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Costs Allowed at $800,000+

Costs Order of $800,000 Plus Awarded

Following a ten day trial, an Ontario court has awarded the successful plaintiff and defendant by counterclaim a costs award of $830,761. 1 2 $10,000 was also allowed for punitive damages.

The case involved a claim made by the plaintiff for a sum in excess of three million of dollars in damages. He was met by a counterclaim of some $1.5 million in damages and $1 million in punitive damages, alleging a breach of a restrictive covenant and a non-solicitation term, and a breach of fiduciary duty, following the plaintiff’s acceptance of employment with a competitor.

The plaintiff’s claim prevailed in the amount of $718,000 and the counterclaim was dismissed.

The non-competition and non-solicitation clauses were found to be unenforceable as contrary to public policy and overly broad. The claim for breach of fiduciary duty was also dismissed. The counterclaim for $1 million in punitive damages was abandoned in mid-trial.

The court was critical of the defendant’s decision to assert serious allegations in the counterclaim, which the court found to be without merit. The late release of a previously contested document was also found to be unfair conduct, all of which led to an unnecessary increment to the costs of the proceeding.

The court expressed the following views on the defence conduct:

Fifth, this is an appropriate case to award costs to discourage frivolous and strategic claims. In my view, PearTree’s counterclaim, including its claim for punitive damages, was obviously meritless. Employers who owe money to employees should be discouraged from engaging in tactical litigation designed to discourage employees from pursuing their rights and entitlements.

[29]           Sixth, this is an appropriate case to award costs to sanction inappropriate behaviour by PearTree in its conduct of this proceeding. In addition to pursuing the counterclaim, PearTree disclosed relevant documents very late in this process. Mr. Donato’s experts repeatedly requested that PearTree produce the “deal tracker” to them to assist them with their work. PearTree refused to produce this information on the basis of relevance. It appears that PearTree changed its mind and gave that information to its own expert when it concluded that it would be helpful to it. It then produced the deal tracker to Mr. Donato on March 24, 2023, about a month before the trial of this action that was commenced in 2018. Late disclosure is unacceptable. Relevance to the proceeding, not perceived helpfulness to one’s own case, is the test for documentary production. PearTree’s conduct merits sanctions.

All this being said, the costs award was nonetheless allowed on a partial indemnity basis.

The above comments appear also to reflect on the considerations given to the defence all-inclusive offer of $1.25 million some three weeks prior to trial. The sum recovered of $718,000 fell short of this offer. The trial judge, however, found that the then partial indemnity costs totaled $635,000. The court found that this offer was “at best……in the ballpark of what Mr. Donato achieved at trial”.

The precedent case referenced on the principle of a costs assessment also spoke to the question of examining the claim made and the result achieved: 3

They include the myriad factors enumerated in rule 57.01(1) of the Rules of Civil Procedure, such as: the result achieved, the amounts claimed and recovered, the complexity and importance of the issues in the proceeding, as well as “any other matter relevant to the question of costs”. This is not a mechanical exercise or a rubber stamp.

In this instance, the plaintiff claimed a sum in excess of $3 million and recovered $718,000. This was not an influence revealed in the costs award.

The costs award, even given the above, still appears generous. All in all, the case clearly illustrates the need to avoid an all in Rule 49 offer. Had the offer been for a set amount plus assessed costs to date, this decision may well have been very much to the contrary.

In addition, the need to avoid outrageous pleadings remains an unquestioned proposition.