Monday, 16 March 2015

The High Cost of Being Unreasonable

All parties in litigation should be able to expect zealous representation from their lawyers.  But when does zealous become overzealous?  When do strategic decisions end up hurting the outcome?  The costs decision in Tossonian v. Cynphany Diamonds Inc. demonstrates how playing hard ball can be expensive.

As described in my earlier post on this case, the plaintiff had claimed that he had a 5-year contract with the employer, and that he should be entitled to damages based on the outstanding term of that contract when he was terminated after only 8 months' employment.  The trial judge found that the parties were not in agreement on a fixed-term contract; although the employer had signed two separate documents citing the 5-year term, these were provided solely for the purpose of assisting the plaintiff in getting a mortgage.  In the result, the plaintiff was awarded damages in lieu of 2 months' reasonable notice of termination.  Although his initial claim had been for over $400,000, which was whittled down to $175,000 at the start of trial, he ultimately recovered damages falling within the jurisdiction of the small claims court.  The judge sought submissions on the question of the parties' legal costs.

In this follow-up decision, the judge's displeasure with the fact that the defendant "played hard ball throughout the litigation" came through loud and clear.  First, the judge found that there was good reason for the plaintiff to allege the existence of a 5-year contract, based on the documents that the employer had signed.  Second, the defendant's own trial tactics had unnecessarily incurred costs and lengthened the trial.  The defendant brought a motion for security for costs and another for the issuance of an interprovincial summons (to the plaintiff's wife), both of which failed.  The defendant also argued a number of "largely unmeritorious evidentiary and procedural objections". All of these measures served to extend a 4 - 5 day trial to 7 days.  Finally, the employer failed to make a reasonable effort to resolve the matter.  As the judge observed, a "commercially astute party in the position of the defendant" would have offered more than the $3,000 (inclusive of interest and costs) that the employer put on the table.

The result?  The employer was ordered to pay the plaintiff's costs on a "partial indemnity" basis to the tune of over $90,000, despite the fact that his damages award was less than $15,000.  The employer was also still responsible for its own legal fees, which exceeded $140,000 for the trial alone.

The message is clear.  Judicial resources are limited.  Parties who waste court time, whether  by failing to engage in good faith efforts to settle cases or by prolonging trial through litigation "tactics", can expect to be sanctioned.  As this decision illustrates, being legally right is often not as important as being reasonable.

Do you need sound legal advice on a labour or employment law issue?  Need representation that is diligent without being unreasonable?  Contact Lance Ceaser for expert guidance.

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