CITATION: Cataraqui Cemetery Company v. Cyr, 2017 ONSC 7359
COURT FILE NO.: CV-10-403-SR
DATE: 2017-12-08
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
THE CATARAQUI CEMETERY COMPANY Plaintiff
– and –
REGINALD CYR and LINDA CYR Defendants
Michael D. Swindley, for The Cataraqui Cemetery Company
Andrew B. Lister, for Reginald Cyr and Linda Cyr
AND BETWEEN:
COURT FILE NO. CV-10-431-SR
REGINALD CYR and LINDA CYR Plaintiffs
– and –
THE CATARAQUI CEMETERY COMPANY Defendant
Andrew B. Lister, for Reginald Cyr and Linda Cyr
Michael D. Swindley, for The Cataraqui Cemetery Company
HEARD: 30 November 2017, at Kingston.
MEW J.
COSTS DECISION
[1] Two simplified rules actions between the parties were tried together over seven days.
[2] In one action, CV-10-403-SR (“403”), The Cataraqui Cemetery Company sought compensatory damages from Reginald Cyr and Linda Cyr in the amount of $43,824.80, or in the alternative, damages for breach of fiduciary duties alleged to have been owed by the Cyrs to the Cemetery Corporation in their capacities as officers and trustees (directors) of the corporation.
[3] In the second action, CV-10-431-SR (“431”), Reginald and Linda Cyr sued the Cataraqui Cemetery Corporation, seeking declarations that six grave plots and an area known as the “Cyr Family Garden” were validly acquired and that the grave plots, the Cyr Family Garden, the family monument and its foundation should remain undisturbed. The Cyrs also sought punitive damages and aggravated damages arising from the allegedly reprehensible conduct of the Cemetery Corporation.
[4] In my reasons for decision reported at 2017 ONSC 5819, I found that the Cyrs had breached their fiduciary obligations to the Cemetery Corporation but that the Cemetery Corporation’s remedy was barred by virtue of the limitation defence pleaded by the Cyrs. I found that other amounts claimed for goods and services provided to the Cyrs but not paid for were also statute barred. And a claim for the return of expenses of their allegedly incurred improperly by the Cyrs when they travelled to Boston on cemetery business, was dismissed on its merits. As a result, the action brought by the Cemetery Corporation against the Cyrs was dismissed.
[5] The declaratory relief sought by the Cyrs was, for all practical purposes, conceded at the opening of the trial (the Cemetery Corporation advised that it was not seeking to dispossess the Cyrs of their grave plots, the Cyr Family Garden, or any of the monuments or markers located thereon). The Cyrs’ claims for aggravated and punitive damages were dismissed.
[6] The parties were unable to agree on costs of these two actions. Furthermore, the Cyrs advised that they wished to maintain a claim that their costs should be paid personally by three trustees of the Cemetery Corporation (Charles Simonds, Rowland Tinline and Hans Blaser) and one senior executive (Robert Lemmon). Accordingly, a hearing was held on the issue of costs.
[7] Reference will be made in these reasons to a third proceeding that was settled in September 2013. In it, the Cyrs sued Messrs. Simonds, Tinline, Blaser and Lemmon for defamation. The minutes of settlement record that the Cyrs were to be paid $100,000 “on account of costs”. The defamation action was formally dismissed without costs.
Issues
[8] The following substantive issues are addressed in these reasons.
a. Which party or parties should be awarded costs;
b. What is the appropriate scale and quantum of costs, taking into account offers to settle;
c. Should there be personal liability for costs on the part of individuals who were not parties to the litigation?
General Observations
[9] This was not a typical simplified rules trial. The trial process was outlined in paras. 10-14 of my reasons for decision. Although, in the end, the trial only took up seven days of court time (as opposed to the three to four weeks that had been projected), this was the result of aggressive case management and substantial time spent assembling evidence in advance of the trial. It was very evident to me that the lawyers on both sides had invested a great deal of time, effort and skill in putting their respective clients’ cases together.
[10] That said, the costs actually incurred are eye-watering. Including the defamation action, the Cyrs spent a total of $606,887.26 (inclusive of disbursements and H.S.T.). Of that, counsel estimates that approximately $400,000 plus H.S.T. is attributable to the 403 and 431 actions. The Cemetery Corporation incurred fees, disbursements and H.S.T. in relation to the 403 and 431 actions totalling $182,049.33. Perhaps part of that disparity can be explained by the fact that, whereas the Cemetery Corporation used the same Kingston law firm throughout, the Cyrs used three different law firms in Kingston, Toronto and Ottawa respectively (the Toronto firm was used primarily for specialist advice in the defamation action).
[11] Comprehensive briefs of documents were prepared for the costs hearing. In part, this was because of the position taken by the Cyrs that Messrs. Simonds, Tinline, Blaser and Lemmon should be found personally liable for the payment of costs. In support of that position, the court was provided with additional evidence, beyond that tendered at trial, of various alleged misdeeds of the individual trustees and executive, both pre- and post-commencement of litigation, said to be relevant to the issue of costs.
General Principles Applicable to the Fixing of Costs
[12] The usual rule in Ontario is that costs follow the event. This is subject to the overarching discretion of the court to determine by whom and to what extent costs should be paid: Courts of Justice Act, R.S.O. 1990, c. C.43, s. 131(1).
[13] Rule 57.01 of the Rules of Civil Procedure provides specific guidance on the exercise of the court’s discretion to award costs. Costs are usually payable on a partial indemnity scale unless the Rules of Civil Procedure provide for, or the circumstances of the case warrant, costs on an enhanced (substantial indemnity or full indemnity) scale.
[14] The principle of proportionality is one of general application to the interpretation of the Rules of Civil Procedure: rule 1.04(1.1) and therefore applies to the application of the rules governing costs. As a general proposition: (i) proportionality does not override other considerations when determining costs; and (ii) proportionality should not be used as a sword to undercompensate a litigant for costs legitimately incurred: Aacurate General Contracting Ltd. v. Tarasco, 2015 ONSC 5980, at paras. 13-17; Dang v. Anderson, 2017 ONSC 2150, paras. 12-15.
[15] However, proportionality is of particular importance when fixing costs under the simplified procedure, which was introduced to promote affordable access to justice: Trafalgar Industries of Canada Ltd. v. Pharmax Ltd. (2003), 2003 40313 (ON SC), 64 O.R. (3d) 288 (S.C.J.).
[16] Fixing of costs is not nearly a mechanical exercise in reviewing the receiving party’s costs outline: Agius v. Home Depot Holdings Inc., 2011 ONSC 5272 at para. 11. The amount of costs should reflect an amount that the court considers to be fair and reasonable and within the expectations of the parties, rather than an exact measure of the actual costs of the successful litigant: Zesta Engineering Ltd. v. Cloutier (2002), 19 A.C.W.S. (3d) 341 (Ont. C.A.) at para. 4; Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291 (C.A.).
[17] Where a defendant makes an offer to settle at least seven days before trial which has not expired at the commencement of trial and which has not been accepted by the plaintiff and the plaintiff obtains a judgment less favourable than the terms of the offer, the plaintiff is entitled to partial indemnity costs to the date of the offer and the defendant is entitled to partial indemnity costs thereafter, unless the court orders otherwise: Rule 49.10(2).
[18] A plaintiff who beats an offer made by the defendant will usually be awarded substantial indemnity costs from the date of the offer: Rule 49.10(1)
Offers to Settle
[19] While offers by both sides were made, modified and withdrawn, recurring themes of those offers were: (i) a willingness of the Cataraqui Cemetery to agree to the declaratory relief sought by the Cyrs provided that the Cyrs paid a sum of money to the Cemetery by way of damages (ranging from a high of $32,000 to a low of $2,504 plus H.S.T.); and (ii) that the Cyrs were prepared to settle on the basis of paying nothing by way of damages (until March 2017, at which point they offered to pay the Cemetery $2,504 plus H.S.T. for the cost of a foundation) but requiring the Cemetery to grant the declaratory relief sought and to pay costs (ranging from $100,000 plus H.S.T. to $200,000 plus H.S.T.).
[20] In the last offer to settle delivered by the Cemetery Corporation prior to trial, the Cemetery Corporation offered to consent to the declaratory relief sought in 431 and to settle 403 upon payment by the Cyrs to the Cemetery of $2,504 plus H.S.T. With respect to both actions, the Cemetery Corporation proposed that costs payable as between the parties should be agreed upon or, failing agreement, be assessed by the court.
[21] The last offer made by the Cyrs prior to trial offered to settle 403 on the basis of the Cyrs paying the Cemetery $2,504 plus H.S.T. and the Cemetery paying the Cyrs’ legal fees of $200,000 plus H.S.T.
Which party or parties should be awarded costs?
[22] The Cyrs assert that they were successful in the litigation. The Cemetery Corporation’s action against them was dismissed in its entirety. The Cyrs’ action, on the other hand, was resolved on the basis of the Cemetery Corporation conceding the Cyrs’ entitlement to the declaratory relief which had been sought by them from the outset.
[23] The Cyrs argue that because of the extensive evidence that Messrs. Simonds, Tinline, Blaser or Lemmon, or a combination thereof, were: (i) out to get them; and (ii) were intent on running up litigation costs and delaying the final resolution of these disputes to the greatest extent possible, those individuals should be required to pay some or all of the Cyrs’ costs personally.
[24] The Cemetery Corporation argues that the litigation resulted in a draw. The court found that the Cyrs had breached the fiduciary duties which they owed to the Cemetery Corporation. It was only because of a limitation defence that the Cemetery Corporation was denied a remedy. Although the Cemetery Corporation had conceded the entitlement of the Cyrs to their declaratory relief at the beginning of trial, it was implicit from all of the offers which the Cemetery Corporation had made since October 2012 that the Cemetery Corporation was prepared to recognise the Cyrs’ ownership of the rights to the graves in question and to the Cyr Family Garden. Accordingly, the Cemetery Corporation argues each side should bear its own costs.
[25] Having stated above the principles generally applicable to the exercise by the court of its discretion to award costs and the parties’ positions, I propose to take a step backwards to look at the overall picture presented by this litigation.
[26] As counsel for both parties candidly conceded during the course of argument, by the time this case got to trial, the money involved (other than costs) was virtually irrelevant.
[27] For the Cemetery Corporation, there was an important point of principle. Had the Cyrs, as trustees (or directors) of the Cemetery Corporation breached the fiduciary duties which they owed to the Cemetery Corporation by, effectively, engaging in a form of self-dealing which they did not disclose to their fellow trustees?
[28] For the Cyrs, it was important to refute the Cemetery Corporation’s attacks on their integrity and reputations which were implicit in the allegations that had been made. In short, the Cyrs wanted to clear their names.
[29] A review of my reasons for decision should quickly disclose that there were other issues too. Issues relating to the placement and payment for hickey markers. A disputed expenses claim. The allegedly improvident sale by the Cyrs to the Cemetery Corporation of a desk, a television and a shed. Responsibility for the payment of landscaping in and around the Cyr Family Garden. But at the core of the dispute, were issues of trust, integrity, fiduciary responsibility and reputation. And, of course, costs.
[30] There are three paragraphs from my reasons for decision which, essentially, capture my overall impression of the case – at paras. 241 – 243. They bear repeating because it will reinforce the context in which I have concluded the issues of costs:
[241] Unfortunately, the behaviour of most of the key individuals involved in these proceedings does them little credit.
[242] Most of the substantive claims against the Cyrs had merit, and it is only because of the Cemetery’s dilatoriness that it has been barred from obtaining a remedy.
[243] That said, the way in which the Cyrs were ousted was unprofessional and unfair. They were judged on the basis of a horribly flawed “report” from Mr. Ross, which lacked objectivity and rigour and was based to a large degree on information provided by Mr. Lemmon, who had been saving up ammunition to use against the Cyrs if ever his position came under threat. The Cyrs were not given an opportunity to question the allegations made against them or to account for their actions.
[31] Each of the parties points the finger at the other as being primarily responsible for the protracted and ruinously expensive nature of this litigation.
[32] As should have been evident from my reasons, both sides are at fault.
[33] At the risk of repeating what I said in my reasons, I found that the Cyrs had breached their fiduciary obligations to the Cemetery Corporation. I also made finding of fact that the trustees of the Cemetery Corporation discovered their claim against the Cyrs (for the purposes of the Limitations Act, 2002) in August 2007 and, for that reason, found that the action commenced by the Cemetery Corporation three years later was statute barred.
[34] I found, too, that the manner in which the Cyrs were ousted from the board in 2010 without being given an opportunity to know the specifics of the allegations made against them or respond to those allegations, was inappropriate.
[35] Both the Cyrs and the Cemetery Corporation presented cogent arguments in support of their respective positions on costs. As I weigh and consider those arguments, however, I find myself constantly being drawn back to three dominant features of this litigation. The first is that the specific relief sought by the parties long ago ceased to be the main driver of the litigation. Rather, the litigation was driven by the parties’ need for vindication. Secondly, as lamentably is often the case, the costs of the litigation, and in particular, the significant expenditure of legal fees by each of the parties, became an ever increasing obstacle to settlement. The third factor is that both responsibility and vindication were fairly even distributed between the parties. For the Cemetery Corporation, their position that the Cyrs had breached their fiduciary duties was vindicated. On the other hand, there was no finding of dishonesty on the part of the Cyrs and their assertion that the Cemetery had unfairly ousted them was upheld.
[36] Both parties made reference to the costs decision in Bernstein v. Poon, 2015 ONSC 2125. Dr. Bernstein, the well-known diet doctor, had sued Dr. Poon, also a diet doctor, as a result of allegedly defamatory comments made in certain publications authored by Dr. Poon. After a seven and a half day trial, Dr. Poon was ordered to pay $10,000 in general damages for defaming Dr. Bernstein. In deciding that the circumstances warranted ordering each of the parties to bear their own costs, the court concluded, at para. 63:
… This case involved two egos, not just one. The plaintiff ruthlessly pursued the defendant. The defendant stubbornly refused to yield. Dr. Bernstein and Dr. Poon each enjoyed a measure of success but I would characterise the overall outcome as close to a draw. The exercise has cost them both a lot of money and, as noted in the reasons for judgment, has used a scarce public resource in doing so. …
[37] Similar comments could be made in respect of this litigation.
[38] But for the costs demanded by the Cyrs in their offer to settle, delivered shortly before the trial, the parties could, and I would speculate, likely would have resolved these actions without the need for a trial. The Cyrs were prepared to pay for a monument foundation (which I ultimately found that they did not have to pay for because they had never been billed for it and the action commenced against them was commenced more than two years after the work was done). The Cemetery Corporation was prepared to accede to the declaratory relief sought. The elephant in the room, however, as evidenced by the Cyrs’ offer, was costs.
[39] I am not unmindful of the fact that, based on my eventual conclusion of the limitation issue, the Cemetery Corporation was never going to get most of the relief which it sought. By contrast, the declaratory relief sought by the Cyrs was asserted in a timely way and was responsive to a threat made by the Cemetery Corporation to repossess the graves (two of which were occupied by the remains of Mr. Cyr’s parents) and the Cyr Family Garden. Those factors would seem to tip the scales in favour of the Cyrs as overall winners. But that would be a hasty conclusion to reach. But for the original breaches of fiduciary duty by the Cyrs, none of the subsequent events complained of by the parties would likely have occurred.
[40] In my view, looking at the overall picture, both sides must bear their share of responsibility for what has happened. It was to all intents and purposes, a draw. The allocation of costs should reflect that.
[41] I have therefore concluded that each party should bear its own costs.
[42] Having so decided, it is, strictly speaking, not necessary for me to deal with any of the other issues I have identified as pertaining to costs. However, I have been advised that an appeal is being taken by the Cemetery Corporation from my finding on the limitation defence raised by the Cyrs. Out of an abundance of caution, therefore, in the event that leave is sought and granted to appeal my costs decision, I will address the other costs issues argued by the parties.
Personal Liability for Costs
[43] In the event that I had made an award of costs in favour of the Cyrs, their position is that those costs should be paid, in whole or in part, by Messrs. Simonds, Tinline, Blaser or Lemmon or a combination thereof.
[44] The Cyrs argue that there is inherent power in the court to make a person who wrongly puts in motion a fruitless and unjustifiable proceeding pay the costs of doing so, pointing to cases in which costs orders have been made against non-parties who are the “real litigants”: see Rockwell Developments Ltd. v. Newtonbrook Plaza Ltd., [1972] O.R. 199 (C.A.) and the cases discussed therein.
[45] Absent a specific provision in the Rules of Civil Procedure or the Courts of Justice Act giving the court jurisdiction to make costs awards against officers or directors of corporations who, in the purported good faith exercise of their responsibilities as such, authorised the prosecution or defence of litigation, I conclude that there is no jurisdiction for me to do so.
[46] I would add that the Cyrs’ position seems to be based largely on their assertion that the individuals they seek to hold responsible for the payment of costs were motivated primarily by their enmity towards the Cyrs and by their desire to continuously delay the conclusion of the litigation. I find no basis for those assertions.
[47] I would not, accordingly, make an award of costs against Messrs. Simonds, Tinline, Blaser or Lemmon personally.
Quantum of Costs
[48] The Cemetery Corporation argued that if I were inclined to award costs to the Cyrs, I should do so on a partial indemnity scale only and should adjust the amount payable to the Cyrs to take into account, amongst other things,
a. the duplication of efforts by the various sets of lawyers employed by the Cyrs;
b. the entire amount attributable to work done by counsel retained primarily for the purposes of dealing with the defamation claim;
c. the unnecessary utilization of two lawyers at trial (one in the capacity of counsel and the other in a supporting role);
d. the time spent for new lawyers on the file to get up to speed (there were a number of personnel changes in the office of the lawyers for the Cyrs);
e. certain disbursements unrelated to the litigation; and
f. travel and accommodation expenses incurred as a result of the Cyrs utilizing out-of-town, rather than local, lawyers.
[49] I should note that no objection was taken by the Cemetery Corporation to the hourly rate charged by lead counsel for the Cyrs.
[50] The Cemetery Corporation also argues that the principle of proportionality should be applied to reduce any partial indemnity costs awarded to the Cyrs.
[51] In the present case, there has, of course, been no monetary award. This Cyrs did seek, but were not awarded, punitive and aggravated damages of $100,000. The litigation was driven to trial by the need for vindication to which I have alluded and the incurring by both parties of significant litigation costs.
[52] I bear in mind also that these actions were governed by the simplified procedure. One of the objectives of the simplified procedure is to promote more cost effective resolution of civil disputes. Costs awards in simplified procedure cases have historically been lower: Trafalgar Industries, at para. 5.
[53] The simple fact of the matter is that this litigation spiralled out of control. The parties were unable to make commercially reasonable decisions about the case. They allowed their business judgment to be overcome by their disdain for and mistrust of their opponents. Mounting costs made it increasingly harder to settle.
[54] By attaching particular weight to concerns for proportionality in simplified procedure cases, had I decided to award costs in favour of the Cyrs, I would have fixed those costs in the amount of $100,000, inclusive of disbursements and H.S.T.
[55] Indeed, by any yardstick, the costs incurred by both sides were out of all proportion to the issues and amounts in dispute.
[56] Notwithstanding my findings and comments about the parties to this litigation and the manner in which they have conducted themselves, I would be remiss if I did not again acknowledge, as I did following the trial, the professionalism of counsel. Fortunately, none of the rancour that existed between their clients was reflected in their conduct of the litigation. That is much to their credit.
Graeme Mew J.
Released: 8 December 2017
CITATION: Cataraqui Cemetery Company v. Cyr, 2017 ONSC 7359
COURT FILE NO.: CV-10-403-SR
DATE: 2017-12-08
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
THE CATARAQUI CEMETERY COMPANY Plaintiff
– and –
REGINALD CYR and LINDA CYR Defendants
AND BETWEEN: Court File No. CV-10-431-SR
REGINALD CYR and LINDA CYR Plaintiffs
– and –
THE CATARAQUI CEMETERY COMPANY Defendant
COSTS DECISION
Graeme Mew J.
Released: 8 December 2017