Court of Appeal for Ontario

CITATION: Ontario Realty Corporation v. Catalfo, 2010 ONCA 641

DATE: 20101005

DOCKET: C51755

BEFORE: Doherty, Feldman and Rouleau JJ.A.

Parties

BETWEEN:

Ontario Realty Corporation and Her Majesty The Queen in right of the Province of Ontario as represented by the Attorney General

Plaintiffs (Respondents)

And

P. GABRIELE & SONS LIMITED, GABBRO CONSTRUCTION LTD., GABRIEL ENVIRONMENTAL SERVICES INC., 1331679 ONTARIO LIMITED, PIERINO GABRIELE, FRANK ANGELO GABRIELE, ANTONIO GABRIELE, SIRMAN ASSOCIATES LIMITED, IV AN A. SIRMAN, PROGRESSIVE ENVIRONMENTAL INC., CYNTHIA D. 1. STILES, 1287512 ONTARIO LIMITED, INTEGRATED PROPERTY SOLUTIONS INC., ROBERT W. ALLAN, ENVIRONMENTAL AND DEVELOPMENT SOLUTIONS LTD., RICHARD C. BENSON, 780551 ONTARIO LIMITED c.o.b. MASTER ENVIRONMENTAL SERVICES, 1331989 ONTARIO LIMITED, 981602 ONTARIO INC. c.o.b . . TRI-SPADE, VINCENT CATALFO, ROSS FAREWELL, KENT BANTING, TATE STREET CAPITAL INC., POPLAR OAKS LAND DEVELOPMENT CORPORATION, VALLEY FORD HOMES INC., MA TEUS VILLAGE INC., VALLEYFORD DEVELOPMENT CORPORATION, ST. STEPHEN'S ESTATES INC., McLEVIN PROPERTIES LTD., LAWSON MEADOWVALE DEVELOPMENTS INC., ROSEBURY HOLDINGS INC., MAYFAIR ELECTRIC LIMITED, ZENAT HOLDINGS LTD., NIMA INVESTMENTS INC., 1331237 ONTARIO LIMITED c.o.b. SOUTHEASTERN ENVIRONMENTAL SERVICES, DAMIAN SPADAFORA, MARY SPADAFORA, MICHAEL ZENTIL, MAURO TONIETTO, SANDRA TONlETTO, JOHN PERDUE, JOHN PERDUE c.o.b. LEGENDS CONSULTING, JOHN F ALCIONI, NEW BELFRIE HOLDINGS INC., ROSEMARY DICARLO, KLEINFELDT CONSULTANTS LIMITED, 1022635 ONTARIO INC. STEPHEN J. BLANEY, H. SUTCLIFFE LIMITED, H. JAMES HAWKEN, L&B CONTRACTING, LARRY D. BELLMORE, MARTINDALE PLANNING SERVICES and ROBERT MARTINDALE

Defendant (Appellant)

Counsel

John B. Laskin and Charles Finlay, for the appellant Vincent Catalfo

Ronald Carr, for the respondents

Heard: September 29, 2010

On appeal from the costs decision of Justice Frank Newbould of the Superior Court of Justice dated December 7, 2009.

Reasons for Decision

By The Court:

[1] The appellant appeals the decision of the trial judge to deprive him of all costs of the action. The appellant was a defendant in respect of numerous claims for fraud and other malfeasance in respect of 19 properties that were sold to other defendants by the ORC, the appellant’s employer.

[2] Two days prior to trial, the respondent withdrew or abandoned its claims in respect of 15 of the impugned transactions. Then at the opening of trial, all claims alleging bid-rigging were abandoned or withdrawn. Finally, during its closing argument, the respondent withdrew all remaining claims against the appellant.

[3] The appellant then sought its costs of the action against the respondent on two bases: (1) that all claims were withdrawn against him, and (2) that he had made two early offers to settle, the first offering to consent to dismissal of the action without costs, and the second, made during his lengthy examination for discovery, was to pay $20,000 Neither offer was accepted. As a result, the appellant remained a party to the action for almost 9 years and through counsel, defended himself at a trial lasting 18 days over three months in the fall of 2009.

[4] The trial judge declined to award any costs to the appellant. He found that although the appellant was not dishonest or purposely evasive as a witness, his involvement in two of the transactions was “troubling” and negligent and had the claim not been abandoned by the Crown, the result might have been much different; and in a third transaction, the Aurora, (for which he was not sued) the appellant agreed to the two unjustified price reductions. The trial judge concluded that these involvements justified the denial of any award of costs.

[5] The appellant submits that the trial judge made errors in principle which undermine the exercise of his discretion on this issue. We agree.

[6] The respondents’ withdrawal of their claims against the appellant before the end of the trial amounted to an effective admission by the Crown that it could not succeed against the appellant and that its claims against him must be dismissed.

[7] Normally, there are costs consequences to a party where its action is dismissed. The purpose of the spectre of cost consequences is to focus litigants on the costs of the litigation to all parties, and to ensure that litigants act responsibly in bringing and pursuing actions, which are costly for any party involved. Similarly, the Rules regarding the cost consequences of offers to settle have the same purpose: to focus litigants on the need to settle as early as possible, if possible, with cost consequences for failure to accept a reasonable offer.

[8] In this case, the trial judge erred by failing to view the appellant as prima facie entitled to his costs of the action, given that the action was wholly withdrawn against him before the end of trial and ultimately dismissed.

[9] The trial judge also erred by failing to advert to the offers to settle that the appellant made to try to extricate himself from the litigation. As he was not one of the parties who benefitted financially by purchasing government properties at undervalue, the amount of damages that could be recovered against him should have been a factor for the respondent to consider in assessing any offer from him. The fact that the respondent rejected the offer of $20,000 and continued against the appellant right up until the end of the trial, indicates that it should have been prepared to accept the cost consequences for that strategy.

[10] Finally, in our view, although the trial judge was entitled to include as a factor the conduct of the appellant on the impugned transactions, the nature of that misconduct, as found by the trial judge, did not trump the other principles that had to be considered so as to warrant a complete denial of costs.

[11] In our view, the decision of the trial judge should be set aside and an order made awarding costs of the action to the appellant on the partial indemnity scale, but with a significant reduction to reflect the misconduct identified by the trial judge.

[12] Costs of $256,000 were claimed on the partial indemnity scale, including $210,000 for fees. We would reduce the fee portion of the costs to reflect some duplication of time caused by a change of lawyers as well as an additional amount for the misconduct. In the result, the fees are reduced to $140,000, and the total amount awarded including disbursements and taxes is $186,000.

[13] Costs of the application for leave to appeal costs and for the appeal to the appellant fixed at $7,500 inclusive of disbursements and taxes.

Signed: “K. Feldman J.A.”

“Doherty J.A.”

“Paul Rouleau J.A.”

RELEASED: “DD” October 5, 2010