Court File and Parties

Court File No.: CV-22-00680592-0000 Date: 2024-04-19 Ontario Superior Court of Justice

Between: LOOKING GLASS GROUP LTD. Applicant – and – TIDYSQUARES LIMITED Respondent

Counsel: Jayson Thomas and Leigh Lampert, for the Applicant Wolfgang Kaufmann, for the Respondent

Heard: In Writing

Before: Papageorgiou J.

Costs Endorsement

Overview

[1] By reasons dated February 12, 2024, I awarded the Applicant $62,400 USD or CAD $84,196.32 as of February 15, 2024, as damages for breach of contract.

[2] In the case, the parties had a contract whereby the Applicant would assist the Respondent with marketing and internet portals through which the Respondent could sell its product on-line. The agreement provided that the Applicant would be compensated through commission in respect of on-line sales made by the Respondent. The agreement also provided that the Applicant would be paid a minimum amount in the event the Respondent did not make sales because it intentionally did not supply inventory through on-line portals (the “Minimum Payments Clause”) unless this non supply was caused by something outside the Respondent’s control (the “Force Majeure Clause”).

[3] The Respondent stopped supplying product alleging that there were issues with its supplier such that inventory was not available, but this was not proven.

[4] I found that the Respondent intentionally stopped providing inventory for sale and that this failure was not something outside the Respondent’s control. Thus, the Minimum Payment was triggered, and the Force Majeure Clause did not apply.

[5] The Applicant claims costs on a substantial indemnity basis in the amount of $65,552 inclusive of disbursements and HST or $48,406 on a partial indemnity basis inclusive of disbursements and HST.

[6] The Respondent acknowledges that it is liable for costs but asserts that it should be limited to $30,000 on a partial indemnity basis inclusive of disbursements and HST.

Decision

[7] For the reasons that follow I award the Applicant $48,406 on a partial indemnity basis inclusive of disbursements and HST.

Issues

[8] In arriving at this decision, the main issues I considered were the scale and quantum of costs.

Analysis

Issue 1: The Scale

[9] I reject the argument that the Applicant is entitled to substantial indemnity costs.

[10] Pursuant to s. 131(1) of the Courts of Justice Act, R.S.O. 1990, c. C.43, costs are in the discretion of the court. Rule 57 of the Rules sets out the factors which courts should have regard to when awarding costs. The overall objective is “to fix an amount that is fair and reasonable for the unsuccessful party to pay in the particular proceeding, rather than an amount fixed by the actual costs incurred by the successful litigant”: Zesta Engineering Ltd. v. Cloutier (2002), 21 C.C.E.L. (3d) 161 (C.A.), at para. 4; Boucher v. Public Accountants Council for the Province of Ontario (2004), 71 O.R. (3d) 291 (C.A.), at para. 26; Clarington (Municipality) v. Blue Circle Canada Inc., 2009 ONCA 722, 100 O.R. (3d) 66, at para. 52; and G.C. v. Ontario (Attorney General), 2014 ONSC 1191, at para. 5.

[11] The court has the discretion to award substantial indemnity costs, but such costs are “rare and exceptional” and only warranted where there has been reprehensible, scandalous, or outrageous conduct on the part of a party: see DUCA Financial Services Credit Union Ltd. v. Bozzo, 2010 ONSC 4601, at para. 5; Foulis v. Robinson (1978), 21 O.R. (2d) 769 (C.A.); and most recently Mars Canada Inc. v. Bemco Cash & Carry Inc., 2018 ONCA 239, 140 O.R. (3d) 81, at para. 43.

[12] In this case the claim for substantial indemnity costs rests in part on the argument that I purported to find that the Applicant “tendered evidence that was false.”

[13] That is not accurate.

[14] The fact that I did not accept some of the Respondent’s evidence regarding why they were not able to continue supplying product, or that whatever occurred did not satisfy the Force Majeure Clause, does not mean that I found that they had deliberately tendered false evidence. If such a conclusion could be reached on the basis of this record, it would mean that every time a court does not accept a witnesses’ evidence, they would be found to have tendered false evidence. Parties are permitted to defend themselves in a litigation proceeding.

[15] There were competing narratives and I accepted one side based upon the evidence which was more persuasively in favour of one side. I note that the Respondents had attached to their affidavits some of the correspondence that I relied upon and that was unhelpful to them.

[16] The Applicant also says that it is entitled to substantial indemnity costs because the Respondent misrepresented its manufacturing capabilities at the material time in order to avoid having to make a payment under the Minimum Payments Clause. The mere existence of misrepresentations does not entitle one side to substantial indemnity costs. Were that the case, the losing party would always be liable to pay substantial indemnity costs where misrepresentation is the cause of action. That is not the law. Additionally, I did not find that the misrepresentations were reprehensible, scandalous, or outrageous.

[17] Further, while the Applicant did make an offer to settle, it did not beat that offer and so the cost consequences in r. 49.10 do not apply.

[18] Although the Court in Ouwroulis v. Reid, 1996 CarswellOnt 427 at para 23 (unreported) did conclude that substantial indemnity costs were warranted where the offer was close to the award made, in the exercise of my discretion I am not prepared to depart from r. 49.10.

Issue 2: Quantum

Complexity

[19] The matter was not complex.

Importance

[20] The matter was important to the Applicant who had in good faith expended sums to set up web portals for the Respondent and who was entitled to a Minimum Payment since the Respondent was not supplying inventory to fill orders being made through this portal.

Proportionality

[21] Here, the Respondent argues that even the partial indemnity costs are disproportionate to the amount the Applicant could reasonably expect to recover. However, the Applicant was forced to litigate this matter because the Respondent failed to pay amounts due in circumstances where it was clear they owed the money. They raised every conceivable argument including the argument that the Minimum Payments Clause was a penalty clause when it was clear it was not based upon the parties’ own agreement, as well as the argument that the Applicant had waived its entitlement which was also clearly not provable on the record. Even the factual opposition regarding whether the Respondent had been unable to supply inventory was weak. This increased the costs for both parties.

[22] As well, I am permitted to take into account offers to settle pursuant to r. 49.13 even when parties do not beat their offers. In this case, the Applicant made a reasonable offer that did not beat my award because the Applicant forgot that one of the months it claimed was a partial month and so the Minimum Payment had to be prorated.

[23] On the other hand, the Respondent’s offers to settle were lowball offers in the amount of $5,000 and then $15,000 coupled with communication to the Applicant that this proceeding would result in both parties expending significant sums. These were nuisance offers that sought to leverage the fact that the claim advanced by the Applicant would be expensive to pursue.

[24] While efficiency and proportionality are important so too is access to justice.

[25] Parties with relatively modest but strong claims should not be forced to choose between seeking their legitimate entitlement or settling for nuisance value because the other party can raise weak arguments that inevitably raise the stakes in terms of costs that have to be expended by the Applicant. Where the losing party puts the successful party in this position, the losing party should not be able to rely on proportionality to argue that the winning party’s costs should be limited.

[26] Proportionality should not be used as a sword to undercompensate the Applicant in this case who at all times and in all respects acted reasonably.

[27] I have reviewed the Applicant’s Bill of Costs which is sufficiently detailed and adequately sets out the hours spent, and rates charged which I find reasonable.

[28] I add that the Respondent is in no position to argue otherwise or to argue that the costs claimed were not within its reasonable contemplation since it did not provide its own Bill of Costs.

Conclusion

[29] In the exercise of my discretion, I award the Applicant partial indemnity costs in the amount of $48,406.42 payable within 30 days.

Papageorgiou J. Released: April 19, 2024