SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: 32-071120

DATE: 20131030

RE: IN THE MATTER OF THE BANKRUPTCY OF GORDON HUGHES

BEFORE: Mr. Justice H.J. Wilton-Siegel

COUNSEL:
Marianne E. Craig, for the Applicant, Ann Haverson

David. A. Seed, for the Respondents, Susan Hughes and Scott & Pichelli Limited

BY WRITTEN SUBMISSIONS

ENDORSEMENT ON COSTS

[1] The applicant Ann Haverson (the “applicant”) was successful on this application. The respondents, Susan Hughes and Scott & Pichelli Limited, (collectively, the “respondent”) submit that they are nevertheless entitled to their costs or, alternatively, that the costs sought by the applicant are excessive.

[2] This was an unfortunate case in which both Ms. Haverson and Ms. Hughes were injured parties as a result of their respective associations with the bankrupt Gordon Hughes, who is now deceased. The Court was required to make a determination between them in circumstances in which each attracted the sympathy of the Court.

[3] As set out in the Endorsement, both parties brought motions addressing the effectiveness of an order dated July 5, 2004 of Molloy J., which set aside an earlier conditional discharge order of Cumming J. dated April 6, 1998 under section 172 of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (the “BIA”). At the time that Ms. Hughes applied for the order of Molloy J., both she and her counsel were apparently unaware that the Registrar in Bankruptcy at Toronto (the “Registrar”) had issued an absolute discharge order dated May 7, 1998 (the “Absolute Discharge Order”).

[4] In the present proceedings, the motion of Ms. Hughes was denied and the motion of the applicant was granted to the extent of a declaration that the Absolute Discharge Order remains in full force and effect and an order that title to certain property claimed by Ms. Hughes be vested in the applicant.

[5] As the successful party, Ms. Haverson seeks her costs on a substantial indemnity basis. However, counsel for the respondent suggests that the conduct of the applicant’s counsel justifies an award of costs in favour of the respondent.

[6] There are two related elements of this submission.

[7] First, the respondent submits that the first letter of the applicant’s counsel to him, referring to her letter of February 22, 2011, implied that the motion before Molloy J. was not served on Mr. Hughes and alleged that the motion confirmation form before Molloy J. was misleading to the court. He says this was an unfounded and tactical attack on his integrity that should attract a costs award.

[8] It should be noted that the applicant’s counsel had previously expressly stated the applicant’s position – that the Absolute Discharge Order was determinative – in correspondence with Scott & Pichelli Limited. In particular, in a letter dated April 26, 2010, she stated expressly that the order of Molloy J. revoked the earlier conditional discharge order but did not annul the Absolute Discharge Order.

[9] The applicant’s counsel could have chosen better language in referring to the 2004 motion materials as “supposedly served on Mr. Hughes”, particularly as she apparently had reviewed the court file for the purposes of her letter of February 22, 2011 and should have seen an affidavit of service in the file. However, in an earlier letter to Scott & Pichelli Limited dated April 22, 2010, she had indicated that her client’s position was that he never received the motion materials for the 2004 motion. She was entitled to assume that the respondent’s counsel was made aware of Hughes’ position on service by Scott & Pichelli Limited.

[10] More significantly, in her letter of February 22, 2011, applicant’s counsel stated “I do not know what circumstances led to your omissions before the Ontario Superior Court of Justice, Bankruptcy Court, but it is clear that Justice Molloy was not aware of the fact that Mr. Hughes had been discharged from bankruptcy approximately 6 years previous”. It is this sentence that the respondent’s counsel says accuses him of fraud on the court.

[11] The Court does not read the letter dated February 22, 2011 of applicant’s counsel in the manner in which the applicant’s counsel alleges. There is no merit to his allegation that the applicant’s counsel attacked his integrity. The passage in the letter of February 22, 2011 is a factually correct statement that material facts were not given to Molloy J. by the respondent’s counsel for which the explanation is not clear. It did not constitute an “ill considered professional attack” on him, as the respondent’s counsel suggested in his reply letter of March 14, 2011. Further, the behavior of the respondent’s counsel in response to this letter was not what would be expected of experienced counsel toward a younger member of the Bar. Among other things, his letter of March 14, 2011 constitutes bullying of a junior member of the Bar by a more experienced counsel whether or not he intended it to be so.

[12] Second, the respondent’s counsel suggests that the applicant’s counsel’s statements amounted to an allegation of fraud upon a court that was not, and has not been, proven. He says the Court “took pains not to decide the issue in this application based on an allegation of misconduct of counsel.” It is correct that the Court did not find that the respondent’s counsel intentionally misled Molloy J. There remains, however, the issue of whether the respondent’s counsel erred in bringing Ms. Hughes’ motion in the manner he did in 2004. The Court refrained from expressing that conclusion in its Endorsement for the reason that it was unnecessary to do so. However, as the respondent’s counsel has now returned to this issue as a basis for a cost award in favour of Ms. Hughes, the Court is compelled to state expressly that if it were necessary to do so it would reach such a conclusion based on the record before it, and it considers such a conclusion to be implied by the wording of the Endorsement. Moreover, it is an unfortunate aspect of this proceeding that the respondent’s counsel remains unwilling to accept that the motion that he brought on behalf of Ms. Hughes in 2004 was legally ineffective and resulted in the present circumstances.

[13] Accordingly, I am not persuaded that the actions of the applicant’s counsel constitute a basis for an award of costs in favour of the respondent. In the alternative, the respondent also argues that it was the action of Gordon Hughes that created the adversarial situation between Ms. Hughes and Ms. Haverson. He says that the Court should refrain from awarding costs in application of an informal rule in estate litigation that costs should be awarded out of the estate where the dispute was the result of action of the deceased.

[14] However, the present circumstances are not analogous to the circumstances in which any such rule might be applied by a court. For the reasons addressed above, I am of the view that the respondent and her counsel contributed significantly to the present circumstances in bringing the motion in the form it was brought in 2004 and must bear the consequences.

[15] Accordingly, the applicant is entitled to her costs of this application. I am not persuaded, however, that there is a basis for awarding costs on a substantial indemnity basis. The circumstances are novel. Moreover, as mentioned, Ms. Hughes has also suffered a loss as a result of her association with Gordon Hughes. Further, the actions of the respondent’s counsel do not constitute behavior that should attract liability to Ms. Hughes for costs on a substantial indemnity basis.

[16] Turning to quantum, the applicant seeks legal fees on a partial indemnity basis in the amount of $15,429.64, plus HST and disbursements. Partial indemnity costs have been calculated as 85% of the actual rates charged to Ms. Haverson. The respondent did not raise any issue regarding the applicant’s disbursements but alleges that the fees sought are excessive.

[17] In fixing costs, I have had regard to the following principal considerations. First, the matter was not particularly complex but it did require a considerable amount of time on the part of the applicant’s counsel researching the history of the proceeding and it involved an interplay with related estate litigation brought by the respondent. Second, the time spent was increased by counsel’s need to attend a number of scheduling conferences and other court appearances. Third, the matter did not involve any novel issue of law as the respondent suggests. Fourth, the substantial majority of the time involved on the matter was spent by junior counsel at a modest hourly rate. Fifth, the respondent sought costs of approximately $8,000 in the respondent’s costs submissions. Given the nature of the issue and the position taken by the respondent’s counsel who had knowledge of the history of this matter, the respondent would reasonably have expected that the applicant’s costs would have exceeded this amount by a reasonable amount. Lastly, the applicant attempted to resolve the matter on a basis that was more favourable to Ms. Hughes than the outcome of the proceedings.

[18] Based on the foregoing, I find fair and reasonable costs of this motion to be $14,000 on an all-inclusive basis.

Wilton-Siegel J.

Date: October 30, 2013