SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: CV-17-579590

DATE: 2020 10 01

RE: THE MANUFACTURERS LIFE INSURANCE COMPANY, Plaintiff

- and -

ASG TECHNOLOGIES GROUP, INC., Defendant

BEFORE: Master Todd Robinson

COUNSEL: N. Wong and M. Migus, for the defendant / moving party

S. D’Souza, A. Bond and A. Forest, for the plaintiff / responding party

HEARD: In writing

COSTS ENDORSEMENT

[1] On December 13, 2019, I heard the motion by ASG Technologies Group, Inc. (“ASG”) for imposition of a discovery plan, including determinations on relevance and proportionality of a variety of document categories that each party sought from the other. The Manufacturer’s Life Insurance Company (“Manulife”) opposed ASG’s discovery plan and argued for imposition of its own version. By reasons for decision released May 27, 2020, I made determinations on relevance and proportionality and imposed a discovery plan pursuant to Rule 29.1.05(2) of the Rules of Civil Procedure, RRO 1990, Reg 194 (the “Rules”). I invited the parties to make written submissions as to costs if they could not reach agreement.

[2] Agreement as to costs was not reached. I have now received and considered each party’s costs submissions. ASG seeks its partial indemnity costs of $45,735.28, inclusive of HST and disbursements or, in the alternative, costs of $36,588.22, representing 80% of ASG’s total partial indemnity costs claim (if the court feels the costs award should reflect ASG’s proportionate success). Manulife argues that each party should bear its own costs of the motion or, at the most, ASG should be awarded no more than $10,000 to $15,000 in all-inclusive costs.

[3] ASG submits that it was largely successful on the motion, having succeeded entirely on 17 items, succeeded in part on 3 items, and only being unsuccessful on 3 items. ASG accordingly submits it was approx. 80% successful on the motion and is thereby entitled to its partial indemnity costs, calculated at 60% of actual fees plus disbursements. ASG submits that the extent of Manulife’s success was limited to production requests on which the parties spent little time at the hearing and have been rendered largely moot by an admission at the motion hearing. The motion is argued to have been entirely unnecessary had Manulife reasonably agreed to proceed through documentary discovery without prejudice to seeking further documents following examinations, opposing questions on examination or opposing production of further documents. Manulife is also argued to have increased the complexity of the motion by adding 11 categories of document requests after ASG’s evidence was served in relation to Mr. Kotecha’s “report”, which was largely rejected.

[4] Manulife submits that ASG was unreasonable in the course of the motion, incurring unnecessary costs, and overstates the extent of its success. Manulife submits that there was divided success in the ultimate result, including consideration that Manulife remains able to examine on those document categories that were not ordered produced and make specific document requests. Manulife further claims for its costs of the initial adjournment of the motion.

[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 a non-exhaustive list of 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. Rule 1.04(1.1), which is also applicable, requires the court to make orders that are proportionate to the importance and complexity of the issues and to the amount involved in the proceeding.

[6] Costs awards should reflect what the court views as a fair and reasonable amount that should be paid by the unsuccessful parties rather than any exact measure of the actual costs to the successful litigant: Zesta Engineering Ltd. v. Cloutier, 2002 25577 (ON CA), [2002] OJ No. 4495 (CA) at para. 4; Davies v. Clarington (Municipality), 2009 ONCA 722 at para. 52. The overall objective is 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), 2004 14579 (ON CA), 71 OR (3d) 291 (CA) at paras. 26 and 38.

[7] In my view, although there was some divided success, Manulife overstates the extent of its own success on the motion. ASG was much more successful and is entitled to its costs of the motion. I have considered all relevant factors in exercising my discretion to fix those costs. Without going through every factor in detail, I note the following:

(a) Both parties argue that the other was unreasonable and that the motion was necessary as a result of the other party’s staunch or unreasonable positions. From the record before me, there is some truth in both submissions. I accept that the motion was necessary, but view that necessity as a neutral factor, since I cannot say it was clearly necessary because of the position of one or the other party.

(b) I agree with Manulife that ASG’s costs should not be assessed as a mathematical calculation based on the percentage of ASG’s success with reference to its claim for costs. I also accept that courts should avoid making distributive costs awards and should not “analyze costs awards as if one were grading a law school exam with a marking grid for each question”: Mancinelli v. Royal Bank of Canada, 2020 ONSC 3743 at para. 39. However, reductions from ASG’s costs claim in light of divided success does not necessarily equate to a distributive costs award. In my view, it would be unjust to deny ASG any costs given the extent of its success.

(c) ASG’s costs claim is evidently within the reasonable expectation of the parties. Manulife’s own costs outline uses the same calculation of partial indemnity costs at 60% of actual rates, and reflects costs of the motion on a partial indemnity basis in the amount of $42,531.11, inclusive of HST and disbursements.

(d) As already noted above, there was some divided success. Manulife was successful in a few categories. Also, my determinations that ASG is not required to produce certain categories of documents has not foreclosed a future motion for production of such documents following examinations for discovery if examination evidence supports relevance of the documents that I was unable to find at this pre-discovery stage.

(e) I agree with ASG that the motion was complex, but some of that complexity was introduced by ASG’s position and expert evidence that New York law applied in assessing relevance on this motion. I held that ASG had “gone down a rabbit-hole regarding the applicability of New York law in the context of this motion”, having erroneously conflated the standard of relevance for discovery purposes and the potential relevance of New York law to interpreting the licensing agreement between the parties.

(f) ASG asserts that its costs outline does not claim “witness fees” for Mr. Prager’s affidavit and cross-examination, presumably referring to Mr. Prager’s expert fees. ASG’s submission is that these are not claimed “in view of the Court’s decision on the applicability of New York law”. However, the costs outline appended to ASG’s costs submissions is the same costs outline submitted at the motion hearing, and was thereby submitted prior to my determination. Since ASG’s costs outline has not changed, I am unclear why ASG is suggesting that its costs claim was somehow adjusted to reflect the outcome of the motion. I have assessed ASG’s costs claim on the basis that the time and disbursement costs claimed for cross-examination include time for preparing Mr. Prager’s two affidavits, as well as legal research and argument on the applicability of New York law. Nothing before me suggests otherwise. In my view, those are not costs that Manulife should reasonably have to pay given my determination.

(g) Having particular regard to the rates claimed by Manulife for its lawyers, I agree with ASG that the rates sought by ASG are reasonable. However, the majority of time claimed by ASG was spent by senior counsel. I am not satisfied, for example, that it was necessary for senior counsel to be primarily responsible for preparation of the motion materials, solely responsible for preparing for and conduct all cross-examinations, or solely responsible for preparing the factum and book of authorities.

(h) Although the total partial indemnity costs claim of each of ASG and Manulife are similar, substantially more lawyer time is claimed by ASG on this motion than Manulife. The difference on Manulife’s side is expert disbursement costs. Notably, ASG claims 30 hours of lawyer time in relation to preparing for, attending and conducting cross-examinations. That time claim does appear high, but is explained, in part, by counsel time travelling to and from New York and Texas for the cross-examinations of Mr. Prager and Mr. Scarpato. Manulife conducted those cross-examinations remotely from Toronto.

(i) Although not cited by either party in their costs submissions, Rule 39.02(4)(b) is relevant to costs of this motion. It expressly provides that a party cross-examining on an affidavit tendered on a motion (other than a motion for summary judgment) is liable for the partial indemnity costs of every adverse party on the motion in respect of the cross-examination, regardless of the outcome of the proceeding, unless the court orders otherwise. Accordingly, each of ASG and Manulife is presumptively liable to the other for the costs of cross-examining the other party’s affiants.

(j) ASG conducted approx. 1.5 hours of cross-examination, regarding which Manulife has provided no breakdown of its own costs separate from global time claims for motion preparation. However, that does not mean the court is incapable of assessing a reasonable reduction in costs to account for ASG’s costs liability pursuant to Rule 39.02(4)(b).

(k) Manulife conducted approx. 40 minutes of cross-examination. Notwithstanding the presumption in Rule 39.02(4)(b), I decline to award any costs to ASG for travel time or travel expenses relating to the cross-examinations of ASG’s affiants. While ASG may not have known the length of the ultimate cross-examination, I agree with Manulife that it was unnecessary and disproportionate for ASG’s counsel to travel to New York and Texas to prepare and/or attend with the affiants during their cross-examinations. ASG has made no submissions on the need for international travel, instead submitting only that the 30 hours claimed for cross-examinations are commensurate with the importance of the issues. Given modern technology, and in the absence of specific submissions to the contrary, I see no need for the in-person attendances. Notably, Manulife conducted its examinations of Mr. Prager and Mr. Scarpato remotely. Litigation is already expensive enough. Unnecessary litigation costs should not be encouraged by the court.

[8] Manulife claims its partial indemnity costs incurred in relation to the initial adjournment of this motion in the amount of $6,384.50. Manulife’s costs claim appears inconsistent, to say the least. In the costs outline appended to Manulife’s costs submissions, an aggregate of 14.9 hours are claimed (13.9 hours by four lawyers and 1.0 hour by a law clerk) totalling pre-tax actual fees of $8,855. However, in the costs outlined filed at the conclusion of the motion, 22 hours are claimed (7 hours by two lawyers and 15 hours by an articling student) totalling pre-tax actual fees of $5,508. No explanation has been provided by Manulife for the apparent increase in its costs claim, why time for an articling student is no longer claimed and two additional lawyers are now included, or why so many timekeepers were required to prepare an adjournment motion record. It also appears from ASG’s reply submissions that a different costs outline was provided to ASG, in which an aggregate of only 6 hours was claimed for the adjournment totalling pre-tax actual fees of only $2,900.

[9] In any event, I am not satisfied that the record supports necessity for Manulife to have prepared a complete motion record in seeking adjournment of ASG’s motion. Had ASG staunchly refused adjournment, an opposed adjournment request could have been argued at the initially-scheduled return of the motion. It is difficult to fathom that the presiding master would have declined an adjournment given the circumstances under which the adjournment was sought.

[10] In light of the foregoing, having weighed the factors in Rule 57.01, I find that the fair and reasonable amount of costs payable by Manulife to ASG in respect of this motion is $30,500.00, inclusive of HST and disbursements, payable within thirty (30) days. Order accordingly.

MASTER TODD ROBINSON

DATE: October 1, 2020