Court File and Parties

COURT FILE NO.: CV-19-617048-00CL DATE: 20220110 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Greta Energy Inc. and Great Grand Valley 2 Limited Partnership, Plaintiffs AND: Pembina Pipeline Corporation and Bluearth Renewables Inc., Defendants

BEFORE: C. Gilmore, J.

COUNSEL: Brendan Van Niejenhuis, Caitlin E. Milne and Senwung Luk, Counsel for the Plaintiffs Mark Gelowitz and Sandy Hay, Counsel, for the Defendant Pembina Pipeline Corporation R. Seumas M. Woods and Rebecca Torrance for the Defendant Bluearth Renewables Inc.

HEARD: In Writing

Endorsement on Costs

Introduction

[1] These summary judgment motions were heard by me on October 13 and 14, 2021. The judgment was released on November 17, 2021. The Plaintiffs brought a motion for summary judgment seeking a dismissal of the Defendants’ motions and damages. The Defendants each brought a motion for summary judgment dismissing the Plaintiffs’ claims against them. I granted the Defendants’ motions and dismissed the Plaintiffs’ claim for damages. I also dismissed the Plaintiffs’ motion for summary judgment.

[2] I requested that counsel provided written submissions on costs on a timetable which was completed on December 23, 2021.

The Positions of the Parties

The Defendant Bluearth

[3] Bluearth seeks its costs of the action and the summary judgment motion in the all-inclusive amount of $785,000.

[4] Bluearth submits that it was entirely successful and is therefore entitled to costs for both the motion and the action. Further, Bluearth served an Offer to Settle after it had served its record but before the Plaintiffs had served their record. The Offer was open until the commencement of trial. Specifically, the April 13, 2021 Offer to Settle offered to consent to an Order dismissing the Plaintiffs’ action against it in exchange for no costs. This Offer should be taken into account in awarding costs to Bluearth on a substantial indemnity scale after the date of the Offer.

[5] The case was complicated involving thousands of productions, four days of discoveries, a two-day hearing, and the Rule 39 examination of Andrew Fengate.

[6] The Plaintiffs’ conduct in the litigation increased costs. In particular, the Plaintiffs’ decision to require comprehensive productions, amending their claim to allege a conspiracy as between the Defendants and its failure to lead any evidence from Fengate contributed to a higher level of costs.

[7] Bluearth seeks cost of $785,000 which is approximately 68% of its actual costs of $1,149,677.14. This is a reasonable amount given that Bluearth had an efficient legal team and the Plaintiffs’ damages claim of $13M. The amount sought includes pre-offer partial indemnity costs and post-offer substantial indemnity costs.

[8] Bluearth further submits that the Plaintiffs should have expected Bluearth to mount a comprehensive defence given the allegations of improper conduct against a company that was owned at the time by one of Canada’s largest pension funds.

The Defendant Pembina Pipeline

[9] The Defendant Pembina Pipeline Corporation (“Pembina” and referred to in the judgment as “Veresen”), seeks all inclusive costs of $654,083.53 for the motion and the action. The costs sought are a blend of partial and substantial indemnity costs based on Pembina’s Offer to Settle dated March 31, 2021. Specifically, Pembina seeks $410,008.50 from July 13, 2017 to March 31, 2021 on a partial indemnity scale and substantial indemnity costs of $158,556.60 from April 1, 2021 to present.

[10] If Pembina is not granted the costs sought, it requests its all-inclusive costs on a partial indemnity scale in the amount of $594,360.54. Pembina submits that the appropriate percentage for partial indemnity costs is 60%.

[11] Pembina’s March 31, 2021 Offer to Settle offered to consent to a dismissal of the motion and the Plaintiffs’ action without costs. As the Plaintiffs were entirely unsuccessful on the motion, the result is far less favourable for them as they will now face payment of a significant costs award. Pembina’s position is that given the complexity and length of the litigation as well as the significant discovery process, the Plaintiffs should bear enhanced cost consequences for failing to accept Pembina’s Offer to Settle.

[12] Pembina further submits that it was accused of improper conduct, conspiracy, and breach of fiduciary duty by the Plaintiffs. Those allegations were dismissed by the Court on the basis that there was no evidence to support them. The Plaintiffs should have reasonably expected Pembina to thoroughly defend such serious allegations and that the cost of doing so would be significant.

The Plaintiffs

[13] The Plaintiffs’ position is that, while costs should follow the event, the costs sought by the Defendants are simply unreasonable. The Plaintiffs suggest that all inclusive costs of $200,000 would be reasonable for Bluearth and $175,000 for Pembina. The Plaintiffs’ actual full indemnity costs were just over $710,000, notwithstanding the fact that the Plaintiffs had two opponents to face while each Defendant only had one. Using the 60% figure in Pembina’s submissions to determine partial indemnity costs, the Plaintiffs’ partial indemnity costs would be in the range of $426,350.

[14] The Plaintiffs’ reasons for suggesting such a significantly lower amount than the Defendants may be summarized as follows:

a. The amount of damages was lowered considerably when the claim was amended; b. The circumstances of this case do not warrant a costs award intended to sanction or denunciate the Plaintiffs. It was simply hard-fought litigation. c. The Defendants’ respective Offers to Settle do not attract the Rule 49 regime nor are they “significant” offers as set out in the relevant case law. d. The production and discovery process were not as complex or burdensome as the Defendants suggest. The parties agreed to a tightly defined discovery plan which included an efficient jointly chosen database format. Discovery time was divided equally and was proportional to the issues. e. Both Defendants’ Bill of Costs contain large volumes of time attributed to anonymous lawyers. The format does not comply with Rule 57.01(5). The amounts charged by these anonymous lawyers range from $300,000 at a substantial indemnity rate by Bluearth and $82,636 at a substantial indemnity rate by Pembina. f. The Plaintiffs’ decision to amend their pleading to include a cause of action for conspiracy was reasonable as was the pursuit of summary judgment. The Plaintiffs were left in the dark on many issues until discovery. g. There is uncertainty in the law related to asset price allocation in a sale of multiple assets where there is ROFR and the issues were of great importance to the energy industry. h. Bluearth did not have a counterclaim and faced far fewer issues than Pembina on the motions. The $200,000 all inclusive amount suggested is entirely reasonable. i. Pembina’s costs request does not include a reduction or reallocation of fees for the work done on the counterclaim which was not discontinued until October 28, 2021. It is reasonable to infer that some of the work done on pleadings, discovery and document production related to the $10M counterclaim. As such, an overall reduction of 25% from a partial indemnity award should be applied to any costs awarded to Pembina. j. The scale of the costs sought is entirely unreasonable and likens to amounts awarded after weeks of trial in other cases. The matter was managed efficiently both procedurally and during the two days of argument. No special circumstances exist that would attract the amounts sought by the Defendants.

Analysis and Ruling

Issue 1) Scale of Costs

[15] The first issue to address in order to properly determine costs in this case is the scale of costs. Both defendants seek substantial indemnity costs after the date of their respective Offers and both defendants submit that they achieved a better result than the one they offered the Plaintiff given the amount of costs sought.

[16] While Rule 49 does not explicitly contemplate a situation in which the claim is dismissed and the Plaintiff receives nothing, the Defendants submit that the caselaw supports the Court exercising its discretion to award substantial indemnity costs after the date of the Offer.

[17] In Holly Downs Developments Inc. v. 1428508 Ontario Limited, 2014 ONSC 2963, the Court considered the type of Offer that was made in the case at bar and found that the successful party was not entitled to substantial indemnity costs after the date of the Offer because the Offer was not “significant” or “realistic” with respect to the claim against it (para 27). In coming to this conclusion, the Court also referred to the unsuccessful party’s claims as not unreasonable and the length of the trial not excessive (para 26).

[18] Similarly, I find that the Defendants’ Offers for a dismissal in exchange for no costs to be ones which can be taken into consideration by this Court but not ones which automatically attract substantial indemnity costs post Offer. Costs must therefore be accordingly adjusted with respect to both proportionality and reasonableness and payable on a partial indemnity scale.

Issue 2: Other Rule 57.01 Factors

[19] There can be no dispute that the Defendants had clear success on both the motion and the action.

[20] While the matter was complex, it was fully argued over two days. It is true there were tens of thousands of documents and four days of discoveries, but the discovery and document process was fully and completely managed by experienced counsel. Allowance must also be made for the examination of Mr. Cogan and the production of Fengate’s documents, some of which were relied upon in my judgment.

[21] The Plaintiffs are critical of the amounts sought by the Defendants and remind the Court that its costs were only $460,350 all inclusive on a partial indemnity scale. However, I agree with the Defendants that while the Plaintiff is not required to reveal their own costs, if they choose not to, that may affect the Court’s ability to properly assess the submission. In this case, the Plaintiff revealed their costs but failed to provide a Bill of Costs. This impaired the Court’s ability to reasonably compare hours spent especially in the face of the Plaintiff’s complaints about “bulk” billing by the Defendants.

[22] With respect to Pembina’s Counterclaim, there does not appear to be a basis for a reduction of the magnitude suggested by the Plaintiff. The majority of work related to successfully defending a motion to stay was brought by the Plaintiffs in 2018. Costs of that motion were dealt with and, as such, only a small amount of overall time (Pembina suggests 3%) represents time billed for the Counterclaim (apart from the stay motion).

[23] As for the Plaintiffs’ suggestion that work was done by unidentified lawyers, I have reviewed the Bill of Costs of both Pembina and Bluearth and find that lawyers and their rates were specifically identified.

[24] The principles which must guide this Court in assessing costs is reasonableness as per Boucher v. Public Accountants Council for the Province of Ontario (2004) at para 302. In Zesta Engineering Ltd. v. Cloutier at para 4, the Court of Appeal did not view it essential to measure the exact costs incurred by the successful party but, rather, an amount that the Court views as fair and reasonable.

[25] Based on all of the above, I find that the amount of costs suggested by the Plaintiffs is neither fair nor reasonable given the success of the Defendants, the complexity of the proceeding, the amounts at stake, and the conduct of the litigation. However, as indicated above, this is not a case for substantial indemnity costs. A reasonable and proportionate amount of partial indemnity costs should be awarded as follows:

a. To Pembina - $450,000 b. To Bluearth - $500,000

[26] The costs are payable forthwith.

C. GILMORE J. Date: January 10, 2022