Superior Court of Justice - Ontario

COURT FILE NO.: CV-21-00659006-0000

DATE: 20220526

RE: LIDA NEZHAT-MAHAL, Plaintiff

AND:

COSMETICA LABORATORIES INC., Defendant

BEFORE: VERMETTE J.

COUNSEL: Oren Barbalat and John-Edward C. Hyde, for the Plaintiff

Howard A. Levitt, for the Defendant

HEARD: In writing

ENDORSEMENT AS TO COSTS

[1] On April 22, 2022, I released an endorsement dismissing the Defendant’s motion to strike the Plaintiff’s Notice of Examination to the President of the Defendant, Ms. Kuga, and to substitute the Defendant’s Vice-President of Research and Innovation as the Defendant’s corporate representative to be examined for discovery by the Plaintiff (2022 ONSC 2458).

[2] The parties were not able to agree on costs and have delivered costs submissions.

Positions of the parties

a. Position of the Plaintiff

[3] The Plaintiff seeks costs on a substantial indemnity basis in the amount of $84,621.20 and submits that a significant award is warranted in this case.

[4] The Plaintiff argues that the Defendant’s procedural conduct significantly contributed to increased costs and she gives a number of examples in support of this submission. She states that her counsel wrote to the Defendant in June 2021 to explain that there was no basis for refusing to produce Ms. Kuga given the authorities on this issue, and to request that the Defendant bring its motion forthwith if it continued to refuse to produce Ms. Kuga. According to the Plaintiff, the Defendant unreasonably insisted that Ms. Kuga was not sufficiently knowledgeable to be produced and repeatedly insisted, without any authority, that the Plaintiff ought to bring a motion if she wished to examine Ms. Kuga.

[5] The Plaintiff submits that the Defendant ought to have known that significant costs would be payable and that an aggressive approach could result in an obligation to pay higher costs.

[6] The Plaintiff refers to the Defendant’s allegation that the selection of Ms. Kuga was pursued for ulterior motives and submits that such a spurious and unproven allegation constituted an unwarranted attack on the Plaintiff’s integrity and dignity. She argues that this represented reprehensible, scandalous and/or outrageous conduct warranting a significant cost award.

[7] Finally, the Plaintiff points out that the Defendant’s costs outline is too low as it makes no provision for fees incurred on behalf of a lawyer who assisted counsel for the Defendant.

b. Position of the Defendant

[8] The Defendant’s position is that the Plaintiff should receive her reasonable partial indemnity costs of the motion, which should be no more than $30,000.00. It submits that there is no legal basis for the Plaintiff to seek substantial indemnity costs and that her costs are excessive and unreasonable.

[9] According to the Defendant, the Plaintiff has made several factually incorrect statements in support of her claim for substantial indemnity costs. Among other things, the Defendant states that there was no delay in bringing this motion. The Defendant submits that there was nothing in the Defendant’s conduct of the motion which was unusual or caused the Plaintiff to incur extra costs or would justify substantial indemnity costs.

[10] The Defendant states the following with respect to its allegation of ulterior motive:

Likewise, the argument that the Plaintiff had a “tactical” reason for seeking to examine Ms. Kuga was neither improper nor frivolous. There is no doubt that having Ms. Kuga examined for Cosmetica is, at the least, extremely inconvenient for Cosmetica.

[11] The Defendant admits that the time of one lawyer was inadvertently left out of its costs outline. It states that when adding her time, the Defendant’s partial indemnity costs are $39,648.00, less than one-half of what the Plaintiff is claiming. The Defendant submits that the moving party (i.e., the Defendant) would normally be expected to have greater costs than the responding party (i.e., the Plaintiff), particularly when the responding party did not file any substantive materials.

[12] The Defendant argues that the costs claimed by the Plaintiff are unreasonable. It points out that the motion took two hours; there was half a day of cross-examinations; the Plaintiff did not file any substantive affidavit evidence on the merits of the motion or responsive to the affidavit of Mr. Mendes; and the Plaintiff only provided an affidavit of its law firm’s law clerk introducing documents produced by the parties, which was not cross-examined upon. According to the Defendant, it was beyond its expectation that it would have to pay the amount of costs sought by the Plaintiff if its motion was unsuccessful.

Discussion

a. Scale of costs

[13] 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.

[14] In my view, the conduct of the Defendant in this case does not rise to that level. It is true that the Defendant alleged that the selection of Ms. Kuga was made for ulterior purposes, and I found that there was no evidence of ulterior motives on the part of the Plaintiff. However, not all unsuccessful attempts to prove dishonesty will inexorably lead to the conclusion that the unsuccessful party should be held liable for substantial indemnity costs: see Hamilton v. Open Window Bakery Ltd., 2004 SCC 9 at para. 26. In this case, I did not interpret the Defendant’s allegation of ulterior motives as being an allegation that the Plaintiff was being dishonest.[^1] Further, it is important to consider the context in which the Defendant made this allegation, which included references to specific cases where it was found that the selection of senior executives as corporate representatives for the purpose of discovery had been made for an ulterior motive.

[15] In light of the foregoing, and taking into account the circumstances of this case and the context in which the allegation of ulterior motives was made, I conclude that this is not a case for substantial indemnity costs and that the appropriate scale of costs is partial indemnity.

b. Quantum

[16] Based on my calculations, the costs incurred by the Plaintiff on a partial indemnity basis are in the amount of $68,450.88 (i.e., 60% of full indemnity: James v. Chedli, 2020 ONSC 4199 at para. 14). This is in contrast to the Defendant’s partial indemnity costs, which are said to be $39,648.00. This amount, which was mentioned for the first time in the Defendant’s costs submissions, is not supported by a costs outline because the Defendant has not provided a costs outline which includes all the lawyers involved on behalf of the Defendant. A review of the incomplete costs outline that was provided by the Defendant suggests that it is missing more than the time spent by one lawyer and that it does not include all the time spent for this matter. For instance, it does not refer to the cross-examination of Mr. Mendes. Thus, I conclude that the amount of partial indemnity costs provided by the Defendant in its costs submissions is lower than it should be.

[17] However, I am of the view that the time spent by the Plaintiff’s lawyers and the amount of costs incurred by the Plaintiff are not fair and reasonable for this type of motion, even if one acknowledges that this was an important issue from the Plaintiff’s perspective. The Defendant has raised a number of valid points in its submissions with respect to the work that was required on the part of the Plaintiff to respond to this motion. At the same time, I note that the Defendant’s position on this motion was somewhat aggressive, that it took some steps that required more time to be spent, and that it filed lengthy materials, including an 18-page reply factum.

[18] As a result, I will apply a reduction to the amount sought by the Plaintiff to ensure the overall reasonableness of the costs award in light of all the circumstances of this case and to take into account potential duplication of work between the timekeepers involved.

Conclusion

[19] 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 the Plaintiff is on a partial indemnity basis in the all-inclusive amount of $45,000.00. In my view, this is an amount that the Defendant should reasonably have expected to pay in the event that it was unsuccessful on its motion, in light of its own costs and the way it proceeded on this motion, among other things.

[20] Accordingly, I order that the Defendant pay to the Plaintiff her costs of the motion in the all-inclusive amount of $45,000 within 30 days.

Vermette J.

Date: May 26, 2022

[^1]: In my view, alleging that someone is being tactical is not the same thing as alleging that someone is being dishonest.