SMTCL Canada, Inc. v. Jerry Bas Holdings Limited, 2015 ONSC 403
COURT FILE NO.: CV-13-492476OT
MOTION HEARD: Written Submissions
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: SMTCL Canada, Inc., Plaintiff
AND:
Jerry Bas Holdings Limited o/a WMTI-JBH, Windsor Machine Tools (2011) Inc., Jerry Bas and Alaina Katherine Bas, Defendants
BEFORE: Master Lou Ann M. Pope
COUNSEL: Joseph A. Carpio, for the Plaintiff
Celina DeVuono, for the Defendants
HEARD: Written Submissions
ENDORSEMENT ON COSTS – rule 57.07(1)
[1] This Endorsement arises from the defendants’ motion in which they obtained an order transferring this action from Toronto to Windsor. (Reasons For Endorsement October 29, 2014, 2014 ONSC 6238) The defendants were awarded their costs of that motion in the amount of $8,532.63. (Endorsement on Costs December 1, 2014, 2014 ONSC 6908)
[2] Also in issue regarding costs was the defendants’ costs thrown away for attendance at an earlier return of the motion on April 1, 2014. The parties filed written submissions on that issue. For the reasons set out in my Endorsement On Costs, I held that the defendants were entitled to costs of $550 for unnecessary attendance at motions court on April 1, 2014; however, I requested submissions from both parties regarding the issue of whether those costs should be paid by plaintiff’s counsel personally under s. 131(1) of the Courts of Justice Act, R.S.O. 1990, c. C.43, and rr. 57.07(1) and (2) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.
[3] Before all submissions had been filed and before I rendered my decision, plaintiff’s counsel requested that the court schedule an urgent “case conference” to deal with issues arising out of my Endorsement on Costs dated December 1, 2014. In the meantime, plaintiff’s counsel served defence counsel with a 37-page document entitled “Submissions Re: Costs Endorsement of December 1, 2014” and filed it with the court the morning of the case conference on December 5, 2014. Defence counsel objected to the broad content of the written submissions which set out the following issues:
Did Master Pope exceed her jurisdiction by making findings as to Ms. Mazinani’s breach of the Rules of Professional Conduct?
Does Ms. Mazinani’s conduct meet the high threshold required for costs to be paid personally by the solicitor?
Was Ms. Mazinani’s conduct so distinguishable from that of Ms. DeVuono, such that only the former was worthy of admonition?
[4] Plaintiff’s counsel advised the court that a case conference was requested essentially to forestall appeal proceedings respecting my December 1, 2014 Endorsement, in particular, with respect to my findings regarding plaintiff’s counsel’s breach of the Rules of Professional Conduct.
[5] In my Case Conference Endorsement of December 5, 2014, I noted that plaintiff’s counsel’s letter of request for a case conference failed to set out the applicable Rule that entitled the plaintiff to a case conference and the issue to be addressed at the case conference. Notwithstanding that failure, the court scheduled an urgent case conference to accommodate plaintiff’s counsel’s request. I also stated in my endorsement that having taken a cursory look at the plaintiff’s written submissions, they were essentially a “[f]actum based on grounds for appeal of my decision.” For the reasons set out therein, I ultimately held that the plaintiff had no right under the Rules of Civil Procedure, or otherwise, to a case conference or any type of appointment with me to raise the issues set out in the plaintiff’s written submissions. As a result, the defendants were awarded costs thrown away of $350 payable within 30 days. Plaintiff’s counsel was warned to ensure that its submissions on costs were confined to the narrow issue of whether plaintiff’s counsel ought to be personally liable for payment of the defendants’ costs thrown away of $550 as ordered in my Endorsement On Costs of December 1, 2014.
[6] However, despite my warning, the plaintiff’s submissions were essentially the same as its submissions filed for the case conference. The same issues were set out in both sets of submissions. In fact, paragraph 4 of the plaintiff’s submissions states that plaintiff’s counsel scheduled the case conference “in an attempt to forestall appeal proceedings respecting the December 1, 2014 Endorsement, specifically the findings respecting the Rules.”
[7] The defendants do not take a position with respect to whether the costs thrown away of $550 ought to be paid by plaintiff’s counsel or by the plaintiff. However, they seek their costs of $250 associated with their counsel’s time to review and respond to the issues contained in the plaintiff’s submissions that they argue are irrelevant and a disregard for the direction of the Court at the case conference.
[8] Of the three issues set out in the plaintiff’s submissions, only the second issue is relevant to my order that submissions be made on the issue of whether Ms. Mazinani (“Mazinani”) ought to be personally liable to pay the defendants’ costs of attendance in motions court on April 1, 2014.
[9] The submissions have accurately set out the law with respect to personal liability for costs against a lawyer.
[10] Rule 57.07 provides as follows:
57.07 (1) Where a lawyer for a party has caused costs to be incurred without reasonable cause or to be wasted by undue delay, negligence or other default, the court may make an order,
(a) disallowing costs between the lawyer and client or directing the lawyer to repay to the client money paid on account of costs;
(b) directing the lawyer to reimburse the client for any costs that the client has been ordered to pay to any other party; and
(c) requiring the lawyer personally to pay the costs of any party.
(2) An order under subrule (1) may be made by the court on its own initiative or on the motion of any party to the proceeding, but no such order shall be made unless the lawyer is given a reasonable opportunity to make representations to the court.
(3) The court may direct that notice of an order against a lawyer under subrule (1) be given to the client in the manner specified in the order.
[11] In fact, in a recent case not referenced by the plaintiff, our Court of Appeal in Galganov v. Russell (Township), 2010 CarswellOnt 7400, 2010 ONCA 410, dealt with this issue. In that case, the Court of Appeal overturned the application judge’s decision to award costs personally against counsel which was based on his negligent conduct. That is not the argument in the case herein; however, the decision is helpful for its confirmation of the general principles and the legal test for a costs order against a lawyer personally under rule 57.07(1).
[12] The general principle as stated by the Court of Appeal, at paragraph 12, is that a lawyer whose conduct results in costs being incurred unreasonably, or wasted, may be deprived of his or her costs or required to pay the costs of any other party.
[13] The legal test under rule 57.07(1) is not concerned with a lawyer’s professional conduct generally, but whether such conduct, including the conduct of the litigation, caused unreasonable costs to be incurred. (Carleton v. Beaverton Hotel (2009), 2009 92124 (ON SCDC), 96 O.R. (3d) 391, 314 D.L.R. (4th) 566 (Div Ct), at para. 18)
[14] The Court of Appeal affirmed the governing principles as set out by the Supreme Court of Canada in Young v. Young, 1993 34 (SCC), [1993] 4 S.C.R. 3 (S.C.C.), at pp. 135-136:
The basic principle on which costs are awarded is as compensation for the successful party, not in order to punish a barrister. Any member of the legal profession might be subject to a compensatory order for costs if it is shown that repetitive and irrelevant material, and excessive motions and applications, characterized the proceeding in which they were involved, and that the lawyer acted in bad faith in encouraging this abuse and delay. It is clear that the courts possess jurisdiction to make such an award, often under statute and, in any event, as part of their inherent jurisdiction to control abuse of process and contempt of court …. [C]ourts must be extremely cautious in awarding costs personally against a lawyer, given the duties upon a lawyer to guard confidentiality of instructions and to bring forward with courage even unpopular causes. A lawyer should not be placed in a situation where his or her fear of an adverse order of costs may conflict with these fundamental duties of his or her calling. [Emphasis in original.]
[15] The Court of Appeal affirmed the two-part test as set out in Carleton to determine the liability of a lawyer for costs under rule 57.07(1).
[16] The first step is to inquire whether the lawyer’s conduct falls within rule 57.07(1) in the sense that it caused costs to be incurred unnecessarily, without reasonable cause or to be wasted by undue delay, negligence or other default. Mere negligence can attract costs consequences in addition to actions or omissions which fall short of negligence (Galganov, at para. 18, citing Marchand (Litigation Guardian of) v. Public General Hospital Society of Chatham (1998), 16 C.P.C. (4th) 201 (Ont. Gen. Div.). Further, the court in Marchand confirmed that “bad faith” is not a requirement for imposing the costs consequence of rule 57.07(1). At para. 122 of Marchand, the court held that “[i]t is only when a lawyer pursues a goal which is clearly unattainable or is clearly derelict in his or her duties as an officer of the court that resort should be had to [r.]. 57.07”.
[17] The second step requires the court to consider whether, in the circumstances, the imposition of costs against the lawyer personally is warranted given the extreme caution principle enunciated in Young. This principle means that costs orders against lawyers personally must be made sparingly, with care and discretion, only in clear cases, and not simply because the conduct of a lawyer may appear to fall within the circumstances described in rule 57.07(1). (Galganov, at para. 22, citing Young, and Carleton, at para. 15)
Analysis
[18] My findings regarding Mazinani’s conduct were based on the manner in which she handled the misunderstanding between counsel regarding the adjournment of the motion which included her letter to the trial coordinator, persistent accusations against opposing counsel and failure to attend motions court on April 1, 2014. (Endorsement on Costs, paras. 10, 16, 20, 23, 24)
[19] In my Endorsement on Costs, I concluded that Mazinani’s conduct caused each counsel to have to spend unnecessary time and expense, including DeVuono’s attendance at court on April 1, 2014.
[20] I am mindful that the potential for a costs order against Mazinani personally is confined only to the $550 costs order that arose out of DeVuono’s attendance at the return of the motion on April 1, 2014.
[21] In applying the first step of the two-part test, I must consider the facts of the case and the particular conduct of Mazinani while conducting a holistic examination of her conduct during the course of the motion. I considered these factors as set out in my Endorsement on Costs which led to my conclusion that Mazinani’s conduct caused costs to be incurred without reasonable cause.
[22] In applying the second step, I must consider whether, in the circumstances, the imposition of costs against the lawyer personally is warranted. The issue is whether Mazinani personally caused the additional costs or whether she was acting as the agent of her client.
[23] There is no evidence before the court as to whether Mazinani was acting on her client’s instructions to explain why no one appeared on behalf of the plaintiff at the return of the motion on April 1, 2014. It was open to Mazinani in her costs submissions to assert that she was following her client’s instructions; however, had she done so, she would have essentially breached the solicitor-client privilege because the obvious conclusion would be that her client instructed her not to attend. Therefore, in this circumstance where the issue of solicitor-client privilege arises and it is possible, at it was here, that the lawyer was acting as agent for her client and acting on her client’s instructions, I find that the imposition of costs against Mazinani personally is not warranted.
[24] For the above reasons, the cost order of $550 to the defendants, made in my Endorsement on Costs, 2014 ONSC 6908, para. 25, shall be paid by the plaintiff within 30 days.
[25] For the following reasons, the further relief sought by the plaintiff at paragraphs 41 and 43 of its “Submission Re: Costs Endorsement of December 1, 2014” is not granted. As stated above, the issue of my jurisdiction is not properly before this court in these costs submissions. Further, the plaintiff requests that costs ordered on the motion be assessed. Similarly, this request is not properly before this court in these submissions. My Endorsement of October 29, 2014 ordered that the costs of $8,532.63 were payable by the plaintiff within 60 days.
[26] Lastly, the defendants seek costs thrown away of $250 to review and respond to all the issues raised by the plaintiff in its costs submissions. While I agree that two of the three issues raised by the plaintiff were not properly before this court for the purpose of the submissions on costs personally against Mazinani, it is my view that the defendants were not required to respond to these issues particularly given my comments and warning to the plaintiff at the case conference. It would have been suffice for the defendants to state in their submissions that those issues were not relevant and that if the court thought it
necessary they were prepared to make written submissions. As such, I decline to grant the defendants’ request for costs.
Original signed “Lou Ann M. Pope”
Master Lou Ann M. Pope
Case Management Master
Date: January 21, 2015