Court File and Parties

COURT FILE NO.: CV-20-644524

DATE: 20220404

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Timothy Kwong

AND:

iAnthus Capital Holdings, Inc., Hadley Ford and Julius Kalcevich

BEFORE: J.T. Akbarali J.

COUNSEL: Andrew Morganti, for the Plaintiff

Jeffrey Levine, Stephen Brown-Okruhlik and Guneev Bhinder, for the Defendants iAnthus Capital Holdings, Inc., and Julius Kalcevich

Kathryn J. Manning and Corey Groper, for the Defendant Hadley Ford

HEARD: In writing

Endorsement

[1] On March 2, 2022, I released reasons denying the plaintiff’s motion for production of documents from the defendants. The plaintiff sought production in advance of filing his reply motion materials in his motion for leave to commence his claim under s. 138.8 of the Securities Act, R.S.O. 1990, c. S.5: Kwong v. iAnthus Capital Holdings, Inc., 2022 ONSC 1400. I held that the plaintiff’s avenues for production were set out in the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, and did not include a request for production prior to the conclusion of the filing of evidence in the leave motion.

[2] These reasons deal with costs of the production motion, a matter over which the parties have been unable to agree.

[3] The three main purposes of modern costs rules are to indemnify successful litigants for the costs of litigation, to encourage settlement, and to discourage and sanction inappropriate behaviour by litigants: Fong v. Chan (1999), 1999 2052 (ON CA), 46 O.R. (3d) 330, at para. 22.

[4] Subject to the provisions of an Act or the rules of court, costs are in the discretion of the court, pursuant to s. 131 of the Courts of Justice Act, R.S.O. 1990, c. C.43. The court exercises its discretion taking into account the factors enumerated in r. 57.01 of the Rules of Civil Procedure, including the principle of indemnity, the reasonable expectations of the unsuccessful party, and the complexity and importance of the issues. Overall, costs must be fair and reasonable: Boucher v. Public Accountants’ Council for the Province of Ontario, 2004 14579 (Ont. C.A.), 71 O.R. (3d) 291, at paras. 4 and 38. A costs award should reflect what the court views as a fair and reasonable contribution by the unsuccessful party to the successful party rather than any exact measure of the actual costs to the successful litigant: Zesta Engineering Ltd. v. Cloutier, 2002 25577 (ON CA), 2002 CarswellOnt 4020, 118 A.C.W.S. (3d) 341 (C.A.), at para. 4.

[5] The defendants iAnthus and Kalcevich claim costs of $13,573.90, all-inclusive, on a partial indemnity scale. They argue that the plaintiff’s motion unnecessarily delayed the hearing of the leave motion, which was originally scheduled for March 31, 2022, and has not yet been rescheduled. They argue that my reasons were consistent with their original response to the plaintiff’s production request, that is, that the plaintiff would have the opportunity to make document requests at cross-examinations following the delivery of his reply evidence.

[6] iAnthus and Kalcevich also argue that their costs are reasonable. The majority of the work done on the motion was done by an associate. Moreover, the issues were important because, had the plaintiff succeeded, he would have, in effect, imposed discovery-like obligations on the defendants before he obtained leave, thus evading an important legislative protection for defendants against strike suits. The motion thus required a diligent response.

[7] In addition, they argue that costs were increased by frequent, lengthy, and unsolicited correspondence from the plaintiff’s counsel. Such correspondence included comments that the defendants say indicate that their costs were within the plaintiff’s reasonable expectations.

[8] The defendant Ford echoes many of his co-defendants’ submissions. However, he seeks costs on a substantial indemnity scale in the amount of $23,029.97, all-inclusive. His bill of costs also supports partial indemnity costs in the amount of $15,353.31 all-inclusive. Counsel indicates that this claim for costs is a discount from the actual time spent on the motion, but that that Ford has reduced his costs claim to a number he argues is fair and reasonable in the circumstances.

[9] Ford seeks a higher scale of costs because, prior to the motion being brought, Ford advised the plaintiff’s counsel that the documents sought were not in his possession. Three days after serving the motion record, the plaintiff’s counsel indicated he did not expect Ford to have the impugned documents. Ford argues that when a party takes a position they should have known would be unsuccessful, they have taken an unreasonable position, and unnecessarily consumed the court’s time and resources (and, I add, the parties’ time and resources), justifying a higher scale of costs: TSI International Group Inc. v. Formosa, 2016 ONSC 4984, at para. 21.

[10] Moreover, the plaintiff made allegations of deliberate misconduct against Ford, including that he lied about his and another person’s resignations from iAnthus; that Ford refused to submit to a cross-examination on his affidavit when Ford’s counsel had offered to produce him; and that Ford was withholding the documents the plaintiff sought despite counsel admitting that they did not expect Ford to have the documents. Ford argues that, by attacking his character, the plaintiff reasonably expected that he would respond to the accusations fully, completely and resolutely. Moreover, where serious allegations of deliberate misconduct are made in the face of a finding to the contrary, a higher scale of costs is appropriate: Greenlight Capital v. Stronach, 2008 34350, at paras. 69, 71-74.

[11] For his part, the plaintiff argues that the costs sought by the defendants are too high. He disputes that costs should be payable for a case conference related to the motion. He argues that the defendants over-lawyered the file.

[12] The plaintiff denies that his conduct warrants substantial indemnity costs. He states his motion was brought in good faith, and I made no findings as to any improper motive. He argues that the costs claimed are outside of the plaintiff’s reasonable expectations. However, despite my direction that the parties file costs outlines, the plaintiff did not do so, nor did he put any information about his own costs before the court. He did point to other cases dealing with issues such as motions to strike affidavit clauses, refusals motions, or leave to appeal motions which garnered costs at a level that he says support his argument that the costs sought in this case are outside the plaintiff’s reasonable expectations.

[13] The plaintiff also argues that he made an offer to set costs for $2,500 to $7,500. This was not an offer to settle exactly, but an attempt to negotiate an agreement with the defendants on what costs would go to the successful party on the motion. No agreement was reached.

[14] The plaintiff relies on the principle of access to justice, and argues that the goals of the Class Proceedings Act, 1992, S.O. 1992, c.6, will only be served as long as there are counsel willing to take risks in order to advance cause of plaintiffs of modest means or modest claims.

[15] The defendants are the successful parties on the motion; they are presumptively entitled to their costs.

[16] iAnthus and Kalcevich seek costs on a partial indemnity scale. There is no reason argued, and none I can see, why they would be entitled to costs on an elevated scale.

[17] As for Ford, given the plaintiff’s counsel’s statement that they did not expect Ford to have the documents, one wonders why they bothered to drag him into the motion, and then to make allegations that went to his character, including that he was withholding the documents they already indicated they did not think he had. This is unreasonable behaviour, and in my view, is worthy of sanction by way of substantial indemnity costs.

[18] However, regardless of the scale of costs, the quantum must be fair and reasonable.

[19] I accept that the motion was important to the parties. If the motion had been granted, the defendants stood to incur significant expense to embark on a production exercise that is normally reserved for discovery, all before the plaintiff’s entitlement to proceed with the action had been determined. The plaintiff should have expected that the motion would be vigorously resisted.

[20] The motion itself was novel, in the sense that it did not have a strong foundation, given the statutory scheme and the relevant rules governing production in the Rules of Civil Procedure. That novelty speaks less to any latitude to which the plaintiff should be entitled, and more to the lack of merits of the motion which should arguably have been apparent on its face. It thus caused unnecessary expense and delay which, in my view, should have been anticipated by the plaintiff at the outset. However, while I find the motion was ill-advised, I do not find it was brought in bad faith. Moreover, while it was plain that the motion would be vigorously defended, the issues raised in the motion were not very complex.

[21] Counsels’ rates are reasonable, and both sets of defence counsel have appropriately allocated work to the least expensive timekeeper. The time spent is not excessive in view of what was at stake in the proceeding, and having regard to the materials filed.

[22] In conclusion, having regard to the factors noted above, I order the plaintiff to pay to the iAnthus and Kalcevich defendants the sum of $13,573.90 in partial indemnity costs, all-inclusive, within thirty days.

[23] I also order the plaintiff to pay costs to the defendant Ford in the amount of $23,029.97 in substantial indemnity costs, all-inclusive, within thirty days.

[24] I note that the record before me contained a number of emails from plaintiff’s counsel to counsel for the defendants that were aggressive and taunting in nature. While I do not condone the tone of those emails, I have not taken counsel’s tone into consideration in reaching my decision on costs.

J.T. Akbarali J.

Date: April 4, 2022