Court File and Parties

Court File No.: CV-22-77988-00 Date: 2023 10 03

Ontario Superior Court of Justice

Between: Michael St. Jean Realty Inc., Plaintiff

And: Scarfone Hawkins LLP, Defendant

Counsel: B.G. Blay, for the Plaintiff M.R. Kestenberg and T.M. Slahta, for the Defendant

Heard: October 3, 2023, in writing

Before: Lemay J

Costs Endorsement

1 The Plaintiffs in this action, Michael St. Jean Realty (“SJR”), brought a claim that the Defendant law firm, Scarfone Hawkins LLP (“Scarfone”) was holding realty commissions from the sale of units in a condominium in trust. A summary judgment motion was heard before me on April 6th, 2023. On July 31st 2023, I released written reasons (2023 ONSC 4425) in which I dismissed SJR’s claims. I am now required to fix the costs for both the motion and the action.

Positions of the Parties

2 Scarfone, as the successful party, seeks costs on a substantial indemnity basis for two reasons. First, Scarfone asserts that this is a case where an unsupported and unsupportable allegation of intentional misconduct was made against the firm and its’ partners. Second, Scarfone offered to settle the action on a without costs basis before serving a Statement of Defence. Scarfone seeks its substantial indemnity costs in the amount of $38,463.12, inclusive of HST and disbursements. In the alternative, Scarfone seeks partial indemnity costs in the amount of $26,055.61 inclusive of HST and disbursements.

3 SJR opposes the claim for substantial indemnity costs on the basis that it did not engage in any pattern of conduct that would entitle Scarfone to substantial indemnity costs. In addition, there is no basis for an order of substantial indemnity costs merely because an offer to settle was made before the Statement of Defence was served. SJR also argues that the costs sought by Scarfone are excessive and should be reduced. SJR argues that the total costs awarded to Scarfone should be what SJR incurred, being $10,811.59 inclusive of HST and disbursements.

Analysis and Decision

a) The Scale of Costs

4 As I have set out above, counsel for Scarfone advances two arguments as to why the costs of this action should be assessed on a substantial indemnity basis. Neither argument succeeds. I will deal with each in turn.

5 I start with the argument that SJR brought unsupported and unsupportable allegations of intentional misconduct against Scarfone. In support of that argument, counsel relies upon the decisions in Ntakos Estate v. Ntakos, 2021 ONSC 3695 and Unisys Canada Inc v. York Three Associates Inc., 2001 7276. I do not view those cases as being applicable in this case.

6 I start with the Ntakos decision. In that case, the Court dismissed the underlying action because it was an abuse of process. In addition, the Court found that there were serious allegations of wrongdoing that had been made against both professionals providing advice to the parties and the other parties themselves. It was all of those factors that supported an elevated award of costs.

7 Then in Unisys, the Court of Appeal accepted that making “unsubstantiated allegations of fraud, misconduct or dishonesty” was sufficient to support a finding of substantial indemnity costs.

8 In this case, the allegations concerned whether monies were impressed with a trust. There was no allegation that Scarfone had engaged in fraud, misconduct or dishonesty. Instead, the allegation was that Scarfone knew that the monies were impressed with a trust and should not have paid them out. It is a mere allegation of an improper payment.

9 Costs on a substantial indemnity basis are awarded in narrow and exceptional circumstances. Davies v. Clarington (Municipality) et. al., 2009 ONCA 722, 100 O.R. (3d) 66 at paras. 28-31. Substantial indemnity costs are an expression of a Court’s disapproval of a party’s litigation conduct: Hunt v. T.D. Securities Inc., 2003 3649, (2003) 66 O.R. (3d) 481 (C.A.).

10 If the Court were to award substantial indemnity costs every time a party advanced a trust claim, then substantial indemnity costs would not be an “exceptional” remedy. Put another way, in this case, the issue before the Court was the question of what should properly be done with the money, and not a question of fraud or dishonesty on the part of counsel. This argument fails.

11 I can deal even more briefly with the second argument. The fact that a Defendant makes an offer to settle before delivering a Statement of Defence does not mean that the Defendant is entitled to substantial indemnity costs. Indeed, in Rule 49.10(2) of the Rules of Civil Procedure, it is clear that, if a Defendant beats its offer at trial, then the Defendant will be entitled to costs on a partial indemnity basis. If the Plaintiff, makes no recovery at all, then the Rule does not apply and the standard scale for costs is partial indemnity costs. S & A Strasser Ltd. v. Richmond Hill (Town of), 1990 6856, (1990) 1 O.R. (3d) 243 (C.A.). I see no reason to deviate from these principles scale in these circumstances.

b) The Quantum of Costs

12 Having determined that I should assess costs on a partial indemnity basis, the factors that I must consider are set out in Rule 57 of the Rules of Civil Procedure R.R.0. 1990, Reg. 194. Apart from considering who was successful in this action, the most relevant factors are the complexity of the matter, the importance of the claim, the amount claimed or recovered in the proceedings and the reasonable expectations of the parties.

13 The claim was for a significant amount of money, in excess of a half million dollars. As a result, one would expect the claim to be vigorously advanced and defended. It was also a claim of moderate complexity, which is a factor that supports a somewhat higher costs award. However, from my perspective, the most relevant consideration is the reasonable expectation of the parties.

14 Neither counsel have filed a detailed, itemized bill of costs. Instead, I have a one-page summary of the tasks that were completed. The difference between the parties in terms of both the amount of time spent and the costs claimed are significant. Some of the difference appears to be that SJR has only outlined the costs for the summary judgment motion. As a result, the costs should be somewhat higher than set out in SJR’s bill of costs.

15 However, I am of the view that the costs claimed by Scarfone are excessive for two key reasons. First, Scarfone has assigned two senior lawyers to this matter. Mr. Kestenberg has nearly fifty years at the bar. Mr. Slahta has more than thirty years at the bar. I see nothing on the facts of this case that would justify two lawyers being assigned to it, much less two lawyers with this much seniority. As a result, I am disallowing all of the costs claimed by Mr. Slahta.

16 Second, while the case was moderately complex, the law was relatively limited, and the cross-examinations were also relatively limited. The motion was argued in approximately an hour, which is indicative of a relatively straightforward matter. Using Mr. Kestenberg’s time alone produces a partial indemnity amount of $15,916.50 plus HST and disbursements which seems modestly high. The disbursements are $1,240.60 and appear reasonable.

17 In my view, there should be some modest deduction from the time spent by Mr. Kestenberg on this file to take into account the reasonable expectations of the Plaintiffs, who would not have spent as much on the action. As a result, I conclude that costs in this matter for both the summary judgment motion and the action should be fixed in the sum of $15,000.00 inclusive of HST and disbursements.

Conclusion

18 For the foregoing reasons, the Plaintiff SJR is to pay the Defendant Scarfone the sum of $15,000.00 inclusive of HST and disbursements on account of both the costs of the summary judgment motion and the action. Those costs are to be paid within thirty (30) days of today’s date.

Lemay J Released: October 3, 2023