Glen Ford et al. v. F. Hoffmann-Laroche Ltd. et al.

COURT FILE NO.: 660-01

DATE: 20051216

SUPERIOR COURT OF JUSTICE - ONTARIO

DIVISIONAL COURT

RE: GLEN FORD, VITAPHARM CANADA LTD., FLEMING FEED MILL LTD., ALIMENTS BRETON INC., ROGER AWAD and MARY HELEN AWAD Plaintiffs

- and -

F. HOFFMANN-LAROCHE LTD., HOFFMANN-LAROCHE LIMITED/LIMITEE, RHÔNE-POULENC S.A., RHÔNE-POULENC CANADA INC., RHÔNE- POULENC ANIMAL NUTRITION INC., RHÔNE- POULENC INC., BASF AKTIENGESELLSCHAFT, BASF CORPORATION, BASF CANADA INC., EISAI CO., LTD., TAKEDA CHEMICAL INDUSTRIES, LTD., TAKEDA CANADA VITAMIN AND FOOD INC., MERCK KgaA, DAIICHI PHARMACEUTICAL COMPANY, LTD., REINHARD STEINMETZ, DIETER SUTER, HUGO STROTMANN, ANDREAS HAURI, KUNO SOMMER and ROLAND BRONNIMANN Defendants

Proceeding under the Class Proceedings Act, 1992

BEFORE: WINKLER R.S.J., CARNWATH & SWINTON JJ.

COUNSEL: William V. Sasso, for the Plaintiffs W. E. Pepall, for the Intervenor, David A. Seed James W. Curran, In person Larry J. Levine, Q.C., for J. Perry Borden, Q.C. J. Perry Borden, Q.C., for Lars Soderstrom, Proposed Intervenor

HEARD at Toronto: November 30, 2005

DECISION ON COSTS

CARNWATH J.:

[1] The above title of proceedings gives no indication of the lamentable history giving rise to this decision on costs. Missing from those described is James W. Curran, his sometimes-lawyer, J. Perry Borden, Q.C., and David A. Seed, a lawyer, at one time briefly retained by Mr. Curran.

[2] As a result of the activities of Messrs. Curran and Borden, the plaintiffs now seek costs against both of them on a substantial indemnity basis arising from their attempts to set aside a consent order between Mr. Curran and the plaintiffs made November 4, 2002.

[3] Since the motion to set aside the November 4, 2002 consent order was based on allegations of fraud and deceit on the part of Mr. Seed, he was granted Intervenor status in these proceedings and seeks to recover his costs from Mr. Curran on a substantial indemnity basis.

[4] Since an award of costs against a solicitor may be made only in the most exceptional circumstances, it is necessary to set out the history of this matter in painful detail.

BACKGROUND

[5] On December 4, 2000, Cumming J. appointed Sutts, Strosberg LLP (“Strosberg”) and Siskind, Cromarty LLP (“Ritchie”) as lead counsel for Ontario class actions in respect of the price-fixing of vitamins and vitamin products. His order stayed five other actions, including one brought by one Horvath (Court File No. 52492/99), in which Mr. Borden represented Mr. Horvath and Mr. Curran acted as advisor to Mr. Borden. He further ordered that leave of the court was required to commence any action in respect of price-fixing of vitamins.

[6] On January 2, 2001, Mr. Horvath appealed the December 4, 2000 decision to the Court of Appeal, but abandoned the appeal on May 14, 2001.

[7] On September 14, 2001, Cumming J. refused Mr. Curran’s motion for leave to commence a proceeding under the Class Proceedings Act and awarded costs of $10,000 against him. Mr. Curran was represented by Mr. Borden.

[8] Mr. Curran appealed to the Court of Appeal, which quashed the appeal and awarded the plaintiffs $10,000 in costs. The Court stated that as the appeal was from an interlocutory order, it should have been taken by seeking leave to appeal to the Divisional Court. The Court also stated that it agreed with the reasons of Cumming J.

[9] On August 23, 2002, Mr. Curran replaced Mr. Borden with Mr. Burlew, but later in September of the same year, Mr. Burlew withdrew. Mr. Curran then retained Mr. Seed to represent him in seeking leave to appeal Cumming J.’s order to the Divisional Court. Before the application for leave to appeal was heard, Mr. Seed reached a resolution of the matter with Mr. Strosberg to settle the matter.

[10] On November 4, 2002, the parties appeared before McNeely J. to hear the application for leave to appeal the refusal of Cumming J. to permit Mr. Curran to commence a class proceeding. On that day, Mr. Curran signed a handwritten notice of change of solicitors from Mr. Borden to Mr. Seed and Mr. Borden was excused. Mr. Curran confirmed that he wished Mr. Seed to act on his behalf and to act upon a consent to an order dismissing his motion for leave to appeal. McNeely J. ordered costs of $3,500 to the plaintiffs.

[11] Following the consent order, Mr. Borden told Mr. Curran that the consent order had been obtained through the fraud of Mr. Seed. Unbelievable as it may seem, Mr. Curran accepted Mr. Borden’s opinion and retained Mr. Borden to bring a motion to set aside the consent order of McNeely J. At approximately the same time, Mr. Curran assigned his RRSP in the amount of approximately $42,000 to Mr. Borden.

[12] In early April, 2003, Mr. Curran brought a motion under rule 59.06(2) to set aside the consent order of McNeely J. on the ground that it was obtained through the fraud and deceit of Mr. Seed.

[13] In early May of 2003, Mr. Strosberg wrote to Mr. Borden, offering to settle the motion on a dismissal without costs basis. The offer remained open for acceptance until commencement of the argument on the motion to set aside scheduled for August 21, 2003. The offer was not accepted.

[14] On May 13, 2003, Mr. Curran assigned his motor vehicle to Borden, apparently as security for payment of legal fees.

[15] On June 16, 2003, Benotto S.J. heard a motion brought by Mr. Borden on behalf of Mr. Curran. She ordered the motion to set aside be expedited and ordered Mr. Curran to be examined as a judgment debtor. Costs of the motion before her were reserved for a Divisional Court panel.

[16] On June 30, 2003, Mr. Curran was examined in aid of execution and admitted he had assigned his assets to Mr. Borden, purportedly as security for Mr. Borden’s legal fees.

[17] On July 28, 2003, Mr. Borden delivered a summons to Bell Canada to produce copies of the Strosberg firm’s telephone records and served a summons on Mr. Strosberg as a witness on the pending motion, as well as delivering summonses to five other witnesses, including Messrs. Seed, Webster and Gosbee, Mr. Seed’s secretary, and a police constable. The only thing more astounding than Mr. Borden’s actions was the response of Bell Canada, who blithely produced copies of the Strosberg firm’s telephone records to Mr. Borden.

[18] These activities resulted in a motion brought before MacFarland J. She directed Mr. Curran to pay $20,000 into court as security for costs for the plaintiffs, directed the return of Mr. Strosberg’s telephone records, prohibited their use, and set aside the summonses delivered by Mr. Borden. On August 18, 2003, Mr. Curran paid $20,000 into court.

[19] On August 19, 2003, the plaintiffs filed a notice of motion for an order requiring Mr. Borden to personally pay the costs on the motion scheduled to be heard on August 21, 2003.

[20] On August 21, 2003, the panel of the Divisional Court (Carnwath, Winkler and Epstein JJ.) dismissed the motion for an order setting aside the consent order of McNeely J. The panel’s reasons were as follows:

We find no merit in the allegation that the order made on consent was obtained by deceit through representation of facts made to Mr. Curran by Mr. Seed. Nothing in the record suggests to us there was any misconduct on the part of Mr. Seed.

[21] In early September of 2003, Mr. Curran retained Kenneth R. Shugart to make submissions on his behalf on the costs issues. In the written submissions dated September 22, 2003, prepared by Mr. Shugart, Mr. Curran sought an order that any costs award should be made against Mr. Borden personally rather than himself on the grounds that:

(a) The motion to set aside the Consent Order was brought without reasonable cause in that (i) there was no basis for any allegation that Seed had deceived Curran, and (ii) even if there were, Borden knew or should have known that finding would not be sufficient to succeed on the motion, absent the additional findings that the plaintiffs had knowledge of the deceit and/or that Seed did not have the necessary authority to consent to the Consent Order on Curran’s behalf;

(b) There was no evidence that could lead the court to either of those findings required under (a) above;

(c) Much of the voluminous materials submitted by Borden on the motion had little or no relevance to the narrow issue before the court; and,

(d) The impetus for pursuing the motion was that of Borden who pursued the motion for personal reasons.

[22] On November 7, 2003, MacFarland J. released her endorsement on costs for the August 13, 2003 motions and awarded fees of $17,500, disbursements of $1,637.91, plus GST to the plaintiffs.

[23] On December 5, 2003, Mr. Shugart withdrew as Mr. Curran’s solicitor. Later in that month, the rule 57.07 motion was adjourned to permit Mr. Curran to retain new counsel.

[24] In February of 2004, Mr. Ian Outerbridge, Q.C. advised he had been obtained by Mr. Curran. Written costs submissions were delivered on behalf of Mr. Curran on March 9, 2005. In those submissions, Mr. Curran asks that all costs for which he had been or could be found liable, be paid personally by Mr. Borden, and that Mr. Borden be prohibited from claiming any costs from Mr. Curran or being able to charge him for work done in respect of these proceedings.

[25] In support of these submissions, Mr. Curran asserted, among other things, that:

(a) The decision to bring the motion to set aside the Consent Order was motivated and encouraged by Borden who persuaded Curran to assert that Seed had been deceitful;

(b) Borden’s theories were without factual foundation and he took unnecessary and misguided steps in furtherance of the motion;

(c) Curran’s decision to authorize Borden to move to set aside the Consent Order was based on Borden’s assurance that the facts in the motion material prepared by Borden would support a finding that Curran had been deceived by Seed for the purpose of obtaining instructions to settle;

(d) A finding that the plaintiffs’ solicitor either had knowledge of the deceit and/or that Seed did not have the necessary authority to consent to the Consent Order was also required to succeed on the motion and there was never any evidence which could reasonably have led the court to those conclusions;

(e) No reasonable solicitor could in the face of prior judicial comments have believed that there was any prospect of success of the motion; and,

(f) Taking up remarks made earlier by Shugart, Curran added:

[25] …This is not a case of a client insisting in the face of contrary advice from his solicitor that the solicitor pursue a hopeless or unpopular cause. Rather, it is clear at [sic] the impetuosity for pursuing this matter in its’ [sic] entirety, including the Motion to Set Aside the Order of McNeely J., was that of Mr. Borden and not Mr. Curran. It also appears that Mr. Borden has allowed his personal views about the litigation and his relationship with the solicitor for the Plaintiffs to supersede his duty to his client.

[26] Shortly after these submissions, Mr. Curran delivered a notice to act in person and, on March 25, 2005, delivered further written submissions on costs that were prepared by Mr. Borden. In these latter submissions, Mr. Curran repudiated all his prior cost submissions, asserting further that they contained material misstatements of fact. These submissions repeated that Mr. Seed deceived and misrepresented facts to cause him to agree to the consent order and, in effect, re-argued the merits of the August 21, 2003 motion.

[27] Meanwhile, on December 17, 2004, Lars Soderstrom, a putative plaintiff in the vitamin price-fixing class action, filed a notice of motion to intervene as a moving party in the costs ruling flowing from the August 21, 2003 hearing. Mr. Soderstrom, not surprisingly, is represented by Mr. Borden. On February 23, 2005, Mr. Borden commenced an application on behalf of Mr. Soderstrom for an order determining his rights to recover loss under the Class Proceedings Act with respect to the vitamin price-fixing. Mr. Strosberg wrote on February 28, 2005, inquiring whether Mr. Soderstrom had obtained leave with respect to the vitamin price-fixing matter and stating if he had not, that the application was a breach of the order of Cumming J. and an abuse of process.

[28] The set date of April 7, 2005 for the hearing of the cost submissions was cancelled because of Carnwath J.’s illness. A new date was selected of July 13, 2005.

[29] On July 13, 2005, a panel consisting of Dunnet, Chapnik and McCombs JJ. found that the motion with respect to who should bear the costs should be dealt with by the panel that delivered the ruling on August 21, 2003. The panel disposed of a constitutional question raised by Mr. Curran in which he asserted that he had been denied fundamental justice. The panel stated as follows:

We are all of the view that this issue, arising as it does from the decision of Cumming J., rendered almost five years ago, on December 4, 2000, is not properly before the court.

The plaintiffs’ request for costs on a substantial indemnity basis against Mr. Curran

[30] The plaintiffs seek costs on a substantial indemnity basis against Mr. Curran for two reasons:

(a) Mr. Curran’s refusal of the plaintiffs’ offer to settle of May 7, 2003, for the dismissal of the motion without costs which remained open until the hearing of the motion to set aside the consent order; and,

(b) The unfounded allegations of fraud made by Mr. Curran against the intervenor, Mr. Seed.

[31] To begin, costs normally follow the event. The plaintiffs are, at the least, entitled to costs on a partial indemnity basis against Mr. Curran.

[32] Since 1998, the costs consequences of an offer to settle have applied to motions:

R. 49.02(2) Subrule (1) and rules 49.03-49.14 also apply to motions with necessary modifications.

[33] The plaintiffs were responding to a motion to set aside the consent judgment. The offer to settle is akin to that made by a defendant. In these circumstances, I find the following statement by Nordheimer J. to accurately describe the applicable law:

As LPIC has fairly acknowledged, its offer to settle is akin to that made by a defendant. A defendant’s offer does not normally attract an award of costs on a substantial indemnity basis. While I recognize that such an order was made in S & A Strasser Ltd. v. Richmond Hill (Town) (1990), 1990 6856 (ON CA), 1 O.R. (3d) 243 (Ont. C.A.), that decision has subsequently been held by the Court of Appeal to reflect a narrow exception, and not the general rule, regarding a defendant’s offer to settle – see Scapillati v. A. Potvin Construction Ltd. (1999), 1999 1473 (ON CA), 44 O.R. (3d) 737 (Ont. C.A.)

While there may be instances where an offer by a defendant or responding party to permit the plaintiff or moving party to withdraw without costs might warrant the imposition of costs on a substantial indemnity basis, I would consider those instances to be rare. In the normal instance, an award of costs on a partial indemnity basis is the appropriate award to impose on the unsuccessful party – see Foulis v. Robinson (1978), 1978 1307 (ON CA), 21 O.R. (2d) 769 (Ont. C.A.).

Lawyers’ Professional Indemnity Co. v. Geto Investments Ltd. (2002), 17 C.P.C. (5th) 334

[34] I find exceptional circumstances sufficient to depart from the normal result. Those circumstances are the knowledge with which I fix Mr. Curran as to the inevitable outcome of the motion.

[35] Mr. Curran dealt personally with Mr. Seed and knew from those meetings whether he was misled or deceived by Mr. Seed and whether he had authorized him to consent to the November 7, 2002 order. Mr. Curran told the court on November 4, 2002 that Mr. Seed had the authority to speak for him and to consent to the order as issued. Mr. Curran did not suggest that any other individual was involved, even as a witness to the communications between them. Measured by any objective standard, the allegations of fraud and deceit were groundless and had no reasonable prospect of success. In the special circumstances of this case, the plaintiffs are entitled to costs on a substantial indemnity basis against Mr. Curran.

[36] An even more compelling reason for such an award of costs is the allegation by Mr. Curran that Mr. Seed was guilty of fraud and deceit. Such allegations blacken the reputation of any person, not least a practising lawyer. Mr. Curran acknowledged on his examination that he was aware of the cost consequences of making unfounded allegations of fraud and deceit.

[37] Where allegations of fraud are made, and declared to be totally unfounded, the matter falls within those rare cases where costs on a substantial indemnity basis may be awarded. I find this to be such a case.

Murano v. Bank of Montreal (1998), 1998 5633 (ON CA), 41 O.R. (3d) 222 (C.A.), affirming (1995), 4 C.P.C. (3d) 143 (Ont. Gen. Div.)

Twaits v. Munk (2000), 2000 14725 (ON CA), 8 C.P.C. (5th) 230 (Ont. C.A.)

[38] A costs award on a substantial indemnity basis is justified on either ground advanced by the plaintiffs. Taken together, no other award would do justice to the plaintiffs.

The plaintiffs’ request for costs on a substantial indemnity basis against Mr. Borden

[39] Rule 57.07(1) of the Rules of Civil Procedure provides that where a solicitor has caused costs to be incurred without reasonable cause, the court may make an order requiring the solicitor to pay the costs of any party.

[40] The basic principle on which costs are awarded is compensation for the successful party, not punishment of lawyers. Courts must be extremely cautious in awarding costs personally against a lawyer, given the duties of the lawyer to his or her client, as fear of an adverse order of costs may conflict with these fundamental duties.

Young v. Young, 1993 34 (SCC), [1993] 4 S.C.R. 3

[41] Rule 57.07(1) is not a codification of the common law but, rather, an alteration of the common law. No finding of “bad faith” need be made to justify the making of an order. An order under this rule should only be made in rare circumstances and such orders should not discourage lawyers from pursuing unpopular or difficult cases. It is only when a lawyer pursues a goal which is clearly unattainable or is clearly derelict in his or her duties as an officer of the court that resort should be had to this rule. In applying the rule, the court must first determine whether the particular conduct complained of falls within the purview of the rule and, secondly, whether the circumstances are such that the provisions of the rules should be invoked.

Marchand (Litigation Guardian of) v. Public General Hospital Society of Chatham (1998), 16 C.P.C. (4th) 201 (Gen. Div.)

[42] I am persuaded by the history of this matter that Messrs. Curran and Borden have been joined at the hip since the first attempt by Mr. Horvath to be named as a representative plaintiff. Some of the events that lead me to this conclusion are:

(a) Mr. Curran’s evidence that Mr. Borden was to pay him his normal hourly rate as an accountant to be a representative plaintiff;

(b) Mr. Seed’s statement to Mr. Curran: “It appears to me that Mr. Borden is emotionally attached to this file, has lost objectivity and has his own agenda”;

(c) Mr. Seed’s concern that despite his retainer to represent Mr. Curran, Mr. Borden continued to attempt to represent him and pursue the litigation on his behalf;

(d) Mr. Borden’s advice to Mr. Curran following the consent order, that Mr. Seed was guilty of fraud and deceit and that Mr. Curran should move to set aside the order, on the basis of Mr. Seed’s fraud and deceit;

(e) The assignment of Mr. Curran’s RRSP of approximately $42,000 to Mr. Borden in January of 2003;

(f) The assignment of Mr. Curran’s motor vehicle to Mr. Borden in May of 2003;

(g) Mr. Borden’s attempt to obtain intervenor status for Mr. Soderstrom on this costs hearing, repeating the same stale arguments rejected by Cumming J. and the Court of Appeal;

(h) Mr. Curran’s written submissions of March 25, 2005, in which he repudiates all his prior costs submissions, asserting they contained material misstatements of facts; and,

(i) Material filed by Mr. Curran on this costs hearing which material has clearly been prepared by Mr. Borden.

[43] I find Mr. Curran and Mr. Borden to have been joint venturers in an attempt to qualify Mr. Curran as a representative plaintiff in a class action in which Mr. Borden would be lead solicitor.

[44] I find that Mr. Borden counselled Mr. Curran to make allegations of fraud and deceit against Mr. Seed when Mr. Borden knew, or ought to have known, there was no truth to those allegations.

[45] I find Mr. Borden counselled Mr. Seed to press on with the motion to set aside the consent order when Mr. Borden knew, or ought to have known, the motion was completely devoid of merit.

[46] I find much of the voluminous materials submitted by Mr. Borden to the court has little or no relevance to the matters in issue. Attached to these reasons as Appendix “A” is a chronology of the events in this matter prepared by plaintiffs’ counsel. I find it to be accurate and to give some idea of the volume of material filed by Mr. Borden.

[47] I find Mr. Borden has caused costs to be incurred without reasonable cause both in his advice to Mr. Curran that Mr. Seed was guilty of fraud and by his almost pathological pursuit of obtaining someone’s appointment as a representative plaintiff in a class action when he knew, or ought to have known, there was no merit in his cause. Having chosen this course of action, I find him jointly and severally liable for the substantial indemnity costs payable by Mr. Curran to the plaintiffs.

The Intervenor’s request for costs on a substantial indemnity basis against Mr. Curran

[48] Mr. Seed seeks costs only against Mr. Curran. There can be little worse for a practising lawyer than to be accused of fraud and deceit. The allegations against Mr. Seed were found to be devoid of merit. He is entitled to his costs on a substantial indemnity basis against Mr. Curran.

The quantum of costs

[49] The plaintiffs have submitted two bills of costs, the first for matters leading up to and including the appearance on the motion to set aside the consent order. The bill is calculated on both a partial and a substantial indemnity scale. The bill calculated on a substantial indemnity scale shows fees of $74,252.50 and GST thereon of $5,197.68 for total fees of $79,450.18. The bill shows disbursements of $7,031.46 and GST thereon of $484.50 for total disbursements of $7,515.96. The total costs on the motion to set aside on the substantial indemnity scale submitted by the plaintiffs is $86,966.14. The second bill submitted by the plaintiffs is for the rule 57.07(2) hearing, including the motion to be added as an intervenor by Mr. Soderstrom. The bill is prepared on both a partial and substantial indemnity scale. It claims fees of $50,797.50 with GST thereon of $3,555.83 for a total of $54,353.33 on a substantial indemnity scale. The bill shows disbursements of $2,275.72, plus GST of $159.30, for total disbursements of $2,435.02. The total bill on a substantial indemnity scale is $56,788.35.

[50] In response to these submitted bills, Messrs. Curran and Borden took no issue with the hours spent or the amounts claimed. They did, in their material filed, continue to argue and re-argue the matter before Cumming J. and the matter before the panel on August 21, 2003. Were this not enough, both Messrs. Curran and Borden continue to allege both directly and indirectly, that Mr. Seed committed a fraud on Mr. Curran.

[51] I find that the plaintiffs are entitled to the amounts claimed on the substantial indemnity scale in their two bills of costs from Messrs. Curran and Borden jointly and severally.

[52] Counsel for the Intervenor, Mr. Seed, submitted a bill of costs for the August 21, 2003 hearing prepared on both a partial and substantial indemnity scale. On the latter scale, the bill claims fees of $27,669 and GST thereon of $1,936.83 for total fees of $29,605.83. The bill claims disbursements of $300 and GST thereon of $21 for a total of $321 in disbursements. Total fees and disbursements are $29,926.83. I find Mr. Curran liable for these costs to the Intervenor. The Intervenor did not seek costs against Mr. Borden.

Mr. Soderstrom’s application to intervene

[53] At the opening of the costs hearing, Mr. Soderstrom, for whom Mr. Borden acts, applied for intervenor status. The material filed included approximately 400 pages of motion record, together with three affidavits of Mr. Soderstrom, all filed on his behalf by Mr. Borden. The material filed was yet, once again, a re-argument of the matters before Cumming J., the Ontario Court of Appeal and the motion to set aside the consent order. Nothing in the material, I find, is of any assistance in considering the cost issues flowing from the appearance of August 21, 2003, and the subsequent motion to fix Mr. Borden with costs. Mr. Soderstrom’s motion for intervenor status was dismissed at the hearing as being completely devoid of merit. The plaintiffs are entitled their costs incurred in responding to the motion for intervenor status and on a substantial indemnity basis for reasons articulated above. Indeed, the plaintiffs’ second bill includes the services performed to meet the application for intervenor status.

Payment out of court

[54] The plaintiffs had moved for payment out of court of those sums paid in to the credit of the action by Mr. Curran. An order will go ordering payment out of court of the $20,000 paid in, plus accrued interest thereon, to Sutts Strosberg LLP to be applied to the $10,000 costs ordered by Cumming J., the $10,000 costs ordered by the Court of Appeal and the $3,500 costs ordered by McNeely J.

[55] An order shall go as follows:

1. Dismissing the motion of Lars Soderstrom for intervenor status;

2. Awarding the plaintiffs total costs on a substantial indemnity basis of $143,754.49, recoverable from Messrs. Curran and Borden, jointly and severally;

3. Awarding the Intervenor, Mr. Seed, costs on a substantial indemnity scale of $29,926.83, recoverable from Mr. Curran;

4. Directing the Accountant of the Superior Court of Justice to pay out to the firm of Sutts Strosberg LLP the sum of $20,000, plus accrued interest thereon, to be applied to those costs ordered by Cumming J. ($10,000), the Court of Appeal ($10,000) and McNeely J. ($3,500).

WINKLER R.S.J.

CARNWATH J.

SWINTON J.

DATE: 20051216