CITATION: Lacey v. Lacey, 2016 ONSC 1716
COURT FILE NO.: CV-15-3042-00ES
COURT FILE NO.: CV-14-516546
DATE: 20160311
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: PETER ALAN LACEY, Plaintiff (Responding Party)
AND:
GRACE ELIZABETH LACEY, ET AL., Defendants (Moving Party)
BEFORE: HAINEY J.
COUNSEL: Murray Maltz, for the Plaintiff (Responding Party), Peter Alan Lacey
Christopher Du Vernet and Carlin McGoogan, for the Defendant (Moving Party), Barbara Smart
HEARD: March 8, 2016
ENDORSEMENT
Background
[1] In March 2013, the Plaintiff, Peter Alan Lacey (“Peter”) commenced an action against his mother, Grace Lacey (“Grace”), his sister, Barbara Smart (“Barbara”), Maurice O’Kelly (“O’Kelly”) and Grace’s legal counsel (the “Action”).
[2] The Action relates to a family cottage located on Tasso Lake (the “Cottage”).
[3] The Action did not proceed against Grace’s legal counsel. Peter settled the claim with O’Kelly and Grace. The settlement was approved by Penny J. in October 2015. Peter did not settle the claim with Barbara.
[4] Barbara brought a motion for summary judgment to dismiss Peter’s claim against her. When the motion came before me for a hearing, Peter consented to an order dismissing his claim against Barbara.
[5] The only issue that I have to decide is whether costs should be awarded to Barbara in respect of the Action, and if so, on what scale and in what amount.
Facts
[6] This family dispute over the Cottage began in 2011. At the time, Grace, who owned the Cottage, was 84 years old and in poor health. She had made a Will in June 2010, when there was no question regarding her competency. In her Will she left the Cottage to Peter and the condominium, in which she was residing, to Barbara. The remainder of her estate was to be divided equally between Peter and Barbara who are her only children.
[7] In July 2011, Grace became seriously ill and was hospitalized. At the time, she purported to sell the Cottage to O’Kelly for $310,000.00. This amount was more than the appraised value of the Cottage. According to Barbara, Grace decided to sell the Cottage because it had become a drain upon her fixed income. She asked Barbara to assist her in selling it. Barbara maintains that Grace was fully competent and capable of managing her affairs when she decided to sell the Cottage.
[8] However, according to Peter, Grace was incompetent at the time. Peter maintains that Barbara took advantage of Grace’s poor mental condition to clandestinely sell the Cottage to his detriment since he was supposed to inherit it when Grace died.
[9] Barbara, who claims to have been acting on Grace’s instructions, obtained an offer to purchase the Cottage from O’Kelly for $310,000 cash. It was accepted by Grace and the transaction was scheduled to close on August 4, 2011.
[10] Before the closing, Peter obtained a deed from Grace transferring the Cottage to him as a joint tenant with her. Peter registered the deed on title so that the sale of the Cottage to O’Kelly could not close.
[11] As a result, an application was commenced by Grace on September 12, 2011, for an order transferring the Cottage back to her from Peter.
[12] Extensive litigation ensued among Grace, Peter and Barbara. Substantially more money has been expended by them than the Cottage is worth. I do not intend to review the details of all of this litigation for the purpose of my Endorsement other than to say that the costs of these proceedings are completely disproportionate to the modest value of the Cottage.
[13] Grace was declared mentally incapable and unable to manage her affairs as of February 10, 2012. The Public Guardian and Trustee was appointed to manage her affairs and continued to pursue the litigation on her behalf. There has been no official determination of Grace’s capacity in June 2011 when she purported to sell the Cottage to O’Kelly.
[14] On March 15, 2013, Peter commenced the Action. His allegations against Barbara can be summarized as follows:
• In June 2011, without the knowledge of Grace, Barbara negotiated the sale of Cottage.
• In June 2011, without the knowledge of Grace, Barbara obtained a signed Agreement of Purchase and Sale for the Cottage from O’Kelly.
• Barbara negotiated the sale and obtained the signed Agreement of Purchase and Sale for the Cottage even though she had no legal interest in it and no authority to act on Grace’s behalf.
• At the time Barbara was aware that Grace had promised that Peter would own the Cottage upon her death.
• Barbara was also aware that Peter had a constructive trust interest in the Cottage.
• Barbara was aware of the oral contract between Peter and Grace that Peter would repair, maintain and renovate the Cottage and upon Grace’s death he would own it.
• Barbara was further aware that Grace did not wish to sell the Cottage to a third party and wanted Peter to own the Cottage upon her death.
• Barbara, in a clandestine and fraudulent fashion, had Grace sign an Agreement of Purchase and Sale selling the Cottage to O’Kelly, knowing that Grace did not understand the document. Barbara did not explain the document properly to Grace and did not show the entire document to Grace.
• Barbara and O’Kelly conspired to have Grace sell the Cottage without her knowledge and against her will.
[15] On April 17, 2013, before delivering her Statement of Defence, Barbara’s counsel served Peter’s counsel with an Offer to Settle which provided as follows:
THE DEFENDANT BARBARA SMART offers to settle this proceeding on the following terms:
a. Dismissal of the action as against her with costs paid by the Plaintiff to her on a partial indemnity basis;
b. This offer shall remain open for acceptance until five minutes after commencement of the trial of this action, after which time if not already accepted, it shall be deemed withdrawn.
[16] In addition to serving the Offer to Settle, Barbara’s counsel also wrote to Peter’s counsel on April 17, 2013, and stated as follows:
Your client is alleging that ours committed civil fraud.
By this letter, I invite him to withdraw the allegation and to advise him that should he not do so forthwith, we will be seeking costs on a substantial indemnity basis in accordance with well-established case law.
While I have no doubt that as an experienced solicitor you advised him of this risk before he commenced the proceeding, I do want to make our position, and the costs award he is courting, clear before this action proceeds any further.
[17] Peter’s counsel did not respond. Barbara delivered her 18-page Statement of Defence on June 13, 2013. In her Statement of Defence she specifically denied all of the allegations made against her and sought costs on a substantial indemnity basis because of “the unfounded allegations of fraud, dishonesty, secrecy and conspiracy”.
[18] As indicated above, Peter settled the Action with Grace, who was represented by the Public Guardian and Trustee, and O’Kelly. The settlement was approved by Penny J. in October 2015.
[19] Peter consented to an order dismissing his claim against Barbara when her motion for summary judgment came before me for hearing.
Issue
[20] The only issue that I must decide is whether costs should be awarded to Barbara, and if so, on what scale and in what amount?
Positions of the Parties
[21] Mr. Maltz, on behalf of Peter, submits that Barbara should not be awarded costs because she acted in bad faith and engaged in clandestine conduct that gave rise to all of the litigation concerning the Cottage. Further, he argues that the court approved settlement represents an acknowledgement on the part of the Public Guardian and Trustee, acting on behalf of Grace that Peter should not have been deprived of the Cottage and it was not in Grace’s best interest for the sale of the Cottage to O’Kelly to take place.
[22] Peter asks me to deny Barbara costs because of her “bad behaviour”.
[23] Mr. Du Vernet, on behalf of Barbara, submits that she, as the successful party in the Action, is entitled to her costs. He argues that in the absence of proof of special circumstances, of which there are none, costs should follow the event.
[24] Further, he submits that Barbara is entitled to be awarded costs on a substantial indemnity scale because Peter alleged fraud and conspiracy against Barbara and did not establish either at trial.
Analysis
Barbara’s Entitlement to Costs
[25] It is well established that a successful party in litigation is entitled to costs in the absence of special circumstances. The Ontario Court of Appeal made this clear in Northwood Mortgage Ltd. v. Gensol Solutions Inc. (2005), 3 B.L.R. (4th) 312, at para. 6, where the Court held that “an order depriving a successful party of costs is exceptional.”
[26] In 1318706 Ontario Ltd. v. Niagara (Regional Municipality), 2005 CanLII 16071 (ON CA), [2005] O.J. No. 1907, the Ontario Court of Appeal stated as follows at para. 50:
This court will rarely interfere with the disposition of costs at first instance. However, as Stratton C.J.N.B. said in Larter v. Universal Sales Ltd. (1991), 1991 CanLII 4077 (NB CA), 50 C.P.C. (2d) 66 (N.B. C.A.), at 67-68:
In M.M. Orkin, The Law of Costs, 2d ed. (Aurora, Ont.: Canada Law Book, 1987) at p.2-13, the author points out that the principle that a successful party is entitled to his costs is of long standing and should not be departed from except for very good reasons. One might depart from the rule if there has been (1) misconduct of the parties, (2) miscarriage in the procedure, or (3) oppressive and vexatious conduct of proceedings.
[27] Mr. Maltz relies upon Barbara’s “bad behaviour” in support of his position that she should be deprived of her costs of the Action. However, the conduct he relies upon occurred before the Action was commenced by Peter in March 2013. Barbara’s alleged bad behaviour is, in fact, the subject matter of the Action.
[28] Mr. Du Vernet characterizes Barbara’s alleged conduct as “pre-litigation conduct”. He argues that this should have no bearing on the issue of costs of the Action since it does not fall within any of the exceptions referred to by the Ontario Court of Appeal in 1318706 Ontario Ltd. v. Niagara (Regional Municipality), supra. I agree with this submission.
[29] On the record before me I do not find any misconduct, miscarriage in the procedure or oppressive or vexatious conduct on the part of Barbara in the conduct of these proceedings. There is, therefore, no basis to deprive her of her costs of the Action.
[30] I find that Barbara is entitled to her costs of the Action payable by Peter.
Scale of Costs
[31] Peter alleged fraud and conspiracy against Barbara in the Action. He did not establish either at trial. Peter was put on notice by Barbara in: (a) her offer to settle; (b) Mr. Du Vernet’s letter dated April 17, 2013; and (c) Barbara’s Statement of Defence, that she would seek costs against him on a substantial indemnity basis if he did not succeed at trial. Nonetheless, Peter proceeded with the Action against Barbara for almost three years. He did not establish his allegations of fraud and conspiracy against Barbara at trial.
[32] Under these circumstances I find that Peter ought to have had a reasonable expectation that he would be exposed to a costs order on a substantial indemnity basis if he did not establish his allegations of fraud and conspiracy against Barbara at trial. Peter is, therefore, responsible for Barbara’s reasonable costs of defending the Action on a substantial indemnity scale.
[33] I find that Barbara is entitled to her costs of the Action on a substantial indemnity scale.
Amount of Costs
[34] Mr. Du Vernet has provided a Bill of Costs that totals $403,174.85 on a substantial indemnity scale. It is 67 pages in length and contains hundreds of docket entries.
[35] As I explained to counsel during the argument of the motion, I do not intend to conduct an assessment of Mr. Du Vernet’s lengthy Bill of Costs. Rather, I will refer the assessment of his account to an assessment officer pursuant to Rule 58 of the Rules of Civil Procedure.
[36] However, I find the amount claimed for costs on behalf of Barbara to be excessive under the circumstances. This was not a complex proceeding involving extensive documentary production and lengthy examinations for discovery. It did not proceed to trial. Costs were fixed and awarded on the motions brought in the proceedings and should not be included in Mr. Du Vernet’s Bill of Costs. Under these circumstances the amount of costs claimed on behalf of Barbara cannot be justified.
[37] The subject matter of all of these proceedings was the Cottage. It has a value of approximately $300,000.00. For a party to incur costs in an amount far in excess of the value of the subject matter of the litigation is unreasonable. Barbara’s claim for costs is disproportionate to the subject matter of the litigation. Costs of this magnitude could not have been within Peter’s reasonable expectation and he should not be liable for such an excessive amount of costs.
[38] For this reason, I will defer making a final order as to the amount of costs to be awarded to Barbara until Mr. Du Vernet’s Bill of Costs has been assessed by an assessment officer. Once an assessment has been conducted the motion is to be continued before me with the assessment officer’s report. At that time I will make a final determination of the amount to be awarded to Barbara for her costs of the Action.
Conclusion
[39] The Action is dismissed against Barbara. Peter is ordered to pay her costs of the Action on a substantial indemnity scale.
[40] This motion is adjourned to allow for the assessment of Mr. Du Vernet’s Bill of Costs pursuant to Rule 58 of the Rules of Civil Procedure. Once that has occurred and I have been provided with the assessment officer’s report, I will fix the amount of costs to be awarded to Barbara for the Action including this motion.
HAINEY J.
Date: March 11, 2016