Ontario Court Dismisses Oppression Remedy Claim and Awards Substantial Indemnity Costs Against Company Who Made the Claim

In what serves as a cautionary tale for individuals or organizations seeking an oppression remedy, an Ontario judge dismissed a company’s oppression remedy claim and ordered that the company pay significant costs after the company was unable to prove the serious claims it had made against the defendants.

What Happened?

Investment Administration Solutions Inc. (IAS) was a judgment creditor (i.e. the party who won a monetary award in a previous lawsuit but has not yet been paid) of Pro-Financial Asset Management Inc. (Pro-Financial).

IAS brought an oppression remedy claim against Pro-Financial and several personal defendants alleging that Pro-Financial and the defendants had stripped out Pro-Financial assets or sold those assets negligently and in a breach of fiduciary duty.

IAS sought:

  • $1.2 million in damages (plus interest) from Pro-Financial and some of the personal defendants;
  • $1.5 million from one of the personal defendants in particular;
  • $1 million in punitive and aggravated damages.

The defendants filed summary judgment motions to have IAS’ oppression remedy claim dismissed.

The Decision

The court granted the summary judgment motions and dismissed the oppression remedy claim, noting that:

IAS’s action was ill-conceived. IAS was an angry service-provider that had supported [one of the defendant’s] in his business for many years, but when a substantial indebtedness was not paid, IAS felt betrayed, but it overreacted in bringing an oppression action.

The court also noted that IAS has “doubtful status as a complainant for an oppression remedy”. In advancing its claim, IAS should have known that it claims against the personal defendants who were never directors of officers of Pro-Financial had no reasonable chance of success.

The court also noted that IAS had made very serious allegations against the defendants, accusing them of perpetrating or assisting in  fraud, oppression, breach of fiduciary duty, and negligence. In doing so, IAS attached the integrity, competence, and professional reputations of the defendants and had sought substantial damages. These serious allegations were ultimately not made out by IAS.

Substantial Indemnity Costs

While every lawsuit is different, and outcomes will depend on the specific facts at hand, in most cases it is the usual practice for the losing party to pay the winning parties “costs”. Costs include money spent bringing the case to court or defending against a claim, including lawyers’ fees, and can additionally include things such as travel costs, office expenses (photocopies, etc.), fees for expert witnesses, and similar.

In Ontario, costs are awarded on either a partial indemnity or substantial indemnity basis, with partial indemnity awards being more common. Substantial indemnity costs are usually higher and awarded primarily where:

  • A plaintiff does better at trial than they would have if they agreed to the settlement offer the plaintiff made; or
  • Where there has been reprehensible or outrageous conduct by one of the parties.

Judges have the ultimate discretion as to whether to award costs, and how much costs to award. Factors that judges will consider in exercising their discretion are any offers to settle that were made during the proceedings, and the behaviour of the successful party during the proceedings.

Here, the court specifically noted that:

Costs may be awarded on a substantial indemnity basis where a party pleads but fails to prove that his or her opponent perpetrated a fraud or committed a criminal act or engaged in other dishonest or reprehensible conduct or makes unfounded allegations that impugn the integrity or good reputation of his or her foes.

The court found that, taking into consideration the various factors that impact its discretion with respect to costs, it was appropriate to order reasonable substantial indemnity costs, and ordered IAS to pay around $188,000 in costs to the personal defendants.

Notably, IAS had disclosed that had it been the successful party, it would have claimed just over $70,000 in partial indemnity costs and just over $100,000 in substantial indemnity costs. IAS did not dispute that the defendants were entitled to costs, but had argued that their non-acceptance of various settlement offers meant that there were no grounds for an award of costs to them on a substantial indemnity basis.

At Financial Litigation, Eli Karp strives to minimize the impact of commercial disputes on our client’s financial security, and resolve litigation as quickly as possible, so they can get back to business. We regularly receive referrals from other clients and law firms and have acted on behalf of companies of all sizes throughout Ontario. Schedule your consultation online, or by calling us at 416-769-4107 x1.