Citation: Sabean v. Aikman, 2016 ONSC 7010
Court File No.: CV-12-455556
Endorsement Released: November 15, 2016
Superior Court of Justice - Ontario
Re: Louis Gordon Sabean, Heather Anne Teitler and Sian Patricia Sabean by her litigation guardian Heather Anne Teitler v. Bruce Robert Aikman and Seaway Yarns Ltd.
Before: Master R. Dash
Counsel: Jeffrey Strype, for the plaintiffs Z.S. Pete Volaric, for Portage Mutual Insurance Co. Austin P. Riley, for John J. Aikins
Costs Endorsement
[1] On October 18, 2016 I dismissed the motion brought on behalf of the defendant to the counterclaim to remove the plaintiffs’ lawyer as lawyer for the plaintiff Sian Sabean based on an alleged disqualifying conflict of interest. This endorsement is concerned with the costs of that motion.
[2] Louis Sabean, was the driver of a motor vehicle in which his daughter Sian Sabean was a passenger when he was rear-ended by a vehicle driven by the defendant Bruce Aikman. Louis and Sian retained lawyer Jeffrey Strype who commenced action against Aikman naming both Louis and Sian as plaintiffs. Aikman counterclaimed against Louis for contribution to the damages suffered by Sian, alleging that Louis caused or contributed to the accident. Louis’s insurer Portage Mutual Insurance Company retained lawyer John Aikins to defend the counterclaim on behalf of Louis. On the instructions of Portage, but contrary to the wishes of Louis, Mr. Aikins brought the motion to remove Mr. Strype. I determined that there was no disqualifying conflict of interest.
[3] The plaintiffs seek costs on a substantial indemnity scale, not against Louis as defendant to the counterclaim, in whose name the motion was brought, but against Portage as to 50% and as against the lawyer, Mr. Aikins as to 50%. The plaintiffs claim costs on a substantial indemnity scale of $14,982 based on actual costs of $20,092. Costs on a partial indemnity scale are said to be $10,025. All numbers are inclusive of HST and disbursements.
[4] The plaintiff Sian Sabean, was successful in resisting the motion for Mr. Strype’s removal and there is no reason that costs should not follow the event. The important question is who should pay the costs and on what scale?
Costs Against Solicitor Personally
[5] In claiming costs against solicitor Aikins, the plaintiffs have failed to address the criteria under rule 57.07 or the jurisprudence for costs against a lawyer personally. Clearly Mr. Aikins takes his instructions from and was at all times acting for Portage, although he would have advised Portage as to the merits of such motion. He was not required to take instructions from Louis although clearly he could not act against his client Louis’s interests. He did not, on behalf of Portage, seek any relief against Louis (it was to remove Mr. Strype as Sian’s counsel), nor was the motion contrary to the interests of Louis as defendant to the counterclaim, although it was contrary to Louis’s wishes and instructions.
[6] The nub of my decision, as stated in paragraph 53 of the reasons, was that although Mr. Aikins, as solicitor for the defendant to the counterclaim had standing to bring the motion, and while there was theoretically a potential for conflict between Louis and Sian, “the likelihood of conflict of interest, risk of impaired representation or risk of real mischief is remote, speculative and minimal, rather than actual, substantial or likely.”
[7] Mr. Aikins argued that the conflict was sufficient to justify Mr. Strype’s removal. I disagreed. He brought forward cases that he argued were similar and binding. Again, I disagreed as each “similar” case had material differences. Mr. Aikins had not, using the words of rule 57.07, caused costs “to be incurred without reasonable cause or to be wasted by undue delay, negligence or other default.” I did raise a number of questions as to why Portage had determined to bring the motion in light of the speculative nature of its allegations of conflict, particularly at a time that interfered with scheduling a summary judgment motion that would have benefited both Portage and its insured. These questions gave me “pause to ask whether Mr. Akins’s concern over Mr. Strype’s alleged conflict is a “genuine” concern of “real mischief”” (paragraph 63).
[8] I addressed these concerns and the motives for bringing the motion, including a suspicion that the motion was brought for the purpose of causing the plaintiffs to reduce their claims to the defendants’ policy limits, as follows: “any risk of conflict in the circumstances of this case is speculative and certainly not substantial, but that does not mean it was unreasonable to bring the matter to the court’s attention to make that determination, nor does it necessarily impugn Mr. Aikins’s motives for bringing the motion”. (paragraph 64)
[9] Hence, although Mr. Aikins, on behalf of Portage, caused the plaintiffs to incur costs, I found that the position taken by Mr Aikins on the motion on instructions from Portage was not unreasonable. It was simply wrong. Courts must be wary in awarding costs personally against a lawyer for advancing an unpopular cause brought on behalf of his client.[^1] Mr. Aikins did not pursue an unattainable goal, even though his position was found to be faulty, nor was he derelict in his duties to the court.[^2]
[10] Costs will not be awarded against Mr. Aikins personally.
Costs Against Portage
[11] It would not be just to award costs against Louis, although the motion was brought in his name as defendant to the counterclaim. The motion was brought contrary to his wishes and instructions. The motion was advanced by Portage. In its costs submissions, Portage states: “Portage instructed Mr. Aikins to bring the motion and Louis Sabean was never at risk to pay any costs personally. Portage, as his liability insurer must pay those costs”. In the unusual facts and circumstances of this motion, cost will be awarded directly against Portage.
Scale of Costs
[12] On what scale should those costs be awarded? The starting point for determining whether costs should be awarded on an elevated scale is that substantial indemnity costs “are generally awarded only where there has been reprehensible, scandalous or outrageous conduct on the part of one of the parties.”[^3] Unfounded allegations of fraud or dishonesty or improper conduct prejudicial to the character or reputation of a party (or in my view their solicitor) typically attract an award of costs on the substantial indemnity scale[^4] although such result is not inexorable since not all such allegations rise to the level of reprehensible, scandalous or outrageous conduct.[^5]All of the circumstances must be considered, particularly “whether the allegations were advanced recklessly or with an improper motive”.[^6]
[13] In my view the allegations that Mr. Strype had a conflict of interest in representing both Sian and Louis as plaintiff were not allegations of fraud or dishonesty. They did however allege, in my view without foundation, that Mr. Strype continued to act for two parties despite a conflict of interest in contravention of the Rules of Professional Conduct, thereby impugning Mr. Strype’s character or professional reputation.
[14] While there was a theoretical conflict, I found that the allegations of conflict were “remote, speculative and minimal”. The examples given of potential conflict in my view did not demonstrate any substantial risk of conflict, impaired representation or disclosure of confidential information. Even if Portage had status to bring the motion in the name of its insured and bring its concerns to the court, I fail to understand how they could have had any “genuine” concern that would have affected the interests of its insured in the “real world”. Although Sian’s claim exceeded Louis’s policy limits with Portage, that would have been no different if Sian and Louis had separate lawyers. The timing of the motion is also relevant as the plaintiffs were taking steps to schedule a summary judgment motion that had the possibility of eliminating any exposure on the part of Portage and its insured. Although I had suspicions as to the motives of Portage, I declined to conclude that they had an improper motive; however, even if their concerns were genuine, such concerns should have been allayed and the motion withdrawn when they were faced with affidavits sworn by each of Louis and Sian that they waived any potential conflict and consented to Mr. Strype continuing to act for both of them.
[15] They have caused the plaintiffs, and in particular the plaintiff Sian, to incur substantial costs on matters not going to the advancement of the dispute among the parties, but going only to her preserving her choice of counsel. When Portage set out upon this motion, they should have known that if they were unsuccessful, they would be causing needless costs to the plaintiff. The motion was “unnecessary’ and “taken through…excessive caution” within the meaning of rule 57.01(1)(f) and it unnecessarily lengthened the duration of the proceedings within the meaning of rule 57.01(1)(e). Motions of this nature in my view make “litigation so prohibitively expensive that legitimate disputes cannot be litigated” and ought to be discouraged by “imposing stiff costs consequences.”[^7]
[16] As I stated in paragraph 66 of my reasons, a message needs to be sent that where liability appears to be clear and any potential conflicts have been waived, motions to disqualify lawyers from acting for both driver and passenger on the basis of conflict resulting from a counterclaim by defendants, “will effectively delay actions, overburden the courts with tactical conflict motions and remove the right of plaintiffs to select their counsel of choice.” The message perhaps need even be louder when the moving party is the party whose interests on liability are aligned with the plaintiffs.
[17] In my view, the means of sending such message is to award costs on a substantial indemnity scale against Portage. There is no reason that Sian Sabean should have to incur the lion’s share of a motion to remove her lawyer of choice. That said, I award costs on a substantial indemnity scale, not actual costs incurred.
Quantum of Costs
[18] I take the actual costs as those set out in the costs outline exchanged between counsel at the hearing of the motion, in the sum of $20,092, rather than amounts of $77,479 set out in a computer generated pre-bill for all services between Jan. 28, 2016 and the date of the motion or even the pre-bill of $31,372 for all services between Aug. 23, 2016 and the date of the motion. The court of appeal has indicated that partial indemnity rates are generally considered to be in the range of 55 to 60% of reasonable actual rates[^8] and substantial indemnity costs are defined as 1.5 times that of partial indemnity costs.[^9] Substantial indemnity rates are generally considered to be in the range of 85% of reasonable actual rates. Costs of $14,982 on a substantial indemnity scale as set out in the plaintiffs’ costs outline is approximately 75% of actual costs and well within that range.
[19] Given the legal complexity of the motion, the importance of the motion to the plaintiff Sian to retain her solicitor of choice, the principle of indemnity including the experience of counsel for the plaintiffs, the time spent and hourly rate of the various involved lawyers (and I find the time spent and hourly rate reasonable in the circumstances), my determination that this motion was not only unnecessary but has unnecessarily lengthened the duration of the proceeding, and while recognizing that costs are not simply a mathematical exercise of multiplying rates by hours spent, I find that the costs as claimed on a substantial indemnity scale of $14,892 are fair, reasonable and proportionate to the issues. Given the costs claimed by Portage in Mr. Aikins’ costs outline of $12,769 on a substantial indemnity scale, the costs claimed by the plaintiffs should have been within their reasonable expectations.
Set Off Against Costs of the Conflicts Motion
[20] That however is not the end of the matter. There are several issues that result in a reduction in the costs claimed. First, the motion by the defendant to the counterclaim was not just to remove Mr. Strype for conflict of interest, but also to compel Sian to attend a defence orthopaedic assessment. The plaintiffs resisted a defence medical examination of Sian, even during the two adjournment dates of the motion and consented to the defence medical examination only on the date of the hearing of the motion. The plaintiffs were unreasonable in their earlier position and they should have consented to the defence medical without the necessity of a motion. In fact the examination had to be adjourned three times during the delay and adjournments of the motion.
[21] The hearing however was devoted almost entirely to the conflict motion. The plaintiff neither claimed nor incurred any time on this aspect of the motion and in my view none of the costs in the plaintiffs’ costs outline relate to this issue. None of the material in the plaintiff’s responding motion record, supplementary record, factum or authorities are devoted to this issue. However, the motion record prepared on behalf of the moving party was devoted approximately 25% to the defence medical issue (the rest to the conflict motion) although all of the research and preparation, its supplementary record, factum and two books of authorities were entirely concerned with the conflict issue. There is also a suggestion that the plaintiffs had outstanding undertakings, but the notice of motion does not seek any relief respecting undertakings. Portage is entitled to compensation for the costs of the motion for a defence medical examination on a partial indemnity scale, which is to be set off against the costs of the plaintiff Sian on the conflicts motion. I would allocate $1,000 to that motion.
[22] Second, the plaintiffs brought and withdrew the cross-motion to remove Mr. Aikins as lawyer for Louis as defendant to the counterclaim. They were of the view that given contradictory instructions from Portage and Louis he was conflicted and should not argue the motion. Although this could be considered a success to the defendant to the counterclaim, it was withdrawn as moot once I determined to hear both motions concurrently. In any event, it does not appear that any time was spent by Mr. Aikins preparing for that motion and no responding materials were prepared. Therefore I award no costs to Mr. Aikins on that motion as none were incurred; however the plaintiffs’ costs must be reduced for the time related to the cross-motion. The notice of motion is three pages and the supporting affidavit contains only three substantive paragraphs. It is impossible to tell from the redacted description of services in the pre-bill how much time was spent although in the plaintiffs’ costs outline “drafting cross-motion material” appears in the services of Mr. De Sanctis, a junior lawyer with the plaintiffs’ firm and “preparation for motion and cross-motion” appears in the services of Mr. Smith. In my view very little time was spent and I reduce one hour of Mr. Smith’s time and one hour of Mr. De Sanctis’s time both on a substantial indemnity scale for a reduction of $575.00.
[23] Third, Portage argues for a reduction based on the two motion adjournments of April 27, where I was told, without the full picture that an admission of liability that would make the motion moot was imminent and of May 27, 2016 where I set the date for this motion without regard for when the plaintiffs’ summary judgment motion would be heard. Mr. Aikins appeared only on the second date. Although I set a peremptory hearing date, that attendance was not booked for the hearing of the motion, only to set a hearing date if the liability issue had not settled. The plaintiffs have not billed for those appearances, nor does it appear has Mr. Aikins. I would not award those costs to either party. It has been brought to my attention that at civil practice court on August 12, 2016 to set a date for the summary judgment motion, the plaintiffs sought unsuccessfully to have Justice Glustein adjourn the conflicts motion. Justice Glustein instead ordered the conflicts motion to proceed as scheduled and he adjourned to another date the setting of the hearing on the summary judgment motion. In my view that is a cost of the summary judgment motion, not the conflicts motion.
[24] In the result, costs to be awarded on the motion to remove Mr. Strype as lawyer of record for the plaintiff Sian Sabean, net of setoffs, is the sum of $13,400 inclusive of disbursements and HST. Although costs would normally be payable to the plaintiff Sian Sabean, in my view given the nature of the motion, they should be payable to her lawyers whose removal was sought.
Order
[25] Portage Mutual Insurance Co. shall pay to Strype Barristers LLP in trust costs of the motion to remove them as lawyers of record for the plaintiff Sian Sabean within 30 days fixed in the sum of $13,400.
Master R. Dash
Date: November 15, 2016
[^1]: Galganov v. Russell, 2012 ONCA 410 at para. 13 quoting Young v. Young, [1993] 4 S.C.R. 3
[^2]: Galganov v. Russell, supra at para. 18
[^3]: Young v. Young, supra, at p. 134. In that case the court referred to solicitor-client costs, the former term for substantial indemnity costs.
[^4]: 1623242 Ontario Inc. v. Great Lakes Copper Inc., 2016 ONSC 1002 (SCJ) at paras. 91 and 93
[^5]: Hamilton v. Open Window Bakery Ltd., (2004) 1 S.C.,R. at para. 26
[^6]: Albert Bloom Ltd. v. Bentick, (1996) 29 O.R. (3d) 681 (Gen. Div.) at p. 18
[^7]: Standard life Assurance Co. v. Elliott, [2007] O.J. No. 2031 (SCJ) at para. 15
[^8]: Inter-Leasing Inc. v. Ontario (Revenue), 2014 ONCA 683, [2014] O.J. No. 263 (C.A.) at para 5.
[^9]: Rule 1.03(1).