Court File and Parties

COURT FILE NO.: CV-20-00629856 DATE: 20210521 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Kore Meals, LLC, Plaintiff – and – Freshii Development, LLC and Freshii Inc., Defendants

BEFORE: E.M. Morgan, J.

COUNSEL: David Boghosian and George Pakozdi, for the Plaintiff Michael O’Brien, for the Defendants

HEARD: Costs submissions in writing

COSTS ENDORSEMENT

[1] On April 19, 2021, I granted the Defendants’ motion staying the proceedings in favour of arbitration in the United States.

[2] Counsel for the Defendants seeks costs on a substantial indemnity scale in the amount of $62,392.86 or, alternatively, on a partial indemnity scale in the amount of $43,805.72. Both amounts are inclusive of disbursements and HST.

[3] Plaintiff’s counsel says that both figures are too high. They are of the view that there are no grounds for awarding substantial indemnity costs, and that partial indemnity costs should be more in line with their own costs of $25,109.17.

[4] The Defendants take the position that very early in the litigation they offered the equivalent of a Rule 49 offer which the Plaintiff refused to take up. As Defendants’ counsel explains it, shortly after the Statement of Claim was served Defendants’ counsel wrote to Plaintiff’s counsel and explained the arbitration clause in their clients’ agreement and “provide[d] the Plaintiff an opportunity to abide by the DAA and agree to discontinue the action in favour of arbitration, failing which [the Defendants] would bring a motion to stay the action and seek its costs…” The Plaintiff did not accept this offer.

[5] Defendants’ counsel considers this exchange to be an offer, rejected by the Plaintiff, that would have been better for the Plaintiff than the result of the motion since it would have resulted in a saving of the costs that the Plaintiff will now have to pay. He therefore submits that under Rule 49.10 of the Rules of Civil Procedure an elevated level of costs is called for since the advantageous settlement offer was not accepted. Defendants’ counsel points out that the fact that the offer was made in letter or email form rather than as a formal Offer to Settle does not undermine its status as a Rule 49 offer: see Crawford v. Mori, 2017 ONSC 1630, at paras.13-14.

[6] With respect, it is not the form of the Offer that concerns me here, it is the content. Defendants’ counsel did what every defendant’s counsel does in one way or another – he told Plaintiff’s counsel that the Defendants were right and the Plaintiff was wrong. He then said that the Defendant would seek the relevant remedy, which it was entitled to do and in fact did. But there was no offer to settle on any terms but the ones that go without saying; that is, if the Plaintiff would withdraw its case and not cause it to be defended, the matter would be at an end.

[7] An offer to settle that is rejected, but that turns out to have been more advantageous than the result of the action or motion, attracts substantial indemnity costs under the Rule 49.10 in order to encourage compromise on the part of litigating parties. But there was no real compromise in the Defendants’ “offer” in this case. The Defendant offered to refrain from defending or seeking a stay of proceedings if the Plaintiff would walk away from the claim. If that is an offer that attracts substantial indemnity costs, then every proceeding attracts substantial indemnity costs.

[8] In short, for one party to say that it is right and the other is wrong and to insist that the other party agree, failing which it will seek a remedy, is to conduct litigation. It is not an offer that qualifies for special costs treatment under Rule 49.10.

[9] Aside from that, the Defendants’ position on costs is a reasonable one. This was a stay motion that entailed considerable legal research. Partial indemnity costs in the range set out by the Defendants do not strike me as unusually high for this kind of proceeding. Defendants’ counsel did what it took to win the motion. As stated by Rule 57.01(1)(0/b), this is not an amount that would take the Plaintiff, itself a sophisticated corporate party, by surprise. I am not inclined to second guess Defendants’ counsel’s investment of time and effort.

[10] The Plaintiff shall pay the Defendants costs in the all-inclusive amount of $43,805.72.

Morgan J.

Date: May 21, 2021