COURT FILE NO.: 07-CV-37560
DATE: 2013/11/18
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Loretta Alice Clarke and Loretta Alice Clarke Holdings Inc.
Plaintiffs
– and –
Peter Clarke, Greg Clarke, Lynda Johns Clarke, and Valley Utilities Limited
Defendants
Marc E. Smith, Counsel for the Plaintiffs
Paull N. Leamen, Counsel for the Defendants
AND BETWEEN:
Peter Clarke
Plaintiff by Counterclaim
– and –
Loretta Alice Clarke and Laurie Wu and Loretta Alice Clarke Holdings Inc.
Defendants by Counterclaim
Paull N. Leamen, Counsel for the Plaintiff by Counterclaim
Mark E. Smith, Counsel for the Defendants by Counterclaim
HEARD: By written submissions
COSTS DECISION
R. Smith J.
Overview
[1] This matter involves an assessment of costs for a Motion for directions on how to implement the terms of a Judgment or alternatively to amend the terms of the Consent Judgment signed in 2010. The parties entered into Minutes of Settlement in 2010 and subsequently consented to Judgment on almost identical terms to the Minutes of Settlements signed by all parties.
[2] The Minutes of Settlement and Consent Judgment signed in 2010, did not contain any terms on how the Judgment was to be implemented and in particular contained no term requiring that the company be wound up, and contained no term about the payment of the capital gains tax, recapture and HST on the transfer of the two properties that were owned by the company having a combined value of $1,750,000.
Positions of Parties
[3] The plaintiffs (defendants by counterclaim), Loretta Alice Clarke and Loretta Alice Clarke Holdings Inc. (herein after referred to as “Loretta” or the “plaintiffs”) seek costs on a substantial indemnity basis of $151,584.96, inclusive of HST and disbursements. In the alternative, Loretta seeks costs on a partial indemnity scale of $97,526.64 inclusive of HST and disbursements.
[4] The remaining defendant and plaintiff by counterclaim is Peter Clark (herein after referred to as “Peter”). He submits that no costs should be awarded to either party because: a) the Minutes of Settlement and the Consent Judgment were deficient and failed to include terms that were required to implement the Judgment; b) Loretta retained control of the company as its sole director, refused to convey the properties to Peter and herself in accordance with the Judgment; and c) the parties intended to divide their assets on a 50/50 basis and this principle and their intent should also apply to the costs incurred to implement the Consent Judgment.
Factors
Success
[5] In this case Loretta was largely successful on her Motion for directions on how to implement the Consent Judgment. However, both parties signed the Minutes of Settlement and agreed to the terms of the Consent Judgment without making provisions for the payment of capital gains taxes, recapture and HST triggered by the transfer of the properties at the agreed price. The Consent Judgment also failed to specify the winding up of the company, and did not include terms outlining how the Judgment would be implemented.
Complexity and Importance
[6] The issue was of some complexity and important to the parties. The issue of whether a judge is functus, three years after signing a Consent Judgment, in the circumstances of this case, was of some complexity.
Unreasonable Behaviour
[7] This dispute, involved various family members, and lasted over several years. The dispute, commenced with an allegation that Loretta had transferred Peter’s shares (50% interest) in the company to herself for one dollar. Loretta subsequently changed the name of the company to Loretta Alice Clarke Holdings Inc. (hereinafter referred to as “LAC”) and fired Peter as a director and an employee of the company and transferred approximately a million dollars of the company’s funds to a new bank account where she was the sole signing officer. As a result of her conduct, an injunction was issued and the shares were subsequently returned to Peter. Loretta’s conduct is not related to this Motion to implement the Judgment but does form part of the factual background and explains the high level of mistrust between the parties. The dispute has continued for a lengthy period of time and the lack of trust has been a major factor preventing the parties from being able to implement the terms of a Consent Judgment and Minutes of Settlement. The other factor is that by her actions of dismissing Peter as a director, Loretta remained the sole director of LAC and retained control over all aspects of the company as Peter was no longer involved. In addition, Loretta also assumed personal responsibility as a director for any unpaid corporate taxes.
[8] I find that Peter’s conduct of refusing to agree to the payment of capital gains and other taxes incurred by LAC by transferring the properties as agreed is not sufficiently unreasonable conduct to justify awarding substantial indemnity costs. The Consent Judgment did not address the payment of taxes and Peter understood that Loretta intended to continue to operate LAC, because she remained as the sole director and kept her own name as the company name. In addition, Minutes of Settlement did not specify that LAC was to be wound up.
[9] I am unable to draw any conclusion as to what the actual intentions of the parties were, with regard to the continued operation of LAC by Loretta, when they signed the Minutes of Settlement. While I am unable to determine whether Loretta intended to continue to operate LAC or whether the parties intended that LAC be wound up, I find that the parties intended that all of their assets, including their interest in LAC, were to be divided equally after paying all debts, capital gains and any other taxes owing.
[10] Peter also objected to Loretta’s refusal to convey the Carp Road property to him at the agreed price in accordance with the Minutes of Settlement for over three years while she retained control of LAC. I find that Loretta should have implemented the terms of the Judgment with regards to transfer of the properties both to Peter and to herself at the agreed price.
Scale of Costs and Offers to Settle
[11] Loretta submitted an Offer to Settle in 2011 however the offer contained terms that were not ultimately awarded such as the appointment of an independent lawyer, and ultimately the winding up of the company. Notwithstanding that it was not a Rule 49 Offer, I find that Loretta’s Offer to Settle was reasonable in the circumstances.
Hourly Rates, Time Spent and Proportionality
[12] The hourly rates are not contested and are not unreasonable given the experience of Counsel. However I find that the time spent to have the terms of a Judgment settled exceed the reasonable expectations of the unsuccessful party.
Intentions of the Parties on Settlement
[13] In my decision I found that the parties intended to divide the value of their respective shares in LAC, as well as their equalization of net family property in their family proceeding on an equal basis. I further found that the parties intended to share on an equal basis, the net assets of all their property after paying all taxes owing and professional fees to ensure that all taxes and debts were paid. I found that this intention was consistent with the Minutes of Settlement and the Consent Judgment.
[14] Loretta’s expectation was set out in her Offer to Settle on November 8, 2011 in which her Counsel stated as follows:
You also mention in your letter that your client seeks costs regarding this Judgment. Firstly, the Judgment is far from clear and any disputes with respect to the interpretation of same are not surprising, and frankly should be all of the parties’ responsibility. Secondly, my client has equally incurred various costs in what some could say were unnecessary legal proceedings. Lastly, it is my view that a Court, will most likely take the same approach as it did at trial and not order any costs for either party. [Emphasis added]
[15] It is clear from the statements made in the Offer to Settle and as was the view of the Trial Judge, McKinnon J., that no costs were payable for the trial portion of these proceedings. I find that because the Consent Judgment was unclear on how it was to be implemented, and both parties failed to include terms on how to implement the Judgment, the Motion to implement the Judgment was ultimately necessary. I further find that both parties would reasonably expect to pay their own costs in implementing the terms of the Judgment, which was silent on several required terms.
Disposition
[16] Having considered all the above factors, I order that both parties bear their own costs of the Motion to implement the Consent Judgement.
Mr. Justice Robert J. Smith
Released: November 18, 2013
COURT FILE NO.: 07-CV-37560
DATE: 2013/11/18
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Loretta Alice Clarke and Loretta Alice Clarke Holdings Inc.
Plaintiffs
– and –
Peter Clarke, Greg Clarke, Lynda Johns Clarke, and Valley Utilities Limited
Defendants
AND BETWEEN:
Peter Clarke
Plaintiff by Counterclaim
– and –
Loretta Alice Clarke and Laurie Wu and Loretta Alice Clarke Holdings Inc.
Defendants by Counterclaim
COSTS DECISION
R. Smith J.
Released: November 18, 2013