Court File and Parties
COURT FILE NO.: CV-05-299825-0000 DATE: 2023-11-14
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
MS. VALENTINA AVDEEVA Plaintiff – and – CAROLINE KHOUSEHABEH, Trustee Defendant
Counsel: Ray Thapar, for the Plaintiff David Wagner, for the Defendant
READ: June 7 & 13 and November 13, 2023
Papageorgiou J.
COSTS ENDORSEMENT
Overview
[1] On May 31, 2023 I granted the plaintiff Valentina Avdeeva judgment declaring that she is the sole owner of a property defined as Bowan Court in that decision. She had brought an action for this declaration and there was also an Application brought by the deceased Mr. Levon Haftan (the “Deceased”) for a declaration that he was entitled to a 50 % interest in Bowan Court which was tried at the same time.
[2] After his death, the action was continued by his Estate Trustee, Caroline Khousehabeh (the “Trustee”).
[3] Ms. Avdeeva seeks costs on a substantial indemnity basis in the amount of $193,203.68 inclusive of HST or alternatively $131,795.64 on a partial indemnity basis inclusive of HST. She also seeks her costs personally against the Trustee.
[4] The Trustee also seeks its costs on a partial indemnity basis in the amount of $179,166.63.
Decision
[5] For the reasons that follow I am awarding the Plaintiff costs as against the Estate in the amount of $135,242.58. I am also awarding a portion of these costs personally against the Trustee, such costs to be in respect of Ms. Avdeeva’s costs incurred after the Trustee obtained the Order to Continue. The Plaintiff’s Bill of Costs does not permit me to determine this amount and I am directing that Ms. Avdeeva provide me a detailed Bill of Costs itemizing such amounts.
Issues
[6] I have arrived at my decision by considering the following issues:
- 1: Which party is entitled to costs?
- 2: What is the appropriate scale of costs?
- 3: What is the reasonable quantum of costs?
- 4: Is there a basis to award costs as against the Estate Trustee personally?
Analysis
Issue 1: Which party is entitled to costs?
[7] The successful party is presumptively entitled to costs: Sims-Howarth v. Bilcliffe, 2000 ONSC 22584 at paragraph 1.
[8] The issues at trial involved: i) Ms. Avdeeva’s and the Deceased’s claims involving Bowan Court; ii) Ms. Avdeeva’s claims relating to a property defined as the Victoria Park Condominium; and iii) Ms. Avdeeva’s claim pursuant to three Promissory Notes.
[9] Ms. Avdeeva had also claimed damages for breach of trust, conversion and mental distress which were abandoned on day 9 of the trial except for a claim for breach of trust with respect to the proceeds of sale of the Victoria Park Condominium.
[10] She also claimed punitive damages which was dismissed by Associate Judge McGraw at Avdeeva v. Khankaldiyan, 2021 ONSC 2681, but in his decision, he referenced the fact that parties could make submissions on costs for that motion. There is no evidence before me as to whether he ordered costs and as such I am not taking this into account as this may have already been into account.
[11] Where there are a number of issues before the court, it may have regards to the dominant issue at trial for the purpose of determining the successful party: Firth v. Allerton, 2013 ONSC 5434 and Mondino v. Mondino, 2014 ONSC 1102 at para 13.
[12] The Court may also take into account success on individual issues, although not all issues necessarily bear equal weight in determining success: Crisp v. Crisp, 2013 ONSC 4366 at para 15.
[13] Although Ms. Avdeeva was not successful in respect of her claims related to the Victoria Park Property and the Promissory Notes, these were not the main issues because the Estate had no money to pay these claims even if Ms. Avdeeva had succeeded.
[14] The real issue in dispute involved the claims related to Bowan Court which has a significant value. The Trustee claimed a 50 % interest in Bowan Court and Ms. Avdeeva claimed full ownership pursuant to a trust agreement where the Deceased had expressly agreed to hold 1 % interest for her, in trust.
[15] The value of the claim in respect of the Victoria Park Condominium was at most approximately $125,000, which was its purchase price, because no valuations were provided reflecting any increase in value. The Victoria Park Condominium had been sold many years ago. Her breach of trust claim did not succeed because there was no evidence that the Deceased was an express trustee with respect to that property. She did not plead fraud or that the Deceased held the Victoria Park Condominium for her by way of resulting trust. The evidence did show that Ms. Avdeeva received no consideration for that transfer and that she did not give it to the Deceased as a gift. In hindsight, I may have been too strict in my analysis of the pleadings, but Ms. Avdeeva did not raise or argue resulting trust in her closing submissions with respect to the Victoria Park Condominium.
[16] The claim in respect of the Promissory Notes was approximately $115,000. This claim failed because Ms. Avdeeva failed to corroborate the amount outstanding pursuant to these notes as required by the Evidence Act, although I found that she did indeed make these loans, which the Deceased had denied outright throughout with a far-fetched explanation as to why he signed these Promissory Notes.
[17] The point is, there was wrongdoing and dishonestly by the Deceased with respect to these two claims which failed, but they were not successful for technical reasons.
[18] Even though these claims failed, the evidence in respect of them was of assistance to the Court in resolving the significant credibility issues.
[19] Ms. Avdeeva was by far the more successful party, because as I have said, the real issue in dispute was the parties’ respective claims with respect to Bowan Court, and as such she is the successful party entitled to costs.
[20] Taking into account the withdrawn claims and some of the divided success justifies a reduction in the costs to which she is entitled by 30 %.
Issue 2: What is the appropriate scale of costs?
[21] The court has the discretion to award substantial indemnity costs, but such costs are “rare and exceptional” and only warranted where there has been reprehensible, scandalous or outrageous conduct on the part of a party: see DUCA Financial Services Credit Union Ltd. v. Bozzo, 2010 ONSC 4601, at para. 5; Foulis v. Robinson (1978), 21 O.R. (2d) 769 (C.A.); Davies v. The Corporation of the Municipality of Clarington, 2009 ONCA 66.
[22] I am awarding costs on a substantial indemnity basis for a number of reasons.
[23] I will deal with the Deceased’s conduct first.
[24] First, as determined by me in my decision, the Deceased held a 1 % interest in Bowan Court in trust only for Ms. Avdeeva pursuant to an express written agreement. His claim to a constructive and resulting trust failed. As per Barry v. Garden River Ojibway Nation 14 (1997), 33 O.R. (3d) 782 beneficiaries of a trust who are obliged to sue their trustees should receive their costs on a solicitor and client scale. The facts of that case are not identical as that case involved a trustee’s unequal distribution to beneficiaries, but the principle still applies. Ms. Avdeeva was not only obliged to sue the Deceased in respect of the 1 % interest he held in trust for her, but he additionally claimed 50 %, something he was not entitled to. Ms. Avdeeva was obliged to sue him when he should have been acting in her interests with respect to the 1 % he held in trust for her.
[25] Second, the trial determined that the Deceased had improperly taken $109,500 from the Bowan Court mortgage because of BMO’s mistake which listed the Deceased as the sole person with title.
[26] Third, when the Deceased brought his motion to Myers J. to set aside the default judgment, he misrepresented that he had cheques showing payments he had made in respect of Bowan Court which was part of the reason the default judgment was set aside. None were ever produced.
[27] Fourth, when examined for discovery the Deceased gave false evidence that he had never attended a meeting with Mr. Adourian, the lawyer who prepared the Victoria Park Conveyance, and that he never even saw the transfer deed. I determined this could not be true based on the transfer deed which showed that Mr. Adourian represented the Deceased as well as Mr. Adourian’s evidence at trial. Had the pleading in respect of the Victoria Park Condominium been properly pleaded as fraud or if she pled and argued a resulting trust, there would have been sufficient evidence before me for Ms. Avdeeva to meet her burden.
[28] Fifth, the Deceased entered into an agreement with the Trustee, in her personal capacity to purchase the Victoria Park Condominium at a time when he knew of Ms. Avdeeva’s claim. This was dishonest and demonstrated an intention to make a fraudulent conveyance as a strategic move to defeat her claim in the litigation.
[29] Sixth, the Deceased’s attempt to obtain 50 % of Ms. Avdeeva’s home through litigation with no persuasive evidence was a brazen attempt to obtain something else from her that he was never entitled to.
[30] I concluded that the Deceased had taken advantage of his close relationship with Ms. Avdeeva, an elderly woman, to engineer financial transactions which were never authorized.
[31] This was more than hard fought and misguided litigation. The Deceased, who had already taken advantage of Ms. Avdeeva, was seeking a Court order to assist him in further taking advantage of her: Davies at para 45.
[32] I now turn to the Trustee’s conduct.
[33] First, the Trustee told the pre-trial judge that all documentary productions were complete. Following the pre-trial the Trustee produced an additional 147 documents and refused to attend for examination on them. This resulted in an adjournment of the trial.
[34] Second, the Trustee told Chalmers J. that she did not produce these documents because she did not know the issues in the action to enable her to determine relevance. Chalmers J. did not accept this explanation concluding that “I am not persuaded by her explanation that the documents were not produced earlier because she did not know the issues in the action and therefore could not determine whether the documents were relevant.” He reserved costs of this matter to the trial judge. I will be including such costs in the overall award here.
[35] Third, the Trustee took the position that she did not have to answer any questions at her examination on the 147 documents related to her knowledge of the matters in dispute because she was examined as a Trustee. She then failed to provide a willsay related to her personal knowledge and sought to testify as to her personal knowledge. This was a litigation tactic inconsistent with the principle that trial by ambush is not permitted.
[36] Fourth, the Trustee raised yet again issues of delay and prejudice at trial, which issues had been exhaustively considered by three motion judges as well as Akbarali J. who dismissed the appeal of the most recent decision. These issues were res judicata and raising them again at trial was an abuse of process.
[37] The totality of the conduct of both the Deceased and the Trustee is sufficiently reprehensible, scandalous or outrageous so as to justify an award of substantial indemnity costs.
Issue 3: What is the reasonable quantum of costs?
[38] Pursuant to s. 131(1) of the Courts of Justice Act, R.S.O. 1990, c. C.43, costs are in the discretion of the court.
[39] Rule 57 of the Rules sets out the factors which courts should have regard to when awarding costs. The overall objective is “to fix an amount that is fair and reasonable for the unsuccessful party to pay in the particular proceeding, rather than an amount fixed by the actual costs incurred by the successful litigant”: Zesta Engineering Ltd. v. Cloutier (2002), 21 C.C.E.L. (3d) 161 (Ont. C.A.), at para. 4; Boucher v. Public Accountants Council for the Province of Ontario (2004), 71 O.R. (3d) 291 (C.A.), at para. 26; Clarington (Municipality) v. Blue Circle Canada Inc., 2009 ONCA 722, 100 O.R. (3d) 66, at para. 52; and G.C. v. Ontario (Attorney General), 2014 ONSC 1191, at para. 5.
[40] The substantial indemnity costs set out in the Trustee’s Bill of Costs totals $265,557.93 inclusive of HST compared to Ms. Avdeeva’s claim for $193,203.68.
[41] There can be no suggestion that Ms. Avdeeva’s costs were not within the reasonable contemplation of the Trustee.
[42] As well, there was a great deal at stake for Ms. Avdeeva as Bowan Court was her home. The issues were complex, involving significant credibility issues, issues of corroboration because of the Evidence Act and the fact that the Deceased had passed away, and principles of resulting and constructive trusts relating to the Deceased’s claims. The Trustee’s conduct lengthened unnecessarily the proceeding. The Trustee advanced a silly argument related to the Rule in Browne v. Dunne (1893), 6 R. 67 (H.L.), and as set out above produced new documents at the last minute, which necessitated an adjournment and further discovery. Finally, the trial lasted eight days.
[43] Reducing these costs by 30 % results in a costs award of $135,242.58.
Issue 4: Is there a basis to award costs as against the Estate Trustee personally?
[44] On February 21, 2019, after the Deceased passed away, the proceeding was stayed. The Trustee, who was the Deceased’s sole beneficiary, took out an Order to Continue.
[45] The Trustee should be liable for costs as well, but not on a joint and several basis. She should only be liable for costs incurred after she took steps to continue the proceeding because in doing so, she continued meritless litigation in circumstances where the Estate had no assets, there was no evidence that the Estate had any debts, and she was the only beneficiary. Thus, litigation was continued for the personal benefit of the Trustee and not for the benefit of the Estate. She stood to gain a half interest in a home with a significant value with nothing to lose.
[46] In exercising my discretion to make this award, I am mindful of the important principle and public policy considerations related to Estate Trustees that Courts should not set up disincentives for people to assume the role of estate trustees because of fears they could be personally liable: Penny Estate v. Resetar, 2011 ONSC 575 at para 19.
[47] In Moodie v. Toronto Transit Commission, 2015 ONSC 5927 at paras 32 and 34, the Court did not make a personal costs award against an estate trustee citing the following considerations:
This is not a situation where a trustee began an action and prosecuted it in his or her own interest as a beneficiary under the will. In this circumstance, [the estate trustee] was doing nothing more than completing an action commenced and continued by her father over a six-year-period. When she was examined, she indicated that her intention, if successful, was to pay off some or all of his debts.
We want people to step forward and take up the responsibility of being estate trustees and litigation guardians. It may be that there will be circumstances where people in these roles will be required to pay costs personally rather than have the money come from the estate. This would be so where the estate trustee acts in his or her own interest or commences an action that is without merit. This is not the case where an estate trustee carries an action, started by the deceased long ago, to completion in the hope of being able to pay debts of the estate. If an estate trustee, in taking up those responsibilities, risked becoming personally liable for the costs of an action started by the deceased person years in the past, it is unlikely that many would be prepared to take on the role.
[48] However, that does not mean that in an appropriate case a Court does not have the discretion to award costs against a Trustee: Zachariadis Estate v. Giannopoulous, 2020 ONSC 588 at para 10; 401 Weston Centre Limited v. 1734252 Ontario Inc., 2021 ONSC 443 at para 43.
[49] In Craven v. Osidacz, 2017 ONSC 4396 an executor was held personally liable because it advanced speculative and groundless defences: para 20.
[50] Here the Trustee, who was the only party who stood to gain, litigated this matter aggressively. She brought a motion to dismiss Ms. Avdeeva’s claim for delay after two such motions had already been dismissed together with an appeal of that dismissal which was also dismissed. She delivered new documents shortly before trial and refused to be examined on these new documents which required Ms. Avdeeva to bring a motion to adjourn and to examine on the documents. She refused to answer questions at this examination and then sought to give the evidence that she refused to give. She continued far-fetched claims and defences with respect to the main issue in dispute which was Bowan Court. These claims and defences were bound to fail. The Trustee knew the Estate had no assets and there is no evidence before this Court that the Estate had any debts, such that the Trustee was pursuing this matter to completion to pay Estate debts with the proceeds.
[51] The Trustee could not have been acting in the best interests of the Estate in defending such claims. See Sweetman v. Lesage, 2016 ONSC 5110 where the Court made an award of costs which the trustee had to pay personally without any recovery from the estate because the estate trustee acted unreasonably and not in the best interests of the estate.
[52] I agree with Ms. Avdeeva that the continuation by the Trustee of the Estate’s claim to 50 % interest in Bowan Court was a “shakedown”, which is also supported by her Offers to Settle. She made an Offer to Settle in March 2022 for $75,000 followed by an Offer to Settle in December 2022 for $100,000. This would not be rational if the Trustee had had a sincere belief in the Estate’s entitlement to a 50 % interest in Bowan Court, which had a significant value.
[53] Her continuing the action in such circumstances amounted to an effective revival of the action which then triggered costs: Weston at para 43.
[54] If the Trustee is not held personally liable, she will have been able to litigate with impunity, taking no risk of loss or consequences for her actions in circumstances where she was seeking to obtain a personal benefit for herself.
[55] Although Ms. Avdeeva’s could have brought a motion for security for costs, this does not excuse the Trustee’s conduct.
[56] However, she should only be responsible for actions she took after she sought the Order to Continue. Up until that time, costs were incurred by the Ms. Avdeeva which could not be recovered.
[57] The Plaintiff did not provide me with a Bill of Costs that would permit me to apportion the costs based upon the steps taken by the Trustee after the Order to Continue.
[58] I am directing Ms. Avdeeva to provide me a detailed summary of costs incurred after the Order to Continue so that this can be determined, after which I will calculate the amount owed by the Trustee personally in respect of costs as a portion of the total $135,242.58 I am awarding.
[59] If the parties cannot resolve this issue, this Bill of Costs may be provided by December 1, 2023 with submissions no longer than one page and the Trustee may respond with submissions no longer than one page by December 8, 2023.
Papageorgiou J.
Released: November 14, 2023
