CITATION: 1168760 Ontario Inc. c/o R&R Realty, Peter Clark & J.G. Rivard Limited v. 6706037 Canada Inc. & Denis Bertrand, 2017 ONSC 7497
COURT FILE NO.: 09-44583
DATE: 2017/12/18
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
1168760 Ontario Inc. c/o R&R Realty, Peter Clark & J.G. Rivard Limited
Plaintiff
– and –
6706037 Canada Inc. & Denis Bertrand
Defendant
Eric R. Williams and Jeremy R. Rubenstein, for the Plaintiffs
David Debenham, for the Defendant Denis Bertrand
Edward H. Masters and Ines Jelic for the Defendant 6706037 Canada Inc.
HEARD: December 5-9,12-14, 2016, June 8 and 9, 2017
COSTS Decision
R. Smith J.
Overview
[1] The plaintiffs were successful after a nine day trial and seek costs against the defendants jointly and severally on a partial indemnity basis of $43,322.70 until their offer to settle and $137,744.10 on a substantial indemnity basis thereafter as they matched their offer to settle after trial. The plaintiffs do not seek costs against the Director of Titles who was added as a party partway through the trial.
[2] The defendant 6706037 Canada Inc. (“670” or “Joncas”) submits that the court should exercise its discretion to refuse to make an award of costs on a substantial indemnity basis as a result of the plaintiffs matching or exceeding their Rule 49 offer to settle after trial. Alternatively “670” submits that I should order the plaintiffs to pay costs to 670 because they failed to prove their allegations of fraud against 670. In addition 670 submits that the costs sought by the plaintiffs are not proportional, the plaintiff’s conduct unnecessarily increased the costs, and that the defendants should not be jointly and severally liable for the costs.
[3] Denis Bertrand (“Bertrand”) submits that the trial was fairly fought by two titans of the Ottawa bar and was an enjoyable and educational experience. I agree with his assessment in this regard. He also submits that the costs should not be awarded on a joint and several basis, and that Bertrand should pay a lesser proportion because 670 was the main antagonist and the plaintiffs were only successful in obtaining their alternative relief against Bertrand. In addition he submits that costs should not be awarded for motions completed before trial where costs were not ordered and he accepted both of the plaintiff’s offers to settle.
Factors
[4] The factors to be considered when fixing costs are set out in Rule 57.01 (1) of the Rules of Civil Procedure and include in addition to success, the amount claimed and recovered, the complexity and importance of the matter and the principle of proportionality, the conduct of any party which unduly lengthened the proceeding, whether any step was improper, vexatious or unnecessary, or taken through negligence mistake or excessive caution, a party’s denial or refusal to admit anything, any offer to settle, the principle of indemnity, scale of costs, hourly rate claimed in relation to the partial indemnity rate set out in the Information to the Profession effective July 1, 2005, the time spent, and the amount that a losing party would reasonably expect to pay.
Success
[5] In this case the plaintiffs were completely successful and obtained a decision finding that Denis Bertrand was a fraudulent person as defined in the Land Titles Act, R.S.O. 1990, c. L.5, and that the transfer from Bertrand to 670 was a fraudulent instrument which was void. They obtained an order vesting 72.97% of the property in their names, and a finding was made that Joncas had knowledge of sufficient circumstances to put an honest and reasonable person on inquiry and he failed to do so, and therefore 670 was not a bona fide purchaser without notice.
[6] 670 and Bertrand were not successful in any part of the trial because Bertrand was found to be a fraudulent person and 670 was not successful in establishing that it was a bona fide purchaser without notice and as a result was not successful in retaining ownership of the property.
Complexity and Importance
[7] The matters in issue were very important to the parties as it involved recovering a 72.97% interest in a 55 acre potential future development site. The issues were also important to 670 as it was attempting to retain ownership of the land, which had been purchased for substantially below market value.
[8] The issues involved were very complex and involved determining whether Mr. Bertrand was a fraudulent person, whether the transfer was a fraudulent instrument, the effect of holding the lands “in trust”, whether Bertrand was a bare trustee, and whether a trustee that had a beneficial interest in the trust could transfer the lands free and clear of the interest of execution creditors who held executions against the trustee. The issues were sufficiently complex to involve the Director of Land Titles to obtain his position on these issues.
Conduct of Any Party
[9] The claim was vigorously defended and pursued. The parties could have cooperated on a joint book of evidence but I do not find that this was any particular party’s fault.
[10] Denis Bertrand was found to be a fraudulent person, who breached his fiduciary duty as a trustee by fraudulently conveying the property without the consent of 72.97% of the beneficial owners and retaining the proceeds for himself. His conduct was reprehensible.
[11] Joncas was found to have failed to make the inquiries of a reasonable and honest purchaser and was found not to be a bona fide purchaser without notice.
Scale of Costs
[12] On April 29th, 2016 the plaintiffs made an offer to settle, whereby 670 would keep the 27.03% interest purchased from Betrand and would convey the remaining 72.97% back to the plaintiffs. If the offer had been accepted within 10 days the action would have been dismissed without costs, and if accepted after 10 days costs would be claimed.
[13] The conveyance from Bertrand to 670 was declared null and void and 670 has achieved a less favourable result after trial than the offer to settle made by the plaintiffs. The plaintiffs have achieved a result as favourable as the terms of their offer to settle as a 72.97% interest in the property was vested in their names as they had offered after the trial. As a result pursuant to s. 49.10 (1) of the Rules of Civil Procedure the plaintiffs are entitled to substantial indemnity costs from the state of their offer to settle unless I exercise my discretion to order otherwise.
[14] 670 submits that I should refuse to award costs to the plaintiffs on a substantial indemnity basis from the date of the offer to settle because they failed to prove that 670 or Joncas acted fraudulently in purchasing the property from Bertrand. 670 submits that the interests of justice require a departure from the general rule that substantial indemnity costs should be ordered when an offer to settle is matched after trial.
[15] The plaintiffs pleaded at para 136; that 670 knew that Bertrand held the Investment Property in trust and deliberately or negligently failed to instruct his solicitor to investigate Bertrand’s authority to transfer the property. This pleading does not allege fraud but rather a deliberate or negligent failure to investigate the authority of the trustee to convey the beneficial interests. Joncas did not make the inquiries required of a reasonable and honest man based on a number of factors set out in the decision
[16] The pleading of fraud against Bertrand was made out at trial and his fraud was carried out “in conjunction” with 670 because it purchased the property. In paragraph 136 the plaintiffs did not allege that Joncas acted in a fraudulent manner but rather that he failed to make the necessary inquiries of a reasonable and honest man.
[17] The plaintiffs also alleged that 670 had been equally enriched by the fraudulent acts of the defendants comes closer to alleging that 670 was an active participant in carrying out the fraud. This was not the plaintiff’s position at trial which was that Joncas was not a bona fide purchaser without notice. I find that Joncas’ conduct of failing to make the inquiries of a reasonable and honest man in the circumstances is sufficiently reprehensible conduct that it would not be in the interests of justice to depart from the general rule that costs should be ordered on a substantial indemnity basis where an offer to settle was matched or exceeded after trial.
[18] The fact that Joncas is a lawyer only increases his knowledge of the need to make further inquiries in the circumstances and he failed to do so. This is also not a sufficient reason for departing from the general rule when awarding costs.
Proportionality
[19] The defendants rely on the decision of Boucher v. Public Accountants Council for the Province of Ontario, 71 O.R (3d) 291, [2004] O.J. No. 2634, 2004 CanLII 14579,which states that the objective when determining costs is to award an amount that is fair and reasonable for the unsuccessful party to pay.
[20] 670 submits that the property was appraised at $300,000 in 2005 and that a 72.97% interest in the property would amount to the plaintiffs having a beneficial interest of $218,910. I agree that this is the value of their interest in the property as appraised in the 2005-2007 time period.
[21] 670 further submits that the plaintiffs cannot justify obtaining an award of costs on the basis the amount of opposing counsel’s Bill of Costs. I disagree with this submission as opposing counsel’s Costs Outlines are specifically provided for in Rule 57.01(6) of the Rules of Civil Procedure. The amount of time spent by opposing counsel is a very relevant factor when determining costs, especially if one party alleges that an excessive amount of time was spent in preparation by opposing counsel.
[22] The amount that the unsuccessful party would reasonable expect to pay is directly related to the legal costs that it has incurred to defend the claim. In this case the 670 filed extensive materials both in submissions following the trial and on costs. While I have not been provided with 670’s bill of costs, I infer that the amount of time spent by it was similar to the amount of time spent by the plaintiffs. As a result, 670 would have reasonably expected to pay an amount similar to the amount claimed by the plaintiffs.
Indemnification
[23] Where a defendant vigorously defends an action and causes the plaintiffs to incur substantial legal costs to prove their claim, even when the value of the property in dispute is modest, the principle of indemnification must be given more weight. This situation has occurred as 670 obtained an adjournment of the trial to obtain the opinion of a second expert appraiser who was called at trial. The trial was lengthened by the defendant’s actions. The plaintiffs also made two reasonable offers to settle, one of which was matched at trial. 670 did not make any reasonable offer to settle as it offered only $1,000 and a dismissal of the plaintiff’s claim. The principle of indemnification is given substantial weight in this case because in the face of a vigorous defence in a case involving complex issues, where no reasonable offer to settle was made by the defendants, the plaintiffs had no reasonable alternative but to pursue their claim diligently. In these circumstances the plaintiff acted reasonably and should be indemnified for the time they were required to spend to prove their case, even when the value of the property was only worth $200,000.
Should Costs be Payable Jointly and Severally
[24] I agree with 670’s submission that Bertrand’s conduct was worse than that of 670. However as 670 acknowledged its conduct is at a minimum negligent for failing to make reasonable inquiries. At para (95) of the decision I found that 670 failed to make the inquiries of an “honest and reasonable” person and as a result 670’s conduct is more serious that merely being negligent.
[25] 670’s conduct was at a minimum negligent for which an award would be made payable on a joint and severed basis with the other defendant. As a result the costs award will be payable jointly and severally by the defendants.
Disposition
[26] The costs of preparing the application and the motions where costs were not awarded, other than the motion at trial should not be included in the Bill of Costs. It is unclear from the details provided in the Bill of Costs whether time was claimed for the initial application and for motions where costs were not awarded. A reduction is made for this reason. The defendants are ordered to pay costs for fees on a partial indemnity basis to April 29, 2016 in the amount of $35,000 plus HST thereon for the reasons given above. In addition the defendants are ordered to pay costs on a substantial indemnity basis from April 29, 2013 in the amount of $130,000 for fees plus HST thereon plus disbursements of $15,000 plus $1869 for HST on the taxable disbursements for the reasons given above. The costs shall be payable by the defendants on a joint and several basis.
Justice Robert J. Smith
Released: December 18, 2017
CITATION: 1168760 Ontario Inc. c/o R&R Realty, Peter Clark & J.G. Rivard Limited v. 6706037 Canada Inc. & Denis Bertrand, 2017 ONSC 7497
COURT FILE NO.: 09-44583
DATE: 2017/12/18
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
1168760 Ontario Inc. c/o R&R Realty, Peter Clark & J.G. Rivard Limited
Plaintiffs
– and –
6706037 Canada Inc. & Denis Bertrand
Defendants
COSTS decision
R. Smith J.
Released: December 18, 2017