) ) POOLE et al Court File 13-59444 Plaintiffs McGRAIL et al Court File 14-60166 Plaintiffs – v. –, 2017 ONSC 5676

CITATION : POOLE et al v. PHILLIPS et al, 2017 ONSC 5676 COURT FILES NO.: 13-59444 and 14-60166 DATE: 2017-09-25 ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: ) ) POOLE et al Court File 13-59444 Plaintiffs McGRAIL et al Court File 14-60166 Plaintiffs – and – PHILLIPS et al Court File 13-59444 and 14-60166 Defendants ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) MICHAEL S. HEBERT and CHERYL G. McLUCKIE, for all Plaintiffs JOHN FABELLO and IRFAN KARA, for the Defendants Douglas Hyatt, Leo De Bever, Robert Gauld, and John Cook DAVID S.

STEINBERG, for the Defendants Marina Ushycky, Steven Brockhouse and Terence Fisk BRUCE O’TOOLE, for the Defendant Margaret Davis PATHIK BAXI, for the Defendant Robin Pullen ) ) ) HEARD: In writing Tausendfreund, J. COSTS ENDORSEMENT

OVERVIEW [ 1 ] Nine of the sixteen Defendants in these two actions (“the moving Defendants”) brought

summary judgment motions. They each sought an Order to have the particular action pertaining to them dismissed. I heard these motions over three days in Ottawa on October 25, 26 and 27, 2016. These were four separate

summary judgment motions. [ 2 ] The Plaintiffs’ claims against each moving Defendant are based on a similar set of factual allegations. [ 3 ] The Plaintiffs seek damages for lost investments. They were investors in limited partnerships, trusts and preferred shares. They lost a substantial amount of their investments and collectively seek damages in the range of $5.5 million dollars. [ 4 ] The moving Defendants were directors of corporations which acted as general partners for certain limited partnerships. The Plaintiffs contend that the moving Defendants, as directors, owed them a duty of care.

They state that the moving Defendants were negligent, breached their fiduciary and statutory obligations to them and that their actions gave rise to a claim of oppression. [ 5 ] Although pleaded, the Plaintiffs did not pursue allegations of fraud beyond the pleadings stage. [ 6 ] The moving Defendants sought to have these actions dismissed on the basis that they, as directors of general partnerships, did not owe a duty of care to the Plaintiffs as investors in limited partnerships, trusts and preferred shares. [ 7 ] In my reasons, I dismissed the Plaintiffs’ claim of oppression against the moving defendants.

I also held that the claim of the Plaintiffs that the decision of these moving Defendants to appoint a receiver had a negative impact on the investments of the Plaintiffs was not actionable against the moving Defendants. [ 8 ] I held that the following claims brought by the Plaintiffs remained as live issues and were to go to trial: (

a) The question of whether the law of negligence should be extended to address the facts raised in these actions required a Cooper v Hobart [1] approach and that the record on these motions was insufficient for that purpose; (

b) The question of what might reasonably be expected of the moving Defendants as directors concerning the financial stewardship of these corporations, as it affected the Plaintiffs, is a triable issue; (

c) The position of the moving defendants, Robin Pullen and Margaret Davis that these actions against them should be dismissed as they took no

part in any of the meetings of directors is a triable issue. GENERAL COSTS PRINCIPALS [ 9 ] The usual rule in Ontario is that costs follow the event.

All costs decisions are in the discretion of the court to determine by whom and to what extent costs are to be paid: Courts of Justice Act, R.S.O. 1990, c.C. 43, s.131(1). [ 10 ] Generally, “costs follow the event, premised upon a…loser pay, costs approach…awarded on a partial indemnity basis [absent exceptional circumstances and/or Rule 49 Offers]…and payable…within 30 days” [2] [ 11 ] R. 57.01 of the Rules of Civil Procedure provides guidance to the court as to the manner in which its discretion under s. 131 of the Courts of Justice Act to award costs should be exercised. [ 12 ] There were no Offers to Settle under R.49 of the Rules of Civil Procedure. [ 13 ] In Anderson v.

St. Jude Medical Inc. (2006), 264 D.L.R. (4557), the Divisional Court set out several principles to be considered in making an award of costs: (

a) The discretion of the court must be exercised in light of the specific facts and circumstances of the case in relation to the factors set out in R.57.01 (1). (

b) A consideration of experience, rates charged and hours spent is appropriate. However, it is subject to the overriding principle of reasonableness, as applied to the factual matrix of the particular case…The quantum should reflect an amount the court considers to be fair and reasonable, rather than any exact measure of the actual costs to the successful litigant. (

c) The court should seek to avoid inconsistency with comparable awards in other cases. (

d) The court should seek to balance the indemnity principle with the fundamental objective of access to justice. POSITION OF THE PLAINTIFFS

[ 14 ] The Plaintiffs submit that they should be entitled to their costs of these motions on a partial indemnity basis. That is so, they state, as the moving Defendants, each of whom had sought a dismissal of the action, had their motions dismissed and now remain as Defendants in these actions. [ 15 ] The Plaintiffs seek costs of $182,725.00 inclusive of fees, disbursements and taxes. They state that: (

a) These costs are within range of what the moving Defendants would reasonably be expected to pay; (

b) These motions were complex and voluminous and required lengthy cross- examinations on three separate occasion, over three days; (

c) The Plaintiffs in these two actions collectively claim approximately $5.5 million dollars; (

d) The proceedings were complex, involving four separate motions by nine separate Defendants; (

e) The moving Defendants sought to have the actions against them dismissed in their entirety; (

f) These motions took in excess of one year to be heard. POSITION OF THE MOVING DEFENDANTS [ 16 ] They are represented by four sets of counsel and seek a total of $289,249.00 as costs on a partial indemnity scale. [ 17 ] In seeking costs, the moving Defendants state that contrary to the Plaintiffs, they were the successful parties on these motions. They rely on the court’s ruling on these motions that the oppression remedy and the issue of the appointment of a receiver were dismissed.

They also state that the remaining causes of action were narrowed in scope and that the Plaintiffs did not pursue the allegation of fraud beyond the pleadings stage. [ 18 ] The moving Defendants also advanced the alternative position that success was divided. In that event, the court would have the discretion to quantify the degree of success and then award costs on that basis. [3] RULING [ 19 ] The action as pleaded is one of substance. The Plaintiffs collectively claim $5.5 million dollars of lost investments.

The moving Defendants each sought a dismissal of the action against them as failing to disclose any cause of action. For the Plaintiffs, these four motions were an “all or nothing” proposition as against the moving Defendants. [ 20 ] In my reasons, I held that the action against the moving Defendants was to continue.

However, the scope of the action has been narrowed and the causes of action were reduced to three. [ 21 ] The relief sought by these moving Defendants in their Notices of Motion did not request a narrowing or reduction of issues with a view of streamlining the action and reducing the expected length of the trial. Their claim was for an outright dismissal of the action as against them. It essentially was an “all or nothing” proposition. To that extent, they were unsuccessful.

However, I take note of the fact that the number of the causes of actions the Plaintiffs raised was reduced and that the allegation of fraud brought by the Plaintiffs did not continue beyond the pleadings stage. To that extent, the moving defendants will receive the benefit of an off-set against the costs entitlement due from them to the Plaintiffs. [ 22 ] The Defendants will receive a credit of 25% of the costs they seek, as a reduction of their costs obligation to the Plaintiffs on a joint and several liability basis. I quantify this credit to be $72,000.00.

After applying this credit, I find that the Plaintiffs on these four motions collectively are entitled to net costs, in the sum of $100,000.00 including fees, disbursements, taxes and for their costs submissions. Honourable Mr. Justice Wolf Tausendfreund Released: September 25, 2017 CITATION : POOLE et al v. PHILLIPS et al, 2017 ONSC 5676 COURT FILE NO.: 13-59444 DATE: 2017-09-25

ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: POOLE et al Plaintiffs – and – PHILLIPS et al Defendants COSTS ENDORSEMENT Tausendfreund, J. Released: September 25, 2017