Court File and Parties

COURT FILE NO.: CV-17-2408-00/CV-17-1481/CV-17-5302 DATE: 2019 05 23 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Peter Pichelli, Todd Leslie, Frank Toth, and 958041 Ontario Limited, Plaintiffs AND: Ante Kegalj, Anthony Vuletic, John Vuletic, Embleton Properties Corp., 1857325 Ontario Ltd., and Brampton G&A Holdings Inc., Defendants

AND BETWEEN: Peter Pichelli, Todd Leslie, Frank Toth, and 958041 Ontario Limited, Plaintiffs AND: Adair Barristers LLP, Geoffrey D. E. Adair, and Tracy Adair, Defendants

AND BETWEEN: Aleardo Caroti, Jacinta Caroti, Ian Grounds, Moraig Grounds, Nancy Kostelac, Brian McDowell, Biljana Nizalek and Marielle Pelchat-Morris AND: Ante Kegalj, Anthony Vuletic, John Vuletic, Mira Vuletic, Embleton Properties Corp., 1857326 Ontario Ltd., and Brampton G&A Holdings Inc.

BEFORE: LeMay J.

COUNSEL: D. Cunningham, Counsel for the Plaintiffs Pichelli et. al. P. Pape, Counsel for the Vuletic Defendants N. Paris, Counsel for the Defendant, Ante Kegalj E. Hiutin, Counsel for the Defendant, Brampton G & A Holdings Inc. (not appearing) A. Melamud, Counsel for Adair Barristers and Geoffrey D .E. Adair D. Steinberg, Counsel for Tracy Adair B. Roberts-Jones and M. Mendelzon, Counsel for the Plaintiffs Caroti et. al.

COSTS ENDORSEMENT

[1] I am case managing this proceeding. I heard two summary judgment motions in April of last year, and provided my reasons by way of a decision in January of this year. In rendering my decision in January of this year, I unfortunately made a decision on three summary judgment motions rather than the two I was supposed to decide.

[2] As a result, I received further submissions from counsel on the issue of whether I was functus officio on the third summary judgment motion, or whether I had the jurisdiction to change my decision to reflect the fact that the motion had been adjourned. Costs submissions for the first two summary judgment motions were deferred pending my ruling on this issue. I eventually determined that I had jurisdiction to change my decision, and did so in an endorsement released February 26th, 2019.

[3] I am now required to fix costs for the following motions:

a) The summary judgment motions brought by Geoff Adair, Tracy Adair and Adair Barristers against the Pichelli parties. b) The summary judgment motion brought by the Vuletics against the Pichelli Parties. c) The motion to vary the decision I made granting summary judgment in favour of Ante Kegalj and against the Pichelli Parties.

[4] I will set out the relevant law, and then will address the appropriate costs for each one of these motions.

The Law

[5] The principles that the Court should generally apply to costs decisions are set out in Rule 57.01. The principles that are most relevant to this case are as follows:

a) Who was the successful party? b) The complexity of the issues. c) The importance of the issues.

[6] There is a presumption that the Court shall fix the costs for matters before it, unless there are exceptional circumstances. Further, in fixing costs the Court should fix an amount that is fair and reasonable to the losing party. (See Boucher v. Public Accountants’ Council for the Province of Ontario (2004), 71 O.R. (3d) 291)

[7] In addition, there are some specific principles that apply to the issues in this case. I will address those issues in the course of my analysis.

The Adair Summary Judgment Motions

[8] The Adair action was a separate action, but the allegations in it related to some of the same events as were covered by the main actions brought against the Vuletics by the Pichelli Parties and the Caroti Parties.

[9] The Adair action comprised two related claims. The first claim was against Geoff Adair and his law firm, and raised a series of issues sounding in breach of fiduciary duty, fraudulent misrepresentation and other related torts. The second claim was against Tracy Adair on the basis of the fact that the mortgage that Geoff Adair and his law firm was given by the Vuletics on account of his legal work was fraudulently transferred to Tracy Adair and she fraudulently received the benefit of this mortgage.

[10] As a result of these claims, the Adairs should be required to disgorge the funds that they received when the mortgage was discharged when the property was sold to Brampton G & A.

[11] Both summary judgment motions were granted, and the Pichelli Parties’ claims against the Adairs were dismissed.

The Positions of the Parties

[12] Tracy Adair seeks full indemnity costs in the sum of $46,348.61, inclusive of HST and disbursements. In support of this position, Tracy Adair advances the following points:

a) The allegations alleged against Ms. Adair were baseless, and there was no evidence whatsoever to support those allegations. b) Ms. Adair made an offer to settle that should factor into the Court’s analysis of costs. c) Rule 57.01(4)(d) gives the Court the authority to award costs on a full indemnity basis where unsubstantiated allegations of dishonesty, illegality and/or conspiracy have been advanced without merit. Such allegations were made here, and hung over Ms. Adair’s head for two years even though she did nothing wrong. d) This litigation was highly complex and costly, and it should have been in the contemplation of the Pichellis that they would be expected to indemnify Ms. Adair if she was successful. e) The quantum of costs claimed by Ms. Adair is fair and reasonable.

[13] Geoffrey Adair and Adair Barristers claim costs on a substantial indemnity basis in the sum of $85,058.37 inclusive of HST and disbursements or, in the alternative, on a partial indemnity basis in the sum of $57,079.84. In support of this position, Mr. Adair and Adair Barristers argue:

a) They made an offer in August of 2017 to have the action against them dismissed without costs, for much the same reasons as set out in my reasons. b) The Pichelli parties made serious and unsubstantiated allegations of intentional wrongdoing against Mr. Adair and his law firm, and those allegations were without merit. c) Given the complexity of the proceeding, the costs incurred by Mr. Adair and his law firm are reasonable.

[14] The Pichelli Parties oppose the positions of the Adair parties, and argue that the costs payable to Ms. Adair should be fixed at an amount of no more than $20,000.00, inclusive of HST and disbursements for the following reasons:

a) Ms. Adair should not have brought a motion for summary judgment. Instead, given the findings in my ruling, she should have brought a motion under Rule 21, which would have been less expensive. b) The materials that Ms. Adair filed were full of inconsistencies and inaccuracies, which meant that the claims against Ms. Adair were neither unreasonable nor unwarranted. c) The initial claim against Ms. Adair was not unreasonable, because the Pichellis were simply following the money from various transactions relating to the property.

[15] The Pichelli parties argue that the costs payable to Geoffrey Adair and Adair Barristers should be no more than $30,000.00 inclusive of HST and disbursements for the following reasons:

a) None of the allegations of impropriety on the part of Mr. Adair or his law firm were ever subjected to an evidentiary analysis. Therefore, there is no way to know whether these allegations were substantiated or unsubstantiated. b) The issue that the Court determined was a question of law and, as a result, the motion brought by Mr. Adair and his law firm should have proceeded as a Rule 21 motion, thus avoiding most of the costs in this case. c) There was duplication of effort by the lawyers for Mr. Adair and Adair Barristers, and such duplication should result in a reduction of the costs otherwise payable.

[16] I permitted the Adair parties the opportunity to provide reply submissions to address the points raised by the Pichelli Parties.

[17] Many of the arguments and counter-arguments made with respect to the costs for Tracy Adair and Geoffrey Adair are the same, so I will address each of them and then consider the appropriate quantum of costs at the end of this section.

Should This Have Been a Rule 21 Motion?

[18] No. On this point, I reject the submissions of the Pichelli Parties for two reasons. First, from a procedural perspective, this case was sufficiently complex that it would have been difficult, if not impossible, to resolve it on the basis of a Rule 21 motion. Certainly, in prospect, as the case management judge I would have struggled with the idea of permitting a Rule 21 motion to be brought, knowing that a Rule 20 motion would inevitably follow if the Rule 21 motion was not successful.

[19] In addition, the Rule 20 motion permitted the Pichelli Parties an opportunity to put their “best foot forward” and provide the Court with evidence that could support their claims of fraud, duty of care and the like. No evidence to support these claims was forthcoming. In the circumstances, a Rule 20 motion was appropriately brought.

[20] This brings me to the second reason why I reject the Pichelli Parties’ argument on this point. When this motion was heard, the Pichelli Parties argued that this motion could not be disposed of even on a Rule 20 motion because a full trial was required. Given that position, it is not now open to the Pichelli Parties to argue that a Rule 21 motion was more appropriate.

The Offer to Settle

[21] Ms. Adair made an Offer to Settle in this case. It does not appear that this Offer is an Offer within the meaning of Rule 49 of the Rules of Civil Procedure. However, the Offer to Settle was a reasonable attempt to resolve the matter, and based on a correct understanding of the law and its application to this case. I will consider that Offer pursuant to Rule 57.01. However, there are other issues that are more relevant to the assessment of costs in this case.

The Allegations of Impropriety

[22] All of the Adair parties advance essentially the same argument on this point. In essence, that argument is that the costs of this case should be on a substantial indemnity basis because the allegations of fraud and other malfeasance made against them were unsubstantiated. In this regard, my attention was directed to an unreported decision of Jennings J. in Rasmussen v. H.R. Trucking Inc., where he stated:

[6] These Defendants request costs on a substantial indemnity basis. My jurisdiction to make such an award rests in part on Section 13(1) of the Courts of Justice Act, R.S.O. 1990 c. C43. Nothing in the provisions of Rule 57.01 affects my power under Section 131(1) of the Courts of Justice Act to award costs on a substantial indemnity basis.

[7] In Murano v. Bank of Montreal, (1998), 41 O.R. (3rd) (222), the Court of Appeal approved the finding of R.A. Blair J. (as he then was) in 131843 Canada Inc. v. Double “R” (Toronto) Ltd., (1992) 7 C.P.C (3rd)(15), that there are two classes of cases which may result in an award of solicitor and client costs, viz:

(a) cases where allegations of fraud are made, and these allegations are determined to be totally unfounded; (b) cases involving “other allegations of improper conduct seriously prejudicial to the character or reputation of a party”, and these allegations are determined to be wholly unfounded.

[8] In Unisys Canada Inc. v. York Three Associates Inc., [2001] O.J. No. 3777, the Court of Appeal cited Murano in support of the proposition that unsubstantiated allegations of fraud, misconduct or dishonesty or other conduct analogous thereto, is sufficiently reprehensible to warrant awarding costs on a substantial indemnity basis.

[23] Similar findings were made in Manning v. Epp (2006 ONSC 35631 at paragraphs 7-8) and The Wyrd Sisters v. Campbell et. al. (2009 ONSC 34041 at para. 10).

[24] In addition, Mr. Adair points Hamilton Cab Company Inc. v. Gill (2017 ONSC 4545), where Reid J. stated (at paras 32 to 34):

[32] The claims by the Gill defendants that Mr. Dean fabricated diary entries after the fact to support his defence of the counterclaim were equivalent to allegations of fraud. They were unsupported and ultimately failed. It is one thing to allege that a lawyer failed to meet a required standard of care in the provision of legal advice. It is another and much more serious attack on a lawyer’s reputation to submit that the lawyer was guilty of fraud. Mr. Dean is a solicitor with 43 years’ experience. The majority of his practice is in the area of real estate. It is no surprise that he needed to fully and vigorously defend the claims made against him which I found were unjustified.

[33] The complexity created in this case by the variety of defences raised by the Gill defendants and the counterclaim by them against Mr. Dean, the need for cross examinations on affidavits and ultimately case management by me required the joint involvement of both Hamilton cab and Mr. Dean.

[34] Based on the foregoing, and a consideration of all the factors set out in Rule 57.01, I am satisfied that there should be an award of substantial indemnity costs payable by the Gill defendants to Hamilton Cab and Mr. Dean.

[25] When these factors are considered, the Adair parties argue that they should be entitled to substantial indemnity costs. The Pichelli parties advanced claims of, inter alia, fraudulent misrepresentation, deceit, conversion and breach of fiduciary duty. The Adair parties argue that these causes of action were an attack on their integrity. I agree. In both cases, the pleadings of the Pichelli parties were a claim that the Adair parties had behaved in a fraudulent manner. The question is whether these claims, which were dismissed, should attract an award of substantial indemnity costs. This brings me to the explanations offered by the Pichelli Parties for advancing these claims.

[26] The Pichelli Parties argue that their motion materials appropriately highlighted the inconsistencies in the evidence provided by the Adairs. I disagree for two reasons. First, the “inconsistencies” in the evidence offered by the Adairs were neither significant nor material to the action before me. Second, even if there were inconsistencies in the evidence offered by the Adair parties, the claim brought by the Pichelli Parties against them was unsustainable and without merit.

[27] The fact that there were elements of the transaction that were not explained to the satisfaction of the Pichelli Parties misses the larger point that the Pichelli Parties had no basis for any claim against any of the Adairs. It must be remembered that the Pichelli Parties conceded that they had never met Mr. Adair, and that the first time they became aware of any of the actions that Mr. Adair had taken was in 2016. Similarly, I found on the motion that there was no basis to conclude that Mr. Adair had made any misrepresentations to any of the Pichelli Parties. On this basis, the fraudulent misrepresentation claims were unsustainable.

[28] On that point, I note that the Pichelli Parties argue that Mr. Adair was given an opportunity to explain these transactions prior to the litigation. Instead of doing so, the Pichelli Parties allege that Mr. Adair responded with “indignation” and made it clear that he did not owe an explanation to anyone. However, this argument misses a key point, which is that Mr. Adair had clients to whom he owed a duty of confidentiality. The Pichelli Parties were not entitled to insist that Mr. Adair breach that duty in order to provide them with information.

[29] This brings me to another point that the Pichelli Parties have raised. They argue that my decision only resolved the legal question of whether Mr. Adair owed them a duty of care. Therefore, they argue that “none of the allegations concerning the propriety or impropriety of the conduct of the Adair Lawyers was ever subject to evidentiary scrutiny at trial.”

[30] I reject this argument as well. The fact is that the claims against the Adair parties, including the fraud claims, were unsustainable. As I noted in my reasons, there was no proximity between the Adairs and the Pichelli Parties.

[31] On this point, the Pichelli Parties argue that I did not consider the misrepresentations that Mr. Adair allegedly made to the Court in the proceedings where he acted as counsel. In my decision I stated that “assuming without deciding” that Mr. Adair had misrepresented facts to the Court, it did not create proximity where none existed previously. Any claim about Mr. Adair’s conduct was not justiciable on the part of the Pichelli Parties. Therefore, in my view, the action should not have been brought.

[32] As can be seen from the foregoing, the Pichelli Parties do not have a satisfactory explanation as to why they brought this action against the Adair parties. Given that, I am of the view that substantial indemnity costs are appropriate for all of the Adair Defendants.

[33] I should add that, on the cases I reviewed, I saw nothing that would justify full indemnity costs for Tracy Adair. As a result, I have assessed her costs at the substantial indemnity amount.

The Reasonable Expectations of the Parties

[34] The Pichelli parties did not provide me with their bill of costs for this motion. As a result, pursuant to Morgan v. Morgan (2017 ONSC 838 at para. 17), the Court should assume that the costs of the Pichelli Parties matched or exceeded the costs of the Adair parties and I make that assumption.

[35] I note that this assumption is also supported by the costs being sought by the Pichelli Parties on the other motions in this case. In that regard, I note that the costs being sought against the Vuletics are in excess of $110,000.00 for a motion that was modestly more complex than this one. I also note that the costs sought by the Pichelli Parties for the very simple motion to have my judgment varied were approximately $17,000.00. As I will discuss more fully below, the quantum of this second claim for costs surprises me as I had provided the parties with most of the research that was necessary to argue the motion to vary.

[36] As a result, when the reasonable expectations of the parties are considered, I am of the view that the costs sought by the Adair parties are reasonable with one exception. Counsel for the Pichelli Parties rightly points out that counsel for Mr. Adair and Adair Partners had some duplication of effort. Although I am not persuaded that all of the time spent by Mr. Pepall and Mr. Melamud was duplicative, some of it clearly was. In particular, there was no need for two counsel to attend at the summary judgment motion. As a result, a reduction in the total fees payable of $5,000.00 to account for the duplication is reasonable.

[37] Therefore, the Pichelli Parties will pay costs to Tracy Adair in the sum of $35,001.30 inclusive of HST and disbursements, and to Geoffrey Adair and Adair Barristers in the sum of $80,000.00 inclusive of HST and disbursements.

The Vuletics’ Summary Judgment Motion

[38] The Vuletics brought summary judgment motion against the Pichelli Parties on the basis that there was no agreement between the parties. The Vuletics argued that the agreement that the Pichelli Parties advanced is a forgery. I concluded that this argument could not be disposed of by summary judgment, and the question of whether the agreement was a forgery remains a live one.

[39] The Pichelli Parties seek costs from the Vuletics in the sum of $111,810.62 on a substantial indemnity scale or, in the alternative, in the sum of $97,194.07 on a partial indemnity scale. In support of this position, the Pichelli Parties argue:

a. The summary judgment motion was not reasonably brought, and was just a delaying tactic. b. The Vuletics unfairly alleged that Mr. Pichelli had unilaterally changed the terms of the agreement between the parties. c. The unfair position taken by the Vuletics required the Pichelli Parties to produce all of their evidence before discoveries were required to be completed.

[40] The Vuletics argue that costs in this case should be in the cause, and should be left to the trial judge to fix. In support of this position, the Vuletics advance the following arguments:

a. The Vuletics’ motion materially advanced the proceedings, laying the ground work for trial, so it is difficult to pre-determine the wasted costs. b. The Pichelli Parties may have engaged in improper activity in this case. As a result, based on Bahl v. Cadesky & Associates ([2013] O.J. No. 998 (S.C.J.)), the Vuletics argue that the costs should be left to the trial judge.

[41] I am of the view that the costs for this summary judgment motion should be left to the trial judge. I start by observing that, at this point, there is no basis for awarding substantial indemnity costs to the Pichellis. In support of that finding, I note that the motion was not brought to delay this action. Instead, it was brought in order to try and simplify the action by reducing the number of parties involved in it. The fact that the motion was unsuccessful does not make it an unreasonable motion and does not create an entitlement to substantial indemnity costs.

[42] This brings me to the key point in assessing costs. As I noted in my reasons, one of these parties has more than likely misrepresented the facts to the Court and to the other parties. However, at this point, I cannot determine which party has done so. If the Vuletics have misrepresented the facts to the Court, then awarding the Pichelli parties partial indemnity costs might be unfair to them, as they might be entitled to substantial indemnity costs for the motion, and may be entitled to substantial indemnity costs for the action. On the other hand, if the Pichelli Parties fraudulently changed the agreement, then an award of partial indemnity costs to the Pichellis might be unfair to the Vuletics.

[43] In addition, there is going to be significant duplication of work between the summary judgment motion and the trial. The trial judge will be in the best position to determine what work was duplicated, and what work was related to the outcome in the trial. On the evidence before me, I cannot make that determination.

[44] For those reasons, this is one of the relatively rare cases where the costs of the summary judgment motion should be left to the trial judge and I so order.

The Motion to Vary

[45] In my decision of January 8th, 2019, I provided reasons for granting summary judgment against the Pichelli Parties, and dismissing their claims against Mr. Ante Kegalj. After correspondence with the parties, I determined that at the hearing I had actually adjourned this summary judgment motion because there was an overlap between it and one of the other claims. This issue was discovered after the reasons for judgment were released, but before the Order was issued and entered.

[46] As a result, I allowed the Pichelli Parties to bring a motion to have me amend those reasons. In my endorsement, I provided the parties with a list of virtually all of the significant cases that addressed the issues that would arise in any motion to vary my decision. I also provided the parties with a copy of the transcript from the two days of hearings. It was clear from the first ten pages of the transcript from the first day that the motion relating to the Kegalj claim had been adjourned. I permitted the parties to provide oral argument, and this lasted approximately 25 minutes.

[47] The motion to vary the terms of my decision was opposed by Mr. Kegalj. I agree with counsel for the Pichelli Parties that this opposition was not justified on the case-law, and I agree that this opposition made the motion more complicated. In particular, I was required to consider arguments advanced by Mr. Kegalj’s counsel in deciding whether I should exercise my jurisdiction to change my order.

[48] Counsel for Mr. Kegalj also argues that the costs should be in the cause. In essence, Mr. Kegalj’s argument is that if he wins the summary judgment motion when it is heard again, then the motion to vary my decision will have been unjustified. I disagree. The motion to vary my decision was necessary as I had made an error that went to an issue of fairness. The variance was opposed by Mr. Kegalj and, as a result, he should be obligated to pay some costs.

[49] This brings me to the question of how much costs should be paid. The Pichelli Parties seek $17,461.08, inclusive of HST and disbursements on account of this motion. In terms of the quantum of costs, counsel for the Pichelli Parties states:

Further, the Court should not second guess the time spent by counsel for the Pichelli Group to redress the problems and injustice that had been created, albeit inadvertently, in the Reasons for Decision dated 08 January 2019.

In this respect, Kegalj should be responsible for paying the legal costs of the Pichelli Group on a partial indemnity basis, including disbursements and H.S.T., in the total amount of $17, 461.08.

[50] I reject this assertion. Regardless of why this motion was necessary, the Court still has a responsibility to ensure that the costs sought by a party are reasonable. Acceding to this argument would be saying, in essence, since the Court made a mistake, the Pichelli Parties are entitled to whatever costs they claim, regardless of whether those costs claims are inflated or unjustified.

[51] I conclude that the costs sought by the Pichelli parties are unjustified for a number of reasons. First, after the issue was identified by counsel, I provided the parties with all of the relevant case-law. Finding the relevant cases was not hard, and did not take a significant amount of research time. I also provided the parties with the transcript of the hearing before me, so there would not have been significant disbursements and finding my error was not difficult as it was in the first few pages of the first day’s hearing.

[52] Second, the legal issues that presented themselves were straightforward. The issues to be addressed in the motion were articulated in the Court of Appeal’s decision in Montague v. Bank of Nova Scotia ((2004), 69 O.R. (3d) 87 (C.A.)) and the Divisional Court’s decision in Brown (Trustee Of) v. Municipal Property Assessment Corp. (2014 ONSC 7137 (Div. Ct.)). These decisions are neither lengthy nor complex. Spending more than $17,000.00 to address a straightforward motion is unjustified.

[53] Third, there is the bill of cost that was presented. There are three significant problems with this bill of cost as follows:

a) There are no specific docket entries for the work. As a result, it is impossible to determine what time was spent performing which tasks. b) While counsel for the Pichelli Parties spent nearly 40 hours preparing the materials for this motion, he also has a bill for $1,675.00 for legal research for an outside lawyer that is claimed as a disbursement. This claim is not reasonable. c) Counsel for the Pichelli Parties claims 6.9 hours as a “counsel fee” for preparing for and attending at the motion on February 19th, 2019. Counsel did not have to make any significant submissions at this motion, and the appearance lasted 25 minutes.

[54] All of these problems with the Bill of Cost leave me with the view that the amounts claimed by counsel for the Pichelli Parties are unsupportable.

[55] Fourth, there is the factum that was prepared. The factum did identify an additional argument that I had not considered when I sent my list of cases to the parties, which is that my original decision could be argued to be a nullity. However, if I had accepted Counsel’s argument on that point, I would have been compelled to dismiss the Pichelli Parties’ motion to vary my decision and would have had to leave the matter to the Court of Appeal to rectify. This argument was unhelpful to the Pichelli Parties.

[56] When all of these facts are considered, the costs sought by the Pichelli Parties are unsupportable. I turn to the reasonable expectations of the parties, and particularly the losing party. A party that opposes a motion that should be granted must expect to pay costs for that motion, both for preparation and for attendance. In the circumstances of this case, I am of the view that Mr. Kegalj should pay costs to the Pichelli Parties in the sum of $2,000.00 inclusive of HST and disbursements. Those costs are to be paid within thirty (30) days of today’s date.

Conclusion and Orders

[57] For the foregoing reasons, I order the following with respect to the costs of these motions:

a) The Pichelli Parties are required to pay costs to Tracy Adair in the sum of $35,001.30 inclusive of HST and disbursements. b) The Pichelli Parties are required to pay costs to Geoffrey Adair and Adair Barristers in the sum of $80,000.00 inclusive of HST and disbursements. c) The costs of the summary judgment motion brought by the Vuletics are left to the trial judge to determine. d) Mr. Kegalj is to pay costs to the Pichelli Parties on account of the motion to vary in the sum of $2,000.00 inclusive of HST and disbursements. e) The costs ordered against the Pichelli parties are payable on a joint and several basis, and must be paid within thirty (30) days of today’s date. f) The costs of the summary judgment motion brought by the Vuletics are reserved to the trial judge.

[58] Finally, the parties are to agree upon the terms of the Order within seven (7) calendar days from the release of these reasons. If they cannot agree, then I am to be advised at our next case conference.

LeMay J. Date: May 23, 2019