SUPERIOR COURT OF JUSTICE – ONTARIO
RE: Russell Murray and Jason Vermeulen, as Trustees of Crossroads Christian Fellowship and in their personal capacity, applicants
AND:
JoAnn Highfield, Steven Authier and Roy Bezanson, respondents
RE: JoAnn Highfield, Steven Authier and Roy Bezanson as Trustees of Crossroads Christian Fellowship and in their personal capacity, applicants
AND:
Russell Murray and Jason Vermeulen, respondents
BEFORE: MITROW J.
COUNSEL: James E. Allin for the applicants (file #4533/06) and for the respondents (file #4604/07)
Edward A. Kalnins for the respondents (file #4533/06) and for the applicants (file #4604/07)
Dana De Sante for the Office of the Public Guardian and Trustee
HEARD: March 8 and April 11, 2012 and written submissions filed
ENDORSEMENT REGARDING SELECTION OF CHARITIES,
MONEY PAID INTO COURT AND COSTS
INTRODUCTION
1Pursuant to my judgment released November 25, 2011, the following three outstanding matters were left to be determined:
a) approval of the charities entitled to share in the money held in court;
b) determining the amount of money that should be paid from the money held in court to World Harvest Church; and
c) costs.
2The judgment set out a procedure for the respondents, JoAnn Highfield (“Ms. Highfield”) and Steven Authier (“Mr. Authier”), to select the charities entitled to share in the funds paid into court. The Public Guardian and Trustee, who did not appear at trial, was required to make brief written submissions as to whether the Public Guardian and Trustee had any objection to the proposed charities selected by the respondents. In addition, the judgment required any party who intended to claim costs out of the money held in court to provide written notice of such intention to the other parties and to the Public Guardian and Trustee and if such notice was given, the Public Guardian and Trustee was required to make written submissions on that issue. Further, the Public Guardian and Trustee was permitted, if requested, to be present in court to make submissions and the Public Guardian and Trustee did make submissions at the hearing of the three remaining issues.
3The issues identified in subparagraphs a) and b) above were resolved by counsel and only the issue of costs was argued. After this matter was argued on March 8, 2012, further oral submissions were heard “on the record” via a telephone conference held on April 11, 2012.
4For ease of reference for the balance of these reasons, “applicants” means Russell Murray (“Mr. Murray”) and Jason Vermeulen (“Mr. Vermeulen”) and “respondents” means JoAnn Highfield and Steven Authier. (As set out in the judgment, Roy Bezanson died prior to trial and on consent all claims by or against him were dismissed without costs.)
FUNDS HELD IN COURT AND CONSENT ORDERS
5The process set out in the judgment for approval of the charities was followed. The judgment did not permit the applicants to be involved in selecting the charities and the applicants took no position as to the charities that were selected. The Public Guardian and Trustee and the respondents agree, and I approve, the following charities to share in the net funds remaining in court after payment of all other amounts as set out herein:
a) 48% shall be paid to the Salvation Army Chatham-Kent Ministry and these funds shall be applied 50% for its pastoral services in the Wallaceburg, Ontario area and 50% for its food bank programs in Wallaceburg, Ontario;
b) 26% shall be paid to the Living Word Assembly Church in Wallaceburg, Ontario;
c) 13% shall be paid to The Gideon’s International in Canada; and
d) 13% shall be paid to the Christian Faith in Action Support Services (also known as Neighbour Link Chatham-Kent).
6The amount to be reimbursed to the World Harvest Church is agreed at $2,970.50.
7The Public Guardian and Trustee requested modest reimbursement of expenses totalling $261.80. There was no opposition to this request and that amount shall be paid as requested from the funds held in court.
8As of February 9, 2012, the sum of $79,586.41 was the amount held in court and this consisted of the net sale proceeds of a little over $69,000 from the sale of the church property, plus a little over $10,000 in accrued interest.
9The respondents’ counsel is in receipt of certified funds totalling $4,100 required to be paid by the applicants pursuant to the judgment. Accordingly, the total funds available for distribution total $83,686.41 plus any further accrued interest.
COSTS
(a) Position of the Parties
10The respondents filed detailed bills of costs both on a partial indemnity basis and substantial indemnity basis. On a partial indemnity basis, the respondents quantify their costs at $61,889 for fees, together with disbursements of $4,022.33, plus taxes as applicable, for a total of $71,875.50. The respondents quantify costs on a substantial indemnity at $93,356.55 for fees, $4,022.33 for disbursements and taxes as applicable, for a total amount of $106,224. The respondents further refine their costs claim by quantifying full indemnity costs at $103,729.50 for fees, $4,022.33 for disbursements and taxes as applicable, for a total of $117,547.07.
11The respondents rely on the findings made at trial and submit that this case merits an award of costs on at least a substantial indemnity basis and that a portion of those costs should be paid out of the funds held in court.
12The applicants submit they are entitled to the costs that they incurred in bringing this proceeding and that those costs should be paid out of the funds held in court. The applicants initially submitted that this amount should be $45,947.60 (being the amounts billed by trial counsel) plus any additional time for preparation and attendance in court. It should be noted that Mr. Allin, who represented the applicants at the hearing subsequent to trial, was not trial counsel. After the judgment was released, Mr. Allin assumed carriage of this file and received information from Mr. Mayes (who was trial counsel) as to the fees and disbursements incurred. As some issue developed regarding whether Mr. Mayes’ entire fees and disbursements were before the court when this matter was first argued on March 8, 2012, counsel requested an opportunity for additional submissions and, when that occurred on April 11, 2012, it was somewhat unclear exactly what Mr. Mayes’ accounts totalled and Mr. Allin, quite candidly and doing the best he could, was unable to provide any further explanation except what Mr. Mayes had forwarded. Based on the additional exhibits filed at the April 11th hearing and further submissions of counsel, I find that Mr. Mayes’ accounts totalled a little under $73,000 inclusive of fees, disbursements and taxes and to that must be added Mr. Allin’s account for work he did subsequent to assuming carriage of the file, which totals another $15,943.68 inclusive of fees at $13,513, disbursements at $596.45 and the balance being HST.
13The Public Guardian and Trustee submitted that based on the findings made at trial the applicants should be ordered to pay costs on a substantial indemnity basis. In relation to whether any money should be paid out of court, the Public Guardian and Trustee submitted that the respondents should be entitled to some payment not to exceed one-third of the money held in court. It was the position of the Public Guardian and Trustee that the respondents were acting in their capacity as trustees and for the benefit of the trust. In relation to the applicants, the Public Guardian and Trustee submitted that the applicants were not neutral parties seeking the direction of the court, nor did the applicants appear to be advocating on behalf of the church or attempting to act in its best interests. It was submitted that the applicants were personally interested in using the assets of the church to help establish a new church for Mr. Murray and that the applicants “descended into the arena of litigation primarily for their own indirect personal interests and, accordingly, should not be shielded by the fact that they were also trustees.”
14The Public Guardian and Trustee submitted it would be consistent with the expectation of the “losing” party (being the applicants) to have expected substantial indemnity costs to fall in the range of $80,000 to $90,000.
15The Public Guardian and Trustee further submitted that in order to avoid double recovery of costs by the respondents, that if the respondents received from the applicants an amount that is greater than the assessed costs minus the amount paid out of court, then the difference should be paid to the Public Guardian and Trustee in trust to be distributed pro rata to the charities named in the order.
(b) Discussion
16It is not necessary to repeat in these reasons in any detail the findings that were made in the judgment. There is no dispute that the applicants were unsuccessful in their position advanced at trial. The trial judgment rejected entirely the position advanced by the applicants, agreeing instead with the respondents that the church had in fact closed, and that all assets of the church were to be liquidated. The judgment included a finding that the congregation had agreed the church assets would be distributed to charity. The entire theory of the applicants’ position at trial, including their contention that the church had never closed and in fact continued as the same church (now known as the World Harvest Church) but in a different location, was rejected entirely.
17In relation to Mr. Murray, findings made at trial included that he was in breach of trust for taking the proceeds of $2,000 in relation to the motor home, which was property belonging to the church, had a conflict of interest in instructing his daughter to increase his housing allowance (his daughter was the treasurer at the time) and that together with Mr. Vermeulen he appropriated $2,000 worth of property belonging to the church. A finding was also made at trial that Mr. Murray had asked his daughter to prepare a document falsely confirming that Ms. Highfield had resigned as a trustee and that Mr. Murray told his daughter that if she did not do this, this would affect their “father/daughter relationship.” At trial, Mr. Murray’s daughter was called by the respondents to testify against her father. Para. 103 of the judgment stated as follows:
The admission made by Mr. Murray in cross-examination telling his daughter not to testify for the Respondents under threat that this would affect his relationship with his daughter was done with one clear purpose in mind and that was to limit any damaging evidence she may give at trial. Mr. Murray was attempting to intimidate a witness, his own daughter, from testifying. It shows Mr. Murray was prepared to use his parental authority for a misguided purpose. This takes on heightened significance considering the evidence of Ms. Cartier relating to breach of trust issues. This evidence, coupled with Mr. Murray’s ultimatum to his daughter that she either prepare a document falsely attesting to Ms. Highfield’s resignation as a trustee or risk affecting their father/daughter relationship, reflects poorly on Mr. Murray’s ability to exercise good judgment, especially considering his leadership role as a pastor and importantly is a factor to be considered in assessing his credibility and the proper weight to be given to his evidence in this trial.
18The respondents submitted that the usual rules which apply to costs in civil litigation have no application in the present case because the applicants were acting in their role as trustees in commencing this litigation and, as such, their legal costs are expenses reasonably incurred on behalf of the trust for which they should be reimbursed from money held in court.
19Although this point was capably argued by Mr. Allin, I respectfully do not accept that submission. The proper approach in dealing with cases involving estates, which can by analogy be extended to the present case involving trustees in the church, is to follow the costs rules that apply in civil litigation. In McDougald Estate v. Gooderham, [2005] O.J. No. 2432, 255 D.L.R. (4th) 435, 199 O.A.C. 203, 17 E.T.R. (3d) 36, 140 A.C.W.S. (3d) 220, 2005 21091, 2005 CarswellOnt 2407 (Ont. C.A.), the court stated as follows in relation to costs and estate litigation:
80 However, the traditional approach has been – in my view, correctly – displaced. The modern approach to fixing costs in estate litigation is to carefully scrutinize the litigation and, unless the court finds that one or more of the public policy considerations set out above applies, to follow the costs rules that apply ...
85 The modern approach to awarding costs, at first instance, in estate litigation recognises the important role that courts play in ensuring that only valid wills executed by competent testators are propounded. It also recognises the need to restrict unwarranted litigation and protect estates from being depleted by litigation. Gone are the days when the costs of all parties are so routinely ordered payable out of the estate that people perceive there is nothing to be lost in pursuing estate litigation. [my emphasis]
20In Davies v. Clarington (Municipality) (2009), 2009 ONCA 722, 100 O.R. (3d) 66 (Ont. C.A.), the Ontario Court of Appeal summarized the law as to when substantial indemnity costs may be ordered at paras. 29 and 30:
[29] In Young v. Young, 1993 34 (SCC), [1993] 4 S.C.R. 3, [1993] S.C.J. No. 112, at p. 134 S.C.R., McLachlin J. described the circumstances when elevated costs are warranted as "only where there has been reprehensible, scandalous or outrageous conduct on the part of one of the parties".
[30] The same principle was expanded upon in Mortimer v. Cameron (1994), 1994 10998 (ON CA), 17 O.R. (3d) 1, [1994] O.J. No. 277 (C.A.), at p. 23 O.R., where Robins J.A., speaking for the court, set out the restricted circumstances in which a higher costs scale is appropriate with reference to Orkin, at para. 219. [page75]
An award of costs on the solicitor-and-client scale, it has been said, is ordered only in rare and exceptional cases to mark the court's disapproval of the conduct of a party in the litigation. The principle guiding the decision to award solicitor-and-client costs has been enunciated thus:
[S]olicitor-and-client costs should not be awarded unless there is some form of reprehensible conduct, either in the circumstances giving rise to the cause of action, or in the proceedings, which makes such costs desirable as a form of chastisement.
21I find that the conduct of Mr. Murray, as described in the judgment, reaches the level to attract substantial indemnity costs. Mr. Murray’s conduct is properly described as reprehensible. Mr. Murray was found to be in breach of trust. He attempted to influence the evidence of his own daughter, who was a witness, and he asked his daughter to prepare a false document to support his theory of the case that Ms. Highfield was no longer a trustee. Mr. Murray was not acting in the interests of the church but, rather, was pursuing his own interests to utilize the assets of the church to establish a new church where he was the pastor.
22The respondents are entitled to have their costs of the trial on a substantial indemnity basis.
23This, however, brings into focus a significant issue. What is the proper amount of costs?
24In exercising discretion as to costs, the governing provisions are s. 131 of the Courts of Justice Act, R.S.O. 1990, c. C.43 [as am. by S.O. 1991, c.46] and r. 57.01, including the factors listed in r. 57.01(1).
25In Davies, supra, the Ontario Court of Appeal set out some principles that must be considered when awarding costs in paras. 51 and 52 as follows:
In Andersen v. St. Jude Medical, Inc., 2006 85158 (ON SCDC), [2006] O.J. No. 508, 264 D.L.R. (4th) 557 (Div. Ct.), the Divisional Court set out several principles that must be considered when awarding costs [at para. 22]:
(1) The discretion of the court must be exercised in light of the specific facts and circumstances of the case in relation to the factors set out in rule 57.01(1): Boucher, Moon and [page79 ] Coldmatic Refrigeration of Canada Ltd. v. Leveltek Processing LLC (2005), 2005 1042 (ON CA), 75 O.R. (3d) 638, [2005] O.J. No. 160 (C.A.).
(2) A consideration of experience, rates charged and hours spent is appropriate, but is subject to the overriding principle of reasonableness as applied to the factual matrix of the particular case: Boucher. The quantum should reflect an amount the court considers to be fair and reasonable rather than any exact measure of the actual costs to the successful litigant: Zesta Engineering Ltd. v. Cloutier, 2002 25577 (ON CA), [2002] O.J. No. 4495, 118 A.C.W.S. (3d) 341 (C.A.), at para. 4.
(3) The reasonable expectation of the unsuccessful party is one of the factors to be considered in determining an amount that is fair and reasonable: rule 57.01(1)(0.b).
(4) The court should seek to avoid inconsistency with comparable awards in other cases. "Like cases, [if they can be found], should conclude with like substantive results": Murano v. Bank of Montreal (1998), 1998 5633 (ON CA), 41 O.R. (3d) 222, [1998] O.J. No. 2897 (C.A.), at p. 249 O.R.
(5) The court should seek to balance the indemnity principle with the fundamental objective of access to justice: Boucher.
As can be seen, the overriding principle is reasonableness. If the judge fails to consider the reasonableness of the costs award, then the result can be contrary to the fundamental objective of access to justice. Rather than engage in a purely mathematical exercise, the judge awarding costs should reflect on what the court views as a reasonable amount that should be paid by the unsuccessful party rather than any exact measure of the actual costs of the successful litigant. In Boucher, this court emphasized the importance of fixing costs in an amount that is fair and reasonable for the unsuccessful party to pay in the particular proceeding, at para. 37, where Armstrong J.A. said "[t]he failure to refer, in assessing costs, to the overriding principle of reasonableness, can produce a result that is contrary to the fundamental objective of access to justice".
26In assessing the “reasonableness” of costs to be awarded, the test of proportionality set out in r. 1.04(1.1) is an important consideration. This subrule provides as follows:
In applying these rules, the court shall make orders and give directions that are proportionate to the importance and complexity of the issues, and to the amount involved, in the proceeding.
27This case was “fought” primarily by two opponents, namely Ms. Highfield and Mr. Murray. The other surviving respondent, Mr. Authier, had been, but was not a trustee when the proceeding was commenced. The applicant, Mr. Vermeulen, was never a trustee. This finding was made at trial, despite the applicants’ contention that Mr. Vermeulen was a trustee. The centre of the dispute in this case was in relation to the sum of approximately $69,000, being the net sale proceeds which were paid into court, on consent, after the church property was sold following the commencement of this case. Crossroads Christian Fellowship (“Crossroads”) was the small non-denominational rural church at the centre of these proceedings. It would be most unlikely that anyone would have commenced this court case had it not been for the money held in court.
28The Ontario Court of Appeal in Davies, supra, has directed that a judge awarding costs must reflect on what the court views is a reasonable amount that should be paid by the unsuccessful party, rather than any exact measure of the actual costs of a successful litigant. I find that the costs claimed by the respondents on the facts of this case, given the amount involved, are excessive and beyond any outer limits of what is reasonable. I do agree with the submission made by Mr. Allin that if the respondents wanted to spend unlimited amounts of money to pursue their case, then they were entitled to do so, but that the respondents cannot saddle the “losing parties” with significant costs which are unreasonable and disproportionate to what was at stake.
29For reasons explained later, it is important in this case to quantify costs both on a partial and substantial indemnity basis.
30As required, one of the factors to consider is the reasonable expectation of the unsuccessful party. While the costs incurred by both applicants and respondents was high, I must make an award that is reasonable.
31In relation to offers, there were offers exchanged but none that fell within the automatic cost consequences set out in r. 49.10.
32This court case simply spun out of control. Parties were investing time, effort and resources well beyond what this case was worth. The combined substantial indemnity costs claimed by both parties exceeded $190,000 representing approximately 275% of the value of the net sale proceeds from the sale of the church.
33Considering s. 131 of the Courts of Justice Act, r. 57.01, including the factors set out in r. 57.01(1), the offers to settle, the proportionality test and the overriding principle of reasonableness, I find that a reasonable assessment of partial indemnity costs is $40,000 and that a reasonable assessment of substantial indemnity costs is $60,000, with both of those amounts being inclusive of disbursements and taxes.
34I raised with counsel on April 11, 2012 the issue of whether costs have to be apportioned between the “losing parties” on the basis of joint and several liability. All counsel agreed that the court’s discretion in awarding costs was wide enough to apportion costs of a “losing party” other than on a joint and several liability basis.
35In the present circumstances, I find that Mr. Murray should bear more of the costs burden than Mr. Vermeulen. On the whole, Mr. Murray was the principal litigator on behalf of the applicants. Mr. Vermeulen was more of a follower, although he did engage jointly in some conduct with Mr. Murray as set out in the judgment.
36I do not find any conduct by Mr. Vermeulen that warrants any costs assessment against him on a substantial indemnity basis. I find that the basis of assessing costs on a substantial indemnity basis relates to the conduct of Mr. Murray.
37There is precedent for departure from the general principle of imposing costs against losing parties on a joint and several liability basis. In Greenhalgh v. Douro-Drummer (Township), [2011] O.J. No. 1657, 2011 ONSC 2064, 82 M.P.L.R. (4th) 128, 2011 CarswellOnt 2397 (Ont. S.C.J.), the court declined to make claimants pursuant to Part V of the Family Law Act jointly and severally liable for costs with the main plaintiff. In Baldwin v. Daubney, 2006 33317 (ON SC), [2006] O.J. No. 3919, [2005] O.T.C. 1047, 21 B.L.R. (4th) 232, 152 A.C.W.S. (3d) 32, 2006 CarswellOnt 5899 (Ont. S.C.), after considering the magnitude of the defendants’ costs claimed and the limited resources of the plaintiffs, the court felt it appropriate to depart from the general rule that costs are to be awarded against multiple plaintiffs on a joint and several basis. Finally, in Adamson v. 544461 Ontario Ltd., [2005] O.J. No. 770, 137 A.C.W.S. (3d) 702 (Ont. S.C.J.), the defendants were entitled to costs on a partial indemnity basis but the court found that one of the plaintiffs was responsible for driving up the costs and, because of that conduct, the court ordered one particular plaintiff to bear more of the costs than the other plaintiffs.
38In relation to the issue of paying some costs out of the funds held in court, I adopt the submissions of the Public Guardian and Trustee that, on a principled approach, there needs to be a maximum imposed on what should be paid out of court to satisfy costs. Although Ms. Highfield was not acting in her self-interest but acting within her role as a trustee, it would be unreasonable to expect that the entire substantial indemnity costs should be paid out of the funds held in court. The beneficiaries of this money are other charities, given that the charity which owned the land, namely Crossroads, ceased to exist.
39It is appropriate that the sum of $20,000 be paid out to the respondents for costs from the money held in court. The issue now arises as to whether the applicants should “benefit” from this because it reduces the costs that they otherwise would have to pay.
40One of the factors to consider is the lack of a trust declaration or any other document that could have assisted the members of the church as to dealing with the sale proceeds after the closure of the church. There were no clear rules for trustees to follow and no definition of who was a church member. The lack of membership criteria contributed to the length of the litigation. I find it appropriate that some costs should be borne by the trust. I am not prepared to require the applicants to pay any portion of the costs payable out of the money held in court.
41The applicants have incurred their own costs in this matter. In rejecting the approach urged on me by Mr. Allin, it follows that the applicants will not be entitled to any reimbursement of their costs out of the money held in court.
42After the $20,000 payment is made out of court, the sum of $40,000 remains outstanding to be paid.
43It is necessary to apportion that money as between Mr. Vermeulen and Mr. Murray. In doing so, I find it is appropriate and reasonable to treat the $20,000 being paid out of court as being paid “on account of” the partial indemnity costs of $40,000. I find that Mr. Vermeulen and Mr. Murray should be jointly and severally responsible for the remaining partial indemnity portion of the costs, which would be $20,000 ($40,000 partial indemnity costs minus $20,000 paid out of court). The remaining $20,000, which is the difference between partial indemnity costs and substantial indemnity costs, shall be paid solely by Mr. Murray.
ORDER
44For the foregoing reasons, an order shall issue as follows:
The respondents are entitled to their costs on a substantial indemnity basis fixed in the amount of $60,000 inclusive of disbursements and GST and HST as applicable.
In partial satisfaction of the costs order in paragraph 1, the sum of $20,000 shall be paid to the respondents JoAnn Highfield and Steven Authier as follows:
a) the sum of $4,100 being held in trust by the respondent JoAnn Highfield shall be released to the respondents, JoAnn Highfield and Steven Authier;
b) the balance of $15,900 shall be paid to the respondents, JoAnn Highfield and Steven Authier out of the money held in court;
c) the amounts set out in subparagraphs a) and b) shall be paid to Lerners LLP in trust, solicitors for the respondents, JoAnn Highfield and Steven Authier, if a direction to this effect, signed by the said respondents, is filed with the court.
The sum of $2,970.50 shall be paid out of the money held in court to the applicants’ solicitor, Mr. James Allin, in trust, and this amount shall be forwarded by Mr. Allin by cheque payable to World Harvest Church and this cheque shall be forwarded to an address as specified by a written direction of a person who is a director or trustee of World Harvest Church and presentation of such a signed direction to Mr. Allin shall be good and sufficient authority for Mr. Allin to forward the cheque to the address as directed.
The sum of $261.80 shall be paid out of the money held in court to the Office of the Public Guardian and Trustee in satisfaction of disbursements incurred by the Public Guardian and Trustee.
The balance of the $40,000 remaining in costs shall be paid by the applicants to the respondents as follows:
a) the applicant, Russell Murray, shall pay to the respondents, JoAnn Highfield and Steven Authier, the sum of $20,000;
b) the balance of $20,000 shall be paid by the applicants, Russell Murray and Jason Vermeulen, to the respondents, JoAnn Highfield and Steven Authier, and the said applicants are jointly and severally liable to pay this amount.
The balance of the money held in court, together with any accrued interest, shall be paid to the following charities in proportions as shown:
a) 48% shall be paid to the Salvation Army Chatham-Kent Ministry and these funds shall be applied 50% for its pastoral services in the Wallaceburg, Ontario area and 50% for its food bank programs in Wallaceburg, Ontario;
b) 26% shall be paid to the Living Word Assembly Church in Wallaceburg, Ontario;
c) 13% shall be paid to The Gideon’s International in Canada; and
d) 13% shall be paid to the Christian Faith in Action Support Services (also known as Neighbour Link Chatham-Kent).
“Justice Victor Mitrow”
Justice Victor Mitrow
Date: May 7, 2012