COURT FILE AND PARTIES
COURT FILE NO.: CV-10-101199-00
DATE: 2012-02-10
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Ricardo Digiuseppe, Plaintiff
AND:
Mary Margaret Todd, Defendant
BEFORE: THE HON. MR. JUSTICE J.R. McCARTHY
COUNSEL:
Ira Book, Counsel for the Defendant/Moving Party
Michael Suria, Counsel for the Plaintiff/Responding Party and for Joseph Irving, Solicitor and Responding Party
HEARD: December 8, 2011
ENDORSEMENT
[ 1 ] The defendant, Mary Margaret Todd, moves for an order for costs of this action which was discontinued by the plaintiff, Ricardo Digiuseppe, by way of a Notice of Discontinuance dated August 12, 2011. The defendant remains self-represented on the record. She retained Mr. Ira Book for the purposes of representing her in respect of this action and matters incidental to it. Accordingly, although not counsel of record, Mr. Book was, for all intents and purposes, counsel for Mary Margaret Todd as defendant in the action and moving party on this motion.
[ 2 ] The defendant seeks costs under Rule 23.05(1) of the Rules of Civil Procedure , R.R.O. 1990, Reg. 436/10, which reads as follows:
23.05 (1) If all or part of an action is discontinued, any party to the action may, within thirty days after the action is discontinued, make a motion respecting the costs of the action. O. Reg. 394/09, s. 8.
[ 3 ] The motion was originally returnable on August 24, 2011, within 30 days of the Notice of Discontinuance, in accordance with that rule.
[ 4 ] The defendant is seeking costs on a substantial indemnity basis against both the plaintiff and the solicitor for the plaintiff, Joseph W. Irving, personally. The defendant is relying on Rules 57.01 and Rule 57.07(1)(c) of the Rules of Civil Procedure .
[ 5 ] Rule 57.07(1)(c) reads as follows:
57.07 (1) Where a lawyer for a party has caused costs to be incurred without reasonable cause or to be wasted by undue delay, negligence or other default, the court may make an order, …
(c) requiring the lawyer personally to pay the costs of any party.
OVERVIEW OF THE FACTS
[ 6 ] The plaintiff commenced this action by issuing a Statement of Claim on October 7, 2010. The action sought to enforce various trust agreements entered into between the plaintiff and the defendant with respect a number of Ontario properties. Damages sought totalled more than $6.5 million.
[ 7 ] The defendant filed a Notice of Intent to Defend on her own behalf on November 2, 2010. She retained Mr. Ira Book to act as her agent and solicitor. He did not become solicitor of record at any time up to and including today’s motion.
[ 8 ] On November 9, 2010, the defendant served a Demand for Particulars under Rule 25.10. On December 16, 2010, plaintiff’s counsel replied that the plaintiff would not provide a response to the Demand for Particulars.
[ 9 ] The defendant brought a motion to compel the plaintiff to produce copies of the alleged trust agreements pursuant to Rules 25.06, 25.08, and 25.10 of the Rules of Civil Procedure . The defendant then brought a motion for an order to have the plaintiff’s solicitor removed as solicitor of record.
[ 10 ] The matter did not come before any motions judge prior to today. On August 12, 2011, the plaintiff discontinued the action by serving the Notice of Discontinuance.
[ 11 ] The defendant now brings this motion seeking an order that both the plaintiff, Ricardo Digiuseppe, and his solicitor, Joseph Irving, pay the defendant her entire costs of the defence of this action and related matters on a substantial indemnity scale, jointly and severally.
[ 12 ] On August 2007, the plaintiff was convicted of defrauding the public of nearly $3.5 million in taxes owing to the Crown. The plaintiff was represented during these criminal proceedings by Mr. Joseph Irving. In submissions on sentencing made before Mr. Justice P. Tetley on February 29, 2008, and on March 17, 2008, solicitor Joseph Irving advised the court that the accused Digiuseppe was without any current financial means to pay a fine: see R. v. Digiuseppe , 2008 ONCJ 127 , [2008] O.J. No. 1107 (C.J.), at paras. 18-19 . The direct quote from the submissions of Mr. Irving to the court reads as follows: “In any event, the defence submits the offender is without sufficient current financial means to pay a fine.”
[ 13 ] On January 25, 2010, Mr. Digiuseppe’s appeal from the convictions and accompanying sentence was dismissed by the Ontario Court of Appeal. On October 7, 2010, the plaintiff issued the present Statement of Claim with Mr. Joseph Irving named as solicitor of record.
THE PARTIES’ POSITIONS IN RESPECT OF COSTS
[ 14 ] In a nutshell, the defendant’s position is as follows:
a. the Statement of Claim issued on October 7, 2010, could not have disclosed a bona fide cause of action and, accordingly, the plaintiff should be responsible for the costs of the defendants;
b. although she was self-represented on the record, Ms. Todd paid to retain legal counsel to defend her interests in this action. In particular, Mr. Book was retained to bring the motions for particulars, the motion for the removal of Joseph Irving as the plaintiff’s solicitor of record, and to investigate and look into matters related to this action including obtaining details of the criminal proceedings;
c. the costs of this action should be on substantial indemnity basis in light of the considerations of Rule 57.01; and
d. the costs should be paid personally by the plaintiff’s solicitor. Mr. Irving caused costs to be incurred unreasonably and unnecessarily by issuing the claim in question. Solicitor Irving misled the court in sentencing submissions when he indicated that Mr. Digiuseppe did not have any current assets to pay a fine. In the alternative, he would have discovered shortly after giving those submissions that the information upon which that assertion was based (i.e. that the accused was without current financial means to pay a fine) was false. Having come into possession of the trust documents which served as the subject matter of the present action, solicitor Irving must have then known that the claim that he was being instructed to advance was based upon a premise, which, if true, meant that the assertion in sentencing submissions a few months before had been false. The plaintiff, by claiming an interest by way of trust in real property, was seeking to advance a position which was irreconcilable with a previous statement made before a court. Issuing a claim as solicitor of record in the face of that constituted a step that was frivolous, vexatious, and fraudulent.
[ 15 ] The plaintiff denies the that defendant is entitled to costs of the action on the basis that:
a. the plaintiff brought a bona fide claim;
b. the defendant’s own conduct in the action was unnecessary and vexatious, causing unreasonable delay and resulting in an increase in costs for all parties; and
c. at all times the defendant was self-represented.
[ 16 ] In the alternative, the plaintiff submits that the defendant is not entitled to the amount of costs she has claimed on the basis that:
a. as set out in a, b, and c above;
b. the action did not progress beyond the pleadings stage; and
c. the defendant was not required to attend in court.
[ 17 ] Finally, the plaintiff contends that Mr. Irving should not be liable to pay costs personally for the following reasons:
a. his conduct throughout the action was reasonable;
b. any delays leading to extra legal costs incurred by the defendant were the result of her own actions; and
c. the defendant’s own conduct in the action was frivolous and vexatious.
RULE 23.05 (1) AND ENTITLEMENT TO COSTS
[ 18 ] Pursuant to section 131(1) of the Courts of Justice Act, R.S.O. 1990, c. C.43, the costs of, and incidental to, a proceeding or step in a proceeding are in the discretion of the court, and the court may determine by whom and to what extent the costs shall be paid.
[ 19 ] Rule 57.01(1) of the Rules of Civil Procedure sets out the factors that a court may consider in exercising that discretion.
[ 20 ] Rule 23.05(1) was amended on October 19, 2009, by Ontario Regulation 349/09. Prior to the amendment, Rule 23.05 provided as follows:
...where a plaintiff discontinues an action against a defendant, the defendant is entitled to costs of the action...unless the court orders otherwise.
The new Rule 23.05(1), in contrast, reads as follows:
If all or part of an action is discontinued, any party may, within thirty days after the action is discontinued, make a motion respecting the costs of the action.
[ 21 ] I was not referred to any decision which has measured the effect of the change in the wording of Rule 23.05(1). The wording used in the previous rule certainly afforded a defendant a prima facie entitlement to costs of an action upon discontinuance by a plaintiff. A reasonable interpretation of the new rule is that it has removed the prima facie entitlement to costs in favour of a method by which either party to the action may make a motion in respect of costs within 30 days after the action is discontinued. I find that the amendment to the rule was intended to accomplish three things:
a. to remove the prima facie entitlement of the defendant to costs;
b. to establish a time frame within which a motion must be brought following a discontinuance, that being 30 days from the date of discontinuance; and
c. to allow for a consideration of costs to be made in favour of either party.
[ 22 ] A number of cases decided under the former Rule 23.05(1) established a bona fide test to be applied to the plaintiff’s cause of action when considering the defendant’s right to recover costs of a discontinued action: see Golda Developments Inc. v. Dawe (2008), 64 C.P.C. (6th) 128 (Ont. S.C.) ; Giannopoulos v. Olga Management Ltd. (2004), 2 C.P.C. (6th) 362 (Ont. S.C.) . Those cases followed the decision of Henry, J. in Provincial Crane Inc. v. AMCA International Ltd. (1990), 44 C.P.C. (2d) 46 (Ont. H.C.) [ Provincial Crane ] , where the bona fide test was succinctly set out at p. 48:
In order to establish that it ought to be relieved of costs in the courts discretion it is my opinion that, at this early stage of the action the plaintiff must satisfy the court that the material filed discloses a bona fide cause of action, that is not frivolous or vexatious and which the plaintiff had some justification to commence, having regard to the conduct of the defendant. Since the court cannot, at this early stage, make final findings of fact or credibility, the court is left to determine if, notwithstanding conflict, there is some evidence to justify the commencement of the action whether or not it can be said that the action may or may not ultimately succeed.
[ 23 ] In my view, the bona fide test laid down in the above cited cases remains the starting point for any consideration of a defendant’s entitlement to costs of a discontinued action and the onus remains on a plaintiff discontinuing an action to demonstrate the bona fides of his pleading in order to escape cost consequences. The issuance of an originating process that is not legitimate or bona fide can be, in itself, a step in the proceeding which is improper, vexatious or unnecessary. There is nothing in the new Rule 23.05(1) which directs the court to look elsewhere other than general principles under Rule 57.01 in exercising its discretion on the matter of costs. I find that applying the bone fide test established in the case law referred to above remains a fair and workable manner by which to consider whether costs consequences should flow out of the application of paragraph (f) of Rule 57.01. In the case at bar, I accept that there was some justification for the commencement of the claim, given that the properties to which the alleged trusts applied had indeed been the subject matter of transactions between the parties. In addition, on October 27, 2010, a mere three weeks after the commencement of the action, the defendant swore an affidavit confirming that she held the properties that were at issue in a bare trust with the defendant as the beneficial owner.
[ 24 ] In my view, this satisfies the de minimus test for a bona fide cause of action as laid down in Provincial Crane . There was some real justification for commencing the claim. A consideration of what constitutes a bona fide claim should not involve speculation on the ultimate merits of the claim nor on what might have been the result had the claim been adjudicated. Similarly, it should not be part of the court’s analysis to weigh the merits of potential defences available to the defendant. Moreover, the fact that claim is ultimately discontinued should not be a factor to consider in the assessment of a claim’s bona fides.
[ 25 ] I am not persuaded that the submissions made by plaintiff’s counsel during the criminal sentencing proceedings are relevant to the plaintiff’s cause of action in this proceeding. Submissions are based upon evidence before the court; however, submissions themselves do not constitute testimony or evidence. Nor does the plaintiff’s choice of solicitor have any bearing on the validity or merits of this claim. I am not persuaded that claims brought against third parties in distinct proceedings have any bearing on the validity of the present claim.
[ 26 ] Other considerations relevant to the question of costs in this matter include the following:
a. the action itself did not progress past the pleadings phase; and
b. the defendant was not required to attend court save and except for the present appearance for the purpose of seeking costs.
[ 27 ] That leaves the question of whether any conduct by the plaintiff tended to unnecessarily shorten or lengthen the duration of the proceeding or whether any step in the proceeding was improper, vexatious, unnecessary or taken through negligence, mistake or excessive caution. I find that the plaintiff’s refusal to answer the demand for particulars of the various alleged trust agreements/declarations of trust was unreasonable and caused an unnecessary lengthening of the duration of the proceeding. As a direct result of that refusal, the defendant was compelled to bring a motion seeking an order for disclosure of those particulars. This was an unnecessary step. I do not accept the plaintiff’s contention that the demand for particulars was unreasonable in light of the affidavit sworn by the defendant on October 27, 2010. The demand was a diligent use of the Rules of Civil Procedure . It was reasonable and necessary for the defendant to have been provided full details of the trust documents in order to prepare a proper defence to the claim.
[ 28 ] The fact that I have found that the plaintiff had a bona fide claim does not relieve him of potential costs consequences. There is nothing in Rule 23.05(1) that adds to, or subtracts from, the court’s discretion to award costs or its obligation to consider the general principles under Rule 57.01 when exercising that discretion. In this matter, I exercise that discretion to award costs in favour of the defendant for the failure of the plaintiff to provide particulars upon a proper demand being made under Rule 25.10. The quantum of those costs will be discussed below.
WHETHER THE DEFENDANT AS A SELF-REPRESENTED LITIGANT IS ENTITLED TO RECOVER COSTS.
[ 29 ] In Fong v. Chan, 1999 2052 (ON CA) , 46 O.R. (3d) 330 (C.A.) [ Fong ], it was held that self-represented litigants are not entitled to costs calculated on the same basis as litigants who retain counsel. A self-represented litigant is only entitled to costs if it can establish that it devoted time and effort to do the work ordinarily done by a lawyer retained to conduct litigation and, as a result, incurred opportunity costs by forgoing remunerative activity: see para. 26. Here, the defendant is not proposing that she be compensated for costs because of lost opportunity; rather, she argues that she incurred actual costs in retaining Mr. Book to do legal work for her. In that important respect, this case is markedly different than the fact scenario in Fong which involved a lawyer-litigant seeking costs on the basis, in part, of lost opportunity. In the present case, Ms. Todd did retain counsel for the express purpose of representing her interests. It is clear that Mr. Book provided legal services to her for which she incurred expense.
[ 30 ] Rule 57.01 requires the court to consider the principle of indemnity in addition to any other matter relevant to the question of costs. That principle governs regardless of whether Ms. Todd’s legal representative, a qualified and practicing lawyer, became solicitor of record. This court has the general discretion to allow costs when costs have been actually incurred. The fact that a self-represented litigant receives valuable services from a solicitor who is not of record does not, in my view, disentitle the litigant from seeking an award of costs when fees between solicitor and client have been incurred. To hold otherwise would effectively ignore the principle of indemnity which the court is obliged to consider under rule 57.01.
[ 31 ] I find that it is not a bar to the self-represented defendant to seek or be awarded costs under Rule 57.01 given that she has actually incurred costs for litigation services provided to her in defending the claim brought against her by the plaintiff.
THE ISSUE OF COSTS PERSONALLY AGAINST SOLICITOR IRVING
[ 32 ] Rule 57.07(1) of the Rules of Civil Procedure allows for the awarding of costs against a lawyer personally.
[ 33 ] In the case of Carleton v. Beaverton Hotel , [2009] O.J. No. 2409 (S.C.) at para. 21 , the Divisional Court for Ontario set out a two step procedure for determining whether the court should award costs personally against a lawyer:
a. first, the court must determine whether the lawyer’s conduct falls within Rule 57.01 (1) in the sense of causing costs to be incurred unnecessarily; and
b. second, as a matter of discretion (and applying the extreme caution test) whether, in the circumstances of the particular case, the imposition of costs against the lawyer personally is warranted.
[ 34 ] In reviewing the discretion of a court to award costs against a lawyer personally, the Honourable Madame Justice McLachlin, writing for a majority of the Supreme Court of Canada in the case of Young v. Young , 1993 34 (SCC) , [1993] 4 S.C.R 3 [ Young ] at para. 254 , asserted that:
Moreover, courts must be extremely cautious in awarding costs personally against a lawyer, given the duties upon a lawyer to guard confidentiality of instructions and to bring forward with courage even unpopular causes. A lawyer should not be placed in a situation where his or her fear of an adverse order of costs may conflict with these fundamental duties of his or her calling.
[ 35 ] In determining whether the defendant’s request for costs against the plaintiff’s lawyer personally would be appropriate in these circumstances, I have considered the following:
a. in the making of submissions on behalf of the plaintiff at the criminal sentencing hearing, solicitor Irving was not giving evidence before the court. He was advocating on behalf of his client;
b. submissions in respect of the plaintiff’s financial means to pay a potential fine imposed by a criminal court are irrelevant to the plaintiff’s cause of action in the current proceeding;
c. any knowledge that solicitor Irving acquired of the financial status of the plaintiff before or after the submissions was protected by solicitor and client privilege; and
d. the decision to refuse to provide particulars was an election made by a party during the litigation process. The remedy for the party seeking the particulars is to bring a motion for an order compelling the particulars and to seek costs. Even if the decision to refuse particulars can be attributed to the lawyer, it would be an extraordinary case where the circumstances of a refusal would warrant costs to be awarded personally against the lawyer for the refusing party.
[ 36 ] I do not find that the conduct of solicitor Irving caused costs to be incurred unnecessarily. The plaintiff took a position on a demand for particulars. It was, in my view, a position that was incorrect but one for which the defendant could, and did, seek relief from the court by way of motion. Those costs have now been considered in the aftermath of a Notice of Discontinuance and in keeping with the principles set out in Rule 57.01.
THE SCALE OF COSTS
[ 37 ] The defendant has sought costs on a substantial indemnity basis. Substantial indemnity costs, often referred to solicitor and client costs, should only be awarded if there has been reprehensible, scandalous or outrageous conduct on the part of one of the parties. The fact that an application has little merit is no basis for awarding solicitor client costs: see Young at para. 251 .
[ 38 ] In the circumstances of this case, the election by the plaintiff to refuse a demand for particulars was conduct that unnecessarily lengthened the duration of the proceeding in that it forced the defendant to bring a motion for particulars prior to the Notice of Discontinuance. That motion was an unnecessary step in the proceeding since it could have been avoided had particulars been provided. However, there was nothing scandalous, outrageous or reprehensible in the conduct of the plaintiff which would warrant costs to be awarded a substantial indemnity scale.
THE CONDUCT OF THE DEFENDANT
[ 39 ] The plaintiff argued that the defendant’s conduct should be considered improper, vexatious or unnecessary. In particular, her motion for an order to remove Mr. Irving as solicitor of record tended to unnecessarily lengthen the duration of the proceeding. I disagree. In providing counsel services to the defendant, Mr. Book aggressively sought to protect his client’s interests from the outset. The plaintiff elected to bring the claim and ultimately to withdraw it. The defendant did nothing more than exercise her rights under the Rules of Civil Procedure . Since the motion to remove solicitor Irving as solicitor of record was ultimately not determined on its merits, it cannot be said that such a step was frivolous, vexatious or unnecessary.
DISPOSITION ON COSTS
[ 40 ] Having regard to the principles enunciated in Rule 57.01 and in light of my findings on the issues set out above, I award costs to the defendant against the plaintiff, Ricardo Digiuseppe, only. Costs shall include the following: $7,500 for legal fees, $975 for HST $1,429.68 for disbursements, and $185.81 for HST on the disbursements, amounting to a grand total of $10,090.49. Those costs include the appearance on the present motion and are payable forthwith.
McCARTHY J.
Date: February 10, 2012