COURT FILE NO.: DC-08-088895-00
DATE: 20090204
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: TONY ALAIMO, ELIZABETH ANTHONY, NANCY BALSAMO, MARY D’AVERSA, CATHY CARERI, VITTORIA GIOVANNETTI, JOSIE MARIANI, CARMELA ROTOLO and ENZA VENUTO
v. MARIA PIA DI MAIO and IOLANDA MASCI
BEFORE: The Honourable Mr. Justice C. Boswell
COUNSEL: Mr. L. Brzezninski for the Applicants
Mr. B. Shulakewych for the Respondent, Di Maio
Mr. D. Lees for the Respondent, Masci
Mr. William E. Pepall for Mr. Barry Goldman
COSTS ENDORSEMENT
Introduction:
[1] The Applicants are former members of the Board of Directors of Hospice Vaughan. They were replaced, en masse, as a result of an election held March 18, 2008. They applied for, amongst other things, an Order setting aside the election results. On June 18, 2008 I released a Judgment dismissing their application.
[2] The Respondents, who were separately represented, seek their costs. Both seek costs on a substantial indemnity scale. Both seek costs against the Applicant’s solicitor, Mr. Goldman, personally. They argue that Mr. Goldman’s conduct as an advocate for the Applicants caused costs to be incurred without reasonable cause. Ms. Di Maio seeks a total of $49,904.03, inclusive of fees, disbursements and GST. Ms. Masci seeks $43,532.32.
[3] The Applicants and Mr. Goldman argue that no costs should be awarded. They say that the Applicants were volunteers acting at all times in good faith and according to what they considered to be in the best interests of Hospice Vaughan. The Applicants are concerned that a costs award in these proceedings may have a chilling effect and discourage volunteers from serving as board members on charitable organizations. They also argue that the conduct of the Respondents both before and during the proceedings was such that they should be denied any costs.
The Issues:
[4] The following issues must be addressed in order to fix costs in this application:
(i) What is the appropriate period of time for which costs are in issue?
(ii) Whether the fact that the Applicants are volunteer members of Hospice Vaughan is a factor of significance in the assessment of costs;
(iii) Whether there has been conduct on the part of the Respondents that ought to reduce or eliminate an award of costs;
(iv) Whether the objectives of the Hospice will be served by no award of costs;
(v) Whether costs, if they are to be awarded, should be awarded on a substantial or partial indemnity basis;
(vi) Whether there are other significant factors bearing on the assessment;
(vii) Whether an award of costs should be made against Mr. Goldman personally.
Anaylsis:
(i) The Time Period in Which Costs are in Issue:
[5] The application before me was preceded by an application commenced by the Respondents against Hospice Vaughan in 2006 (the “Di Maio Application”). As I noted in my Judgment in this proceeding, the Di Maio Application sought, amongst other things, an Order requiring a general meeting to be called for the purpose of electing a new Board of Directors of Hospice Vaughan.
[6] The Di Maio Application was resolved, on consent. The consent was incorporated in the terms of the Order of the Honourable Mr. Justice A. Sosna dated October 22, 2007. The Order required a general election meeting to be held on February 20, 2008. An arbitrator was appointed by the Court to oversee any issues between the parties with respect to the election.
[7] In terms of the costs of the Di Maio Application, Justice Sosna ordered that after the election meeting, the parties were to make submissions to him on the issue of costs. In other words, Justice Sosna reserved to himself the determination of the costs of the Di Maio Application.
[8] On March 13, 2008, several days in advance of the scheduled election, the Applicants in this application moved for leave to appeal certain rulings of the arbitrator and/or judicial review of those decisions. In addition, the Applicants sought a court order postponing the election. They were unsuccessful in their bid to postpone the election. Their motion for leave to appeal was adjourned sine die. Costs of the unsuccessful motion were reserved to the earlier of the completion of the costs submissions to Sosna J., or to the presiding judge on the return of the motion.
[9] The matter came back before the court on March 19, 2008 and it was again adjourned. No costs were ordered. Subsequently, Mr. Justice A. Bryant was appointed to case manage the motions of the Applicants. An April 1, 2008 endorsement of Bryant J. notes that the “motions judge retains jurisdiction to determine the matter of the assessment of costs in the earlier proceedings and in this application.”
[10] It is not clear to me from the endorsement of Bryant J., what the term “earlier proceedings” was meant to include. Prior to the election on March 18, 2008, the proceeding was between Ms. Di Maio and Ms. Masci as Applicants and Hospice Vaughan as Respondent. In the proceedings before me, the Applicants were the former directors of Hospice Vaughan (now proceeding in their individual capacities) and Ms. Di Miao and Ms. Masci were the Respondents. Hospice Vaughan did not participate in the proceedings before me, nor make submissions on costs.
[11] The Respondents seek costs of the proceedings from March 13, 2008 onward. In my view, however, it is appropriate that I deal only with the costs of the application before me. I say that because of the fact that the proceedings are differently constituted. The parties are different. Hospice Vaughan is not before me in these proceedings. The Applicants were not before the court, as individual parties, in the prior proceedings. Accordingly, I defer the issue of costs in the prior proceedings to Justice Sosna, in accordance with paragraph 30 of his Order dated October 22, 2007.
[12] The dividing line, in my view, is with the motion that came before Justice Boyko on March 19, 2008, one day after the election. It is the proceeding that was subsequently reconstituted as the application before me. I will, accordingly, deal with costs from March 19, 2008 forward. Anything prior to that time I believe is properly a matter to be dealt with in accordance with Justice Sosna’s order.
(ii) The Applicants as Volunteers
[13] There is a general principle that costs should follow the event. The Respondents were successful in this application and generally speaking should be entitled to costs. The Applicants argue that the general rule as to costs should not be followed in this case and that no costs should be ordered because:
(a) the Applicants were volunteers with no personal interest in the matters in issue;
(b) the litigation was made necessary because of the conduct of the Respondents; and,
(c) the objectives of the Hospice are more likely to be achieved if there is no order as to costs.
[14] I will address the Applicants’ arguments in turn.
[15] The Applicants submit that no costs should be awarded, given that they are volunteer members of a Board of Directors of a charitable organization. They say they had no self-interest in pursuing the litigation and that they were only pursuing the best interests of the charity. The thrust of the submission is that an award of costs would have a chilling effect and deter individuals from becoming members of boards of charitable organizations.
[16] The Applicants rely on two cases in support of their argument. The first, Barron v. Warkentin (2006), 28 C.P.C. (6th) 169 (Alta. C.A.) was a matter where the Alberta Court of Appeal was considering the issue of costs on an application for judicial review. Barron is distinguishable on its facts from the case at bar. Barron dealt with a volunteer tribunal whose decision was being challenged. That is not the case here. Although the Applicants are volunteers, they did not put themselves into the position of volunteer decision-makers. I do not believe the same chilling effect would be felt if costs were awarded against the Applicants in the circumstances of the case at bar. In Barron, the chilling effect is obvious. If members of volunteer tribunals acting in good faith could be subject to orders of costs against them when their decisions are challenged, few would want to volunteer to be decision-makers. Moreover, one would have to question the independence of the decision-making where the volunteer must wonder, at least subconsciously, about the personal cost consequences attached to any given decision.
[17] In the case of the Applicants here, however, there is no such inherent risk of costs in their agreeing to be board members. The risk of costs arose only as a result of a conscious decision to litigate the election results. The risk of costs was discussed very clearly in a case management hearing with Justice Bryant on April 2, 2008, well before the application proceeded.
[18] The second case on which the Applicants rely is Eco-Tourism 2010 Society v. Vancouver 2010 Bid Corp., [2005] B.C.J. No. 203. This was a small claims court decision in an application by Eco-Tourism to obtain the court’s consent to use the word 2010 in its name. The claim was dismissed for want of jurisdiction. No costs were awarded on the basis that the Claimants’ motives were pure, there was an economic imbalance between the parties and, in any event, costs would be uncollectible.
[19] I do not believe that Eco-Tourism is helpful to the Applicants in these proceedings. I do not accept that there is a general legal principle that the purity of the motives of the losing party is a justification for refusing to award costs.
[20] I agree that courts must be careful not to deter public participation in charity organizations. I do not believe, however, that a costs award in the circumstances of this case is likely to have a general deterrent effect.
[21] I appreciate that there is a political element to the subject matter of the application. But the issue of the election had already been the subject of substantial litigation. A process was set up by the Order of Sosna J. An arbitrator was put in place to oversee the process to ensure that it was fair and democratic. Under the stewardship of the Applicants, the charitable organization, Hospice Vaughan, spent substantial sums litigating with the Respondents. The Applicants chose to continue litigating with the Respondents even after the election was completed. The Respondents are not even members of the newly elected Board of Directors and it is not clear to me why they were named as Respondents, other than I suppose for some sense of continuity with the previous proceedings. At some point, the Applicants have to accept that there may be cost consequences to their decisions. This fact was made abundantly clear to them by Justice Bryant on April 2, 2008 and by me on April 23, 2008 before argument of the Application.
(iii) The Conduct of the Respondents
[22] I do not find that there was any conduct of the Respondents during the hearing of the application before me that would impact on the issue of costs. By the time the matter came before me, however, it had a rich history.
[23] The Applicants argue that I should consider misconduct occurring before the commencement of the litigation. They rely on Mayer v. Lodzer Centre Congregation, [2003] O.J. No. 3070 (S.C.J.), and the cases cited therein, where Justice Mandel held,
In exercising its discretion as to costs the conduct of the party before litigation as well as during litigation is an important factor to be taken into account.
[24] The Applicants impugn the following conduct of the Respondents:
(i) The litigation leading up to the final Judgment had been acrimonious. The terms of the final Judgment of Justice Sosna dated October 22, 2007 established a procedure for the holding of an election. There was a concern that voting members of Hospice Vaughan may have questions about the prior litigation. Paragraph 18 of the Judgment provided a mechanism for interested parties to have access to information about the litigation. The provision was designed to avoid electioneering. In early January 2008, however, Ms. Masci and/or Ms. Di Maio circulated a letter to Hospice Vaughan members setting out some of their concerns with respect to the manner in which the Hospice had been run under the existing Board of Directors. The letter was of an electioneering nature. Hospice Vaughan brought the correspondence to the attention of the arbitrator, who found that the Respondents had violated the spirit, if not the letter, of the Judgment. He enjoined them from further campaigning;
(ii) Subsequently, a further newspaper article appeared in a local paper, further commenting on issues relating to the election. The Arbitrator identified Ms. Di Maio as a source of the information contained in the newspaper article and he found that Ms. Di Maio had made continuous efforts to unfairly prejudice the conduct and outcome of the election. He disqualified Ms. Di Maio from attending at or voting at the election meeting;
(iii) Justice Sosna found, on February 19, 2008, that the Respondents had, by their conduct since the Order of October 22, 2007, undermined both the spirit and the letter of the Order.
[25] I find that the actions of the Respondents, in undermining the Order of October 22, 2007 contributed substantially to the dispute between the parties and the ensuing litigation. In my view, this is an important factor to consider in the assessment of costs.
(iv) The Objectives of the Hospice
[26] The Applicants argue that the objectives of the Hospice would be best served by no order as to costs. I can not agree with that submission. I think the objectives of the Hospice are a neutral consideration in terms of the costs before me. It may be that the objectives of the Hospice are a relevant consideration in the proceedings in which the Hospice was a party. The Hospice is no longer involved in these proceedings. The Applicants are no longer directors of the board and neither are the Respondents. The Hospice will neither benefit nor suffer from a costs award in these proceedings.
(v) Scale of Costs: Substantial Indemnity or Partial Indemnity
[27] The Respondents seek costs fixed on a substantial indemnity basis. Their submissions in favour of the higher scale of costs rest largely on the failure of the Applicants to deliver focused materials and to identify with clarity the issues in question in the application.
[28] A review of the transcript from the case management meeting with Bryant J. on April 2, 2008 reveals that Justice Bryant struggled to identify the issues in question as did I when the application was ultimately argued. In my view, the failure to clearly identify the relief sought and the basis for the relief was a factor that contributed to the length of the argument and should be considered in determining the quantum of costs.
[29] I do not believe, however, that this is an appropriate case to order costs on a substantial indemnity scale. I have not been referred to any Rule 49 offer that impacts on the costs award. The conduct of the Applicants was not otherwise of such a nature that it calls out for an award of costs on a full indemnity scale. Moreover, the conduct of the Respondents, as referred to above, militates against full indemnity costs.
[30] If costs are to be awarded, they will be fixed on a partial indemnity basis.
(vi) Other Significant Issues Bearing on Costs
[31] Rule 57.01(1) sets out a number of factors for the court to consider when making a costs order. Included in those factors are the following:
(a) the complexity of the proceeding;
(b) the importance of the issues;
(c) the conduct of any party that tended to shorten or to lengthen unnecessarily the duration of the proceeding;
(d) any offers to settle;
(e) the principle of indemnity;
(f) the concept of proportionality, which includes at least two factors:
(a) the amount claimed and the amount recovered in the proceeding; and,
(b) the amount of costs that an unsuccessful party could reasonably expect to pay in relation to the step in the proceeding for which costs are being fixed;
(g) any other matter relevant to the question of costs.
[32] In addition to those matters expressly addressed in the preceding sections of this endorsement, I have considered the following:
a) the Complexity of the Proceedings:
[33] The issues argued on the application were, in my view, significantly complex and were made more so by virtue of the fact that the precise issues under argument were difficult to identify. Clearly, the matter involved complicated procedural and substantive issues. In addition, the issue as to whether judicial review is available with respect to the decisions of a private arbitrator was a novel one.
b) Importance of the Issues:
[34] The issues were of significant importance to the parties, to the Hospice and to the community at large. The resolution of the acrimonious dispute over the control of the Board of Directors was necessary to allow the Hospice to be stabilized so that it could return to the business of providing its charitable works, so necessary to the community. As I stated in my Judgment of June 18, 2008: “It is imperative that the struggle be brought to an end so that the Hospice can begin to refocus its efforts entirely on providing the supportive works it has been known for over the past decade or more.”
c) Offers to Settle:
[35] There were no Rule 49 offers exchanged that impact on the costs award.
d) Proportionality:
[36] The total costs sought, on a substantial indemnity basis are almost $100,000.00. The application did not involve a monetary claim. Neither party had any financial interest in the outcome of the proceedings.
[37] The concept of proportionality includes, in my view, the reasonable expectations of the parties in terms of what costs might be at stake for any step in the proceedings. The costs claimed by the Respondents are in line with the amount of time, effort and advocacy involved in the proceedings. Substantial preparation was required for the hearing, which proceeded over two days. As I indicated, I think significant additional effort was required on the part of counsel for the Respondents, given the unfocussed approach to the application by the Applicants.
[38] The Applicants argue that there was a duplication of effort here and that they should not be required to pay costs for the Respondents to be separately represented. I think there is something to be said for this argument.
[39] At no point did it become apparent to me that the Respondents’ positions on any of the issues were in conflict or were divergent. In fact, my recollection is that their positions on all issues have been the same throughout.
[40] I believe that there was some delegation between counsel in terms of who would be primarily responsible for tackling certain issues. That said, I think there is some overlay between the two Bills of Costs and that some discounting has to be done to take that fact into account.
(vii) Should costs be awarded against Mr. Goldman personally?
[41] The parties have agreed that this issue, raised by the Respondents, shall be reserved pending the parties’ review and consideration on my endorsement regarding quantum and entitlement. The parties are to advise me if they wish to have an oral hearing on the issue of Mr. Goldman’s liability, if any, for the costs awarded herein. The parties are to arrange a telephone conference call with me through the judicial secretaries’ office should they wish to arrange such an oral hearing.
Conclusion:
[42] I appreciate that there is an element of arbitrariness to the following calculations, but in my view, it is something that can not be avoided in the exercise of the discretion to award costs.
[43] The total costs sought include the following:
(i) substantial indemnity fees of $86,020.00
(ii) disbursements of $2,932.43
[44] Of the fees sought, a total of $12,195.00 relate to proceedings before March 19, 2008, which I am not including for the reasons set out above. The revised substantial indemnity fees are $73,825.00. Although I was not provided with an indication as to what counsel considered to be reasonable fees on a partial indemnity scale, I fix those, as a starting point, at $50,000.00. This figure takes into consideration the fact that there was some duplication of effort resulting from the decision of the Respondents to be separately represented.
[45] I discount those fees by $20,000.00, or $10,000.00 for each Respondent, for conduct on the part of the Respondents that I believe contributed significantly to the acrimony between the parties and the length of the litigation.
[46] I fix costs at a total of $30,000.00 in fees, plus GST of 5%, to be divided equally between the Respondents. In addition, the Respondent, Ms. Di Maio, is entitled to disbursements fixed at $1,394.03, including GST. The Respondent, Ms. Masci, is entitled to disbursements of $1,311.11 inclusive of PST and GST.
Boswell J.
DATE: February 6, 2009.