Court File and Parties

Date: 20240905 Superior Court of Justice – Ontario (Commercial List)

Re: DOUG MIDDLETON And: DIRECT BROADCAST SATELLITE COMMUNICATIONS CORP., THE BENEFITS GROUP INC. and MARK BER JDM GROUP LTD. and JASON MIDDLETON And: DIRECT BROADCAST SATELLITE COMMUNICATIONS CORP., THE BENEFITS GROUP INC. and MARK BER DIRECT BROADCASTING SATELLITE COMMUNICATIONS CORP., THE PRODUCERS GROUP LTD. and MARK BER And: JDM GROUP LTD., PRODUCERS PLANNING GROUP INC., THE BENEFITS GROUP INC., THORNBRIDGE CAPITAL GROUP INC., DOUG MIDDLETON and JASON MIDDLETON

Before: KIMMEL J.

Counsel: Harvey Chaiton & Laura Culleton, for the Sales Officer B. Riley Farber Advisory Inc. Howard Borlack & Ben Tustain, for Doug Middleton, Jason Middleton, and JDM Group Ltd. Kevin MacDonald & Jamie Sanderson, for Direct Broadcast Satellite Communications Corp., Mark Ber, The Producers Group Ltd., Thornbridge Capital Inc., and Producers Planning Group Ltd.

Heard: Written Cost Submissions Dated July 11, July 26 and August 19, 2024

Costs Endorsement (sales officer’s motion for advice and directions: sale plan)

[1] The Sales Officer was appointed in these three oppression remedy applications to wind up and sell the business and assets of two Companies, the Producer’s Planning Group Ltd. and The Benefits Group Inc. The Sales Officer has been unable to fulfill its mandate under the Appointment Order because of ongoing disputes between the three principals, Mark, Jason and Doug.

[2] On June 14, 2024 the court released its endorsement providing advice and directions to the Sales Officer, directing that certain PG Transferred Policies be included in the Property that the Sales Officer was mandated to sell under a December 30, 2022 Appointment Order (see Middleton v. Direct Broadcast Satellite Communications Corp., 2024 ONSC 3442).

[3] Capitalized terms not otherwise defined in this costs endorsement shall have the meanings ascribed to them in the June 14 Endorsement.

[4] Although this motion was brought by the Sales Officer, the real lis was between Jason and Doug and their affiliates on one side and Mark and his affiliates on the other. It was resolved in favour of the position advanced by Jason and Doug and their affiliates, which clearly prevailed over Mark’s position.

[5] The court found that Mark had improperly caused the PG Originating Policies to be transferred to PG. The court also found that Mark had orchestrated the circumstances that led clients to request that other policies be transferred to PG. To that extent, his actions were found to have undermined the Appointment Order that mandated the Sales Officer to sell the Property of the Companies that included these policies that were transferred to PG after the Appointment Order was made.

[6] In the June 14 Endorsement, the court noted that Jason and Doug and their affiliates had a prima facie entitlement to costs on a partial indemnity scale. The parties were permitted to make submissions on the scale or other terms of costs if they were not able to reach an agreement on costs. No agreement was reached.

The Parties' Positions on Costs

a) Jason and Doug

[7] The costs outline submitted on behalf of Jason and Doug claims fees (inclusive of HST) on a partial indemnity scale (60% of actual) of $50,239.80, on a substantial indemnity scale (at 90% of actual) of $74,808.83, based on actual fees of $83,733.00 for 168 hours of lawyer time. They claim disbursements of $590.43 on top of the fees.

[8] Jason and Doug and their affiliates are seeking their substantial indemnity costs of this motion as against Mark and his affiliates in the amount of $74,808.83 (plus disbursements of $590.43 for a total of $75,399.26), or alternatively on a partial indemnity scale at $50,829.43.

[9] Jason and Doug are also seeking an order that Mark and his affiliates pay the costs and expenses of the Sales Officer of this motion (to be determined when it comes time to approve the accounts of the Sales Officer), because payment in the normal course under the Appointment Order would mean that both sides would share equally in the costs of the Sales Officer for this motion. Jason and Doug contend that it would be unfair for them to have to eventually pay half of the Sales Officer's costs of this motion.

[10] Jason and Doug argue that this motion was only necessary because of the course of conduct that Mark embarked upon after the Appointment Order was made, designed to undermine the mandate that had been given to the Sales Officer. They argue that Mark's conduct was also intended to exploit court delays by delaying the settlement of the Appointment Order and unilaterally changing the status quo regarding the ownership and administration of certain policies that belonged to the Companies in the meantime.

b) Mark

[11] Mark and his affiliates maintain that partial indemnity costs is the appropriate scale of costs. They do not challenge the amount of partial indemnity costs ($50,239.80 in fees plus disbursements of $590.43, for a total of $50,829.43) set out in Jason and Doug's costs outline. This amount is less than the partial indemnity costs amount that was indicated in Mark’s own costs outline for this motion of $57,332.81, which includes disbursements of $307.

[12] Mark and his affiliates contend that the matter of costs was settled on the basis that they would pay the claimed partial indemnity costs of $50,239.80. This alleged settlement regarding costs led to a further disagreement between the parties in the course of making their cost submissions about the existence of a settlement and what, if any, weight should be given to the without prejudice settlement communications between counsel on this topic.

[13] Mark and his affiliates also oppose any order requiring them to pay the costs of the Sales Officer of this motion, which they say should be paid in the normal course pursuant to the Appointment Order (e.g. from the sale proceeds after the Property is sold, and thus shared equally by both sides).

c) The Sales Officer

[14] The Sales Officer did not seek a separate award of its costs of this motion. It will seek to recover its costs of this motion as part of its fees and expenses under the Appointment Order.

Scale of Costs

[15] I have reviewed the without prejudice communications between counsel about settling the matter of costs. These communications do not amount to an enforceable agreement. There were always two components to the costs that Jason and Doug and their affiliates were seeking. That was noted in the June 14 Endorsement. The without prejudice communications disclose that there was no agreement reached regarding the costs of the Sales Officer, one of the components; the other being the scale of costs for this motion.

[16] Costs are a matter of the court's discretion under s. 131 of the Courts of Justice Act, with regard to any applicable factors under Rule 57. The Rule 57 factors may be relevant to both the issues of quantum and scale of costs. Here the point of disagreement is about the scale of costs.

[17] It is well recognized that "elevated costs are warranted in only two circumstances. The first involves the operation of an offer to settle under Rule 49.10, where substantial indemnity costs are explicitly authorized. The second is where the losing party has engaged in behaviour worthy of sanction." See Davies v. Clarington (Municipality) et al., 2009 ONCA 722 at paras. 48-49.

[18] No Rule 49 offer has been identified that would justify a higher scale of costs. Jason and Doug rely on the court's finding that Mark's conduct undermined the Appointment Order that mandated the Sales Officer to sell Property that included certain Policies that were transferred to PG after the Appointment Order was made. They say that Mark crossed the threshold of “reprehensible, scandalous or outrageous” conduct such as was recognized in Young v. Young, [1993] 4 SCR 3 as warranting substantial indemnity costs.

[19] I do not find Mark's conduct to have crossed that threshold. While Mark was found to have been in the wrong, and the court does not condone Mark taking matters into his own hands after the Sales Officer was appointed, he had an explanation for why he thought he was entitled to do what he did; no finding was made that what Mark did was a blatant and flagrant disregard of the court's process or of an explicit court order in the context of this motion Mark's actions have been ordered to be corrected and the appropriate scale of costs for the motion that righted that ship is a partial indemnity award.

[20] This case is distinguishable from Parkland Corporation v. SRAA Inc., 2021 ONSC 3342 in which the losing parties were found (at para. 11) not to have advanced any legal basis for their position.

[21] Since I have determined partial indemnity costs to be the appropriate scale of costs for reasons independent of the alleged settlement of costs to be awarded on this motion, I need not address any further submissions that the parties have provided, or sought to provide, about the alleged costs settlement.

Costs of the Sales Officer

[22] The Sales Officer is not seeking its costs at this time. The Appointment Order directs that the Sales Officer’s expenses and fees in carrying out the Sale Process should be paid for by the Companies. That process could not begin until this motion was decided.

[23] Jason and Doug seek an order that Mark and his affiliates be held responsible for the Sales Officer’s costs of this motion. They say they should not be burdened with half of the expense that will eventually be charged by the Sales Office for having to bring this motion when it was all because of Mark’s conduct. They want Mark and his affiliates to pay for the entire cost associated with the Sales Officer's investigative and reporting efforts made necessary by that conduct.

[24] Since no invoice or costs outline has been provided by the Sales Officer, Jason and Doug suggest that the precise determination of the amount of costs attributable or resulting from Mark's conduct that led to this motion can be determined at a later date. They ask that the court include in its order on costs a provision that the Sales Officer’s costs of this motion are payable by Mark but leave them to be fixed during any subsequent motion to approve the Sales Officer’s fees and expenses.

[25] When it comes time to approve the fees and expenses of the Sales Officer, there may be grounds for a disproportionate allocation of those fees and expenses as between the parties, which would require an amendment to the Appointment Order. The arguments advanced by Jason and Doug in relation to the Sales Officer's fees and expenses associated with this motion may be raised again by them at that time.

[26] As Mark points out, there may be other arguments to be raised for disproportionate allocation of the fees and expenses of the Sales Officer; for example, Mark claims that conduct of Jason and Doug and their affiliates in the settlement of the Richardson Litigation may be another factor to consider.

[27] The court makes no ruling at this time regarding any of the potential arguments that might later be made regarding a disproportionate allocation of responsibility for the fees and expenses of the Sales Officer.

Costs Disposition

[28] In the exercise of my discretion, Mark and his affiliates are ordered to pay the partial indemnity costs of Jason and Doug and their affiliates of this motion, fixed in the all-inclusive amount of $50,829.43 and payable forthwith.

Kimmel J. Date: September 5, 2024