SUPERIOR COURT OF JUSTICE - ONTARIO
COURT FILE NO.: 6503/06
DATE: 20120606
RE: JAMES B. HAWLEY, a partner of STEPPE FINANCIAL PARTNERSHIP, Plaintiff
AND:
JOHN PENNINGTON, HOWARD RUBINOFF and FOGLER RUBINOFF LLP, Defendants
BEFORE: HOURIGAN J.
COUNSEL:
Ronald S. Sleightholm, Counsel for the Plaintiff
Craig R. Colraine, Counsel for the Defendant John Pennington
Christine Fotopoulos, Counsel for the Defendants Howard Rubinoff and Fogler Rubinoff LLP.
COSTS ENDORSEMENT
[ 1 ] This costs endorsement is further to my endorsement of March 12, 2012 wherein I granted the motions of John Pennington and Howard Rubinoff and Fogler Rubinoff LLP for summary judgment.
[ 2 ] I found that the action should be stayed as an abuse of process in that the plaintiff was attempting to make a collateral attack on the decisions of Justice Farley and the Court of Appeal in an earlier proceeding.
[ 3 ] I noted that with respect to the conduct of Mr. Rubinoff and his firm, that at the hearing of the motion the plaintiff alleged that they were in a conflict of interest. I determined that there was, in fact, no conflict.
[ 4 ] I found that the statement of claim included a vague assertion that Mr. Rubinoff and his firm acted against the plaintiff’s interests for their own financial gain. That claim too was dismissed as the plaintiff offered no proof whatsoever in support of the allegation and, in the face of the summary judgment motion, did not even bother to examine Mr. Rubinoff.
[ 5 ] I concluded that the case cried out for dismissal on a summary basis and that it was a frivolous and rather obvious effort to get around the previous court rulings.
[ 6 ] The defendant, John Pennington, seeks costs on a substantial indemnity scale of $29,099.23 or, in the alternative, on a partial indemnity scale of $21,286.79. Mr. Pennington submits that costs should be awarded on a substantial indemnity scale as the case was an abuse of process and a collateral attack. He also notes that the claim itself was not properly pleaded and relies upon Rule 57.01(f).
[ 7 ] The defendants, Mr. Rubinoff and Fogler Rubinoff LLP, also seek costs on a substantial indemnity scale of $39,295.75, plus disbursements of $1,547.73. These defendants note that the claim called into question Mr. Rubinoff’s conduct and ethical standards as a solicitor and that the plaintiff failed to adduce any evidence to support his bald accusations. These defendants submit that the thrust of the allegations made against them were in the nature of a planned scheme or conspiracy involving Mr. Rubinoff and Mr. Pennington designed to deprive Mr. Hawley of income.
[ 8 ] The plaintiff submits that this is not a case where substantial indemnity costs is warranted because the claim against Mr. Rubinoff and his firm was that they had breached their contract and fiduciary duties to 5400 Dixie Road Inc. and Steepe Financial Partnership. Further, the plaintiff argues that no allegations of fraud, illegality or conspiracy were made. He submits that a claim based on a lawyer’s breach of contract or fiduciary duty and/or conflict of interest does not engage concepts of fraud, illegality or conspiracy.
[ 9 ] Costs on a higher scale should only be awarded in rare and exceptional cases to mark the court’s disapproval of the conduct of a party in the litigation. An improper allegation of fraudulent or similar conduct will often attract a costs sanction.
[ 10 ] In Unisys Canada Inc. v. York Three Associates Inc. , [2000] O.J. No. 3622 , Justice Sutherland found that the fact that the word “fraud” was not used to describe a lawyers’ conduct does not shelter a plaintiff from an award of costs on a higher scale:
Where allegations of impropriety or illegality such as would seriously prejudice the character of a party are made and the conduct is not proven, and then more so when they are shown to have no evidentiary basis, the word “fraud” need not appear in the pleading for it to attract a costs award on a solicitor and client scale: Mele v. Thorne Reddell (1997), 1997 12124 (ON SC) , 32 O.R. (3d) 674 (Dambrot, J.) ; Lawson v. Toronto Hospital Corp. (1991), 52 O.A.C. 186 , at p. 187 (Div. Ct.) ; 131843 Canada Inc. v. Double “R” (Toronto) Ltd., supra.
The accusations made in this case are the sort that go to the heart of Cancilla’s integrity. The accusations were quite unfounded and were obviously made without checking with known, and friendly, participants who were in a position to advise as to their truth or falsity. The unsubstantiated allegations were directed at a professional whose reputation for integrity is of the utmost importance to him. That, in my opinion, makes this one of those special and rare cases where an award of solicitor and client costs is called for. An order is to go providing for costs to Cancilla on a party-and-party basis to October 26, 1998, and solicitor and client costs thereafter, subject only to the two per cent reduction referred to above. (at paras. 36 and 37).
[ 11 ] See also the decision of Justice MacDonnell in Zawadzki v. Matthews Group Ltd ., [1998] O.J. No. 43 (Gen. Div.) at paragraph 10 .
[ 12 ] Turning first to the issue of the scale of costs, I conclude that costs on a substantial indemnity scale are warranted in the circumstances. I reach this conclusion for the following reasons.
[ 13 ] First, this case was clearly an attempt to get around earlier court rulings by both Justice Farley and the Ontario Court of Appeal. I cannot speculate as to the motives behind such conduct, but it should have been plain to both the plaintiff and his counsel that this was an action that was doomed from the outset. This type of tactical manoeuvre must be condemned in the strongest possible terms by this court.
[ 14 ] Second, while counsel for the plaintiff now tries to minimize the nature of the allegations made against Mr. Rubinoff and his firm, it is clear to me that the thrust of his client’s claim was that Mr. Rubinoff and his firm engaged in a concerted effort with Mr. Pennington to deprive Mr. Hawley of income and to personally benefit there from. This is a conspiracy claim in all but name.
[ 15 ] Third, I was also very troubled by the fact that a serious allegation of conflict of interest was asserted but never pleaded. Counsel for Mr. Rubinoff and his firm was placed in the untenable position of having to respond on the fly to an ever shifting claim against her clients.
[ 16 ] In short, the plaintiff made serious and entirely unfounded allegations against a senior member of the bar. When called upon to provide evidence in support of the allegations, he failed utterly to do so. The fact that he did not even bother to cross-examine Mr. Rubinoff demonstrates that he knew that his claims were entirely without merit. Again, I cannot speculate as to why the plaintiff and his counsel would take this course of action, but it is entirely inappropriate and is worthy of sanction.
[ 17 ] With respect to the quantum of damages, I reject the argument made by plaintiff’s counsel that this matter did not require the attendance of junior counsel. In my view, cases of this complexity, where serious allegation are being made, warrant the attendance of junior counsel. Therefore, I make no reduction in this regard.
[ 18 ] I do accept his argument that a small reduction should be made with respect to the attendance of counsel for Mr. Rubinoff and Fogler Rubinoff LLP on cross-examinations in two other matters where they were not a party. Otherwise, I find the amounts claimed by the defendants are fair and reasonable in the circumstances.
[ 19 ] I award costs as follows:
The plaintiff, James Hawley, shall pay costs forthwith to the defendants, Fogler Rubinoff LLP and Howard Rubinoff, in the amount of $38,500.00, inclusive of disbursements and applicable taxes; and
The plaintiff, James Hawley, shall pay costs forthwith to the defendant, John Pennington, in the amount of $29,000.00, inclusive of disbursements and applicable taxes.
HOURIGAN J.
Date: June 6, 2012