Court File and Parties

COURT FILE NO.: CV-22-00679459-0000 DATE: 20240301 ONTARIO SUPERIOR COURT OF JUSTICE

Application under s. 248 of the Business Corporations Act, R.S.O. 1990, c. B.16 as amended.

BETWEEN: MICHELLE GOJKOVICH Applicant

• and - BUHBLI ORGANICS INC., ORGANIC PRODUCTS CONSULTING INC. and JOHN RODY Respondents

Counsel: Stephen Schwartz and Darren Marr for the Applicant Shayan Kamalie and Karan Khak for the Respondents

HEARD: In writing

PERELL, J.

Reasons for Decision - Costs

[1] The Applicant, Michelle Gojkovich, and the Respondent, John Rody, are the co-owners of the Respondent Buhbli Organics Inc. Mr. Rody is the sole owner of the Respondent Organic Products Consulting Inc., which provides services solely for Buhbli Organics. Mr. Rody is also the sole owner of Buhbli Brands Inc.

[2] In a second oppression remedy application, Ms. Gojkovic brought a motion for:

a. an Order that the title of proceedings for this application be amended to add Buhbli Brands Inc. as a Respondent and that all requirements of service are dispensed with, b. an Order appointing MNP LLP as monitor over the Respondents, c. an Order amending the Orders of May 9, 2023 and July 4, 2023 such that Buhbli Brands is ordered to be wound up as part of the winding up of Buhbli Organics, d. an Order amending the Order of July 4, 2023 such that Buhbli Brands is separately and jointly liable for the damages ordered, e. an Order amending the costs Order of July 4, 2023 such that Buhbli Brands is separately and jointly liable for the costs ordered, f. an Order that Mr. Rody, Organic Products Consulting, and Buhbli Brands and other entities indirectly controlled by him immediately reimburse Buhbli Organics for all funds taken or diverted from Buhbli Organics since May 9, 2023, g. an Order compelling the Respondents to disclose all amounts paid from the assets of Buhbli Organics towards legal fees and disbursements associated with this Application and to immediately reimburse Buhbli Organics. h. an order determining whether documents belonging to Buhbli Organics and obtained by Ms. Gojkovich, are subject to lawyer-client privilege,

[3] The Rody Respondents namely Mr. Rody and his corporation Organic Products Consulting Inc. brought a cross-motion for the following relief:

a. an Order striking Ms. Gojkovich's motion for interim relief (and her motion for security for costs in the Divisional Court), b. an Order removing Chaitons LLP as solicitor for Ms. Gojkovich, c. in the alternative, an Order striking paragraphs 30, 36, 37, 38, 39, 40, 41, 43, 46, 47, 48, 49, 55, (except subparagraph (k)), 56, 57, 58, and the first sentence of 59 and Exhibits ‘L, M, N, Q, R, S, T, U, V, W, X, Y, Z, BB, CC, DD, EE, FF, GG’ of the affidavit dated October 6, 2023 of Ms. Gojkovich and paragraphs ‘w, x, and y’ of her Notice of Cross Motion on the basis that she has unilaterally obtained information and documentation by hacking into email accounts without consent and reading privileged and confidential emails between the Respondents and their counsel,

[4] I dismissed the Rody Respondents’ cross-motion; and except for the relief requested in paragraphs c, d, e, f, g, and h, of the claim for relief, as set out above, I granted Ms. Gojkovich’s motion. I granted Ms. Gojkovich’s Order on terms that she scrub the copies of the Rody Respondents’ documents that she has on her computer and that Chaitons LLP destroy the copies of the documents that it had segregated as lawyer and client communications. [1]

[5] In my Reasons for Decision, I stipulated that if the parties cannot agree about the matter of costs, they may make submissions in writing beginning with Ms. Gojkovich’s submissions within twenty days from the release of these Reasons for Decision followed by the Respondents’ submissions within a further twenty days. I received costs submissions from both parties.

[6] Ms. Gojkovich seeks costs on a substantial indemnity scale of $94,248.57 comprised of $91,751.20 in fees and $2,497.37 in disbursements. For the reasons that follow, I award costs on a partial indemnity basis of $60,000, all inclusive. The costs shall be payable jointly and severally by the Respondents save for the Respondent Buhbli Organics Inc., which has no liability for costs.

[7] The most general rule about costs, not to be departed from without good reason, is that costs at a partial indemnity scale follow the event, which is to say that normally costs are ordered to be paid by the unsuccessful party to the successful party on a partial indemnity scale. [2]

[8] A critical controlling principle for the awarding of costs is that the sum awarded reflect the fair and reasonable expectations of the unsuccessful litigant. [3] The overriding principle in awarding costs is reasonableness. [4]

[9] The explanation for the costs award in the immediate case begins by noting that Ms. Gojkovich was the successful party on both motions, and the usual award in these circumstances is that costs are awarded to the successful party on a partial indemnity scale. Applying the normal guidelines with respect to costs on a partial indemnity basis, the appropriate award in the immediate case is $60,000, all inclusive.

[10] The next point to note is that these costs should be the joint and several liability of the Respondents - save for the Respondent Buhbli Organics Inc.

[11] Buhbli Organics Inc. is a “technical respondent” joined because it is the object of the dispute and technically needs to be bound by the outcome of the substantive disputants, who are Ms. Gojkovich on one side and Mr. Rody and his corporations on the other side.

[12] The genuine litigants who are the subjects of the litigation are Ms. Gojkovich and Mr. Rody, and neither of them should expect their costs to be subsidized and paid by the object of the litigation, which is their jointly owned corporation. Ms. Gojkovich must pay her lawyers and as the successful party, she is entitled to be indemnified on a partial indemnified basis by Mr. Rody and his corporations. She is not entitled to be indemnified by the object of the litigation.

[13] Mr. Rody must pay his lawyer and as the unsuccessful (or even as a successful party) he has no right to have Buhbli Organics Inc. pay his legal fees. Buhbli Organics Inc. is not the litigation financier for either of its 50:50 owners.

[14] In my costs award on Ms. Gojkovich’s first oppression remedy application, I ordered that the costs not to be paid by Buhbli Organics because Ms. Gojkovich was a 50% owner. [5] On this second oppression remedy application, I make the same order.

[15] In my costs award on Ms. Gojkovich’s first oppression remedy application, I also ordered that Mr. Rody disclose all amounts paid by Buhbli Organics Inc. on behalf of his legal fees and to reimburse Buhbli Organics – not Ms. Gojkovich – for those costs, which must be paid by Mr. Rody and or by his corporations but not by Buhbli Organics Inc. I repeat this Order as part of this second costs award mutatis mutandis.

[16] On this second oppression remedy application, Mr. Rody testified that Buhbli Organics had paid $139,500 in legal fees on his behalf for the first oppression application, but he had not reimbursed Buhbli Organics for these expenditures. At risk of being found in contempt of a court order, Mr. Rody should reimburse Buhbli Organics Inc. for legal expenses paid on his behalf.

[17] Continuing with my explanation for the $60,000, all inclusive, costs award on a partial indemnity basis that I have made, it is my conclusion that the second oppression remedy unlike the first oppression remedy application is not appropriate for an award on a substantial indemnity basis.

[18] In this regard, the first point to note is that the first costs award was essentially unopposed. The Respondents did not file opposing costs submissions. This time, albeit a few days late, the Respondents did file submissions, and they argued that the circumstances of the second oppression remedy application accompanied by the Respondents’ cross motion did not justify a punitive costs award.

[19] There is traction to this submission. The issues on the second oppression remedy application were far more circumscribed than on the first application. The major aim of Ms. Gojkovich’s motion was to have a monitor appointed and this relief was not opposed save for the matter of joining Buhbli Brands Inc. nunc pro tunc as of October 12, 2023.

[20] In the result, I did appoint a monitor to monitor the activities of all of the Respondents, but I did not join Buhbli Brands Inc. nunc pro tunc. Thus, the second oppression application was not an unqualified success for Ms. Gojkovich.

[21] It is true that I found that Mr. Rody has continued to freeze out his co-owner in Buhbli Organics Inc., but it appears that his management of the business remains sound and the business is prospering. I have ordered Mr. Rody to reimburse Buhbli Organics for its payment of his personal legal fees and assuming his appeal is unsuccessful, there will be a reckoning if he has diverted monies that he is not entitled to for the services he is providing as an employee or consultant.

[22] The next point to note is that as a stand alone application, from a procedural perspective, the Respondents’ resistance and their conduct in resisting Ms. Gojkovich’s second oppression application would not justify a punitive award on a substantial indemnity scale.

[23] Standing alone, the second oppression remedy application was a hard-fought proceeding for which a partial indemnity costs award of $60,000, all inclusive, is reasonable and within the reasonable expectations of the unsuccessful party.

[24] This brings the discussion to the late arriving cross-motion to have Chaitons, Ms. Gojkovich’s lawyers, disqualified for their handling of the information that Ms. Gojkovich had obtained from the computers that she had come to understand gave her access to information that was otherwise known only to Mr. Rody including relevant information, irrelevant personal information, and private solicitor and client communications.

[25] On the cross-motion, in the result, I concluded that there was no merit to the allegations being made against Chaitons, but I did order that Ms. Gojkovich scrub the copies of the Rody Respondents’ documents that she has on her computer and I did order that Chaitons LLP destroy the copies of the documents that it had segregated as lawyer and client communications.

[26] The Respondents’ conduct vis-à-vis Ms. Gojkovich has been deplorable, but in this instance it was her conduct, that took the case in the dicey legal territory of protecting solicitor and client privilege, which Mr. Rody was entitled to do and which his lawyers were obliged to do.

[27] Chaitons was aware that there was a problem about privileged communications, and I concluded that they responded appropriately, but the situation was complicated, without any clear precedent and Mr. Rody and his lawyer could not just ignore it. In these circumstances, in my opinion, a fulsome partial indemnity award of $60,000 is the appropriate award.

[28] Orders accordingly.

Perell, J.

Released: March 1, 2024

[1] Gojkovich v. Buhbli Organics Inc., 2023 ONSC 7254. [2] McCracken v. Canadian National Railway, 2012 ONSC 6838; Hague v. Liberty Mutual Insurance Co., [2005] O.J. No. 1660 (S.C.J.); Pike's Tent and Awning Ltd. v. Cormdale Genetics Inc. (1998), 27 C.P.C. (4th) 352 (Ont. Gen. Div.); Bell Canada v. Olympia & York Developments Ltd. (1994), 17 O.R. (3d) 135 (C.A.). [3] Boucher v. Public Accountants Council for the Province of Ontario (2004), 71 O.R. (3d) 291 at para. 24 (C.A.); Stellarbridge Management Inc. v. Magna International (Canada) Inc., [2004] O.J. No. 2102 at para. 97 (C.A.); Zesta Engineering Ltd. v. Cloutier (2002), 21 C.C.E.L. (3d) 161 at para. 4 (Ont. C.A.); McGee v. London Life Insurance Co., [2008] O.J. No. 5312 at paras. 5-8 (S.C.J.); Caputo v. Imperial Tobacco Ltd. (2005), 74 O.R. (3d) 728 at paras. 23-25 (S.C.J.); Lee v. General Motors Co. of Canada, [2004] O.J. No. 2245 (S.C.J.). [4] Davies v. Clarington (Municipality) (2009), 2009 ONCA 722, 100 O.R. (3d) 66 at para. 52 (C.A.). [5] Gojkovich v. Buhbli Organics Inc., 2023 ONSC 3962.