DATE: 20210602
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
MARQUEST ASSET MANAGEMENT INC.
Plaintiff/Defendant by Counterclaim
– and –
STONE INVESTMENT GROUP LTD.
Defendant/Plaintiff by Counterclaim
Kevin Richard and Manon Landry, for the Plaintiff/Defendant by Counterclaim
Sean D. McGarry, for the Defendant/Plaintiff by Counterclaim
HEARD: in writing
Papageorgiou j.
Costs decision
[1] By reasons dated April 9, 2021, I granted summary judgment to Marquest Asset Management Inc. (“Marquest”) in respect of amounts owed by Stone Investment Group Limited (“Stone”) pursuant to a Promissory Note and also granted summary judgment to Stone in respect of its counterclaim.
[2] The parties could not settle the issue of interest and costs and made written submissions.
Background
[3] Stone had purchased certain mutual funds from Marquest and was required to make payments over time pursuant to a purchase agreement and corresponding promissory note. In October 2019, Stone asserted that Marquest had breached the purchase agreement and stopped making monthly payments. Instead, it paid amounts owing pursuant to the purchase agreement and Promissory Note into court pending resolution of the dispute.
[4] Marquest had brought a claim against Stone in respect of amounts owed to Marquest pursuant to a Promissory Note. Stone counterclaimed for damages for breach of contract.
[5] I awarded Stone damages in the amount of $89,476.44 and awarded Marquest the net amount owed pursuant to the Promissory Note after deduction of amounts owed to Stone pursuant to this judgment.
[6] The parties are in agreement that the balance owed to Marquest pursuant to the Promissory Note was $136,431.33.
Interest
[7] Each party claims interest which is partially complicated by the fact that some of the moneys which Stone paid into court ($54,862.36) were partially released to Marquest after a tax issue was resolved. Stone says interest on such funds continues to accrue only until the date Stone released them in July 2020, while Marquest says that it accrues until Marquest received these funds in September 2020.
[8] As well, the Promissory Note contains a provision entitling Marquest to interest for a Major Default of 15 percent while the Purchase Agreement does not have a corresponding provision: therefore, pursuant to the contracts, Stone may only claim interest at the Courts of Justice Act, R.S.O. 1990, c. C.43 (“CJA”) rate.
[9] The parties have agreed that if Marquest is entitled to interest at 15 percent, then the interest owing is as follows:
(a) 15% from the September release date is $17,035.31; and
(b) 15% from the July consent date is $15,695.77
[10] On the issue of whether Marquest is entitled to 15 percent interest at all, Stone stays that the purpose of the 15 percent was to address the risk of collection and that once the moneys were paid into court, this risk was addressed. As well, Stone asserts that it is unfair to subject it to the 15 percent interest rate when Stone is only entitled to interest at the CJA rates. Stone cites no authority in support of these general propositions.
[11] Stone asks the court to disallow the contractual interest rate citing section 130 of the CJA and the case of Royal Bank of Canada v. State Farm Fire and Casualty Co., 2003 CanLII 39513 (Ont. S.C.) (“Royal Bank”), at para. 5, which it says gives the court a broad discretion to reject the contractual interest rate.
[12] As set out in Royal Bank, at para. 6:
[…] the purpose of pre-judgment interest is to compensate a plaintiff for deprivation of the monies to which the plaintiff has been found entitled and the exercise of the court’s discretion must be related to the task of putting the plaintiff in the same position, so far as money is concerned, as he would have been if he had not suffered the loss. See Finlayson in Irvington Holdings at page 26. In that case Finlayson J.A. went on to state that interest should not be used as either a reward or a penalty but should reflect the value of money wrongfully withheld from the date of demand for payment to the date of determination at trial. It is also clear from that case that the onus is on the defendant to persuade the court that it is appropriate to exercise its discretion to disallow pre-judgment.
[13] In my view, this is not an appropriate case to exercise any discretion to disallow interest at the contractual rate. The parties negotiated their comprehensive agreements which implicitly provided that Marquest would be entitled to 15 percent interest in respect of Major Default of the Promissory Note. The Purchase Agreement does not provide any similar provision in respect of amounts owed to Stone in respect of breaches. The parties expressly agreed to this different treatment and in my view, it would be to rewrite their agreement if I disallowed interest at the contractual rate.
[14] In terms of whether interest runs to the date Stone released funds from the payment into court or to the date Marquest received them, in my view it must be from the date Marquest received the funds because the point of the interest is to put Marquest in the same position as it would have been had it not suffered the loss.
[15] Accordingly, the quantum of interest to which Marquest is entitled in this scenario as agreed upon by the parties is $17,035.31.
[16] The parties made the submission that when they calculated the above two scenarios, it included the pre-judgment interest claim made by Stone.
[17] They also agreed that netting the damages award in favour of Stone from amounts owed to Marquest in respect of the Promissory Note results in net principal owed to Marquest in the amount of $46,954.80 plus whatever interest I awarded to Marquest in accordance with the above scenarios. Therefore, the total payment to Marquest in respect of principal plus prejudgment interest is $46,954.80 + $17,035.31 = $63,990.11.
Costs
[18] Pursuant to s. 131(1) of the CJA, costs are in the discretion of the court. Rule 57 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, sets out the factors which courts should have regard to when awarding costs. The overall objective is “to fix an amount that is fair and reasonable for the unsuccessful party to pay in the particular proceeding, rather than an amount fixed by the actual costs incurred by the successful litigant”: Boucher v. Public Accountants for the Province of Ontario (2004), 2004 CanLII 14579 (ON CA), 71 O.R. (3d) 291 (Ont. C.A.), at para. 26; see also Zesta Engineering Ltd. v. Cloutier, 2002 CanLII 25577 (Ont. C.A.), at para. 4; Davies v. Clarington (Municipality) et al., 2009 ONCA 722, 100 O.R. (3d) 66, at para. 52; G.C. v. Ontario (Attorney General), 2014 ONSC 1191.
[19] Judges have a duty to fix or assess costs in reasonable amounts and have a duty to make sure that the hours spent are reasonably justified: Pagnotta v. Brown, [2002] O.J. No. 3033 (Ont. S.C.), at para. 25.
[20] Further, there must be practical and reasonable limits to the amounts awarded for costs and those amounts should bear some reasonable connection to the amount that should reasonably have been contemplated: Toronto (City) v. First Ontario Realty Corp. (2002), 2002 CanLII 49482 (ON SC), 59 O.R. (3d) 568 (Ont. S.C.), at para. 26; Gratton-Masuy Environmental Technologies Inc. v. Building Materials Evaluation Commission, 2003 ONSC 8279.
Stone’s request
[21] With respect to the action, Stone requests substantial indemnity costs of $32,815.99 plus $403.35 in disbursements or alternatively on a partial indemnity basis of $23,199.47 plus $403.35. With respect to the summary judgment motion, Stone claims $42,587.39 on a substantial indemnity basis or $31,200.71 on a partial indemnity basis.
Marquest’s request
[22] Marquest requests its costs of the action in the amount of $33,675.41 on a substantial indemnity basis plus disbursements in the amount of $767.73, or alternatively $22,450.28 on a partial indemnity basis and costs of the summary judgment motion in the amount of $15,000. It argues that it was the most successful party in respect of the summary judgment motion.
[23] Marquest points out that pursuant to section 4.5 of the Promissory Note, Marquest is entitled to indemnity from Stone for all damages, costs and expenses (including legal fees on a substantial indemnity basis) arising out of or resulting from the collection of any amounts due by Stone to Marquest.
Rule 49 offers
[24] The parties have also referred to various offers they have made.
[25] Rule 49 addresses cost consequences of a party’s failure to accept an offer to settle as follows:
COSTS CONSEQUENCES OF FAILURE TO ACCEPT
Plaintiff’s Offer
49.10 (1) Where an offer to settle,
(a) is made by a plaintiff at least seven days before the commencement of the hearing;
(b) is not withdrawn and does not expire before the commencement of the hearing; and
(c) is not accepted by the defendant,
and the plaintiff obtains a judgment as favourable as or more favourable than the terms of the offer to settle, the plaintiff is entitled to partial indemnity costs to the date the offer to settle was served and substantial indemnity costs from that date, unless the court orders otherwise. R.R.O. 1990, Reg. 194, r. 49.10 (1); O. Reg. 284/01, s. 11 (1).
Defendant’s Offer
(2) Where an offer to settle,
(a) is made by a defendant at least seven days before the commencement of the hearing;
(b) is not withdrawn and does not expire before the commencement of the hearing; and
(c) is not accepted by the plaintiff,
and the plaintiff obtains a judgment as favourable as or less favourable than the terms of the offer to settle, the plaintiff is entitled to partial indemnity costs to the date the offer was served and the defendant is entitled to partial indemnity costs from that date, unless the court orders otherwise.
Burden of Proof
(3) The burden of proving that the judgment is as favourable as the terms of the offer to settle, or more or less favourable, as the case may be, is on the party who claims the benefit of subrule (1) or (2).
[26] Stone says that it made the following offers:
a. On October 4, 2019, it made an offer to settle the Cooltech Issue (as defined in my April 9 decision) for $31,000.
b. On June 12, 2020, it made an offer whereby Stone would receive $89,376.44, Marquest would receive the balance of amounts paid into court and each party would bear its own costs.
[27] The first offer was not a Rule 49 Offer and did not deal with all of the issues in this proceeding. The second offer is almost precisely the judgment except that it did not address interest to which Marquest is entitled which I have found above, and as such Stone did not achieve a better result than its offer.
[28] On April 16, 2021, Marquest made a with prejudice offer to settle damages, interest and costs for the payment to Marquest of $63,990.20 and this offer was open until the delivery of Marquest’s costs submission. Marquest did not beat this offer by ten cents. In any event, in my view r. 49 would not strictly speaking apply to this offer as there was no hearing after the offer was made. In any event, the costs incurred after this offer was made were only the costs of preparing Marquest’s cost submission.
Scale of costs
[29] In my view, there is no basis to award substantial indemnity costs in this case to Stone based on the offers and accordingly, it is entitled to costs on a partial indemnity basis. However, Marquest is entitled to substantial indemnity costs in respect of its successful enforcement of the Promissory Note, in part, as a result of section 4.5 of the Promissory Note.
Divided success
[30] There was divided success in this matter.
[31] The costs associated with the enforcement of the Promissory Note by Marquest could not have been as significant as those associated with Stone’s counterclaim where it achieved substantial success. Neither party’s bill of costs separates out the cost associated with the enforcement of the Promissory Note versus the costs associated with Stone’s counterclaim.
[32] Marquest’s claim was a simple breach of contract case versus Stone’s defence and counterclaim which involved complex issues and which formed the central issue at the hearing before me, in particular the argument in respect of the Cooltech Issue where Stone had complete success. Although I acknowledge that Marquest’s partial success on the Promissory Note is in part based on its successful defence of the CRA Issue as well as its successful position that Stone could not prove any damages associated with the TFSA Issue, these issues were much less significant in this case.
[33] In my view, while Marquest is entitled to some costs, Stone has been more successful in this case.
[34] Balancing both parties’ claims for costs, Marquest’s contractual right to substantial indemnity costs under section 4.5 of the Promissory Note for enforcement of the Promissory Note and the greater complexity of Stone’s defence and counterclaim in respect of which I have found it achieved substantial success, I am awarding Stone $30,000 on a partial indemnity basis for both its costs of the action and the summary judgment motion inclusive of all disbursements. In my view, this is the appropriate amount net of any costs to which Marquest might be entitled on a substantial indemnity basis.
[35] I would ask the parties to prepare a draft Order that takes into account all aspects of this endorsement including provisions for the payment out of court of the amounts which I have found.
Papageorgiou J.
Released: June 2, 2021
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
MARQUEST ASSET MANAGEMENT INC.
Plaintiff/Defendant by Counterclaim
– and –
STONE INVESTMENT GROUP LTD.
Defendant/Plaintiff by Counterclaim
COSTS DECISION
Papageorgiou J.
Released: June 2, 2021