Court File and Parties

COURT FILE NO.: 11-52499 Ottawa/737-2013 L’Orignal DATE: 20160817 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN: Court File No.: 11-52499 BANK OF MONTREAL Applicant – and – JEAN-LUC CARDINAL and THE ESTATE OF RAYMOND CARDINAL, operating as FERME LANIDRAC Respondents

Counsel: Guy Pratte/Karen Perron, for the Applicant, Bank of Montreal Ronald Caza/Érik Labelle Eastaugh for the Respondents

AND BETWEEN: Court File No.: 737-2013 JEAN-LUC CARDINAL, LINDA CARDINAL, LA SUCCESSION DU FEU RAYMOND CARDINAL ET FERME LANIDRAC Plaintiffs – and – LA BANQUE DE MONTRÉAL et SURGESON CARSON ASSOICATES, INC. Defendants

Counsel: Ronald Caza/Érik Labelle Eastaugh, for the Plaintiffs Guy Pratte/Karen Perron, for the Defendant, La Banque de Montréal Sally Gomery, for the Defendant, Surgeson Carson Associates, Inc.

HEARD: By written submissions

costs decision

Beaudoin J.

[1] On March 21, 2016 I released my decision with respect to two bilingual motions. The first was brought in Court file no. 737-2013 (“the l’Orignal action”) wherein La Banque de Montréal (“The Bank”) and Surgerson Carson Associates, Inc. (“The Receiver”) as Defendants sought summary judgment dismissing the Plaintiffs’ claims. The second motion was brought by Jean-Luc Cardinal and the Estate of Raymond Cardinal operating as Ferme Lanidrac (“The Borrowers”) in Ottawa Court file no. 11-52499 wherein the Borrowers sought to set aside the consent judgment granted in favor of the Bank of Montreal dated November 28, 2011. The Borrowers also sought retroactive leave to bring the l’Orignal action against the Receiver.

[2] It was conceded that unless the Borrowers were successful in setting aside the judgment of November 28, 2011, summary judgment should be granted dismissing the Plaintiffs’ claims in the L’Orignal action. After argument, I dismissed the Borrowers’ motion and granted the summary judgment sought by the Bank and the Receiver. They now seek their costs.

The Position of the Bank

[3] The Bank and the Receiver had sought summary judgment on the basis that the Plaintiffs’ action was an abuse of process, was estopped by the doctrine of issue of estoppel and did not raise any genuine issues requiring a trial.

[4] The Bank cites the factors set out in rule 57.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 and submits that in the circumstances of this case, it is fair and reasonable that the Bank be awarded costs on a substantial indemnity basis in the amount of $144,721.56, or in the alternative, on a partial indemnity basis in the amount of $98,923.03.

[5] The Bank claims complete success on both motions and seeks all of its costs in defending the l’Orignal action from its commencement to its costs for bringing the summary judgment motion and in defending the Plaintiffs’ motion.

[6] The Bank notes that the Plaintiffs sought total damages in excess of $33 million for special damages, exemplary damages and general damages.

[7] As to the complexity of the proceeding, the Bank notes that the Plaintiffs’ action and the material filed by them in these proceedings raised serious allegations against the Bank going back several years. It was therefore necessary for the Bank to review and analyse a significant number of documents in order to understand and respond to the allegations.

[8] The Bank maintains that the issues were important in that the Plaintiffs’ action and their motion materials raised serious allegations of impropriety by the Bank including the abuse of power, breach of contract, misrepresentation, fraud and other forms of misconduct including an allegation that the Bank misled the Court when the termination order was obtained in 2011.

[9] In their motion materials, the Plaintiffs also accused the Bank’s representative of lying in various sworn affidavits filed in the Court in these proceedings. The Bank maintains that its integrity as an honest and reliable financial institution is a key element of its reputation and that the allegations made by the Plaintiffs therefore attacked the core of its reputation.

[10] The Bank relies on the fact that the Plaintiffs raised allegations that had been settled in 2011 and that the settlement was approved by the Court in 2011. Notwithstanding the prior adjudication, the Plaintiffs commenced the l’Orignal action two years later. The Bank maintains that the action of the Plaintiffs as a whole was an abuse of process.

[11] The Bank submits that an award of costs on a substantial indemnity scale is warranted for two reasons: a) the borrowers made unfounded allegations which are seriously prejudicial to the character and reputation of the Bank; and, b) their claim was found to be an abuse of process.

[12] The Bank submits that the litigation was not in the public interest, is to be discouraged and justifies an award of costs on a substantial indemnity scale. They also cite case law from the Supreme Court of Canada which has recognized the costs on a solicitor client scale are appropriate in the face of unwarranted allegations of fraud or dishonesty. [1]

[13] Finally, the Bank submits that the amounts claimed are reasonable and proportionate to the quantum of damages sought by the Plaintiffs in their action and in light of the nature of the accusations were made that were made against it.

The Position of the Receiver

[14] In its submissions, the Receiver notes that in addition to the allegations made against the Bank, the Borrowers had claimed that the Receiver had been grossly negligent during the receivership, relying for the most part on the same factual allegations that they had raised prior to their signature of the settlement agreement leading to the termination order in 2011.

[15] The Receiver relies on its success in both motions and seeks its cost on a substantial indemnity basis of $60,975 or in the alternative, costs on a partial indemnity basis in the amount of $45,842.30.

[16] Citing the factors listed under rule 57.01, the Receiver notes its complete success and the very large amount claimed. The Receiver joins the Bank in maintaining this was a factually and legally complex case. The Borrowers had filed numerous affidavits and many books of exhibits. Lengthy affidavits and transcripts of evidence from the proceedings in 2011 were also relevant to show that the Borrowers’ allegations in the subsequent action reproduced allegations that they had raised years earlier in the previous proceeding. Given the size of the claim and the multiplicity of legal arguments, the Receiver submits that it had to devote considerable time, resources and money on these matters.

[17] The Receiver notes that the Borrowers had alleged that it had grossly mismanaged the receivership and had actively misrepresented the farm’s financial situation and viability not only to them but also to the Court. The Borrowers also suggested that the Receiver’s principal, Kevin McCart, had made inaccurate or dishonest statements in his affidavit on the motions. The Receiver’s reputation, as well as that of Mr. McCart, was at issue.

[18] The Receiver alleges that the Borrowers attacked the integrity of the court process by arguing that a court order could be set aside based only on the unsupported and self-serving assertions of Mr. Jean-Luc Cardinal.

[19] The Receiver points out that the Borrowers commenced the l’Orignal action without seeking the leave of the Court as required under the terms of the parties’ settlement. Had they sought this authorization, the Receiver maintains that the application would have been denied and the matter would have proceeded much more quickly and at a much lower cost for all of the parties.

[20] The Receiver concludes that substantial indemnity costs are warranted in this case. It acknowledges that while access to justice is a fundamental value, the party should be discouraged from commencing abusive, duplicative and clearly unmeritorious actions. The Receiver argues that the Court found the Borrower’s action to be an abuse of process and clearly devoid of any merit and that it should never have been brought.

Les observations des demandeurs

[21] Les demandeurs reconnaissent que les montants qu’ils réclamaient étaient importantes et que les défendeurs on eut gain de cause dans les deux motions et qu’ils ont donc droit à une ordonnance de dépens. Toutefois, les demandeurs soutiennent que certains facteurs militent contre l’octroi des dépens recherchés.

[22] Les défendeurs affirment que les questions juridiques soulevées par les motions n’étaient pas particulièrement complexes et que le droit applicable n’a pas fait l’objet d’un débat prolongé.

[23] En plus, les demandeurs soutiennent que le succès a été partagé. Le débat juridique a porté principalement sur deux questions : le critère applicable à la motion en invalidation de l’ordonnance du 28 novembre 2011 et le critère applicable à la demande d’autorisation de poursuivre le Séquestre. La Cour a donné raison aux demandeurs sur le premier point, et au Séquestre sur le second.

[24] Selon les demandeurs, les défendeurs ont produit un dossier des preuves allant bien au-delà de ce qui était nécessaire tenu compte des questions en litige et que l’approche des défendeurs a prolongé et complexifié inutilement le travail requis. Les demandeurs soulignent que la Cour n’a pas statué que les questions des demandeurs étaient « dénuées de fondement. » Elle a plutôt décidé que le témoignage de M. Cardinal n’était pas suffisant, à lui seul, pour invalider l’entente de règlement tenu compte du fardeau de preuve applicable, soit celui de la preuve prima facie solide.

[25] Les demandeurs citent ce paragraphe de la décision de la Cour suprême dans l’affaire Hamilton c. Open Window Bakery Ltd., au para 26:

La tentative infructueuse d’établir, selon la prépondérance des probabilités l’existence de fraude ou de malhonnêteté n’amène pas forcément à conclure que la partie déboutée doit être tenue de verser des dépens avocat-client, étant donné que les tentatives de ce genre ne seront pas toutes considérées, à juste titre, comme une « conduite répréhensible, scandaleuse ou outrageante.

[26] Contrairement à ce que prétend le Séquestre, les demandeurs allèguent que le fait qu’ils se voyaient tenus d’obtenir la permission de la Cour avant de procéder avec l’action contre le Séquestre ne milite pas en faveur de l’octroi de dépens plus élevés. Même si les demandeurs avaient présenté une motion à cette effet avant d’entamer l’instance, les questions juridiques et factuelles auraient été les mêmes et il aurait été nécessaire d’ajouter la Banque comme partie à l’instance. Les demandeurs prétendent que les débats n’auraient donc pas été plus simple, ni plus rapide.

[27] Les demandeurs soulignent que la Cour a statué que l’action était rejeté en raison de l’autorité de la chose jugée ( res judicata ) et qu’elle n’a pas qualifié la conduite des demandeurs d’abusive. En l’absence d’une intention agressive ou abusive, le seul fait qu’une action tombe sous l’autorité de la chose jugée ne saurait justifier l’octroi des dépens à l’échelle de l’indemnité substantielle, surtout lorsque, comme ici, le fardeau de preuve, devant lequel se trouvait la partie perdante, était très rigoureux.

[28] Selon les demandeurs, une ordonnance de dépens à l’échelle de l’indemnité substantielle n’est indiquée que si sa conduite était répréhensible, scandaleuse ou outrageuse. Ils cherchent à distinguer les décisions citées par les défendeurs et soutiennent que les litiges dans cette instance étaient moins complexes, il y avait moins de défendeurs, et le montant réclamé était beaucoup plus petit.

[29] Pour ces motifs, les demandeurs soutiennent qu’il serait juste d’accorder 40 000, 00$ en dépens à la Banque et 16 900, 00 $ au Séquestre. Ils jugent que ces montants respectent les proportions relatives des montants réclamés par chaque défendeur et qu’ils sont proportionnels au niveau de complexité et à l’importance du litige.

Analysis and Conclusion

[30] The Borrowers are correct in their submission that I did not feel it necessary to dismiss their new action an abuse of process. Nevertheless, having found that the Borrowers had executed three forbearance agreements, two settlement agreements with full and final releases and had consented to a termination order, I could have easily come to that conclusion. While I may have relied on the doctrine of res judicata in dismissing the Borrowers’ new action, their conduct in attempting to re-litigate claims that had been so thoroughly negotiated and resolved by way of a court order is a relevant matter in assessing costs.

[31] I agree that actions such as these should be discouraged. In their desperate bid to set aside the previous court order and pursue their claims against the Bank and the Receiver, the Borrowers had to rely on allegations of dishonesty that bordered on fraud. Their evidence fell short of the very high burden of proof required in this case.

[32] I also agree that the Borrowers unnecessarily increased costs by not first seeking leave to commence the l’Orignal action against the Receiver. While the arguments would have remained the same, the costs to the Receiver and the Bank would have been significantly less and more in line with what the Borrowers now submit is reasonable amount to pay.

[33] While the materials filed by the Defendants were extensive, they were necessary to demonstrate that the Borrowers were repeating the same allegations in their new action that had been previously relied upon to set aside the appointment of the Receiver. My review of the background history between the Bank and the Borrowers comprised nine pages of my fifteen page decision.

[34] While the Plaintiffs claim that the Defendants’ Bills of Costs are excessive, they have not provided me with any information as to their own costs. As a result, I can infer that they devoted comparable time and money as their opponents [2].

[35] Given the serious allegations of dishonesty and the attacks on the integrity and reputations of the Defendants, I accept that costs on a substantial indemnity scale are appropriate in this case. In determining a fair and reasonable amount to be paid on that scale, I am not bound to accept the amounts presented to me in the Cost Outlines of the Defendants. I also acknowledge that the Borrowers’ had some success in arguing the applicable test to set aside the consent judgment.

[36] Having regard to all of the above. I assess the Bank’s costs in the amount of $110,000 and those of the Receiver in the amount of $50,000; both sums inclusive of HST.

Mr. Justice Robert N. Beaudoin Released: August 17, 2016