Endorsement on Costs
Court File No.: 09-45538
Date: 2012/04/25
Superior Court of Justice - Ontario
RE: THOMAS THEODORE ASSALY, CONOR ASSALY, a minor, HUNTER ASSALY, a minor, CARSON ASSALY, a minor, MAXIMILLIAM ASSALY, a minor, CHLOE ASSALY, a minor, ANGELI ASSALY, a minor, and CHAD ASSALY, a minor, by their Litigation Guardian KAREN ASSALY (Plaintiffs)
AND
GLORIA ASSALY (Defendant)
AND
ROBERT ASSALY, in his capacity as ESTATE TRUSTEE OF THE ESTATE OF THOMAS C. ASSALY (Third Party)
BEFORE: Mr. Justice Robert N. Beaudoin
COUNSEL:
Chantal Beaupré, for the Plaintiffs
Rodrigue Escayola, for the Defendant
Gail S. Nicholls, for the Third Party
HEARD: By Written Submissions
ENDORSEMENT ON COSTS
[ 1 ] The Moving Party, Gloria Assaly, successfully brought a motion to remove Andrew Lister and the law firm of Lister Beaupré as solicitors for the Plaintiffs. The motion was supported by the Third Party. This motion was made necessary following the hire of John E. Smith (“Smith”) as counsel for the firm of Lister Beaupré. Smith had previously acted for both Gloria Assaly and the late Thomas C. Assaly.
Costs being sought by the Moving Party
[ 2 ] The successful Moving Party incurred legal fees in excess of $20,892.00 plus disbursements and HST, and seeks its costs on a full indemnity basis.
[ 3 ] Even on a full indemnity basis, the Moving Party submits her costs are well in line with the quantum sought by the Respondents had they been successful, namely, $17,571,20.
[ 4 ] The Moving Party was entirely successful and notes my findings as follows:
• At the outset of the litigation, Smith recognized he was in a conflict of interest;
• Lister Beaupré was aware of the conflict of interest and acknowledged it;
• Smith was in possession of confidential information as a result of his previous retainers, which related directly to the matter in issue;
• Smith disclosed some of that confidential information ... including privileged and confidential information;
• It is evident that other members of the Lister Beaupré firm have discussed these matters with Smith;
• The measures taken to prevent the conflict were of no effect given the exchange of information with Smith;
• Smith used confidential information attributable to a solicitor and client relationship relevant to the matter at hand and he allowed it to be used to the prejudice of his former client; and
• The apparent and real conflict of interest should have been acknowledged from the outset.
[ 5 ] The Moving Party notes the following having regard to the factors found at Rule 57.01:
The principle of indemnity of costs awards
[ 6 ] The Moving Party’s Costs Outline was exchanged at the outset of the hearing and supports the calculation of costs requested.
The Moving Party was successful
[ 7 ] I concluded that I could not allow the firm to continue to act “by any measure of any test”.
Reasonable expectations of the parties
[ 8 ] According to their own Costs Outline, the Respondents indicated their intention of seeking $17,571.00 if successful. This is a strong indicator of what an unsuccessful party could have reasonably been expected to pay.
The conduct of the Respondents
[ 9 ] The evidence made it abundantly clear that there was a conflict of interest. All were aware of it and had acknowledged it. Lister Beaupré not only failed to implement adequate measures to prevent the spread of confidential and privileged information; they actually sought such information from Smith, who breached his solicitor‑client obligations in the most obvious of ways by disclosing it to them.
[ 10 ] The Moving Party adds that the conduct of the Respondents and of their solicitors in this case is so egregious that it warrants the exceptional imposition of costs on a substantial indemnity scale and despite the removal of Lister Beaupré, the damage already done to the Defendant and Third Party is likely irreversible and irreparable.
Importance of the Issues
[ 11 ] This matter was of the utmost importance to the Moving Party. It was essential to level the playing field by not allowing the Respondents to benefit from the unfair and unethical advantage of having unrestricted access to privileged and confidential information.
[ 12 ] This matter was not only paramount to the Moving Party but raised issues of importance to the public. This kind of behaviour on a solicitor’s part undermines the administration of justice and the public’s confidence in the profession.
[ 13 ] The Moving Party concludes that this motion should have never been contested. The costs of the motion were incurred as a result of Lister Beaupré’s failure to meet its obligations towards members of the public, the profession and the judicial system.
The Third Party’s Costs Submissions
[ 14 ] The Third Party and the Moving Party Defendant were united in interest, and were successful in having the Plaintiffs’ counsel removed. In that context, the Third Party’s costs on a full indemnity basis using the actual rates applicable plus HST were $11,359.32. On a partial indemnity basis, those costs, inclusive of HST are $10,090.90.
[ 15 ] Taking into account the experience factor, resulting in a higher hourly rate, the Third Party says its cost are completely in line with the costs sought by the unsuccessful Plaintiffs, on the basis of what they would have expected if successful.
[ 16 ] Having regard to the relevant factors, the Third Party notes:
The Third Party was successful
[ 17 ] I held that “by any measure of any test” the Plaintiffs’ counsel was conflicted and furthermore, the solicitor‑client privilege had been breached.
Should the Plaintiffs have opposed the Motion?
[ 18 ] The Third Party submits that it is difficult to imagine a more clear‑cut example of a conflict than this. There was a finding not only that there was a potential conflict, but that privileged information had been shared between Mr. Smith and Ms. Skowronski. That breach of solicitor‑client privilege was evident from the materials filed by the Plaintiffs’ solicitors.
The experience and specialization of the parties entitled to costs
[ 19 ] Counsel for the Third Party received her call in 1970, and hence has 42 years of experience at the Bar, and has specialized in the area of Estate Litigation, Estate Planning and Administration. She maintains that her hourly rate of $450.00 is entirely in line with the rate charged by competent senior lawyers. This as compared to an hourly rate of $350.00 and $240.00 charged by Andrew Lister and Chantal Beaupré called in 1994 and 2004 respectively, neither of whom are noted as Estate litigation specialists.
The reasonable expectation of the unsuccessful parties as to quantum
[ 20 ] In their Costs Outline, Plaintiffs’ counsel discloses that four lawyers spent 62.5 hours at varying rates. In addition, their claim for costs includes an articling student’s time of 9.75 hours. The Third Party therefore submitted that her time of 17.2 hours plus a counsel fee on the motion are entirely within the expectations of the Plaintiffs.
The conduct of the parties
[ 21 ] The Third Party repeats that this matter should never have been defended and argues that in the face of the conflict which was acknowledged from the outset by Mr. Smith, and reiterated by him on a number of occasions, Plaintiffs’ counsel should have resiled from the file the moment that Mr. Smith joined Lister Beaupré. Counsel continued to represent the Plaintiffs and to seek and obtain confidential information from Mr. Smith. Mr. Smith was clearly in breach of his solicitor‑client obligations of confidentiality.
[ 22 ] The Third Party suggests that to the extent that costs on a full indemnity basis are not awarded to the Third Party against the Litigation Guardian for the Plaintiffs, any difference between full indemnity and substantial indemnity costs awarded should be the subject of an order pursuant to Rule 57.07 (1) of the Rules of Civil Procedure requiring Lister Beaupré personally to pay the differential between full and substantial indemnity costs of the Moving Party and the Third Party.
The importance of the issues
[ 23 ] As noted by the Defendant, the Third Party claims that Plaintiffs’ counsel and the Plaintiffs have had unrestricted access to privileged and confidential information gleaned by Mr. Smith during his several years of dealing with the Defendant and the deceased on numerous different retainers, and more importantly, gleaned by him in the days immediately preceding the remarriage. This information relates to the capacity of the deceased – the very issue which is the subject matter of this proceeding. The Third Party suggests that the harm caused to the Moving Party’s position may well be irreparable.
[ 24 ] The Third Party concludes that this issue is of incalculable importance from a public policy point of view, in that this kind of behaviour must be discouraged in order to maintain the integrity of the profession and the administration of justice, as well as the confidence of the public in both.
The Plaintiffs’ (Responding Parties’) Submissions on Costs
[ 25 ] The Respondents submit that the Moving Party is entitled to costs on a substantial indemnity basis and that the Third Party is not entitled to costs. The Respondents note the following costs figures as set out in the parties’ respective Costs Outlines:
Moving Party $24,905.98
Third Party $11,359.32
Respondents $17,571.20
[ 26 ] Although the Moving Party was successful on its motion, the Respondents claim that the outcome of the motion could not have been predicted with certainty. They say that the decision focused on a small aspect of the facts and law at issue which were not the focus of the Moving Party’s Notice of Motion and factum. They say it was reasonable for the Plaintiffs and the Plaintiffs’ solicitors to have defended the motion.
[ 27 ] The Respondents argue that their expectation of costs is not within the range to the costs submitted by the Moving Party. The costs requested by the Moving Party alone are about 17% higher than those of the Respondents.
[ 28 ] The Respondents cite case law that has held that substantial indemnity costs are to be awarded only in rare and exceptional cases. Costs on a substantial indemnity scale are justified only when a high standard of misconduct is present. Costs on a substantial indemnity scale are viewed as a form of chastisement.
[ 29 ] Absent reprehensible, scandalous or outrageous conduct on the part of one of the parties, the usual practice is to award costs on a partial indemnity scale.
[ 30 ] For these reasons, the Respondents submit that I should order costs on a partial indemnity basis in the amount of $15,549.74.
Costs Requested by the Third Party
[ 31 ] The Respondents claim that the Third Party’s costs are a duplication of the Moving Party’s costs and that they should not be liable for the Third Party’s costs because the Third Party supported the Moving Party in its motion. The Respondents add that simply because the Third Party submitted the only affidavit relied upon by the Moving Party in its motion, this does not justify its claim for costs.
[ 32 ] If the costs requested by the Third Party are added to the costs requested by the Moving Party, those parties are seeking 2.5 times the amount of costs spent by the Respondents on this motion.
[ 33 ] As for the claim that the solicitors personally pay any part of the claims for costs, the Respondents’ solicitors note that the Rule 57.07 of the Rules of Civil Procedure indicate that a solicitor may be ordered to pay costs personally where the solicitor has caused costs to be incurred without reasonable cause or to be wasted by undue delay, negligence or other default. The negligence must be gross negligence or dereliction of professional duty. They cite and rely on 931473 Ontario Ltd. v. Coldwell Banker Canada Inc ., 5 C.P.C. (3d) 271 (Gen. Div.) .
[ 34 ] In the event that I determine that the Third Party is entitled to some costs, those costs should not exceed $2,021.26, all inclusive, which is the difference between the Moving Party’s costs on a partial indemnity basis and the Respondents’ costs on a full indemnity basis.
Third Party Reply
[ 35 ] The Third Party has filed a response to the allegation of duplication of costs of the Defendant and the Third Party. She cites long established case law, namely, Rogers v. Davis et al ., 1932 10 (SCC) , [1932] SCR 546, which determined that Respondents with a similar interest in a proceeding were entitled to retain separate firms of solicitors and, even though those separate firms had filed a joint factum, they were, nevertheless, entitled to a separate bill of costs.
[ 36 ] The Third Party and the Defendant determined that it was in the interests of all parties and the most cost efficient deployment of resources to tender a joint factum. The Third Party`s counsel notes her claim for costs is limited to the work performed on behalf of the Third Party which included drafting the Affidavit, support of the Motion, attendance on the Cross‑Examination of the Moving Party and attendance on the return of the Motion. She adds that Counsel for the Defendant and the Third Party have endeavoured, wherever their interests have coincided, to strive for a division of labour in order to avoid a duplication. She says this decision had the salutary effect of reducing costs, not duplicating or adding to them and as a consequence, the Respondents should not be heard to complain.
Conclusion
[ 37 ] John E. Smith acted for both Gloria Assaly and the late Thomas C. Assaly. His retainers related closely to the matters in issue in these proceedings which were commenced in July 2009. Although he made a brief appearance on behalf of the Plaintiffs at a Case Conference in January 2011, he acknowledged his conflict of interest and indicated that he was appearing only as an agent since the Plaintiffs were having difficulties with their then counsel. At that Case Conference, he handed out a copy of the late Thomas C. Assaly’s will. In February 2011, the Plaintiffs retained Lister Beaupré but then, in August, 2011, Mr. Smith joined the law firm as counsel to the firm. That decision alone would have raised great concerns with regard to the appearance of a conflict of interest on behalf of Lister Beaupré. Every precaution should have been taken to ensure that no confidential information would be shared. That was not done. If the adequacies of the screening measures had been the only issue, I could have understood why Lister Beaupré might have resisted this motion.
[ 38 ] Incredibly, in order to respond to this motion, Lister Beaupré then did the very thing they should have avoided at all costs. Lister Beaupré shared information about this motion with John Smith and he in turn provided them with a memorandum that breached solicitor‑client privilege and divulged confidential information relating to the very matters in issue. Lister Beaupré then included this information in their motion record and placed it before the court. Lister Beaupré not only continued to resist the motion, but cross‑examinations on affidavits and argument were required. This motion should never have been defended.
[ 39 ] The conduct of the Plaintiffs and of their counsel is deserving of sanction. This kind of behaviour must be discouraged in order to maintain the integrity of the profession and the confidence of the public in the legal profession. Lister Beaupré prepared the responding materials and they must take some responsibility for inviting Mr. Smith to breach his duty of confidentiality to his former clients. As Justice Sutherland said in 931473 Ontario Ltd . at para. 29, citing Lord Denning in R. & T. Thew Ltd. v. Reeves ( No.2), [1982] Q.B. 1283; [1982] 3 All E.R. 1086 (C.A.) :
The cases show that it [payment of costs by solicitors] is not available in cases of mistake, error of judgment or mere negligence. It is only available where the conduct of the solicitor is inexcusable and such as to merit reproof.
[ 40 ] In this case, the conduct of the solicitors merits reproof. This is one of the exceptional cases where imposition of costs on a full indemnity basis is warranted. The Moving Party’s costs are assessed at $24,905.68 and the Third Party’s costs are assessed at $11,359.32. Those costs should be paid 75% by the Plaintiffs and 25% by the solicitors personally.
Mr. Justice Robert N. Beaudoin
Date: April 25, 2012
COURT FILE NO.: 09-45538
DATE: 2012/04/25
SUPERIOR COURT OF JUSTICE - ONTARIO RE: THOMAS THEODORE ASSALY, CONOR ASSALY, a minor, HUNTER ASSALY, a minor, CARSON ASSALY, a minor, MAXIMILLIAM ASSALY, a minor, CHLOE ASSALY, a minor, ANGELI ASSALY, a minor, and CHAD ASSALY, a minor, by their Litigation Guardian KAREN ASSALY (Plaintiffs) AND GLORIA ASSALY (Defendant) AND ROBERT ASSALY, in his capacity as ESTATE TRUSTEE OF THE ESTATE OF THOMAS C. ASSALY (Third Party) BEFORE: Mr. Justice Robert N. Beaudoin COUNSEL: Chantal Beaupré, for the Plaintiffs Rodrigue Escayola, for the Defendant Gail S. Nicholls, for the Third Party ENDORSEMENT on costs Beaudoin J.
Released: April 25, 2012