Court File and Parties

Court File No.: CV-22-00684661-0000 Date: 2023-08-04

Superior Court of Justice - Ontario

Re: Gelareh Scott, Plaintiff And: Forum Investment and Development Corporation, Defendant

Before: Associate Justice R. Frank

Counsel: David Cassin for the defendant / moving party Natalie MacDonald for the plaintiff / responding party

Heard: August 4, 2023

Endorsement

[1] This is a motion by the defendant to strike certain paragraphs of the plaintiff’s statement of claim pursuant to Rule 25.11. After appearing to argue the motion, but prior to argument, the parties resolved the substantive issues and agreed that certain of the impugned paragraphs would be amended to remove parts of the pleadings in those paragraphs. The agreed-upon amendments are found in Schedule “A” to this endorsement, with the portions highlighted in yellow reflecting the pleadings that the parties have agreed will be removed. In reaching this agreement, the parties were unable to agree on costs of the motion and made their respective costs submissions.

[2] The defendant’s position is that no costs should be awarded with respect to the motion. The defendant relies on Muskala v Sitarski, in which Myers J. held that “costs generally should not be awarded when parties settle ‘except for costs.’”[^1] The defendant submits that I should exercise my discretion to refrain from awarding costs because this is not an “exceptional case” where a cost award is appropriate even though settlement was reached. The defendant submits that it is not possible for the court to determine that any party achieved substantial success or that the motion was unnecessary or brought improperly. In particular, the defendant disputes the plaintiff’s suggestion that the result was not a compromise, and that the agreement provides for only minimal and insubstantial changes to the statement of claim. The defendant also submits that there is no basis for the court to conclude that the defendant acted unreasonably in not settling the motion sooner.

[3] The plaintiff views the settlement in a very different light and seeks costs on a partial indemnity basis in the amount of $7,500 plus taxes. The plaintiff submits that the court should consider the defendant’s position from the outset of the pleadings dispute – as far back as August 2022, which pre-dates service of the defendant’s notice of motion. The plaintiff argues that the defendant’s initial position sought the deletion of a significant number of paragraphs in their entirety that would have removed pleadings that are important to the plaintiff’s claim. The plaintiff asserts that the defendant’s position was then changed to a demand to remove fewer paragraphs, but ones that were still material. Then, the plaintiff says, the defendant further narrowed the portions of the impugned paragraphs that it viewed as most offensive. Finally, the plaintiff says, the settlement reached today resulted in an agreement to remove only minor portions of the disputed pleadings.

[4] The plaintiff argues that Muskala (and the cases that it cites or that follow it) should be considered in light of cases in which the court has awarded costs notwithstanding a negotiated settlement. One such case is Woloski v. Woloski,[^2] in which Boswell J. made the following observations:

[34] It is important to be careful how such a principle [as outlined in Waterloo North Condominium Corporation No. 161 v. Redmond, 2017 ONSC 1304 at paras 24-34] is interpreted and applied. I do not understand any of the cases referred to me as suggesting that there is a presumption that costs will not be awarded where the parties have reached a settlement. If there were such a presumption, then parties would never settle on the basis that costs are to be assessed by the court. Such a term would be meaningless. And if it’s meaningless, it will be of no assistance as a means to push otherwise substantively settled proceedings across the settlement finish line.

[35] Where parties have managed to resolve the substantive issues between them but have left the issue of costs to be litigated, it is incumbent upon the court to give meaning to the parties’ agreement and to exercise its discretion to fix costs in accordance with the principles that guide that discretion.

[39] In summary, my view is where the parties have reached a negotiated resolution of all substantive issues in a proceeding but have left the issue of costs to the court’s discretion, the court should consider and apply the usual principles that govern the exercise of its discretion, subject to the need to be particularly cautious about the assessment of the matter of success.

[5] Relying on Woloski and Zdanowicz v. O’Neill,[^3] the plaintiff asserts that court must be cognizant of the fact that agreements to settle a motion on consent may be conditional on a party’s right to have the court determine costs. In Zdanowicz, the court stated as follows:

Costs are not generally awarded when a motion proceeds on consent unless, as here, the parties have agreed to deal with costs separately and/or where the motion would unlikely have proceeded on consent without deferring costs (Kearney v. Hill, 2017 ONSC 6306 at paras. 27-31; Muskala v. Sitarski, 2017 ONSC 2842 at paras. 5-12).[^4]

[6] In Kearney v. Hill,[^5] the court outlined the following principles:

[30] If the court now refuses to determine entitlement to costs, this would be inconsistent with the express agreement of the parties. Moreover, it may well limit or prevent future settlements since, if parties believe that they will not be able to resolve costs issues through subsequent adjudication, they may be unwilling or unable to voluntarily resolve the substantive issues in dispute. In this case, for example, I regard it as unlikely that Mary Jr. and Carol would have been able to resolve their differences at the April 2017 mediation if they had been told in advance that this court would refuse to make a costs order.

[31] In determining whether there are exceptional circumstances that would justify a costs order in the context of a settlement, the court should have regard to the considerations identified in Rule 57.01(1) of the Rules of Civil Procedure (“Rule 57.01”). In this case, and as explained below, I regard the following Rule 57.01 factors as being particularly relevant: (i) the result; (ii) whether there were any written offers to settle; (iii) whether the conduct of any party “tended to shorten or to lengthen unnecessarily the duration of the proceeding”; and (iv) whether any step in the proceeding was “improper, vexatious or unnecessary”.

[7] The plaintiff essentially submits that:

a. if no costs are awarded simply because there was a settlement, this will be a disincentive to settlement;

b. the results of the settlement of this motion demonstrate that the plaintiff achieved substantial success; and

c. if the plaintiff cannot recover any of her significant costs on this motion, the defendant will be rewarded for bringing this motion.

[8] The difficulty with the plaintiff’s position is that it hinges on the court finding that the motion was unnecessary and that the plaintiff was largely successful in opposing it. However, in the particular circumstances of this case, I am not able to draw such conclusions. In this regard, I am mindful of the “need to be particularly cautious about the assessment of the matter of success.”[^6] The following comments by Myers J. in Muskala are apt:

Third, there is usually no way for the court to make the findings of fact that they (sic) parties need to support a costs determination. The parties essentially want me to pretend to hear the motion in my chambers on their material and decide what the outcome might have been without hearing from counsel and without the parties undertaking the risk of jeopardy associated with that decision. Then they ask me to assess whether bringing or defending the motion was reasonable. It is all hypothetical since there is no longer a true lis or dispute between the parties. Yet the parties ask the court to balance the factors under Rule 57.01, consider proportionality and reasonable expectations, and, in this and many other cases, ask the court to determine if a party’s conduct was reprehensible so as to justify an enhanced award of punitive costs. I cannot tell if the defendants ought to have consented in advance or if they had good reason not to consent until they did. One never knows why people settle without invading the privileged relationship between lawyer and client. Perhaps the defendants had very good defences to the motions but chose to consent for other reasons – such as to establish their bona fides and to buy peace.[^7]

[9] In the circumstances of this motion, I am not in a position to balance the factors under Rule 57.01 and determine whether the result was substantially in favour of the plaintiff, whether the conduct of any party “tended to shorten or to lengthen unnecessarily the duration of the proceeding”; or whether any step in the proceeding was “improper, vexatious or unnecessary”. While the plaintiff had offered to settle the motion by way of a dismissal without costs, the result here does not meet or exceed that offer.

[10] For the above reasons, I exercise my discretion to refrain from ordering any costs of this motion. I order as follows:

1. The statement of claim shall be amended to delete the portions of the paragraphs listed in Schedule “A” to this endorsement that are highlighted in yellow.

2. There shall be no costs of this motion.

R. Frank Associate J.

Date: August 8, 2023

SCHEDULE “A”

23. Mr. Viswanathan forced employees to comply with strict and unreasonable deadlines for his own professional gain and in order to create the appearance of leadership. However, failure to comply with deadlines would often lead to differential and negative treatment toward those who failed to meet these deadlines, and caused employees,

employment.

24. Despite the Defendant’s workplace being a fast-paced work environment even prior to the hiring of Mr. Viswanathan, the Plaintiff was consistently able to manage her work load and responsibilities. However, upon Mr. Viswanathan’s arrival, the Defendant developed a ‘work until you drop philosophy’, with a revolving door of employees who were overworked to the point that they either resigned, or left for stress related purposes. as did Mr. Bhardwaj, a Junior Accountant who eventually sought medical support as a result of stress.

25. The Defendant’s demanding work environment, with no support or assistance available to employees, took a significant toll not only on the Plaintiff’s mental health and well-being, but the mental health and well-being of her colleagues/. including Ali Bhimani (“Mr. Bhimani”), who was subsequently hospitalized. The Plaintiff pleads that the harmful effects and toxicity of the working environment were exacerbated with the hiring of Mr. Viswanathan.

26. For instance, as Controller, the Plaintiff required, and sought, the hiring of an Accounting Manager to help alleviate the workload. Repeatedly, the Plaintiff was advised by Mr. Viswanathan and by Human Resources that they had engaged the services of a recruiter and initiated the hiring process, with which the Plaintiff was involved. However, several months later, in or around October 2021, the Defendant finally hired Mr. Bhardwaj as a Junior Accountant, who is also a friend of Senior Accountant, Reza Farahdel (“Mr. Farahdel”). The Plaintiff submits that rather than hire an Accounting Manager as originally agreed, the hiring of Mr. Bhardwaj was done as a means of placating the Plaintiff, and that in any event, Mr. Bhardwaj ultimately resigned two (2) months later. because of the extreme stress he also experienced in the workplace.

27. In fact, Mr. Ramage himself was the subject of sexual harassment allegations that were brought forward by the Defendant’s former Receptionist and Office Manager, Renee

Chisholm (“Ms. Chisholm”). However, shortly after the complaint was made, to the Plaintiff’s knowledge, information, and belief, Ms. Chisholm she was dismissed from her employment in early 2019, as a direct result of her having had the courage to bring forward allegations to the Defendant as a direct result of the toxic work environment and sexual harassment she had been subjected to in the workplace.

57. Because of Ms. Chisholm’s this employee’s termination, the preference given to male Partners within the company, the failure of Ms. Teed to respond to concerns raised by the Plaintiff, as well as the power that Mr. Viswanathan had over the Plaintiff in respect of the security of her employment, the Plaintiff feared that if she complained to anyone within the company, she too would lose her job., just like Ms. Chisholm.

[^1]: Muskala v Sitarski, 2017 ONSC 2842 (“Muskala”) at para 5 [^2]: Woloski v. Woloski, 2022 ONSC 7013 (“Woloski”) at paras 34-35 and 39 [^3]: Zdanowicz v. O’Neill, 2021 ONSC 4143 (“Zdanowicz”) [^4]: Zdanowicz at para 8 [^5]: Kearney v. Hill, 2017 ONSC 6306 at para 30 [^6]: Woloski at para 39 [^7]: Muskala at para 9