ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: 09-46843
DATE: 2012/03/07

BETWEEN

VICTORIA ORDER OF NURSES FOR CANADA and VICTORIAN ORDER OF NURSES FOR CANADA – ONTARIO BRANCH Applicants – and – GREATER HAMILTON WELLNESS FOUNDATION Respondent

David Sherriff-Scott and Peter C.P. Thompson, Q.C., for the Applicants

Henry G. Blumberg, Ronald S. Segal and Scott D. Chambers, for the Respondent

Dana De Sante, for the Public Guardian and Trustee

HEARD: By Written Submissions

decision on costs

BEAUDOIN J.

[ 1 ] As set out in my Reasons for Decision dated September 27, 2011, the Applicants achieved success with respect to their claims against the Respondent. In supplementary Reasons dated November 16, 2011, I granted additional relief to the Applicants. They now seek an order requiring the Respondent Foundation to pay their costs of these proceedings in the amount of $454,686.19 on a substantial indemnity basis.

[ 2 ] The Applicants also request an order authorizing an immediate payment from the funds to be transferred to VON Ontario In Trust of the full amount of the costs awarded to them and to the Public Guardian and Trustee (“PGT”) in the event that the amounts awarded are not paid by or on behalf of the Respondent within 30 days of the award. This further order is requested without prejudice to the rights of the Applicants and the PGT to claim the unpaid amounts of such costs awards against the insurer for the Respondent Foundation, the Directors for the Respondent Foundation and/or their insurer.

The Applicable Scale of Costs

[ 3 ] The Applicants assert that they are entitled to an award of costs based on the substantial indemnity scale for three reasons.

[ 4 ] First, they assert that the Respondent conducted itself throughout this proceeding by alleging that the Applicants had engaged in deceitful or dishonest behaviour. These allegations attacked the very heart of the Applicants’ honesty and integrity.

[ 5 ] Second, the Applicants served two Offers to Settle in this proceeding: the first dated October 5, 2010, which remained open well after the hearing commenced, and a second dated June 22, 2011, which remained open until the resumption of proceedings on August 2, 2011. The Applicants claim that the result achieved by the Applicants significantly exceeded the terms of the October 5, 2010 Offer to Settle and was materially better than the June 22, 2011 Offer to Settle.

[ 6 ] Third, given the conduct of the Respondent and the Offers to Settle, the Applicants argue that I should exercise my discretion in favour of an award of costs on a substantial indemnity scale.

Unfounded and Unproven Allegations of Dishonesty

[ 7 ] Throughout the course of this proceeding, the Applicants claim that the Respondent made, and continued to make, unsubstantiated and unsuccessful allegations against them to the effect that the Applicants had engaged in conduct which was dishonest or deceitful.

[ 8 ] The Applicants refer to allegations that they had engaged in a “diversion”, “misapplication”, “seizure of money”, or “money grabs”. This behaviour was characterized as being “inappropriate”, a “breach of trust”, or a “breach of fiduciary duty”. It was alleged that the Applicants had “orchestrated” transactions only to achieve a “transfer of assets to the Applicants”. It was alleged that the Applicants “seized” money which was said to have been inappropriately diverted to them. The Respondent claimed that this seized or diverted money was used in a way which was inconsistent with its charitable purposes.

[ 9 ] The Respondent also alleged that the Applicants engaged in these “orchestrated” diversions of money and that the sum “diverted”, or “misapplied” amounted to “more than $1 million from local Hamilton control”. In a letter addressed from Respondent’s counsel, Ronald S. Segal, dated February 22, 2011, he claimed that the Applicants had diverted $6,500,000.00 from the Hamilton community and had misapplied these sums to pay their own restructuring and reorganizations costs. This allegation was made in a letter which was reviewed by Hackland RSJ in a motion which sought the appointment of a case management judge to hear this proceeding.

[ 10 ] The Applicants note that during the week of August 2, 2011, in oral argument, Respondent’s counsel alleged that the Applicants had made false or deceptive statements in a Land Transfer Tax Affidavit. In their Supplementary Brief of Authorities, Respondent’s counsel provided the Court with the “Offences for False Statements” (section 6) of the Land Transfer Tax Act which refers to penalties for “deceptive”, “false”, and “misleading” statements in affidavits or documents in connection with land transactions.

[ 11 ] The Respondent claimed that hundreds of thousands of dollars were transferred to the Applicants from 2003 to 2007 in order to satisfy its disbursement quota. The Respondent alleged that this money was accumulated and in effect deliberately diverted away from charitable programs in Hamilton or from the “expansion” of charitable programs in Hamilton. The Applicants point out that the Respondent incorrectly claimed it was never aware that there was an accumulation of money in the Applicants’ deferred revenue account. In fact, the evidence demonstrated that the Respondent was aware that all deferred revenue was to be used to support the activities of VON Hamilton, including the renovation of the Adult Daycare Centre (“ADC”).

[ 12 ] Kate Bursey, the Respondent’s sole affiant, described this Application as the pursuit of “an unfounded claim in a desperate attempt to seize the Foundation’s assets”. During oral submissions and in Affidavit material filed at the outset of the hearing during the week of August 2, 2011, Ms. Kate Bursey alleged that the Applicants had “exploited” the Foundation’s silence on the litigation to actively contact persons in an effort to deliberately generate complaints from donors to the Foundation. Again, in the same Affidavit, Ms. Bursey alleged that members of the Applicants had engaged in behaviour for the purpose of “targeting” her in order to undermine this litigation or her personally.

[ 13 ] The Applicants also refer to this same Affidavit, where Ms. Bursey and another member of the Respondent Board of Directors, Ms. Edrupt, provided evidence which misled a donor by alleging that her policy insurance could not be assigned to the Applicant, VON Ontario Branch, because there was “no legal entity for the VON Hamilton in which to assign a life insurance policy to”. This suggested that VON Ontario Branch was not the successor to the original Branch and that there was no such entity. This assertion was contradicted by the Respondent’s own declarations in income tax returns and financial statements which certified that the Applicant, VON Ontario Branch, was the successor to the original VON Hamilton‑Wentworth Branch. Many of these certifications were made by Ms. Bursey herself. The Applicants emphasize that I determined that all of these allegations were unfounded.

Case Law

[ 14 ] The making of unsubstantiated or unproven allegations of dishonesty and deceit in a proceeding calls for the imposition of substantial indemnity costs. The Applicants cite Bargman v. Rooney , [1998] O.J. No.5528 , where Justice Blair, as he then was, stated this at paras. 18-19:

18 It matters not, in my view, at what stage in the proceedings the unproved allegations are levelled. Because of their extraordinarily serious nature - going, as they do, directly to the heart of a person's very integrity - allegations of fraud and dishonesty are simply not to be made unless there is every reasonable likelihood that they can be proved. The cost sanction exists in these circumstances to help ensure that such will be the case. As Winkler J. noted recently in The Toronto-Dominion Bank v. Leigh Instruments Limited (Trustee of) [1998] O.J. No. 4221 (at p. 10) ,

The court should not condone the recent trend in commercial cases of alleging fraud, seemingly without regard for the rule that fraud must be strictly pleaded and strictly proved.

19 I agree. The cost sanction should be imposed sharply and firmly by the Courts, in my opinion, at any stage in the proceedings when unsupported and unproven allegations of fraud and dishonesty are put forward. As Brockenshire J. noted, in Goulin v. Goulin (1995), 1995 7236 (ON SC) , 26 O.R. (3d) 472 (Gen. Div.), at pp. 475-476:

In my view the principle, as above stated [i.e. that unsupported and unproven allegations of fraud and dishonesty are good and sufficient reason to award solicitor-client costs] is not limited to decisions after trials or judicial hearings. The principle is one of general applicability. The point is to chastise or punish reprehensible conduct, and to save harmless an innocent litigant from the otherwise unnecessary expense of litigation ...

The nature of an award of solicitor-client costs is to increase the punishment as the improper conduct continues, and to encourage others to avoid such conduct.

(Decision continues exactly as in the original text.)

Mr. Justice Robert N. Beaudoin

Released: March 7, 2012