COURT FILE NO.: CV-17-0374-00
DATE: 2021-08-18
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
HARLAN SCHWARTZ AND RED LAKE OUTFITTERS
Mr. Nick Melchiorre, for the Plaintiffs
Plaintiffs/Responding Party
- and -
ROBERT COLLETTE
Mr. Jordan Lester, for the Defendant
Defendant/Moving Party
HEARD: May 18, 2021 by videoconference at Thunder Bay, Ontario
Madam Justice T. J. Nieckarz
ENDORSEMENT ON COSTS
OVERVIEW:
[1] The Defendant brought a motion seeking a dismissal of the Plaintiffs’ action pursuant to s. 137.1 of the Courts of Justice Act, R.S.O. 1990, c. C.43 (commonly referred to as “SLAPP” provisions). The action involves claims for defamation and other torts.
[2] The first set of reasons delivered on the motion was released on October 27, 2020: See Schwartz & Red Lake Outfitters v. Collette, 2020 ONSC 6580 (the “Reasons”). I dismissed those of the Plaintiffs’ claims related to expressions made by the Defendant on various online fora. I found that these expressions related to a matter of public interest, and I was not satisfied that the Plaintiffs had met their burden to avoid dismissal under s. 137.1(4).
[3] Two issues required further submissions from the parties. Those submissions were heard on January 20, 2021 and supplementary reasons were released on the motion on March 22, 2021: See Schwartz & Red Lake Outfitters v. Collette, 2021 ONSC 2138 (the “Supplementary Reasons”). I rejected the Defendant’s position and allowed the Plaintiffs to continue with their claims for defamation related to an expression the Defendant conceded was not a public interest expression, and with respect to conduct alleged to have caused an intentional infliction of mental/emotional suffering.
[4] The effect of the two decisions was that the most substantial portion of the Plaintiffs’ claims were dismissed pursuant to s. 137.1 of the Courts of Justice Act, R.S.O. 1990, c. C.43, but some claims survived. The action continues in a modified form.
[5] At para. 127 of the Reasons, I found that the Defendant had been substantially successful on the motion and was entitled to costs at least to that point. I invited the parties to make submissions as to costs if they were unable to agree as to quantum.
[6] In the Supplementary Reasons I made no finding as to costs of that appearance, but indicated that submissions may be made if the parties could not agree.
[7] The Defendant seeks the following:
a. Costs of the motion, including both appearances, on a full indemnity basis in the amount of $33,041.51 inclusive of fees, disbursements and H.S.T.;
b. In the alternative, costs of the first appearance on the motion on a full indemnity basis in the amount of $25,162.73 inclusive of fees, disbursements and H.S.T.; and
c. Damages in the amount of $15,000 pursuant to s. 137.1(9) on the basis that the dismissed claims in the proceeding were brought in bad faith and for an improper purpose.
[8] The Plaintiffs’ position with respect to costs may be summarized as:
a. The Plaintiffs should have their costs for the following reasons:
i. The motion was unnecessary by virtue of an offer to settle dated September 19, 2019 in which the Plaintiffs offered to dismiss the entire action without costs;
ii. The Plaintiffs were successful on the second appearance; and
iii. The issues were novel, with the interests of the Plaintiffs worth protecting.
b. In the alternative, the Defendant’s costs should not be full indemnity as provided for in s. 137.1(7) as the Defendant was not successful in dismissing the action in its entirety as contemplated by that subsection;
c. The full indemnity cost consequences are not applicable given that the Defendant did not bring the motion promptly upon the close of pleadings; and
d. The costs claimed by the Defendant are excessive.
[9] With respect to damages, the Plaintiffs deny that there is bad faith or other conduct that warrants an award of damages. The Plaintiffs further point to the lack of evidence of any damages having been suffered by the Defendant.
[10] While Plaintiffs’ counsel was prepared to argue the issue of costs, Mr. Melchiorre brought a motion returnable at the costs hearing for an Order removing Weiler Maloney Nelson and himself as lawyers of record for the Plaintiffs. The Defendant took no position with respect to that motion. I am satisfied based on the materials filed that the Weiler firm (and Mr. Melchiorre) should be removed as counsel of record.
[11] For reasons that follow, the Plaintiffs shall pay the Defendant costs associated with the motion in the amount of $17,500. The Defendant’s claim for damages is dismissed.
Law and Analysis:
Issue #1: What costs should be payable?
Law:
[12] Section 137.1 provides that:
Costs on dismissal
(7) If a judge dismisses a proceeding under this section, the moving party is entitled to costs on the motion and in the proceeding on a full indemnity basis, unless the judge determines that such an award is not appropriate in the circumstances.
Costs if motion to dismiss denied
(8) If a judge does not dismiss a proceeding under this section, the responding party is not entitled to costs on the motion, unless the judge determines that such an award is appropriate in the circumstances.
[13] In Mazhar v. Farooqi, 2020 ONSC 3490, at para. 86, Pinto J. quoted the following excerpt from the Law Commission of Ontario report, Defamation Law in the Internet Age: Final Report (Toronto: Law commission of Ontario, 2020), at p. 52 in describing the cost provisions of the anti-SLAPP legislation:
The legislation uses cost provisions to encourage defendants to make use of the new procedure. Where a defendant is successful in having a proceeding dismissed, there is a statutory presumption that she will be awarded her costs of the motion and the proceeding on a full indemnity basis. However, where a plaintiff is successful in defending her action, the presumption is the opposite – she will not be awarded costs on the motion. Both presumptions are subject to the judge’s discretion.
[14] In Fortress Real Developments Inc. v. Rabidoux, 2018 ONCA 686 the Court of Appeal offered guidance on the operation of the cost provisions of s. 137.1.
[15] Sections 137.1(7) and (8) are intended to serve as a strong deterrent to SLAPPs and to encourage Defendants to seek a quick termination of that litigation by way of a s. 137.1 motion: See Fortress, at para. 61.
[16] The starting point for the analysis in s. 137.1(7) is the presumption that a defendant should receive costs on both the motion and in the proceeding on a full indemnity basis: See Fortress, at para. 60, and Subway v. Canadian Broadcasting Corporation, 2020 ONSC 1263, at para. 5.
[17] Similarly, if a defendant is not successful in having a proceeding dismissed, the presumption in s. 137.1(8) provides that there shall be no costs payable to either party.
[18] While ss. 137.1(7) and (8) provide for presumptive cost consequences, these presumptions are rebuttable. The discretion of a judge to make a different award is not ousted. A motion judge in exercising discretion under these provisions will still be guided by the same considerations that guide the exercise of discretion with respect to costs in other proceedings. This includes the factors provided for in r. 57.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. This also includes being mindful of the overriding objectives that a costs order be fair and reasonable having regard to all the relevant factors: See Fortress, at para. 63.
[19] In United Soils Management Ltd. v. Mohammed, 2019 ONCA 128, at para. 42, the Court of Appeal once again confirmed that there remains an obligation on a motion judge, when determining the quantum of costs under s. 137.1(7), to undertake the same type of analysis that is required in any other context. A quantum of costs must still be fair and reasonable and must be proportionate to the importance and complexity of the issues and the amount involved in the proceeding.
Analysis:
[20] This case presented some unique and challenging issues. The law surrounding anti-SLAPP legislation is still evolving, such that a disposition of this case was delayed while awaiting significant Supreme Court of Canada decisions. A further appearance by counsel, and further submissions were required to address issues that remained unclear even after the release of those decisions.
[21] Similarly, with respect to costs, this case is not simple. The majority of the claims of the Plaintiffs were dismissed, but the entire action was not dismissed and remains ongoing. This does not bring the case squarely within s. 137.1(7) or (8).
[22] The Plaintiffs argue that because the entire action was not dismissed, s. 137.1(7) does not apply and the Defendant is not entitled to full indemnity costs of the motion. The Plaintiffs argue that either the presumption provided for in s. 137.1(8) of no costs is applicable, or alternatively that they are entitled to their costs by virtue of their offer to settle.
[23] I have already previously found that the Defendant is entitled to costs at least up until the point of hearing the first part of the motion. The Plaintiffs’ submissions do not dissuade me from this finding.
[24] Despite the fact that the entire proceeding was not dismissed, in my view, the principles underlying s. 137.1(7) with respect to the original motion hearing, and s. 137.1(8) with respect to the subsequent appearance pertaining to “other claims” remain applicable. These provisions remain the starting point for the analysis, subject to an exercise of discretion by me.
[25] With respect to the original motion hearing, in the Reasons I found that the litigation was brought to silence Mr. Collette. I found that this lawsuit had all the indicia of a true SLAPP. The full indemnity starting point for the assessment of costs established by s. 137.1(7) is intended to disincentivize this kind of litigation: See Fortress, at para. 71.
[26] In Joshi at para. 23, Justice Kimmel was faced with an analogous situation in which a counterclaim was dismissed under s. 137.1, but the remainder of the proceeding continued. Despite the entire proceeding not having been dismissed, Justice Kimmel applied the spirit of s. 137.1(7) to the cost analysis, even though she exercised her discretion to award an amount less than full indemnity. In finding that the rationale behind s. 137.1(7) remained applicable, in that the costs award should act as a significant enough deterrent against plaintiffs resorting to the courts to shut down public debate, Justice Kimmel determined that some reduction to the full indemnity amount claimed would be appropriate to ensure a fair, reasonable and proportionate award of costs that took into consideration the proceeding is continuing and in which it is reasonable to infer that some of the fruits of the work done will be of use in pursuit of the ongoing action. In short, despite the entire proceeding not having been dismissed, Justice Kimmel applied the principles behind s. 137.1(7) while exercising her discretion to arrive at a fair and reasonable award of costs in the circumstances of that case.
[27] In my view, the approach of Justice Kimmel of applying the principles of s. 137.1(7) even though the entire proceeding was not dismissed is appropriate in this case. The majority of the Plaintiffs’ claims were dismissed. All claims that related to public interest debate were dismissed. Section 137.1(7) is an appropriate starting point for the analysis on costs, subject to any adjustments required to ensure a fair, reasonable and proportionate costs award.
[28] With respect to the second appearance, the result of which was not to dismiss the entire action, I find that no costs to either party is the most appropriate disposition, keeping in mind the spirit of s. 137.1(8) and the novel issues that were faced by the parties and the court at that appearance.
The Offer to Settle:
[29] With respect to the Plaintiffs’ offer to settle, it does not attract the cost consequences of Rule 49, and does not disentitle the Defendant to its costs as the successful party with respect to the bulk of the motion, but it is a factor to consider in exercising my discretion as to the scale and quantum of costs.
[30] On September 19, 2019, five days before the scheduled hearing of the motion, the Plaintiffs delivered their offer. The offer provided for a full dismissal of the action, without costs.
[31] The Defendants responded on September 22, 2019, rejecting the offer and indicating they were proceeding with the motion.
[32] More than a month after the motion hearing, on November 9, 2019, the Defendants provided a counter offer, offering to settle the entire action on the basis that it be dismissed without costs provided the Plaintiffs transfer their cabin in the Woodland Caribou Provincial Park (the subject of the public interest debate) to the Defendant.
[33] Rule 49.10 provides that where an offer to settle is made by a Plaintiff at least seven days before the commencement of the hearing, is not withdrawn and does not expire prior to the hearing, and where the Plaintiff obtains a judgment as favourable or more favourable than the terms of the offer, the Plaintiff is entitled to:
a. partial indemnity costs to the date the offer was served; and
b. substantial indemnity costs from that date, unless the court orders otherwise.
[34] Rule 49.03 provides that where an offer to settle is made less than seven days before the hearing commences, the costs consequences referred to in Rule 49.10 do not apply. However, despite Rule 49.03 and Rule 49.10, Rule 49.13 allows the court to exercise its discretion in awarding costs by taking into consideration any offer made in writing, the date of the offer and the terms.
[35] The Plaintiffs argue that the decision on the motion was more favourable to them than their offer because the entire proceeding was not dismissed. Even though the offer was not served at least seven days before the motion hearing, and they were the responding party to the motion, they argue that the Rule 49.10 consequences should still apply. The Plaintiffs rely on Kagal v. Tessler, 2003 O.J. No. 630, 2003 CanLII 7272 (ON SC). In that case, O’Driscoll J., exercised his discretion in favour of applying the Rule 49.10 costs consequences even though an offer had not been made seven days prior to the hearing.
[36] The Defendant argues that this is not a case for the exercise of that discretion given that the Plaintiffs’ offer was not as favourable as the result on the motion. The offer to settle disregards the Defendant’s entitlement to costs. At the time the offer was served, the Defendant had incurred significant costs for the preparation of its materials, including a factum.
[37] I agree with the Defendant that on the circumstances of this case it would not be an appropriate exercise of my discretion to award costs as proposed by the Plaintiffs on the basis of the offer to settle. To do so would ignore the principles underlying the costs provisions of s. 137.1, and also the fact that the Plaintiffs’ last minute offer demonstrated no consideration for the substantial costs already incurred by the Defendant on account of the motion. The motion should not have been a surprise to the Plaintiffs. There had been communication between counsel for some time prior to materials being delivered.
Quantum:
[38] While the Defendant is entitled to costs of the original motion hearing, I find that full indemnity costs are not appropriate on the facts of this case. I find that an award of substantial indemnity costs will strike the appropriate balance between the principles underlying costs in a SLAPP motion and another fundamental purpose of costs; to encourage settlement.
[39] The primary reason for departing from the presumption of full indemnity costs relates to the offer to settle. The offer to settle, if accepted could have settled the motion and the entire action on the basis sought by the Defendant, but for the issue of costs and damages. It represented a significant concession on the part of the Plaintiffs. While it was not unreasonable for the Defendant to reject the offer given that costs and damages had not been satisfactorily addressed, no effort was made to negotiate this issue or propose that merely the issues of costs and damages be argued before the court if the parties were able to otherwise agree to a dismissal of the action.
[40] While it may be a factor in certain cases, I do not consider the timing of the motion to be a factor for consideration in determining costs in this case. The motion was still brought at an early stages of the proceeding. There is no evidence of additional costs incurred by the Plaintiffs as a result of any delay in bringing the motion.
[41] The question then becomes, what is a fair, reasonable and proportionate substantial indemnity award. The Defendant claims the sum of $22,912.84 inclusive of fees, disbursements and H.S.T. The Plaintiffs argue that this is excessive and points to their substantial indemnity costs for the original motion hearing of $5,318.77 inclusive of H.S.T. The Plaintiffs argue that their entire substantial indemnity bill for the action is only $17,297.53.
[42] While the unsuccessful party’s costs incurred are helpful to a court in determining their reasonable expectation in relation to a potential costs award, I find that the Plaintiffs’ costs are not helpful in this case. The Defendant was the only party to file materials on the motion. The Plaintiffs filed no materials, gave no evidence, no factum and no caselaw. The entirety of the Plaintiffs’ arguments relied on the pleadings, documents and law filed on behalf of the Defendant. The Plaintiffs’ arguments were brief. The Plaintiffs’ costs cannot reasonably be compared to those of the Defendant in the circumstances.
[43] The materials filed by the Defendant were extensive. They were responsive to the issues and the legal test to be met. To properly prepare the materials the Defendant was required to incur significant costs to access government documents pertaining to the Plaintiffs through a Freedom of Information request and appeal. The Plaintiffs did not voluntarily provide the documents required.
[44] As I indicated at the outset, I am also mindful of the novel nature of SLAPP motions at the time of the argument. There was not a large body of law available at that time and it is not something familiar to most counsel. More research and preparation was required. This preparation was reflected in the quality of the materials and argument made by counsel for the Defendant.
[45] Having said this, some reduction in the costs sought is warranted. There is a considerable amount of student time claimed by various students, totalling $5,580.90 exclusive of H.S.T. Some of this time is productive and will have resulted in costs savings by not having required counsel to perform the work at a higher rate, but some appears to reflect learning and overlap. With respect to clerk time claimed, the majority of the $2,228.85 claimed on account of fees (not including H.S.T.) is for administrative tasks that are charged at a clerk rate. While some time is recoverable on a substantial indemnity basis for clerical time, the amount is excessive in relation to what an unsuccessful litigant should be expected to pay.
[46] Taking into consideration all of the foregoing, I find that a fair and reasonable amount of substantial indemnity costs is $17,500 inclusive of H.S.T. and disbursements.
Issue #2: Should damages be awarded?
Law:
[47] Section 137.1(9) of the Courts of Justice Act, provides that if a judge finds, in dismissing a proceeding under that section, that the responding party brought the proceeding in bad faith or for an improper purpose, the judge may award the moving party such damages as the judge considers appropriate.
[48] The mere fact that a proceeding is dismissed as a strategic lawsuit against public participation SLAPP is not enough to satisfy the requirement of bad faith or improper purpose: See Joshi, at para. 4.
[49] In affirming a damages award in United Soils Management Ltd. v. Mohammed, 2019 ONCA 128 at paras. 35 - 38, the Court of Appeal set out the following principles:
a. If the court is satisfied that the action has been brought in bad faith or for an improper motive, such as punishing, silencing or intimidating the defendant rather than the pursuit of a legal remedy, the court has the power to award damages in such amount as is just
b. It is not necessary for a defendant to adduce medical evidence in support of a claim for damages. While it may be of assistance in determining quantum of damages, in certain cases it may be presumed that damages will arise from the use of a SLAPP lawsuit. For example, if the defendant is inexperienced in litigation, they may suffer stress and anxiety associated with be involved with a court proceeding, particularly if the conduct of the plaintiff is intimidating.
c. Damages will not flow in every case. A costs award on a full indemnity basis may address any harm to a defendant that arises from a SLAPP proceeding.
d. Section 137.1(9) is intended to provide compensation for harm done directly to the defendant arising from the impact of the instituted proceeding. It is not intended to sanction the conduct of a plaintiff through a punitive damage award. Any need to sanction conduct is achieved through s. 137.1(7).
Analysis:
[50] The Defendant argues that this proceeding was brought in bad faith by the Plaintiffs and for an improper purpose. The Defendant relies on the following findings of fact made by me on the motion:
a. That the proceeding was intended to silence a vocal opponent and dissuade him from participating further in public debates about the Woodland Caribou Provincial Park; There is evidence of a strained relationship between the parties and of a desire on the part of the Plaintiffs to stop the Defendant from speaking publicly on certain issues;
b. The Plaintiffs have not diligently pursued this action, which further suggests the intention behind the litigation was to silence the Defendant on an ongoing public interest issue;
c. The action appears motivated by a desire to silence public interest expression by the Defendant; and
d. Allowing the action to proceed could deter others from speaking out against the Plaintiffs’ position with respect to the public issue in dispute.
[51] The Defendant further argues that there is “smoking gun” evidence of the Plaintiffs’ bad faith in the form of Mr. Schwartz’s FaceBook message to the Defendant and his wife, in which he threatened to use his “virtually unlimited financial resources” to commence civil action if the Defendant did not stop slandering his name in public, and spreading gossip and lies about him.
[52] The Plaintiffs argue that the litigation was not brought in bad faith or for an improper purpose; it was brought to protect the reputation and legitimate business interests of the Plaintiffs. Furthermore, the Plaintiffs argue that the FaceBook message amounted to nothing different than a “cease and desist” letter, albeit couched in different language.
[53] I appreciate the Defendant’s position with respect to the findings made by me and the threat made in the FaceBook message. These actions could lead to a finding of improper purpose and in other circumstances, these facts could attract a damages award. On the facts of this case, I do not find such an award appropriate.
[54] The parties are competitors. They have a long standing dispute. I am left with the impression that decisions made by each of them in this litigation were partially driven by frustration on each of their part and the culmination of the dispute between them.
[55] What does not sit right with me is the Defendant’s conduct in this litigation with respect to the November 9th counter-offer. Offering to settle only on the basis that the Plaintiffs’ cabin at the park that was the subject of the public interest debate be transferred to the Defendant strikes me as having a punitive element to it, or there was an ulterior motive for not resolving the proceeding. The Defendant made no cash offer to settle the issue of costs and damages in the litigation.
[56] Furthermore, while I appreciate that no medical evidence is required to justify a damages award, there is little evidence before me as to the impact of this litigation on the Defendant and what would cause the damages to be in the range claimed.
[57] For these reasons the damages claim is dismissed.
Order:
[58] In light of the foregoing, it is ordered that:
a. The Plaintiffs shall pay to the Defendant on account of the s. 137.1 motion, jointly and severally, the sum of $17,500 costs;
b. The Defendant’s claim for damages pursuant to s. 137.1(9) is dismissed; and
c. A separate order shall issue for the removal of Weiler Maloney Nelson and Nick Melchiorre as solicitors of record for the Plaintiffs on the following terms:
i. As set out in paragraphs (a) to (d) in the notice of motion;
ii. The order shall contain the last known address and contact information for the Plaintiffs; and
iii. Mr. Melchiorre shall ensure that the order removing his firm as solicitors of record and the costs decision are sent to the Plaintiffs at the last known regular mail and e-mail addresses.
“Original signed by” The Honourable Madam Justice T.J. Nieckarz
Released: August 18, 2021
COURT FILE NO.: CV-17-0374-00
DATE: 2021-08-18
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
HARLAN SCHWARTZ AND RED LAKE OUTFITTERS
Plaintiffs/Responding Parties
- and –
ROBERT COLLETTE
Defendant/Moving Party
ENDORSEMENT ON COSTS
Nieckarz J.
Released: August 18, 2021