COURT FILE NO.: CV-15-4447-0000ES DATE: 2018-12-05 ONTARIO SUPERIOR COURT OF JUSTICE
B E T W E E N:
CONCETTA BACA, GINA DE VINCENTIS and LUCIANO GUALTIERO RICCI Jon David Giacomelli and Manjit Singh, for the Plaintiffs Plaintiffs
- and -
AUGUSTA TIBERI, BRUNO TIBERI and IDA CAPORALE Defendants Harvey S. Dorsey, for the Defendants
HEARD: April 12, July 17, August 14, October 12 and 13, and December 14, 2017, at Brampton, Ontario Price J. Costs Endorsement
Overview
[1] Acting under a Power of Attorney for Property that Giustino Ricci gave to her ten years earlier, Mr. Ricci’s daughter, Augusta Tiberi:
(a) Caused her own name to be added to Mr. Ricci’s bank account and misappropriated funds from the account to pay her own and her husband’s personal expenses;
(b) Caused Mr. Ricci to incur tens of thousands of dollars of debt for the benefit of herself, her husband, and her sister, Ida Caporale;
(c) Moved into Mr. Ricci’s home with her husband and their adult son, and lived there with him until Mr. Ricci’s death, not paying rent or occupancy expenses; and
(d) Transferred the title to the home to Mr. Ricci and herself jointly.
[2] Following Mr. Ricci’s death, Ms. Tiberi:
(a) Continued to live in the home with her husband and son, without paying rent or occupancy expenses;
(b) Transferred the home into her own name and, on the same day, borrowed $250,000.00 against it, which she used to pay debts of her own, her husband’s, and her sister, Ida’s.
(c) Transferred ownership of the home to the names of herself and her husband, and borrowed a further $400,000.00 against the home from the bank, using part of the proceeds of the mortgage to pay off the earlier mortgage, and depositing the remainder into their personal joint bank account, retaining the interest earned for themselves.
[3] When Mr. Ricci’s other three siblings demanded that Ms. Tiberi distribute Mr. Ricci’s estate equally among Mr. Ricci’s five children in accordance with his will, Mr. and Ms. Tiberi and Ms. Caporale hired a lawyer, Dorothy Hagel, to resist their claims.
[4] The siblings eventually settled the litigation, with the exception of costs, which they agreed to submit to this court to determine. The court asked the parties and their counsel whether Ms. Hagel might have personal liability for costs as a result of her conduct. Ms. Hagel’s clients waived their claim to solicitor-client privilege, and the court ordered Ms. Hagel to produce her file to them and to the plaintiffs, and permitted all parties to file material and conduct cross-examinations. All parties, and Ms. Hagel, then made written and oral submissions as to costs.
[5] Ms. Hagel’s file revealed that Ms. Tiberi had informed her of her misappropriation of estate funds at the outset. Ms. Hagel failed to disclose the misappropriation to the plaintiffs or to the court, and misled the court as to what had happened to the mortgage proceeds and as to the current whereabouts of the proceeds. The plaintiffs seek their costs on a full recovery basis from Ms. Hagel personally and punitive costs. Ms. Hagel’s clients seek their costs from her, and indemnification for the costs claimed against them by the plaintiffs.
[6] For the reasons that follow, Ms. Hagel and her clients shall be jointly and severally liable for the plaintiffs’ costs on a full recovery basis, less a reduction of $50,000.00 plus HST, being made based on excessive time having been spent by plaintiffs’ counsel. Ms. Hagel personally shall be responsible for 25% of the plaintiffs’ costs. This will achieve the objectives of costs orders, and will sanction Ms. Hagel for her failure to perform her duty to her clients and the court.
Background Facts
Mr. Ricci’s Estate
[7] Concetta Baca, Gina de Vincentis, and Luciano Gualtiero, (“the plaintiffs”), and Augusta Tiberi and Ida Caporale, (“the defendant siblings”), are the only children of the deceased, Giustino Ricci (“Mr. Ricci”).
[8] In his last will and testament, dated March 16, 1987, Mr. Ricci left the residue of his estate in equal shares to his five children. The will named Augusta Tiberi (“Ms. Tiberi”) and her brother, the plaintiff, Luciano Gualtiero (described in the pleadings as “Wally”), as Co-Estate Trustees.
[9] On June 15, 1999, Mr. Ricci appointed Ms. Tiberi and her sister, the plaintiff, Gina De Vincentis, as his Co-Attorneys for Personal Care. On December 13, 2000, he appointed Ms. Tiberi as his Attorney for Property.
[10] After Mr. Ricci’s wife died on March 15, 2005, her assets passed to Mr. Ricci as her surviving spouse. Ms. Tiberi’s name was then added to Mr. Ricci’s bank account.
[11] Ms. Tiberi has admitted that she used funds from Mr. Ricci’s bank account to pay her own and her husband’s personal expenses. Additionally, she has admitted that she caused her father to incur tens-of-thousands of dollars of debt to the benefit of herself, her husband, Bruno, and her sister, Ida.
[12] In November 2009, Ms. Tiberi and her husband, Bruno Tiberi (“Mr. and Ms. Tiberi”) sold their own home for a profit of at least $216,000.00 and moved into Mr. Ricci’s home at 1038 Roosevelt Road, Mississauga, (“the Home”) with their adult son, Daniel. Daniel began operating his company, Danberry Construction, out of the Home. The Tiberi family lived in the Home with Mr. Ricci until his death on August 5, 2012, and continued to live there after his death, without paying any occupancy expenses.
[13] On November 5, 2010, without the plaintiffs’ knowledge, Ms. Tiberi used her Power of Attorney from Mr. Ricci to transfer the Home to herself and Mr. Ricci in joint tenancy, to avoid probate.
Events Leading to Litigation
[14] On December 13, 2013, following Mr. Ricci’s death on August 5, 2012, and again without the plaintiffs’ knowledge, Ms. Tiberi transferred the Home to herself alone. On the same day, she gave a private lender a $250,000.00 mortgage on the Home, using the proceeds of the mortgage to pay off her and her husband’s personal debts, including their ScotiaLine lines of credit and Scotiabank VISA credit card balance, and those of her sister, Ida Caporale. She deposited the remainder of the mortgage proceeds into her and her husband’s personal bank account.
[15] Following Mr. Ricci’s death, Ms. Tiberi refused to disclose his or the estate’s financial records to her Co-Estate Trustee, Luciano Gualtiero. The records would have revealed her breaches of trust and her indebtedness to the estate.
[16] Beginning in about August 2013, Luciano asked Ms. Tiberi to begin administering Mr. Ricci’s estate. Despite Ms. Tiberi’s assurances that she would do so, she failed to take the necessary steps for several years.
[17] On February 23, 2015, without the knowledge of the plaintiffs, Ms. Tiberi transferred the Home into the names of herself and her husband, and Mr. and Ms. Tiberi gave a $400,000.00 mortgage on the Home to TD Bank. They used the proceeds of the mortgage to pay off the earlier mortgage to the private lender, and deposited the remainder into their own bank account, retaining the interest for themselves.
The Estate Litigation
[18] When the plaintiffs discovered that the Home had been transferred into Mr. and Ms. Tiberi’s names and confronted Ms. Tiberi about it, she rebuffed them. The plaintiffs thereupon retained Mr. Singh, who issued an Application on September 29, 2015, to require Ms. Tiberi to account for the property she had managed as Mr. Ricci’s Attorney for Property and for the assets she had managed as a Co-Trustee of his Estate and to have her accounts passed by the court.
[19] On October 20, 2015, the defendants retained Dorothy Hagel, a lawyer whose website states that she practices primarily estate litigation. Ms. Hagel delivered a Responding Record on December 7, 2015, and the parties made their first appearance in court on December 15, 2015.
[20] On December 15, 2015, the court made an order that:
- Ms. Tiberi serve, within 60 days, the formal accounting of her dealings with Mr. Ricci’s property from December 13, 2000 to the date of his death, and of her dealings with his estate from the date of his death to the date of the order;
- Ms. Tiberi serve, within 30 days, copies “of all financial records of the deceased Giustino Ricci from December 13, 2000 to the date of his death” and “from the date of his death to the date this Order.”
- Ms. Tiberi, within 30 days, obtain and pay for a present-day appraisal of the Home by a certified real estate appraisal approved of by the plaintiffs and share the results with them.
- “This Court declares that the Respondents hold title to the property located at 1038 Roosevelt Road, Mississauga, Ontario, in trust on behalf of the residual beneficiaries of the estate of the deceased Giustino Ricci”; and
- “This Court declares that the Respondents hold $400,000.00, plus interest from the date of the mortgage, in trust on behalf of the residual beneficiaries of the estate of the deceased Giustino Ricci.”
[21] On February 9, 2016, Ms. Hagel served a motion seeking approval of Ms. Tiberi’s accounts. She also sought an order declaring that Ms. Tiberi was not in breach of trust for failing to retain Mr. Ricci’s financial records pre-dating 2009. The defendants made a cross-motion to have Ms. Tiberi found in contempt for failing to produce the financial records of Mr. Ricci and his Estate, as required by the December 15, 2015, Order.
[22] At the return of the motions on February 26, 2016, Fragomeni J. asked Ms. Hagel where the mortgage proceeds were. She answered ambiguously, stating that the proceeds were “sitting in a resulting trust”. The hearing occupied Fragomeni J. for a full day and was not completed. Justice Fragomeni observed that the materials that Ms. Hagel had filed were not responsive to the issues the plaintiffs had raised, and granted her an additional month to prepare and serve materials that were responsive. For this purpose, he adjourned the hearing to March 24, 2016.
[23] On March 2, 2016, Fragomeni J. issued an endorsement ordering Ms. Tiberi to disclose the whereabouts of the $400,000.00 mortgage proceeds which the court, on December 15, 2015, had declared that the respondents held in trust.
[24] On March 22, 2016, Ms. Hagel served on plaintiffs a Supplementary Motion Record which included an affidavit sworn by Ms. Tiberi on March 21, 2016. The affidavit failed to disclose the whereabouts of the $400,000.00 mortgage proceeds.
[25] On March 24, 2016, Fragomeni J. presided over a second full day of hearing of the motions he had adjourned from February 26, 2016. At the hearing, Ms. Hagel asked the court to convert the application into an action. Justice Fragomeni issued his endorsement on April 29, 2016, wherein he:
(a) Noted that Ms. Tiberi’s affidavit had failed to disclose the whereabouts of the $400,000.00 mortgage proceeds that she had been holding in trust, despite his order that she do so.
(b) Converted the application into an action and set a timetable for the action, culminating in a trial at the blitz trial sittings in January 2017.
(a) Ordered the defendants to pay the proceeds of the $400,000.00 mortgage into court.
(b) Left the issue of whether Ms. Tiberi had breached the December 15, 2015, order to the trial judge.
[26] On May 20, 2016, Mr. Singh and Ms. Hagel submitted their arguments on the costs of the motions. On May 26, 2016, Fragomeni J. issued his endorsement, reserving the costs to the Trial Judge.
[27] On May 25, 2016, Mr. and Ms. Tiberi paid $400,000.00 into court to the credit of this action.
[28] On May 27, 2016, Mr. Singh served the plaintiffs’ Statement of Claim on the defendants, in compliance with Fragomeni J.’s timetable. On June 23, 2016, four days before her clients’ Statement of Defence was due, Ms. Hagel sent a Demand for Particulars comprising 50 particulars. Mr. Singh delivered the plaintiffs’ Response to the Demand the following day.
[29] On June 27, 2016, the day the defence was due, Ms. Hagel delivered a Motion for Particulars, returnable in five weeks. She then left for vacation for the five weeks, returning in the first week of August, when she had unilaterally scheduled the hearing of her clients’ motion.
[30] On July 4, 2016, Mr. Singh served Notices of Examination on the defendants by sending them to Ms. Hagel, their counsel of record. Although he had scheduled the examinations for dates when Ms. Hagel had indicated she would be available, Ms. Hagel notified Mr. Singh that she was refusing service of the Notices of Examination, and on July 29, 2016, informed Mr. Singh that she was no longer available on the scheduled dates. As a result, the examinations did not proceed by August 30, 2016, the deadline specified in Fragomeni J.’s timetable.
[31] On August 2, 2016, Mr. Singh served a Notice of Cross-Examination on Ms. Hagel to cross-examine her client, Augusta Tiberi, on her affidavit filed in support of the defendants’ motion for particulars, to determine whether the particulars sought were within her knowledge. On the same day, Ms. Hagel sent a letter to Mr. Singh, refusing to produce her client for cross-examination on the basis that it was an attempt to prematurely begin the discovery. On August 5, Mr. Singh delivered a cross-motion for leave to cross-examine Ms. Tiberi on her affidavit. On September 8, 2016, Ms. Hagel delivered a reply to the plaintiffs’ cross-motion, with an affidavit by Ms. Hagel herself, in which she amended her clients’ motion for particulars to add a claim that the Statement of Claim be struck out as disclosing no cause of action.
[32] On October 14, 2016, this court heard and dismissed the defendants’ motion to strike the Statement of Claim and for particulars. It allowed the plaintiffs’ cross-motion to require Ms. Tiberi to attend for cross-examination, and ordered the defendants to pay the plaintiffs’ costs of the motions on a substantial indemnity scale in the amount of $14,500.00.
[33] Additionally, the court imposed a strict and accelerated timetable, requiring the defendant to deliver their Statement of Defence and requiring the discovery process to be completed within six weeks, by the end of December 2016, so that the action could still be tried at the January 2017 trial blitz sittings, as Fragomeni J. had ordered on April 29, 2016.
[34] On October 21, 2016, Ms. Hagel delivered her clients’ Statement of Defence and Counterclaim. Mr. Singh delivered his clients’ Reply and Defence to Counterclaim on October 31, 2016.
[35] On November 10, 2016, Ms. Hagel served her clients’ Affidavit of Documents. At the end of November 2016, the parties completed Examinations for Discovery which lasted two days for the plaintiffs and two days for the defendants. Ms. Tiberi admitted, at her examination, that she had used her Power of Attorney from Mr. Ricci to incur debts in his name to pay her and her husband’s expenses, that after his death, she had given a $250,000.00 mortgage against the Home, to pay their expenses, and that after she had transferred the Home to herself and her husband, they had given a $400,000.00 mortgage on the Home and used the proceeds to re-pay the earlier mortgage, and deposited the balance into their own bank accounts.
[36] At the conclusion of the examinations for discovery, the parties exchanged offers to settle, which were not accepted.
[37] The plaintiffs delivered a motion to strike the Statement of Defence for non-compliance with undertakings, to be heard on December 16, 2016, because the court’s October 14, 2016, order had given the parties until December 15 to comply with their undertakings, and because the parties were already scheduled to appear at a 9:00 am pre-trial conference on December 16. However, on December 6, 2016, Ms. Hagel served a motion for compliance with the plaintiffs’ undertakings, for hearing on December 13, 2016, two days before compliance was due, and notwithstanding that Mr. Singh had earlier informed her that he was scheduled to be in a different court that day on a different matter.
[38] On December 9, 2016, Ms. Hagel delivered a Notice of Abandonment of her clients’ motion for compliance with the defendants’ undertakings. On December 14, 2016, Mr. Singh demanded his clients’ costs of the abandoned motion. Ms. Hagel did not respond to the demand.
[39] On December 15, 2016, Ms. Hagel served her clients’ answers to undertakings, hours before the plaintiffs’ motion to strike their Statement of Defence was to be heard. Mr. Singh regarded the answers to be inadequate, and proceeded with his clients’ motion to strike the defendants’ Statement of Defence for non-compliance.
[40] On December 16, 2016, this court began to hear the plaintiffs’ motion to strike the Statement of Defence. Because the plaintiffs’ material brought Ms. Hagel’s conduct into question, she retained Ben Arkin, an estate law litigator, to represent her. The court found that Ms. Hagel’s material was inadequate and did not comply with guidelines the court had given for such motions. It adjourned the motion for a week, to December 23, 2016, to give Ms. Hagel a further opportunity to respond to the motion. However, outside the courtroom on December 16, Mr. Singh approached Mr. Arkin and suggested that the matter ought to settle as the defendants’ admissions at discovery left no genuine issue for trial. Mr. Singh proposed mediation, and Mr. Arkin agreed.
[41] On December 22 and 23, 2016, the action was mediated with all the parties present. The defendants were represented by both Ms. Hagel and Mr. Arkin. The parties settled all claims except costs, which they agreed to leave to this court to determine.
The Costs Hearing
[42] At the ensuing costs hearing, the court raised the question of whether there was a basis for finding Ms. Hagel personally liable for some or all of the costs. The court adjourned the hearing to enable Ms. Hagel to consult counsel and for the defendants to consider their position. The defendants later indicated that they were seeking an order requiring Ms. Hagel to pay their costs and to indemnify them for any liability they might have for the plaintiffs’ costs. Ms. Hagel sought leave to file responding material. The defendants waived their solicitor-client privilege, and the court ordered Ms. Hagel to produce her notes and granted leave to all parties, and Ms. Hagel, to cross-examine each other on their respective affidavits and to make arguments on costs.
[43] The costs hearing proceeded on October 12 and 13, and on December 14, 2017. On December 14, 2017, the defendants produced answers to undertakings given at their cross-examinations on the affidavits filed in the costs proceeding. The answers contained, among other records, the ledger for the $250,000 mortgage, which confirmed that the proceeds of that mortgage had been used to pay off Mr. and Ms. Tiberi’s ScotiaLine lines of credit and Scotiabank VISA balances, the statements of which were also produced.
[44] Following the costs hearing, the court reserved its judgment.
Developments Since the Court Reserved its Decision on Costs
[45] On February 27, 2018, counsel for the plaintiffs and the defendants and for Ms. Hagel appeared before me with a motion on consent for an order removing two charges that Ms. Hagel had placed on the title to the Home to secure her claim to fees and disbursements. Ms. Hagel had obtained leave to register the charges in a motion without notice to the parties, and she had not served a copy of the order on the parties after obtaining it. The parties became aware of the charges when the Home was sold, on consent, and the purchaser required the charges to be removed.
[46] On the consent of all parties and of Ms. Hagel, the court made an order on February 27, 2018, removing the charges, and removing a Certificate of Pending Litigation which the plaintiffs had obtained at the outset of the litigation. The order was to facilitate the sale of the Home, which was scheduled to close later the same day. The terms of the order provided that the net proceeds of sale of the Home would be held in trust by the solicitor assisting the siblings in the sale of the Home, and that the issue of the propriety of the charging order, and the costs of the motion to remove the charges, would be deferred pending the court’s decision regarding the costs of the action.
[47] On March 13, 2018, also on the consent of the parties and of Ms. Hagel, the $400,000.00 that Mr. and Ms. Tiberi had paid into court on May 25, 2016, together with accrued interest, was paid out of court to Younan Nicolini Law Group, A.P., the solicitor who had assisted the siblings in the sale of the Home, to be held in trust, together with the net proceeds of sale of the Home, pending the release of the court’s decision on costs.
Issues
[48] The court must determine who, if anyone, is entitled to their costs of the litigation and, if so, in what amount. Additionally, the court must determine whether costs should be paid personally by Ms. Hagel.
[49] These issues require the court to consider the principles that apply to determining when an estate trustee should be held personally responsible for the costs of estate litigation, and how the court should apportion liability for costs as between a lawyer and client when litigation is conducted in an unreasonable manner.
Parties' Positions
The Plaintiffs’ Position
[50] The plaintiffs say that they are entitled to their costs on the ground that they were successful in the outcome. They submit that they should be awarded their costs on a full recovery basis, having regard to their attempts, from the outset, to settle their claims, and based on the unreasonable conduct of the defendants and their lawyer.
[51] The plaintiffs claim their costs on a full recovery basis in the amount of $394,727.40, plus punitive costs, for the deceptive affidavits that the defendants and their lawyer tendered to the court.
[52] The plaintiffs submit that their costs, including punitive costs, should be paid by Ms. Hagel personally. They submit that Ms. Hagel undertook a defence that was legally untenable from the outset, and tendered false affidavits, which cost both her clients and the plaintiffs hundreds-of-thousands of dollars in costs, only to reach an outcome that was no more favourable to her clients than the offer(s) the plaintiffs made at the outset of the proceeding.
The Defendants’ Position
[53] The defendants submit that the court should not award costs to anyone. In the alternative, they submit that if the court finds that any positions they advanced or steps they took caused costs to be unnecessarily incurred, this was the result of the advice, or lack of advice, given to them by Ms. Hagel and the steps she recommended or pursued without giving them proper advice or warning as to the risks. They argue that her failure to give them proper advice from the outset of the litigation, and her pursuit of unreasonable positions and motions, also unnecessarily increased their own costs.
[54] The defendants say that they relied on Ms. Hagel to advise and guide them and that they never instructed her to take a course of action that was unreasonable or would cause costs to be unnecessarily incurred. They submit that Ms. Hagel never warned them that any steps she took on their behalf would lead to such a result.
Ms. Hagel’s Position
[55] Ms. Hagel submits that this court already determined, on October 14, 2016, that she would not be personally liable for the plaintiffs’ costs.
[56] Ms. Hagel further submits that, in any event, this is not the clearest of cases where a lawyer has been derelict in her duty or has pursued a goal that was clearly unattainable or seriously undermined the authority of the court or interfered with the administration of justice. She submits that the goals she pursued were attainable, and that the costs were incurred because her client, Ms. Tiberi, was unwilling to make concessions, the parties did not get along, and the plaintiffs’ lawyer, Mr. Singh, was uncivil to her and toward her clients.
[57] Additionally, Ms. Hagel submits that she advised Ms. Tiberi at their first meeting that the court would take an unfavourable view of the mortgage and advised her to pay the money to her in trust or to pay it into court. She states that Ms. Tiberi told her that she had used the mortgage proceeds to pay off personal debts, that only a portion of the proceeds remained, and that she did not have the money to pay the mortgage proceeds into court without selling the Home. Ms. Hagel submits that that she encouraged Ms. Tiberi to sell the Home, but that she was unwilling to do so. She states that her argument was therefore necessary to protect Ms. Tiberi’s position.
[58] Ms. Hagel further submits that she advised Ms. Tiberi to produce the records of Mr. Ricci and his estate back to 2000, but that Ms. Tiberi told her that she no longer had the records.
[59] Ms. Hagel submits that even if Ms. Tiberi had not opposed the plaintiffs’ claim for the mortgage proceeds, litigation would have been necessary, in any event, to advance Ms. Tiberi’s claim for reimbursement of expenses she had incurred caring for her father, and for compensation as his attorney for property. She argues that those claims were advanced in Ms. Tiberi’s counterclaim and were settled at mediation by a payment of $50,000.00 to Ms. Tiberi.
Findings of Fact
Has the Court Already Determined that Ms. Hagel is Not Personally Liable for the Defendants’ Costs?
[60] Ms. Hagel argues that this court has already determined that she shall not be held personally liable for the parties’ costs. I disagree. The court stated, on October 14, 2016:
… this case leaves me somewhat breathless in terms of your conduct frankly. If time were more plentiful I would consider adjourning the matter and having you come back to explain why costs, or a portion of them, should not be paid by you personally. I think your conduct in responding to the Plaintiffs’ efforts to get this matter on in compliance with Justice Fragomeni’s order …is beyond the pale. It’s one of those very few cases, and I think there has only been one in the last eight years where I have actually sent some material to The Law Society to look at, but I was thinking that this might be one of those cases where the Court would have an obligation to do that. [1]
[61] As a result of the parties’ settlement of the substantive issues in the proceeding, and their agreement that costs should be determined by this court, the defendants’ waiver of solicitor and client privilege over Ms. Hagel’s communications with them, and the full hearing that ensued, Ms. Hagel has now had the opportunity, not afforded earlier, to explain why costs, or a portion of them, should not be awarded against her personally.
Did Ms. Hagel, on Behalf of the Defendants, Pursue a Goal that was Unattainable?
[62] I find that Ms. Hagel, in resisting the plaintiffs’ claim for reimbursement of mortgage proceeds to the estate, pursued a goal on behalf of the defendants that was unattainable. Further, I find that, in doing so, Ms. Hagel misrepresented the facts to the court.
[63] In the Statement of Defence and Counterclaim, filed on October 18, 2016, Ms. Hagel denies the assertions made in paragraphs 16 to 31 of the Statement of Claim which were, to Ms. Hagel’s knowledge, true. This includes assertions that Ms. Tiberi:
a) transferred the Home to herself and her husband [2] and gave a $400,000.00 mortgage on the Home to TD Bank, [3] without the knowledge of the plaintiffs, including the co-estate trustee; [4]
b) deposited the proceeds of the mortgage into her and her husband’s own bank accounts, [5] failed to segregate the proceeds from their own assets, [6] and retained the interest on the proceeds; [7]
c) failed to produce the records, contrary to this court’s order dated December 15, 2015, [8] and to disclose the whereabouts of the funds, contrary to Fragomeni J.’s order dated March 2, 2016; [9]
d) thereby converting the funds, in breach of her trust [10] and in breach of her fiduciary duty. [11]
[64] The Statement of Defence and Counterclaim counters with assertions that Ms. Hagel knew to be false, including that:
a) the reason Mr. and Ms. Tiberi transferred the property to themselves was “to take advantage of their joint credit strength, when obtaining a mortgage on the Roosevelt House, in order to generate liquidity for payment of the plaintiffs, as the Roosevelt House was the only asset in Father’s estate”; [12]
b) they gave the $400,000.00 mortgage on the Home “for the purpose of providing the cash necessary to pay the four siblings their respective entitlements to the estate”; [13]
c) that doing so did not affect “the value of equitable shares of the estate to which the plaintiffs are entitled”; [14]
d) that Ms. Tiberi’s failure to segregate the $400,000 mortgage proceeds from her own assets did not amount to a breach of trust or breach of her fiduciary duty, [15] and, in any event, was done honestly and in good faith; [16] and,
e) that it was not a breach of trust for Ms. Tiberi to retain the interest earned on (the balance of) the $400,000.00 mortgage proceeds, as she and her husband were paying a greater amount of interest on the mortgage itself (which, I would observe, was not theirs to give in the first place) [17] and that, in any event, she was acting honestly because she gave the mortgage for the purpose of paying out the value of the beneficial shares to the plaintiffs, [18] and because the mortgage did not diminish the value of their shares. [19]
[65] Ms. Hagel knew, as appears from the notes she made on October 27, 2015, that Ms. Tiberi had given the mortgage because she “had to pay expenses”, that she had paid two lines of credit and a VISA credit card debt, and that she had only $140,000.00 left. [20] The mortgage certainly diminished the value of the plaintiffs’ interest in the estate unless and until it was re-paid, and on October 27, 2015, Ms. Tiberi had only $140,000.00 and was unable to re-pay it without selling the Home, which she was unwilling to do. In light of these facts, Ms. Hagel adopted an untenable position in seeking to avoid a finding that Ms. Tiberi had breached her trust and fiduciary obligations to the beneficiaries of the estate and to avoid a judgment that required her to repay those funds.
Did Ms. Hagel Mislead the Court, Seriously Undermine its Authority, or Seriously Interfere with the Administration of Justice?
[66] I find that Ms. Hagel misled the court, and seriously undermined its authority, in the following respects:
i. Ms. Hagel Caused a Misleading Affidavit, Sworn December 7, 2015, to be Prepared and Sworn by her Client, Ms. Tiberi.
[67] Notwithstanding Ms. Tiberi’s information to Ms. Hagel in their discussion in October 2015, indicating that she had used the mortgage proceeds to pay her expenses and debts, as appears from Ms. Hagel’s notes of October 27, 2015, Ms. Hagel sent a letter dated December 4, 2015, to Mr. Singh, in which she stated, with reference to the $400,000 mortgage:
My client also informs me that the mortgage taken on the property was to allow her to generate sufficient liquid funds to effect the distribution to her siblings without necessity of selling the house, in which my client would like to remain. Her husband was added to the title on the property to add his credit strength allowing my client to obtain the mortgage from the bank.
[Emphasis added.]
[68] Ms. Hagel adopted the same explanation in an affidavit that she drafted, or caused to be drafted, which Ms. Tiberi swore before Ms. Hagel’s associate, Leona Tranter, on December 7, 2015. The affidavit states:
- As there were no liquid assets in the estate, (see Exhibit B attached) the mortgage for $400,000.00 was taken out, secured against the house, for the sole purpose of providing the cash necessary to pay my 4 siblings their respective entitlements from the estate ….
[69] Ms. Hagel knew this assertion to be false, based on her initial conversation with Ms. Tiberi, as appears from her notes of October 27, 2015, made following her telephone discussion with Ms. Tiberi. The notes disclose that Ms. Tiberi’s reason for borrowing the $400,000.00 by giving the mortgage was that she “had to pay expenses”. These included two lines of credit and a VISA debt, paid with the proceeds of the $250,000 mortgage, and re-payment of that mortgage with the proceeds of the $400,000 mortgage.
ii. Ms. Hagel Failed to Ensure that $400,000 Mortgage Proceeds, or what Remained of them, were Held in Trust Pursuant to the Court’s Order Dated December 15, 2015.
[70] My order dated December 15, 2015, provided that “the Respondents hold $400,000.00, plus interest from the date of the mortgage, in trust on behalf of the residual beneficiaries of the estate of the deceased Guistino Ricci.”
[71] Ms. Tranter, a lawyer with Ms. Hagel’s firm, states in her affidavit sworn July 27, 2017, that shortly after the defendants retained Hagel Law Firm, Ms. Hagel advised Ms. Tranter that she had informed Ms. Tiberi that the $400,000.00 mortgage would be a significant issue before the Court. Ms. Tranter states:
- …On December 16, 2015, my notes show that I discussed this with Dorothy:
“discussed w DH re case – weaknesses (eg - $400k in Feb [o]stensibly to pay beneficiaries - > still 10 mos later - 0 distributions made*
DH to meet w A Tiberi – a “look it” meeting.
- need to know what’s going on
* DH had no answer – looks bad - & Judge saw thru it – so awarded costs against you”
[Emphasis added.]
[72] The above notes disclose that Ms. Tiberi’s lawyers, Ms. Hagel and Ms. Tranter, were aware of the falsity of the explanation that Ms. Tiberi had given for the $400,000.00 mortgage in her affidavit sworn December 7, 2015, namely, that she had taken it in order to generate liquid funds to pay out the beneficiaries. Ms. Tranter states that the mortgage was “ostensibly” to pay beneficiaries, but that no distributions were made in the ensuing 10 months. The notes, made December 16, 2015, the day after the hearing before me, state, “Judge saw thru [sic] it [and] so awarded costs against you”.
[73] In addition, it appears from the evidence before me that Ms. Hagel failed to properly advise the defendants to pay the funds into trust according to the order. Ms. Tiberi states, in her affidavit of July 15, 2017:
Dorothy provided me with no advice concerning this issue, including the seriousness of a claim of fraud against me or Bruno. Nor did Dorothy advise me at the time to discharge the mortgage, to pay the funds into a trust account, or to pay the funds into Court pending the conclusion of the litigation. Had she given me that advice, I would have followed it as I did with all other advice she gave me.
…Following this Order [dated December 15, 2015], Dorothy did not advise me that I was required to deposit the $400,000.00 into a trust account or take any other action with respect to these funds. Likewise, she did not advise me to even disclosure [sic] the location of those funds until Justice Fragomeni directed this on March 2, 2016, as I will explain below.
[74] I find that Ms. Hagel’s actions directly contributed to her client’s breach of the December 15, 2015, order.
iii. Ms. Hagel Gave False or Misleading Responses to Fragomeni J. on February 26, 2016
[75] I find that Ms. Hagel intentionally misled the court at the hearing on February 26, 2016.
[76] At the hearing, Justice Fragomeni inquired where the defendants were holding the $400,000 plus interest, pursuant to the court’s earlier order. Ms. Hagel responded “Where is it? It’s sitting in the resulting trust, Your Honour, as a result of the decision in [indiscernible] they are entitled to the value of the equity of the house, not reduced by this mortgage.” [Emphasis added].
[77] Ms. Hagel argues, in her affidavit sworn October 30, 2017, that what she meant was that Ms. Tiberi was holding the Home in trust for the Estate and that, by doing so, she was holding its value for the beneficiaries of the Estate. Ms. Hagel further states that:
18.…However, my submissions to the Court were not intended to deceive the Court into thinking that the money was being held in a separate trust account, when it was not. Rather, my submissions were based on my understanding, that saying ‘in trust’ described Augusta’s position that she held the equity in the Property in trust for the beneficiaries of the estate, as she did not claim that Guistine meant to give the Property to her alone. I did not believe I was representing that the $400,000 was being held separately.
[78] It is clear from the transcript of the February 26 hearing that Fragomeni J. was referring to the $400,000.00 mortgage proceeds, not the Home on which the mortgage was given, or the equity that remained in the Home after the mortgage was given. The mortgage had diminished the value of the Home to the estate.
[79] Ms. Hagel knew that Ms. Tiberi had spent most of the mortgage proceeds to pay her own expenses and to repay her debts and that only $190,000 remained. Ms. Hagel states in her affidavit sworn July 27, 2017, that she did not advise her client to pay the mortgage proceeds into court because she knew that her client has spent some of the money to pay her own expenses and debts.
[80] The $190,000.00 was not being held in trust. It was Ms. Hagel’s duty to reply in a forthright manner to Fragomeni J.’s question, and to disclose the fact that only $190,000.00 remained of the mortgage proceeds, and that those funds were not being held in a trust account, as the order of December 15, 2015, required. Instead, Ms. Hagel gave responses that were calculated to be ambiguous and misleading.
[81] The transcript of the hearing on February 26, 2016, continues as follows:
THE COURT: I don’t understand what you just said. The order, at least as I’m reading it, is that they’re holding the property in trust on behalf of the residual beneficiaries, and the $400,000 in trust for the residual beneficiaries so…
MS. HAGEL: Yes, because, she cannot reduce – she cannot reduce the claim of the applicants by just taking the mortgage out and reducing the value of the property, that’s what it means. The property is $825,000 and that – the value of the property, subject to accounting, is to be distributed among the siblings. So my client obviously cannot just take $400,000 and run away with it and say, well, there’s only $400,000 remaining and this is only – this is how much I’m gonna pay. This is not what she is saying.
What she is saying, yes, you are entitled to the value of the entire house and this is – this is consistent with the Justice Price ordered because that’s what also the will said. They are entitled to the value – one-fifth value of the estate, subject to the accounting. And the only asset in this estate is this house. So whether she takes the mortgage on it or not, the money in the mortgage, it is held in trust for them because the money in the mortgage is not suppose to reduce whatever they supposed to be receiving and that’s the reality of this estate.
[82] It is clear beyond any doubt that Fragomeni J. was asking Ms. Hagel where the money was. Ms. Hagel’s reply was calculated to convey the meaning that the money was “sitting” in trust.
[83] If Ms. Hagel’s response was not an explicit lie, it was a deliberate evasion of Fragomeni J.’s question. I find that it was intentionally ambiguous and calculated to mislead Fragomeni J. to believe that the mortgage funds were being preserved. Justice Fragomeni was clearly asking Ms. Hagel to assure him that the mortgage proceeds were being held in trust, in accordance with the December 15 order. Ms. Hagel replied with words that were intended to give him that assurance, notwithstanding Ms. Hagel’s knowledge that there was no basis for the assurance.
iv. Ms. Hagel Facilitated Ms. Tiberi’s Breach of Fragomeni J.’s Order Dated March 2, 2016
[84] Justice Fragomeni’s order dated March 2, 2016, at paragraph 1(c), required Ms. Tiberi to deliver an affidavit that confirms the order to hold the funds in trust is being complied with and “shall specifically set out where the funds are being held in trust.”
[85] If there had been any uncertainty in Ms. Hagel’s mind as to the intent of Fragomeni J.’s question to her on December 7, 2015, which I find there was not, it would have been brought home to her by his endorsement, when she received it on March 2, 2016.
[86] Ms. Hagel states in her affidavit sworn October 30, 2017, with reference to the endorsement dated March 2, 2016:
- It was as a result of this endorsement that I understood that Justice Fragomeni intended for Augusta to hold the $400,000 separately. I did not understand this to mean that Augusta was required to hold $400,000 separately.
[87] It is significant that Ms. Hagel did not comply with that aspect of Fragomeni J.’s March 2 order. Rather Ms. Hagel drafted, or caused to be drafted, Ms. Tiberi’s affidavit sworn on March 22, 2016, which states that the $400,000 in question was held in trust by Ms. Tiberi on behalf of the residual beneficiaries of Mr. Ricci’s estate.
[88] Ms. Tiberi’s statement, to Ms. Hagel’s knowledge, was intentionally misleading, in implying that Ms. Tiberi was, in fact, holding the $400,000 mortgage proceeds in trust.
v. Ms. Hagel Failed in her Duty of Probity in Relation to Ms. Tiberi’s Obligations to the Court
[89] Ms. Hagel did not produce the records of Mr. Ricci and his estate in compliance with this court’s order dated December 15, 2015. That order required Ms. Tiberi to produce the records within 30 days. Ms. Hagel did not disclose many of the relevant records, including the records of the lines of credit and credit card that revealed the debts paid from the proceeds of the $250,000 mortgage loan from the private lender, and the records relating to the $400,000 mortgage and its proceeds, until almost 11 months later, when she served her clients’ Affidavit of Documents on November 10, 2016.
[90] Ms. Hagel’s opposition to having Ms. Tiberi produce the records began on December 15, 2015, when the order for production was initially made. It continued at the hearing before Fragomeni J. on February 26, 2016, where she claimed that she provided relevant records and that the ones requested by Mr. Singh were not relevant to the claim. [21]
[91] Justice Fragomeni’s order dated March 2, 2016, required Ms. Tiberi to serve and file a further affidavit to confirm that the December 15 order was being complied with by setting out (1) what steps were taken to comply with the order to produce records, and (2) where the funds were specifically being held in trust.
[92] In the affidavit that Ms. Hagel drafted or caused to be prepared for Ms. Tiberi, sworn on March 21, 2016, Ms. Tiberi continued to resist production of the records on the ground of “relevance”. At para. 65, she claimed that the position by the Plaintiffs for the production of was “extreme, completely disproportional and unreasonable.”
[93] Regarding the funds held in trust, Ms. Tiberi stated, at paras. 104 - 105:
With respect to paragraph 23 whereby Ms. Singh also claims to have been informed by the Applicants in their belief that “there is no juristic reason nor any prejudice to” me if the Court were to order me to deliver to the Court the funds that I currently hold in trust on behalf of the residual beneficiaries of the estate of my late father, I respond that the Applicants are not entitled to the entire amount of $400,000 in addition to their claim to the value of the house, as they claim.
…The current $400,000 mortgage on the property at 1038 Roosevelt Road does not form part of the records of the estate of the deceased.
[Emphasis added.]
[94] In her affidavit sworn July 15, 2017, Ms. Tiberi stated that Ms. Hagel did not express concern over knowingly misleading the plaintiffs regarding the funds.
12.…In her letter of December 4, 2015, to the Plaintiff’s lawyer, Manjit Singh, Dorothy expressed a similar sentiment… Neither her own notes nor her correspondence to Mr. Singh indicate that Dorothy had any serious concern over assuring the Plaintiffs or their lawyer that the funds obtained from the Mortgage were secure and/or that they would be properly placed into a trust account.
[Emphasis added.]
[95] I find that Ms. Tiberi, to Ms. Hagel’s knowledge and with her complicity, actively resisted producing the records that would disclose what she had done with the proceeds of the $250,000 mortgage and the $400,000 mortgage, as those records would reveal the breaches of trust and fiduciary duty that Ms. Tiberi had disclosed to Ms. Hagel in their first conversation in October 2015.
[96] I further find that Ms. Tiberi’s affidavit of March 21, 2016, was worded in such a way as to create the misleading impression that Ms. Tiberi was, in fact, holding the $400,000 in trust, but was resisting producing the records on the (legally untenable) ground that they were her own financial records, and not those of the estate.
[97] Ms. Tiberi failed to produce the records required, in breach of both my order dated December 15, 2015, and of Fragomeni J.’s order dated March 2, 2016. She also failed to disclose the whereabouts of the $400,000 mortgage proceeds, as she had been ordered to do. I find that Ms. Hagel failed in her duty to advise Ms. Tiberi to obtain the records, and in her duty either to produce them to the plaintiffs or to be forthright as to the reason they were not produced. She did neither.
[98] Ms. Hagel endeavours to shift the responsibility for the non-production of the records entirely to her client. This is demonstrated by her affidavit sworn July 26, 2017, where she states at paragraphs 19-21 that she informed Ms. Tiberi of the obligation to obtain the records and that Ms. Tiberi made the efforts to obtain these records on her own to save on costs.
[99] I find that Ms. Hagel, in leaving it entirely to Ms. Tiberi to obtain the documents the court had required her to produce, knowing that Ms. Tiberi was concealing the fact that she had spent the mortgage proceeds in the payment of her own expenses and debts, and deposited the remainder to her own bank account, without any advice as to the nature of her obligations and the potential consequences of non-compliance, amounted to a tacit acquiescence in Ms. Tiberi’s non-compliance with the orders.
[100] I further find that Ms. Hagel’s correspondence to Mr. Singh, and the affidavits which she caused to be prepared for Ms. Tiberi, which disputed Ms. Tiberi’s obligation to produce the records on the ground of relevance, made Ms. Hagel complicit in her client’s subterfuge. Ms. Hagel knew these positions were untenable.
[101] For the reasons listed above, I find that Ms. Hagel misled the court on several occasions. Her failure to advise her client and her acquiescence of her client’s behavior caused the defendant to also mislead the court and breach court orders. In doing so she undermined the authority of the court and interfered with the administration of justice.
Analysis and Law
General Principles
[102] In assessing costs, the court is guided by the factors set out in Rule 57.01(1) of the Rules of Civil Procedure. Among those factors are the following:
(i) The complexity of the proceeding;
(ii) The importance of the issues;
(iii) The conduct of any party that tended to shorten or to lengthen unnecessarily the duration of the proceeding;
(iv) Any offers to settle;
(v) The principle of indemnity;
(vi) The concept of proportionality, which includes at least two factors:
(a) The amount claimed and the amount recovered in the proceeding; and,
(b) The amount of costs that an unsuccessful party could reasonably expect to pay in relation to the step in the proceeding for which costs are being fixed;
(vii) Any other matter relevant to the question of costs. [22]
[103] In determining the costs to be awarded, the court must apply fairness and reasonableness as overriding principles. [23] The court does not engage in a mechanical exercise but, rather, takes a contextual approach, applying the principles and factors discussed above, and sets a figure that is fair and reasonable in all the circumstances. [24] This includes the consideration of the parties’ reasonable expectations in regards to quantum. [25]
Costs in Estate Litigation
[104] Historically, costs in estates litigation were covered from the estate – this is no longer the norm. The Court of Appeal set out the current approach to costs in estate litigation in McDougald Estate v. Gooderham, (2005). [26] Gillese J.A., speaking for the court, explained:
The modern approach to awarding costs, at first instance, in estate litigation recognises the important role that courts play in ensuring that only valid wills executed by competent testators are propounded. It also recognises the need to restrict unwarranted litigation and protect estates from being depleted by litigation. Gone are the days when the costs of all parties are so routinely ordered payable out of the estate that people perceive there is nothing to be lost in pursuing estate litigation. [27]
[Emphasis added.]
[105] In White v. Gicas, the Court of Appeal expanded on the modern approach, stating that modern estate litigation is subject to the general civil litigation costs regime, barring any public policy concerns that require deviation from the norm. Such cases, the court held, are limited. [28]
[106] Thus, the public policy considerations that pertain to estate litigation are: “(1) the need to give effect to valid wills that reflect the intention of competent testators; and (2) the need to ensure that estates are properly administered.” [29] In estate cases where all the litigants have acted reasonably, these considerations may require that a litigant be relieved of the costs consequences of an adverse outcome. [30]
Application of Cost Principles
[107] The present case involves an estate that is valued at approximately $1,000,000. The issues went beyond straightforward estate administration and touched on the duties owed by an estate trustee, and her lawyer, to the beneficiaries of an estate and to the court.
[108] The case involved issues of moderate factual complexity. The defendants were required to argue procedural issues that Ms. Hagel raised, which otherwise would not have been controversial. This lengthened the proceeding and required detailed examinations of financial records, examinations for discovery, cross-examinations on affidavits, and review of Ms. Hagel’s own notes.
[109] The plaintiffs made offers to settle both before and after issuing the application. These offers were reasonable, and should have brought the proceeding to a speedy conclusion. The outcome the plaintiffs ultimately achieved was as favourable as their offers to settle.
[110] Mr. Ricci’s will was straightforward. Litigation should not have been necessary to ensure that the estate was properly administered. It was Ms. Tiberi’s breaches of her fiduciary duty, exacerbated by her lawyer’s failure to guide her that resulted in the litigation proceeding beyond its initial stages. In particular:
a) Ms. Tiberi transferred the Home, which was an asset of the estate, to herself and her husband, charging it with a $400,000 mortgage, and used the proceeds of the mortgage to pay her family’s debts and expenses, and deposited the balance in her and her husbands’ personal accounts.
b) Ms. Tiberi failed to acknowledge her wrongdoing and take whatever steps available to her to rectify the situation by producing Mr. Ricci’s financial records and the records of the mortgages, re-paying the amount she had misappropriated, and distributing the estate in accordance with the will without further delay.
c) Ms. Tiberi and Ms. Hagel took the untenable positions that the Home and mortgage proceeds did not form part of the estate, and that the plaintiffs were not entitled to the records, or to re-payment of the amounts misappropriated.
d) Ms. Tiberi and Ms. Hagel failed to comply with court orders to preserve the Home and the mortgage proceeds, to disclose the whereabouts of the mortgage proceeds, and to pay those proceeds into court.
e) The defendants and Ms. Hagel failed to comply with undertakings given at examinations for discovery.
f) Ms. Tiberi and Ms. Hagel failed to comply with court-imposed timetables, made a needless and untimely demand for particulars, delivered a baseless counterclaim without prior notice, and made a baseless motion for compliance with undertakings and then abandoned the motion and failed to respond to the plaintiffs’ demand for the costs of responding to the motion.
g) Ms. Tiberi and Ms. Hagel failed to deliver material responsive to the plaintiffs’ issues in relation to the motion for approval of the estate trustee’s accounts, and in relation to the motion for compliance with undertakings.
[111] In such circumstances, where the problems giving rise to the litigation were caused by the estate trustee and her lawyer, it is appropriate, for the policy reasons referred to above, that they bear the reasonable costs associated with the resolution of the proceeding.
Reasonableness and Proportionality of Costs Claimed
[112] In reviewing a claim for costs, the court does not undertake a line by line analysis of the hours claimed, and should not second-guess the amount claimed, unless it is clearly excessive or overreaching. It considers what is reasonable in the circumstances and, taking into account all the relevant factors, awards costs in a global fashion. [31]
[113] In determining the appropriate hourly rates to be assigned to the lawyers involved in the motion, the court follows the approach taken by Aitkin J. in Geographic Resources. [32] That is, the starting point is the successor of the Costs Grid, namely, the “Information for the Profession” bulletin from the Costs Sub-Committee of the Rules Committee (the “Costs Bulletin”), which can be found immediately before Rule 57 in the Carthy and Watson & McGowan editions of the Rules, sets out maximum partial indemnity hourly rates for counsel of various levels of experience.
[114] The Costs Bulletin suggests maximum hourly rates (on a partial indemnity scale) of $80.00 for law clerks, $225.00 for lawyers with less than 10 years’ experience, $300.00 for lawyers with between 10 and 20 years’ experience, and $350.00 for lawyers with 20 years’ experience or more. [33] The upper limits in the Costs Bulletin are generally intended for the most complex and important of cases.
[115] The Costs Bulletin, published in 2005, is now dated. It is appropriate to adjust the hourly rates in the Costs Bulletin to account for inflation since 2005. Based on the Bank of Canada’s Inflation Calculator [34] the 2018 equivalent of the hourly rates in the Costs Bulletin are approximately $99.00 for law clerks, $280.00 for lawyers with under 10 years’ experience, $373.00 for lawyers with between 10 and 20 years’ experience, and $435.00 for lawyers with more than 20 years’ experience.
[116] The court is guided by the rates in the Costs Bulletin, not the actual hourly rates charged. The actual rates charged are relevant only as a limiting factor, in preventing the costs awarded from exceeding the actual fees charged. The Costs Sub-Committee’s rates apply to all lawyers and all cases, so everyone of the same level of experience starts at the same rate.
[117] The court adjusts the hourly rate, or the resulting fees, to reflect unique features of the case, including the complexity of the proceeding, the importance of the issues, and the other factors set out in Rule 57.01(1). If an excessive amount of time was spent, or too many lawyers worked on the file, the court reduces the resulting quantum of fees accordingly. As long as the resulting amount does not exceed the amount actually charged to the client, the actual fee that the client agreed to pay is irrelevant.
The Lawyers’ Time and Hourly Rates
[118] The plaintiffs set out the following time billed and rates charged for each of their lawyers and law clerks in the plaintiffs’ costs outline:
Jon-David Giacomelli (1992 call) billed a total of 54.5 hours with a partial indemnity rate of $321.00, a substantial indemnity rate of $428.00, and an actual rate of $535.00.
Adam Cappelli (1996 call) billed a total of 2.1 hours with a partial indemnity rate of $270.00, a substantial indemnity rate of $360.00, and an actual rate of $450.00.
Christopher Macleod (2002 call) billed a total of 1.8 hours with a partial indemnity rate of $270.00, a substantial indemnity rate of $283.20, and an actual rate of $354.00.
Manjit Singh (2008 call) billed a total of 738.40 hours with a partial indemnity rate of $196.01, a substantial indemnity rate of $261.35, and an actual rate of $327.31.
Ruzbeh Hosseini (2009 call) billed a total of 0.1 hours with a partial indemnity rate of $177.00, a substantial indemnity rate of $236.00, and an actual rate of $295.00.
Stephanie Battista (2014 call) billed a total of 1.1 hours with a partial indemnity rate of $120.00, a substantial indemnity rate of $160.00, and an actual rate of $200.00.
N. Joan Kasozi (2016 call) billed a total of 69.20 hours with a partial indemnity rate of $135.00, a substantial indemnity rate of $180.00, and an actual rate of $225.00.
Sakina Babwani (2017 call) billed a total of 153.40 hours with a partial indemnity rate of $101.59, a substantial indemnity rate of $135.46, and an actual rate of $169.33.
Law clerks billed a total of 66.6 hours with a partial indemnity rate of $117.00, a substantial indemnity rate of $156.00, and an actual rate of $195.00.
[119] In addition to the above, the plaintiffs claimed $23,343.99 in disbursements, inclusive of HST.
[120] The plaintiffs’ costs outline totaled over 1,000 hours of work by eight different lawyers and costs amounting to $210,862.27 at a partial indemnity rate, $281,153.43 at a substantial indemnity rate, and $351,941.41 at a full indemnity rate, plus HST.
[121] The plaintiffs’ costs outline failed to provide a breakdown of the time spent by task. This information is imperative when determining the reasonableness and proportionality of cost awards.
[122] By contrast, the defendants’ costs outline claims a just over 700 hours of work by three lawyers and costs amounting to $185,941.72 inclusive of HST and disbursements, on a full indemnity scale.
[123] When compared to the defendant’s costs outline and the modest value of the estate, it is difficult to find the plaintiff’s costs reasonable or proportionate. The estate was worth just under $1,000,000. The plaintiffs were only entitled to 60% of the estate.
[124] Finally, while the rates of the Plaintiffs’ lawyers fit within the guidelines set out in the Costs Bulletin, I find the time spent on the matter to be excessive.
[125] I find that the time claimed by the Plaintiffs is neither reasonable nor proportionate, having regard to the complexity of the case, the value of the estate, and the defendants’ costs. Further, the absence of dockets from Plaintiffs’ counsel does not permit a detailed analysis of the reasonableness of time spent.
Costs Award
[126] The general rule is that costs will be awarded on a partial indemnity scale. In special circumstances, costs may be awarded on a higher scale. Such exceptional cases will tend to involve one party to the litigation behaving in an abusive manner, bringing proceedings wholly devoid of merit, or running up the bill unnecessarily. [35] In the present case, Ms. Tiberi’s defence as estate trustee was devoid of any merit. Further, the positions taken on behalf of the defendants unnecessarily increased the costs of the litigation.
[127] In Net Connect Installation Inc. v. Mobile Zone Inc., (2017), the Court of Appeal upheld the lower court decision to award full indemnity costs to the successful party. In their reasons the Court found:
An award of costs on an elevated scale is justified in only very narrow circumstances – where an offer to settle is engaged or where the losing party has engaged in behaviour worthy of sanction: Davies v. Clarington (Municipality) (2009), 2009 ONCA 722, 100 O.R. (3d) 66 (C.A.) at para. 28. Substantial indemnity costs is the elevated scale of costs normally resorted to when the court wishes to express its disapproval of the conduct of a party to the litigation. It follows that conduct worthy of sanction would have to be especially egregious to justify the highest scale of full indemnity costs.
In this case, full indemnity costs were warranted given the factual findings that the motion judge made regarding the conduct of the appellants, especially the movement of funds out of the country in an effort to place them out of reach of the respondents and the instances of fabricated evidence. We would reiterate, however, that it is only in rare and exceptional cases where such a costs award is justified. [36]
[Emphasis added.]
[128] In Net Connect Installation Inc., the lower court found that courts are entitled to award full indemnity costs when “a party to litigation adds delay and costs to the proceedings, is less than forthright with documentary disclosure, repeatedly lies under oath, fraudulently creates documents and/or attempts to perpetrate a fraud on the plaintiff and the court.” [37]
[129] With regard to awarding the plaintiffs their costs on a full recovery basis, this court has held that:
The overriding common thread that seems to appear through cases where costs have been awarded on a full indemnity scale is the strong sentiment that the matter, or the issue at least, should never have been brought before the court in the first place, leading to a reaction that the innocent party should not have had to pay a penny towards the costs of the litigation. [38]
[130] The plaintiffs submit that this matter ought to never have been brought before the court. I agree. The plaintiffs were innocent parties, and should not have had to pay a penny towards the costs of this litigation. Their demand at the outset of the proceeding was simple: make the estate whole and distribute the assets in accordance with the uncontested will without further delay. That is exactly the result the parties achieved in their settlement.
[131] Any action or tactic that would prevent the timely distribution of the assets would be improper, unnecessary, and a breach of Ms. Tiberi’s fiduciary duty. Any reason why Ms. Tiberi would be unable to discharge her duties as estate trustee should be immediately disclosed to the court. That is the advice Ms. Hagel should have given her clients. Instead, she undertook a campaign of tactical obfuscation, delay, and baseless applications resulting in needless litigation and extraordinary costs.
[132] The facts before me support an award of full indemnity payable against the defendants. However, due to the unreasonable and disproportionate nature of the plaintiffs’ costs outline; I find that a reduction of $50,000 plus HST is appropriate and will achieve the court’s goal of fairness and reasonableness in awarding costs.
[133] This reduction of costs should in no way reflect the conduct of the plaintiffs’ counsel. Plaintiffs’ counsel did an excellent job: they represented their client’s interests, expedited matters where appropriate, and made a difficult case much easier for the court.
[134] The disbursements claimed by the plaintiffs are not at issue and are payable in full.
Counsel’s Personal Liability for Costs
Legal Principles
[135] The court’s statutory jurisdiction to award costs against a lawyer is found in rule 57.07, which provides:
57.07 (1) Where a lawyer for a party has caused costs to be incurred without reasonable cause or to be wasted by undue delay, negligence or other default, the court may make an order, disallowing costs between the lawyer and client or directing the lawyer to repay to the client money paid on account of costs;
directing the lawyer to reimburse the client for any costs that the client has been ordered to pay to any other party; and requiring the lawyer personally to pay the costs of any party.
(2) An order under sub-rule (1) may be made by the court on its own initiative or on the motion of any party to the proceeding, but no such order shall be made unless the lawyer is given a reasonable opportunity to make representations to the court.
[136] Rule 57.07 is “designed to protect and compensate a party who has been subject to costs being incurred without reasonable cause, not to punish a lawyer.” [39] In Galganov, the Court of Appeal outlined a two-part test to be followed when considering a cost award under rule 57.07. First, the court must inquire whether the lawyer’s conduct caused costs to be incurred unnecessarily. Mere negligence can attract costs consequences, and bad faith is not required. [40] Second, the court must consider the ‘extreme caution principle’, which states that these awards must only be made in exceptional circumstances in the clearest of cases, and not simply when a case seems to prima facie fall under rule 57.07. [41]
[137] However, in addition to rule 57.07, the court derives jurisdiction to award costs against counsel from its inherent jurisdiction to control its own process. [42] A court may award costs against counsel as a sanction for misconduct, but Chief Justice Strathy cautioned against using inherent jurisdiction too readily. He noted that such power should not be used in a manner contrary to statute, but envisioned its application to sanction conduct that undermines the fair administration of justice. [43]
[138] Writing for the majority of the Supreme Court of Canada in Quebec (Director of Criminal and Penal Prosecutions) v. Jodoin, (2017), Gascon J. found that awards against a lawyer personally should be the exception, not the norm:
[A]n award of costs against a lawyer personally can be justified only on an exceptional basis where the lawyer's acts have seriously undermined the authority of the courts or seriously interfered with the administration of justice. This high threshold is met where a court has before it an unfounded, frivolous, dilatory or vexatious proceeding that denotes a serious abuse of the judicial system by the lawyer, or dishonest or malicious misconduct on his or her part, that is deliberate. Thus, a lawyer may not knowingly use judicial resources for a purely dilatory purpose with the sole objective of obstructing the orderly conduct of the judicial process in a calculated manner. [44]
[139] Thus, whether acting under inherent jurisdiction or rule 57.07, courts will rarely make an award of costs against a lawyer. Ms. Hagel argued as much in her submissions on costs.
[140] There is another element to consider when considering whether a lawyer’s conduct seriously undermined the administration of justice. Gascon J. noted in Jodoin that the roles of criminal defence counsel and civil litigation counsel are different with respect to costs liability. Civil litigation counsel have “an ethical duty to encourage compromise and agreement as much as possible.” [45] Simply put, counsel are not expected to forcefully oppose every step opposing counsel may take.
Application of the Legal Principles to the Facts of this Case
[141] I will now examine the issue of Ms. Hagel’s personal liability for costs. I will consider how the defendants’ conduct tended to lengthen the proceeding unnecessarily, thereby increasing the parties’ costs, and how Ms. Hagel’s actions contributed to that conduct.
[142] Ms. Hagel learned that her clients had misappropriated the estate’s assets shortly after she was retained. There is no evidence that Ms. Hagel properly advised her clients to rectify their actions and make the estate whole. The defendants state that Ms. Hagel did not advise them that the mortgage they had given against the Home might be viewed as improper. [46] They say that Ms. Hagel’s own notes and communications disclose that she had no concerns about this issue, notwithstanding the fact that serious claims of fraud and breach of trust and fiduciary duty had been made against Mr. and Ms. Tiberi in relation to the mortgage. [47]
[143] It was not until after the first of two hearings of the plaintiffs’ motions that Ms. Hagel first advised Ms. Tiberi that there was a possibility that she would have to pay the funds into court, and later, that she should consider doing so. [48] Thereafter, Ms. Hagel did not simply consent to that aspect of the plaintiffs’ motion but made an ex parte motion to pay funds into court, an unnecessary step in light of the fact that the plaintiffs had already moved for such an order. [49]
[144] Even after the order on December 15, 2015, directed Ms. Tiberi to hold the Home and mortgage proceeds in trust and to produce all financial records regarding the estate, [50] Ms. Hagel did not advise Mr. and Ms. Tiberi to deposit the funds into a trust account or into court, or to disclose the funds’ location. She did not do so until well after the plaintiffs’ motion for payment of the funds into court was underway. [51] Ms. Hagel then pursued an untenable position in response to the plaintiffs’ motion, namely that only a portion of the mortgage funds be paid into court. [52]
[145] The defendants assert that it was only in response to the court’s order following the first hearing of their motion for approval of Ms. Tiberi’s accounts, and after Fragomeni J. adjourned the hearing because Ms. Hagel had failed to tender sufficient evidence in response to the issues the plaintiffs had raised, that Ms. Hagel first advised Ms. Tiberi to produce the documents concerning the mortgage proceeds. They argue that Ms. Hagel only did so to avoid a finding of contempt being made against her. [53]
[146] The defendants also assert that Ms. Hagel, on her own initiative, prepared and served a demand for some 50 particulars the day before the Statement of Defence was due, and later advanced a motion to strike the Statement of Claim as a result of her views concerning the sufficiency of that pleading. [54] The court summarily dismissed the defendants’ motion, expressing its view that the outcome was a “foregone conclusion” in light of the fact that that plaintiffs’ claim was exceedingly explicit and detailed. [55]
[147] On October 14, 2016, this court noted the defendants’ shocking disregard of its prior order in a number of respects, all of which related to conduct attributable to Ms. Hagel. [56] The court questioned whether costs were escalating because the defendants did not understand Ms. Hagel’s advice to them or because she was not properly explaining the law to them. [57] The defendants submit that the evidence tendered at the costs hearing demonstrates that the latter was the case. [58]
Ms. Hagel’s Culpability and Untenable Legal Argument(s)
[148] Ms. Hagel is culpable for knowing of the aforementioned acts and advising her clients (or accepting their instructions) to take untenable legal positions to justify those same culpable acts. She is also culpable for initiating and maintaining utterly unnecessary and useless litigation procedures that cost both her clients and the plaintiffs hundreds-of-thousands of dollars in legal costs. Ms. Hagel’s baseless tactics did nothing to avoid the only inevitable conclusion possible: that the defendants would make the estate whole and sell the Home on the open market in order to distribute the sale proceeds pursuant to the terms of the uncontested will. This was exactly what the plaintiffs had demanded all along, and was exactly what the parties agreed to on the eve of trial.
[149] Ms. Hagel holds herself out to the public as “specializing in estate planning and estate disputes” [59] and, in particular, claims that she is “positioned to help [her] clients to avoid unnecessary estate litigation” and that she will “explain [to her clients their] rights and options under Ontario estate law and will help [her clients] find the best solutions for [their] situation…to avoid costly, pointless legal battles…” [60]
[150] Ms. Hagel’s legal arguments in this case belied her own self-characterization.
[151] The ultimate outcome was exactly what Ms. Hagel should have realized from the outset: her clients’ various breaches would eventually become known and they would have to make the estate whole again before taking immediate steps to disburse the estate’s assets. It is what the plaintiffs wanted, and it is what the parties agreed to in mediation. It is the exact end result that Ms. Hagel should have realized was inevitable. There was no avoiding that outcome; the proper application of the current law requires it. That is what Ms. Hagel should have told her clients as soon as she became aware of the situation.
[152] There was no evidence tendered that Ms. Hagel ever properly advised her clients of the situation. Her own clients deny that she ever did. The evidence strongly suggests that Ms. Hagel’s interpretation of the current law was either negligent, or amounted to a failure in her duty as the lawyer of record to advise her clients properly. Either way, she is culpable.
[153] Ms. Hagel took various legal positions that not only baffled this court, but needlessly wasted court resources and rang up thousands of dollars in legal costs. Regarding her untenable legal positions, I observed directly to Ms. Hagel in open court, as follows:
Now, I rather suspect that the reason the costs of this litigation are escalating in the way they are is because either your clients don’t understand what you are telling them about what the law is and about what their conduct is, or else you are not explaining that to them. [61]
Ms. Hagel’s Conduct
[154] Not only did Ms. Hagel’s conduct unnecessarily increase the legal costs incurred by both parties, her conduct prevented meaningful compromise that directly inhibited a resolution of the matter. In fact, this whole matter was resolved at mediation within one week of Ms. Hagel retaining Mr. Ben Arkins (an experienced estate law litigator).
[155] In addition to taking an untenable legal position, I have found above that Ms. Hagel personally misled the court, allowed her clients to mislead the court, and facilitated her client’s breach of court orders. Her actions in this matter directly caused unnecessary litigation, hindered this court’s ability to adjudicate this matter in an expeditious manner, and interfered with the administration of justice.
[156] I find that this is an appropriate case for the court to exercise its authority under both its inherent jurisdiction and rule 57.07 to award costs personally against the defendants’ counsel, Ms. Hagel.
[157] I do not have the necessary evidence to assess the amount, or reasonableness of such amounts, that Ms. Hagel might charge her own clients. This is an issue best left to an assessment pursuant to the Solicitors Act, should the defendants seek one.
Conclusion
[158] Nearly all of the legal costs in this litigation could have been avoided if Ms. Hagel had simply advised her clients to make the estate whole and distribute the assets of the estate pursuant to the uncontested will.
[159] The court is mindful of Ms. Ida Caporale’s limited role in this matter. While Ms. Caporale is not completely blameless, I do not find that it would be reasonable for her to be responsible for costs on the same basis as Ms. and Mr. Tiberi.
[160] For the foregoing reasons, it is ordered that:
The defendants and their legal counsel, Ms. Hagel, shall be jointly and severally liable to the plaintiffs for their legal costs incurred on a full recovery basis, subject to a reduction of $50,000.
Accordingly, the defendants and Ms. Hagel shall jointly and severally pay the plaintiffs their costs on a full recovery basis, fixed in the amount of $365,519.70, inclusive of fees, HST and disbursements, calculated as follows:
(a) Fees in the amount of $301,941.41, being $351,941.41 to October 11, 2017, less a reduction of $50,000.00; plus
(b) $39,252.38, being HST on the said fees of $301,941.41 @13%; plus
(c) $981.92, being the plaintiffs’ estimated fees, including HST, in their Costs Outline of October 11, 2017, for the three further appearances that followed; plus
(d) Disbursements of $23,343.99, inclusive of HST;
[161] Costs shall be apportioned as follows:
Ms. Hagel shall personally pay 25% of the plaintiffs’ costs.
The balance of the plaintiffs’ costs shall be apportioned as follows:
(a) 75% shall be paid by Ms. and Mr. Tiberi; and
(b) 25% shall be paid by Ms. Caporale.
Price J. Dated: December 5, 2018
COURT FILE NO.: CV-15-4447-0000ES DATE: 2018-12-05 ONTARIO SUPERIOR COURT OF JUSTICE B E T W E E N: CONCETTA BACA, GINA DE VINCENTIS and LUCIANO GUALTIERO Plaintiffs - and – AUGUSTA TIBERI, BRUNO TIBERI and IDA CAPORALE Defendants REASONS FOR ORDER Price J. Released: December 5, 2018