Tingas-Demetriou v. Dublin et al.

[Indexed as: Tingas-Demetriou v. Dublin]

Ontario Reports Ontario Superior Court of Justice, Turnbull J. June 2, 2016 132 O.R. (3d) 475 | 2016 ONSC 3414

Case Summary

Civil procedure — Costs — Full indemnity costs — Plaintiff bringing action in which she made clearly unfounded allegations of deceit, misrepresentation and fraud — Defendants making early offers to settle — Action dismissed on consent immediately before summary judgment motion was to be argued — Defendants entitled to their costs on full indemnity basis.

The defendant S sold a property to the plaintiff for approximately $255,000 through the defendant KSF, which had obtained it through a judgment foreclosure for $114,444. The defendant D loaned the plaintiff $275,000 secured by a mortgage on the property. The plaintiff sued the defendants for $300,000, which she alleged had been fraudulently misappropriated from her, and sought punitive and/or aggravated damages in the amount of $100,000. She made allegations of deceit, misrepresentation, conspiracy and fraud. The defendants made early offers to settle which were not accepted. The action was dismissed on consent immediately before a summary judgment motion was to be heard. The defendants sought their costs.

Held, the defendants should be awarded costs on a full indemnity basis.

The action was ill-founded. There was clearly no conspiracy, deceit or fraud, and an appraisal existed which justified the price which was paid for the property. Parties who make unfounded allegations of fraud or improper conduct which are seriously prejudicial to the character and reputation of a party may be held liable to pay costs on a higher scale. [page476]

Cases referred to CIBC Mortgages Inc. v. Vieira, [2014] O.J. No. 352, 2014 ONSC 56 (S.C.J.); Smith Estate v. Rotstein, [2010] O.J. No. 3266, 2010 ONSC 4487, 59 E.T.R. (3d) 279, 191 A.C.W.S. (3d) 748 (S.C.J.)

Rules and regulations referred to Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rules 49, 57, 57.01

Ruling on Costs

Counsel: A. Douglas Burns, for plaintiff. Carmine Scalzi, for defendant Max Dublin. Daniel Bernstein, for defendants Woolfson & Woolfson and E. Sidney Woolfson. Stephen M. Turk, for defendants Kevin Swartz and KSF Realty Inc.

1Costs endorsement of TURNBULL J.: — The defendants Kevin Swartz ("Swartz"), KSF Realty Inc. ("KSF") and Max Dublin ("Dublin") seek their costs of this action after it was dismissed on consent immediately before a motion for summary judgment was to be argued.

2The plaintiff sued the defendants for approximately $300,000 which she alleged had been fraudulently misappropriated from her by the defendants. She further sought the sum of $100,000 for punitive and/or aggravated damages.

3The plaintiff purchased a property in the City of Hamilton in May 2015 for approximately $255,000. The defendant Swartz sold the property to the plaintiff through the defendant company KSF. KSF had obtained the property on or about February 20, 2015 through a judgment foreclosure for the sum of $114,444. The defendant Dublin loaned the plaintiff a sum of $275,000 secured by a mortgage on the property. At the same time, Dublin obtained a second mortgage on another property owned by the plaintiff.

4At para. 12 of her statement of claim, the plaintiff alleged that the defendants "misrepresented support, disclosure, and duty to [the plaintiff] and acted in concert to the detriment of same".

5At para. 14, the plaintiff alleged that the profits which accrued to KSF and Dublin in the transaction, represented "deceit, misrepresentation, and fraud in their dealings with the plaintiff".

6At para. 15, the plaintiff alleged that the defendants, in particular KSF and Dublin, deliberately deceived, misrepresented, misled and converted money from the plaintiff. [page477]

7The defendants vigorously defended the action. Immediately after being served with the statement of claim, counsel for KSF and Swartz advised by letter on December 1, 2015 as follows:

I have instructions to advise you my client is prepared to consent to a dismissal of the action hereon on a without costs basis and in exchange for a full and final release the wording of which we will have to agree upon and I assume you and I will act reasonably in furtherance of same. Said offer is open for acceptance for 7 days or until such time as I receive a response to the request for particulars set out herein. After 7 days or a response is received, my client will consent to the dismissal of the action herein in exchange for a full and final release (same terms as above) and payment of its agreed to costs or assessed costs minus $500.00. Said second offer is open for acceptance until 10 minutes after the commencement of a trial or any summary judgment motion brought by my clients. I can advise if this matter proceeds to a trial or summary judgment motion, my client will be seeking full indemnity costs against yours in light of the fraud allegations and the outrageous nature of the pleading put forward.

8Counsel for Dublin, Carmine Scalzi, also wrote to counsel for the plaintiff on December 1, 2015. In that letter, he enclosed a Rule 49 offer to settle served pursuant to the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. The plaintiff was advised that if a summary judgment motion was required to dismiss the action, the offer to settle would be relied upon with respect to the issue of costs. The offer to settle, dated November 30, 2015, provided the following:

(1) The plaintiff was to agree to dismiss the action against Max Dublin on a without prejudice basis. (2) The plaintiff was to pay the defendant Max Dublin his costs on a partial indemnity basis less $500. (3) The offer was to remain open until one minute after the commencement of the trial.

9On Wednesday February 17, 2016, as the summary judgment motion approached, counsel for Swartz and KSF sent an e-mail to counsel for the plaintiff. In that e-mail, he wrote as follows:

Please note my client's offer as said in my letter of December 1, 2015 is hereby amended as of this moment. My clients at this point will only consent to the dismissal of the claim provided their costs are paid on a substantial indemnity basis less $500.00. Mr. Scalzi has advised me to advise you that any offers from his client are now amended so that his client is seeking substantial indemnity costs as well.

When counsel appeared on the summary judgment motion on April 8, 2016, an order was granted on consent dismissing the action with costs to be assessed. [page478]

Costs of Kevin Swartz and KSF Realty Inc.

10In his costs outline, Mr. Turk requests full indemnity fees of $28,000 based on a billing rate of $500 per hour. He further seeks the sum of $1,500 (full indemnity) for appearances in court on two occasions.

11In considering the issue of costs, the court is to be guided by the factors outlined under rule 57.01. In this case, the plaintiff sought in excess of $388,000 and nothing was recovered. The motion for summary judgment was not complex but, in my view, the issue was very important to the defendants. Their integrity and professional reputations were being attacked in the proceedings and hence separate legal representation was required by Swartz, KSF and Dublin.

12It is apparent from the review of the file that this was an ill-founded action. There clearly was no conspiracy, no deceit, no fraud and an appraisal existed which justified the value of the property and the price which was paid for it.

13Under Rule 57, the court also needs to look at the failure of any party to admit something that should have been admitted. The defendants served demands for particulars and a careful review of those demands should have made clear to the plaintiff that her action would likely not proceed.

14Mr. Turk, counsel for Swartz and KSF was called to the bar in March 1990. He therefore has practised approximately 26 years and on a full indemnity basis he claims $500 per hour.

15I requested a breakdown of dockets and hours spent by Mr. Turk in this matter. He has provided me with detailed dockets and a breakdown of the way in which time was spent on the matter.

16I find this is a case in which full indemnity fees should be awarded. However, I am not convinced that all the legal work needed to be billed at $500 per hour as much of the work could have been done by a law clerk or a junior lawyer. In the circumstances, I am going to grant the defendants their full indemnity costs fixed in the amount of $23,000. Further, I will allow preparation costs for these submissions on costs of $1,500.

17Mr. Turk has claimed $2,200 for disbursements in his costs outline but a summary of those costs was not provided with the material received by my office. I am asking Mr. Turk to forward those to Mr. Burns to determine if there is any issue taken with respect to those disbursements claimed and I will add an addendum to this ruling to reflect whatever is awarded. This must be provided to my office on or before June 15, 2016. [page479]

18I recognize that reasonableness and proportionality are fundamental principles that must be taken into consideration in an assessment of costs of an action. In this matter, there were only two court appearances and a telephone conference call for costs submissions held on April 8, 2016. There were no pre-trial motions, no exchange of affidavit of documents and obviously no trial conducted. There was one cross-examination on the affidavit of the plaintiff.

19Mr. Burns has noted that the claims of the defendants combined are excessive particularly in light of the fact that the plaintiff's own bill of costs was only approximately $12,000.

Request for Full Indemnity Costs

20In considering full indemnity costs, I am acutely aware of the fair and reasonable expectations of parties must be considered. Counsel for both defendants wrote letters on December 1, 2015, wherein the nature of the claim was discussed and the plaintiff was put on notice as to what the defendants would be seeking if the matter went forward.

21In this case, the defendants both made an early offer to settle this action.

22Mr. Turk's offer met the formal requirements of Rule 49. It suggested a compromise, it was in writing, it was served on the other party at least seven days before the commencement of the hearing, it was not withdrawn prior to the commencement of the hearing and it remained open for acceptance until immediately after of the commencement of the hearing. The same can be said for Mr. Scalzi's offer to settle.

23A greater concern is the fact that serious allegations of improper conduct were made against the defendants without any evidentiary foundation. The plaintiff knew or ought to have known that the professional reputations of the defendants were put into question by the plaintiff. It was inevitable that they would vigorously defend the action. Our courts have often held that parties who make allegations of fraud or improper conduct which are seriously prejudicial to the character and reputation of a party, which prove to be unfounded, are often held liable to pay costs on a higher scale (CIBC Mortgages Inc. v. Vieira, [2014] O.J. No. 352, 2014 ONSC 56 (S.C.J.), at para. 5).

24On review of the entire file, it is clear the defendants did nothing wrong prior to the commencement of litigation and they gave the plaintiff ample opportunity for her to deal responsibly with her claim once it was commenced. The fact that she waited until the eve before a summary judgment motion was to be argued is not the responsibility of the defendants. [page480]

25In the case of Smith Estate v. Rotstein, [2010] O.J. No. 3266, 2010 ONSC 4487 (S.C.J.), at para. 57, Brown J. (as he then was) noted that "[o]ne of the most effective ways to measure the reasonableness of the expectations of an unsuccessful party, is to require that party to file a Bill of Costs as part of its costs submissions". Justice Brown noted that one of the most effective ways of determining the reasonableness of the costs sought by a party is to determine the amount paid by the other party who is being requested to pay. While Mr. Burns gave a general estimation of the amount billed to his client, a bill of costs was not provided.

26In all the circumstances of this case, I feel the defendants Swartz and KSF should be paid their costs on a full indemnity basis, including time for preparation of these submissions, in the amount of $24,500 plus HST. I note that no statement of the actual fees charged to KSF and Swartz were provided to the court.

27I have not received detailed dockets of time from Mr. Scalzi. The costs outline claims $25,500 based on a full indemnity fee of $425 per hour. He further seeks the sum of $1,275 for a counsel fee for appearance.

28Mr. Scalzi was called to the bar in July 2006. From the review of the services outlined in his bill of costs and the review of the file (recognizing that his client also had brought an action on the mortgage in a separate proceeding), I am prepared to grant full indemnity fees to Dublin in the amount of $16,275 plus HST. The claim of $2,150 for disbursements has not been itemized and it should be sent to the attention of Mr. Burns. If Mr. Burns agrees with the figures, the court should be advised and the claim should be sent to my attention so that I can issue an addendum to this ruling. This must be provided to my office on or before June 15, 2016.

29I also have not yet received a statement from Mr. Scalzi as to the actual rates and bill rendered to Mr. Dublin in this matter. In a letter dated April 29, 2016, Mr. Scalzi provided me with a general breakdown of the hours spent and the nature of the services. It is clear to me that some of the time that he has claimed related to the mortgage action brought against the defendant on default of the mortgage and part of the time was spent in defending the plaintiff's claim for fraud. In the circumstances, I am prepared to allow the defendant 40 hours with respect to this action on a full indemnity basis at $425 per hour. That amount is $17,000, plus HST.

30I thank counsel for their submissions in this difficult matter.