COURT FILE NO.: 14-49521 DATE: 20210218

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Punch Integrated Communications Inc., Edward Roszczka, Patricia Roszczka and Rostel Realty Corp. Plaintiffs and Responding Parties on the Motion

– and –

2125426 Ontario Inc., Ric Agostini, Paul Montague, Scott Martin and Tom O’Rourke Defendants and Moving Parties on the Motion

Counsel: Paul Marshall, Counsel for the Plaintiffs P. A. Gupta, Counsel for Defendants, 2125426 Ontario Inc., Ric Agostini, Paul Montague and Scott Martin R. Andrew Biggart, Counsel for Tom O’Rourke

HEARD: In Writing

COSTS DECISION

Overview

[1] The defendant, Tom O’Rourke (“O’Rourke”), and the remaining defendants (hereinafter the “212 Defendants”) (collectively “the defendants”) each brought a motion for the dismissal of the plaintiffs’ action on the basis that it was statute-barred and, if the plaintiffs’ action was not dismissed, for an order that the plaintiff post security for costs of their claims.

[2] On November 20, 2020, I held that the plaintiffs’ claims were statute-barred and dismissed the action, with reasons to follow. Reasons for Decision were released on December 4, 2020 (the “Reasons”). I found that in 2011, two of the four plaintiffs, Punch Integrated Communications Inc. (“Punch”) and Ed Roszczka (“Mr. Roszczka”), had previously sued O’Rourke and the 212 Defendants in 2011 (the “2011 Claim”) and that this action (the “2014 Claim”) was essentially a restatement of the 2011 Claim.

[3] There were two plaintiffs in the 2014 action - Mr. Roszczka’s spouse, Patricia Roszczka (“Mrs. Roszczka”) and Rostel Realty Corp., a corporation owned by Mr. and Mrs. Roszczka – who were not plaintiffs in the 2011 Claim. However, as set out in the Reasons, I found that all the plaintiffs in the 2014 Claim had “discovered” their claim by July 14, 2011. As a result, the claims set out in the 2014 Claim were statute-barred.

[4] As the successful parties on the motion, O’Rourke and the 212 Defendants are presumptively entitled to their costs of their motion and of the 2014 Claim.

[5] This decision follows my receipt and review of the parties’ costs written submissions.

Positions of the Parties

(i) The 212 Defendants:

[6] The 212 Defendants seek their costs of the motion and the 2014 Claim on a substantial-indemnity scale in the amount of $38,191.47.

[7] The 212 Defendants identify three grounds in support of their submissions that they are entitled to costs on a substantial indemnity basis because:

1. the proceedings were totally unnecessary;
2. the 212 Defendants made legitimate offers to settle; and
3. the plaintiffs made serious and unfounded allegations of fraud.

(ii) O’Rourke

[8] O’Rourke also seeks his costs on a substantial indemnity scale in the amount of $23,745.63.

[9] In support of his submission, O’Rourke asserts that:

1. it was plain and obvious that the plaintiffs’ claim was statute-barred and should never have been commenced, let alone pursued, especially as against O’Rourke;
2. O’Rourke left 2125426 Ontario Inc. in 2009 and suffered the stress of having a $12 million claim hanging over his head for nine years which concluded with the plaintiffs being awarded nothing; and
3. the plaintiffs made serious and completely unsubstantiated allegations of fraud as against all the defendants, including O’Rourke, despite that the plaintiffs’ own evidence disclosed no evidence of fraudulent conduct or any improper conduct whatsoever.

(iii) The Plaintiffs

[10] The plaintiffs take issue with a) the time spent by the defendants on the motions for summary judgment; b) the lack of complexity of the issues involved; and c) the defendants’ request for costs on a substantial indemnity scale.

(a) Time Spent

[11] The plaintiffs submit that had they successfully resisted the defendants’ motion for summary judgment, then none of the time spent by the defendants would have “been thrown away”. Secondly, that the time spent on “the investigation done to prepare the 2014” Claim would have “carried over to the preparation of the defendants’ motions for summary judgment”. The plaintiffs assert that, added together, the time spent by the defendants’ counsel on the motion is 114 hours. By my arithmetic, the combined time spent by the defendants on the motion (i.e. lawyers, law clerks and student) totals 112 hours: 69.20 hours for the 212 Defendants and 42.8 hours for O’Rourke.

[12] The plaintiffs chose not to include their Bill of Costs or make any reference to the time spent by their lawyers. That information might have assisted the court in comparing the time spent by counsel.

(b) Lack of Complexity

[13] The plaintiffs submit that the issues on this motion were straightforward and turned on a finding of the plaintiffs’ state of knowledge when the claims were issued in 2011 and 2014. The plaintiffs assert that this court “disposed of the plaintiffs’ state of knowledge on a discrete analysis” of emails exchanged in 2006, a letter of understanding between the parties, and the incorporation of the defendants’ company – in short “not a finding made on a mountain of competing evidence”.

[14] As set out in the Reasons, on a motion for summary judgment, the parties must put their best foot forward. If there was not “a mountain of competing evidence”, it is because the plaintiffs failed to lead competing evidence.

[15] The basis of the defendants’ motion for summary judgment was that the 2011 Claim showed that the plaintiffs had “discovered” their claims by July 14, 2011. In response to the motion, the plaintiffs alleged, in part, fraudulent concealment of facts which, the plaintiffs submitted, were not discovered until 2013. However, the plaintiffs’ own evidence on the motion showed that the documents they identified as “key documents” had been in the possession of the plaintiffs at all relevant times; furthermore, the plaintiffs led no evidence to show that the defendants had “hidden, secreted, cloaked, camouflaged, disguised, and/or covered-up the conduct or identity of their alleged wrongdoings” [1].

(c) Costs on a Substantial Indemnity Scale: Allegations of Fraud and Offers to Settle

[16] The plaintiffs oppose the defendants’ request that costs be awarded on a substantial indemnity scale. They ask the court to consider the entirety of paragraph 26 of Hamilton v. Open Window Bakery Ltd., 2004 SCC 9, and not just the portion referenced by the 212 Defendants. Paragraph 26 is instructive in this case and reads as follows:

In Young v. Young, [1993] 4 S.C.R. 3, at p. 134, McLachlin J. (as she then was) for a majority of this Court held that solicitor-and-client costs “are generally awarded only where there has been reprehensible, scandalous or outrageous conduct on the part of one of the parties”. An unsuccessful attempt to prove fraud or dishonesty on a balance of probabilities does not lead inexorably to the conclusion that the unsuccessful party should be held liable for solicitor-and-client costs, since not all such attempts will be correctly considered to amount to “reprehensible, scandalous or outrageous conduct”. However, allegations of fraud and dishonesty are serious and potentially very damaging to those accused of deception. When, as here, a party makes such allegations unsuccessfully at trial and with access to information sufficient to conclude that the other party was merely negligent and neither dishonest nor fraudulent (as Wilkins J. found), costs on a solicitor-and-client scale are appropriate: see, generally, M. M. Orkin, The Law of Costs (2nd ed. (loose-leaf)), at para. 219.

[17] Without putting forth supporting evidence, the plaintiffs alleged that the defendants had concealed facts from the plaintiffs and, in their factum on the motion, asserted that the doctrine of fraudulent concealment ought to be applied to “prevent a limitation period for operating as an instrument of injustice”. In other words, the plaintiffs relied upon the doctrine of fraudulent concealment in their defence of the motion for summary judgment.

[18] The plaintiffs submit that there were no findings that the plaintiffs had been engaged in conduct that would attract solicitor-and-client costs. While the plaintiffs asserted fraudulent concealment on this motion, they ask the court to note that the motion was decided on the basis of the limitation period and without an adjudication on the allegation of fraud. The plaintiffs also submit that, in this case, they were not given the opportunity to retract the allegations of fraud, as was the case in 1442810 Ontario Inc. v. Sarohia, 2015 ONSC 7537, a case relied upon by O’Rourke.

[19] It is appropriate to address that last submission now: the allegation of fraudulent concealment was the basis of the plaintiffs’ submission that the 2014 Claim was not barred by the expiry of a limitation period. Withdrawing that allegation would have been fatal to the 2014 Claim (Harold v. Quigley, 2017 ONSC 6976, at para. 13).

[20] The plaintiffs also assert that there had not been examinations for discovery, pre-trial and trial, and all of the “discovery opportunities a litigant normally benefits from”.

[21] On a motion for summary judgment, the court is entitled to assume that the evidence put forth will be the evidence at trial. When the plaintiffs commenced the 2014 Claim, the defendants disclosed that they were aware of the 2011 Claim and stated that they would bring a motion for summary judgment. Despite that, the plaintiffs did not conduct examinations for discovery or cross-examine on the affidavit on this motion. The plaintiffs’ submission that, had there been cross-examinations or examinations for discovery, the outcome of the motion for summary judgment might have been different, comes too late and can have no bearing on costs.

[22] Finally, the plaintiffs state that offers to settle related to the settlement of the 2014 Claim, not the motion for summary judgment.

[23] Rule 57 [2] allows the court to consider offers to settle. The cost consequences to a plaintiff of not accepting a defendant’s offer to settle, at best, entitles a defendant to partial indemnity costs from the date of service of a r. 49 offer. As the plaintiffs’ claim has been dismissed in its entirety, partial indemnity costs are the starting point for the determination of the defendants’ costs, subject to adjustment upon the application of the r. 57 factors.

[24] The plaintiffs asked that the defendants’ costs be fixed at $25,000 inclusive of fees, disbursements and taxes.

[25] While it is not perfectly clear, as I read the plaintiffs submissions, they appear to be asking that costs be fixed for the defendants, collectively, in the total amount of $25,000.

The Law

[26] The general principles applicable to party and party costs are well settled. The successful party is presumptively entitled to its costs, which are in the discretion of the court. (Courts of Justice Act, RSO 1990, c. C.43, s. 131(1) “the CJA”)

[27] Rule 57.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 sets out factors I may consider in exercising my discretion:

Factors in Discretion

57.01 (1) In exercising its discretion under section 131 of the Courts of Justice Act to award costs, the court may consider, in addition to the result in the proceeding and any offer to settle or to contribute made in writing,

(0.a) 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;

(0.b) the amount of costs that an unsuccessful party could reasonably expect to pay in relation to the step in the proceeding for which costs are being fixed;

(a) the amount claimed and the amount recovered in the proceeding;

(b) the apportionment of liability;

(c) the complexity of the proceeding;

(d) the importance of the issues;

(e) the conduct of any party that tended to shorten or to lengthen unnecessarily the duration of the proceeding;

(f) whether any step in the proceeding was,

(i) improper, vexatious or unnecessary, or

(ii) taken through negligence, mistake or excessive caution;

(g) a party’s denial of or refusal to admit anything that should have been admitted;

(h) whether it is appropriate to award any costs or more than one set of costs where a party,

(i) commenced separate proceedings for claims that should have been made in one proceeding, or

(ii) in defending a proceeding separated unnecessarily from another party in the same interest or defended by a different lawyer; and

(i) any other matter relevant to the question of costs. R.R.O. 1990, Reg. 194, r. 57.01 (1); O. Reg. 627/98, s. 6; O. Reg. 42/05, s. 4 (1); O. Reg. 575/07, s. 1.

[28] Overall, the objective is to fix an amount that is fair and reasonable, having regard for, among other things, the expectations of the parties concerning the quantum of costs: Boucher v. Public Accountants Council for the Province of Ontario, [2004] O.J. No. 2634, 71 O.R. (3d) 291 (C.A.) at paras. 26, 38.

[29] In fixing costs, the overriding principle is that of reasonableness (Boucher, at para. 27).

Analysis

[30] Applying the principles of reasonableness and expectations of the parties as per Boucher, the starting point of my analysis is a consideration of the time/fees of each party on this motion.

[31] The costs claimed relate to the litigation as a whole, including the motion for summary judgment. In determining what amount is reasonable in this case, I have taken into account that:

(i) the $12 million claimed by the plaintiffs is a significant sum;

(ii) the time spent by counsel for O’Rourke and the 212 Defendants on investigating the allegations and drafting pleadings is justified given:

a) the passage of time since the occurrence of the events underlying the claim; b) the complexity of the claim itself, which included breach of contract, breach of trust and wrongful interference with economic relations; c) the nature of the damages, including the $2.1 million claimed by Rostel Realty Corp. for loss of rental income and capital loss allegedly suffered by the plaintiffs; and, d) the nature and scope of the evidence to be reviewed, which was voluminous, complex, and embedded in computer and other records.

(iii) there were specific allegations made against one of the 212 Defendants, Paul Montague, which had to be investigated, separate and apart for the allegations against the remaining 212 Defendants, and which required specific paragraphs in the statement of defence;

(iv) to the extent possible, the 212 Defendants and O’Rourke collaborated on the motion for summary judgment, to minimize overlap of effort and to keep costs down;

(v) despite the collaboration of the defendants, the factual differences between the 212 Defendants and O’Rourke required those parties to be separately represented in the 2014 Claim and on the summary judgment motion;

(vi) the materials filed on the summary judgment motion; and

(vii) as evidenced by the Bill of Costs filed by the 212 Defendants, a significant amount of the time recorded was for services delegated to more junior lawyers or law clerks and a student, whose hourly rates were much lower than that of senior counsel, P. A. Nina Gupta, who had carriage of the defence and argued the motion for summary judgment. On its face, that delegation of work appears reasonable and prudent. A similar observation is made of the Bill of Costs submitted by O’Rourke. Although there was no claim for law clerks or students, work appears to have been delegated to more junior counsel again, leaving R. Andrew Biggart, the senior counsel with carriage, to make oral argument on the motion for summary judgment.

[32] In consideration of the foregoing, I conclude that the time spent by counsel for the 212 Defendants and O’Rourke as set out in their Bills of Costs was reasonable.

[33] The plaintiffs have raised no issue with the hourly rates charged. While at the high-end, I accept that the hourly rates charged by Ms. Gupta are within a reasonable range for senior counsel on a claim of this magnitude. While the hourly rate charged by R. Andrew Biggart, counsel for O’Rourke, is lower than Ms. Gupta’s, I find that it is at the low-end for a lawyer with his seniority.

[34] The materials filed on the motion assist with the application of rule 57.01 (0.b): what amount of costs would the plaintiffs have reasonably expected to pay? That information is found in the motion materials filed by the defendants, both of which included a draft Bill of Costs, filed in support of the alternate relief claimed: an order that the plaintiffs post security for costs.

[35] In the draft bill of costs filed by the 212 Defendants filed in support of the motion for security for costs, they showed actual fees to October 2, 2019 of $11,012.50, for investigation and preparation of pleadings, and $14,074, to respond to a motion to set a timetable and to prepare the motion for summary judgment. In the Bill of Costs filed by the 212 Defendants in their costs submissions, it shows fees incurred for the drafting and exchanging of pleadings of $12,010, and for the motions, $24,876.50. The latter figure is an increase of approximately $10,800 from October 2, 2019, which, I assume, related to the review of the plaintiffs’ motion record, preparation of the reply motion record, preparation of a factum, attendance to argue the motion, review of the Reasons, and preparation of costs submissions.

[36] Prior to bringing their summary judgment motion, the 212 Defendants had served an offer to settle dated March 8, 2016 pursuant to which, they agreed to pay the plaintiffs $500 in full settlement of the plaintiffs’ claims. By its terms, this offer remained open for acceptance until one minute after the commencement of trial.

[37] The 212 Defendants served their motion for summary judgment on October 14, 2020. The motion was not argued until November 20, 2020. I conclude that the offer to settle made by the 212 Defendants remained open for acceptance up to November 20, 2020, at the latest. Thus, the plaintiffs could have accepted this offer and, by then, would have known exactly what fees had been incurred by the 212 Defendants up to October 2, 2019. The plaintiffs would also have known that the 212 Defendants would have continued to incur legal fees after October 2, 2019.

[38] On his motion for summary judgment, O’Rourke also sought the alternate relief of security for costs. He was seeking a payment of $100,000.00, which would have served to inform the plaintiffs of the costs that O’Rourke would be seeking from them, if he was successful against the plaintiffs.

[39] From the evidence put forth on the summary judgment motions, the plaintiffs were made aware of the defendants’ costs - actual and anticipated. I find that the plaintiffs knew that if they were unsuccessful in defending the defendants’ motions for summary judgment, the plaintiffs reasonably expected to be ordered to pay costs on a partial indemnity basis. They also knew that the 212 Defendants’ partial indemnity costs exceeded $25,000 and O’Rourke’s were approximately $16,000.

Is there any basis for awarding an elevated rate of costs?

[40] In my view, there is good reason to fix costs in an amount higher than partial indemnity costs.

[41] Firstly, soon after the 2014 Claim had been served, the plaintiffs knew that the defendants took the position that the 2014 Claim was statute-barred on the basis that the plaintiffs, or at least two of them, had issued the 2011 Claim against the same defendants asserting essentially the same claims.

[42] After serving a Notice of Intent to Defend, the 212 Defendants offered to consent to a dismissal of the 2014 Claim without costs, provided they were not required to file a statement of defence. The plaintiffs, represented by counsel, (who had drafted the 2011 Claim), chose to proceed with the 2014 Claim.

[43] The plaintiffs’ claim against O’Rourke faced an additional limitations-period hurdle given O’Rourke’s departure from 2125426 Ontario Inc. in May 2009. As he makes clear in his statement of defence, O’Rourke had no involvement with any of the other parties to this litigation from and after May 6, 2009. Despite that, the plaintiffs pursued their claim against O’Rourke, knowing that his involvement in any of the events ended, at the latest, more than five years prior to the 2014 Claim. As set out in his costs submissions, O’Rourke has borne of the stress of being named as a defendant in a $12 million claim for a period of nine years.

Disposition

[44] Having determined that this case justifies an award of costs in excess of partial indemnity, and having applied the r. 57.01 principles to the facts of this case, I fix the defendants’ costs to be paid by the plaintiffs as follows:

(1) to the 212 Defendants the sum of $32,265 inclusive of HST and disbursements; and

(2) to O’Rourke the sum of $22,000 inclusive of HST and disbursements

to be paid by the plaintiffs, who are jointly and severally liable therefor.

Date: February 18, 2021 Justice L. Sheard

Footnotes

[1] Reasons, at para. 60. [2] Rules of Civil Procedure, R.R.O. 1990, Reg. 194.