Court File and Parties

Court File No.: CV-14-126 (Kingston) Date: 20220222 Superior Court of Justice - Ontario

Re: Joseph Torres and Keith Smalbill, Plaintiffs And: MGL Properties Ltd. (formerly, Mr. Gas Limited/Mr. Gas Limitee), BCP IV Service Station LP, and BCP IV Service Station Limited, Defendants

Before: Mr. Justice Graeme Mew

Counsel: David M. Adams, for the plaintiffs Michael S. Hebert, for the defendants

Heard: In writing, at Kingston

Costs Endorsement

[1] The plaintiffs brought a motion seeking various orders including an order pursuant to s. 248 of the Business Corporations Act, R.S.O. 1990, c. B. 16, requiring the defendants to pay into court $8,000,000 by way of security for the plaintiffs’ claim or, in the alternative, an injunction restraining the defendants from dissipating assets that might otherwise be used to satisfy a judgment obtained by the plaintiffs.

[2] The plaintiffs’ motion was dismissed: 2021 ONSC 8239.

[3] The parties have been unable to agree the costs of this motion and have now filed written submissions on the issue of costs.

[4] The litigation between the parties has had a somewhat turbulent history. The action was commenced on 28 March 2014 claiming, among other relief, $7,000,000 in damages resulting from the alleged contamination of the plaintiffs’ property – on which is located a mixed-use commercial/residential building – as a result of contamination alleged to have been caused by operations at a neighbouring gas station. That gas station was originally owned by the defendant MGL Properties Ltd. However, in December 2018, MGL sold the gas station to the defendants, BCP IV Service Station LP and BCP IV Service Station Limited.

[5] In June 2020, the plaintiffs brought a motion for various relief including the issues that were eventually heard by me. As I noted in my Reasons for Decision, the materials filed on the motion were voluminous. Over 5,000 pages. Fourteen affidavits were served and ten individuals were cross-examined (two pursuant to Rule 39.03 notices served by the plaintiffs). There were a number of adjournments and several case conferences. It also bears noting that although it is over eight years since this action was commenced, it has not yet been set down for trial.

[6] On 10 September 2021, instead of proceeding as scheduled with a full day hearing of the motion, the parties argued a motion to enforce an alleged settlement of the issues which were to have been dealt with.

[7] At that time, the court was informed that the parties had reached agreement on an amount (not specified at the time) to be paid into court by MGL by way of security for the plaintiffs’ claim. There was, however, a dispute about whether the issue of costs of the motion had been resolved. I held that there had not been a meeting of minds on that issue and, hence, no settlement: 2021 ONSC 6088.

[8] Up until 20 August 2021, the plaintiffs had been prepared to resolve the issue of costs on the basis that the costs of the motion would be in the discretion of the trial judge or as agreed upon by the parties. That was no longer the plaintiffs’ position by the time the motion to enforce the settlement was heard on 10 September.

[9] During the course of submissions on the settlement motion, counsel for MGL informed the court that MGL would be content to leave it to the court to decide when the issue of costs should be dealt with, i.e. at an interlocutory stage, or at the end of the case.

[10] In my decision on the settlement enforcement motion, I attempted, to the extent that I felt it appropriate to do so, to telegraph my concerns about losing what appeared to be an accord on the amount of security to be paid by MGL because of a lack of agreement on when the issue of costs should be determined. At para. 23, I encouraged the parties “to reflect upon today’s proceedings as well as the discussions and exchanges that have occurred during the past few weeks” and to “carefully evaluate whether the interests of their clients are best served by going forward with the motion afresh when it would appear that there was a significant degree of agreement, albeit not on all of the essential terms that were under discussion”.

[11] The plaintiffs evidently did not take the hint.

[12] Instead, the plaintiffs proceeded with their motion in which they sought, inter alia, to have the full amount of their claim, namely $8,000,000, paid into court or otherwise held in trust by way of security for their claim.

[13] As part of the parties’ costs submissions, there has now been disclosure of the offers to settle made before the hearing of the motion.

[14] Both sides were prepared to accept $1,000,000 as the amount that should be paid by MGL by way of security.

[15] Instead, in the end, the plaintiffs got nothing.

[16] The plaintiffs argue that all was not in vain. The cross-examinations that were undertaken in relation to the motion can stand as discovery evidence or evidence to be used at trial. The expert reports can also form the basis for the expert evidence at trial.

[17] While it is likely that the expert reports can and will be used at trial and that some of the cross-examinations can also be put to further use, it remains the case that a great deal of time, money and effort appears to have been expended because of a lack of agreement on costs.

[18] What makes the situation even more lamentable is that the issue was not who should pay or how much they should pay but, simply, when a decision should be made on the issue of costs.

[19] MGL’s substantive indemnity costs are said to be $235,148.63 including disbursements and taxes. The disbursements are high for a motion, including over $20,000 for expert witness fees.

[20] MGL made several offers to settle. The last one was made on 28 October 2021 and, in relation to costs, proposed that costs of the motion should be in the discretion of the trial judge or as agreed by the parties. The defendants made a similar offer to settle on 21 September 2021. The plaintiffs, on the other hand, wanted personal guarantees from certain individuals and entities in addition to a security of $1,000,000 and also stipulated that costs of the motion should be determined in the discretion of the trial judge following the trial of the action, or as may be otherwise agreed by the parties.

[21] Although the result of the motion is that the $1,000,000 by way of security does not need to be posted by MGL, the costs provisions in the written offers (as opposed to the submissions made by counsel for MGL during the course of the hearing of the settlement enforcement motion) have terms on costs that contemplate the costs being dealt with by the trial judge. That, of course, is not what has happened. While I did order that the costs of the settlement motion should be dealt with by the trial judge, I directed that the costs of the oppression/injunction motion would be dealt with by me as the motion judge.

[22] Ultimately, no one has “beaten” their offer when regard is had to all the terms of the offers made.

[23] Nevertheless, it is entirely appropriate that in exercising the discretion given to me by Rule 49.10 of the Rules of Civil Procedure, I should take into account that considerable costs could, and should, have been avoided given the agreement that existed on the amount to be paid by way of security. The defendants argue that, taking into account all factors, including the making of some allegedly intemperate and strongly worded allegations by the plaintiffs against MGL and its principals, an award of substantial indemnity costs is warranted.

[24] The plaintiffs, on the other hand, while not seriously challenging the time and expense incurred by MGL, point to the fact that a substantial portion of the costs being claimed relate to work done and expenditures incurred – such as expert reports and cross-examinations – that can be used by the parties at trial.

[25] While the expert reports assisted the court to the extent that they underscored the existence of genuine issues to be tried, I am not inclined to encumber the costs of the motion with expenses that will principally benefit the trial of the substantive issues between the parties. On the other hand, although transcripts of witnesses and experts may be of benefit at the trial, the principal purpose for which they were created relates to the motion.

[26] MGL’s claim for partial indemnity costs is $163,958.69. That includes $23,995.67 (plus tax) for disbursements. Those disbursements include $9,715.50 paid to D. A. Birkholz Analytical Consultant Inc. and $11,113.87 paid to LRL Associates Ltd., for a total of $20,829.37 paid to the two firms of the experts. In my view, those disbursements should be excluded from the costs of the motion but can, of course, be taken into account as and when the costs of the action fall to be determined. However, any examinations or cross-examinations of the experts were undertaken for the purposes of the motion and therefore should be considered as part of the costs of the motion.

[27] Ultimately, I am not prepared to exercise my discretion to make an enhanced award of costs. Both parties have contributed to the lack of progress in this matter. That said, I see no reason, particularly in light of the outcome of the motion, not to award MGL the vast majority of the partial indemnity costs which it has claimed (after backing out the expert witness fees).

[28] In the result, the plaintiffs shall pay MGL partial indemnity costs in the all-inclusive amount of $140,000. These costs are payable within 30 days of the date of the release of this costs endorsement.

[29] The parties need to get on with this litigation. To that end, my judicial assistant will schedule a case conference with the parties to confirm a timetable for the outstanding steps to be taken. The parties are encouraged to agree on a timetable in advance of that case conference.

Mew J Date: 22 February 2022