COURT FILE NO.: CV-23-00694442-000
DATE: 20230825
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: NATIVELANDS SPECIFIC CLAIMS GROUP LTD. and ABORIGINAL INSURANCE SERVICES INC., Plaintiffs
– and –
JUSTICE RISK SOLUTIONS INC., CAPITAL STREET CONSULTING, 13777863 CANADA LTD. o/a WILLOW INDIGENOUS COMMUNITY SERVICES LTD., SCOTT SMITH, NICOLE CHUBATY, SPARROWSET INC., 24SLASH7 INC., CYNTHIA MARSDEN-MCDONALD, DYLAN DESJARLAIS, DAVID OAKE, DARREL OLSON and ANDREA FAVELL, Defendants
BEFORE: Justice E.M. Morgan
COUNSEL: Stephen Gleave and Heather Treacy, for the Plaintiffs Matti Lemmens and Jenna Rumeo, for the Defendants, Justice Risk Solutions Inc., Capital Street Consulting Sparrowset Inc., 24slash7 Inc., Dylan DesJarlais, Cynthia Marsden-McDonald, Nicole Chubaty and Scott Smith
HEARD: Cost submissions in writing
INJUNCTION MOTION COSTS
I. The unsuccessful/successful injunction
[1] The Plaintiffs are an insurance brokerage and consulting firm focused on helping clients engaged in the First Nations Specific Claims process. They sought an injunction that, if entirely successful, would have put the Defendants[^1] – who are former contractors and/or employees of the Plaintiffs’ and who now run a competing firm – out of business.
[2] On July 25, 2023, I granted part of the relief sought by the Plaintiffs in that I required the Defendants to return certain items and to cease using certain proprietary information belonging to the Plaintiffs. But I dismissed the more far-reaching injunctive relief that was the crux of the Plaintiffs’ motion: Nativelands Specific Claims Group v. Justice Risk Solutions, 2023 ONSC 4305.
[3] In the final paragraph of my reasons for decision, I requested, as I often do, that the parties each have their counsel “email my assistant short submissions” addressing the issue of costs: Ibid, at para 54. They have now done so; but in their enthusiasm, the word “short” seems to have been overlooked.
II. The compressed timeframe
[4] Defendants’ counsel seek costs on an elevated scale – either full or substantial indemnity. In taking that position, they make what boil down to two fundamental arguments about the Plaintiffs’ supposed impropriety in conducting the motion. The first of these is that Plaintiff’s counsel wrongly scheduled this matter as an urgent injunction, thereby compressing the time for producing responding materials and for preparing the motion. This time pressure, they contend, increased their costs unnecessarily.
[5] It is the case that Plaintiffs’ counsel managed to get the motion put on a relatively short timeline. They filed their requisition to attend Civil Practice Court on March 30, 2023. That attendance was on notice, and both sides’ counsel signed in and appeared before Justice Koehnen on April 5, 2023. Although full motion records were not filed in CPC, the injunction request and the relevant parties were set out for the presiding judge in the requisition form, and both sides’ counsel were in attendance. Justice Koehnen scheduled the motion to be heard on May 9, 2023.
[6] In setting the schedule for the hearing, Justice Koehnen clearly paid attention to the Defendants’ concerns about time pressure. His endorsement states:
Plaintiff seeks interim injunction hearing for 3 hours. Plaintiff will limit itself to 45 minutes of argument on the motion. Defendants will have the balance of the time.
[7] In giving the parties 4½ weeks to prepare, Justice Koehnen did not put the matter at the top of the queue, but did place it ahead of motions which have no sense of urgency and which in today’s state of court backlog take upward of a year to be heard. After all, the injunction alleged ongoing wrongful competition and the degradation of the Plaintiffs’ business. While the Plaintiffs were ultimately not successful in proving that much, proof is not expected at the CPC scheduling hearing. The motion was described accurately as it stood at that stage.
[8] That said, Justice Koehnen did not schedule the matter on such a short timeline that Defendants’ counsel could not be ready to argue the motion on its merits. A month to prepare a motion is only a compressed timeframe in the context of a backlogged court docket. Otherwise, it is – and here turned out to be – adequate time to produce responding materials and conduct any necessary cross-examinations.
[9] In saying this, I do not mean to minimize the amount of work put into the motion by both sides. In the result, however, the compressed timeframe seemed to have focused the parties on their task rather than to have impeded them. Plaintiffs’ law firm, DLA Piper, is a large, international firm, with Canadian offices in Vancouver, Calgary, Edmonton, Toronto, and Montreal. Defendants’ law firm, Stikeman Elliott, is one of Canada’s largest national law firms, with Canadian offices in Vancouver, Calgary, Ottawa, Toronto, and Montreal. I dare say that neither side was short on personnel, and both managed to invest the lawyer hours it took to present a well documented and well-argued motion.
[10] As it turned out, counsel appeared before me on May 9, 2023 and advised that they were hopeful they could resolve the matter by agreement. The motion adjourned to give them time to do so. After several weeks, they advised the court that no resolution had been reached, and so the motion was re-scheduled for June 27, 2023.
[11] The motion was heard over the course of a day. Both sides’ counsel were well prepared, in just the way one would expect from lawyers and firms of their high calibre. I see no reason to impose an elevated level of costs in the wake of this kind of effective and time efficient lawyering; in fact, I only wish that more motions could proceed this way!
III. The Plaintiff’s post-motion conduct
[12] The argument made by Defendants’ counsel in seeking more than the usual quantum of costs is not related to the billable hours devoted to the motion. Rather, this part of Defendants’ counsel’s cost submissions revolves around allegations about the Plaintiff’s conduct. It is Defendants’ counsel’s view that the Plaintiffs have conducted themselves in a way which should inspire the court to impose on them increased costs.
[13] Rules 57.01(1)(e ) through (h.1) of the Rules of Civil Procedure set out the type of matters that courts are to take into account in awarding elevated costs due to a party’s conduct. They are addressed to conduct that would tend to make the litigation more protracted and costly than it otherwise need be:
General Principles
Factors in Discretion
57.01 (1) In exercising its discretion under section 131 of the Courts of Justice Act to award costs, the court may consider…
(e) the conduct of any party that tended to shorten or to lengthen unnecessarily the duration of the proceeding;
(f) whether any step in the proceeding was,
(i) improper, vexatious or unnecessary, or
(ii) taken through negligence, mistake or excessive caution;
(g) a party’s denial of or refusal to admit anything that should have been admitted;
(h) whether it is appropriate to award any costs or more than one set of costs where a party,
(i) commenced separate proceedings for claims that should have been made in one proceeding, or
(ii) in defending a proceeding separated unnecessarily from another party in the same interest or defended by a different lawyer;
(h.1) whether a party unreasonably objected to proceeding by telephone conference or video conference.
[14] In addition to these itemized considerations, conduct that is “especially egregious” can provide a ground for substantial indemnity costs, although such conduct has been described by the Court of Appeal as “rare and exceptional”: Net Connect Installation Inc. v. Mobile Zone Inc., 2017 ONCA 766, at paras 8-9. For example, unfounded allegations of fraud may lead to an elevated costs award: 1623242 Ontario Inc. v. Great Lakes Copper Inc., 2016 ONSC 1002. Similarly, argumentation or conduct that is discriminatory or otherwise “reprehensible, scandalous [and] outrageous” will trigger substantial indemnity costs: Young v. Young, 1993 CanLII 34 (SCC), [1993] 4 SCR 3, at para. 250.
[15] In Walker v. Ritchie, 2006 SCC 45, [2006] 2 SCR 428, the Supreme Court of Canada provided guidance that the judicial discretion on costs granted in section 131 of the Courts of Justice Act is to be exercised, in the main, in accordance with the principles embodied by the enumerated factors in Rule 57.01. Justice Rothstein observed, at para 26, that those factors “dealt either with the nature of the case or the conduct of the parties in the litigation.” As in other Canadian jurisdictions, “[w]hile the list is not exhaustive, it notably does not include post-trial conduct or conduct in other proceedings”: 1022049 Alberta Ltd. v. Medicine Hat (City of), 2006 ABQB 208, at para 9.
[16] The considerations, in other words, are limited to conduct within the litigation to which the costs award applies; whether the party seeking costs is a good or bad individual or corporate citizen outside of the specific piece of litigation, is not part of the analysis. Common law courts have for several centuries understood that while there is a judgmental character to the award or imposition of costs, the judgment has to do with the litigation, not with the litigant more generally:
The basis of all rules on this subject should rest upon the degree of blame to be imputed to the respective parties; and the question, who shall bear the costs will be answered with this other question, whose fault was it that they were incurred?
Mitchell v. Gard (1863), 164 ER 1280, at 1281.
[17] Costs can be compensatory or regulatory – Rules 57.01(1)(0.a) and (0.b) set out the principles of indemnity and reasonable expectations, while the other subsections of Rule 57.01(1) describe features of the litigation and its conduct. No part of the Rule sanctions or rewards parties at large. An evil person might legitimately win a motion or trial, while a righteous person might legitimately lose one. Anglo-Canadian jurisprudence holds that barring something untoward in the conduct of the action, costs will follow the event: British Columbia (Minister of Forests) v. Okanagan Indian Band, 2003 SCC 71, [2003] 3 SCR 371, at para 35.
[18] Defendants’ argument here does not focus on any conduct perpetrated by the Plaintiffs in their conduct of the action. Rather, it focuses on conduct engaged in by the Plaintiffs subsequent to the hearing of the motion and to the release of my decision.
[19] Defendants’ counsel appended to their cost submissions an affidavit of an administrative assistant at their law firm which, in turn, appended a letter written on the letterhead of the Plaintiff, Nativelands, and signed by Matt Koroll, who is presumably an employee of that company but not a lawyer. The letter, which is dated July 29, 2023 – four days after the release of my decision – is addressed to Chief Jordan Hill of Shamattawa First Nation – a client of the Defendants’ and formerly a client of the Plaintiffs’.
[20] In his letter, Mr. Koroll indicates that the Plaintiffs view the Defendants as having acted wrongfully in convincing Shamattawa to fire the Plaintiffs and hire the Defendants. The letter to Chief Hill specifically states: “However, we want to assure you that we have taken necessary legal action, and the court has already heard our motion and delivered a ruling against [the Defendant] Justice Risk.”
[21] Defendants’ counsel further submit that Plaintiffs’ counsel have also sent similar correspondence to other lawyers. They specifically state that on July 31, 2023, counsel for the Plaintiffs wrote to Mr. Josh Morrison, “a lawyer at MLT Aikins LLP who practices in areas of Indigenous law” about my endorsement. Defendants’ counsel complains that Plaintiffs’ counsel “advised Mr. Morrison that ‘[t]he Endorsement grants an injunction’ against the Motion Defendants.
[22] Defendants’ counsel argue that the statements by Mr. Korrol and by Plaintiffs’ counsel are “manifestly false.” They go on to submit that, “[t]he Endorsement is unambiguous – there is no ruling against Justice Risk, all of the Motion Defendants were entirely successful. The order that was issued was on terms that were offered by Justice Risk and which the Plaintiffs had rejected, and therefore was a ruling against the Plaintiffs’ position.”
[23] The questions raised by this submission is whether the correspondence by the Plaintiffs and their lawyers is misleading, and whether any of that matters here.
[24] In my view, there are two perspectives on my ruling that could arguably be correct. In making their submissions, Defendants’ counsel understands that while the conclusion of my endorsement and the Order that flows from that endorsement, set out terms which impose obligations on the Defendants, those terms were offered by the Defendants as settlement terms. The Plaintiffs never accepted those terms, but are now forced by my Order to do so in place of the more far-reaching terms that they had sought to impose.
[25] By contrast, in sending their correspondence, Mr. Koroll and Plaintiffs’ counsel understand that my Order, on its face, imposes a series of obligations on the Defendants. And since the Order is not issued on consent, those obligations have, in effect, been imposed on the Defendants. The Order imposes no specific obligations on the Plaintiffs, except that it dismisses the balance of their injunction motion.
[26] In other words, the terms of the Order are clear and unambiguous, but the characterization of who won and who lost – the ‘spin’ as one might say in marketing jargon – can be made to go either way.
[27] It is elementary that while counsel for a litigating party is prohibited from by-passing opposing counsel and writing directly to the opposite party, there is no prohibition on Mr. Koroll, a non-lawyer, writing to Chief Hill, another non-lawyer. There is likewise no prohibition on the Plaintiffs’ lawyer writing to Mr. Morrison, another lawyer. Mr. Koroll can put his interpretation on the court’s ruling, and Chief Hill can do the same; Plaintiffs’ counsel can put the Order under a legal analytic microscope, and Mr. Morrison can do the same. I see nothing improper in any of this.
[28] To take an Order like the one that I issued, and to announce, “We won”, is hardly the type of egregious misconduct in the course of litigation that would spark an extra level of costs. Either side might want to say that they won. But more importantly, this assertion – whether true, false, or debatable – adds nothing to the length or expense of the completed motion. From the perspective of how the motion was argued in court, it is a meaningless molehill and not the mountain that it has been made out to be.
[29] In fact, it is Plaintiffs’ counsel’s submission that this entire attempt to adduce new evidence at this stage is itself an improper use by the Defendants of the cost procedure. In Hamdy v. Hamdy, 2015 ONSC 5605, at para 107, the Court advised that that it did “not intend to review all the examples of Mr. Wickham [respondent’s counsel] trying to provide evidence himself through the cost submissions. The point is that any attempt to do this is highly improper.”
[30] Even if I were not inclined to label this approach improper, I find the evidence to be inadmissible. There is appellate authority for the proposition that correspondence that was not in the record for the hearing on the merits, but that was “attached to the post-trial submission of counsel…was not properly before the trial judge, and she erred in referring to it”: Anderson v. Amoco Canada Oil and Gas, 2002 ABCA 162, at para 61.
[31] This inadmissibility is not just a technical point in the law of evidence. Defendants’ counsel have tried to make it formally correct by appending it to a secretary’s affidavit. But the real point is that the evidence is not reliable – the most important piece is a letter from a person using Plaintiff’s letterhead that has not been tested in any way. And even more importantly, it is irrelevant to the issue at hand. It arises subsequent to the decision in the motion and so did not add to the costs of litigating the motion. It is a continuation of the underlying dispute between the parties, and may eventually be relevant at trial, but it is not relevant here.
[32] Whether the attempt to introduce new evidence that is untested by cross-examination, and to which there was no opportunity to respond, is improper or inadmissible, the effect is the same. It should not be before me at the cost submissions stage.
[33] What is equally certain is that I will not be awarding the Defendants any extra costs in compensation for these efforts. Defendants’ counsel has submitted that they are entitled to an additional payment for the time and effort of putting together their cost submissions. They seek these extra costs either on a full indemnity basis in the amount of $14,240.83, or on a substantial indemnity basis in the amount of $12,816.74, or on a partial indemnity basis in the amount of $8,544.50.
[34] On any scale, this is an extraordinary request. I see no basis for awarding extra costs of that nature, especially where a portion of them reflects the production of what I determine to be inadmissible evidence.
[35] There is good reason why trial and motion judges typically call for brief submissions on costs, and not extensive ones. The submissions are made in addition to the litigation; they are not part and parcel of its substance, and are not ordinarily compensable in themselves. The law on whether cost submissions can themselves be a ground for costs was summarized efficiently and effectively in C.(K.D.) v. C.(M.C.) and H.(D.), 2007 ONCJ 210, at para 12:
Submissions for costs are not a ‘step’ in the case. The rules do not envision a separate determination for the costs of cost submissions. The Ontario Court of Appeal in Somers v. Fournier (2002), 60 O.R. (3d) 225, 162 O.A.C. 1, 214 D.L.R. (4th) 611, 12 C.C.L.T. (3d) 68, 22 C.P.C. (5th) 264, 27 M.V.R. (4th) 165, 2002 CanLII 45001, [2002] O.J. No. 2543, 2002 CarswellOnt 2119, at paragraph [19], stated that costs of litigation are incidental to the determination of the rights of the parties. They are not part of the lis between litigants. In Giang v. Le, supra, at paragraph [26], the court stated that costs have no separate independent existence. Costs flow from a judicial dispute and represent the expense necessarily incurred in obtaining its resolution.
IV. Miscellaneous arguments for elevated costs
[36] The other points that Defendants’ counsel make in their cost submissions are, in effect, restatements of their position on the motion itself. They state, for example, that the Plaintiffs put forward “[m]ere assumptions that the Motion Defendants took steps to compete with them while still on the Plaintiffs’ payroll”. They also submit that the Plaintiffs made “[u]ntenable, broad arguments that professionals are prohibited from ‘taking knowledge’ from an employer”, and that they made “[b]ald assertions of misuse of confidential information, specifically improper use of an email server, without producing any evidence of such.
[37] Each of those arguments was made at the motion and addressed in my reasons for decision. The Defendants were largely successful on each of the points. The Plaintiffs could not meet their burden of proof in establishing facts necessary to support the extensive injunction that they sought. They also lost a legal argument about the application of non-competition principles in the absence of a written agreement.
[38] But losing a motion, or a substantial part of a motion, is not the same as misconducting a motion. The Plaintiff’s case was for the most part unconvincing, but it was in no part improper. The assumption under the combination of Rules 15.01(1)(0.a) and (0.b) is that the successful side is compensated with a level of costs that would be within the reasonable expectations of the unsuccessful side. In the ordinary course, that means costs on a partial indemnity scale.
V. Conclusion
[39] As indicated, the Defendants for the most part succeeded in fending off the injunction sought by the Plaintiffs – or, at least, in fending off the most substantial aspects of the injunction. They are entitled to costs. As also indicated, there is nothing here to displace the ordinary partial indemnity scale for those costs. On that scale, and disregarding the request for an extra payment in respect of cost submissions preparation, the Defendants seek a total award of $51,415.09.
[40] That said, the Defendants were not entirely successful. My Order requires them to return certain proprietary items and to disregard certain information belonging to the Plaintiffs. As already explained, those terms come from an offer to settle that was made by the Defendants themselves. It is the Defendants’ view that those terms should therefore not count as a ruling against them.
[41] I take the Defendants’ point, and I do appreciate that the terms that I imposed were taken from their own offer. However, I will take into account, that, acceptable as the offer’s terms were from my point of view, they came rather late in the day in the context of the contested motion. Plaintiffs’ counsel point out that by the time the Defendant’s offer was made, something in the neighbourhood of 85% of the total costs of the motion had already been incurred. The Defendants’ offer, in other words, was ultimately acceptable to the court, but it did not come without its own costs.
[42] Costs are always discretionary under section 131 of the Courts of Justice Act. Under the circumstances, I see my ruling as striking a middle ground between the positions taken by the two sides for most of the time leading up to the hearing date. I will therefore exercise my discretion by striking another mid-point in awarding costs. The Defendants are entitled to one-half of their partial indemnity costs.
VI. Disposition
[43] Using round numbers for the sake of convenience, the Plaintiffs shall pay the Defendants the all-inclusive amount of $25,700 as costs of this motion.
Date: August 25, 2023 Morgan J.
[^1]: Editorial note: The Defendants, 13777863 Canada Ltd. O/A Willow Indigenous Community Services Ltd., Darrel Olson, David Oake, and Andrea Favell, were not the target of the Plaintiff’s injunction motion and did not participate in it. Accordingly, the “Defendants”, as used here, refers only to Justice Risk Solutions Inc., Capital Street Consulting Sparrowset Inc., 24slash7 Inc., Dylan DesJarlais, Cynthia Marsden-McDonald, Nicole Chubaty, and Scott Smith.