Shatford v. Mason, 2016 ONSC 6925
COURT FILE NO.: CV-12-108358
DATE: 20161116
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Jeffrey Shatford, Plaintiff/Judgment Creditor
AND:
Jay Mason, Defendant/Judgment Debtor
BEFORE: The Honourable Madam Justice A.M. Mullins
COUNSEL: Ivan Lavrence, Counsel, for the Plaintiff/Judgment Creditor
William Chalmers, Counsel, for the Defendant/Judgment Debtor
HEARD: August 25, 2016
COSTS ENDORSEMENT
Nature of Proceeding
[1] Costs are sought by Fraser Mason in respect of an abandoned motion made by the plaintiff, Jeffrey Shatford. On June 6, 2012, Shatford obtained a default judgment for sums loaned and unpaid. Jay Mason, Fraser’s son, was ordered to pay $114,153.84 plus costs and post-judgment interest. On November 21, 2012, Shatford brought a motion for relief relating to enforcement of the judgment by garnishment. He later abandoned that motion. Fraser Mason seeks the sum of $63,644.52 payable by Shatford, on a partial indemnity scale.
Background
[2] On June 6, 2012, Shatford registered a writ of seizure in relation to the judgment he had against Jay Mason. Jay Mason and his wife Stephanie Mason had purchased real property in May 2006. Jay Mason’s father had secured $750,000 by way of a mortgage on their property. At one point, he pledged this to the Royal Bank of Canada.
[3] The day after the writ was registered, Mason senior demanded repayment of the mortgage. (On July 17, 2012, RBC assigned the mortgage back to him).
[4] On August 9, 2012, Mason senior commenced an action against Jay and Stephanie Mason for possession of the secured property and payment of $751,173.29 (the Mortgage Action).
[5] On November 7, 2012, Jay Mason was noted in default in the Mortgage Action.
[6] On November 30, 2012, the property was listed for sale under power of sale. The property was sold on January 9, 2013, and the transaction closed on March 14, 2013. On April 16, 2013, Low J. granted judgment in the Mortgage Action in the amount of $739,968.
[7] In June of 2012, Shatford sent Notices of Garnishment to seven entities, though not Fraser Mason personally. Fraser Mason was involved with two of the named garnishees, Home Technology Solutions (HTS) and Home Technology Solutions Inc.
[8] As of December 10, 2009, Jay Mason had been registered as a partner of HTS. Shortly after Shatford demanded payment from Jay Mason in December 2011, HTS was folded into HTS Inc. with only Fraser Mason as a director.
[9] Neither HTS nor HTS Inc. (the HTS Businesses) filed a Garnishee’s Statement in response to Shatford’s notice of garnishment. As they did not owe any funds to Jay Mason, it was reasoned, they had no obligation to respond. In the absence of any disclosure, Shatford persisted in his expectations that there may have been funds or assets to which Jay Mason was entitled and available to satisfy the unpaid judgment.
[10] Shatford had not conducted an examination in aid of execution, as he might well have done. He was left to his own suspicions, whether founded or not, that the Mason father and son duo were deliberately thwarting repayment. Meanwhile, Jay Mason and his wife had separated, further obscuring matters in relation to the property secured by Mason senior’s mortgage.
[11] On June 22, 2012, Shatford commenced an action alleging fraud (the Fraud Action) against Jay, Fraser, and Stephanie Mason, and two potential buyers of the property. In the Statement of Claim, he alleged that the mortgage and HTS Inc.’s corporate structure were fraudulently created to hinder his ability to enforce the default judgment. Amongst other claims, Shatford sought a declaration that the default judgment had priority over the mortgage.
[12] On September 17, 2012, Shatford served the defendants with a Notice of Discontinuance of the Fraud Action.
[13] On July 18, 2013, I ordered Shatford to pay Fraser Mason costs of $7,500 for the abandoned Fraud Action.
[14] On December 5, 2012, the motion that is the subject of this costs claim was before Gilmore J. Shatford sought relief including:
i. Directions regarding the priority issue;
ii. An order for directions regarding the Notices of Garnishment served upon the HTS Businesses;
iii. An order for the examination under oath of Jay and Fraser Mason; and
iv. An order that any proceeds of the sale of the property be paid into the court pending resolution of the motion.
[15] Gilmore J. adjourned the motion at Fraser Mason’s request. In her endorsement of December 7, 2012, she made a temporary order requiring any proceeds from the potential sale of the property be paid into the Court.
[16] On December 2, 2014, Gilmore J. ordered Fraser Mason to pay Shatford $3,000 in costs for the December 2012 appearance. Payment was stayed until the hearing of the motion.
[17] The motion returned to court on July 11, 2013, before me. At the hearing, Shatford’s new counsel advised that the priority claim would no longer be pursued. Arguments were not completed, and the matter was adjourned.
[18] Following the July 11, 2013 appearance, Fraser delivered a Garnishee’s Statement relating to the HTS businesses.
[19] On September 9, 2013, Shatford served a Notice of Abandonment of the motion.
[20] Fraser Mason paid $741,000 in proceeds of sale into the court in accordance with Gilmore J.’s temporary order. He brought a motion to have the money released to him, initially set for argument on April 2, 2012, but DiTomaso J. adjourned the matter until August 20, 2013.
[21] On August 20, 2013, McCarthy J. ordered the release of the funds to Fraser Mason, save for $150,000. He ruled that Shatford would be liable for costs of that motion if Fraser Mason was later able to secure an order for the release of the $150,000 balance.
[22] On September 12, 2013, Vallee J. signed a consent order for the release of the $150,000 balance to Fraser Mason.
[23] At some point, Fraser Mason had commenced a tort action (the Tort Action) against Jeffrey Shatford and his then counsel Tanya Walker. He alleged that the defendants had conspired to wrongfully detain his money by refusing to consent to an order for payment out.
[24] O’Marra J. struck the Statement of Claim as disclosing no reasonable cause of action. He ordered Fraser to pay $20,057 in costs to Shatford. These costs remain unpaid.
[25] Fraser’s subsequent appeal was dismissed (Mason v. Shatford, 2015 ONCA 133, 250 A.C.W.S. (3d) 170). The Court of Appeal ordered Fraser to pay Shatford costs of $10,000 for the appeal. These costs remain unpaid.
Key Issues
Are Fraser Mason’s cost claims “fair and reasonable” in the circumstances?
Are some portions of Fraser Mason’s cost claims properly attributable to other aspects of the litigation between the parties?
Should this motion be stayed or dismissed due to Fraser Mason’s failure to pay prior cost orders?
Does the litigation behaviour of Fraser Mason or Jeffrey Shatford warrant cost sanctions?
Given the orders of Gilmore, McCarthy and Vallee J., are the costs of those steps recoverable at this stage?
Key Positions of Fraser Mason and Jeffrey Shatford
General Principles
[26] Fraser Mason and Shatford generally agree on the framework of rules and principles that should guide the court’s analysis in this motion:
R. 37.09(3) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 grants Fraser a prima facie entitlement to costs for the abandoned motion;
R. 57.01 outlines the factors to be considered in fixing costs;
The overriding principles in fixing cost awards are fairness and reasonableness;
The court should balance the indemnity principle with the prevailing policy of access to justice; and
The court must take a contextual approach to determining what is fair and reasonable in the circumstances of the case.
[27] Mason senior emphasizes that the onus is on Shatford to rebut the prima facie costs entitlement.
1. Are Fraser Mason’s cost claims “fair and reasonable” in the circumstances?
[28] Shatford argues that Mason senior’s claim of $63,664.52 in costs is excessive beyond any possible doubt. From the Statement of Accounts tendered in evidence, it appears that Fraser incurred more than $120,000 in legal fees for a motion concerning a judgment of about $117,000. In particular:
a. His lead counsel personally attended to many simple tasks that should have been delegated to lower level employees of his firm;
b. He insisted on rushing the first appearance of the motion to release the property funds; and
c. The law firm expended 195.4 hours on a routine motion.
[29] Fraser Mason argues that it is not the role of the court to second guess time spent by counsel unless it is manifestly unreasonable in the sense that the total time spent is clearly excessive or the matter has been overly lawyered.
2. Are some portions of Fraser Mason’s cost claims improperly attributed to the Enforcement Motion?
[30] Shatford argues that $22,740 of Fraser’s costs are inappropriately claimed as relating to this motion.
a. $7,530 relate to the December 2012 appearance before Gilmore J. These costs were already adjudicated upon in Gilmore J.’s endorsement of December 2, 2014.
b. $1,100 relate to an ex parte motion to effect substituted service on Stephanie Mason. The order requested ought to have addressed costs.
c. $3,510 relate to the cross-examination of a non-party.
d. $1,200 relate to the sale of the property and the family law matter involving Jay and Stephanie Mason.
e. $1,100 relate to a cross-examination of Fraser Mason that was rendered useless by his refusal to answer questions relating to the garnishment.
f. $6,840 relate to the motion to release the sale proceeds brought before DiTomaso J. on April 2, 2013. DiTomaso J. did not make a costs order and payment out was resolved by the consent order of Vallee J.
3. Should this motion be stayed or dismissed due to Fraser Mason’s failure to pay prior cost awards?
[31] Fraser has failed to pay any of the cost orders from the Tort Action, the Tort Action’s appeal, and the December 5, 2012 appearance. Therefore, Shatford argues, this motion for costs should be dismissed under r. 60.12.
4. Does the litigation behaviour of Fraser Mason or Jeffrey Shatford warrant cost sanctions?
(A) Fraser Mason’s Litigation Behaviour
[32] Shatford submits that a successful party may be denied costs, receive reduced costs, or have costs ordered against it, when it engages in misconduct. He argues that cost sanctions should be ordered in this motion because of Fraser Mason’s:
i. Wilful refusal to abide by the Rules of Civil Procedure (r. 57.01(1)(e) and (g));
ii. Refusal to answer legitimate questions on cross-examination (r. 57.01(1)(e) and (g)), and
iii. Needlessly aggressive and grossly disproportionate litigation (r. 57.01(1)(f)(i) and (h)(i)).
(i) Wilful Refusal to Abide by the Rules of Civil Procedure (r. 57.01(1)(e) and (g))
[33] Shatford argues that Fraser’s failure to file a Garnishee’s Statement upon receiving the Notices of Garnishment was a wilful breach of the Rules of Civil Procedure. If the Garnishee’s Statement had been filed, the motion may not have been needed at all.
[34] In response, Fraser argues that the Notices of Garnishment were inherently flawed and did not warrant a response.
[35] Under r. 60.08(e), a Notice of Garnishment must be accompanied by an affidavit outlining the grounds for the belief that the intended garnishees are, or will become, indebted to the debtor. Fraser Mason argues that Shatford’s affidavit failed to specify the required grounds of belief.
[36] Mason senior also contends that the Notices of Garnishment sent to the HTS Businesses did not warrant a response. The businesses did not owe a debt to Jay Mason, so they were not liable to pay anything to the sheriff. As there was no debt to dispute, they were not obligated to file a Garnishee’s Statement under r. 60.08(15).
(ii) Refusal to Answer Legitimate Questions on Cross-Examination (r. 57.01(1)(e) and (g)
[37] Fraser Mason’s conduct on cross-examination necessitated bringing the enforcement motion to a hearing (SF, at para. 53), submits Shatford. He says that Fraser actively refused to answer questions regarding the HTS Businesses’ indebtedness to Jay. Meanwhile, Shatford had failed to exhaust the available means to acquire the relevant information because he did not attempt to compel Jay’s attendance for examination before bringing the motion.
(iii) Needlessly Aggressive and Grossly Disproportionate Litigation Behavior (r. 57.01(1)(e), (f)(i) and (h)(i)
[38] Shatford argues that cost sanctions should follow Fraser’s aggressive and grossly disproportionate litigation behavior. Examples of Fraser’s aggressive and disproportionate behavior include:
a. Spending 195.4 hours on a simple motion;
b. Bringing the groundless Tort Action;
c. Appealing the Tort Action judgment against Shatford; and
d. Bringing motions to release the property sale proceeds instead of waiting for the return of the Enforcement Motion.
[39] Shatford submits that Fraser Mason’s conduct reveals an intention to make it too difficult and expensive for Shatford to collect on Jay Mason’s debt.
(A) Jeffrey Shatford’s Litigation Behaviour
[40] Fraser Mason lists a number of factors that he argues justify drawing an adverse inference from Shatford’s conduct in the motion. These factors include:
a. The priority claim could have been dealt with in the Fraud Action, making the enforcement motion unnecessary;
b. He served Notices of Garnishment to five other entities, but did not bring motions to enforce the garnishment against any of them;
c. He did not attempt to examine Jay Mason before moving for Fraser Mason’s examination; and
d. He admits that there was no change in his knowledge regarding any debts the HTS Businesses owed Jay Mason between the time the enforcement motion was brought and when it was abandoned.
[41] Fraser Mason also complains that the priority claim was ill-advised and doomed from the outset. Shatford admits that priority was one of two principal issues in the enforcement motion. Therefore, Fraser contends that his entitlement to at least half of the costs is beyond doubt.
Quantum of Costs
[42] In his supplementary factum, Mason senior urges that cost amounts should be calculated at 55%-60% of a reasonable rate in order to accurately reflect partial indemnity. In support of this position, he invokes the decisions in Inter-Leasing Inc. v. Ontario (Minister of Revenue), 2014 ONCA 683, 2014 ONCA 4683, 245 A.C.W.S. (3d) 539, at para. 5; and Fairfield Sentry Ltd. v. PricewaterhouseCoopers LLP, 2015 ONSC 4961, 257 A.C.W.S. (3d) 65, at paras. 5, 7.
Disposition
[43] Fraser Mason is presumptively entitled to costs. As well as the prima facie entitlement, the motion for directions in the garnishment did serve to revive some, if not all, of the issues that had already been abandoned in an action, specifically the question of any priority of the mortgage vis-a-vis the garnishment.
[44] The overriding principles as to quantum of costs are fairness and reasonableness. The relevant factors are outlined in r. 57, as to how the discretion of the court is to be exercised.
[45] No issue was taken with the hourly rates of the time-keepers as expressed on a partial indemnity basis, which I consider are reasonable.
[46] The issue between Shatford and Fraser Mason’s business organizations was the extent to which the latter could be compelled to pay any sum up to $114,153.84, plus interest and costs, because of their monetary relationship, if any, with Jay Mason. Although Fraser Mason contends that the sum in issue on the motion should be measured by the $750,000 secured by his mortgage on his son’s matrimonial home, until his son’s marriage breakdown, sale of the home and the re-assignment of the mortgage from RBC, those funds were not in Fraser Mason’s hands in any event. The measure of the amount in issue was more appropriately the amount if any subject to garnishment.
[47] It is clear from the particulars of Mason senior’s costs outline that some of the sums claimed relate to work on the motion for payment in and out or the mortgage funds, and extraneous other aspects of the litigation. I accept as correct the plaintiff’s submissions that the sums relating to the appearances before Gilmore J., the substituted service upon Stephanie Mason, the costs of cross-examination of a third party, the costs of sale of the property and the costs of cross-examination of Fraser Mason are not recoverable in the context of the abandoned motion for directions on the garnishment, nor are costs that fall within the proceeding as they were before McCarthy, DiTomaso and Vallee J. Something approaching $22,740.00 is the total value claimed for this work. Fraser Mason ought to have sought his costs when these matters before a judge deciding the issue. There was no reservation of the issue of costs when the machinations over payment in and out of court of the mortgage proceeds was finally disposed of by Vallee J, on consent.
[48] Fraser Mason may have been correct that the rule governing garnishment does not, when narrowly interpreted, require a response from a business organization if no sum was owed. This does not however accord with the plain words of rule 60.08.(15). Regardless, his choice not to have his business organizations file a garnishee statement until ordered to do so was a particularly unhelpful and inflammatory choice to have made.
[49] Each of Shatford and Fraser Mason caused actions to be commenced on collateral targets, alleging fraud and conspiracy to thwart the system of justice. From this and their conduct throughout, it is reasonable to infer that they were less interested in the facts and the truth of them than in empowering themselves to bludgeon one another with lawsuits.
[50] It is evident from the accounts and costs outline of the plaintiff that counsel was meticulous in time record keeping and thorough in the work performed. That said, counsel of the experience claimed may be taken to be able and obliged to tailor the work in proportion to the quantum and importance of the issues in dispute.
[51] According to the costs outline, some portion of the work at Item B 1 relates to the motion in issue. It appears that the work at item 3 relating to examinations does as well. It is not clear how items 2 or 9 relate. For the reasons given, I do not allow the sums at items 4, 5, 6, 7, 8, or 9.
[52] Allowing the deduction I have for unrelated work and considering the issues in dispute and the conduct of the parties, a fair and reasonable sum in costs for the plaintiff to pay Fraser Mason, representing a reasonable proportion of the sums at item B 1 and 3, is $10,000.00. Disbursements were not challenged, but certain of them ought not to be recovered as they clearly relate to Stephanie Mason. The disbursements will be allowed with the exception of the sums paid to Network Reporting and Process Servers regarding her.
[53] In my view, it would not have been expeditious to have stayed this hearing, even though, in-explicably, Fraser Mason has not yet paid the costs he was ordered to pay to the plaintiff. It is time this long-standing litigation is brought to an end. The enforcement of this order for costs shall, nonetheless, be stayed until such time as Fraser Mason has paid the outstanding costs awards in favour of the plaintiff.
Madam Justice A.M. Mullins
Date: November 16, 2016