Court File and Parties

COURT FILE NO.: CV-19-00618631-0000 DATE: 20210622 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Quercus Algoma Corporation, Quercus Algoma Land Corporation, Algoma Timberlakes Corporation Applicants

AND: Algoma Central Corporation Respondent

BEFORE: Vella J.

COUNSEL: Jonathan Lancaster and Daniel Richer, for the Applicants Christopher Matthews, for the Respondent

HEARD: In Writing

COSTS ENDORSEMENT

[1] The Respondent, Algoma Central Corporation (“ACC”), seeks costs of the application on a partial indemnity basis, in the sum of $144,054.57 comprised of $125,841.80 plus HST, plus disbursements in the sum of $1,853.33.

[2] The Applicants, Quercus Algoma Corporation, Quercus Algoma Land Corporation, and Algoma Timberlakes Corporation (collectively, “QAC”) submit that there should be no costs as this is a case of first impression. In the alternative, QAC submits that the appropriate amount for costs on a partial indemnity basis is $30,000.

CASE OF FIRST IMPRESSION

[3] QAC relies on several cases in support of its position that in cases of first impression, there should be no costs awarded. However, while some of the cases support this position, others do not. For example, in Gowling & Henderson v. Canada (1982), 1982 CanLII 3126 (ON SC), 136 D.L.R. (3d) 292 (Ont. H.C.), Hughes J., at para. 16, awarded no costs, finding that the matter had public importance and was of first impression “in one aspect”. In Royal Bank of Canada v. Central Capital Corp. (1996), 1996 CanLII 1521 (ON CA), 27 O.R. (3d) 494 (C.A.), Weiler J.A. declined to award costs in light of the case being of first impression, but Laskin J.A., in concurring reasons, cited the public importance of the case, in addition to the case being one of first impression, as justifying no costs. In Moore v. Getahun, 2015 ONCA 443, at para. 2, the Court of Appeal declined to make an award of no costs, because in that case, it did not see the novel issue as one of public importance: “It is only where an issue is truly novel or a matter of first impression that a departure is warranted from the normal rule that a successful party is entitled to partial indemnity for costs.”

[4] ACC, in turn, relies on cases in which costs were awarded despite involving legal issues of first impression. See, for example: Qin v. Ontario Securities Commission, 2021 ONCA 165; Retirement Homes Regulatory Authority v. In Touch Retirement Living for Vegetarians/Vegans Inc., 2019 ONSC 3401.

[5] Unfortunately, many of the cases cited by each party contains little, if any, analysis of why the subject court ordered no costs, or declined to make that order.

[6] It seems apparent that there is no fixed rule as to when the extraordinary order of “no costs” will be warranted, except that it is a matter of the court’s discretion, and will be informed by whether there is a true public interest that was being served. As K. Campbell J. observed in Lantheus Medical Imaging Inc. v. Atomic Energy of Canada Ltd., 2012 ONSC 4780, at para. 8, even public interest litigants sometimes must pay costs when they are unsuccessful.

[7] In Lantheus, at para. 9, K. Campbell J. stated:

Moreover, the authorities suggest that this discretion is much less likely to be exercised when the unsuccessful party is a well-financed litigant who was seeking to advance their own personal interests in the litigation, and was not motivated by any coincident public interest that may have been furthered by the resulting decision … Accordingly, when an unsuccessful party is motivated in the litigation by their own commercial interests, and not by the selfless ideal of advancing a greater public interest, the theoretical rationale for the exercise of this discretionary jurisdiction to make no costs order is wholly absent.

[8] At the end of the day, the court must exercise its discretion in determining whether costs are warranted. If costs are warranted, the court must determine what the appropriate scale and quantum is having regard to the factors set out in r. 57 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, and the jurisprudence, including, most notably, Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 CanLII 14579 (ON CA), 71 O.R. (3d) 291 (C.A.).

[9] In my view, this case does not warrant departing from the usual rule that a successful party is entitled to costs. The litigants here were seeking to advance their private financial interests, and not a novel issue of public importance for the benefit of the public good.

[10] Therefore, there is no good reason for departing from the normal rule that costs should follow the cause.

COSTS WILL FOLLOW THE CAUSE

[11] Both parties agree that costs, if awarded, should be on a partial indemnity basis.

[12] I have examined the costs outline submitted on behalf of ACC.

[13] The hearing of this matter took one day. There were relatively brief cross-examinations. For example, the cross-examination of QAC’s deponent took just under two hours. The affidavits were also relatively brief and straightforward. For example, ACC relied on two affidavits – one with twelve paragraphs and five exhibits, and the other with six paragraphs and one exhibit.

[14] This was not a factually complex matter though it involved a transaction that was negotiated and completed in or around 1997. While not factually complex, there was an extensive series of land transactions that had to be explained involving various parcels of lands captured by the Mining Rights Option Agreement.

[15] The legal issues, however, were complex insofar as this was a case of first impression and involved esoteric property topics such as corporeal and incorporeal hereditaments. The main issue of whether the mining rights option in issue was captured by the 21-year or 40-year period under ss. 13(3) or 14, respectively, of the Perpetuities Act, R.S.O. 1990, c. P.9, required much legal research into the origins of the rule against perpetuities at common law and the statute. The evolution of the Perpetuities Act had to be examined to ascertain the legislative intent as to what types of property interests were captured under the respective vesting periods as part of the statutory interpretation exercise.

[16] As was candidly admitted at the hearing, the issue raised by this application befuddled even seasoned mining lawyers.

[17] In Boucher, at para. 26, the Court of Appeal noted that the court must assess costs in a manner 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.” In Boucher, at para. 27, the Court of Appeal also cautioned that “it is not the role of the court to second-guess the time spent by counsel unless it is manifestly unreasonable in the sense that the total time spent is clearly excessive or the matter has been overly lawyered.”

[18] I have examined the hourly rates charged by counsel and find them to be within the acceptable range. Furthermore, using 60 percent of the solicitor client rates to calculate the partial indemnity rates is also appropriate.

[19] The issue I have is with respect to the amount of time charged on this matter. I am not questioning the lawyers’ determination of the work they needed to do on behalf of their client or the value of that work to their client. However, it cannot be expected that the losing party will have to pay the full hours spent by the successful party unless that effort was reasonable in the circumstances of the case.

[20] In Boucher, at para. 38, the Court of Appeal directed that the reasonable expectations of the parties must be considered in assessing the appropriate costs award. Unfortunately, QAC did not submit a costs outline. However, in its submissions, it represented that the partial indemnity costs sought by ACC is more than the full lawyer account charged to QAC. QAC’s lawyers state that its lead lawyer’s total time was 73.4 hours and that an additional 8.9 hours was put on the file by other less senior lawyers. This is contrasted with the 257.2 hours incurred by the lead lawyer for ACC plus an additional 30.4 hours by other lawyers, a clerk, and law students. My rough calculations put QAC’s full solicitor client legal fees at around $65,000.

[21] On the other hand, ACC had more at stake in this application than QAC did. Had the ACC lost, its mining rights option over 148,000 acres of land, and by extension, the balance of the 816,000 acres that were the subject of the umbrella transaction and subject to the same Mining Rights Option Agreement would all have been void as expired by operation of the Perpetuities Act. ACC spent more time investigating the history of the transactions that gave rise to the subject Mining Rights Option Agreement and also conducted extensive legal research into underlying principles and secondary authorities, including Ontario’s Law Reform Commission Report from which the Perpetuities Act was developed.

[22] Overall, I find that the ACC was justified in spending more time than QAC did in preparing its response, particularly with respect to its thorough legal research and submissions concerning the application of the competing provisions of the Perpetuities Act. However, I also find that ACC’s time was excessive, particularly with respect to review of files, preparation of affidavits, and preparation of cross-examinations. Furthermore, to a lesser degree, ACC’s time was excessive with respect to the 42.6 hours spent preparing the factum and book of authorities (including a review of QAC’s factum and authorities) plus an additional 83.2 hours devoted to legal research, which included 66 hours of research by senior counsel.

[23] I have considered the factors set out in r. 57, the cases submitted by both parties, their written submissions, and the reasonable expectations of the parties. In my view, a fair and reasonable result is a reduction of the fees sought by ACC by approximately 40 percent.

[24] Accordingly, I have fixed costs in the sum of $75,000 plus HST, and $1,853.33 in disbursements for a total of $86,603.33.

Justice S. Vella

Date: June 22, 2021