Court File and Parties

COURT FILE NO.: CV-18-594044

DATE: 20211026

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: BROOK RESTORATION LTD. Plaintiff

AND:

ALEXANDER MCMULLEN, CHRISTIAN BRANNAN, AMANDA KALCIC and TRUGRP INC. Defendants

BEFORE: Justice Glustein

COUNSEL: Stephen F. Gleave, for the Plaintiff Robert G. Tanner, for the Defendants Alexander McMullen and Trugrp Inc. Julian R. Nawrocki, for the Defendant Christian Brannan

COSTS ENDORSEMENT

Overview

[1] The defendants seek costs in relation to a notice of motion served in August 2019 by the plaintiff Brook Restoration Ltd. (Brook), in which Brook sought an interim injunction. The proposed motion was not heard as counsel for Brook advised at a case conference that Brook would not proceed with the injunction motion.

[2] The present action arises from Brook’s allegations that (i) the defendants breached their common law duties by setting up a competing company while under contract of employment with Brook; and (ii) after the personal defendants resigned in early 2018, the defendants misappropriated Brook’s confidential and proprietary information to win restoration bids that otherwise would have been won by Brook.

[3] In its notice of motion, Brook sought relief including an order:

(i) requiring the defendants to “deliver up to Brook any of Brook’s confidential business documents and information in their possession, power or control, whether in hard copy or in electronic or digital form … including … all information, data and documentation that contains Brook’s information”,

(ii) prohibiting the defendants from using the confidential information,

(iii) prohibiting the defendants from destroying, altering, disposing of or moving out of Ontario documents and confidential information belonging to Brook,

(iv) requiring the defendants to identify all media devices and email accounts “used from January 2017 to end of August 2019, including … all computers, smartphones, ipads, tablets, usb sticks, memory sticks, external hard drives”, and

(v) requiring the defendants to deliver any computer and any external data storage devices in the possession of or used by the defendants, in unaltered format, for inspection by a forensic computer expert to be retained by Brook.

[4] The defendants seek costs on a substantial indemnity scale, under rule 37.09(3) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. The defendants Alexander McMullen and Trugrp Inc. (Trugrp) seek costs of $19,912.20. The defendant Christian Brannan seeks costs of $24,703.05.

[5] Brook submits that costs ought to be payable in the cause, since (amongst other reasons), there were no costs thrown away and the work done by the parties on the motion will be used and considered at trial.

[6] For the reasons that follow, I agree with Brook and order that costs of the motion are payable in the cause.

Analysis

[7] The parties raised several legal issues, including (i) whether the motion was “abandoned” under rule 37.09(3), (ii) any presumption for payment of costs under rule 37.09(3) that might arise if the motion was abandoned, and (iii) whether case law that presumes costs in the cause for a successful injunction also applies to an unsuccessful (or withdrawn) injunction.

[8] However, on the facts of this case, it is not necessary for me to consider any of the above legal issues.

[9] All parties agree that the court has discretion to make a costs award regardless of whether a motion is abandoned or an injunction is unsuccessful. On the facts of the present case, I would exercise that discretion to order costs payable in the cause.

[10] Under rule 37.09(3), when a motion is abandoned or deemed to be abandoned, the responding party on whom the notice of motion is served “is entitled to the costs of the motion forthwith, unless the court orders otherwise”. Consequently, the court has discretion to order costs even if a motion is abandoned or dismissed: Cherny v. Pollari, 2017 ONSC 1886, at para. 14.

[11] Even if a motion for interlocutory relief is not pursued, the court has the discretion to not order costs. In TDL Group Ltd. v. 1060284 Ontario Ltd., 2000 CanLII 22736 (ON SC), [2000] O.J. No. 4582 (S.C.), Nordheimer J. (as he then was) ordered costs in the cause of an interlocutory injunction which the plaintiff decided not to pursue. He held that the motion should be considered dismissed, at para. 36:

I agree with counsel for the defendants that a motion for an interlocutory injunction cannot be adjourned to the trial. By definition, the relief that is being sought is for the purpose of protecting matters pending the trial. Once the trial begins, the fundamental rationale for the relief has disappeared. It is therefore illogical to adjourn such relief to the trial. What has really happened here is that the plaintiff has decided not to proceed with the interlocutory relief because it is hoped that the matter will get to trial expeditiously where all issues will be resolved. However, the plaintiff does not wish to abandon the motion because it would then be faced with the costs consequences of so doing as provided for in rule 37.09(3). Nonetheless, in these circumstances, the only appropriate order is to dismiss the motion for interlocutory relief. It should be made clear, however, that such dismissal is without prejudice to the plaintiff bringing a fresh motion for such relief if future circumstances warrant it.

[12] However, Nordheimer J. reviewed the facts of the case and held that costs in the cause was the appropriate order since, at para. 41, “a considerable portion of the costs associated with the injunction motion will benefit the parties in terms of the overall proceeding”. I set out his full reasons on costs, at para. 41:

Lastly, in terms of the costs, the defendants say that they should have the costs of the injunction motion as it has been dismissed. In my view, the costs of the injunction motion should be left to be determined by the trial judge subject to any further order being made in that regard. The trial judge is likely to be in the best position, having decided the fundamental issues in the action, to determine the most appropriate disposition of the costs relating to the injunctive relief sought. I also note that a considerable portion of the costs associated with the injunction motion will benefit the parties in terms of the overall proceeding since some of the cross-examinations can clearly form part of the discoveries to be held and others have provided, particularly to the defendants, an opportunity to obtain the evidence of potential witnesses under oath which opportunity they would not normally have. All of this only reinforces my view that the trial judge is likely to be best able to determine how those costs should be dealt with. However, I recognize the possibility that other circumstances may intervene between now and the time of trial, or that the trial might be delayed for reasons which are not yet apparent, such that some other disposition of these costs might become more appropriate. To allow for those contingencies, I have added the provision making this disposition of the costs subject to any further order of the court.

[13] In Faas v. Coloroso, 2014 ONSC 4494, at para. 25, Morgan J. did not order costs of a withdrawn motion for an interlocutory injunction since, on the facts of that case, the trial judge “will also be in the best position to determine how much of the time and effort spent on the motion was useful at trial and how much was thrown away”.

[14] On the facts of the present case, I make a similar order that costs of the withdrawn motion (whether or not considered as dismissed or abandoned) are payable in the cause. I rely on the factors set out below.

[15] First, Brook did not unreasonably refuse the defendants’ offer to settle, in which the defendants offered to undertake “to make no use, disclosure or disposition of Brook’s confidential documents or information”. In June 2019, the defendants had disclosed in a response to a proceeding before the Labour Board that their new company, Trugrp, had won approximately 20-30 bids. The defendants have refused to produce those contracts and supporting information. Consequently, it was reasonable for Brook to pursue injunctive relief for the return of the electronic and hard copy documents sought in the notice of motion rather than accepting the proposed undertaking.

[16] Similarly, it was reasonable for Brook to pursue injunctive relief (and not accept the defendants’ undertaking) given Brook’s position that around the same time as the Labour Board disclosure, “the Defendants served their Affidavit of Documents [and] the Plaintiff first saw that hundreds of documents were in the Defendants’ possession and which comprised the Plaintiff’s confidential and proprietary information – including hundreds of the Plaintiff’s policies and procedures, the costing of projects, labour and materials, and the complete client list”.

[17] Second, while I make no finding on the merits of Brook’s submissions as to spoliation, the issue will be raised at trial, as well as the deletion process followed by the defendants. Those same issues arise from the injunctive relief sought.

[18] Third, the cross-examinations on affidavits occurred at the same time as examinations for discovery. There is no practical means to distinguish between time spent for the motion and time spent for trial.

[19] Fourth, I cannot find on the evidence before me that the relief sought of the return of documents created any wasted costs. The issue on the injunction was whether there was sufficient evidence to establish that there was a serious question to be tried of breach of confidential information. This merits of the breach of confidential information issue will be decided by the trial judge. The affidavits filed by the parties addressed this core issue. Consequently, the various forms of relief sought by Brook flowed from the core issue in the case.

[20] It has now been more than three years since the departure of the personal defendants. An injunction at this point would be of little utility. The trial will address all of the same issues which were the subject of cross-examination/discovery. Spoliation issues will have to be addressed at trial, so there is little utility in proceeding with an injunction that might not even result in the return of the documents sought.

[21] For the above reasons, I cannot find that there have been costs thrown away. That issue is best left to the trial judge to determine. On the facts of this case, I agree with Brook’s submissions that (i) “[t]he trial will be the right place to argue the remedy for spoiled evidence”; (ii) “[the trial] will also be the right time to argue about the misappropriation of Brook’s confidential and proprietary information, including seeking remedies such as a permanent injunction and damages”; and (iii) “[t]he work done to date arms the parties to address these issues at trial”.

[22] Consequently, I order that costs of the motion be reserved to the trial judge.

GLUSTEIN J.

Date: 20211026