COURT FILE NO.: CV-18-4479-00 & CV-15-5603-00
DATE: 2022 12 16
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
Marijana Mudronja
Dalkeith Palmer and Latania Dyer for the Applicant
Applicant
- and -
Eddy Mudronja and Mareddy Corporation
Monica Peters, for the Respondents
Respondents
HEARD: April 19, 20 21, 22 and May 18
COSTS ENDORSEMENT
MCGEE J.
[1] Both parties claim a measure of success on this five-day Trial of an Issue, for which Reasons for Judgment were released on September 6, 2022. In those reasons, I set a value of $1,832,054.60 for 40% of the common shares owned by Marijana Mudronja as of January 31, 2017 in a corporation known as “Mareddy”. It had been agreed within a December 17, 2020 consent Order that Eddy, who owns the remaining 60% of the shares in Mareddy, would purchase Marijana’s shares for the value to be determined by this Trial of an Issue.
[2] Marijana now seeks costs of $618,995.27, being a substantial indemnity of all of her fees of $432,153.36 and disbursements of $115,557.48 incurred from the start of this litigation, plus HST thereon, inclusive of the costs of prior counsel. She invites the Court to assess an even higher amount than $618,995 on her twin assertions that Eddy’s failure to produce timely disclosure prior to Trial and his conduct at Trial resulted in her incurring additional legal costs.
[3] Eddy states that neither party was wholly successful and that if costs are granted to Marijana, they should be in the amount of $120,000 inclusive of fees, disbursements and HST which in his view, reasonably represent a partial indemnity of costs given the nature, complexity, and outcome of the proceeding.
[4] I agree with Eddy’s submissions that costs of $618,995.27 are not warranted. This was only a Trial of an Issue and was designed to be summary in nature. The costs to be awarded cannot include the costs of prior attendances for which costs have already been awarded or are not before me. Neither can it be found that Marijana was wholly successful. At Trial, she sought a purchase price of $2,600,000 for her 40% holding.
[5] For the reasons set out below, I award Marijana costs of $138,425.00 being fees and disbursements of $122,500 and HST of $15,925.00.
The Law
[6] Section 131 of the Courts of Justice Act, R.S.O. 1990, c. C.43, provides that costs are in the discretion of the court. As noted in DUCA Financial Services Credit Union Ltd. v. Bozzo, 2010 ONSC 4601, at para. 5:
[i]n Ontario, the normative approach is first, that costs follow the event; second, that costs are awarded on a partial indemnity basis; and third, that costs are payable forthwith, i.e. within 30 days. Discretion can, of course, be exercised in exceptional circumstances to depart from any one or more of these norms.
[7] Rule 57.01 (1) of the Rules of Civil Procedure lists a broad range of factors for the court to consider when determining costs, including the result achieved in the proceeding, the complexity of the proceeding, the importance of the issues and whether any step in the proceeding was improper, vexatious, or unnecessary.
[8] As stated by Armstrong J.A. in Boucher v. Public Accountants Council for the Province of Ontario, (2004), 2004 14579 (ON CA), 71 O.R. (3rd) 291 (Ont. C.A.), fixing costs involves more than merely calculating the docketed hours and using the cost grid. At para. 24., Armstrong J.A. cites with approval para. 4 of the Court of Appeal’s decision in Zesta Engineering Ltd. v. Cloutier, 2002 25577:
[i]n our view, the costs award should reflect more what the court views as a fair and reasonable amount that should be paid by the unsuccessful parties rather than any exact measure of the actual costs to the successful litigant.
[9] Rule 49.10(2) provides that when a defendant makes an Offer to Settle that is available for acceptance by the plaintiff up to the start of Trial, and it is not accepted and the plaintiff receives an award that is less favourable than the Offer, the defendant is entitled to partial indemnity costs from the date of the Offer.
[10] Rule 49.13 allows the Court to consider any Offer to Settle made in writing, the date the Offer was made and the terms of the Offer when exercising its discretion with respect to costs, even if the Offer is not sufficient to attract the provisions of Rule 49.10. When deciding costs, it is an error for the Court to ignore Offers that demonstrate a genuine and continuing effort to settle an action, and pre-trial efforts by counsel to expedite the conduct of the Trial, see Bifolchi v Sherar (Litigation administrator of) (1998), 1998 7122 (ON CA), 108 O.A.C. 370 (C.A.).
Entitlement to Costs
[11] Marijana was successful in the primary issue to be determined on this Trial of an Issue: did Eddy, as the majority shareholder in Mareddy oppress Marijana’s interests in the corporation in a manner that caused economic harm to the value of her shares? Because I found that he dealt with the finances of Mareddy in a manner that negatively impacted the valuation of her shares, Marijana is entitled to an award of costs on a partial indemnity scale. She was successful in that I declined to apply an advance discount on the “en bloc” fair market value of Marijana’s 40% shareholding as calculated by Eddy’s valuator, Mr. Pont, and I did not apply a minority shareholder discount.
[12] But on the secondary issue: whether Marijana should be compensated for further economic losses calculated by her expert as of January 31, 2017 – some of which double counted the losses occasioned by the oppressive conduct, Marijana was not successful. I did not accept Marijana’s expert’s opinion on the value of her shares vis-à-vis her claim for economic loss as of January 31, 2017.
[13] I ascribe no entitlement to costs for either party on the question of whether the consent valuation date of January 31, 2017 for Marijana’s shares should be set aside in favour of a present-day valuation. There was some confusion with respect to this claim at the start of Trial because Justice Ricchetti’s March 4, 2022 endorsement stating that the question was to be left to the Trial judge was not made known to me. As set out in paragraphs 53 to 60 of my Reasons for Decision it is now clear that it remains an issue to be determined by the Trial Judge.
[14] I therefore find that Marijana was partially successful at this Trial of an Issue and to the measure of her success, is entitled to costs.
Scale
[15] I do not accept Marijana’s submission that Eddy should have expected to pay substantial indemnity costs for this Trial of an Issue in the event that it was found that he had acted oppressively towards Marijana.
[16] This was to be a discrete determination on the unique facts of the case. It was organized on consent within Justice Shaw’s December 17, 2020 endorsement. As such, the parties intended it to be a summary process that would aid an expeditious resolution of an intractable dispute within a long-term litigation profile. The terms of the consent endorsement were designed to ensure a focussed adjudication that was amenable to an early resolution because the primary variable – the date for the valuation of Marijana’s shares – had been agreed.
[17] To the measure of her success, I find that Marijana is entitled to a partial indemnity of her costs.
Quantum
[18] The whole of this proceeding was not before me, so I begin by accepting that Marijana’s requested costs must be reduced by $231,161.18, the amount calculated by Eddy to be the amount of costs that she states were incurred prior to July 2021. I also reduce her request by the amount of costs claimed for subsequent proceedings in which an award of costs has already been granted or in which costs were not sought.
[19] I then turn to the direction set out in Boucher v. Public Accountants Council for the Province of Ontario that the court should consider what is fair and reasonable for the unsuccessful party to pay. It has repeatedly been held that reasonableness and proportionality are “touchstone considerations” or “overarching considerations” in costs determinations. See Davies v. Clarington (Municipality), 2009 ONCA 722, at para. 52 in the assessment of costs.
[20] Here, Marijana’s costs submission does not easily lend itself to an assessment of what is fair and reasonable. There is limited to no detail within the broad categories of costs asserted, and it is impossible to determine with any accuracy whether the time spent on any given task was appropriate. The same can be observed with respect to the claimed disbursements. Her documentation regarding expert’s invoices is almost wholly lacking.
[21] While there is no requirement that a Bill of Costs must follow an itemized bdate and task format, a Bill of Costs is not a blank cheque. A party seeking a large amount of costs has an obligation to provide sufficient information to justify what work was actually performed and why it had to be performed. Because I do not have that level of detail, or supporting documentation for the expert’s fees, the approach that I must take is to identify an overall number that I assess to be a fair and appropriate amount of costs for an unsuccessful defendant to pay on a five-day Trial of an Issue in which the plaintiff has been partially successful.
[22] One measure of what would be in the reasonable expectations of an unsuccessful defendant to pay, is what he himself paid in fees and disbursement. In this regard, I have examined Eddy’s Bill of Costs which shows total fees of $53,856 and disbursements of $60,702 (reflecting the focus of this Trial on the experts’ evidence) plus HST thereon for a total of $121,559.50.
[23] A second measure is the efforts of each party to resolve the dispute. Here, the costs submissions reveal that Marijana resisted efforts to resolve the value of her shares, as had been intended within the consent Order. It is not contested that Marijana refused multiple offers to have the parties’ respective experts meet to discuss the issues prior to Trial.
[24] Having experts confer prior to Trial is a critical and necessary step towards resolution, particularly in a matter that was structured for that purpose. Having the experts confer allows them to identify the issues on which they agree and explore the facts and assumptions underlying the issues that are in dispute. By exploring the issues in dispute, they are able to advance resolution and trial efficiency.
[25] I do not accept Marijana’s assertion that she was correct in refusing a joint meeting because she did not trust the accuracy or the fulsomeness of Eddy’s disclosure. Her expert, Mr. Krofchick testified that many of his assumptions about economic loss were borne from the absence of full information. Had Marijana permitted the experts to meet, the missing information could have been provided by Eddy’s valuator and moreover, the duplications in Mr. Krofchick’s calculations would have become apparent and been corrected. Where Eddy’s valuator agreed with Mr. Krofchick, the issues for trial would have been further narrowed.
[26] Marijana’s resistance to a resolution can be further observed within the Offers to Settle. Eddy made a series of Offers to Settle from May 30, 2019 to September 22, 2022, but Marijana’s only Offer to Settle was dated April 14, 2022. It was in the amount of $2,740,000, a figure that exceeded the amount sought at Trial. Although Eddy’s Offers to Settle do not rise to the level of a Rule 49.10(2) Offer, I find that they are relevant to this costs decision pursuant to Rule 49.13 because each was substantive, sought to narrow the issues and demonstrated a genuine effort to resolve the dispute.
[27] For example, Eddie’s May 20, 2022 Offer proposed a payment of $2,400,000 for Marijana’s shares, subject to a reduction for any litigation costs that he incurred after May 25, 2022 on a partial indemnity scale. The terms of the Offer were not necessarily a more favourable outcome for Marijana at the start of Trial because Eddie’s costs were unknown, but nonetheless, I the Offer was attempt to engage Marijana in settlement negotiations, a process that she resisted.
[28] Costs awards accomplish various purposes in addition to the traditional objective of indemnification. Costs can be used to sanction behaviour that increases the duration and expense of litigation or is otherwise unreasonable, see: British Columbia (Minister of Forests) v. Okanagan Indian Band, 2002, S.C.C., supra, paragraph 25.
[29] I find that Marijana made no real efforts to resolve the purchase price of her shares and in so doing, engaged in unreasonable litigation conduct that should be sanctioned by a reduction in her costs. For this reason, and the reasons set out above, I assess and then reduce her claim for costs on this proceeding to the rounded amounts of $60,000 for fees and $60,000 in disbursements, inclusive of her experts’ fees, plus HST.
[30] I add to this assessment, a further amount of costs appertain to Eddy’s communication in the hallway with his next witness, while he was in the midst of his cross examination. A voir dire had to be conducted to learn what had been discussed and whether either Eddie or his witness’s evidence had been influenced by the discussion. This additional step lengthened the trial and diminished the dignity of the proceeding. This is also conduct that must be sanctioned with an award of costs and I do so by granting Marijana $2,500 in costs thrown away.
Conclusion
[31] In considering all of the factors set out above, I grant Marijana costs of $138,425.00 on this five-day Trial of an Issue being rounded fees of $60,000, a further $60,000 for disbursements and $2,500 in costs thrown away, plus HST of $15,925.00.
McGee J.
Released: 2022 12 16
COURT FILE NO.: CV-18-4479-00 & CV-15-5603-00
DATE: 2022 12 16
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
Marijana Mudronja
Applicant
- and –
Eddy Mudronja and Mareddy Corporation
Respondents
COSTS ENDORSEMENT
McGee J.
Released: 2022 12 16