COURT FILE NO.: CV-18-605410

DATE: 20211222

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: CRESTWOOD PREPARATORY COLLEGE INC., CRESTWOOD SCHOOL, MANDRAKE MANAGEMENT CONSULTANTS CORPORATION, NEXCAREER INC. and RADAR HEADHUNTERS INC., formerly known as WWWORK!COM INC.

AND:

DAVID SMITH, THOMAS THORNEY, RITA BOTELHO, JAMES KEMBLE and FISH RECRUIT INC.

BEFORE: VERMETTE J.

COUNSEL: Sean Dewart and Brett Hughes, for the Plaintiffs

Stephen Aylward, for the Defendants

HEARD: In writing

ENDORSEMENT AS TO COSTS

[1] On December 6, 2021, I released an endorsement granting the motion of the Defendant David Smith for a permanent stay of this action as against him. The parties were not able to agree on costs and have delivered costs submissions.

Positions of the parties

a. Mr. Smith’s position

[2] Mr. Smith requests his costs of the motion on a full indemnity basis in the amount of $51,385.53 ($30,139.84 on a partial indemnity basis). Given that the effect of my decision is to bring the action to an end with respect to Mr. Smith, Mr. Smith also requests his costs of the action on a partial indemnity basis in the amount of $5,238.20.

[3] Mr. Smith submits that this Court has discretion to award costs on an elevated scale where there has been an abuse of process, and notes that full indemnity costs have been awarded in other cases where there was a failure to immediately disclose a litigation agreement. He argues that this was not a case of “near-compliance by a party otherwise acting in good faith”, but, rather, a situation where there was a deliberate and repeated refusal by the Plaintiffs to accept and abide by their obligations. Mr. Smith points to three factors which, in his view, warrant a severe costs sanction: (a) this case involved two distinct breaches (i.e. two distinct settlement agreements); (b) the Plaintiffs did not disclose the Thorney Agreement; and (c) the Plaintiffs misled Mr. Smith about the Thorney Agreement.

[4] Mr. Smith also submits that the quantum of costs claimed is reasonable, and notes that the motion was factually complex.

b. The Plaintiffs’ position

[5] The Plaintiffs do not dispute that costs should follow the event. However, they state that the successful party on a stay motion for non-disclosure of a settlement is not presumptively entitled to either substantial or full indemnity costs, and they refer to cases where costs were ordered on a partial indemnity scale.

[6] The Plaintiffs submit that the line between a settlement that entirely changes the litigation landscape and one that does not cannot be defined with precision, and that parties should not be further penalized – in addition to the permanent stay of proceedings – for mistakenly erring on the side of protecting settlement privilege in good faith. They point out that there is no suggestion of misconduct on the Plaintiffs’ part in responding to Mr. Smith’s motion, and they distinguish some of the case law relied upon by Mr. Smith on this basis.

[7] The Plaintiffs argue that Mr. Smith’s costs are excessive and note that Mr. Smith’s motion record was comprised of law clerk affidavits attaching documents that were straightforward to assemble. The Plaintiffs also argue that Mr. Smith should not be entitled to any costs in respect of his post-hearing submissions since he withheld the fact that he had issued a statement of claim against the Plaintiffs. Finally, the Plaintiffs submit that Mr. Smith’s costs should be reduced to account for the fact that he was unsuccessful on his multiplicity of proceedings argument. In their view, reasonable partial indemnity costs for the motion would be in the amount of $20,000.00, all inclusive.

[8] The Plaintiffs agree that $5,238.20 is a reasonable amount for Mr. Smith’s partial indemnity costs of the balance of the action.

Discussion

a. Scale of costs

[9] I agree with the Plaintiffs that the successful party on a stay motion for non-disclosure of a settlement is not presumptively entitled to either substantial or full indemnity costs: see Waxman v. Waxman, 2021 ONSC 2180 at paras. 108-110. Awards of costs on a partial indemnity scale have been made on such motions in a number of cases.

[10] The two cases relied upon by Mr. Smith are distinguishable. In Moore v. Bertuzzi, 2012 ONSC 5008, full indemnity costs were imposed as a sanction for the failure to disclose a settlement agreement and for breaching a court order. No stay of proceedings was ordered in that case. In contrast, there has been no breach of a court order in this case and a sanction has already been imposed for the failure to immediately disclose the settlement agreements, i.e. a permanent stay of proceedings.

[11] In Tallman Truck Centre Limited v. KSP Holdings Inc. (unreported), Justice Myers found reprehensible conduct on the part of the plaintiff in the conduct of the motion. As has been observed in many cases, costs on the elevated scale are exceptional and are reserved for those situations when a party has displayed reprehensible, scandalous or outrageous conduct: see Quickie Convenience Stores Corp. v. Parkland Fuel Corporation, 2021 ONCA 287 at para. 4. In my view, the conduct of the Plaintiffs in this case does not rise to that level. While the conduct of the Plaintiffs’ lawyers in relation to the non-disclosure of the settlement agreements (and I note that the Plaintiffs were represented by different counsel on this motion) was deliberate and lacking in many respects, I do not find that they were acting in bad faith. They were misguided and did not understand their obligations.

[12] Accordingly, an award of partial indemnity costs is appropriate.

b. Quantum

[13] While the Plaintiffs’ position is that Mr. Smith’s costs are excessive, they have not filed a costs outline reflecting their own costs. In his costs submissions, Mr. Smith refers to a costs outline of the Plaintiffs which he received but that the Court does not have. According to Mr. Smith’s written submissions, the Plaintiffs’ costs outline to the date of the hearing totals $26,750.24 – presumably on a full indemnity basis – compared with the amount of $46,684.50 sought by Mr. Smith on a full indemnity basis for the same period. However, Mr. Smith notes that the Plaintiffs’ costs outline does not include the time spent by the Plaintiffs’ lawyers of record who originally represented the Plaintiffs on this motion, including through cross-examinations.

[14] Although the unsuccessful party is not obliged to disclose what they expended on costs, an attack on the quantum of the opponent’s claim for costs without disclosing one’s own costs outline “is no more than an attack in the air”: see United States of America v. Yemec (2007), 2007 CanLII 65619 (ON SCDC), 85 O.R. (3d) 751 at para. 54 (Div. Ct.).

[15] I reject the Plaintiffs’ argument that Mr. Smith should not be entitled to any costs in respect of his post-hearing submissions since he withheld the fact that he had issued a statement of claim against the Plaintiffs. The Plaintiffs wished to make additional submissions on this issue and Mr. Smith was entitled to respond.

[16] I conclude from my review of Mr. Smith’s costs outline that the hours spent by Mr. Smith’s lawyers and the costs sought by Mr. Smith are generally reasonable in the circumstances. However, I will apply a small reduction to ensure the overall reasonableness of the costs award in light of all the circumstances of this case (including the fact that Mr. Smith was partially unsuccessful in seeking a stay based on the multiplicity of proceedings) and to take into account potential duplication of work given the number of timekeepers involved.

Conclusion

[17] Taking the foregoing into account, as well as the factors set out in Rule 57.01(1) of the Rules of Civil Procedure, I find that the fair and reasonable award of costs in favour of Mr. Smith for the motion is in the all-inclusive amount of $27,000.00. In my view, this is an amount that the Plaintiffs should reasonably have expected to pay in the event that they were unsuccessful on the motion, especially given the importance of the motion for both sides.

[18] The Plaintiffs are also to pay to Mr. Smith his costs of the action on a partial indemnity basis in the amount of $5,238.20.

[19] Both sets of costs are to be paid by the Plaintiffs to Mr. Smith within 30 days.

Vermette J.

Date: December 22, 2021