SUPERIOR COURT OF JUSTICE
COURT FILE NO.: CV-17-570254-00CP
DATE: 20210317
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
REBECCA LEE BOAL
Plaintiff
- and -
INTERNATIONAL CAPITAL MANAGEMENT INC., JOHN SANCHEZ a.k.a. JOHN PAUL SANCHEZ, JAVIER SANCHEZ a.k.a. JAVIER ANDREAS SANCHEZ, INVOICE PAYMENT SYSTEMS CORP., 1361655 ONTARIO INC., 1634792 ONTARIO INC., THE SAVEL CORPORATION, 2029984 ONTARIO LTD. and 2029986 ONTARIO LTD.
Defendants
David Milosevic, for the Plaintiff
David F. O’Connor and Sean M. Grayson for the Defendants, International Capital Management Inc., John Sanchez, Javier Sanchez, 1634792 Ontario Inc., 1361655 Ontario Inc., 2029984 Ontario Ltd. and 2029986 Ontario Ltd.
Douglas Levitt for the Defendant Invoice Payment System Corporation
Susan Toth for the Defendant The Savel Corporation
Proceeding under the Class Proceedings Act, 1992.
HEARD: In writing
PERELL, J.
REASONS FOR DECISION - COSTS
A. Introduction
[1] This is a cost decision after an unsuccessful motion to certify this action as a class action[1] under the Class Proceedings Act, 1992.[2]
[2] The Plaintiff Rebecca Lee Boal sued:
a. John Sanchez, his brother, Javier Sanchez, and their corporation, International Capital Management Inc. (“ICM”) for breach of fiduciary duty.
b. 1361655 Ontario Inc., 1634792 Ontario Inc., The Savel Corporation, 2029984 Ontario Ltd., and 2029986 Ontario Ltd. for: (a) knowing assistance and (b) knowing receipt.
c. Invoice Payment System Corporation (“IPS”) for: (a) knowing assistance; (b) knowing receipt; (c) breach of contract; and (d) oppression pursuant to the Ontario Business Corporations Act. [3]
[3] IPS claims costs of $317,061.24, all inclusive, on a substantial indemnity basis or $212,067.54, all inclusive, on a partial indemnity basis.
[4] The Savel Corporation claims costs of $35,000, all inclusive, on a partial indemnity basis.
[5] In the aggregate, the ICM Defendants claim: (a) costs of $433,088.15, all inclusive, on a mixed substantial and partial indemnity basis, which they reduce to $400,000, all inclusive, to avoid arguments about alleged redundancies; or (b) costs of $332,198.15, all inclusive, on a partial indemnity basis, which they reduce to $300,000, all inclusive, to avoid arguments about alleged redundancies. More precisely:
a. The Defendants, John Sanchez, Javier Sanchez, 1361655 Ontario Inc., 1634792 Ontario Inc., 2029984 Ontario Ltd., 2029986 Ontario Ltd., and ICM (collectively, the “ICM Defendants”), seek costs of $345,681.30, all inclusive, for the certification motion or $244,791.30, all inclusive, on a partial indemnity basis.
b. The ICM Defendants were represented by Wright & Temelini LLP, then Aird & Berlis LLP and then by Roy O’Connor LLP. The costs for Wright & Temelini LLP and Aird & Berlis LLP’s legal services ($33,026.80) are claimed on a partial indemnity basis. The costs for Roy O’Connor LLP’s legal services are claimed on a substantial indemnity basis or alternatively on a partial indemnity basis.
c. The Defendants John Sanchez, Javier Sanchez, and 1361655 Ontario Inc., who were represented by Aird & Berlis LLP seek costs on a partial indemnity basis of $13,827.36 for a motion to temporarily lift the certification of pending litigation.
d. The Defendants John Sanchez, Javier Sanchez, and 1361655 Ontario Inc., who were represented by Aird & Berlis LLP at the time seek costs on a partial indemnity basis of $73,579.49, all inclusive, for a successful motion to discharge a certificate of pending litigation.[4]
[6] For the reasons that follow, I award: (a) the ICM Defendants $300,000, all inclusive; (b) IPS $212,067.54, all inclusive; and (c) the Savel Corporation $35,000, all inclusive.
B. General Principles – Costs and Class Proceedings
[7] Modern costs rules are designed to advance five purposes in the administration of justice: (1) to indemnify successful litigants for the costs of litigation, although not necessarily completely; (2) to facilitate access to justice, including access for impecunious litigants; (3) to discourage frivolous claims and defences; (4) to discourage and sanction inappropriate behaviour by litigants in their conduct of the proceedings; and (5) to encourage settlements.[5]
[8] The court's discretion in awarding costs arises under the authority of s. 131 of the Courts of Justice Act[6] and is to be exercised by a consideration of the factors in rule 57.01(1) of the Rules of Civil Procedure.[7] The traditional discretionary principles developed for costs awards are codified in rule 57.01(1), which states:
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.
[9] The most general rule about costs, not to be departed from without good reason, is that costs at a partial indemnity scale follow the event, which is to say that normally costs are ordered to be paid by the unsuccessful party to the successful party on a partial indemnity scale.[8] This is the "loser-pays" principle.
[10] A critical controlling principle for the awarding of costs is that the sum awarded reflect the fair and reasonable expectations of the unsuccessful litigant.[9] In Boucher v. Public Accountants for the Province of Ontario,[10] after a two-day hearing of a judicial review application, the motions judge fixed costs on a partial indemnity scale at $187,682.51, all inclusive. On appeal, the Court of Appeal reduced the aggregated award to $63,000, all inclusive. At para. 24 of his judgment, Justice Armstrong stated:
- The appellants submit that the motions judge accepted the bills of costs that were presented to her without any deductions. The bills were prepared in accordance with the calculation of hours times dollar rates provided by the costs grid. While it is appropriate to do the costs grid calculation, it is also necessary to step back and consider the result produced and question whether, in all the circumstances, the result is fair and reasonable. This approach was sanctioned by this court in Zesta Engineering Ltd. v. Cloutier (2002), 2002 25577 (ON CA), 21 C.C.E.L. (3d) 161 (Ont. C.A.) at para. 4.
In our view, the costs award should reflect more 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.
See also Stellarbridge Management Inc. v. Magna International (Canada) Inc., 2004 9852 (ON CA), [2004] O.J. No. 2102 (C.A.) para. 97.
[11] The assessment of reasonableness is discretionary and very much dependent upon the circumstances of each case. In some cases, it may be reasonable for the successful party to make exhaustive efforts and to commit enormous legal resources, and in those cases, it might be said that the unsuccessful party could reasonably expect to pay those costs. In other cases, however, the successful party may have been well served by giving his or her lawyer instructions to make exhaustive efforts, but it might be disproportionate and unreasonable to expect the unsuccessful party to pay those costs, even if he or she would have expected or anticipated that his or her foe would have marshalled those legal resources.
[12] In Davies v. Clarington (Municipality)[11] at para. 52, Justice Epstein stated that the overriding principle in awarding costs is reasonableness. She stated:
As can be seen, the overriding principle is reasonableness. If the judge fails to consider the reasonableness of the costs award, then the result can be contrary to the fundamental objective of access to justice. Rather than engage in a purely mathematical exercise, the judge awarding costs should reflect on what the court views as a reasonable amount that should be paid by the unsuccessful party rather than any exact measure of the actual costs of the successful litigant. In Boucher [Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291 (C.A.)], this court emphasized the importance of fixing costs in an amount that is fair and reasonable for the unsuccessful party to pay in the particular proceeding at para. 37, where Armstrong J.A. said: "[t]he failure to refer, in assessing costs, to the overriding principle of reasonableness, can produce a result that is contrary to the fundamental objective of access to justice."
[13] The same approach is applied to the recovery of fees paid to an expert witness. In Pearson v. Inco Ltd.,[12] at para. 20, Justice Nordheimer stated:
[T]he approach to the recovery of fees paid to expert witnesses ought to be exactly the same as the approach to the fees to be recovered by counsel. The court should consider what is fair in terms of hours and rates as well as the overall amount and should then fix an amount which it is reasonable for the losing party to pay. In so doing, the court is not bound by what the client may have actually had to pay the expert.
[14] Although the unsuccessful party is not obliged to disclose what he or she expended on costs, where the unsuccessful party submits that the costs claimed by the successful party are excessive, evidence of what he or she expended is relevant to the determination of what is reasonable and of what the unsuccessful party might reasonably have expected to pay and the failure to proffer this evidence tempers and diminishes the unsuccessful party’s criticism of the excessiveness of the costs claim.[13] An attack on the quantum of the opponent’s claim for costs without disclosing one’s own bill of costs is no more than an attack in the air.[14]
[15] Another important factor in awarding costs in class actions is the principle that the court should have regard to the underlying goals of the Class Proceedings Act, 1992; namely: (1) access to justice; (2) behaviour modification; and (3) judicial economy.[15]
[16] In Pearson v. Inco Ltd.,[16] at para. 13, the Court of Appeal identified the following principles for fixing costs on a certification motion: (1) Ontario, unlike other class proceedings jurisdictions such as British Columbia, has not sought to interfere with the normal rule that costs will ordinarily follow the event; (2) the costs must reflect what is fair and reasonable; (3) the costs should, if possible, reflect costs awards made in closely comparable cases, recognizing that comparisons will rarely provide firm guidance; (4) a motion for certification is a vital step in the proceeding and the parties expect to devote substantial resources to prosecuting and defending the motion; (5) the costs expectations of the parties can be determined by the amount of costs that an unsuccessful party could reasonably expect to pay; (6) the complexity of the issues; (7) whether the case raises an issue of public importance; and (8) a fundamental object of the Class Proceedings Act, 1992 is to provide enhanced access to justice.
[17] In class actions, distributive costs awards, in which the major issues are identified and the successful party on each issue is awarded costs, are to be avoided.[17]
C. Discussion and Analysis
[18] The Savel Corporation was a successful party on the certification motion, and it claims $35,000 on a partial indemnity basis, which drew a mild submission from Ms. Boal that the sum should be modestly reduced. I am not persuaded that there is a good reason to reduce this partial indemnity scale claim for costs. It is fair and reasonable and in accord with the above principles that govern the awarding of costs in class proceedings. I, therefore, award the Savel Corporation, $35,000, all inclusive.
[19] IPS was a successful party on the certification motion, and it claims costs of $317,061.24, all inclusive, on a substantial indemnity basis or $212,067.54, all inclusive, on a partial indemnity basis.
[20] In my opinion, as I shall explain below, this is not a case for a punitive costs award and the appropriate award to IPS is on a partial indemnity basis. That award is fair and reasonable and in accord with the above principles that govern the awarding of costs in class proceedings. I, therefore, award IPS $212,067.54, all inclusive.
[21] The ICM Defendants were successful parties on the certification motion and successful on two other interlocutory motions in the run up to the certification motion. They claim costs of $433,088.15, all inclusive, on a mixed substantial and partial indemnity basis, which they reduce to $400,000, all inclusive, to avoid arguments about alleged redundancies; or (b) costs of $332,198.15, all inclusive, on a partial indemnity basis, which they reduce to $300,000, all inclusive, to avoid arguments about alleged redundancies.
[22] In my opinion, as I shall explain below, this is not a case for a punitive costs award and the appropriate award to the ICM Defendants is on a partial indemnity basis. That award is fair and reasonable and in accord with the above principles that govern the awarding of costs in class proceedings. I, therefore, award the ICM Defendants $300,000, all inclusive.
[23] The Defendants respective claims for costs on a substantial indemnity basis are essentially based on the circumstances that: (a) Ms. Boal made serious allegations of disreputable conduct by the Defendants which were not proven, which is a well-established grounds for a punitive costs award; (b) Ms. Boal pursued claims for damages and for security for those damages, long after it was or ought to have been apparent that the Class Members did not suffer any damages; (c) Ms. Boal unreasonably pursued causes of action when it was palpably apparent that they were not certifiable in accordance with the criteria for certification; (d) Ms. Boal added parties against whom there were baseless claims of knowing assistance and knowing receipt; (e) the Defendants frequently warned Ms. Boal of the litigation risks to which Ms. Boal was exposed and there were numerous opportunities to take an escape ramp; and (f) after protracted settlement negotiations Ms. Boal walked away from a settlement that was very favourable to the Class Members in as much as they would recover a monetary award and not be liable for costs.
[24] While there is some traction to the Defendants’ arguments that the case is an appropriate one for a punitive award of costs, there are also counterarguments that Ms. Boal’s action, particularly at the outset when the absence of harm from the alleged wrongdoing was not as clear as it was to become, does not merit a punitive costs award. Moreover, at its core, in the immediate case, the Defendants’ arguments in favour of a punitive costs award are ultimately based largely on the circumstances that Ms. Boal’s arguments for certification, which it should be recalled is not a motion that establishes the merits of the plaintiff’s case, failed on the merits of the certification criteria and that with the benefit of hindsight she should rue not taking one of the escape routes offered to her by the Defendants.
[25] However, Ms. Boal’s action was never frivolous and vexatious, her breach of fiduciary duty claim has not been determined on an individual basis, the claim was appropriately prosecuted toward a certification motion, and the failure on the certification merits and the wisdom of hindsight are why costs are awarded on a partial indemnity basis. These circumstances of failing to achieve certification, as such, are not a reason to make a punitive costs award in all the circumstances of the immediate case.
[26] Having regard to all the circumstances of the immediate case and the factors relevant to the exercise of the court’s discretion, I would not make a punitive costs award in the immediate case, but the Defendants are respectively entitled to their costs on a partial indemnity basis as claimed.
[27] Orders accordingly.
Perell, J.
Released: March 17, 2021
COURT FILE NO.: CV-17-570254-00CP
DATE: 20210317
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
REBECCA LEE BOAL
Plaintiff
- and -
INTERNATIONAL CAPITAL MANAGEMENT INC., JOHN SANCHEZ a.k.a. JOHN PAUL SANCHEZ, JAVIER SANCHEZ a.k.a. JAVIER ANDREAS SANCHEZ, INVOICE PAYMENT SYSTEMS CORP., 1361655 ONTARIO INC., 1634792 ONTARIO INC., THE SAVEL CORPORATION, 2029984 ONTARIO LTD. and 2029986 ONTARIO LTD.
Defendants
REASONS FOR DECISION - COSTS
PERELL J.
Released: March 17, 2021
[1] Boal v. International Capital Management Inc. 2021 ONSC 651
[2] S.O. 1992, c. 6.
[3] R.S.O. 1990, c. B 16.
[4] Boal v. International Capital Management Inc., 2018 ONSC 2275 (CPL Discharge Decision); Boal v. International Capital Management Inc., 2018 ONSC 3646 (CPL Costs Decision).
[5] Reynolds v. Kingston (City) Police Services Board (2007), 2007 ONCA 375, 86 O.R. (3d) 43 (C.A.); 1465778 Ontario Inc. v. 1122077 Ontario Ltd. (2006), 2006 35819 (ON CA), 82 O.R. (3d) 757 (C.A.); British Columbia (Minister of Forests) v. Okanagan Indian Band, 2003 SCC 71, [2003] 3 S.C.R. 371 (S.C.C.); Somers v. Fournier (2002), 2002 45001 (ON CA), 60 O.R. (3d) 225 (C.A.); Fong v. Chan (1999), 1999 2052 (ON CA), 46 O.R. (3d) 330 (C.A.).
[6] R.S.O. 1990, c. C-43.
[8] Hague v. Liberty Mutual Insurance Co., 2005 13782 (ON SC), [2005] O.J. No. 1660 (S.C.J.); Pike's Tent and Awning Ltd. v. Cormdale Genetics Inc. (1998), 27 C.P.C. (4th) 352 (Ont. Gen. Div.); Bell Canada v. Olympia & York Developments Ltd. (1994), 1994 239 (ON CA), 17 O.R. (3d) 135 (C.A.); McCracken v. Canadian National Railway, 2012 ONSC 6838.
[9] McGee v. London Life Insurance Co., [2008] O.J. No. 5312 (S.C.J.); Caputo v. Imperial Tobacco Ltd. (2005), 2005 63806 (ON SC), 74 O.R. (3d) 728 (S.C.J.); Caputo v. Imperial Tobacco Ltd. (2005), 74 O.R. (3d) 728 (S.C.J.); Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291 (C.A.); Lee v. General Motors Co. of Canada, [2004] O.J. No. 2245 (S.C.J.).
[10] (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291 (C.A.).
[11] (2009), 2009 ONCA 722, 100 O.R. (3d) 66 (C.A.).
[12] [2002] O.J. No. 3532 (S.C.J.).
[13] Chapman v. Benefit Plan Administrators Ltd., 2014 ONSC 537 at paras. 11-12; MacDonald v. BMO Trust Co., 2012 ONSC 2654 at para. 27; Hague v. Liberty Mutual Insurance Co. (2005), 2005 13782 (ON SC), 13 C.P.C. (6th) 37 at para. 15 (S.C.J.).
[14] United States of America v. Yemec, 2007 65619 (ON SCDC), [2007] O.J. No. 2066 (Div. Ct.) at para. 54; Risorto v. State Farm Mutual Automobile Insurance Co. (2003), 2003 43566 (ON SC), 64 O.R. (3d) 135 at para. 10 (S.C.J.).
[15] Green v. Canadian Imperial Bank of Commerce, 2016 ONSC 3829; Brown v. Canada (Attorney General), 2013 ONCA 18 at para. 37; Smith v. Inco Ltd., 2012 ONSC 5094 at paras. 74-109; Ruffolo v. Sun Life Assurance Co. of Canada, 2009 ONCA 274, at para. 37; KRP Enterprises Inc. v. Haldimand (County), [2008] O.J. No. 3021 (S.C.J.); McNaughton Automotive Ltd. v. Co-operators General Insurance Co., 2007 12709 (ON SCDC), [2007] O.J. No. 1453 (Div. Ct.).
[16] (2006), 2006 7666 (ON CA), 79 O.R. (3d) 427 (C.A.).
[17] Lau v. Bayview Landmark Inc., [1999] O.J. No. 4385 at paras. 2-4 (S.C.J.) Pearson v. Inco Ltd., (2006), 2006 7666 (ON CA), 79 O.R. (3d) 427 at para. 5 (C.A.).