COURT FILE NO.: 14-61338
DATE: May 17, 2021
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
MATTHEW DUMAIS and DUMAIS FAMILY TRUST
Plaintiffs
– and –
NOVOTECH TECHNOLOGIES CORPORATION
Defendant
– and –
RICHARD HOBBS, LARRY BELLEHUMEUR and 7341334 CANADA INC.
Defendants
James Plotkin on limited retainer for Matthew Dumais, with Matthew Dumais representing himself for the balance of any issues
No one appearing for Dumais Family Trust
Gary G. Boyd for Novotech Technologies Corp., and as agent for Larry Bellehumeur and 7341334 Canada Inc.
Richard Hobbs representing himself
HEARD: May 4, 2021
ENDORSEMENT FOLLOWING MAY 4, 2021 CASE CONFERENCE
Justice Sally Gomery
[1] The parties attended on May 4, 2021 to obtain the court’s further directions on the determination of costs payable by the defendant, Novotech Technologies Corporation (“Novotech”), to the plaintiff, Matthew Dumais, pursuant to the parties’ settlement agreement. For the reasons that follow, I confirm that Mr. Dumais shall bring a motion to enforce the settlement so that I may determine the issue. Other claims that Mr. Dumais intends to exert against Novotech shall not be considered in the context of this motion.
Background
[2] This longstanding and highly contentious dispute arises from a shareholders’ disagreement. I have been case managing the action since 2018. In June 2020, Novotech made an offer to settle the action by purchasing Mr. Dumais’ shares for a fixed price plus interest, plus “costs as agreed or assessed”. In return, Mr. Dumais would agree to dismiss the action. Mr. Dumais accepted the offer and Novotech has since paid the agreed upon price for the shares plus interest.
[3] The parties have, however, been unable to agree on the scale or quantum of the costs that Novotech should pay to Mr. Dumais. Mr. Dumais contends that Novotech would pay his full indemnity or substantial indemnity costs. The costs are in the mid-six figures and involve legal fees and disbursements paid to several different law firms. Mr. Dumais may also seek to recover some costs he personally incurred during the action. Novotech says that its offer reasonably contemplated the payment of only partial indemnity costs, and that some costs claimed by Mr. Dumais were not incurred for this action.
[4] The parties attempted to schedule an assessment hearing through the assessment office but were advised that they needed a court order to do so. Mr. Dumais also sought to challenge alleged accounting errors in Novotech’s calculation of the taxable investment income generated by the shares.
[5] At a case conference on April 6, 2021, I concluded that Mr. Dumais should bring a motion to enforce the parties’ settlement to provide the parties with a forum and the procedural means to adjudicate the costs issue. I directed the parties to obtain a hearing date for the motion through the motions’ office. I advised Mr. Dumais that the tax issue appeared to fall outside the parties’ settlement.
[6] Following the April conference, the parties remained unable to agree on a way forward and requested further direction from the court. This resulted in the May 4 case conference.
The Costs Issue
The Parties’ Positions
[7] At the May 4 case conference, Novotech argued that the appropriate mechanism to determine costs is through an assessment, because the offer specifically provides for “costs as agreed or assessed”. R. 57.04 provides that:
Where a proceeding is settled on the basis that a party shall pay or recover costs and the amount of costs is not included in or determined by the settlement, the costs may be assessed under Rule 58 on the filing of a copy of the minutes of settlement in the office of the assessment officer.
[8] Novotech says that my order should therefore be confined to requiring that costs be assessed by an assessment officer. In the alternative, it suggests that I should refer the determination of costs to a master.
[9] Mr. Dumais contends that the enforcement of the agreement to settle is a contractual issue in respect of which this court clearly has jurisdiction. The fixing of costs is an ancillary issue which a Superior Court judge can address pursuant to their inherent jurisdiction to deal with assessment matters; Woods v. Chamberland, 1991 CanLII 7186 (ONSC); Peel Terminal Warehouses Ltd. v. Wootten, Rinaldo & Rosenfeld (1978), 1978 CanLII 1655 (ON CA), 21 O.R. (2d) 857 (C.A.).
Analysis
[10] An assessment officer has broad discretion to fix costs, taking into account not only the factors specifically listed at r. 58.06(1), but also any other factor that the officer considers relevant. This includes a determination of the appropriate scale of costs, taking into account the overarching principles of fairness, reasonableness and proportionality.
[11] In this case, however, the appropriate scale of costs depends not only on the application of these principles, but on the interpretation of the parties’ agreement. In order to decide whether Mr. Dumais should be compensated for the costs of litigation on a full, substantial or partial indemnity basis, findings will have to be made about the parties’ intent when they reached their settlement and the scope of their agreement. This may require not only the interpretation of the plain meaning of the parties’ agreement but a consideration of evidence with respect to the surrounding circumstances.
[12] I conclude that, in this case, the necessary factual and legal determinations should be made by a judge. The situation here is analogous to the situation in Cookish v. Paul Lee Associates Professional Corporation, 2013 ONCA 278, where the Court of Appeal considered whether an assessment officer can, or should, determine whether the parties had a valid contingency fee agreement. In his reasons, R.A. Blair, JA noted that an assessment officer has no inherent jurisdiction and courts must be careful in making orders that would require officers to exercise powers that are not expressly granted to them by statute. He concluded that, while there may be circumstances in which it is appropriate for a judge, when referring a solicitor’s bill for assessment, to delegate decisions about the nature and validity of a retainer agreement, the preferable procedure is for a judge to make those determinations.
[13] The principles set out in Cookish would not prevent me from interpreting the parties’ settlement agreement and then directing an assessment on the quantum of costs pursuant to the agreement. Novotech urges me to do so, for two reasons. First, it says that, if I decline to order an assessment, I am effectively rewriting the parties’ agreement. Second, the absence of an assessment would limit the parties’ appeal rights.
[14] I agree that the words of the parties’ agreement — that Novotech shall pay “costs as agreed or assessed” — appear to contemplate an assessment by an assessment officer rather than by this court. I also acknowledge that, if one of the parties is dissatisfied with the outcome of an assessment process, they have a right of appeal to this court pursuant to s. 17(b) of the Courts of Justice Act, R.S.O. 1990, c. C-43, whereas a party would have to obtain leave to appeal a costs order of this court, pursuant to s. 133(b).
[15] As already found, however, it would be inappropriate to refer the entire issue of costs to assessment. There is, therefore, no way to fully give effect to the parties’ apparent assumption about how costs would be fixed. The difference in appeal rights is not significant, because costs are highly discretionary. As a result, any reviewing court is bound to treat a costs assessment with considerable deference, whether it is made by an assessment officer or a judge.
[16] The fundamental question is whether, in order to give partial effect to the words used in the offer to settle, this court should make legal and factual determinations about the nature and scope of the parties’ agreement but then delegate a subsidiary question, the actual quantum of costs, to an assessment officer. Taking this approach would not, in my view, confer any real benefit on the parties and would run contrary to the modern approach to costs determinations.
[17] Pursuant to r. 57.01(7), a court “shall devise and adopt the simplest, least expensive and most expeditious process for fixing costs”. A Superior Court judge has both the inherent jurisdiction and the explicit authority, pursuant to s. 131 of the CJA, to fix costs of any step taken in litigation. Pursuant to r. 57.01(3.1) and 57.03(1)(b), it is only in an exceptional case that the court may delegate this task by referring costs for assessment under r. 58. Rule 57.04 gives parties the option of seeking an assessment by an assessment officer of costs on the settlement of an action but does not mandate this route.
[18] In Lewis v. Dynamite Network Solutions Inc., 2017 ONSC 6296, Sanfilippo J. considered a motion to enforce a settlement for $10,000 “plus costs to be assessed, argued or negotiated”. He held that the motion had been unnecessary because he did not have to make any determinations that an assessment officer could not have made, and the moving party therefore could have availed himself of an assessment pursuant to r. 57.04. At para. 9, however, he concluded that it was appropriate for him to fix costs, “in the interest of efficiency and in furtherance of the objective of seeking the most expeditious and least expensive determination of the last remaining issue in this six-year-old action, and thereby to provide the parties with some much-needed finality”.
[19] The situation in this case is slightly different, because the parties cannot obtain an assessment in the absence of an order by this court. This however makes the argument for avoiding an assessment process even stronger here.
[20] I conclude, in the circumstances, that the parties’ overall interests will be best served by a single hearing, before me, to determine both the scale and scope of the costs payable by Novotech under the settlement agreement, and the precise amount of costs that it should reasonably pay.
The Alleged Accounting Errors
[21] Mr. Dumais stands by his position that Novotech’s financials are inaccurate. As noted at the last case conference in April, and as again acknowledged by Mr. Dumais at the May 4 attendance, this issue falls outside the ambit of the parties’ settlement. As a result, the court will not deal with it in the context of a motion to enforce the settlement.
Directions
[22] The costs payable by Novotech shall be adjudicated on a motion by Mr. Dumais to enforce the parties’ settlement agreement. Since I remain the case management judge assigned to this case, I shall hear the motion.
[23] At the May 4 case conference, I directed Novotech and Mr. Dumais to discuss how they intended to present evidence at a hearing. Unless they have agreed otherwise, I direct that a hearing be conducted based on affidavits to be exchanged by the parties within 60 days of this endorsement, and cross-examinations to be conducted within 60 days thereafter. I direct the parties to schedule a further case conference in late June or early July, for the purpose of setting a hearing date.
Justice Sally Gomery
Released: May 17, 2021
COURT FILE NO.: 14-61338
DATE: May 17, 2021
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
MATTHEW DUMAIS and DUMAIS FAMILY TRUST
Plaintiffs
– and –
NOVOTECH TECHNOLOGIES CORPORATION
Defendant
– and –
RICHARD HOBBS, LARRY BELLEHUMEUR and 7341334 CANADA INC.
Defendants
ENDORSEMENT FOLLOWING MAY 4, 2021 CASE CONFERENCE
Justice Sally Gomery
Released: May 17, 2021