COURT FILE NO.: CV-19-80062
DATE: 2020/11/12
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Chase Wong, Plaintiff
-and-
10658987 Canada Inc., Min Zhou, also know as Anna Zhou and Guo Jie Ma, also know as Sam Jie, Defendants
BEFORE: Madam Justice Sylvia Corthorn
COUNSEL: Robert J. De Toni, for the Plaintiff
Patricia A. Lawson, for the Defendants
HEARD: In writing
COSTS ENDORSEMENT
Introduction
[1] This endorsement is in follow up to the court’s ruling on the plaintiff’s motion for injunctive relief related to three residential rental properties and for non-injunctive relief related to the finances and management of the defendant corporation.
Background
[2] In 2018 and 2019, the parties were involved in the purchase and management of three residential properties in the City of Ottawa (“the Properties”). Title to the Properties is registered in the name of the defendant corporation (“the Corporation”).
[3] In 2019, the relationship between the plaintiff (“Chase”) and the individual defendants (“Anna” and “Sam”) broke down. Chase has had no involvement in the Properties since March 2019.
[4] The parties’ dispute is with respect to the extent, if any at all, to which Chase is a shareholder of the Corporation. He alleges that he is a 50 per cent shareholder; Anna and Sam say that they are the only two shareholders.
[5] In 2019, Chase was concerned that Anna and Sam would cause the Corporation to deal with the Properties in a way that would prejudice his alleged 50 per cent interest in them. Chase therefore brought a motion on an urgent basis for injunctive relief.
[6] Chase sought to maintain the status quo with respect to the Properties. Specifically, he sought an order preventing the Corporation from selling, encumbering, or carrying out any major renovations to the Properties. In addition, Chase sought non-injunctive relief with respect to the finances and operation of the Corporation. The defendants opposed the motion in its entirety.
[7] After serving his notice of motion, Chase commenced an application for an oppression remedy (“the Proceeding”). The court file number in the Proceeding is different from the court file number on the documents before the court on the motion. It appears to have been an oversight or error that the Proceeding was given a different court file number than the motion. In an email dated May 2, 2019, Chase’s counsel was directed by the Case Management Office to “use the same file number” in the Proceeding as on the motion when having the notice of application issued.
[8] Prior to the return of the motion, the parties agreed upon the terms of an undertaking given by the defendants with respect to the Properties and the Corporation (“the Undertaking”). The Undertaking did not resolve all the issues raised on Chase’s motion.
[9] The court’s ruling on the motion was released in April 2020: Wong v. 10658987 Canada Inc. et al., 2020 ONSC 2469 (“the Ruling”). The motion for injunctive relief was dismissed. Equitable non-injunctive relief was granted. The equities of the parties’ respective circumstances were addressed at paras. 93 and 94 of the Ruling:
[93] There are a number of similarities between the circumstances in Romijay and those in the matter before this court: the evidentiary record is not complete (including because of the lack of certified translations of relevant documents); the relief sought will not tie up the assets of 106 Canada while the application proceeds; the relief, if granted, will not be regarded as a final determination; and the relief sought is intended to preserve the status quo so that Chase’s ownership interest (if found) is not lost pending a final determination of the application: at para. 25.
[94] I find that an equitable solution is to make an order pursuant to which 106 Canada shall remain the owner of, account for the income generated from, and account for expenses related to the Properties pending a final determination of the Proceeding. I also find that it is equitable for 106 Canada to be precluded from relying on any one of the Properties as security (a) for any purpose other than an encumbrance related to reasonable repair and renovation of the subject property, and (b) without Chase’s consent or a further order of the Court. Lastly, I find that it is equitable to entitle 106 Canada to sell the Properties and account for the proceeds of sale, pending a final determination of the Proceeding.
[10] With respect to the latter form of relief, the court was concerned not to step into territory over which the parties may have already agreed: Ruling, at para. 95.
[11] The parties were given an opportunity to resolve the terms of the order for non-injunctive relief. They were unable to do so. With the assistance of the court, the terms of the order were settled in June 2020: Wong v. 10658987 Canada Inc. et al., 2020 ONSC 3778, at para. 3 (“the Order”).
[12] Following the release of the Order, the parties were given an opportunity to resolve the issue of costs of the motion. They were unable to resolve that issue and they delivered written costs submissions.
Positions of the Parties
[13] The plaintiff and the defendants each submit that they are the successful party or parties on the motion and therefore entitled to costs. The parties are seeking their respective costs on the partial indemnity scale: the plaintiff seeks $32,770.40, and the defendants seek $37,913.38. Both amounts include $1,000 with respect to the written costs submissions.
[14] Chase submits that, despite the dismissal of his request for injunctive relief, he was the successful party on the motion. As a measure of that success, Chase points to the similarities between the non-injunctive relief granted and the terms of the Undertaking. He emphasizes that the defendants (a) were not prepared to extend the terms of the Undertaking beyond the motion date, and (b) asked the court to dismiss Chase’s motion in its entirety.
[15] The defendants submit that they were the successful parties because the request for injunctive relief was dismissed. They submit that the motion was otherwise unnecessary because they were prepared to abide by the terms of the Undertaking pending a “full hearing on the merits” (a term used in one of two letters dated May 10, 2019 from defendants’ counsel to plaintiff’s counsel). The defendants also submit that the terms of the Order are, in the end, more favourable to them than were the terms of the Undertaking.
Analysis
[16] The request for an injunction was dismissed because Chase failed to establish that he would suffer irreparable harm if an interim injunction was not granted.
[17] Chase’s request for non-injunctive relief was made in the context of his oppression remedy claim under s. 241(3) of the Canada Business Corporations Act, R.S.C. 1985, c. C-44 (“CBCA”). A factor to be considered when determining a request for relief in an oppression remedy claim is the reasonable expectations of the parties: BCE Inc. v. 1976 Debentureholders, 2008 SCC 69, [2008] 3 S.C.R. 560, at para. 62.
[18] At paras. 90-92 of the Ruling, I addressed the fact that, in response to the motion, the defendants chose to rely solely on affidavit evidence from Anna; no affidavit from Sam was before the court. At para. 92, I made the following findings as to the significance of the lack of evidence as to Sam’s reasonable expectations:
[I]t is because of the defendants’ decision to rely only on Anna’s evidence that the court is not in a position to apply the factors set out in BCE Inc. and assess the reasonableness of Chase’s expectations with respect to the 50 per cent shareholding in 106 Canada. Oppression is an equitable remedy: BCE Inc., at para. 58. It would be inequitable to find against Chase on the issue of “reasonable expectations” when the court’s inability to reach a conclusion in that regard is the result of the defendants’ decision to rely solely on evidence from Anna. That said, I also make no finding on the issue of the reasonableness of Chase’s expectations.
[19] I find that Chase achieved a measure of success with respect to the non-injunctive relief granted, despite the court not being in a position to consider the reasonable expectations of the parties – a position the court found itself in because of the strategic decisions made by the defendants in responding to the motion.
[20] I turn next to a comparison of the terms of the Undertaking and the terms of the Order. A copy of the Undertaking was not before the court on the motion. The court was made aware of a limited number of the terms. A copy of the Undertaking was provided to the court for the case conference at which the terms of the Order were settled.
[21] The defendants characterize Chase as entirely unsuccessful on the motion because (a) the claim for injunctive relief was dismissed, and (b) the terms of the Order are more favourable to them than were the terms of the Undertaking. I disagree with the defendants’ characterization of Chase as entirely unsuccessful on the motion. I also disagree with the defendants’ characterization of the terms of the Undertaking.
[22] Dealing first with the assessment of Chase’s success or lack of success on the motion, the defendants overlook two things. First, they overlook the limitations on the intended duration of the Undertaking. At para. 8 of their costs submissions, the defendants submit that they:
• “[G]ave [the Undertaking] in May 2019 pending a ‘full hearing on the merits’ in December 2019”;
• “[D]id not feel that a motion for an interim injunction was necessary once this undertaking was agreed to”; and
• Requested, through their counsel, that the December 2019 hearing be on the full merits of the application.
[23] I find those submissions to be an oversimplification of the defendants’ position as it appears in the email and letter communication filed by the parties collectively as part of the costs submissions. For the following reasons, I find that the defendants did not agree that the terms of the Undertaking would remain in effect until the hearing of the application:
• As of May 10, 2019, it was clear that Chase was proceeding with a motion for interim relief, with the return date for the motion scheduled for December 9, 2019;
• In both of her letters dated May 10, 2019, the defendants’ counsel set out the defendants’ position with respect to the restrictions on the duration of the Undertaking as follows: “7. The above terms will remain in effect until the earlier of the hearing of the motion on December 9, 2019 or further Order of the court”;
• In the first of her two May 10, 2019 letters, defendants’ counsel said, “[a]t this time, it is not our clients’ intention to sell any of [the Properties]. However, as you know, any situation may change in seven (7) months”. I find that this statement contributed to Chase’s concern that his alleged interest in the Properties would not be protected pending a hearing of the application and/or an urgent motion pursued if the defendants served notice of their intention to sell one or more of the Properties;
• In the second of her two May 10, 2019 letters, defendants’ counsel introduced the seven numbered terms of the Undertaking with the following paragraph: “The undertakings our clients are prepared to give, so that this matter proceeds on December 9, 2019, for a full hearing on the merits, are as follows”. Term seven, quoted above, followed thereafter – with the end date as the return of the motion and not the return of the application; and
• In the second of her two May 10, 2019 letters, defendants’ counsel concluded her letter with a suggested timetable for “the hearing on December 9, 2019”. The same timetable was proposed in a letter from defendants’ counsel dated May 13, 2019, sent following a case conference before Master Kaufman, at which the return date for the motion was revised from December 9 to December 12, 2019.
[24] In summary, there was no agreement reached between the parties that the Undertaking would remain in effect until a determination on the application. I find that one of the main reasons why there was no such agreement was because the terms of the Undertaking were not sufficient, from Chase’s perspective, to protect his alleged interest in the Corporation and, in turn, the Properties.
[25] The second matter that the defendants have overlooked is that their position on the motion was that Chase was not entitled to any of the relief sought. Measured against the defendants’ refusal to extend the effect of any of the terms of the Undertaking beyond the return/determination of the motion and the defendants’ refusal to agree to any of the relief sought, I find that Chase achieved a measure of success on the motion.
[26] Specifically, the defendants characterize the term of the Order related to a potential sale of the Properties as more favourable to them than the related term of the Undertaking. The latter term required the defendants to give Chase at least 30 days’ written notice of their intention to sell one or more of the Properties. On receipt of such notice, Chase would have been permitted to bring a motion, on an urgent basis, for an order prohibiting the defendants from selling or transferring ownership of the property or the Properties.
[27] Under the Order, the Corporation is permitted to sell one or more of the Properties but is required to account to Chase with respect to the sale. The balance of any sale proceeds is to be held in trust by the defendants’ counsel pending an agreement between the parties or a further order of the court.
[28] I do not view the difference between those terms as evidence of a complete lack of success on Chase’s part. The defendants wanted to be able to do as they liked with the property and did not want to have to account for the proceeds of sale. Had they delivered a notice of their intention to sell one or more of the Properties, Chase would have been required to bring the matter before the court in an attempt to protect his alleged interest in them.
[29] By contrast, the terms of the Order (a) restrict what the defendants may do with the Properties, (b) require them to account for the proceeds of sale of one or more of the Properties, and (c) provide Chase with protection of his alleged interest in the Properties without requiring him to bring the matter before the court again.
[30] In summary, I find that Chase achieved a measure of success on the motion and, as a result of that success, he is entitled costs of the motion on the partial indemnity scale. I find, however, that his entitlement to costs is contingent on his success in the cause.
[31] The net effect of the outcome of the motion is to minimize, if not eliminate, the potential for prejudice to Chase’s alleged interest in the Properties and/or to the Corporation’s finances and operations. If Chase is ultimately successful on the application, then the end result of the motion is a measure of protection for him over the interest which he alleges he has in the Corporation and the Properties. If Chase is ultimately unsuccessful on the application, then the motion has resulted in a measure of protection for Chase over nothing and he should not be compensated with costs of the motion.
[32] In their Supplemental Submissions on Costs, the defendants are critical of Chase for proceeding by way of an application instead of an action and for proceeding with the motion rather than to a hearing (be it an application or a trial) on the overall merits of his claims.
[33] With respect to the first criticism, the defendants submit that “this matter should have been transformed into an action.” I am not aware of the defendants taking any steps to have the application converted to an action. They did not bring a cross-motion for relief of that kind. It is within the discretion of the judge hearing the application to order that the whole application or any issue proceed to trial and to give directions in that regard: r. 38.10(1)(b) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. The application may yet be changed to an action. If that happens, then the defendants will have an opportunity, at a later date, to address the issue of their costs of the application.
[34] In summary, Chase’s decision to proceed by application is not relevant to his entitlement to costs of the motion.
[35] With respect to the second criticism, I refer to the paragraphs above in which the duration of the Undertaking was only until the motion was determined. In addition, it is difficult to reconcile the defendants’ position that the matter should proceed to a “hearing on the merits” in December 2019 when, at the same time, they took the position that the application should be converted to an action, with the exchange of pleadings, the exchange of affidavits of documents, and examinations for discovery. Had the matter been converted to an action as the defendants requested, it would not have proceeded to a trial in December 2019.
[36] With respect to the third criticism, there is no evidence that the defendants were prepared to have the terms of the Undertaking remain in effect until a trial of the action (assuming that conversion was made).
[37] In summary, the defendants shall pay Chase his costs of the motion on the partial indemnity scale and in the cause. I turn next to fixing Chase’s costs of the motion.
[38] The full indemnity costs identified by the parties are roughly $50,000 each (with Chase at $52,745.72 and the defendants at $50,812.38). The reasonableness of the quantum of costs requested by the parties respectively is not in dispute. Clearly the costs claimed are within the reasonable expectations of the opposing party or parties.
[39] The parties differ, however, in their respective calculations of partial indemnity costs as a percentage of full indemnity costs. Chase relies on 60 per cent, and the defendants on 70 per cent, of full indemnity fees when calculating the fee portion of costs on the partial indemnity scale. In Dia et. al. v. Calypso Theme Waterpark et. al., 2020 ONSC 5191, Justice Williams reviewed the law with respect to fixing costs on the partial indemnity scale. At para. 29, she provided the following summary of the applicable principles:
• Partial indemnity costs must be fixed in an amount that is fair and reasonable for the unsuccessful party to pay;
• Partial indemnity costs must be fixed in an amount that is proportionate to the importance and complexity of the issues and to the amount involved in a proceeding;
• The degree of indemnification intended by the partial indemnity scale of costs is not defined;
• Partial indemnity costs may be but are not necessarily equal to a certain percentage of a successful party’s actual costs;
• There is a limit to a court’s discretion to award partial indemnity costs that is tied to the actual or full indemnity costs of the successful party: Partial indemnity costs must be less than two-thirds of the successful party’s actual or full indemnity costs; and
• Litigants seeking costs must disclose their actual or full indemnity costs.
[40] I am satisfied that the quantum of costs on the partial indemnity scale requested by Chase is in keeping with the principles set out above. The amount claimed is proportional to the overall monetary value of his claim and to the complexity of the issues argued on the motion.
[41] I fix Chase’s costs of the motion and costs submissions on the partial indemnity scale at a total of $32,770 based on $31,770 for the motion and $1,000 for the costs submissions.
Disposition
[42] The defendants shall pay Chase his costs of the motion and the related costs submissions on the partial indemnity scale, in the cause, and fixed in the total amount of $32,770.
Madam Justice Sylvia Corthorn
Date: November 12, 2020
COURT FILE NO.: CV-19-80062
DATE: 2020/11/12
ONTARIO
SUPERIOR COURT OF JUSTICE
RE: Chase Wong, Applicant
-and-
10658987 Canada Inc., Min Zhou, also know as Anna Zhou and Guo Jie Ma, also know as Sam Jie, Defendants
BEFORE: Madam Justice Sylvia Corthorn
COUNSEL: Robert J. De Toni, for the Plaintiff
Patricia A. Lawson, for the Defendants
COSTS endorsement
Madam Justice Sylvia Corthorn
Released: November 12, 2020