Court File and Parties

COURT FILE NO.: CV-21-00674398-0000 DATE: 2023-02-01 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: ALEM BIRHANE, FEKRE GABRESELASSIE and YOHANNES GHEBREMEDHIN, Applicants AND: MEDHANIE ALEM ERITREAN ORTHODOX TEWAHDO CHURCH, ANDEBERHAN KIDANE, FUTZUM AITSEGHEB, SAMUEL TEKIE KELETE, MICHAEL TEKESTE and KALEAB KELIT ARAIA, Respondents

BEFORE: VERMETTE J.

COUNSEL: Allan Morrison and Vibhu Sharma, for the Applicants David Sischy and Yona Gal, for the Respondents Medhanie Alem Eritrean Orthodox Tewahdo Church, Andeberhan Kidane, Futzum Aitseghel, Samuel Tekie Kelete and Michael Tekeste

HEARD: In writing

ENDORSEMENT AS TO COSTS

[1] On October 11, 2022, I released reasons for judgment (2022 ONSC 5732) ordering the Respondents to hold an annual general meeting (“AGM”) for the primary purpose of holding an election of directors.

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

Positions of the parties

a. Position of the Applicants

[3] The Applicants seek costs on a full indemnity basis in the amount of $99,233.38 or on a substantial indemnity basis in the amount of $90,012.58. In the alternative, they request costs on a partial indemnity basis in the amount of $76,181.38.

[4] The Applicants submit that they were successful in relation to the key relief sought in the Application, with some remaining aspects to be addressed by the Court as the need arises, and in opposing the Respondents’ challenge to this Court’s jurisdiction.

[5] The Applicants state that they have not benefited financially from this legal proceeding and have been out of pocket due to the conduct of the Respondents. They point out that they attempted to resolve matters amicably for a few years and resorted to litigation as a last resort. They also point out that the Respondents delayed matters, were not forthright and did not comply with their legal obligations.

[6] The Applicants refer to Rule 49.13 of the Rules of Civil Procedure and argue that even though they did not make a formal Rule 49 offer, this Court should take into account the fact that there were attempts by the Applicants to resolve this matter on terms that were as or more favourable than the Court’s determination. The Applicants also argue that a higher scale of costs is appropriate in this case in light of the conduct of the Respondents.

b. Position of the Respondents

[7] The Respondents’ position is that there should be no costs award.

[8] The Respondents state that they did not resist the Application due to a refusal to facilitate the election of new directors. Rather, they litigated the Application because, in their view, the Application sought to compel the Medhanie Alem Eritrean Orthodox Tewahdo Church (“Church”) to violate its canon law. According to the Respondents, their position that the issues were non-justiciable and the Court lacked jurisdiction to weigh in on issues of canon law sought to preserve the Church’s autonomy. They argue that they advocated for interests that transcend the personal agendas that often carry parties to court.

[9] The Respondents submit that this case raised issues of public importance (including the autonomy of religious organizations within the context of a new statutory regime) and is akin to public interest litigation, both of which are circumstances in which courts tend to award no costs.

[10] In the alternative, the Respondents argue that any costs award should be on a partial indemnity basis, using rates that are 60% of actual rates. They point out that the Applicants’ costs outline uses partial indemnity rates of 75%. They also argue that it is unsuitable for the Applicants to seek benefits of a Rule 49 Offer without providing any evidence of having made such an offer. The Respondents state that no such offers were exchanged and that no other grounds for an elevated costs award exist.

[11] The Respondents further submit that any costs award should take into account the Applicants’ public defamatory and injurious allegations of financial impropriety and the fact that, despite making such serious allegations publicly, the Applicants did not pursue their harmful and unsubstantiated allegations of financial wrongdoing at a charity.

[12] The Respondents state that given the serious and damaging allegations of financial impropriety made in public filings, they were compelled to respond. Before the February 4, 2022 attendance before Justice Vella, the Respondents filed a costs outline seeking costs in the amount of $12,566.95 on a partial indemnity basis and reserved their right to pursue those costs. Should any costs be awarded to the Applicants, the Respondents request that any amounts that the Applicants incurred in relation to the court attendances before Justices Myers and Vella be excluded, with a further setoff for the $12,566.95 incurred by the Respondents in responding to the allegations of financial impropriety.

[13] While the Respondents have provided a costs outline in support of the costs that they incurred in relation to the court attendance on February 4, 2022, they have not provided a costs outline with respect to the Application.

c. The Applicants’ reply

[14] With respect to the Respondents’ request for costs in relation to the court attendance on February 4, 2022, the Applicants submit that the work outlined in the costs outline is work that has been used on the Application and it includes communications regarding the resolution of this matter.

[15] The Applicants also state that the parties had agreed on terms prior to the preparation and delivery of the Respondents’ motion materials. They argue that the Respondents served and filed unnecessary motion materials the night before the hearing.

Discussion

a. Entitlement to costs

[16] The Applicants were successful on the Application. In my view, there are no factors in this case that militate against the general principle that costs should follow the event. I reject the Respondents’ argument that there is a public interest element to this litigation. Both sides purport to act in the best interests of the Church and most of the issues raised were fact-specific. Further, while I have concluded that the Respondents’ conduct in this case does not rise to the level required to award costs on an elevated scale (as explained below), I am of the view that there were issues with the manner in which they conducted the litigation, as outlined in my reasons for judgment. I find that it is appropriate for the Respondents to pay costs to the Applicants.

b. Scale of costs

[17] There is no basis to order costs on a full indemnity basis in this case, and no authorities have been referred to by the Applicants in support of such a request.

[18] I also find that this is not a case where substantial indemnity costs should be ordered. As has been observed in many cases, costs on an 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. Although my reasons for judgment outline a number of issues with respect to the Respondents’ conduct, it is my view that the conduct of the Respondents in this case does not rise to the egregious level required to award costs on an elevated scale. Hard-fought litigation is insufficient to justify an elevated costs award: see Davies v. Clarington (Municipality), 2009 ONCA 722 at paras. 42-46.

[19] With respect to the Applicants’ argument under Rule 49.13 of the Rules of Civil Procedure, they have failed to identify a clear offer made in writing, as well as the date and terms of such offer. Given that costs on a substantial indemnity basis are the exception rather than the rule, it is insufficient to refer generally to attempts to resolve the matter to trigger an elevated scale of costs.

c. Quantum

[20] I agree with the Respondents that the partial indemnity rates used in the Applicants’ costs outline are too high. As a general rule of thumb, partial indemnity rates are 60% of full indemnity rates: see James v. Chedli, 2020 ONSC 4199 at para. 14. In order to reflect appropriate partial indemnity rates, the costs that the Applicants claim on a partial indemnity basis should be reduced to $62,350.18.

[21] The Respondents have not criticized the time spent by the Applicants’ lawyers (except for their submissions in relation to the February 4, 2022 court attendance). Given that the Respondents have not disclosed their own costs outline, such criticism would have been “no more than an attack in the air”: see United States of America v. Yemec (2007), 2007 CanLII 65619, 85 O.R. (3d) 751 at para. 54 (Div. Ct.).

[22] Despite the absence of submissions on this point, this Court must be satisfied that the costs sought are fair and reasonable. Based on my review of the Applicants’ costs outline and the hours spent by the Applicants’ lawyers, I find that it is appropriate to apply a small reduction 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.

d. Costs related to the court attendance on February 4, 2022

[23] Given that there has been no judicial determination with respect to any financial issues, and in light of the procedural background of this matter, including the purported agreement of the parties that was endorsed by the Court on February 4, 2022, I decline to make any deduction to the quantum of costs because of allegations made by the Applicants in relation to financial matters. The fact that the Respondents did not comply with the parties’ agreement and the order made by Justice Vella on February 4, 2022 – i.e. they did not hold an AGM on February 26, 2022 that was in accordance with the by-laws of the Church – supports the conclusion that there should be no deduction in favour of the Respondents in relation to the court attendance on February 4, 2022.

[24] Further, the Respondents have not demonstrated any costs thrown away. I note that they relied upon the affidavit of Andeberhan Kidane sworn February 2, 2022 on the Application. In addition, the agreement that was reached prior to the February 4, 2022 court attendance to hold an AGM was to resolve the Application (or part of it).

Conclusion

[25] Taking the foregoing into account, as well as the factors set out in Rule 57.01(1) of the Rules of Civil Procedure and the reasonable expectations of the parties, I find that the fair and reasonable award of costs in favour of the Applicants for the Application is on a partial indemnity basis in the all-inclusive amount of $58,000.00. In my view, this is an amount that the Respondents (except for Kaleab Kelit Araia, who did not oppose the Application) should reasonably have expected to pay in the event that they were unsuccessful on the Application. Based on the materials filed by the Respondents, the submissions made on their behalf and the fact that they had at least two counsel involved in this matter, I expect that the Respondents incurred higher costs with respect to the Application.

[26] The costs are to be paid by the Respondents (except for Kaleab Kelit Araia) to the Applicants within 30 days.

Vermette J.

Date: February 1, 2023