Court File and Parties
COURT FILE NO.: ES-1057-16 DATE: 2018/08/01 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Anna Lehmann, Applicant AND: Estate of William Lehmann, Respondent
BEFORE: The Honourable Mr. Justice G.E. Taylor
COUNSEL: Ken Nathens, Counsel for the Applicant Irwin Duncan, Counsel for the Respondent
HEARD: April 23 – 27, 2018
COSTS ENDORSEMENT
[1]
Background
On June 28, 2018, I released Reasons for Judgment dismissing all claims made by the applicant. I requested written submissions with respect to costs if the parties could not resolve the issue of costs. Those written submissions have now been received.
[2]
Positions of the Parties
The respondent seeks costs payable by the applicant in the amount of $168,286.69 calculated on the basis of partial indemnity costs to May 17, 2017 and substantial indemnity costs thereafter. The applicant seeks an award of partial indemnity costs payable by the respondent in the amount of $40,000 inclusive of disbursements and HST.
3The applicant was completely unsuccessful in this proceeding. There is no basis on which she can be found entitled to be paid costs by the respondent.
[4]
Scale of Costs
Although the respondent made an offer to settle which was not accepted, rule 49.10 of the Rules of Civil Procedure cannot result in the respondent being entitled to substantial indemnity costs subsequent to the date of the offer: (S & A Strasser Ltd. v. Richmond Hill (1990), 1990 6856 (ON CA), 1 O.R. (3d) 243; Scapillati v. A. Potvin Construction Ltd. (1999), 1999 1473 (ON CA), 44 O.R. (3d) 737).
5Nor can a combination of rules 49.13 and 57.01(1) lead to an award of substantial indemnity costs. In Davies v. Clarington (Municipality) (2009), 2009 ONCA 722, 100 O.R. (3d) 66, the Ontario Court of Appeal stated at paragraph 40:
In summary, while fixing costs is a discretionary exercise, attracting a high level of deference, it must be on a principled basis. The judicial discretion under rules 49.13 and 57.01 is not so broad as to permit a fundamental change to the law that governs the award of an elevated level of costs. Apart from the operation of rule 49.10, elevated costs should only be awarded on a clear finding of reprehensible conduct on the part of the party against which the cost award is being made.
6The respondent submits that the applicant should be found to have engaged in reprehensible conduct sufficient to justify an award of substantial indemnity costs. The respondent relies on the following conduct on the part of the applicant to justify the awarding of substantial indemnity costs:
a) The applicant arranged for the transfer of title to the Florida property into her name alone when the Second Amending Agreement provided that the surviving spouse had a right of possession only to the Florida property subject to certain events occurring which would trigger the sale of the Florida property;
b) The applicant caused unnecessary expense to the respondent by requiring a report to be produced by the accountant for Lehmann Bookbinding setting out amounts paid by the company to William Lehmann and members of his family and values of the corporations in the Lehmann Bookbinding group of companies;
c) The applicant’s assertion that she was forced by the respondent to sign the Marriage Contract and the Amending Agreements;
d) The applicant’s demand that the administration of the respondent’s estate be suspended pending the outcome of the present litigation; and,
e) The applicant’s assertion that William Lehmann was in breach of the Marriage Contract by failing to have in place a life insurance policy which paid a death benefit of $50,000 instead of a policy with a $25,000 death benefit.
7In Gerula v. Flores, 1995 1096 (ON CA), [1995] O.J. No. 2300, the Ontario Court of Appeal set out at paragraph 79 the four requirements for an award of solicitor-client costs as follows:
(1) Solicitor and client costs as opposed to party-and-party costs will only be awarded in rare and exceptional cases.
(2) A defendant is entitled to defend an action and to put a plaintiff to the proof of his case.
(3) Where a defendant's acts are a deliberate attempt to frustrate the proceedings by fraud or deception, where the conduct of the defendant is calculated to harm the plaintiff, or where the unreasonable conduct of the defendant compounds the complexity of the proceedings, there are proper grounds to order solicitor and client costs.
(4) The fact that the issue of liability was not contested at trial and that the defendant did not give evidence at trial are not factors which, by themselves, should result in an award of solicitor and client costs.
In my view these principles are equally applicable to a claim for substantial indemnity costs to be awarded against an applicant or plaintiff.
8In Hunt v. TD Securities Inc., 2003 3649 (ON CA), [2003] O.J. No. 3245, the Court of Appeal also concluded that an award of substantial indemnity costs ought not to be awarded against a defendant who “plays hardball” and is ultimately unsuccessful at trial (see paragraphs 155 – 157).
9In this case the applicant chose to vigorously pursue her claim against her late husband’s estate. She was not successful in her claims. She did not alter documents or act reprehensively. Her testimony that she did not understand the Marriage Contract or the Amending Agreements and was forced to sign at least some of the agreements was rejected but as the Court of Appeal observed in Hunt at paragraph 146, findings of credibility are the kinds of assessments that trial judges make on a daily basis and that such findings cannot be said to constitute a "rare and exceptional circumstance".
10The applicant testified that when she went to the tax office in Florida to report her husband’s death, she was told that Florida law required title to the Florida property be transferred into her name as the surviving spouse. She did not falsify any documents nor was any evidence lead to contradict the applicant’s evidence on this point.
11In my view the conduct of the applicant during the course of this litigation does not amount to reprehensible conduct so as to make this case one of the rare and exceptional cases which justify an award of substantial indemnity costs. The respondent is entitled to partial indemnity costs throughout this proceeding.
[12]
Fixing the Costs
Rule 57.01(1) of the Rules of Civil Procedure sets out the principles or factors to be considered when fixing costs.
13The applicant sought an award of periodic spousal support of $5,000 per month or lump sum spousal support of $500,000. In final submissions, the applicant revised her position to seek periodic support of $2,500 per month or a lump sum support amount of $300,000. In addition, the applicant sought a declaration that she was the sole beneficial owner of the Foxboro property. The Foxboro property had been purchased in 2010 for slightly less than $400,000 and was worth over $800,000 by the time of the trial. I therefore calculate the amount in issue to be something in excess of $900,000.
14The issues and particularly the amount of the claim were important to the parties. There was some legal complexity involving the requirements to set aside the provisions of a marriage contract and the severing of a joint tenancy by a course of conduct.
15The trial was conducted efficiently by counsel for both parties. There was however some duplication in the documents filed as exhibits as both parties filed separate copies of many documents. This could have been avoided by pretrial discussion and agreement.
16Senior counsel for the respondent spent approximately 64 hours in trial preparation and junior counsel, who was not present for most of the trial, spent another 106 hours preparing the case for trial. In contrast, based on my review of the time records provided by counsel for the applicant, senior counsel spent approximately 40 hours preparing for trial and junior counsel spent an additional 20 hours. Counsel for the respondent recorded 50 hours for trial attendance whereas counsel for the applicant docketed 42 hours for trial attendance which included preparation during the course of the trial. I do not find that the difference in the amount of time spent by senior counsel in trial preparation and trial attendance to be significant but there is a vast discrepancy between the hours spent by junior counsel for the respondent in trial preparation (who has 24 years of experience) and the time spent by junior counsel for the applicant for the same purpose. In my view it is not appropriate to expect the applicant to be responsible for all of the time spent by junior counsel for the respondent in preparation for trial.
17Senior counsel for the respondent with 45 years’ of experience claimed a partial indemnity rate of $300 per hour. Senior counsel for the applicant with 24 years’ experience indicated an hourly billing rate of $400. The respondent did not expressly object to the partial indemnity rates proposed by the respondent for either senior or junior counsel. I find that the partial indemnity rates suggested by the respondent are reasonable.
18I must also take into consideration the amount of costs that the applicant, as the unsuccessful party, could reasonably expect to pay. The applicant must have had in contemplation a significant liability to pay costs to the respondent, if she was ultimately unsuccessful in the action. I note that, according to the applicant’s Costs Submissions, she incurred a liability to her own lawyer for fees, disbursements and HST in an amount slightly less than $95,000. She must have realized that she would be facing a significant cost award if she was unsuccessful.
19The applicant objects to the respondent’s disbursements in the amount of $2,400 for photocopying and $260 for meals and parking. The total disbursements claimed by the respondent are $6,775 exclusive of HST. The applicant’s disbursements total $6,500 which includes $400 for binding materials and $750 for hotel accommodation. I agree that there was some unnecessary duplication of photocopying of documents and that meals and parking are not appropriately included in costs to be paid by the unsuccessful party.
20I am not assessing costs. I am fixing costs of this proceeding in an amount which is fair and reasonable to both parties. In my view, an appropriate amount of costs to be paid by the applicant to the respondent is $75,000 inclusive of disbursements.
[21]
Disposition
The applicant is ordered to pay to the respondent the sum of $75,000 plus HST as partial indemnity costs of this proceeding, payable forthwith.
G.E. Taylor J.
Date: August 1, 2018