Court File and Parties
Date: 2022-04-19 Ontario Superior Court of Justice
Between: Court File No.: CV-13-00005678-00 Correct Building Corporation and Correct Group Inc., Plaintiffs And: Jeffrey Lehman, Jon Babulic, Richard Forward, Janet Foster, Charles Magwood, Edward Archer, Ingrid Peters, Deborah McKinnon, Jennifer Robinson, Metrolinx, Robert Stewart, Indicom Appraisal Associates Ltd., Alex Nuttall, Jerry Moore, Michael Prowser and The Corporation of the City of Barrie, Defendants
And Between: Court File No.: CV-11-00000384-00 Correct Group Inc., Plaintiff And: The Corporation of the City of Barrie, Defendant
Before: L. Ricchetti RSJ.
Counsel: R. Colautti and A. Landry, for the Plaintiff, Correct Group Inc. A. Formosa and F. Bogach, for Jeffrey Lehman, Jon Babulic, Richard Forward, Janet Foster, Charles Magwood, Edward Archer, Deborah McKinnon, Jennifer Robinson, Alex Nuttal, Jerry Moore, Michael Prowse and the Corporation of the City of Barrie; A. Formosa and F. Bogach, for the Defendant, The Corporation of the City of Barrie.
Heard: In Writing.
Costs Endorsement
1The Defendants in both actions brought summary judgment motions seeking to dismiss the Plaintiff’s claims with costs.
2The motions were granted dismissing both actions.
Overview of the Facts
3Correct Group Inc. (“CGI”) and the Corporation of the City of Barrie (“Barrie”) had entered into a Preliminary Agreement with respect to the development of Lands owned by Barrie. This court found that the Preliminary Agreement was not a valid and enforceable agreement but rather was an agreement to agree and, further, there was not duty to negotiate in good faith in these circumstances.
4CGI also advanced a separate action and made a number of claims against individuals at Barrie, such as Councillors, employees and agents, mostly in tort, breach of municipal by-law and in contract.
5Correct Building Corporation (“CBC”) was, by the time of this motion, no longer a party to either action. The claim by CBC against the Individual Defendants was dismissed by this court. The parties apparently subsequently agreed that the same reasoning dismissing CBC’s claim, would also apply to CBC’s claim against the Individual Defendants.
6The detailed facts, findings and decision on these summary judgment motions are set out in Correct Building Corporation v. Lehman, 2022 ONSC 527.
7The summary judgment motions in these two actions were heard together over the course of one week.
8To say the materials filed by the parties was voluminous is an understatement; there being approximately 23,000 pages of materials, many affidavits, many transcripts of cross-examinations on the multitude of affidavits filed, expert reports, historical environmental and archeological reports, extremely lengthy factums, and detailed oral submissions.
9Cost Outlines were filed by the parties prior to the release of the court’s decision:
a) The Individual Defendants sought costs of the summary judgment motion at $390,845.30 on a partial indemnity basis up to $649,709.09 on a full indemnity basis.
b) Barrie sought costs of the summary judgment motion at $468,095.34 on a partial indemnity basis up to $762,527.01 on a full indemnity basis.
c) CGI sought costs of the summary judgment motion at $897,785.48 on a partial indemnity basis and $1,245,344.60 on a full indemnity basis. Its full indemnity costs for the summary judgment motion was $1,345,344.60 (all inclusive).
The Position of the Parties
10The Individual Defendants seek costs of the entire action on a substantial indemnity basis in the amount of $731,228.71 all inclusive. In the alternative, the Individual Defendants seek $549,832.64, all inclusive, on a partial indemnity basis.
11Barrie seeks costs of the action on a partial indemnity basis in the amount of $937,191.79 all inclusive.
12Neither of these amounts include the cost submissions.
13CGI submits that costs should be payable to the Individual Defendants and Barrie on a partial indemnity basis.
14CGI submits that the amounts claimed by both Barrie and the Individual Defendants are excessive, unreasonable and takes specific issue with one specific disbursement.
Analysis
Entitlement to Costs
15There is no dispute that Barrie and the Individual Defendants were entirely successful in the summary judgment motion and hence the action.
16They are entitled to costs of the action and the summary judgment motion.
Scale of Costs
Individual Defendants
17The Individual Defendants submit that CGI made serious and unfounded allegations of wrongdoing against them. The Individual Defendants point to the allegations of fraud, negligent and fraudulent misrepresentations, breach of duty of good faith and conspiracy, all made without foundation. The Individual Defendants submit that these baseless and serious allegations of wrongful conduct against the Individual Defendant “warrants a costs sanction” of substantial indemnity costs.
18The Individual Defendants also point to an Offer to Settle dated June 13, 2018, whereby they agreed to a dismissal of the action without costs if accepted within 10 days and, thereafter, with assessed costs.
19The Individual Defendants point to the consent to CGI’s consent to dismissal against Deborah McKinnon and Jennifer Robinson at the commencement of the motion. This underscores some of the findings made below regarding the purpose and strength of the case against the Individual Defendants.
20As for the Offer to Settle, CGI submits the Individual Defendants’ Offer was not a Rule 49 Offer because the “plaintiff” did not obtain a judgment. I agree that because of the wording in Rule 49.10(2), the presumptive cost consequences of the Rule do not apply. Nevertheless, Rule 49(13) permits this court, in the exercise of its discretion, to consideration any offer to settle. And I do so.
21In my view, the claim against the Individual Defendants was a frivolous claim designed solely to exert litigation tactical pressure on Barrie by making claims against Councillors and staff involved in the proposed sale of the Lands. I need not repeat the findings in my reasons on each of the claims made against the Individual Defendants, but it is clear there was no merit to the claims advanced against the Individual Defendants. Some of the more significant findings included:
a) The contractual dealings were between CGI and Barrie. The claim against the Individual Defendants sought to circumvent the true nature of the dealings between the two parties. This claim against the Individual Defendants, by this “shotgun” approach, to attempted to somehow even though there was no clearly articulated personal wrong committed by the Individual Defendants. In any event, even if the Individual Defendants had committed a wrong – the liability would have been that of Barrie by virtue of the Municipal Act. I am satisfied this claim against Barrie’s Councillors, agents and staff was solely for the purpose of using litigation to leverage either a “deal” or a settlement with Barrie. In other words, the claim against the Individual Defendants was brought in bad faith and as an abuse of the litigation process;
b) The Individual Defendants had contractual and fiduciary obligations to Barrie and CGI’s claims essentially sought to establish a duty owed to CGI contrary to the Individual Defendants’ obligations to Barrie – to act in the best interests of Barrie;
c) There were allegations of fraud, conspiracy and bad faith against each of the Individual Defendants with no evidence to support such claims; and
d) An example of the lack of evidence to support the serious allegations, the contractual claim, breach of the confidentiality agreement, had no evidentiary basis other than a “belief” by Mr. Allen Furbacher that someone had breached the confidentiality agreement.
22I am satisfied, considering the above circumstances, that CGI’s claim against the Individual Defendants constitutes egregious conduct deserving of sanctioning, by way of awarding a punitive scale of costs, is warranted. I also add that the fact CGI could have abandoned this claim in 2018 pursuant to the Individual Defendants’ Offer to Settle, after the examinations, adds to the exercise of my discretion to award substantial indemnity costs in favour of the Individual Defendants.
Barrie
23There is no dispute on this issue, partial indemnity costs of the motion and action are appropriate.
Quantum
24The principles for assessment of costs are set out in Rule 57.01 of the Rules of Civil Procedure.
25There are a number of relevant factors that apply to the assessment of costs of both Barrie and the Individual Defendants:
a) The claim was for $40 million dollars against Barrie and each of the Individual Defendants. The CGI claim initially included a claim for specific performance to prevent the sale of the Lands (and also with the registration of a CPL);
b) There were many separate and distinct claims advanced by CGI against all defendants;
c) The claims were complex and involved extensive issues of fact and law;
d) The claims, particularly given the allegations of fraud, bad faith, breach of municipal laws, were very important to Barrie and to the Individual Defendants – a public municipality and public servants;
e) There were extensive examinations for discovery. Mr. Furbacher’s examination alone took 7 days (in addition to the cross-examination of Mr. Furbacher in the summary judgment motion);
f) On the summary judgment alone, CGI expected it, if successful, might recover partial indemnity costs of $897,785.48 or substantial indemnity costs of $1,025,695.50. This is a significant indication as to the resources that CGI put into these two actions and CGI should have expected that similar legal resources would be utilized by Barrie and the Individual Defendants to defend the actions and prosecute the summary judgment motions;
g) The documentary evidence was complex and voluminous. On the summary judgment motion there were over 23,000 pages but that didn’t include all the documents produced in the action. As stated in the Reasons for Judgment, CGI’s submissions on the summary judgment motion were approximately 300 pages in length;
h) There were extensive and numerous cross-examinations on the summary judgment motion; and
i) There were a number of expert reports relied on by CGI that had to be considered. It is clear that Barrie retained a responding expert report but more on this below.
26CGI submits, that when it adds the partial indemnity claims of Barrie and the Individual Defendants for the action (which totalled $1,328,799.21), Barrie and the Individual claims for costs are excessive. I do not accept this. CGI is comparing “apples and oranges”. CGI sought partial indemnity costs for the summary judgment motion alone at $897,785.48. The costs of the summary judgment motion would be less than the costs of the action, which includes the summary judgment motion.
27When one considers the many years, complexity, scope of documentation, motions and many court attendances prior to the summary judgment motions, it is not surprising that the partial indemnity costs claimed by Barrie and the Individual Defendants is higher than CGI’s summary judgment motion costs.
28CGI claims that the examinations of Mr. Furbacher were excessive. I do not accept that the examinations and cross-examination of Mr. Furbacher were excessive given his role and the claims and allegations brought by his company.
29CGI submits that a reasonable counsel fee on a partial indemnity basis for both actions would be $850,000 inclusive of HST. Then CGI submits that a further reduction of $300,000 should be imposed for the abandoned Barrie counterclaim. Exactly, how these amounts were arrived at is not explained.
Fees - The Individual Defendants
30The Individual Defendants seek substantial indemnity costs of $731,228.71, all inclusive.
31The Individual Defendants set out their claims for costs of the various steps in the action. Having reviewed the amount claimed for each step, I cannot find that any amount was unreasonable given the circumstances of this case.
32For example, each of the Individual Defendants was required to file an affidavit of documents, affidavits in the summary judgment motion, and undergo examinations and cross-examinations.
33What must also be kept in mind is that it was CGI that advanced numerous distinct and separate types of claims right through the summary judgment motion. The sheer number of claims adds to the complexity of the action and the summary judgment motion.
34There is no disciplined basis to reduce or vary this amount.
35CGI did not break down its Cost Outline for the summary judgment motion to the two actions but rather combined the two amounts. Accordingly, it is not possible to compare CGI’s expectation of costs for the summary judgment motion in the Individual Action.
36I am satisfied that the substantial indemnity amount claimed by the Individual Defendants of $731,228.71 constitutes reasonable as costs of the action.
Fees - Barrie
37I accept that Barrie’s cost must be reduced to take into account the counterclaim which Barrie abandoned prior to the summary judgment motion.
38I will deal with this below.
Disbursements
39CGI does not take issue with the disbursements for the summary judgment motion.
40It does take issue with one claimed disbursement in the action - item 4 on page 46 of Barrie’s Cost submissions tab 3: $92,911.43 (inclusive of HST) being a report of LBC Meaden & Moore.
41CGI’s position is that this expert’s report was never produced as a document in its Affidavit of Documents or in its motion materials. Essentially, this is the first time CGI became aware that Barrie had retained an expert.
42I agree with CGI that without production, without use of and without more information regarding the need and use of this report obtained by Barrie, this is not a recoverable disbursement under Tariff A.
Deduction for the abandoned Barrie Counterclaim
43This was a non-issue in the summary judgment motion having been dismissed prior to or just as the motion was being brought.
44Barrie’s counterclaim related to damages arising from, not only the registration of a CPL, but also a claim by CGI that it was seeking specific performance of the Preliminary Agreement (i.e. transfer of the Lands). Eventually, the CPL was removed. Eventually, CGI abandoned its claim for specific performance. Barrie became free to deal with the Lands as it saw fit.
45In my view, this counterclaim did not add much to the fees and expenses as it was interrelated to the CGI’s claim, which was determined to have no merit.
46In my view, a reasonable discount for this counterclaim is $50,000 all inclusive.
Conclusion
47Accordingly, I assess Barrie and the Individual Defendants’ costs as follows:
- Barrie Claimed - $468,095.34 all inclusive on a partial indemnity basis
- Individual Defendants - $731,228.71 all inclusive on a substantial indemnity basis
- Less abandoned counterclaim – MINUS $50,000
- Less reduction in disbursements – MINUS $92,911.43
- Reasonable costs of the cost submissions – fixed at $10,000
- TOTAL $1,066,412.62 all inclusive
48Given that this total amount is approximately the same amount CGI sought for the summary judgment motion alone on a substantial indemnity basis, it is an amount CGI should reasonably have expected to pay for the entire action, including the summary judgment motion.
49Costs of the action payable by CGI to Barrie and the Individual Defendants in the amount of $1,066,412.62, all inclusive, forthwith.
L. Ricchetti RSJ.
Date: April 19, 2022