Court File and Parties

Court File No.: CV-14-511332 Date: 2024-04-19 Ontario Superior Court of Justice

Between:

JAMES BAY RESOURCES LIMITED, Plaintiff – and – MAK MERA NIGERIA LIMITED a.k.a. MAK MERA LIMITED and ADEWALE OLORUNSOLA a.k.a. WALE SOLA, Defendants

Counsel: Hilary Book and William McLennan, for the Plaintiff Erin Chesney and David Hakim, for the Defendants

Heard: In Writing

Papageorgiou J.

Costs Endorsement

Overview

[1] By reasons dated December 4, 2023, I awarded James Bay Resources Limited (“James Bay”) damages for breach of contract in the amount of $405,000 as against the defendant Mak Mera Limited (“Mak Mera”) and damages for defamation in the amount of $200,000 as against the defendants Mak Mera and Wale Sola in respect of a letter written to the Department of Petroleum Resources dated July 14, 2014 (the “July Letter”).

[2] James Bay seeks costs of the action in the amount of $607,759 inclusive of HST. This encompasses part of its costs on a partial indemnity basis and part of its costs on a substantial indemnity basis.

Decision

[3] I award costs in the amount of $309,401.91 inclusive of HST only as against Mak Mera.

[4] I make no costs award against Mr. Sola because there was divided success as between Mr. Sola and James Bay. While James Bay was successful in its defamation claim against him, Mr. Sola was successful in resisting the breach of contract claim which constituted 2/3 of the damage award.

Analysis

The General Law

[5] 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 of Civil Procedure, R.R.O. 1990, Reg. 194 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 (Ont. 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.

James Bay was the successful party.

[6] As against Mak Mera James Bay was the successful party and is presumptively entitled to its costs.

[7] However, as set out above, there was divided success as between Mr. Sola and James Bay and so I make no award of costs against Mr. Sola.

Importance.

[8] The matter was important to James Bay as the July Letter contained significant allegations against James Bay and had had a significant impact on James’ Bay’s reputation. The July Letter set out that James Bay acted deceptively and took equity away that belonged to Mak Mera. I found that the July Letter was “extremely misleading” and made to extract pecuniary benefits that Mak Mera was not entitled to.

Complexity.

[9] There were only three witnesses at trial, but there were complicated corporate documents. The documents at trial were more than 20,000 pages long.

[10] Even though this case was primarily a breach of contract case involving two short agreements and a single defamatory letter, it revolved around Nigeria’s oil and gas industry and James Bay’s attempt to enter that market.

[11] The contractual legal issues included the interpretation of a number of agreements and whether the Defendants were entitled to payment of amounts set out in such agreements irrespective of James’ Bay’s successful acquisition of an oil and gas asset, whether pre-contractual negotiations were admissible, whether James Bay had breached their agreement by failing to use reasonable efforts to obtain TSXV approval and whether a term could be implied.

[12] The defamation claim involved factual issues as to whether the July Letter was substantially true, whether it was fair comment, whether it was written on an occasion of qualified privilege, and whether there was malice.

[13] All of the above took place within the context of Nigeria’s local content requirement that required entrants into the field to partner with a Nigerian firm.

[14] Thus, overall, and despite the fact that there were only three witnesses, the matters at issue had what I would call medium complexity.

Detail in James Bay’s Bill of Costs.

[15] James Bay’s Bill of Costs contains time spent by 8 lawyers and 3 law students without explaining why so many different individuals would be required. It has been held that an unsuccessful party cannot be held responsible for costs incurred where the matter has been over lawyered: Persaud v. Bratanov and Unifund Assurance, 2012 ONSC 6870 at para 29.

[16] The case was certainly not complex enough to require this many individuals working on the file and this would have likely resulted in duplication of effort.

[17] As well, the Bill of Costs lists only general categories of work with subsequent lists of the time spent by each individual on these general tasks. There is no detail related to what these individuals did within these tasks. These categories are:

• Pleadings: Drafting and preparing Statement of Claim; service of Statement of Claim; reviewing Statement of Defence; drafting and preparing Request to Admit; service of Request to Admit; preparing pleadings brief; research relating to pleadings issues; communications with clients and counsel regarding pleadings.
• Document Production: Reviewing and organizing documents; preparing and compiling affidavit of documents, collecting and reviewing supplementary productions; producing second, third, fourth, and fifth supplementary affidavits of documents and reviewing defendants’ affidavit of documents; communications with clients.
• Examination for Discovery: Negotiating and finalizing discovery plan, preparing for discovery; attending examinations; reviewing examination transcript; preparing answers to undertakings/under advisements; communications with clients and counsel regarding time.
• Mediation and Settlement: Meetings and emails with clients and counsel regarding settlement offers; preparing mediation briefs; attending mediation.
• Case conference: June 24, 2021.
• Pretrials: November 20, 202 and September 3, 2021.
• Trial Preparation: Setting matter down for trial; preparation and attendance at trial scheduling court; preparing written and oral submissions; conducting research; attendance at trial management conference; preparing and negotiating joint book of documents, joint cast of characters, chronology, agreed statement of facts and aide memoires; preparing brief of authorities; preparing witness exams; meetings with witnesses to prepare for trial; communications with clients and counsel regarding same;
• Attendance at trial: conducting additional research on issues raised during trial; reviewing trial transcripts; preparing transcript summaries; preparing oral and written closing submissions; reviewing plaintiffs’ closing submissions; attending closing arguments; communications with clients and counsel regarding same. (Excluding time claimed for the motion pursuant to Rule 53.08.)

[18] While detailed dockets are not required, because the Bill of Costs does not indicate what specific work each of the above individuals did within each of these categories it is not possible to assess the concern about duplication which arises because of the number of different individuals working on the same tasks. I agree that the Bill of Costs is not sufficiently detailed to allow for a meaningful assessment of the reasonableness of the fees claimed, in particular the specific tasks each person undertook in advancing the litigation.

[19] When a party does not provide sufficient information, the Court has discretion to reduce costs for lack of clarity and explanation: Whitfield v. Whitfield, 2016 ONCA 720 at para 6; 1043 Bloor Street Inc. v. Vihena, 2018 ONSC 3853 at para 13; Tait v. Guard Inc. at para 1.

Claiming amounts for corporate counsel

[20] The Bill of Costs also includes the time of Mr. Egan, counsel at WeirFoulds whose tasks were not particularized and who is a corporate lawyer. Mr. Egan was also a fact witness in the proceeding who was examined for discovery, although he did not testify. Without particularizing what tasks Mr. Egan did that related to the litigation as opposed to his involvement in issues of fact, I agree that some reduction of his time is appropriate: Trustees of the Ontario Public Service Employees Union Pension Trust Fund v. Clark at para 3.

[21] However, I do not agree that all of his time and all of Mr. Mitchell’s time should be eliminated merely on the basis that they are corporate lawyers. There were corporate issues and there would have been nothing wrong with them doing work in the litigation in respect of these or assisting litigation counsel with them.

Conduct that unnecessarily increased costs.

[22] I reject James Bay’s argument that the Defendants took a kitchen sink approach that made the litigation longer by raising all defamation defences. In my view, raising these defences to the defamation claim did not significantly lengthen the factual portion of the trial; most of the same factual issues were related to these various defenses and would have had to have been lead even if only one defamation defence had been raised.

[23] In my view it is James Bay’s conduct that unnecessarily increased costs.

[24] James Bay delivered a second supplementary affidavit of documents in 2017 on the eve of discovery and then refused to reattend which resulted in the need for a motion that resulted in an order that James Bay re-attend in 2018. And yet it claims time for attending examination for discovery in 2018 in the approximate amount of $17,000.

[25] Further, from the outset James Bay chose to have its corporate law firm WeirFoulds LLP act as litigation counsel when one of its corporate counsel, Mr. Egan, had been involved in the underlying facts and was the Chairman of James Bay’s Board. It should have been foreseeable that this would lead to issues.

[26] This is particularly so since when Mr. Egan was examined for discovery James Bay had to arrange counsel from a separate law firm to attend because it was acknowledged that “it wouldn’t be appropriate for WeirFoulds to be counsel on Mr. Egan’s examination…Because under the Rules of Professional Conduct, you can't appear as counsel in an examination...or in a proceeding where one of your colleagues is being examined.”

[27] When the trial was originally scheduled to commence in September 2021, the trial judge raised concerns about WeirFoulds LLP acting for James Bay. James Bay then terminated WeirFoulds, and the trial had to be adjourned. Courts have held that a losing party cannot reasonably expect to have to pay for costs associated with duplicative work resulting from a successful party’s decision to retain new counsel: Nutzenberger v. Mert, 2021 ONSC 1127 at para 9.

[28] James Bay sought its costs thrown away at that time for preparation in the amount of $69,103 which the Court denied; the Defendants were awarded their costs.

[29] And yet James Bay’s Bill of Costs contains trial preparation costs in the amount of $93,597 for time spent prior to the adjourned trial in September 2021. James Bay is not entitled to these amounts.

[30] Additionally, at the outset of trial James Bay sought to introduce three new documents which necessitated additional discovery yet again, as well as a voir dire and motion. I agreed that the Defendants would have their substantial indemnity costs on such motion which are $10,330.40 and which I will set off against the costs award here.

[31] In closing, James Bay also abandoned its claim for punitive damages as well as its claim for reimbursement of expenses from Mak Mera. Time and costs would have been spent by the Defendants in preparing for these.

Proportionality

[32] I agree with the Defendants’ argument that James Bay’s cost in the amount of $607,795 is disproportionate to the damages at trial awarded in the amount of $605,000:

[33] I agree with the Defendants’ arguments that:

• This action does not give rise to the “rare circumstances where the justice of the case requires the risk and expenditure of greater resources than the actual amount at issue on a claim”: Gupta v. Singh, 2017 ONSC 2406 at para 52.
• In general, a plaintiff cannot expect to be rewarded “for risking far more in costs than the damages [they] might reasonably expect to recover for a legitimate claim”: Gupta at para 52; Temblar Building Supplies Ltd. v. 1839563 Ontario Limited, 2020 ONSC 683 at paras 44-45; Marcus v. Cochrane, 2014 ONCA 207 at para 15.

Reasonable expectations

[34] The Defendants did not provide their own Bill of Costs for the action and James Bay argues that the Court may draw an adverse inference: Fraser v. Haukioja, 2010 ONCA 249 at para 73.

[35] In response Mak Mera cites caselaw that hold that there is no requirement for an unsuccessful party to prepare and file a Bill of Costs and that deciding to do so does not prevent that party from critiquing the successful litigant’s costs by identifying specific areas of concern in the successful party’s costs claim: Kalogon Spar Ltd. v Papageorge, 2020 ONSC 3232 at paras 41, 42.

[36] In this case, even though the Defendants did not provide a Bill of Costs, they had provided a projected Bill of Costs when they brought an unsuccessful motion for security for costs in February 2022. At that time, they projected their costs to be $386,408.72 on a partial indemnity basis.

[37] As such, in my view, at least that quantum of costs would have been within the Defendants’ reasonable contemplation.

Offers to Settle

[38] On August 30, 2021, almost two years before the trial, James Bay made an offer to settle for $405,000. This triggers the costs consequences in r. 49.10. As such James Bay is entitled to its partial indemnity costs to the date of the offer and on a substantial indemnity basis thereafter.

[39] Based upon its Bill of Costs, the total partial indemnity costs it claims are:

• Partial indemnity: $238,530 plus HST.
• Substantial indemnity: $277,978.5 plus HST
• Disbursements: $21,380 plus HST.

Conclusion

[40] There are hard numbers that I am subtracting from James Bay’s partial indemnity claim including:

• Claim for discovery in 2018 in the approximate amount of $17,000.
• Trial preparation costs in the amount of $93,597 prior to the adjourned September 2021 trial.

[41] This reduces the partial indemnity claim from $238,530 to $127,933.

[42] I also apply a reduction of 30% to all of its claimed costs to take into account the lack of particularity in its Bill of Costs, James Bay’s conduct that unnecessarily increased costs, proportionality, and other concerns above. (Although the lack of particularity is concerning, given Mak Mera’s own proposed or anticipated Bill of Costs when it made the application for security for costs, the medium complexity, and the fact that this was a two-week trial which would have necessitated significant preparation, I accept that this action still required James Bay to expend significant resources.)

[43] Additionally, I must deduct substantial indemnity costs in the amount of $10,330 for the motion relating to the production of 3 documents the weekend before the trial commenced.

[44] Therefore, I award:

• Partial indemnity costs up to the date of the offer in the amount of $89,553 ($127,933 x .7)
• Substantial indemnity costs in the amount of $194,584 ($277,978.5 x .7)
• These total $284,137.
• I subtract $10,330 for a total of $273,807 plus $35,594.91 in HST for a total of $309,401.91 payable within 30 days.

[45] The parties may submit a revised judgment that takes into account interest and costs.

Papageorgiou J. Released: April 19, 2024