SUPERIOR COURT OF JUSTICE – ONTARIO

COMMERCIAL LIST

COURT FILE NO.: 08-CL-7399
DATE: 20130312

B E T W E E N:

PATRICIA BUCCILLI and
DRAPERY INTERIORS ETC. INC.

Plaintiffs

• and -

PASQUALE PILLITTERI also known as
PAT PILLITTERI, CHRISTINA PILLITTERI, PATRON CONTRACTING LIMITED also known as CDC CONTRACTING, BIRCHLAND HOMES INC. and VENDRAIN INC.

Defendants

Michael R. Kestenberg and Thomas M. Slahta, for the Plaintiffs

Peter R. Greene, Kyle Peterson and Brigid Wilkinson, for the Defendants

BEFORE: Newbould J.

ENDORSEMENT

[1] In this action, in which the plaintiff Patricia Buccilli was successful, costs are sought on a substantial indemnity basis. In the action, I set aside a Transfer Agreement and declared that Ms. Buccilli had a one-third interest in certain assets.

[2] Normally costs are awarded on a partial indemnity basis, and it is the exception to award them on a substantial indemnity basis. See Mortimer v. Cameron (1994), 1994 10998 (ON CA), 17 O.R. (3d) 1 (C.A.) and Foulis v. Robinson (1978), 1978 1307 (ON CA), 21 O.R. (2d) 769 (C.A.). Orkin, The Law of Costs, 2nd ed. (Aurora: Canada Law Book, 1993), states the following at pp. 2-215 to 2-216 regarding costs on a solicitor client basis (now substantial indemnity):

Such orders are not to be made by way of damages, or on the view that the award of damages should reach the plaintiff intact, and are inappropriate where there has been no wrongdoing.

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 the party in the litigation. The principle guiding the decision to award solicitor-and-client cost has been enunciated thus:

Solicitor-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.

[3] Breach of a fiduciary duty can give rise to a substantial indemnity award, so long as it can be said that the actions of the defendant were reprehensible. See McBride Metal Fabricating Corp. v. H & W Sales Co. Inc. (2002), 2002 41899 (ON CA), 59 O.R. (3d) 97 (C.A.) at paras. 39 and 40.

[4] In this case, I held that the plaintiff should succeed for several reasons, being breach of fiduciary duty, undue influence, misrepresentation and unconscionability. Unconscionability, undue influence and breach of fiduciary duty are related concepts all designed to protect vulnerable persons. See a discussion on this in my reasons for judgment at para. 138. Certainly it cannot be said that in every such case substantial indemnity costs can be awarded by nature of the legal duty breached. The conduct giving rise to the cause of action or in the proceedings must be reprehensible.

[5] In this case, the conduct of the defendants was reprehensible. In particular, they took advantage of their sister in law who was vulnerable with a lack of knowledge of what she was giving up. This was no innocent behaviour that crossed legal boundaries. It was reprehensible for the defendants to put assets into Vendrain, and this was compounded by the steps taken in the action. In particular, no records of any kind, including bank records, were produced by the defendants that would shed light on what they did regarding the properties recorded on the books as being Vendrain assets, and they maintained throughout the trial their right to have done so with evidence that defied credulity. While normally findings of credibility might not warrant costs on a higher scale, the situation was compounded by their failure to produce any relevant documents on the issue, putting the plaintiff in a difficult situation in attempting to prove her case. As a result of a lack of Vendrain records, no finding as to the ownership of three properties acquired in 1999 or 2001 could be made. This conduct on the part of the defendants in not producing records was deliberate.

[6] In the circumstances, I award costs on a substantial indemnity basis.

[7] The plaintiff’s cost outline does not indicate an amount for costs on a substantial indemnity basis. It provides actual costs, including HST/GST and disbursements, of approximately $579,000 for the plaintiff’s current lawyers and approximately $65,500 for her previous lawyers, for a total of approximately $645,000. Costs on a partial indemnity basis are set out at a total of approximately $490,000. In the written submissions of behalf of the plaintiff, it was asserted that the costs should be set at fees of no less than $500,000 plus taxes and disbursements of $18,028.97. The taxes are approximately $63,000 and thus the plaintiff claims total costs on a substantial indemnity basis of approximately $581,000.

[8] The defendants originally contended that costs on a partial indemnity basis, all in, should be set at $350,000. In later correspondence, after the dockets of the plaintiff’s current lawyers had been produced, this figure was raised to $450,000. I do not know if this was deliberate or a mistake. If the defendants $450,000 all in were reduced by the disbursements and HST/GST of approximately $63,000, the resulting $387,000 would amount to $580,500 on a substantial indemnity basis if multiplied by 1.5 as per rule 1.03. When the HST/GST and disbursements were added back, it would result in a total amount on a substantial indemnity basis of $643,500. If the all-in figure of $350,000 were used, it would amount on a substantial indemnity basis using the same calculations of $493,000.

[9] The defendants assert that the plaintiffs had two senior counsel throughout the trial, which was unwarranted. I do not think there is much in this complaint. The actual rate charged by Mr. Kestenberg for the year leading up to the trial was $620, whereas the rate for Mr. Slahta was $405, a rate below what is normally considered for an experienced senior lawyer.

[10] There is also a complaint that the claim for rent was abandoned at the end of the trial and thus there should be some deduction. This may be a legitimate complaint, although I note that the time taken up on this issue was nowhere near the time taken up by the other issues. Some deduction should be made for that. It was also contended that there must have been some duplication of work caused by the plaintiff changing lawyers, although no request was made for the previous lawyer’s dockets. I think it obvious that there must have been some duplication, and the cost outline refers to a large number of hours spent on reviewing the files received from the former lawyer.

[11] It is also complained that the plaintiff abandoned at the opening of trial a claim for fraud that had been pleaded. I do not know, however, what if any extra work may have been done throughout the case prior to trial because of this pleading, but I suspect no extra work was done. The pleading of fraud was no more than a claim based on the facts which sustained the other causes of action. It was not asserted that the withdrawn fraud claim should disentitle the plaintiff to her costs.

[12] A fair and reasonable award on a substantial indemnity basis, after considering all of the evidence and submissions, would be $525,000 inclusive of HST/GST and disbursements, which I order.

Newbould J.

Date: March 12, 2013.