Monday, 16 March 2015

Being sued and winning and losing at the same time

Whenever there is a civil case being heard in a court, for the most part, there is a winner and a loser. The loser is stuck with having to pay the winner’s court costs along with his or her own. But on rare occasions, the winner has to pay not only his own court costs but that of the loser. The following case is an example of how this can be. The case was Tossonian v. Cynphany Diamonds.                           

The defendant firm, Cynphany Diamonds sells all kinds of diamond jewellery and has a number of branches in Ontario, Canada. The plaintiff in this case was Razmig Tossonian. The case dealt with an employment contract between the two parties. The company offered Tossonaian a job as the director of the firm’s branches in Toronto. The parties signed a simple employment agreement that included the terms of employment and it also mentioned a five-year employment term. 

Tossonian’s employer discovered that Tossonian had been discussing possible opportunities with the firm’s competitor and subsequently he was fired. The trail judge ruled that Tossonian did not have a fixed term contract of employment, but even though he was dismissed, he was entitled to two months’ notice of the termination of his employment.                       

He was awarded damages of $13,520 plus pre-judgment interest. The amount of damages awarded to him would have been within the Small Claims Court’s monetary jurisdiction of $25,000 where the costs would be much less. Unfortunately, Tossonian, the plaintiff chose to file his claim in the Superior Court because he sued his former employer for $400.000 which he later chose to reduce his claim to $175,000 at the opening of the trial. Needless to say, not only would his own lawyer’s fees be much higher in that court but so would the lawyer’s fees of the defendant.                                         

The plaintiff acknowledged that, as a result of recovering an amount within the monetary jurisdiction of the Small Claims Court, it was open to the Superior court judge to order that the plaintiff should not recover any costs of his action. That generally is the rule.

The defendant argued that not only should the plaintiff be awarded no costs, he should be ordered to pay the defendant’s costs because of unwarranted and ultimately abandoned allegations of false statements and bad faith allegations. The allegations of bad faith attracted a minimal amount of additional time at trial beyond dealing with the other damages issues and did not, in the judge’s view; result in any significant waste of time or effort on the part of counsel for the defendant.

The judge said, “I have concluded that it was reasonable for the plaintiff to bring his action in the Superior Court, and that, accordingly, he is prima facie entitled to costs of the action. Those costs should include the costs of an unsuccessful motion for security for costs which the defendant brought a few months before trial (the costs of which were reserved to the trial judge by Master Hawkins, who heard the motion.”

While the plaintiff claimed general damages for wrongful dismissal in the amount of $403,520 and damages for “bad faith in dismissal” in the amount of $23,280, in his opening statement at the trial, counsel for the plaintiff advised that the claim for damages for wrongful dismissal was limited to $174,382.73 (the difference between what the plaintiff would have earned during the balance of the five year contract which he asserted he had and what he actually earned and was projected to earn during that period). The claim for “bad faith” damages was abandoned by the time counsel gave his closing speech at the end of the trial.

Although the defendant complained that the plaintiff’s inflated claim for $403,520 was still in existence at the beginning of trial, it would have been plain and obvious that the most the plaintiff could obtain by way of general damages was what he would have earned during the five year contract, if one had been found to exist, and what he had actually earned (would earn) during that same period. All of the information necessary to make that assessment was in the possession of the parties.

There were at least two documents, signed by the owner of the defendant firm, which supported the plaintiff’s claim that he had a five year fixed term contract. While the judge ultimately found that there had not been a meeting of minds on the existence of a five year contract, the defendant’s position would have been considerably stronger if the owner had not signed those documents which the judge found were signed in order to assist the plaintiff in obtaining a mortgage for his home.  I turns out, the document was signed after the start of the plaintiff’s employment and not before therefore it wasn’t enforceable.


The phrase, “meeting of the minds” brings to me an incident in my own life that will explain this phrase a little better. Back in 1964, I applied for a licence as a bill collector. The registrar did a search with the Credit Bureau and discovered that I was in arrears with my payment to a furniture company. He told me to fix it. I met the lawyer for the firm and he hand-wrote an agreement that I would only have to pay $25 dollars a month. He insisted that I pay $50 month but he didn’t change it on the handwritten agreement. He said that I could come back the next day and sign the typed one and pick up a copy of it. I returned the next day and when I asked for a copy of the agreement, I was given a copy of the handwritten agreement that had been signed by the lawyer so I signed it also. It said that I would only have to pay $25 a month and not $50 a month. I gave it to the registrar and was immediately licenced. After I sent the first payment of $25 to the lawyer, he demanded another $25 so that the monthly payment would be $50. I told him of the hand-written agreement. He contacted the registrar and told him that there was a meeting of the minds that the monthly payment would be $50 a month. I denied that I agreed to that amount of the monthly payment. The registrar asked him for a copy of the signed agreement to that effect. There wasn’t one because when I arrived at the lawyer’s office, he hadn’t had the agreement typed up and that is why I got a copy of the hand-written agreement.  The registrar rightly told him that he was stuck with the signed hand-written copy.

The judge in the case I am submitting to you said,  “Although the issues in the case were not particularly complex, if the plaintiff had succeeded in persuading me that he had a five year fixed term contract of employment, he could reasonably have expected to recover damages in the range of $175,000. Accordingly, it was appropriate, in my view, for him to have utilized the ordinary procedure, rather than the simplified procedure or the pursuit of his claim in the Small Claims Court.”

Costs of the trial

The defendants claim for its own costs is $140,000, inclusive of disbursements and HST on a substantial indemnity basis and $100,000 all-inclusive on a partial indemnity basis. Having regard to the expectations of the party paying costs, the amount claimed by the plaintiff for its partial indemnity costs would not, accordingly, be surprising, from the defendants’ perspective.

The defendant made a reference to the plaintiff’s disclosure (in connection with the security for costs motion) that he and his lawyers were operating under a contingency agreement. That agreement has not been produced. Accordingly, the defendants argue, there is essential evidence lacking regarding the costs equation. Reference is made by the defendant to cases in which the court has declined to award costs in excess of fees and disbursements actually charged to the party claiming costs.

A contingency agreement is between a client and his lawyer that the client won’t have to pay for the lawyer’s service but the lawyer will get a certain percentage of the award if the client’s case is won.

The judge said, “The defendants’ submissions ignore the fact that contingency fee agreements are ubiquitous (seeming to be everywhere at once) in modern litigation particularly in personal injury and many wrongful dismissal cases. Counsel has not directed my attention to any case in which the disclosure of a contingency fee agreement has been held to be a pre-requisite of a plaintiff’s entitlement to recover partial indemnity costs of a proceeding. In the circumstances, the fact that the plaintiff had a contingency fee agreement with his lawyers is not a sufficient reason for not awarding him costs in this case.  Finally, although I have already alluded to the defendants’ own expectations of the costs that it might be faced with (having regard to the costs which the defendants sought to recover himself), it does need to be recognized that this is one of those unfortunate cases where the costs incurred greatly exceed the amount of damages recovered by the plaintiff. That is not, in and of itself, a reason to decline to award the plaintiff his reasonable costs.”

The judge further said, I would also observe that although there was some non-compliance by both parties with the directions given at the pre-trial conference, the defendant’s degree of non-compliance was significant. At the opening of trial, for example, the defendant moved for the issuance of an ‘inter-provincial summons to witness’ directed at the plaintiff’s wife (a resident of British Columbia). When that motion was denied, the defendant sought, and was refused, an adjournment. There were then a steady flow of largely unmeritorious evidentiary and procedural objections which ultimately resulted in what was listed as a four to five day trial taking seven days. While the defendant will no doubt say that some of these tactics were ultimately vindicated by the result (which turned, to some degree, on the evidence of a witness who was summoned shortly before the sixth day of trial) the defendant has to take a significant share of the responsibility for the length of the trial and, as a result, the expense that was incurred.”       

The plaintiff sought partial indemnity costs of $88,450.98 inclusive of disbursements and HST (tax) plus another $3,500 in respect of the costs of the ‘security for costs motion’. Most of the work undertaken on behalf of the plaintiff was by two fee-earners, the most senior of whom claimed a partial indemnity rate of $300 per hour with 12 years of experience at the bar.(court)

The term “security for costs’” is brought before a judge as a motion in which a defendant argues that the plaintiff doesn’t have enough money to pay the cost of the defendant if the plaintiff loses the case. If the judge is convinced of that fact, then the judge can stop the proceedings going any further.

The judge then said, “For the foregoing reasons, I would exercise my discretion to award the plaintiff his partial indemnity costs of the trial, which I fix at $88,450.98 (inclusive of disbursements and HST) plus $3,500 for the costs of the motion for security for costs. This results in a total costs award in favour of the plaintiff of $92,030.98.

Now what makes this case stand out is that the defendant (Cynphany Diamonds) was being punished by the judge despite the fact that the plaintiff  (Tossonian) had originally asked for $400,000 and then reduced his claim to $175,000 and eventually was only awarded $13,520 plus pre-judgment interest. That certainly was a win for the defendant.   

The judge’s reasoning was that aside from the fact that there wasn’t an enforceable agreement between the two parties, Tossonian was entitled to reasonable notice before he was fired.  Reasonable notice can be applied in one of two ways. The first way is that the employee remains at his job for the time period applicable to him or secondly, he is fired on the spot but given a reasonable severance pay after he has been fired. In this case, neither occurred.

Something like that occurred to me in the 1950s. I was a draftsman for a large engineering company and while there, I applied for a job in another city. I made the mistake of giving the prospect employer the phone number of my current employer because I didn’t have a phone of my own. That is when my employer learned that I was seeking employment elsewhere. I should add that the prospect employer was not an engineering firm. In any case, I was fired on the spot with no severance pay.

The judge in Tossonian’s case had set the awarding of damages at $13,250 which represented two months’ notice. Because the defendant firm was playing hard ball throughout the court proceedings, the judge ordered that the defendant had to pay slightly more than $90,000 in costs to Mr. Tossonian.

The moral in this story is to play nice when you are sued or when you sue someone else.    

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