COURT OF APPEAL FOR ONTARIO
CITATION: Mauldin v. Cassels Brock & Blackwell LLP, 2013 ONCA 307
DATE: 20130508
DOCKET: C52912 and C52913
Winkler C.J.O., Laskin, Sharpe, Armstrong and Rouleau JJ.A.
C52912
BETWEEN
Fred Mauldin, Dan Myers, Robert Blomberg, Theodore Landkammer, Lloyd Chelli, Stephen Yee, Marvin Cleair, Carolyn Cleair, Richard Hanna, Douglas Laird, Charles Ivans, Lyn White and Athena Smith
Plaintiffs (Respondents)
and
Cassels Brock & Blackwell LLP, Gregory Jack Peebles and Robert Hryniak
Defendants (Appellant)
C52913
AND BETWEEN
Bruno Appliance and Furniture, Inc.
Plaintiff (Respondent)
and
Cassels Brock & Blackwell LLP, Gregory Jack Peebles and Robert Hryniak
Defendants (Appellant)
Sarit E. Batner and Moya J. Graham, for the appellant Robert Hryniak
Javad Heydary, David K. Alderson and Ruzbeh Hosseini, for the respondents
Paul Le Vay and Luisa Ritacca, for the defendant Cassels Brock
Jonathan L. Rosenstein, for the defendant Gregory Jack Peebles
Heard: June 21, 22 and 23, 2011
On appeal from the order of Justice A. Duncan Grace of the Superior Court of Justice, dated October 22, 2010, with reasons reported at 2010 ONSC 5490.
COSTS ENDORSEMENT
A. background
[1] Two sets of plaintiffs in two actions (the "Mauldin action" and the "Bruno action") sued the defendants, Robert Hryniak, Cassels Brock LLP, and Gregory Jack Peebles, for investment losses arising from allegedly fraudulent investment schemes. The plaintiffs in the two actions (the "Mauldin group" and "Bruno") brought motions for summary judgment against all of the defendants.
[2] The two motions were heard together after the amendments to Rule 20 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, had come into effect. The motion judge granted the motions as against Hryniak, but dismissed the motions as against Cassels Brock and Peebles on the basis that a trial was required to determine their liability. He awarded the Mauldin group damages of USD$1,190,401 and awarded Bruno USD$1 million.
[3] Hryniak appealed from the orders for summary judgment against him. His appeals were heard by a five-judge panel of this court, together with three other appeals from decisions under the amended Rule 20: see Combined Air Mechanical v. Flesch, 2011 ONCA 764, leave to appeal to the S.C.C. granted, [2012] S.C.C.A. 47, appeal heard and reserved (26 March 2013). This court's intention in Combined Air was to clarify for judges and litigants in the province of Ontario the nature of the test that applies for determining whether or not summary judgment should be granted, the scope and purpose of the new powers under the amended rule, and the types of cases that are amenable to summary judgment.
[4] The court dismissed Hryniak's appeal from the motion judge's order granting summary judgment in favour of the Mauldin group and allowed Hryniak's appeal from the motion judge's order granting summary judgment in favour of Bruno. The parties were asked for written submissions on the costs of Hryniak's appeals and the costs of the summary judgment motion in the Bruno action. The parties were also asked to file written submissions on the order this court should make concerning the proceeds of a letter of credit in the amount of $950,000, which Hryniak posted as a condition of granting his motion to extend time to perfect his appeals: see Mauldin v. Hryniak, 2011 ONCA 67, 274 O.A.C. 353, at para. 41, varied 2011 ONCA 126.
[5] The letter of credit issue may be dealt with in short order. The Supreme Court of Canada has heard and reserved Hryniak's appeal from this court's decision upholding the summary judgment against him in favour of the Mauldin group. It would not be appropriate for this court to release all or even part of the proceeds secured by the letter of credit to the Mauldin group pending the disposition of this appeal. The parties may return to this court to deal with the letter of credit following the release of the Supreme Court of Canada's decision.
[6] We now consider the costs issues.
B. motion judge's costs order
[7] The motion judge ordered Hryniak to pay $275,000 in costs of the motions, plus $15,000 in disbursements. He stated, at para. 36, that the entitlement to this award "should be shared by the Mauldin group and Bruno based on the principal amounts awarded to them in my reasons on the motions." He reserved to the trial judge the costs of any amount relating to the various cross-examinations and the Rule 39.03 examinations "since they may be used at trial".
[8] The motion judge went on to award the successful defendants their costs of the motions. He awarded $30,000 to Peebles, inclusive of disbursements and applicable taxes. He awarded Cassels Brock $75,000 in respect of the Bruno action and $65,000 in respect of the Mauldin action, inclusive of disbursements and taxes (at paras. 42 and 45). Liability for paying these costs was allocated between the Mauldin group and Bruno in proportion to the principal amounts they invested (at para. 66).
[9] Finally, the motion judge considered the appropriateness of making a Sanderson or a Bullock order. A Bullock order requires an unsuccessful defendant to reimburse the plaintiff for the successful defendant's costs; a Sanderson order requires the unsuccessful defendant to pay the successful defendant's costs directly: see Moore (Litigation Guardian of) v. Wienecke, [2006] O.J. No. 2044, at para. 11, rev'd 2008 ONCA 162, 90 O.R. (3d) 463 (C.A.), but affirmed on this point.
[10] The motion judge considered the following two-step test for deciding whether to make a Sanderson order:
As a threshold matter, was it reasonable for the plaintiffs to join the defendants in one action (or, as here, in one motion)?
Is a Sanderson order fair and reasonable in the circumstances?
[11] In answering the threshold question in the affirmative, the motion judge noted that the defendants asserted crossclaims against each other. It was thus reasonable for the plaintiffs to join the defendants when they filed their motions for summary judgment.
[12] Concerning the second question, the motion judge concluded it was appropriate that Hryniak bear the responsibility for some, but not all, of the costs awarded to Cassels Brock and Peebles. The motion judge made several observations in reaching this conclusion, at para. 63. For example, he observed that Hryniak's ability to make allegations against Peebles – thereby perpetuating Cassels Brock's involvement – was partly attributable to Peebles' conduct in allowing Hryniak to have access to Cassels Brock's trust account "whenever he chose and seemingly without question."
[13] The motion judge held that one-third of the costs awarded to Cassels Brock and Peebles should be payable by Hryniak. This meant that Hryniak was required to pay the all-inclusive amounts of $46,667 to Cassels Brock and $10,000 to Peebles. The plaintiffs were required to pay the all-inclusive amounts of $93,333 to Cassels Brock and $20,000 to Peebles, with liability allocated in proportion to the principal amounts they invested.
C. Parties' POSITIONS ON COSTS
(1) Hryniak's Submissions
(a) Costs of the Motions and the Appeals
[14] Hryniak acknowledges that the parties were not asked for submissions on the costs awarded on the summary judgment motion in the Mauldin action. He contends that the court needs to address this issue because the motion judge did not allocate the total costs award of $290,000 between the two actions. According to Hryniak, the work done on behalf of the plaintiffs on each motion was roughly the same and, accordingly, the total award should be equally divided.
[15] Hryniak submits that the parties should bear their own costs of the Mauldin group's motion. Alternatively, he submits that the costs award to the Mauldin group be $108,750, all-inclusive. This amount represents 50 per cent of the total costs award reduced by a contingency of 25 per cent to reflect the inappropriate pursuit of summary judgment.
[16] Regarding the costs of the appeal, Hryniak asks that the parties bear their own costs of the appeal in the Mauldin matter. Alternatively, he asks that costs of $32,000, all-inclusive, be awarded to the Mauldin group.
[17] In respect of the Bruno motion, Hryniak requests costs in the amount of $145,000, all-inclusive. This represents one-half of the costs order in the plaintiffs' favour on the summary judgment motions.
[18] Hryniak requests costs of the appeal in respect of the Bruno motion in the amount of $32,000, payable forthwith. This amount represents half of his costs on a partial indemnity basis.
[19] In support of his position on the costs of the motions and the appeals, Hryniak asks this court to take into account its comments in Combined Air, at para. 152, that neither of these actions should have been the subject of summary judgment motions. The underlying motions were costly, which should result in a reduction of the cost awards in favour of the Mauldin group on both the appeal and the motion. The summary judgment motion was an inefficient proceeding. Hryniak will still need to defend himself at a trial against other causes of action that the Mauldin group are pursuing against him.
(b) Sanderson Order
[20] Hryniak contends that the motion judge's Sanderson order requiring him to pay one-third of the successful defendants' costs of the summary judgment motions should be set aside. Considering the court's reasons regarding the inappropriateness of these summary judgment motions, the Sanderson order is no longer appropriate. Moreover, given that the appeal in the Bruno matter was allowed, there was no success by the plaintiff against any of these defendants and the Sanderson order is no longer available.
(2) Mauldin group's and Bruno's Submissions
(a) Costs of the Motions and the Appeals
[21] The position of the Mauldin group and Bruno is that this court should not interfere with the motion judge's costs order.
[22] The Mauldin group submits that there is no need for this court to revisit the motion judge's costs order on the basis that it awarded a global figure to both sets of plaintiffs. The motion judge, at para. 36, allocated the costs award between the Mauldin group and Bruno based on the principal amounts awarded to them in his reasons on the motion. On this formula, the Mauldin group was awarded costs of $158,181.81 and Bruno was awarded costs of $131,818.18 (all-inclusive).
[23] The Mauldin group further submits that Hryniak is abusing the opportunity to make costs submissions concerning this motion by effectively launching an appeal from the costs order without having sought leave to appeal. It is not open to this court to review the merits of the costs order in the absence of an application for leave to appeal.
[24] Regarding the costs of the appeal, the Mauldin group asks that Hryniak pay its costs forthwith, fixed on a substantial indemnity scale in the amount of $69,627.52, plus disbursements of $18,182. The conduct giving rise to the liability in this case is deserving of disapproval in the form of substantial indemnity costs: see generally, Authorson (Litigation guardian of) v. Canada (Attorney General) (2002), 2002 CanLII 44976 (ON CA), 215 D.L.R. (4th) 544 (Ont. C.A.). According to the Mauldin group, given the uncertain state of the law on the test for summary judgment, it would be unfair to deny these plaintiffs their costs of the appeal.
[25] In support of Bruno's position that the costs of the motion remain as ordered by the motion judge, Bruno submits that this outcome is justified by Hryniak's reprehensible pre-litigation conduct, including not investing Bruno's money, but using it for his own requirements. Bruno also points out that Hryniak did not appeal from the costs order of the motion judge.
[26] With respect to the costs of the appeal, Bruno asks that Hryniak pay costs in the amount of $45,521.47 on a partial indemnity basis, or in the alternative, that no costs be payable on the appeal. The court may deviate from the general rule that costs follow the event when it is just and equitable to do so: Wallace v. Allen (2007), 2007 CanLII 31445 (ON SC), 86 O.R. (3d) 489 (S.C.J.), at para. 10. Hryniak's conduct – both pre-litigation and his ongoing conduct – is so reprehensible that it is deserving of sanction.
[27] In support of the alternative position that no costs be awarded on appeal, Bruno points out that this court considered a novel and important issue in the use of summary judgment under the new Rule 20. This is a factor in determining whether costs are to be made payable on appeal: MDG Kingston Inc. v. MDG Computers Canada Inc., 2008 ONCA 656, at para. 40.
(3) Co-Defendants' Submissions on the Sanderson Order in respect of the Bruno motion
[28] The Mauldin group and Bruno submit that the motion judge's Sanderson order should stand. The manner in which Hryniak chose to execute his fraud resulted in circumstances that caused the plaintiffs to include the remaining defendants in this action. In any event, no appeal of the Sanderson Order is properly before the court.
[29] Cassels Brock submits that a Sanderson Order is only appropriate where the moving party succeeds against at least one of the responding parties, and where the order would be just and fair in the circumstances. Considering that Bruno was entirely unsuccessful on the motion against all of the defendants, the Sanderson Order is no longer appropriate. Accordingly, Bruno should now be found responsible for the portion of the co-defendants' costs that Hryniak was originally ordered to pay.
[30] Cassels Brock further submits that it is not fair and equitable for it to continue to bear the risk of non-recovery of costs payable by Hryniak under the Sanderson order: see Whaley v. Dennis, [2006] O.J. No. 683 (S.C.J.), at para. 55.
[31] Cassels Brock proposes that, in assessing the amount subject to the Sanderson order, this court should follow the motion judge's approach of awarding costs in proportion to the amounts invested by each set of plaintiffs. Using this formula, Bruno should be liable for an additional $21,212.27 in favour of Cassels Brock.
[32] Peebles adopts the submissions of Cassels Brock. He asks this court to set aside the Sanderson Order and to make the remaining costs in the Bruno motion payable by Bruno.
D. anaylsis
[33] As a preliminary point, there is no basis for Hryniak's position that the motion judge did not allocate the costs award between the two actions. The motion judge dealt with entitlement at para. 36 of his reasons by apportioning the costs award based on the principal amounts awarded on the motion.
[34] Hryniak's submissions concerning the costs of the Mauldin group's successful motion for summary judgment were not requested by this court in its disposition of the appeal and are not properly before us. Hryniak did not seek leave to appeal from the motion judge's cost order in respect of that motion, including the motion judge's Sanderson order in relation to the costs of the Mauldin group's motion.
[35] Even leaving aside this procedural impediment to accepting Hryniak's position, we see no reason to depart from the principle that costs are awarded to the successful party. As this court pointed out in Combined Air, at para. 156: Hryniak's defence to this action "simply has no credibility." There is no reason to deprive the successful plaintiffs of their costs of the motion in the circumstances. Nor is there any reason to interfere with the Sanderson order in respect of the Mauldin group's motion given the outcome of the appeal.
[36] However, the situation is different with respect to Hryniak's successful appeal from the summary judgment against him in the Bruno matter. As we stated in Combined Air, at para. 166: "The evidence against Hryniak in that action was not nearly as overwhelming". We further explained that at least two genuine issues require a trial in that action, including the issue whether Hryniak made any statement that induced Bruno to invest with him. In these circumstances, we see no reason to depart from the general principle that costs follow the event.
[37] We therefore set aside the motion judge's costs order in favour of Bruno and in its place order that Hryniak receive his costs of Bruno's summary judgment motion, to be reserved to the trial judge. This court ordered that affidavits and cross-examinations on the affidavits used on the summary judgment motion may be used at trial in the same manner as examinations for discovery. A significant amount of the costs incurred will serve to reduce the costs of bringing the action to trial. It is difficult, therefore, for this court to carry out a proper quantification of the costs of the motion. Hryniak has not filed materials in support of his request that costs be fixed that could assist this court in making such a determination. The trial judge will be in a better position to assess these costs in the light of the steps necessarily taken to bring the case to trial and the results at trial.
[38] Since Bruno's motion failed against all three defendants, we set aside the motion judge's Sanderson order in respect of the costs of the Bruno motion. The Sanderson order reduced Bruno's obligation to pay the costs awarded to Cassels Brock and to Peebles by $21,212.27 and $4,545.45 respectively. Bruno is now responsible for payment of these amounts. Hryniak's obligations to Cassels Brock and Peebles are reduced accordingly.
[39] In awarding costs of the appeals, we see no reason to depart from the general rule that costs follow the event. We would not, however, award the Mauldin group its costs on a substantial indemnity scale. Hryniak raised a number of serious and important issues surrounding the interpretation of Rule 20 that warranted consideration by this court. As a result, we award the Mauldin group the costs of the appeal on a partial indemnity scale. We consider a reasonable award, in the circumstances, to be $32,000, inclusive of disbursements and applicable taxes. We also award Hryniak his costs of his appeal from the order for summary judgment obtained by Bruno, fixed in the amount of $32,000, inclusive of disbursements and applicable taxes.
"W.K. Winkler C.J.O."
"John Laskin J.A."
"Robert J. Sharpe J.A."
"R.P. Armstrong J.A."
"Paul Rouleau J.A."