ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: CV-11-0206-OT
DATE: 20120628

BETWEEN:

KARL ROSE
Plaintiff

– and –

NATASHA PICA and TONY PICA
Defendants

M. Miller, for the Plaintiff

J. Barzo, for the Defendant
A. Rogerson, for Non-Parties Kimberley and David Pica

HEARD: By Written Submissions

McISAAC J.

[ 1 ] The plaintiff seeks costs following his successful claim to set aside a fraudulent conveyance between parent and child. He was a major creditor of both her parents at the time of the conveyance. My reasons for judgment can be found at 2011 ONSC 7502. In particular, I found that the parents and child all colluded to frustrate the plaintiff in any attempt to realize upon this debt of almost $1 million: see paras. 12 and 15.

1. Claim against Natasha Pica

[ 2 ] The plaintiff submits that the conduct of the defendant merits an award of costs on the substantial indemnity scale in the amount of $71,764.92 inclusive of disbursements and HST. The trial itself lasted three days. The defendant resists this suggestion arguing that her fraudulent conduct that forms the basis for this claim cannot be the basis for a costs award at the higher scale.

[ 3 ] Assuming without deciding that this submission is correct, I am satisfied that there are circumstances in the litigation itself, in particular, her testimony at trial that merit an elevated award: see Prinzo v. Baycrest Centre for Geriatric Care (2002), 2002 45005 (ON CA), 215 D.L.R. (4 th ) 31 (Ont. C.A.). Ms. Pica insisted that the challenged conveyance took place in order to secure her loan of money to her parents and was not done to prejudice the plaintiff. As I noted in my judgment, there was a “virtual tsunami of circumstances” surrounding this transaction establishing its fraudulent nature: see para. 14. In light of that reprehensible conduct, I am satisfied that substantial indemnity costs should follow.

2. Costs against Third Parties

[ 4 ] The plaintiff did not join Natasha Pica’s parents in this litigation despite his claim that they “orchestrated” this fraudulent scheme to defeat collection. As such, they argue that this court has no jurisdiction to make such an award against them: see XLO Investments Ltd. v. Hurontario Management Services (1999), 170 D.L.R. (4 th ) 371 (Ont. C.A.) at para. 7.

[ 5 ] However, in para. 6 of that case, the Court noted that the third party had not used his personally-controlled corporation as a “sham” to effect the impugned transaction. That is not the situation in the instant case. I have found that the subject conveyance was indeed a ruse to avoid collection of the plaintiff’s investment to them. As such, I see nothing in this ruling that impedes an award against these third parties.

[ 6 ] The Privy Council had occasion fairly recently to examine in depth the issue of third-party costs liability: see Dymocks Franchise Systems (NSW) Pty. Ltd. v. Todd and Drs (No. 2) (New Zealand), [2004] UKPC 39. At para. 25 thereof, it was determined that the following highlighted principles should inform the exercise of this discretion:

Although costs orders against non-parties are to be regarded as “exceptional”, exceptional in this context means no more than outside the ordinary run of cases where parties pursue or defend claims for their own benefit and at their own expense. The ultimate question in any such “exceptional” case is whether in all the circumstances it is just to make the order...

Where, however, the non-party not merely funds the proceedings but substantially also controls or at any rate is to benefit from them, justice will ordinarily require that, if the proceedings fail, he will pay the successful party’s costs...He himself is “the real party” to the litigation, a concept repeatedly invoked throughout the jurisprudence...

...If a non-party does so for his own financial benefit, either to gain the fruits of the litigation or to preserve assets in which the person has an interest, it may, depending upon the circumstances, be appropriate to make an order for costs against that person...

[ 7 ] Although these comments flow from a case involving an insolvent company, I am satisfied they should prevail in this case which involves a fraudulent conveyance conspired to defeat a legitimate creditor. Given the findings of Natasha Pica’s impecuniosity made in my trial judgment, I have little difficulty in concluding as a matter of common sense that she had no financial wherewithal to fund this litigation and that her parents did so. In those circumstances, I am prepared to find that it is fair and just to saddle them with the costs order sought by the plaintiff.

3. Quantum

[ 8 ] As I have already noted, the plaintiff seeks a costs order in the amount of $71,764.92 inclusive of disbursements and HST on the substantial indemnity scale. Despite the findings to this point of this ruling, I am still required to determine what is fair and reasonable having regard to the broad range of factors in R. 57.01(3). Having done so, I award the plaintiff herein his costs in the fixed amount of $60,000.00, inclusive of disbursements and HST. This award shall be against the defendant, Natasha Pica and against her non-party parents, Kimberley Pica and David Pica.

McISAAC J.

Released: June 28, 2012