Citation: Wilfert v. McCallum, 2017 ONSC 4431

COURT FILE NO.: CV-15-553897

DATE: 20170720

ONTARIO

SUPERIOR COURT OF JUSTICE

RE: BRYON WILFERT and ELIZABETH WILFERT, Plaintiffs

AND: IAN MCCALLUM and JACQUELINE BOUGHNER, Defendants

BEFORE: Mr. Justice M. D. Faieta

COUNSEL: Paul H. Starkman, for the Plaintiffs

Shaun A. Hashim, for the Defendants

C O S T S E N D O R S E M E N T

BACKGROUND

[1] For reasons dated June 23, 2017, I dismissed the plaintiffs’ action on a Rule 21 motion: see Wilfert v. McCallum, 2017 ONSC 3853. The defendants had advanced three grounds for dismissal, two of which were unsuccessful. However, I found that the claim disclosed no reasonable cause of action given that the plaintiffs did not have standing to bring an action under the Fraudulent Conveyances Act, R.S.O. 1990, c. F.29 (the “Act”). The plaintiffs’ claim arose many years after the alleged fraudulent conveyance of the defendant McCallum’s interest in their home to the defendant Boughner; thus, the plaintiffs had no standing as “creditors or others” under the Act in respect of the impugned transfer.

[2] The defendants claim their costs of this action, on a substantial indemnity basis, in the amount of $35,145.47 inclusive of $1,309.88 in disbursements.

ANALYSIS

[3] The fixing of costs is governed by s. 131 of the Courts of Justice Act, R.S.O. 1990, c. C.43 and the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. Rule 57.01 is the primary rule governing costs. It enumerates various factors to consider when exercising discretion to award costs. Rule 1.04(1.1), the purpose of which is to promote access to justice, is also applicable. It provides that,

In applying these rules, the court shall make orders and give directions that are proportionate to the importance and complexity of the issues, and to the amount involved, in the proceeding.

[4] In fixing costs, the objective is to ascertain “an amount that is fair and reasonable for the unsuccessful party to pay in the particular proceeding, rather than an amount fixed by the actual costs incurred by the successful litigant”: Boucher v. Public Accountants Council (Ontario) (2004), 2004 CanLII 14579 (ON CA), 71 O.R. (3d) 291 (C.A.), at paras. 26, 37; Davies v. Clarington (Municipality), 2009 ONCA 722, 100 O.R. (3d) 66, at paras. 50-52; Elbakhiet v. Palmer, 2014 ONCA 544, 121 O.R. (3d) 616, at para. 38, leave to appeal refused [2014] S.C.C.A. No. 427. Although a successful party is usually indemnified for its costs by the unsuccessful party, the principle of indemnity is but one of many considerations in fixing the amount of costs: Boucher, at para. 38.

[5] I now turn to the various relevant considerations in assessing costs in this matter.

Principle of Indemnity

[6] The defendants claim a total of about 106 hours: (1) 17.8 hours for reviewing and investigating the Statement of Claim; (2) 28.6 hours for gathering evidence and preparing a request to admit; (3) 5.8 hours for preparing the motion record; (4) 38.8 hours for legal research on limitation period, bankruptcy law and the sufficiency of pleading as well as the preparation of the factum and reply factum; and (5) 15 hours for preparation of and attendance on the motion.

[7] The defendants claim actual and substantial indemnity rates, respectively, of $290 and $261 for Mr. Hashim, and $520 and $468 for each of Mr. Theall and Ms. Francis.

[8] The plaintiffs’ Costs Outline claims about 39 hours, including the same items claimed by the defendants other than the first item listed above. In my view, the amount of time claimed by the defendants is excessive for the tasks described above.

The Amount that an Unsuccessful Party could Reasonably Expect to Pay

[9] The plaintiffs’ Costs Outline claims an actual rate of $550 per hour and a partial indemnity rate of $300 per hour.

[10] The plaintiffs’ Costs Outline reflects $11,096.44 in partial indemnity costs for this motion.

[11] Nevertheless, the plaintiffs submit that the defendants’ costs of the motion should be fixed at $6,822.04, inclusive of disbursements of $1,309.00, based on 26.3 hours of billable time. It is unreasonable for the plaintiffs to contend that the defendants’ costs should be so low in contrast to the costs the plaintiffs themselves claim

The Amount Claimed and the Amount Recovered

[12] The plaintiffs claimed, amongst other things, compensation in the amount of $658,000 and a declaration that the transfer of the defendant McCallum’s interest in his matrimonial home to the defendant Boughner was a fraudulent conveyance. The claim was dismissed.

The Apportionment of Liability

[13] This factor is not relevant to this proceeding.

The Complexity of the Proceeding

[14] The issues raised by this Rule 21 proceeding were of modest complexity.

The Importance of the Issues

[15] While the issues raised by this motion were obviously of importance to the parties and may have some jurisprudential importance, they are not of significant jurisprudential importance.

The Conduct of any Party that Tended to Shorten or Lengthen Unnecessarily the Duration of the Proceeding

[16] Neither party suggests that the conduct of the other party tended to shorten or unnecessarily lengthen the duration of this proceeding.

Whether any Step in the Proceeding was Improper, Vexatious or Unnecessary, or Taken through Negligence, Mistake or Excessive Caution

[17] Neither party suggests that the other party took a step that was improper in the context of this factor.

A Party’s Denial of or Refusal to Admit Anything that Should Have Been Admitted

[18] Neither party suggests that the other party denied or refused to admit anything that should have been admitted.

Whether it is Appropriate to Award any Costs or More than One Set of Costs where a Party Commenced Separate Proceedings for Claims that Should Have Been Made in One Proceeding or in Defending a Proceeding Separated Unnecessarily from Another Party in the Same Interest or Defended by a Different Lawyer

[19] This factor was not an issue in this proceeding.

Any Other Matter Relevant to the Question of Costs

[20] There is no evidence that any offers to settle were made.

[21] The defendants submit that substantial indemnity costs are warranted because (1) the plaintiffs’ claim was based on an unsubstantiated allegation of fraud; and (2) the plaintiffs obtained a certificate of pending litigation and threatened to seize and sell the defendants’ home on the basis of an obviously deficient claim.

[22] In Hamilton v. Open Window Bakery Ltd., [2004] 1 S.C.R. 303, 2004 SCC 9, at para. 26, the Supreme Court of Canada stated:

In Young v. Young, 1993 CanLII 34 (SCC), [1993] 4 S.C.R. 3, at p. 134, McLachlin J. (as she then was) for a majority of this Court held that solicitor-and-client costs “are generally awarded only where there has been … reprehensible, scandalous or outrageous conduct on the part of one of the parties”. An unsuccessful attempt to prove fraud or dishonesty on a balance of probabilities does not lead inexorably to the conclusion that the unsuccessful party should be held liable for solicitor-and-client costs, since not all such attempts will be correctly considered to amount to “reprehensible, scandalous or outrageous conduct”. However, allegations of fraud and dishonesty are serious and potentially very damaging to those accused of deception. When, as here, a party makes such allegations unsuccessfully at trial and with access to information sufficient to conclude that the other party was merely negligent and neither dishonest nor fraudulent (as Wilkins J. found), costs on a solicitor-and-client scale are appropriate: see, generally, M. M. Orkin, The Law of Costs (2nd ed. (loose-leaf)), at para. 219. [Emphasis added.]

[23] Further, I agree with the following views expressed by Lax J. in Manning v. Epp, [2006] O.J. No. 4239 (S.C.), at paras. 7-9:

Costs on the higher scale can be awarded as a form of chastisement and as a mark of the court's disapproval of a litigant's conduct. This is intended to punish as well as to deter others from engaging in similar conduct. Unproved allegations of fraud frequently attract awards on the higher scale. Unproved allegations of breach of trust, conspiracy, misrepresentation, breach of fiduciary duty, and the like, may also attract this kind of award….

Cost sanctions are imposed for these kinds of unproved allegations because they are rooted in assertions of dishonesty and deceit and go to the heart of a person's integrity…. Where serious allegations of dishonest or illegal acts are made, but are so inadequately pleaded that they are not permitted to go forward, costs consequences should likewise follow. These allegations have stood in the public record and over the heads of the defendants. The plaintiffs admitted that the allegations were akin to or as serious as fraud. The allegations were made against public officials in the course of carrying out their public duties. To strike recklessly at the integrity of a person occupying a position of public trust is a serious matter.

The task for the court is to punish and deter unwarranted allegations and egregious conduct, but without discouraging the tenacious pursuit and advancement of serious claims of impropriety in a proper case.... [Emphasis added.]

[24] In attacking the transfer, the plaintiffs alleged that the defendant McCallum, with the cooperation of and assistance from the defendant Boughner, took steps “… to defeat, hinder, delay or defraud his creditors and future creditors including the Plaintiffs” by arranging for the matrimonial home to be registered solely in the name of the defendant Boughner. However, the plaintiffs made these serious allegations without standing to have the 1993 transfer of the property set aside given that, based on their pleading, they did not have a “claim” in any sense (such as a debt owed to them by the defendants) at the time of the impugned transfer.

[25] In these circumstances, such serious and failed allegations of misconduct constitute “reprehensible, scandalous or outrageous conduct” on the part of the plaintiffs and should attract substantial indemnity cost consequences.

Conclusions

[26] In light of the considerations described above, I find that it is fair and reasonable to award the defendants the sum of $20,000 in respect of their costs of this action, inclusive of disbursements and HST, payable by the plaintiffs forthwith.

Mr. Justice M. D. Faieta

Released: July 20, 2017