CITATION: Man-Shield (NWO) Construction Inc. v. Macdonald, 2017 ONSC 684
COURT FILE NO.: CV-15-0470
DATE: 2017-01-27
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
Man-Shield (NWO) Construction Inc.
Daniel Matson, for the Plaintiff (Responding Party)
Plaintiff
- and -
Gisele Macdonald, 2353268 Ontario Inc., Allure Condominiums LP., Aikins, MacAulay & Thorvaldson LLP., Jonathan B. Kroft, Carrel + Partners and Johanna Maki
Laird Scrimshaw for the Defendants Aikins, MacAulay & Thorvaldson and Jonathan B. Kroft (Moving Parties)
Defendants
HEARD: December 7, 2016, at Thunder Bay, Ontario
Justice D. C. Shaw
Decision on Costs
[1] The defendants, Aikins, MacAulay & Thorvaldson and Jonathan B. Kroft, were successful in their motion for summary judgment. An order was granted dismissing the action as against them.
[2] This is a decision on the costs of that summary judgment motion.
Background
[3] The plaintiff is a general contractor hired to construct two condominium buildings in Thunder Bay, the Allure Condominiums and the Aurora Condominiums.
[4] During the course of construction of the two condominium buildings, disputes arose between the plaintiff and the owner of the lands upon which the condominium buildings were constructed. The plaintiff registered a construction lien against Allure Condominiums.
[5] Aikins, MacAulay & Thorvaldson (“Aikins”) is a law firm in Winnipeg. Mr. Kroft is a senior partner with Aikins.
[6] In January 2015, Aikins was retained by the owner in the lien dispute. Mr. Kroft represented the owner in the negotiation of a settlement agreement (the “Agreement”) to lift the construction lien.
[7] The defendant, Carrel + Partners LLP, is a law firm in Thunder Bay. The defendant, Johanna Maki, is a lawyer practicing with Carrel + Partners. Ms. Maki acted for the owner in closing the condominium unit transactions.
[8] In May 2015, pursuant to the Agreement, the plaintiff discharged its construction lien and certificate of action. The lien was preventing the closing of the sale of the condominium units.
[9] In September 2015, Aikins received a Carrel + Partners LLP cheque in the amount of $1,007,202.11, payable to the plaintiff’s solicitor, in trust. Mr. Kroft forwarded this cheque to the plaintiff’s solicitor under cover of letter dated September 24, 2015.
[10] The plaintiff alleged that there was a breach of trust under the Agreement. The plaintiff claimed that the delivery of trust funds to the plaintiff’s lawyer, in the amount of $1,007,202.11, failed to satisfy what the plaintiff alleged was the owner’s obligation to pay $2,100,000 plus HST, under the Agreement.
[11] The plaintiff claimed against Aikins and Mr. Kroft for breach of trust.
[12] A number of allegations were made in the statement of claim against Aikins and Mr. Kroft. On the hearing of the summary judgment motion, counsel for the plaintiff narrowed the allegations to one. Acknowledging that Aikins and Mr. Kroft were not parties to the trust, counsel for the plaintiff alleged that Mr. Kroft knowingly assisted in a dishonest and fraudulent act perpetrated by Mr. Kroft’s client, the owner.
[13] I found that there was no evidence whatsoever to support that allegation. The plaintiff failed to present any facts in support of its position. In an affidavit filed on behalf of the plaintiff on the summary judgment motion, the President of the plaintiff deposed that he was “…unaware at this time of what, if any, involvement they (Aikins and Mr. Kroft) had.…”. Although Mr. Kroft’s affidavit had been served four months before the hearing of the motion, the plaintiff chose not to cross-examine him.
[14] The only affidavit material filed by the plaintiff on the summary judgment motion was the aforementioned affidavit of its President. That affidavit was filed only four days before the motion was heard.
Submissions
(a) Aikins and Mr. Kroft
[15] Counsel for Aikins and Mr. Kroft submits that costs should be awarded against the plaintiff on a full indemnity basis. He submits that the unfounded accusations against his clients were defamatory, but because they were made in litigation pleadings, his clients have no recourse other than to have the court state that the plaintiff’s conduct was unacceptable and award costs accordingly. Counsel submits that the unfounded allegations must be viewed as having been made for a collateral advantage, namely to embarrass the firm and the lawyer and render them incapable of acting for their client.
[16] Counsel has filed a Costs Outline, setting out partial indemnity fees of $19,134.20, substantial indemnity fees of $28,451.30 and full indemnity fees of $31,557.00. It shows disbursements of $554.56, inclusive of HST.
[17] The Costs Outline shows that both Mr. Scrimshaw, who has 35 years’ experience, and Mr. Hardick, who has four years’ experience, worked on the file.
[18] Mr. Scrimshaw docketed 70.5 hours. His partial indemnity rate is shown at $210.00 per hour, his substantial indemnity rate is $315.00 per hour and his full indemnity rate is $350.00 per hour.
[19] Mr. Hardick shows 55.2 hours of docketed time, at a partial indemnity rate of $66.00 per hour, a substantial indemnity rate of $99.00 per hour and a full indemnity rate of $110.00 per hour.
[20] The Costs Outline also shows modest fees for clerk time.
[21] The Costs Outline includes preparation for and attendance by Mr. Scrimshaw on the costs hearing.
(b) The Plaintiff
[22] Counsel for the plaintiff submits that costs should be awarded on a partial indemnity basis. He submits that full indemnity costs are awarded only in very limited circumstances such as in estate matters or where required by contract.
[23] Counsel submits that the allegations against Aikins and Mr. Kroft were not made for any collateral purpose. Rather, he submits, the plaintiff believed that money was missing and did not know who was responsible. Counsel notes that the plaintiff never asked Aikins or Mr. Kroft to remove themselves from the file.
[24] With respect to the quantum of costs, counsel for the plaintiff accepts that the hourly rates are reasonable. However, he submits that 70 hours of time for Mr. Scrimshaw and 50 hours of time for Mr. Hardick are excessive. Counsel for the plaintiff suggests costs be awarded in the sum of $7,000, inclusive of HST and disbursements.
[25] The plaintiff did not file a Costs Outline.
Discussion
[26] An award of costs is a matter in the discretion of the judge by virtue of s. 131(1) of the Courts of Justice Act, which provides:
Subject to the provisions of an Act or rules of court, the costs of and incidental to a proceeding or a step in a proceeding are in the discretion of the court, and the court may determine by whom and to what extent the costs shall be paid.
[27] Rule 57.01 allows the court to take into account “any other matter relevant to the question of costs.” Read in conjunction with s. 131 of the Courts of Justice Act, the court therefore has wide discretion. Rule 57.01(4) provides:
(4) Nothing in this rule or rules 57.02 to 57.07 affects the authority of the court under section 131 of the Courts of Justice Act,
(d) to award costs in an amount that represents full indemnity.
[28] The discretion of the court must be exercised in light of the specific facts and circumstances of the case in relation to the factors set out in Rule 57.01(1). Anderson v. St. Jude Medical Inc., 2006 85158 (ON SCDC), [2006] O.J. No. 508 (Div Ct), at para. 22.
[29] The court must take into account the principle of proportionality set out in Rule 1.04 (1.1) and the overriding principle of reasonableness discussed in Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291 (C.A.), at p. 302.
[30] Full indemnity costs will be awarded only in exceptional circumstances. Mark M. Orkin, The Law of Costs (Toronto: Canada Law Book, Looseleaf) , pp. 2 – 213 and 2 – 214, states:
Elevated costs are warranted only in two circumstances: where there is an offer to settle pursuant to rule 49.10 of the Rules of Civil Procedure and where there is a finding of reprehensible conduct on the part of the party against whom the costs award is made.
…. Full indemnity costs is not a defined term. Full indemnity rates should equate to an award of costs at actual rates. That definition, however, is subject to the qualification of reasonableness. As the Ontario Court of Appeal wrote MacKinnon v. Ontario Municipal Employees Retirement Board (2007), [2007 ONCA 874](https://www.canlii.org/en/on/onca/doc/2007/2007onca874/2007onca874.html), 288 D.L.R. 4th 688 (Ont. C.A.), at para. [92]:
I wish to note that in ordering costs on a full indemnity basis, I do not wish to be taken as suggesting that there are no “checks and balances” on such costs. At a minimum, such costs are to be reviewed by the court and are limited to those that have been reasonably incurred.
[31] In Baryluk (c.o.b. Wyrd Sisters) v. Campbell, [2009] O.J. No 2772 (S.C.J.), Hackland J. held that the case before him was one of those exceptional cases where costs should be awarded on a full indemnity basis. He found that an unfounded attack on the integrity of judicial officers (two Superior Court judges and a Master) should be recognized as conduct requiring chastisement and deterrence. He wrote, at paras. 9 and 10:
9 I am of the opinion that this is one of the rare cases in which costs should be awarded on a full indemnity basis. As noted, I found that this action constituted a scurrilous attack on the administration of justice. The conduct of the defendants, judges of this court, was characterized by the plaintiff as case-fixing, abuse of public office, dishonesty and deceit in circumstances where there was no basis on the facts pleaded or submissions made to the court to support such outrageous allegations. Reckless attacks on the integrity of judicial officers must be recognized as conduct requiring chastisement and deterrence.
10 There is ample authority for an award of full indemnity costs where unsubstantiated allegations of dishonesty, illegality, and conspiracy are advanced without merit. While full indemnity and substantial indemnity costs are an exception to the general rule and awarded only under special circumstances, allegations made or conduct by a party that is “reprehensible, scandalous, or outrageous” falls wihtin the ambit of an award of full indemnity costs, see Schreiber v. Mulroney, 2007 31754 (ON SC), [2007] O.J. No. 3191, 2007 CarswellOnt 5267 (S.C.J.) at paras. 8, 9, 11; Penney v. Penny, [2006] O.J. No. 4802, 2006 CarswellOnt 7605 at para. 29; Donmor Industries Ltd. v. Kremlin Canada Inc., 1992 7543 (ON SC), [1992] O.J. No. 4055, 1992 CarswellOnt 1728 (Gen.Div) at para. 14; and Apotex Inc. v. Egis Pharmaceuticals, 1991 2729 (ON SC), [1991] O.J. No. 1232, 1991 CarswellOnt 3149 (Gen.Div) at paras. 12 – 14.
[32] In Willmot v. Willmot, [2007] O.J. No. 2574 (S.C.J.), Power J. awarded full indemnity costs against a party who made unfounded allegations that the lawyers acting for the opposing party had misled the court and withheld documents. At para. 8, he stated:
Litigants and their legal counsel should not be exposed to unfounded allegations of misconduct. Such unfounded allegations should be sanctioned by the court through, at the very least, an order for costs in favour of the parties against whom the allegations are made.
[33] Recently, in Tingas – Demetriou v. Dublin 2016 ONSC 3414, Turnbull J. awarded full indemnity costs to the defendants against whom the plaintiff had made allegations of conspiracy, fraud and deceit without any evidentiary foundation. At para. 23, Turnbull J. stated:
The plaintiff knew or ought to have known that the professional reputations of the defendants were put into question by the plaintiff. It was inevitable that they would vigorously defend the action. Our courts have often held that parties who make allegations of fraud or improper conduct which are seriously prejudicial to the character and reputation of a party, which prove to be unfounded, are often held liable to pay costs on a higher scale. CIBC Mortgages Inc. v. Vieira et al. 2014 ONSC 56 at para. 5.
[34] In my view, this is one of those exceptional cases where costs should be awarded on a full indemnity basis.
[35] The allegations made against Mr. Kroft and Aikins, that they knowingly participated in a dishonest and fraudulent act by their client, is as serious an allegation as can be made against a lawyer in his capacity as a lawyer and as an officer of the court.
[36] A lawyer’s reputation for integrity and ethical conduct is an essential element of his or her standing in the profession. Lawyers work over the course of years, if not decades, to build their reputations. Mr. Kroft is a senior partner in one of Western Canada’s largest law firms. Allegations of dishonesty and fraudulent conduct have the potential to destroy a lawyer’s reputation overnight. Made in another setting, such unfounded allegations would properly be the subject of an action for defamation.
[37] These allegations, moreover, were made through counsel. They were not the impetuous remarks of an unrepresented party. This, in my view, compounds the seriousness and blameworthiness of the allegations. Counsel are fully aware of the importance of a lawyer’s reputation. To pursue accusations that a lawyer is guilty of fraud and dishonesty, when there is not a scintilla of evidence in support of those accusations, where the client on whose behalf those allegations were made swears an affidavit stating that the client is “…unaware at this time of what, if any, involvement [Aikins and Mr. Kroft] had….” in the events in question is, in my opinion, deserving of censure. The appropriate form of censure in this case is to award full indemnity costs against the party making the unfounded allegations.
[38] In coming to the decision, I am not making a finding that the unfounded allegations were made for a collateral purpose.
[39] Mindful that full indemnity costs must be limited to those that have been reasonably incurred and that they are subject to the principle of proportionality, I am of the view that the combined 120 hours docketed by Mr. Scrimshaw and Mr. Hardick are excessive for this summary judgment motion. In the hearing on costs, I questioned Mr. Scrimshaw as to overlap in the hours that he and Mr. Hardick spent on the file. Mr. Scrimshaw agreed that the time recorded for him and Mr. Hardick should be reduced by 20% to reflect some overlap in their work. This appears to be a reasonable concession.
[40] I have no doubt that the times recorded were spent by the respective lawyers. My task is not to engage in a line by line assessment of the time, but rather to determine what is a fair and reasonable amount to be paid by the plaintiff by way of full indemnity.
[41] There is no requirement that an unsuccessful party who is not seeking costs must file a bill of costs, although it is preferable that they do so. To attack the quantum of costs of the successful party as excessive, without producing one’s own Bill of Costs is, as stated by Winkler J., as he then was, in Risorto v. State Farm Mutual Automobile Insurance Co. (2003), 2003 43566 (ON SC), 64 O.R. (3d) 135 (S.C.J.), at para. 10, “no more than an attack in the air.”
[42] The hourly rates of Mr. Scrimshaw and Mr. Hardick are conceded by plaintiff’s counsel to be reasonable. Actual hourly rates of $350.00 for Mr. Scrimshaw, with 35 years’ experience, and of $110.00 for Mr. Hardick, with four years’ experience, are well within a reasonable range.
[43] Having regard to the factors discussed, I am of the opinion that it is fair and reasonable to award the defendants, Aikins and Mr. Kroft, full indemnity costs of the summary judgment motion, in the amounts of $25,000, plus HST, for fees and $554.56, inclusive of HST, for disbursements, payable within 30 days.
_____”original signed by”
Regional Senior Justice D. C. Shaw
Released: January 27, 2017
CITATION: Man-Shield (NWO) Construction Inc. v. Macdonald, 2017 ONSC 684
COURT FILE NO.: CV-15-0470
DATE: 2017-01-27
ONTARIO
SUPERIOR COURT OF JUSTICE
Man-Shield (NWO) Construction Inc.
Plaintiff
- and -
Gisele Macdonald, 2353268 Ontario Inc., Allure Condominiums LP., Aikins, MacAulay & Thorvaldson LLP., Jonathan B. Kroft, Carrel + Partners and Johanna Maki
Defendants
DECISION ON COSTS
Shaw J.
Released: January 27, 2017
/sab