Adshade v. TDCI Bracebridge, 2015 ONSC 3204

COURT FILE NO.: CV-10678-00CL

DATE: 20150522

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Grace Adshade, Beaver Valley Holdings Limited and Premiere Self Storage Inc., Applicants

AND:

TDCI Bracebridge Inc., Clive Figueira and Carol Tarback, Respondents

BEFORE: L.A. Pattillo J.

COUNSEL: Kevin Fisher and Holly LeValliant, for the Applicants

John P. Ormston, for the Respondents TDCI Bracebridge and Carol Tarback

COSTS ENDORSEMENT

[1] For reasons released February 27, 2015 (2015 ONSC 1275), I allowed the applicants’, Grace Adshade (“Adshade”), Beaver Valley Holdings Limited (“BVHL”) and Premiere Self Storage (“Premiere”) application and appointed BDO Canada Ltd. (“BDO”) as Receiver/Manager of the respondent TDCI Bracebridge Inc. (“TDCI”). In addition, I held that BVHL was entitled to 50% of the issued shares of TDCI and the Dura Mortgage registered to the respondent Carol Tarback (“Tarback”) was to be transferred to BVHL and registered against TDCI’s property in Bracebridge. I dismissed the balance of the relief requested by the applicants.

[2] I further held that the applicants, having been successful in respect of the main relief they sought, were entitled to their costs. Because neither side had provided cost outlines at the end of argument, I directed that the parties file same along with brief submissions. I have now received submissions from counsel for the applicants and for the respondents TDCI and Tarback. The respondent Clive Figueira (“Figueira”) was not represented at the hearing and filed no submissions in respect of costs.

[3] The applicants submit that they are entitled to their costs against all respondents, jointly and severally, on a substantial indemnity basis. In that regard, they submit a cost outline claiming substantial indemnity costs of $237,703.93, including taxes plus disbursements of $148,537.78.

[4] TDCI and Tarback submit that the respondents should not be jointly and severally liable and that costs should not be awarded against them on a substantial indemnity basis. They further submit that the quantum of costs claimed by the applicants is excessive, not fair and not proportionate to the file. TDCI and Tarback submit that costs should be apportioned on a pro rata basis and that Tarback should be responsible for no more that 5% of the total amount of costs awarded.

[5] In my view, based on all the evidence, costs should be on a substantial indemnity scale against Figueira and TDCI and on a partial indemnity basis against Tarback. Further, the cost awards should be joint and several against all respondents but only to the extent of the partial indemnity amount. In other words, all respondents are responsible for the costs up to the partial indemnity amount and only Figueira and TDCI are responsible for the excess amount to satisfy the substantial indemnity award. Further, and in the circumstances, I do not consider that a pro rata apportionment of the costs between respondents is appropriate.

[6] Substantial indemnity costs (formerly solicitor and client costs) are not awarded unless there is some form of “reprehensible, scandalous or outrageous conduct” on the part of the party against whom costs are to be assessed. See: Davies v. Clarington (Municipality) (2009), 100 O.R. (3d) 66, 2009 ONCA 722 (C.A.) and cases referred to therein.

[7] I have concluded that Figueira and TDCI should be liable for substantial indemnity costs having regard to their actions during the course of the litigation. In my view, Figueira’s conduct and through him TDCI, was reprehensible.

[8] On September 11, 2014, shortly after the application was commenced, the parties agreed to a consent order which provided, among other things, that the respondents would maintain the status quo of TDCI and Premiere until the hearing of the application or further order and particularly would not further encumber, transfer or convey TDCI or Premiere property without consent or further order. The consent order further provided that the respondents would disclose all information in their possession or control concerning the issues raised to BDO who would have access to the premises and records of TDCI and Premiere.

[9] The respondents and specifically Figueira and TDCI, failed to comply with the September 11, 2014 order. Figueira was the individual directing the day to day operations of TDCI and Premiere. Figueira was not cooperative with BDO and failed to provide it with relevant information. More concerning, he provided false information to BDO in order to hide some of the significant operational issues of TDCI. Figueira also failed to provide information to the applicants concerning TDCI’s pending transactions which he was negotiating. Rather than provide the information, Figueira caused TDCI to bring a motion for approval of a pending transaction, needlessly increasing costs. Further and pending the return of the application, Figueira utilized TDCI’s funds for his own personal benefit while not paying corporate expenses. Finally, rather than preserve the status quo of Premiere, which was owned by Adshade, Figueira actively took steps to appropriate Premiere’s business and assets by changing its name and entering into new contracts with Premiere’s clients without Adshade’s knowledge.

[10] Tarback is Figueira’s wife. Although she was the sole shareholder of TDCI initially and then latterly a 50% shareholder with BVHL (Adshade’s holding company), she was never involved in the day to day business of TDCI. Nor did she ever have any involvement with Adshade concerning TDCI. She is a stay at home mom who received money from the company which was the money the family lived on both before and after the application was commenced. There is no evidence that she was personally involved in the above actions of Figueira. I am unable, therefore, to attribute Figueira’s improper conduct during the course of the litigation to her. She was, however, a respondent in the application and contested it, as is her right. Having lost, she is liable to the applicants for costs. In the circumstances, however, I consider that she should only be liable for partial indemnity costs.

[11] The partial indemnity fees claimed by the applicants total $184,062.74 before taxes. They are 70% of the actual fees. By comparison, TDCI and Tarback’s counsel charged a total of $80,426.65 for the litigation or $56,298.66 for partial indemnity. While I recognise that different interests are at stake between the applicants and the respondents, the difference in amounts is striking.

[12] Although there were substantial issues in play, I agree with TDCI and Tarback’s counsel that the fees charged are excessive and not proportionate to the file. Five lawyers and a law clerk worked on the file during its existence. While a client is entitled to direct its lawyers as it sees fit, that does not mean that all costs incurred are recoverable. The costs recovered must be fair and reasonable having regard to the issues in play. In other words, the determination of costs is not simply a mathematical exercise. See: Boucher v. Public Accountants Council (Ontario) (2004), 2004 CanLII 14579 (ON CA), 71 O.R. (3d) 291 (Ont. C.A.).

[13] Although I only have a cost outline with totals from the applicants as opposed to detailed dockets (although the two BDO accounts provided contain detailed dockets), I consider the amounts claimed for many of the items to be too high. I need only refer to a few items: the time claimed for written submissions in advance of the hearing for senior and junior counsel totals 48 hours; the time for the hearing (2 days) for both senior and junior counsel totals 71 hours; the time for reviewing my decision and settling the order totals 27.5 hours. By the same token, I recognize that the applicants were put to greater expense than required due to the conduct of Figueira and TDCI.

[14] A word about the disbursements claimed of $148,537.78. The vast majority of that amount arises from two accounts from BDO totaling $130,557.66. The balance of $17,980.12 is usual disbursements and no issue is taken by the respondents. BDO was involved primarily after the September 11, 2014 consent order to investigate TDCI and clarify the operational issues surrounding TDCI. In light of the information Adshade had concerning the operation of TDCI and Figueira’s total lack of cooperation, I consider Adshade’s retainer of BDO to have been appropriate. In my view BDO’s costs are recoverable as a disbursement against Figueira and TDCI. For the reasons previously stated, I do not think they should be recoverable against Tarback.

[15] In conclusion, I order substantial indemnity costs of the application against TDCI and Figueira in the amount of $150,000, plus disbursements of $148,537.78 for a total of $298,537.78. I order partial indemnity costs of $100,000 against Tarback, plus disbursements of $17,980.12 for a total of $117,980.12.

[16] The cost award is joint and several against all the respondents to the extent of $117,980.12. The remainder of the costs against TDCI and Figueira of $180,557.66 ($298,537.78 – 117,980.12) are the responsibility of TDCI and Figueira.

L. A. Pattillo J.

Released: May 22, 2015