In Gelman v. 1529439 Ontario, 2021 ONSC 424, Madam Justice Bernadette Dietrich denied a successful litigant’s claim for pre-litigation costs, following the rule set out in Greenlight Capital, Inc. v. Stronach (2008), 2008 CanLII 34359 (ON SCDC), 91 O.R. (3d) 241 (Div. Ct.). In doing so, Dietrich J. resurfaced 90 George Street Ltd. v. Ottawa-Carleton Standard, 2015 ONSC 336 in which pre-litigation costs for mediation were awarded in an arbitration and upheld on a post-award challenge. Those costs related to mediation imposed by the Condominium Act, 1998, SO 1998, c 19 which requires parties to mediate budget disagreements before undertaking arbitration and, as such, did not represent an exercise of discretion by the parties prior to commencing arbitration.
Albert Gelman Inc. in its capacity as trustee in bankruptcy (“Trustee”) prevailed in a summary judgment motion and sought costs, including pre-litigation costs incurred prior to the summary judgment motion. Defendants contested the scale of costs sought and argued against an award of pre-litigation costs.
At paras 17-25, Dietrich J. addressed Trustee’s claim for pre-litigation costs. Defendants relied on Greenlight Capital, Inc. v. Stronach (2008), 2008 CanLII 34359 (ON SCDC), 91 O.R. (3d) 241 (Div. Ct.) as a general principle that pre-litigation costs may not be included in a award of costs. Dietrich J. agreed with Defendants’ reliance but noted an exception in which parties were obliged by legislation to engage in dispute resolution before arbitration.
Dietrich J. referred to 90 George Street Ltd. v. Ottawa-Carleton Standard, 2015 ONSC 336 which involved, among others, a challenge to the arbitrator’s award of costs before the arbitration. In that 2015 decision, Mr. Justice Patrick Smith at paras 107-127 considered the challenge to the arbitrator’s award of costs and, at paras 112-114, considered the arbitrator’s inclusion of costs for mediation costs as part of those awarded. In his analysis, Smith J. also acknowledged the rule set out in Greenlight Capital, Inc. v. Stronach (2008), 2008 CanLII 34359 (ON SCDC), 91 O.R. (3d) 241 (Div. Ct.) but noted expressly that the legislation in the case before him imposed mediation and, being non-optional, qualified as “proper and appropriate”.
“ The Appellant argued that the case of Greenlight Capital, Inc. v. Stronach (2008), 2008 CanLII 34359 (ON SCDC), 91 O.R. (3d) 241 (Div. Ct.) [Greenlight] was an authority for the proposition that an award of costs prior to the commencement of a proceeding is a reversible error.
 A close reading of the decision however, indicates that the court in Greenlight held that an award for costs prior to the Notice of Application was an error principle (at para. 76).
 The [Condominium Act, 1998, SO 1998, c 19] requires parties to mediate budget disagreements before undertaking arbitration. As such, I find that the mediation process did not represent an exercise of discretion by the parties prior to commencing arbitration and for that reason costs encompassing the mediation are related to the arbitration process and are proper and appropriate and dismiss the appeal on this issue”.
Despite the precedent in the 2015 decision which relied on the Condominium Act and its legislated obligation to engage in mediation, Dietrich J. concluded it provided no assistance to the Trustee.
“ I find that the Trustee has not shown that any of the costs included in the “Pre-litigation Matters” section of its Bill of Costs, which it classifies generally as: a) information gathering; and b) review and analysis of relevant related proceedings, are costs that would be properly included in the award of costs payable by the defendants. I am not persuaded that all of the time described as pre-litigation costs was incidental to the Trustee’s claim against the defendants. Much of the time spent appears to relate to the principal creditor’s decision to petition the Bankrupt into bankruptcy. The defendants were not parties to the bankruptcy application and took no position on it. I also note that the Trustee did not seek recovery of these pre-litigation costs in its statement of claim or motion for summary judgment”.
She concluded by disallowing Trustee’s claimed “Pre-Litigation Matters” costs.
“ Nothing in the Trustee’s submissions persuades me that their pre-litigation costs for information gathering and review of related proceedings to determine their strategy for advancing their claims merit inclusion in the costs award. Accordingly, I decline to exercise my discretion to award those pre-litigation costs”.
urbitral notes – First, for Dietrich J.’s decision on the summary judgment application, see Albert Gelman Inc. v. 1529439 Ontario Limited, 2020 ONSC 7917.