impossible), were outlined at length in my earlier endorsement, since reported as Struthmann v. Struthmann, 2020 ONSC 759.
[3] In their application, Mrs Struthmann and Ms Serediak sought relief capable of being summarized broadly as follows:
a. they asked that Mr Struthmann be stripped immediately of any and all rights he had as a shareholder, director, officer and/or employee of the Tetra group, and ordered to sell his shares therein to Mrs Struthmann and Ms Serediak for fair market value; and
b. they asked for various forms of ancillary relief, in the form of additional orders permitting Mrs Struthmann and Ms Serediak to run the Tetra group while Mr Struthmann was restrained from contacting them, (except through counsel), attending within a certain distance of any place where they lived or worked, (thereby including the offices and facilities of the Tetra group), or retaining any corporate credit or bank access cards.
[4] In his counter-application, Mr Struthmann sought relief capable of being summarized broadly as follows:
a. an order compelling Mrs Struthmann and Ms Serediak to sell their shares in the Tetra group to Mr Struthmann, along with any corollary relief necessary to effect the share transaction and transfer control of the companies, including Mrs Struthmann and Ms Serediak being removed from their positions as directors, officers and/or employees of the corporations; and
b. an order requiring Mrs Struthmann and Ms Serediak to produce business, accounting and bank records to Mr Struthmann.
[5] For reasons set out in my earlier endorsement, I dismissed the application brought by Mrs Struthmann and Ms Serediak, and generally granted the relief requested by Mr Struthmann in his application.
[6] Because my decision was reserved, the parties had no opportunity to address costs when the application and counter-application were argued on January 31, 2020, and my reasons therefore invited written cost submissions pursuant to an indicated timetable, if the parties were unable to reach an agreement on entitlement and/or quantum in that regard.
[7] The parties apparently were not able to settle the costs of the applications, and written costs submissions were tendered accordingly. In particular, while the trial co-ordinator initially postponed the forwarding of further cost-related material to me until the timetable had completely run its course, (and arrangements for supplying that material to me were the subject of a further delay attributable to extraordinary circumstances associated with the coronavirus and COVID-19 pandemic), I now have received the following:
a. initial cost submissions tendered on behalf of Mr Struthmann, filed with the court on or about February 13, 2020;
b. responding cost submissions tendered on behalf of Mrs Struthmann and Ms Serediak, filed with the court on or about February 28, 2020; and
c. reply cost submissions tendered on behalf of Mr Struthmann, filed with the court on or about March 5, 2020.
Party Positions
[8] I have reviewed and considered the above cost submissions in detail and at length, and the following overview should not suggest otherwise. In broad terms, however, the parties’ respective positions may be summarized as follows:
a. Mr Struthmann seeks an all-inclusive amount of $44,491.98 in costs from Mrs Struthmann and Ms Serediak, jointly and severally, on a partial indemnity basis. In particular, as indicated in the submissions tendered on his behalf, (including a costs outline and appended list of disbursements), Mr Struthmann seeks $36,132.00 in fees and $3,267.78 in disbursements, together with applicable HST. In doing so, Mr Struthmann relies upon various considerations, including:
i. his success in having the application of Mrs Struthmann and Ms Serediak dismissed, and securing the relief sought in his counter-application;
ii. various aspects of the applications indicating importance of the matter to both parties, a degree of complexity inherent in the proceedings, and what is said to have been the reasonable expectations of the parties in relation to costs; and
iii. a settlement offer conveyed on October 4, 2019, whereby Mr Struthmann is said to have proposed an agreed resolution of the matter similar to the relief eventually ordered by the court; i.e., an outcome whereby the parties would agree to Mr Struthmann buying out the corporate interests of Mrs Struthmann and Ms Serediak, at a price to be determined by a valuation to be negotiated and agreed or litigated if necessary.
b. In response, Mrs Struthmann and Ms Serediak took the position that there should be no costs awarded in relation to the two applications, that the costs sought by Mr Struthmann in that regard were excessive in any event, and that the court should award Mr Struthmann no more than $10,000.00 in costs if costs were payable at all. Submissions tendered in support of those alternative positions relied on suggested considerations that included the following:
i. It was emphasized that Mrs Struthmann and Ms Serediak advanced their position in good faith, (e.g., in an effort to protect employees of the family corporations and the corporations themselves, and address the corporate deadlock), and “should not be punished” by an award of costs for having done so.
ii. On a related note, it was emphasized that the matter was argued in a “conciliatory” manner, (e.g., insofar as all concerned agreed that more specific orders concerning transitional arrangements were not required given the ongoing involvement of the court-appointed monitor), and that I made “no finding of unreasonable conduct” in that regard. In the circumstances, it was submitted that no cost award was required to discourage unreasonable conduct.
iii. It was said that the application brought by Mrs Struthmann and Ms Serediak was “necessary” in the circumstances, insofar as they “were left with no practical choice other than to proceed” with the application.
iv. Because the court was able to solve the parties’ dispute without ruling on the merits of either side’s allegations of oppressive and unfair conduct, it was said that there accordingly was no finding of “liability”, in turn creating “exceptional circumstances” warranting a “no costs” disposition. In particular, it was suggested that, without such a liability determination, there could be no reasonable expectation of cost indemnification.
v. It was submitted that the costs claimed by Mr Struthmann were excessive in any event, for a number of reasons. In particular, it was said:
that Mr Struthmann was seeking reimbursement of approximately 66 percent of his actual legal fees incurred, which exceeded the maximum partial indemnity rate of 60 percent normally applied in other decisions of this court;
that Mr Struthmann should not be awarded costs in relation to preparation, material and argument relating to the allegations of oppressive conduct advanced by each side, as the court found it unnecessary to determine the merit of such allegations in resolving the parties’ dispute;
that the court should not award costs corresponding to time Mr Struthmann’s counsel and an articling student spent travelling back and forth between Toronto and Woodstock, when competent local counsel could have been retained to deal with the matter;
that it was unreasonable, in any event, to expect Mrs Struthmann and Ms Serediak to pay for the travel time and attendance of the articling student who accompanied Mr Struthmann’s counsel; and
that the time devoted to preparation of Mr Struthmann’s cost submissions was excessive.
General Principles
[9] Before further consideration and assessment of the cost positions outlined above, I pause to reiterate a number of general principles applicable to such cost determinations.
[10] Pursuant to section 131 of the Courts of Justice Act, R.S.O. 1990, c.C.43, as amended, and subject to the provisions of an Act or rules of court, “the costs of and incidental to a proceeding or a step in a proceeding are in the discretion of the court, and the court may determine by whom and to what extent the costs shall be paid”.
[11] This is supplemented by the provisions of Rule 57.01 of the Rules of Civil Procedure, subsection (1) of which lists a broad range of factors the court may consider when exercising its discretion to award costs pursuant to section 131.
[12] Our courts repeatedly have emphasized that cost awards must not be a simple mechanical or mathematical calculation; e.g., focused merely on details of time spent multiplied by hourly rates, or a tabulation of disbursements actually incurred.
[13] Rather, all cost claims are subject to the “overriding principle of reasonableness”, as applied to the factual matrix of the case, pursuant to a required ultimate “cross check” in that regard. [1]
[14] The overall goal is to award costs in an amount that is “fair and reasonable for the unsuccessful party to pay in a particular proceeding”, rather than a sum tailored to an exact measure of the actual costs of a successful litigant. [2]
Entitlement
[15] In my view, Mr Struthmann clearly was the successful party, as far as the two applications were concerned.
[16] Without limiting the generality of the foregoing, I do not think it can be said that success was divided in this case, having regard to the outcome of the two applications. The relief sought by Mrs Struthmann and Ms Serediak was denied in its entirety, and the relief sought by Mr Struthmann generally was granted.
[17] In the circumstances, costs accordingly should follow the event.
[18] In that regard, I am not persuaded that there are any relevant circumstances or considerations in this case that would justify denying Mr Struthmann an award of costs payable by Mrs Struthmann and Ms Serediak.
[19] My reasons in that regard are multi-faceted, but include the following:
a. First, the suggestion that an award of costs in Mr Struthmann’s favour would “punish” Mrs Struthmann and Ms Serediak for bringing their application, or resisting Mr Struthmann’s counter-application, is based on a faulty premise. In that regard:
i. As noted by Justice Nordheimer (as he then was) in Lawyers Professional Indemnity Co. v. Geto Investments Ltd., [2002] O.J. No. 921 (S.C.J.), at paragraphs 14-15, courts have emphasized for more than 150 years -- through now ancient decisions such as Harold v. Smith (1860), 5 H. & N. 381 (Eng.Exch.), and more modern appellate authorities such as Clark v. Nash, [1990] B.C.J. No. 727 (C.A.), and Fong v. Chan (1999), 46 O.R. (3d) 330 (C.A.) -- that the fundamental purpose of cost awards is indemnity of the successful party for legal expenses incurred, and that perceptions of cost awards as some form of punishment therefore are misplaced and inappropriate. In particular: “Costs as between party and party are given by the law as an indemnity to the person entitled to them: they are not imposed as a punishment on the party who pays them, nor given as a bonus to the party who receives them.”
ii. Of course, the obligation of Mrs Struthmann and Ms Serediak to provide cost indemnification may be unwanted and possibly onerous; e.g., pending Mr Struthmann completing a purchase of their interests in the Tetra group of companies.
iii. However, from the perspective of Mr Struthmann, the need to respond to the application brought by his wife and daughter, bring a counter-application of his own, have both application argued, and incur the associated costs of doing so, no doubt was unwanted and onerous as well. Again, the focus is on his cost indemnification.
b. Second, while it is commendable that Mrs Struthmann and Ms Serediak did nothing to warrant a finding of unreasonable conduct in bringing their own application or resisting the counter-application brought by Mr Struthmann, in my view, that is not a consideration justifying a “no cost” award, but a reason for declining to award costs on an elevated scale. Without limiting the generality of the foregoing:
i. The submission once again reflects a mistaken view that costs are imposed as a punishment, in turn suggesting that costs should not be awarded when there is no conduct worthy of chastisement. Again, the fundamental purpose of costs is indemnity of a successful party for legal expenses incurred, and that goal and need will exist even where the opposing litigant, although unsuccessful, otherwise has approached the litigation in a reasonable matter.
ii. Numerous courts have emphasized that awarding costs on a partial indemnity basis generally strikes the proper balance as to the burden of costs that should be borne respectively by unsuccessful and successful parties, with awards of costs on an elevated scale being used as a form of chastisement to address only those “rare” and “exceptional” cases where a litigant has exhibited misbehavior or conduct that is “reprehensible”, “scandalous”, “outrageous”, “egregious”, an “abuse of process”, or generally “deserving of reproof or rebuke”. [3]
iii. By implication, the absence of unreasonable behaviour deserving of such chastisement, reproof or rebuke cannot by itself shield an unsuccessful party from providing a measure of cost indemnity to a successful party. If that was the correct approach, costs would never be awarded, except on an elevated scale in “exceptional” cases where a litigant has acted unreasonably. Awarding costs to indemnify successful parties would become the exception rather than the norm.
c. Third, I am not persuaded that Mrs Struthmann and Ms Serediak had “no practical option” but to proceed with their application, which in turn prompted Mr Struthmann to respond and bring his own counter-application. Without limiting the generality of the foregoing:
i. In relation to their stated desire to protect corporate employees, the application brought by Mrs Struthmann and Ms Serediak was not the only option. As noted in my earlier endorsement, various other mechanisms exist to protect such employees from improper harassment, abuse and/or endangerment, and to deter and address misconduct in that regard. See, for example: the Human Rights Code, R.S.O. 1990, c.H.19; the Occupational Health and Safety Act, R.S.O. 1990, c.0.1; civil actions for wrongful dismissal; and the Criminal Code, R.S.C. 1985, c.C-46. Not only do such other mechanisms address such concerns in more targeted and specialized ways than the blunt instrument of the application brought by Mrs Struthmann and Ms Serediak, but the evidence filed in relation to the applications made it clear that those concerned were clearly aware of such other mechanisms, and resorting to them.
ii. In terms of addressing the deadlock in corporate management, in my view it was not necessary for Mrs Struthmann and Ms Serediak to proceed with their application after Mr Struthmann indicated and confirmed, in his settlement overture of October 4, 2019, if not before, his willingness and desire to purchase their interest in the corporations after completion of a suitable valuation process. In that regard:
As noted above, Mr Struthmann’s written cost submissions included reliance, (in reply), on correspondence dated October 4, 2019, sent by Mr Struthmann’s counsel to counsel representing Mrs Struthmann and Ms Serediak.
Although not characterized as a formal “offer to settle” for the purposes of Rule 49.10 of the Rules of Civil Procedure, the correspondence:
a. asked Mrs Struthmann and Ms Serediak to accept that, having regard to the law applicable to situations of deadlock in corporate management where there is an irreparable breakdown of the relationship between shareholders, where the reasonable expectations to be honoured involve one shareholder having founded, built and controlled the corporation, the best result Mrs Struthmann and Ms Serediak could hope to achieve was Mr Struthmann’s court-ordered purchase of their interest in the Tetra group;
b. indicated Mr Struthmann’s willingness to proceed directly to the issue of valuing the interest of Mrs Struthmann and Ms Serediak in the corporations, and proceed with such a purchase; and
c. asked Mrs Struthmann and Ms Serediak to prepare an estimate of their share values, with the valuation issues then being litigated if necessary.
- In short, at least three to four months before the two applications proceeded to a formal hearing, the correspondence asked Mrs Struthmann and Ms Serediak to accept voluntarily, without the applications being argued, the substantive outcome the court essentially ordered after the parties had gone to the expense of arguing the motions. The corporate deadlock problem accordingly could have been addressed and resolved without argument of the two applications, had Mrs Struthmann and Ms Serediak taken that proffered figurative “off-ramp” from the highway leading towards a contested hearing of the two applications. They instead continued to pursue an outcome that would break the corporate deadlock by Mr Struthmann’s exclusion from the Tetra group; an outcome not favoured by the courts, in such circumstances, for the reasons detailed in my earlier endorsement.
d. Fourth, in my view a formal finding of liability is not a sine qua non of an award providing a measure of cost indemnification to a successful party, and any suggestion to the contrary attempts to define the parameters of “success” too narrowly. Without limiting the generality of the foregoing:
i. Our courts repeatedly have recognized and emphasized that the prospect of adverse cost awards plays a significant role in discouraging unnecessary steps in litigation; a competing goal of the costs system that is just as important as facilitating access to justice. [4] In that regard, our normal cost indemnification rules create an important "reality check" on the manner in which litigants pursue litigation. [5]
ii. Having regard to such considerations, it seems self-evident to me that, when one party will not agree voluntarily to an outcome requested by another, thereby forcing the other party to litigate the matter to a formal court-ordered conclusion, and that other party then obtains a court order confirming the outcome her or she requested without the need for further litigation, that other party must be regarded as the “successful” litigant, even if the outcome sought and obtained by the other party does not require a formal determination of “liability” per se. Were the situation otherwise, parties effectively would be encouraged to adopt unreasonable positions, and force the litigation of steps and outcomes that should be agreed upon without the need for litigation, whenever the court is capable of granting relief without the necessity of determining particular “liability” issues.
iii. For example, in this case:
The outcome Mr Struthmann sought to achieve in this case, (despite the opposition of Mrs Struthmann and Ms Serediak), was ownership and retained control of the Tetra group.
There were suggested alternative paths to that outcome. One path involved a direct exercise of the court’s jurisdiction under s.248 of Ontario’s Business Corporations Act, R.S.O. 1990, c.B.16, (“the OBCA”), requiring determinations of whether oppressive and unfair conduct had been established; determinations which might be characterized as findings of liability for such conduct. Another path, (the one I chose to take), involved an exercise of the jurisdiction granted to the court by s.207 of the OBCA, which did not require such determinations.
Despite the jurisdictional path taken by the court, Mr Struthmann was successful in obtaining the relief and outcome he requested and was obliged to formally seek from the court, and was successful in opposing the relief and outcome formally sought by Mrs Struthmann and Ms Serediak.
The particular jurisdictional path taken was but one consideration in the course of my analysis, and in my view it is the outcome of the applications, rather than incidental steps in the court’s reasoning, that defines the parameters of success. Cost submissions that focus on the determination of incidental issues on the way to a court’s conclusions, rather than the substantive outcome decided by the court, essentially suggest application of a “distributive costs” approach, which our courts do not favour. [6]
[20] For all such reasons, in my view Mr Struthmann is entitled to an award of costs, payable jointly and severally by Mrs Struthmann and Ms Serediak, in relation to their dismissed application and Mr Struthmann’s successful counter-application.
Scale
[21] As noted above, Mr Struthmann sought his costs on a partial indemnity basis. There was no suggestion on his part that costs should be awarded on an elevated scale, through reliance on Rule 49.10 of the Rules of Civil Procedure or otherwise.
[22] As also noted above, our courts have emphasized that awarding costs on a partial indemnity basis generally strikes the proper balance as to the burden of costs that should be borne by unsuccessful and successful parties.
[23] I accordingly intend to award Mr Struthmann his costs of the two applications on a partial indemnity basis.
Quantification
[24] As noted above, costs must be reasonable and proportionate to the circumstances, and are subject to the “overriding principle of reasonableness”, as applied to the factual matrix of the case.
[25] In arriving at a global determination of a quantified cost award that is “fair and reasonable” in relation to the two applications, having regard to all the circumstances, my considerations include but are not limited to those outlined below.
AMOUNT CLAIMED AND RECOVERED – RULE 57.01(1)(a)
[26] Rule 57.01(1)(a) of the Rules of Civil Procedure permits the court to consider “the amount claimed and the amount recovered in the proceeding”.
[27] As stated, the wording of that factor nominally focuses on financial amounts claimed and recovered, which obviously has no literal “fit” in the circumstances of these particular applications, where the parties were fighting for ownership and control of the Tetra group of companies. However, the broader underlying consideration is the degree to which a party to a proceeding or step in the proceeding may or may not have been successful in obtaining requested relief.
[28] I already have noted and explained my view that Mr Struthmann clearly was the successful party in that regard.
PRINCIPLE OF INDEMNITY – RULE 57.01(1)(0.a)
[29] Rule 57.01(0.a) of the Rules of Civil Procedure permits the court to consider, in exercising its cost discretion, “the principle of indemnity, including, where applicable, the experience of the lawyer for the party entitled to the costs as well as the rates charged and the hours spent by that lawyer”.
[30] As noted above, Mr Struthmann’s written cost submissions included a costs outline, which particularized the indemnification being sought in relation his legal fees and disbursements.
[31] No issue was taken with the quantum of disbursements claimed by Mr Struthmann, (leaving aside the question of whether he should be awarded costs at all), and I independently find the disbursements claimed by Mr Struthmann to be reasonable and appropriate.
[32] The issues raised by Mrs Struthmann and Ms Serediak in relation to quantum were focused on the fee indemnification sought by Mr Struthmann.
[33] In that regard, the costs outline includes information concerning the years of legal experience of Mr Macklin, (the particular lawyer who represented Mr Struthmann in relation to the applications), the extent to which Mr Macklin was assisted by an articling student, as well as an indication of their respective hourly rates actually charged and corresponding partial indemnity fee rates used for cost claim calculations.
[34] The responding cost submissions tendered on behalf of Mrs Struthmann and Ms Serediak do not question those indications of lawyer experience. However, they did take issue with the partial indemnity rates claimed, on the suggested basis, (noted above), that such rates ”should be limited to 60%, at most”. In that regard:
a. A view that the “rate for partial indemnity fees should not exceed 60 percent of the actual rate” does find expression in the caselaw of our court dealing with cost claims. [7]
b. In my view, however, such expressions cannot and should not be read as stating an inviolable rule, as opposed to a guideline, as such percentages obviously turn on the particular partial indemnity rates claimed by counsel and the particular hourly rates actually charged by counsel. In the circumstances of any given case, the actual hourly rates charged by counsel may be modest or low, (especially when compared with significantly higher if not exorbitant hourly rates actually charged by other counsel), with the partial indemnity rate claimed by counsel generating a cost claim that may exceed 60 percent of the actual hourly rates charged but which nevertheless may be “fair and reasonable for the unsuccessful party to pay in a particular proceeding”, in compliance with the overall goal of cost awards outlined above.
c. In the present case, I independently find the partial indemnity rates used in the calculation of Mr Struthmann’s cost claim to be reasonable in the circumstances.
[35] As noted above, the cost submissions filed on behalf of Mrs Struthmann and Ms Serediak also take issue with other aspects of the time and amounts underlying Mr Struthmann’s claim for costs, in support of suggestions that the claim is excessive.
[36] In that regard, I am mindful of the general admonition, voiced by Justice Nordheimer (as he then was) in Basedo v. University Health Network, [2002] O.J. No. 597 (S.C.J.), but embraced by our Court of Appeal in Boucher v. Public Accountants Council (Ontario), supra, at paragraph 27, that “it is not the role of the court to second-guess the time spent by counsel unless it is manifestly unreasonable in the sense that the total time spent is clearly excessive or the matter has been overly lawyered”.
[37] Similarly, our courts repeatedly have emphasized that, when one party attacks another’s costs as excessive but declines to make voluntary disclosure of its own corresponding costs, (as Mrs Struthmann and Ms Serediak have declined to do in this case), such criticisms are “no more than an attack in the air”. [8]
[38] For such reasons, I am not inclined to accord much significance to broad complaints that the time spent by Mr Struthmann’s legal time on certain matters, (such as preparation of cost submissions), was excessive.
[39] Nor was I persuaded by arguments that Mr Struthmann should not be awarded costs in relation to preparation, material and argument relating to the allegations of oppressive conduct advanced by each side, simply because the court found it unnecessary to determine the merit of such allegations in resolving the parties’ dispute. Without limiting the generality of the foregoing:
a. Again, such arguments reflect a “distributive cost” approach which our courts do not favour, and undermine the reality that cost awards generally should reflect substantive outcomes rather than incidental steps in the court’s reasoning.
b. Moreover, it was Mrs Struthmann and Ms Serediak who chose to extend the focus and scope of their application well beyond the existence of corporate management deadlock, (sufficient to engage the court’s jurisdiction to address and resolve the parties’ dispute), to rely upon extensive and serious allegations of oppressive and unfair conduct as well. In the circumstances, it was hardly surprising that Mr Struthmann considered it necessary and appropriate to address such issues as well; i.e., to provide the court with his opposing perspective in relation to such matters, in case the court was inclined to base its decision on such considerations. In my view, having effectively established the fronts along which the parties’ litigious battle would be fought, Mrs Struthmann and Ms Serediak cannot reasonably argue that Mr Struthmann should be denied indemnification for the cost of defending and engaging on all those fronts, even if the battle ultimately was won by a breakthrough in a more limited area.
[40] However, some of the cost objections advanced on behalf of Mrs Struthmann and Ms Serediak are based on principle, (i.e., arguments that certain costs should not be recoverable at all, as opposed to arguments that costs capable of being properly claimed are excessive), and in my view some of those objections have merit. For example:
a. It was argued that the court should not award costs corresponding to the time Mr Macklin and his articling spent travelling back and forth between Toronto and Woodstock, and I agree. In that regard:
i. Our courts have emphasized that, while parties are entitled to counsel of their choice, their litigation opponents should not be required to pay the travel expenses and costs associated with the attendance of counsel barring exceptional circumstances. [9] In my view, there were no indications of any such exceptional circumstances in this case.
ii. The material filed in relation to costs nevertheless makes it difficult to address such concerns and “back out”, with precision, costs claimed in relation to travel time. In particular, time devoted to travel and time spent attending at hearings essentially has been “lumped together” the relevant cost outline, and claimed without differentiation in Mr Struthmann’s cost submissions. [10]
b. It was argued that the court, in any event, should not award costs relating to the attendance of an articling student at the court hearings dealing with the two applications. In that regard:
i. I am loathe to suggest any form of general cost rules in that regard, as there no doubt are cases where the complexity of a particular matter makes it advisable and/or advantageous for counsel to be assisted at a hearing by the presence of an articling student.
ii. In the particular circumstances of this case, however, I think it noteworthy that, as indicated and confirmed by the cost outline tendered with Mr Struthmann’s cost submissions, preparation for court attendances was done by Mr Macklin alone, with no corresponding preparation time being docketed by Mr Macklin’s articling student. Nor, in my view, did the relevant court hearings in this matter involve any situation, (akin to those regularly encountered during the course of a trial), where counsel inherently might be incapable of necessarily focusing on proceedings and taking fulsome notes at the same time.
iii. In the result, I think it fair to infer that attendance of an articling student at the hearings in this particular matter took the form of a watching brief; i.e., an experience that no doubt was beneficial to the legal training of that articling student, but not a cost that reasonably should be visited on opposing litigants.
REASONABLE EXPECTATIONS OF UNSUCCESSFUL PARTY – RULE 57.01(1)(0.b)
[41] Again, the responding cost submissions and material tendered on behalf of Mrs Struthmann and Ms Serediak included no cost outline of their own.
[42] In effect, they accordingly chose not to supply me with any information detailing the time, disbursements and corresponding HST devoted to the matter from their perspective.
[43] As emphasized by numerous authorities, [11] an unsuccessful party's failure to supply information concerning his or her own costs is an important consideration in assessing that party's reasonable expectations, and permits an inference that the resources devoted to the matter by the unsuccessful party were comparable to those expended by the successful party.
[44] Given the extensive material prepared and filed on behalf of Mrs Struthmann and Ms Serediak in relation to the two applications, I think that inference is both safe and appropriate in this particular instance.
[45] Moreover, as noted in the cost submissions of Mr Struthmann, such an inference is buttressed in this particular case by evidence, (filed in support of Mr Struthmann’s counter-application), that Mrs Struthmann and Ms Serediak had paid their counsel $35,000 by early October of 2019; i.e., well before numerous additional court filings and appearances. It remains unclear whether the money was paid as an initial retainer or in satisfaction of fees and disbursements already incurred. However, it was open to Mrs Struthmann and Ms Serediak to provide information indicating it was the former, (i.e., that they incurred no legal expense beyond that $35,000 payment), and they failed to do so.
COMPLEXITY OF PROCEEDING AND IMPORTANCE OF ISSUES – RULES 57.01(1)(c) AND RULES 57.01(1)(d)
[46] Rules 57.01(1)(c) and 57.01(1)(d) of the Rules of Civil Procedure permit the court to consider, in exercising its cost discretion, “the complexity of the proceeding” and “the importance of the issues”.
[47] I agree with the submissions, made on behalf of Mr Struthmann, that the two applications involved issues of medium to high complexity, particularly insofar as the underlying factual matrix was concerned.
[48] I also agree with the submission that the issues raised and addressed by the applications were extremely important from the perspective of both sides. Without limiting the generality of the foregoing:
a. The Tetra group has been the principal employer of Mrs Struthmann and Ms Serediak for many years, and they repeatedly have emphasized the personal concern they feel for the welfare of the companies and those who work for the companies.
b. For the reasons outlined in my earlier endorsement, the founding, growth and management of the Tetra group of companies has in many ways been the principal life’s work of Mr Struthmann, who also was called upon to defend his personal reputation in relation to very serious allegations of personal and professional misconduct.
c. As noted in my earlier endorsement, the Tetra group has been operated in a very successful and profitable manner; e.g., with TC Industries having almost $1.7 million in retained earnings, TC International having almost $440,000 in retained earnings, and TC Retail having a net book value of approximately $560,000. Even on a conservative basis, if formal ownership of the relevant corporations is somewhat evenly divided, one side’s forced purchase of the other’s interest in the corporations is quite likely to involve a payment in excess of $1 million.
CONDUCT AND/OR STEPS THAT LENGTHENED PROCEEDING – RULES 57.01(1)(e) AND 57.01(1)(f)
[49] Rule 57.01(1)(e) of the Rules of Civil Procedure permits the court to consider, in exercising its cost discretion, “the conduct of any party that tended to shorten or lengthen unnecessarily the duration of the proceeding”.
[50] Rule 57.01(1)(f) of the Rules of Civil Procedure permits the court to consider whether any step in the proceeding was “improper, vexatious or unnecessary”, or “taken through negligence, mistake or excessive caution”.
[51] In my view, these were not relevant factors or considerations in the determination of an appropriate cost award in relation to the two applications, apart from the consideration, (already discussed above), that it was Mrs Struthmann and Ms Serediak who effectively chose to expand the dispute to issues concerning oppressive and unfair conduct; i.e., instead of confining it to a determination of which side should be permitted to buy out the other, to address an acknowledged deadlock in corporate management.
[52] For the reasons outlined in my earlier endorsement, that was unnecessary, and something which unquestionably complicated and extended the proceedings.
REFUSAL TO MAKE APPROPRIATE ADMISSIONS – RULE 57.01(1)(g)
[53] Rule 57.01(1)(g) of the Rules of Civil Procedure permits the court to consider, in exercising its cost discretion, the refusal of a party to make appropriate admissions.
[54] In my view, this was/is not a relevant factor or consideration in the determination of an appropriate cost award in relation to the two applications.
ANY OTHER MATTER RELEVANT TO COSTS – RULE 57.01(1)(i)
[55] In my view, the only “other” consideration worthy of further comment is the correspondence of October 4, 2019, to which I already have referred.
[56] In that regard:
a. The cost submissions tendered on behalf of Mr Struthmann, while stopping short of referring to the correspondence as an offer to “settle”, did characterize it as an “offer” that was ignored, in circumstances where the court went on to order the buy out Mr Struthmann was proposing, “based on the grounds ultimately found by the court”.
b. In my view, the correspondence fell short of an offer to settle that would engage the presumptive cost sequences of Rule 49.10 of the Rules of Civil Procedure, in relation to Mr Struthmann’s counter-application or otherwise. In particular, while our Court of Appeal has confirmed that an offer to settle need not contain an element of compromise, [12] it also has emphasized that the underlying policy of Rule 49 requires that settlement officers must be clear – indeed, “crystal clear” – before Rule 49.10 and its presumptive cost consequences will be engaged. Uncertainty or lack of clarity in any aspect of an offer may prevent a party from showing that the judgment obtained was “as favourable as the terms of the offer to settle, or more or less favourable”, as the case may be”, for the purposes of Rule 49.10(3). [13] In this case, the correspondence sent by Mr Struthmann’s counsel on October 4, 2019, certainly proposed a substantive outcome, (i.e., proceeding directly to an agreement that Mr Struthmann would buy out the corporate interests of Mrs Struthmann and Ms Serediak, without the need for argument of the two applications, at a value to be agreed or litigated), but was entirely silent on the subject of costs. While a “no costs” approach may have been intended, that was not made “crystal clear”, and a failure to agree on outstanding cost issues left open the possibility that they might have been the subject of reservation and later argument.
c. Rule 49.13 of the Rules of Civil Procedure nevertheless confirms that, despite rules 49.03, 49.10 and 49.11, the court, in exercising its discretion with respect to costs, may take into account any offer to settle made in writing, the date the offer was made and the terms of the offer.
d. In this case, the offer set forth in the relevant correspondence, despite its shortcomings, certainly confirmed that Mr Struthmann was ready and willing to proceed immediately to a valuation of and purchase of the interest Mrs Struthmann and Ms Serediak had in the Tetra group, without the time and expense involved in proceeding with formal hearing of the two applications. In other words, had Mrs Struthmann and Ms Serediak agreed with Mr Struthmann’s proposal, the parties would have arrived at the same position where they are now, without the intervening time and expense.
e. As noted in the costs submissions tendered on behalf of Mr Struthmann, Mrs Struthmann and Ms Serediak nevertheless insisted on having their “day in court”, only to have the court formally confirm the outcome predicted and desired by Mr Struthmann. They were entitled to do so. However, having done so, their obligation to pay reasonable costs to Mr Struthmann, in relation to their unsuccessful exercise, should come as no surprise.
Conclusion
[57] As many decisions have emphasized, discretionary cost determinations are far from an exact science.
[58] Again, the overall goal is to award costs in an amount that is fair and reasonable in relation to a particular proceeding or step in a proceeding, having examined various factors such as those outlined in Rule 57.01 of the Rules of Civil Procedure.
[59] Having regard to all the circumstances of this particular case, including the various considerations explored in detail above, and the overriding principle of reasonableness, I think justice will be served if my discretion is exercised so as to award Mr Struthmann his costs of the dismissed application brought by Mrs Struthmann and Ms Serediak, and the costs of his successful counter-application, fixed in the all-inclusive amount of $38,000.00, payable within 60 days. The obligation of Mrs Struthmann and Ms Serediak in that regard shall be joint and several.
[60] An order shall go accordingly.
Justice I.F. Leach Date: March 31, 2020
[1] See, for example, Boucher, Moon and Coldmatic Refrigeration of Canada Ltd. v. Leveltek Processing LLC (2005), 75 O.R. (3d) 638 (C.A.), and Anderson v. St Jude Medical Inc. (2006), 264 D.L.R. (4th) 557 (Ont.Div.Ct.).
[2] See Boucher v. Public Accountants Council for the Province of Ontario, [2004] O.J. No. 2634 (C.A.), at paragraph 26, and Zesta Engineering Ltd. v. Cloutier, [2002] O.J. no. 4495 (C.A.), at paragraph 4.
[3] See, for example: Isaacs v. MHG International Ltd., (1984), 45 O.R. (2d) 693 (C.A.); Foulis v. Robinson (1987), 21 O.R. (2d) 179 (C.A.); Young v. Young, [1993] 4 S.C.R. 3; Mortimer v. Cameron (1994), 17 O.R. (3d) 1 (C.A.); McBride Metal Fabricating Corp. v. H&W Sales Co. (2002), 59 O.R. (3d) 97 (C.A.); Leung v. Leung (1993), 15 C.P.C. (3d) 42 (B.C.S.C.), at p.44, cited with approval by our Court of Appeal in Authorson (Litigation guardian of) v. Canada (Attorney General), [2002] O.J. No. 2182 (C.A.), at paragraph 5; and Davies v. Clarington, [2009] O.J. No. 4236 (C.A.).
[4] See, again, Boucher v. Public Accountants Council (Ontario), supra, at paragraph 37.
[5] See, for example, Agius v. Home Depot Holdings Inc., [2011] O.J. No. 4424 (Ont. S.C.J.), and the additional cases examined and cited therein. See also Boucher v. Public Accountants Council (Ontario), supra, at paragraph 37; Guelph (City) v. Wellington-Dufferin-Guelph Health Unit, 2011 ONSC 7523 (Ont. S.C.J.), at paragraph 14; and Mayer v. 1474479 Ontario Inc., [2014] O.J. No. 1984 (S.C.J.), at paragraph 99.
[6] See, for example: Tricontinental Investments Co. v. Guarantee Co. of North America (1988), 29 C.P.C. (2d) 99 (Ont.H.C.); William Allan Real Estate Co. v. Robichaud (1990), 72 O.R. (2d) 595 (H.C.); and Oakville Storage & Forwarders Ltd. v. Canadian National Railway Co. (1991), 5 O.R. (3d) 1 (C.A.), leave to appeal to the Supreme Court of Canada refused (1992), 6 O.R. (3d) xiii (note).
[7] See, for example, Nobosoft Corporation v. No Borders Inc. (2006), 154 A.C.W.S. (3d) 558 (Ont.S.C.J.), at paragraph 8, reversed on other grounds [2007] O.J. No. 2378 (C.A.).
[8] See, for example: Risorto v. State Farm Mutual Automobile Insurance Co., (2003), 64 O.R. (3d) 135 (S.C.J.); Springer v. Aird & Berlis LLP, [2009] O.J. No. 2170 (S.C.J.), at paragraphs 12-17; and Landmark Vehicle Leasing Corp. v. Thethi Holdings Inc., [2010] O.J. No. 2942 (S.C.J.), at paragraphs 40-42.
[9] See, for example, Eve v. Wilhelm Estate (Trustee of), 2016 ONSC 3532, at paragraph 18.
[10] In this case, there is no dispute that two court attendances were required to deal with the two applications, and two round trips between the city of Toronto, (the location of the law office of Mr Struthmann’s counsel), and the city of Woodstock, (where the two applications were brought and heard), therefore presumably were factored into Mr Struthmann’s claim for cost reimbursement. Moreover, I believe I can take some degree of judicial notice that the driving time between the city of Toronto and the city of Woodstock is approximately 90 minutes, assuming ideal road and traffic conditions, but that such ease of travel rarely prevails when the intervening highways are congested with weekday commuter traffic.
[11] See, for example: Smith Estate v. Rotstein, [2011] O.J. No. 3075 (Ont. C.A.), at paragraphs 50-51, leave to appeal refused, (2012), [2011] S.C.C.A. No. 441 (S.C.C.); and my own comments in Valastro v. London (City), [2013] O.J. No. 1353 (Ont. S.C.J.), at paragraph 12(b).
[12] See Data General (Canada) Ltd. v. Molnar Systems Group Inc. (1991), 6 O.R. (3d) 409 (C.A.).