Court File and Parties
Court File No.: 810/10 (Guelph); and CV-13-44774 (Brampton) Date: 2017-06-28 Ontario Superior Court of Justice
Between: Barbara Ann Blatherwick, Applicant And: Brian Earl Blatherwick, Respondent
And: Court File No.: CV-13-44774 (Brampton) Between: Seasons (H.K.) Limited, Applicant And: Rockwood Landco Inc., Respondent
Counsel: J. Cox and N. Bazar, for Mrs. Blatherwick I. Kilgour, for Mr. Blatherwick J. Ormston and L. Moffatt, for Seasons (HK) Limited
Heard: May 29, 2017 Judge: Ricchetti J.
Costs Endorsement
[1] The Reasons for Judgment are set out in Blatherwick v. Blatherwick, 2015 ONSC 2606 released on April 27, 2015 (“Reasons”).
[2] A hearing was held to determine the costs of these proceedings.
The Position of the Parties
[3] Mrs. Blatherwick claims:
a) full recovery costs from Mr. Blatherwick in the total amount of $1,461,031.31 inclusive of HST. This is broken down as follows: $991,554.50 in legal fees and the balance in expert fees, disbursements and HST. Mrs. Blatherwick’s costs include all the fees and disbursements incurred in these proceedings, including the motion before Justice Tzimas on December 14, 2014 where Justice Tzimas ordered Mr. Blatherwick to pay $60,000 in costs of the motion but which costs remain outstanding; and
b) the full recovery cost award should be joint and several with Seasons (HK) Limited (“Seasons (HK)”). In the alternative, Mrs. Blatherwick claims that joint and several costs should accrue from February 22, 2013, the day that Seasons (HK) commenced the application, that amount being $871,379.62 on a full recovery basis. In the further alternative, Mrs. Blatherwick claims that the cost award should be 30% of the total fees and disbursements incurred.
[4] Mr. Blatherwick does not dispute Mrs. Blatherwick’s entitlement to costs. Mr. Blatherwick’s position is that the amount claimed is excessive, unreasonable, includes duplication, and legal fees/disbursements after the judgment was released. Mr. Blatherwick claims he does not have the ability to pay the costs. Mr. Blatherwick suggests that a reasonable and appropriate cost award would be in the range of approximately $500,000 to $700,000.
[5] Seasons (HK) does not dispute Mrs. Blatherwick’s entitlement to costs but submit that:
a) the cost award against Seasons (HK) should be approximately $96,000 inclusive of fees, disbursements and HST on a partial indemnity basis; and
b) any cost award against Seasons (HK) should not be joint and several with the cost award against Mr. Blatherwick.
The Law
Costs
[6] Section 131 of the Courts of Justice Act provides the court with a very broad discretion for the award of costs in legal proceedings.
[7] The relevant portions of Rule 24 of the Family Law Rules provides:
(5) In deciding whether a party has behaved reasonably or unreasonably, the court shall examine,
(a) the party’s behaviour in relation to the issues from the time they arose, including whether the party made an offer to settle;
(b) the reasonableness of any offer the party made; and
(c) any offer the party withdrew or failed to accept.
(8) If a party has acted in bad faith, the court shall decide costs on a full recovery basis and shall order the party to pay them immediately.
(11) In setting the amount of costs, the court shall consider,
(a) the importance, complexity or difficulty of the issues;
(b) the reasonableness or unreasonableness of each party’s behaviour in the case;
(c) the lawyer’s rates;
(d) the time properly spent on the case, including conversations between the lawyer and the party or witnesses, drafting documents and correspondence, attempts to settle, preparation, hearing, argument, and preparation and signature of the order;
(e) expenses properly paid or payable; and
(f) any other relevant matter.
(12) The court may make an order that a party pay an amount of money to another party to cover part or all of the expenses of carrying on the case, including a lawyer’s fees.
[8] The relevant portions of Rule 18 of the Family Law Rules provides:
(14) A party who makes an offer is, unless the court orders otherwise, entitled to costs to the date the offer was served and full recovery of costs from that date, if the following conditions are met:
If the offer relates to a trial or the hearing of a step other than a motion, it is made at least seven days before the trial or hearing date.
The offer does not expire and is not withdrawn before the hearing starts.
The offer is not accepted.
The party who made the offer obtains an order that is as favourable as or more favourable than the offer.
(15) The burden of proving that the order is as favourable as or more favourable than the offer to settle is on the party who claims the benefit of subrule (14).
(16) When the court exercises its discretion over costs, it may take into account any written offer to settle, the date it was made and its terms, even if subrule (14) does not apply.
[9] While not limiting the court’s discretion under s. 131 of the Courts of Justice Act (See Rule 57(4) of the Rules of Civil Procedure), the Rules of Civil Procedure provide:
57.01 (1) In exercising its discretion under section 131 of the Courts of Justice Act to award costs, the court may consider, in addition to the result in the proceeding and any offer to settle or to contribute made in writing,
(0.a) the principle of indemnity, including, where applicable, the experience of the lawyer for the party entitled to the costs as well as the rates charged and the hours spent by that lawyer;
(0.b) the amount of costs that an unsuccessful party could reasonably expect to pay in relation to the step in the proceeding for which costs are being fixed;
(a) the amount claimed and the amount recovered in the proceeding;
(b) the apportionment of liability;
(c) the complexity of the proceeding;
(d) the importance of the issues;
(e) the conduct of any party that tended to shorten or to lengthen unnecessarily the duration of the proceeding;
(f) whether any step in the proceeding was,
(i) improper, vexatious or unnecessary, or
(ii) taken through negligence, mistake or excessive caution;
(g) a party’s denial of or refusal to admit anything that should have been admitted;
(h) whether it is appropriate to award any costs or more than one set of costs where a party,
(i) commenced separate proceedings for claims that should have been made in one proceeding, or
(ii) in defending a proceeding separated unnecessarily from another party in the same interest or defended by a different lawyer; and
(i) any other matter relevant to the question of costs.
Substantial and Full Indemnity Costs
[10] An award of substantial or full indemnity costs may be made in circumstances such as where:
a) The court makes a finding of “bad faith” under Rule 24(8) of the Family Law Rules. Generally, bad faith requires dishonesty or malice (with “malice” involving the intent to cause harm and “harm” being used in its widest sense);
b) the “offer to settle” provisions are engaged under the Family Law Rules or the Rules of Civil Procedure; or
c) the court finds that there has been “reprehensible, scandalous, or outrageous conduct on the part of one of the parties”. See Young v. Young, [1993] 4 S.C.R. 3, at p. 134.
[11] In Mortimer v. Cameron (1994), 17 O.R. (3rd) 1 (C.A.) the court stated that a cost award of substantial or full indemnity “is to be ordered only in rare and exceptional cases to mark the court’s disapproval of the conduct of the party in the litigation.”
[12] In Green v. Green, [2014] W.D.F.L. 4439 (Ont. S. C.J.), the court awarded full recovery costs for the entire proceeding. The husband had concealed from and misled the parties and the Court about his true financial circumstances. The husband had also made false representations, swore false financial statements, and failed to respond to a request to produce documents. The Green case has many similarities to the case at bar.
[13] In Stevens v Stevens, 2012 ONSC 6881, the court awarded the wife full recovery costs for the entire proceeding. The Court stated:
“One of the most significant contributors to lengthy and costly litigation is to thrust economic havoc on the other when this game of litigation hide and seek forms part of their litigation strategy. This cannot be permitted by the court.”
Quantum of Costs
[14] In Boucher v. Public Accountants Council (Ontario), (2004), 71 OR (3d) 291 (C.A.) the Court of Appeal stated that making a costs award is not a mechanical exercise. The overall objective is to fix an amount that is fair and reasonable for the unsuccessful party to pay in the particular circumstances. What constitutes “fair and reasonable” takes into account all relevant considerations such as the reasonable expectation of what the losing party might expect to pay, the amounts at issue and the outcome.
Joint and Several Cost Awards
[15] The general rule is that where multiple plaintiffs commence a claim against defendant(s) and are unsuccessful against the defendant(s), then the plaintiffs are jointly liable for costs. This stems from the fact the plaintiffs decided to jointly commence the claim against the defendant(s). Mark Orkin in The Law of Costs, Second Edition, Thomson Reuters, (“Orkin on Costs”) at para 208.1.1. states:
The usual rule is that the liability of unsuccessful plaintiffs for costs is joint and several unless the court in the exercise of its discretion orders otherwise.
[16] Where the plaintiffs are successful against the defendants, Orkin on Costs at states:
While the prima facie rule is to find liability for costs in the same proportion as apportionment of liability the court may, in the exercise of its general discretion as to costs, depart from the rule where its application would work an injustice.
(see para 208.6)
Typically, costs are apportioned among defendants in the same proportion as their liability for damages.
Where a plaintiff recovers judgment against two defendants it is correct to apportion costs between them in the same ratio as the apportionment of liability but the court may also order joint and several liability for costs.
(see para 209.1)
[17] Mrs. Blatherwick relies on Meady v. Greyhound Canada Transportation Corp, [2013] O.J. No. 4634 for the general rule that unsuccessful plaintiffs are jointly and severally liable for costs. This is a correct statement of law. However, this “consolidated proceeding” was not analogous to “unsuccessful plaintiffs” since Mr. Blatherwick was not an “unsuccessful plaintiff”.
Costs Against a Non-Party
[18] Subsequent to the hearing, counsel brought 1318847 Ontario Limited v. Laval Tool & Mould Ltd., 2017 ONCA 184 to the court’s attention. For the reasons set out below, I am not persuaded that this authority adds to the determination of costs in this case.
The Analysis
Costs Against Mr. Blatherwick
Scale of Costs
[19] While Mrs. Blatherwick filed extensive written submissions, Mr. Blatherwick filed no written submissions.
[20] During oral submissions, Mr. Blatherwick’s counsel’s made general, vague statements about the costs claimed as being too high or unreasonable. The oral submissions were extremely brief. There were no submissions on exactly, how, which or what claimed costs were excessive, unreasonable or duplicative. These very brief submissions were of no assistance to the court as to what constitutes the appropriate scale or quantum of costs in this case.
[21] Mr. Blatherwick’s counsel’s submission that Mr. Blatherwick does not have the ability to pay a cost award has no merit. The Reasons clearly set out that Mr. Blatherwick is a wealthy man as the largest shareholder/owner of the successful Seasons Halloween Business. No new evidence was filed by Mr. Blatherwick to support any financial change to his ability to pay a cost award. In these circumstances, it is inconceivable that this court should penalize Mrs. Blatherwick by making an award of costs which otherwise meets the factors and criteria for a punitive award of costs because Mr. Blatherwick makes bald assertions, through counsel, that he cannot pay any costs awarded against him.
The Offers to Settle
[22] Mrs. Blatherwick made two offers prior to trial:
a) On December 6, 2012, an offer that Mr. Blatherwick pay $5,700,000.00 CAD in full satisfaction of all claims including property and spousal support, Mrs. Blatherwick retain the matrimonial home and transfer all interest in Blatherwick Holdings to Mr. Blatherwick, and there would be no further claim against the Mr. Blatherwick’s business interests. This Offer was withdrawn on January 5, 2015, prior to the commencement of the trial. As a result, this offer does not attract “cost consequences” but is a factor in assessing reasonable costs;
b) On January 28, 2015, Mrs. Blatherwick offered to settle both proceedings in exchange for Mr. Blatherwick making a one-time lump sum spousal support payment of $7,800,000.00 CAD, Mrs. Blatherwick would withdraw all property claims, Mrs. Blatherwick would transfer her interest in the Brownridge property to Mr. Blatherwick, Mrs. Blatherwick would consent to Seasons HK having a beneficial ownership of the Brownridge Property, and Mrs. Blatherwick would make no further claim on Mr. Blatherwick’s business interests. This offer was open for acceptance until the beginning of trial.
[23] Mr. Blatherwick did not accept the January 28, 2015 offer. The judgment of the court exceeded $9,500,000. The second offer complies with the Family Law Rules (notwithstanding that it also deals with the Brownridge Property claimed by Seasons (HK) since it contemplated Mrs. Blatherwick giving up any claim to such property). Mrs. Blatherwick exceeded this offer at trial. The cost consequences under Rule 18(14) of the Family Law Rules apply. Mrs. Blatherwick is entitled to full indemnity costs at least after January 28, 2015.
Bad Faith
[24] This court finds that full indemnity costs should be awarded for the entire proceeding (not just for the period after the January 28, 2015 Offer to Settle) as Mr. Blatherwick acted in bad faith throughout the proceeding.
[25] I will not repeat the findings in the Reasons that Mr. Blatherwick lied, was not forthcoming with relevant and necessary productions, engaged in deliberate non-disclosure, undertook a deliberate course of conduct to avoid dealing with this proceeding on the truth, merits and the law and thereby forcing Mrs. Blatherwick’s counsel to expend unnecessary time and to retain third parties to attempt to properly deal with the issues in the matrimonial proceeding. Mr. Blatherwick’s position on fundamental issues, such as his ownership and role in the Halloween Seasons Business before and during the trial, changed considerably extending and complicating the trial unnecessarily. Documents produced by Mr. Blatherwick were, in some cases, prepared after-the-fact and backdated in an attempt to support his position. As stated in the Reasons, a clear picture of Mr. Blatherwick’s finances was not capable of precise determination because of his deceptive and deliberate conduct and actions in this proceeding. The underlying reason for Mr. Blatherwick’s conduct was described at para. 280 of the Reasons:
There is no doubt that the lack of information and documentation, in addition to the constantly changing information and production of, at the time, questionable documentation, was designed to make Mrs. Blatherwick’s claims difficult and expensive to litigate.
[26] These actions by Mr. Blatherwick unnecessarily extended and complicated these legal proceeding. Added to this, the flagrant disregard of the court process, the numerous findings of contempt by Mr. Blatherwick and deliberate attempts to deceive this court, there is no doubt Mr. Blatherwick acted in bad faith throughout this proceeding entitling Mrs. Blatherwick to a cost award of full indemnity for the entire proceeding.
Conclusion on Level of Costs
[27] I conclude Mr. Blatherwick acted in bad faith throughout this proceeding and Mrs. Blatherwick exceeded the second Offer to Settle (which engaged the cost consequences). This is truly one of those rare and exceptional cases where the court should and must penalize Mr. Blatherwick for his “reprehensible, scandalous, or outrageous conduct” by awarding fully indemnity costs throughout the entire proceeding.
The Costs of the Seasons (HK) Application
[28] There is no doubt that some of the costs claimed by Mrs. Blatherwick include the legal fees and disbursements to defend the Seasons (HK) Application. In my view, these costs are properly included in the costs payable by Mr. Blatherwick for the following reasons:
a) This Court found that Seasons (HK) and Mr. Blatherwick had a common position and interest in the Application designed to keep the Brownridge Property out of the reach of Mrs. Blatherwick’s matrimonial claims;
b) Mr. Blatherwick consented to the relief in the Seasons (H.K.) Application, leaving it to Mrs. Blatherwick to defend the Seasons (H.K.) Application claim to exclude the Brownridge Property from the NFP; and
c) Mr. Blatherwick has an interest in Seasons (HK). If Seasons (HK) succeeded, this would have benefited Mr. Blatherwick through his indirect interest in Seasons (HK).
The Financial Examination
[29] Mr. Blatherwick submits that costs should be limited to the date of the Judgment and should not include the costs of the subsequent financial examination of Mr. Blatherwick in early 2016.
[30] I disagree. Rule 24(1) of the Family Law Rules provides that “There is a presumption that a successful party is entitled to the costs of a motion, enforcement, case or appeal.” “Case” is defined in Rule 2(1) of the Family Law Rules as: “case” means an application or any other method allowed in law for bringing a matter to the court for a final order or provisional order, and includes all motions, enforcements and appeals”. (emphasis added)
[31] Clearly, the financial examination was part of the necessary and reasonable steps taken by Mrs. Blatherwick to enforce the Judgment and, therefore, part of the costs of this “case”. Besides, having a second hearing to deal with the costs of enforcement in this matter would make no sense and not be efficient.
Quantum of Costs
[32] Notwithstanding that Mrs. Blatherwick is entitled to full indemnity costs, the costs of the legal services to be awarded must still be fair and reasonably incurred having regard to the issues in the case. The difficulty is that Mr. Blatherwick’s counsel does not point to any particular cost item(s) as being unreasonably incurred, excessive or duplicative. This court is left to its own devices to determine what was fairly and reasonably incurred in this case.
[33] It should be noted that Mrs. Blatherwick’s counsel points to a significant reduction of approximately $93,000 in fees and the elimination of law student time from the Bill of Costs as an indication of the reasonableness of the amount claimed.
[34] As stated above, the costs claimed are substantial. However, when the circumstances of this case and the appropriate factors are considered, the total amount of costs claimed are, in my view, reasonable:
(a) The importance, complexity or difficulty of the issues: This case involved multiple corporations in multiple jurisdictions around the world. The financial holdings of Mr. Blatherwick were extensive, complex and to some extent undocumented. Without productions or admissions from Mr. Blatherwick, unearthing Halloween Seasons Business corporations and holdings was an expensive and time consuming undertaking by Mrs. Blatherwick’s counsel;
(b) The reasonableness or unreasonableness of each party’s behaviour in the case: Mr. Blatherwick acted in bad faith throughout the entire litigation causing unnecessary and excessive costs to be incurred by Mrs. Blatherwick. Mr. Blatherwick’s lack of productions and reliable answers was a major challenge prior to and during trial;
(c) The lawyer’s rates: Mr. Cox is an experienced senior family law counsel and his rate of $550.00 per hour is reasonable in the context of this difficult case. Further, having a junior co-counsel, given the production issues, the multiplicity of issues, and the ever changing positions of Mr. Blatherwick, this additional cost was reasonable and necessary in these circumstances;
(d) Expenses properly paid or payable: All the claimed expenses appear to be proper, reasonable and necessarily incurred; and
(e) Any other relevant matter:
The lack of productions and admissions from Mr. Blatherwick caused Mrs. Blatherwick’s counsel to incur many costs, including retaining many third parties in different jurisdictions for matters which should have been uncontentious (i.e. the corporate entities and the corporate documentation);
The amount at issue in this case was substantial, making it necessary for a thorough review of facts and law, thereby making it reasonable to incur substantial legal costs to advance this claim; and
Mr. Blatherwick deliberately caused Mrs. Blatherwick to incur substantial and unnecessary costs by breaching various court orders and taking other actions such as the bankruptcy in an effort to avoid a trial on the merits, each step causing innumerable costs to be incurred. This was a deliberate course of conduct by Mr. Blatherwick to dissuade Mrs. Blatherwick from continuing with the litigation or accepting a low offer to settle.
[35] I find that the high costs incurred in this case were directly attributable to Mr. Blatherwick’s actions and conduct in this proceeding throughout. Having reviewed the Cost Outline, I find that the legal fees or disbursements claimed were necessary and reasonable in the circumstances of this case.
Conclusion on the Quantum of Costs
[36] I am satisfied a reasonable award is that Mr. Blatherwick pay Mrs. Blatherwick costs in the amount of $1,401,031.31 (this being the $1,461,031.31 less the $60,000 costs ordered by Justice Tzimas) forthwith. To be clear, Justice Tzimas’ cost order continues to be enforceable.
Costs Against Seasons (HK)
[37] The background to the Application was set out in the Reasons:
[38] This Application was issued on February 22, 2013. Seasons HK filed a complete application record – a Notice of Application and an affidavit of Mr. Simon Leung. Mr. Leung was one of the partners in the Seasons Halloween Business. This Application sought an order declaring that a property in Halton Hills, registered in the name of a company held by Mr. and Mrs. Blatherwick and their children, was beneficially owned by Seasons HK. Seasons HK, in the alternative, sought a vesting order. Mr. Blatherwick consented to the relief sought by Seasons HK in this Application. Mrs. Blatherwick disputed Seasons HK's claim.
[39] On October 24, 2013, Seasons HK amended its Application to add trust and unjust enrichment claims.
[40] Justice Tzimas ordered that the Seasons HK Application be heard at the same time as the Matrimonial and other issues involving Mr. and Mrs. Blatherwick.
[41] Counsel for Seasons HK and Mrs. Blatherwick agreed that no responding materials were required to be filed by Mrs. Blatherwick and that her productions and evidence would be the same as those in the matrimonial proceeding. Essentially, counsel agreed that Mrs. Blatherwick’s legal position was to deny that the subject property was beneficially owned by Seasons HK. These agreements were confirmed by both counsel on the record at trial.
[38] Justice Tzimas ordered that “Seasons and Rockwood’s participation in the matrimonial proceedings [be] limited to the issues that are engaged by the [civil] application”.
[39] While there was a “consolidation order” by Justice Tzimas, new pleadings were not ordered. Therefore, there are no pleadings showing who the plaintiff(s) or defendant(s) are in the consolidated proceeding.
[40] Further, it does not appear from Justice Tzimas’ endorsement that it was a full consolidation since Seasons (HK)’s participation was limited to the issues in the Application.
[41] What is clear from the discussion with counsel at the commencement of trial was that the parties recognized the need for efficiency by not requiring additional pleadings, not requiring additional productions, and agreeing to common evidence. This made it unnecessary for Seasons (HK)’s counsel to be present each day during the trial.
[42] Essentially, because of Justice Tzimas’ order and the practicalities of efficiency, there remained two separate proceedings at the trial. The matrimonial and Application issues were argued separately. Seasons (HK)’s counsel was not present for a significant portion of the trial during the matrimonial issues (although in some cases, junior counsel was present and in other cases, the audio recording was acquired by Seasons (HK)’s counsel).
[43] There are no Offers to Settle which affect this portion of the costs decision. On the third day of the trial, Mrs. Blatherwick offered to consent to a dismissal without costs of the Application while allowing Mr. Blatherwick to assert that Seasons (HK) was the beneficial owner of the Brownridge Property. This offer was not accepted. I am not persuaded that this offer engages “cost consequences” under the applicable rules or is a relevant factor to be considered.
[44] Mrs. Blatherwick submits full indemnity costs are appropriate given the findings of this court: rejecting the evidence of Mr. Leung; the obvious attempt to strip Mr. Blatherwick of any exigible assets in Ontario; and the participation of Seasons (HK) in the deliberate obfuscation of the financial affairs of the Seasons Halloween Business (i.e. the “brotherhood of trust” referred to in the Reasons).
[45] Mrs. Blatherwick relies on this court’s finding at para. 95 of the Reasons:
He [Mr. Blatherwick] and his partners met and agreed to assist Mr. Blatherwick in this matrimonial litigation to protect the Seasons Halloween Business from Mrs. Blatherwick.
[46] Seasons (HK) relies on:
a) the Application was commenced 2 ½ years after the matrimonial litigation had been commenced;
b) Seasons (HK) only called one witness during the month long trial;
c) Seasons (HK)’s Application was limited to one asset. While the ownership of the asset was necessary to determine the NFP, it was only a small portion of the overall family property and support issues in these proceedings;
d) Seasons (HK) was not put on notice that Mrs. Blatherwick would be seeking joint and several liability for the costs of the entire proceeding. Seasons (HK) submits it might have participated more fully in the entire trial to protect against such a consequence had it known of this position at the commencement of trial;
e) By agreement, Mrs. Blatherwick’s counsel did not have to produce a pleading or make productions in the Application;
f) Seasons (HK) did not participate in any other motions (aside from the consolidation motion), discoveries, or other steps; and
g) The Offer to Settle of January 28, 2015 was not capable of being accepted by Seasons (HK) because it required acceptance by Mr. Blatherwick, who did not accept that offer.
Scale of Costs
[47] This court found that Mr. Leung, the president of Seasons (HK), lacked credibility and presented a false and backdated document (such as the Declaration of Trust) in an attempt to support Seasons (HK)’s claim to the Brownridge Property. This court made the following findings regarding Mr. Leung’s credibility:
[98] I reject much of Mr. Leung’s evidence. He is a long-time friend of Mr. Blatherwick. He is one of the “brotherhood of trust”. He was central to several documents that were created and back-dated. Some of my serious concerns regarding Mr. Leung’s evidence include:
a. Mr. Leung appeared confused when it came to the corporate structure of the Seasons Halloween Business despite the submission by Mr. Blatherwick and Seasons HK that it was Mr. Leung who was in charge of the Season Halloween Business and not Mr. Blatherwick. Mr. Leung did not appear certain as to who owned Seasons Capital or Capitalrich - two very significant companies in the Seasons Halloween Business. Mr. Leung testified he “thinks” Seasons HK owns Seasons USA, but again, he wasn’t really sure. Yet, amidst all of this alleged uncertainty, Mr. Leung was the person who allegedly told Mr. Blatherwick shortly before trial that Mr. Blatherwick does not own any shares in Capitalrich but does own shares in Seasons Capital. And for the first time, Mr. Leung suggested he owns 25% of the shares in Seasons Macao despite nothing in the records and four and a half years of evidence that Mr. Blatherwick (50%), Mr. Gravelle (25%) and Mr. Williams (25%) were the shareholders of Seasons Macao. Mr. Leung was also unable to name the Trustee for Capitalrich despite the approximately 42% of shares Capitalrich holds in Seasons HK – which Mr. Leung now says are his shares – not Mr. Blatherwick’s shares. Mr. Leung was also unsure whether Capitalrich had bank accounts. Mr. Leung testified using phrases such as “To the best of my knowledge” to avoid being definitive of any particular answer. Clearly, Mr. Leung was involved in this complex shell game of "who owns what" in the Seasons Halloween Business. Given Mr. Blatherwick's epiphany at trial as to what shareholdings he did and did not have, Mr. Leung's evasive and uncertain answers appeared designed not to conflict with any answers Mr. Blatherwick may have given to this court;
b. Despite his evidence that he is the principal person in authority at the Seasons Halloween Business, on July 2011 Mr. Leung completed an information package to Warner Brothers where he represented that he owned 15% of Seasons HK and Seasons Macao and that Mr. Blatherwick owned 55% of Seasons HK and Seasons Macao;
c. Mr. Leung was unsure whether or not Seasons owned the Crystal pumpkin patent, who owned it, or whether royalties or fees were paid or received. This is surprising giving that, according to Mr. Blatherwick, approximately $7,000,000 USD in sales (approximately one sixth of the entire Seasons Halloween Business sales worldwide) are generated by this product;
d. Despite being the sole affiant in support of Seasons HK’s application for the declaration that Seasons HK is the beneficial owner of the Brownridge Property, Mr. Leung could not remember if the Brownridge Property was listed as a current asset in the Seasons HK’s books. Mr. Leung had no independent recollection of when the Brownridge Property was purchased. Mr. Leung did not know what the purpose of Rockwood Landco was or who the shareholders were. Mr. Leung had no involvement in the purchase of the Brownridge Property (a multi-million dollar asset allegedly owned by Seasons H.K). Specifically, Mr. Leung never spoke to the lawyer or a real estate agent in Ontario who dealt with the purchase of the Brownridge Property. This lack of personal involvement seriously undermines Mr. Leung’s knowledge of the purpose and acquisition of the Brownridge Property;
e. Mr. Leung appeared to have little knowledge of the Discovery Bay monies and bank accounts despite the millions of dollars from the Seasons Halloween Business that found its way to the Discovery Bay bank accounts. From 2006 to 2010, Mr. Leung received approximately $1,600,000 USD from Discovery Bay. Mr. Leung, like Mr. Blatherwick, denied knowing much about Discovery Bay. Mr. Leung set out in his affidavit of February 14, 2012 that Mr. Zheung (a third party whom the Seasons Halloween Business had a business relationship) deposited money into Discovery Bay and permits Mr. Blatherwick and himself to take $100,000 per year. This explanation doesn’t reconcile with the MY Commercial statements which show many transfers to, or for, Mr. Blatherwick and Mr. Leung well in excess of this amount. This explanation is also inconsistent with the calculation by Mr. Blatherwick’s former counsel that Mr. Blatherwick and Mr. Leung each withdrew approximately $1,600,000 over the years 2006 to 2010 from Discovery Bay. How could Mr. Leung not know details about Discovery Bay when he had received such large amounts of money from Discovery Bay? I conclude that Mr. Leung is a participant in this shell game regarding Discovery Bay and was not prepared to be forthright and honest when giving his evidence;
f. Despite the fact Mr. Blatherwick testified, Mr. Leung was advancing personal funds to pay for Mr. Blatherwick’s former lawyer, Mr. Leung knew little about the amounts paid and did not know how much money he or Seasons HK had paid to Mr. Blatherwick’s former lawyer. Prior to trial, Mrs. Blatherwick’s counsel wrote to Mr. Blatherwick asking Mr. Leung to bring copies of the bank statements for certain payments allegedly made by Mr. Leung personally to Mr. Blatherwick’s former lawyer. Mr. Blatherwick and Mr. Leung alleged that these were "loans" from Mr. Leung. Mrs. Blatherwick's counsel wanted to verify from which bank accounts the monies originated - Mr. Leung's personal account or Seasons HK account. Mr. Leung failed to bring the documentation. The logical inference to be drawn is that Mr. Leung is assisting Mr. Blatherwick avoid the effects of the Mareva/Freezing Order by falsely characterizing monies paid to Mr. Blatherwick's lawyer as "loans" from Mr. Leung, instead of what they really were - payments to Mr. Blatherwick from the Seasons Halloween Business;
g. When questioned about a significant letter, Mr. Leung wrote on June 7, 2011 confirming that Mr. Blatherwick owed money to Discovery Bay, Mr. Leung’s recollection as to how this letter came about was vague. The letter, as discussed below, was created to respond to a concern raised by Mr. Blatherwick's former counsel and to support a re-characterization of monies Mr. Blatherwick had received from Discovery Bay - the same company Mr. Leung knew little about during his evidence at trial. Mr. Leung did as he was asked and signed a letter confirming that the monies Mr. Blatherwick had received from Discovery Bay above a certain amount were loans. Mr. Leung could do that within a day, yet Mr. Leung could not provide this court with any information regarding Discovery Bay; and
h. When asked if he knew of an agency agreement between Mr. Zheung (Carnival Trading) and Seasons Halloween business, Mr. Leung responded: “I believe so.” Until shown the alleged agency agreements, Mr. Leung wasn’t even sure how much Mr. Zheung was paid despite testifying that he “oks” every payment out of Seasons HK. It is hard to imagine that Mr. Leung, particularly, if he was in charge of the Seasons Halloween Business as Mr. Blatherwick alleges and as Mr. Leung would like this court to believe, would not know whether there was an agency agreement with Mr. Zheung’s company when Mr. Zheung allegedly receives 7% of the gross sales of the Seasons Halloween Business. On last year's estimated gross sales of $42,000,000 USD, this would be approximately $7,000,000 USD!
[99] I conclude that Mr. Leung's evidence is neither credible nor reliable. (emphasis added)
[48] I agree that some of the above criticism of Mr. Leung relate to the matrimonial proceeding, but much of the above criticism relates to Seasons (HK) also related to Season (HK)’s position in the Seasons Halloween Business corporate structure which was relevant to the various claims advanced by Seasons (HK) and the Brownridge Property.
[49] I find that, to some extent, the Application took more time and became more complex because of Mr. Leung’s lack of productions, falsified and backdated documents and evasive answers.
[50] Because of the findings made at trial, I find that Seasons (HK) acted, in this proceeding, in a manner which was “reprehensible, scandalous, or outrageous conduct”. Such conduct deserves this court’s sanction by making a punitive award of costs.
[51] I also find that Seasons (HK) did act in bad faith because it failed to produce the relevant documents (para. 502-510 of the Reasons) and, instead, produced a Declaration of Trust which was found to be “false and backdated” (para. 515 of the Reasons) which was the main basis for Seasons (HK)’s claim to beneficial ownership.
[52] I disagree with Seasons (HK)’s counsel’s submission that Seasons (HK) would reasonably have expected to pay partial indemnity costs if it lost the Application. That is simply not reasonable given the evidence of Mr. Leung, the positions taken, the circumstances and findings in this case.
[53] In these circumstances, a punitive order of full indemnity costs is appropriate.
Joint and Several Liability?
[54] The position of Mrs. Blatherwick was summarized in her counsel’s factum as follows:
The Respondent admitted there was a brotherhood of trust between the partners and they look after each other. The Respondent admitted that he was a liar and a cheat and carries on business with partners that are the same. The Respondent admitted that he and his partners met and agreed they would finance the litigation to defeat Mrs. Blatherwick’s interests and protect the Seasons Group of Companies.
[55] Season (HK) submits it is only liable to Mrs. Blatherwick for costs associated with the time spent by Mrs. Blatherwick’s counsel on the Application.
[56] This is not a typical case of consolidation of two proceedings where it is clear who are the plaintiff(s) and who are the defendant(s). There continued to be two separate claims argued at trial – Mrs. Blatherwick’s matrimonial claim and Seasons (HK)’s trust claim in its Application.
[57] It is important to note that the Application proceeded on the basis that Mrs. Blatherwick, a shareholder in Rockwood Landco, and on behalf of Rockwood Landco, opposed (i.e. was the respondent) Seasons (HK)’s Application.
[58] As a result, the trial proceeded on the basis that Mrs. Blatherwick was the “plaintiff” in the matrimonial proceeding and, essentially, Mrs. Blatherwick was the “defendant” in the Application. This can be clearly seen by the manner in which the trial unfolded and the arguments were made at trial.
[59] I do not find that champerty or maintenance has been established in this case.
[60] I disagree with the submission by Seasons (HK) that this is a case of costs being sought against a “non-party”. There was a consolidation order making Seasons (HK) a party to the proceedings. 1318847 Ontario Limited v. Laval Tool & Mould Ltd., 2017 ONCA 184 has no application to this case.
[61] In reality, Mrs. Blatherwick seeks the joint and several cost award because of the “conspiratorial nature” of Seasons (HK) involvement in the matrimonial claim. I disagree. Seasons (HK)’s conduct in the Application justifies a full indemnity cost award against Seasons (HK) but to order Seasons (HK) to be responsible for all Mrs. Blatherwick’s costs would be harsh, unreasonable, disregard the separate entity, disregard its limited claim relating to the Brownridge Property and the limited amount of time the Brownridge Property issues took of the entire trial.
[62] Further, Mr. Blatherwick has assets to pay the judgment and a cost award. The issue is exigibility given that Mr. Blatherwick’s assets are off-shore. This impediment does give Mrs. Blatherwick a right to have Seasons (HK) obligated to pay the entire costs of these proceedings – the matrimonial proceeding and the Application.
[63] The allegation that the Seasons Halloween Business (not necessarily Seasons (HK) was funding the matrimonial litigation, was advanced by Mrs. Blatherwick well before trial. However, at no point prior to or during the trial did Mrs. Blatherwick raise the issue that it would seek costs against the Seasons Halloween Business or any of the companies in the corporate structure. The fact that Seasons (HK) was not on notice that Mrs. Blatherwick would be seeking joint and several costs, is a significant factor since Seasons (HK) could have been prejudiced by this lack of notice.
[64] Seasons (HK) raises another valid policy concern. Costs are designed to compensate a successful party, encourage settlement and sanction bad behaviour. Consolidation orders are made for party and judicial efficiency to deal with common issues. Here, the consolidation order was sought by Mrs. Blatherwick and granted against Seasons (HK). Unless there are clear and cogent reasons for making a joint and several cost award in consolidation proceedings, consolidation orders would become less sought after and opposed more often given the potential risk of a joint and several cost award. I echo the concerns described by Justice Archibald in Empire Life Insurance Company v. Krystal Holdings Inc.:
[44] Finally, I emphasize that to award costs on a joint and several basis could create a significant impediment to the consolidation of proceedings with common issues. The plaintiff originally commenced 147 different claims. The statements of claim were later consolidated to avoid a multiplicity of proceedings on common issues in accordance with s. 138 of the Courts of Justice Act. One goal of consolidation is to reduce the overall legal costs of an action for all parties. If costs are awarded on a joint and several liability when proceedings are consolidated in circumstances such as these, individual defendants would resist the efficacy of consolidation to avoid the risk of disproportionate cost liability. Clearly, the principle is to reduce overall legal costs, not to cause individuals to risk excessive liability for legal costs, completely disproportionate to their own potential liability. I realize the burden that this result will place on the plaintiff; however, the unfairness that would be caused by the alternative is substantial and far outweighs the factors in favour of a joint and several costs award.
[65] In the context of this case, it is not necessary to deal with this policy issue given that, while a consolidation order was made, in many respects the two matters proceeded separately except for common evidence. This trial turned out to be more akin to two proceedings tried together. I am not persuaded that a joint and several cost award would be appropriate or in the interests of justice in this case.
Quantum of Costs
[66] Mrs. Blatherwick’s counsel’s Cost Outline does not separate out fees and disbursements related to the Application. I am not persuaded that this task can be done efficiently, at all or at a reasonable cost given the manner in which the trial proceeded. For example, how much of Mr. Leung’s testimony related to the Application and how much related to the matrimonial proceeding? At best this could only be “guesstimated”.
[67] In the alternative, Mrs. Blatherwick seeks an order that Seasons (HK) is liable for 30% of the costs awarded for the proceedings. This “broad brush” approach has no logical basis for selecting this percentage. It fails to take into account that the Application was commenced 2 ½ years after the matrimonial proceeding had been commenced. It fails to take into account the respective difference in the claims. It fails to take into account an estimate of the time each matter took during the trial. I reject this as a reasonable approach.
[68] In these circumstances, Seasons (HK) submit this court should use its own counsel’s fees and disbursements as the best reasonable estimate of the proportionate costs incurred in dealing with the Application. This amount is approximately $96,000 for fees, disbursement and HST on a partial indemnity basis. However, during submissions, Seasons (HK) counsel agreed that there could be additional disbursements incurred by Mrs. Blatherwick reasonably attributed (at least in part) to the Application such as obtaining the appraisal on the Brownridge Property and corporate documents. While this might be the case, I am not persuaded this would add any significant amount to a cost award since many of these additional disbursements would likely have been needed for the matrimonial proceeding in any event.
[69] In my view, the best evidence available as to what a reasonable cost award should be are the costs incurred by Seasons (HK) adjusted to take into account the full indemnity cost award. By increasing the approximately $75,000 in fees to $120,000 to reflect full indemnity costs, adding HST of $15,600 on the fees, the disbursements of $12,277.41 (inclusive of HST) related to the Application, a reasonable award of costs is $147,877.41. So ordered.
Conclusion
[70] Mr. Blatherwick shall pay costs to Mrs. Blatherwick the amount of $1,401,031.31 (this being the $1,461,031.31 less the $60,000 costs ordered by Justice Tzimas) forthwith. To be clear, Justice Tzimas’ cost order continues to be enforceable.
[71] Seasons (HK) shall pay costs in the amount of $147,877.41 which amount is included in the cost award against Mr. Blatherwick and as such is joint and several to the extent of this amount only.
Ricchetti, J. Date: June 28, 2017