Manulife Bank of Canada v. Buzanic

NEWMARKET COURT FILE NO.: CV-14-120956-00SR

DATE: 20190117

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Manulife Bank of Canada Plaintiff

– and –

Lucrezia Buzanic Defendant

COUNSEL: Eric Kerson, for the Plaintiff Norman Groot, for the Defendant

HEARD: October 18, 2018 and November 23, 2018

REASONS FOR DECISION

de sa j.

Overview

[1] The Defendant, Lucrezia Buzanic (“Ms. Buzanic”) seeks full indemnity costs of this action on what she calls an improper discontinuance by the Plaintiff, Manulife Bank of Canada (“Manulife”) on May 31, 2018. She also seeks her full costs of the motion of October 18, 2018, and this motion. Ms. Buzanic also asks this Court to make an order of $100,000 in punitive damages and/or “damages at large for abuse of the legal process” against Manulife, based on its callous and outrageous conduct towards her.

[2] Having reviewed the record before me, I find the conduct of Manulife in pursuing its action against Ms. Buzanic was not unreasonable. Moreover, I find that the manner in which Manulife discontinued its action and its approach since the discontinuance was neither high-handed nor improper.

[3] In the circumstances, I am only prepared to order costs of the action in favour of Ms. Buzanic in the amount of $12,000. My reasons are outlined below.

Summary of Facts

The Loan

[4] Manulife’s claim related to a line of credit obtained in relation to Ms. Buzanic’s property at 2262 Medhat Drive in Mississauga, Ontario (the “Medhat property").

[5] In 2012, Manulife approved a Manulife One account for a $515,000 line of credit for Ms. Buzanic and registered a $640,000 mortgage against her Medhat property to secure the loan. Various cheques were issued on the account, both personal and official cheques.

[6] By June 2012, the line of credit was maxed out. At some point prior to August 12, 2012, Ms. Buzanic started to receive phone calls and demand letters relating to the outstanding balance on the credit card. Manulife made numerous requests for payment under the Loan and Mortgage including a demand in writing that the outstanding amount be paid.

[7] From the outset, Ms. Buzanic denied that she knew anything about the loan.

[8] On October 24, 2012, investigators at Manulife were contacted by the RCMP in respect of Ms. Buzanic’s account. Apparently, the recipients of various cheques from the account had been identified as recipients of cheques in a 2011 large scale mortgage fraud investigation involving multiple Manulife One accounts.

[9] On December 12, 2012, Ms. Buzanic filed a fraud complaint with Manulife in which she advised the company that much of the information in their records was wrong.

Manulife’s Investigation into the Fraud

[10] Manulife’s title insurer commenced an investigation into the alleged fraud. They made inquiries into the original line of credit and the circumstances leading up to the line being secured against Ms. Buzanic’s home.

[11] When the line of credit was originally obtained, David MacKay was Manulife’s representative handling the account. Manulife investigators made contact with Mr. MacKay.

[12] Mr. MacKay recalled that Ms. Buzanic called Manulife and wanted to learn more about the Manulife One product. Essentially, with the Manulife One product, Manulife takes a mortgage registered in a second position and then when the customer’s first mortgage matures, the customer has the option of wrapping the amount owing on the first mortgage into a new first mortgage with Manulife or the customer can refinance somewhere else.

[13] Mr. MacKay recalls having discussed the Manulife One product on the telephone with Ms. Buzanic and had understood that she was a real estate broker. Mr. MacKay did recall that Ms. Buzanic stated that her home was undergoing extensive renovations and this was confirmed by Mr. MacKay personally who entered the Medhat property on at least one occasion, and possibly twice.

[14] He met with Ms. Buzanic both at her home and at a coffee shop. Mr. MacKay explained that he had a good recollection of being inside the Medhat property which indeed appeared to be undergoing extensive renovation. Mr. MacKay also seemed to recall one or two cats roaming around. He spent approximately 20 or 30 minutes in the Medhat property and Ms. Buzanic seemed very comfortable in the house.

[15] He received the documentation from Ms. Buzanic directly, and he also received a business card. He confirmed that the person who presented before him as Ms. Buzanic was the person who appeared in the photographic identification. Mr. MacKay recalled that Ms. Buzanic was between 5’3” and 5’6” with over coloured, frizzy and wiry hair. Ms. Buzanic also had a raspy voice.

[16] As part of Manulife’s product, Ms. Buzanic was required to pay out any unsecured debt, being a loan in favour of Royal Bank in the amount of $8,309 and a CIBC credit card with an outstanding balance of $10,641. This amount was advanced by Manulife to Ms. Buzanic with a view to paying these outstanding debts.

[17] FNF Canada (an intermediary acting for Manulife in processing these payments) received from Manulife the sum of $18,950 of which $10,641 was payable to CIBC Card Services and $8,309 was payable to Royal Bank of Canada. It is believed that these payments were, in fact, made on Ms. Buzanic’s outstanding credit cards. The cheques had been issued by FNF Canada and were sent to Ms. Buzanic’s Medhat address. The cheques also appear to have been negotiated through Ms. Buzanic’s personal account to settle the outstanding accounts. Each credit card had been in place for at least 5 years.

[18] As part of their investigation, Manulife’s title insurer contacted Ms. Buzanic on September 9, 2013, October 30, 2013, and April 11, 2014 requesting the credit card statements for the specific months to determine whether or not the payments had been negotiated through Ms. Buzanic’s accounts and used to settle the outstanding credit card debts. This was sought with a view to determining whether or not Ms. Buzanic had direct knowledge of the scheme, and whether she benefitted from it.

[19] If she was not able to locate the statements, they asked that she obtain them again from the respective financial institutions and obtain copies of the statements. In the letter of April 11, 2014 to Ms. Buzanic, the investigator explained:

I appreciate that your have been unable to locate your copies of the documentation, however, as part of my investigation it is essential to determine whether you received a benefit on your CIBC credit card of $10,641.00 and an additional benefit on your Royal of Canada credit card in the amount of $8,309.

[20] In response to this request, Ms. Buzanic replied:

I’ve put up with pure harassment from all the different departments for 2 years so please if you need any more from me then I must say I’m going to have to retain legal advice as I feel I’ve been abused enough from this dreadful experience. I’ve cooperated with all your client’s needs, now please stop this nightmare so I can put it behind me and try to look after my fragile health.

[21] Given Ms. Buzanic’s refusal to provide her credit card statements and bank information pertaining to the cheques sent by FNF Canada to the Medhat address, Manulife, through its title insurance company, Chicago Title Insurance Company (“CTIC”), decided to commence litigation.

Commencing the Claim

[22] On November 5, 2014, Ms. Buzanic received a demand letter from Manulife asking that she pay the outstanding balance. Manulife took the position that the mortgage was valid and enforceable on its face and that they were commencing legal proceedings. Given their investigation, it was their belief that Ms. Buzanic was aware and benefitted directly from the fraud.

[23] On December 3, 2014, Manulife issued a claim against Ms. Buzanic with respect to the line of credit that had been taken out in her name and secured against her Property. The claim was for payment of $572,703.34 due under the mortgage, as well as prejudgment interest and post-judgment interest pursuant to the terms of the loan and the mortgage. The claim was also for possession of the Medhat property and costs.

[24] On or about January12, 2015, Ms. Buzanic served her Statement of Defence. Ms. Buzanic denied Manulife’s allegations and pleaded that she was not aware of a Manulife Account Operating Agreement, and had not signed any such agreement on September 23, 2011.

[25] On September 14, 2016, Manulife and Ms. Buzanic consented to a Discovery Plan, which required an exchange of Affidavits of Documents on or before September 30, 2016.

[26] On October 3, 2016, Manulife spoke to counsel for Ms. Buzanic regarding a potential dismissal of the action in return for reimbursement by Ms. Buzanic on account of monetary benefits received directly by her under the Mortgage. Even if Ms. Buzanic could not be established to be part of the fraud, Manulife took the position that her outstanding credit card balances were paid off by Manulife, meaning that Ms. Buzanic had been unjustly enriched in at least the amount of $18,950 (the cheques received from FNF Canada to pay off her credit card amounts).

[27] On July 5, 2017, Ms. Buzanic refused to a dismissal on that basis. Instead, Ms. Buzanic went to the Media with her story. On or about July 18, 2017, Global News published an article that contained an interview with Ms. Buzanic in which she indicated she was involved in ongoing litigation with Manulife.

[28] As a result of the Global News article, which cast Manulife in a negative light, and given the scale of the funds which were remaining in dispute, Manulife, by and through CTIC, instructed counsel to abandon the claim for reimbursement from Ms. Buzanic, and to seek her consent to a dismissal on a without costs basis. Ms. Buzanic refused this offer.

[29] On or about October 3, 2017, Manulife’s counsel received correspondence from Ms. Buzanic’s counsel demanding payment of $50,000 on account of Ms. Buzanic’s legal costs, as well as to compensate Ms. Buzanic for her pain and suffering in exchange for her consent to a dismissal of the action.

[30] Manulife indicated that it would be prepared to pay her legal costs in the amount of $12,000. A review of Ms. Buzanic’s Bill of Costs indicates at the time of this offer, Ms. Buzanic had incurred total costs in the amount of $12,025. Had Ms. Buzanic accepted the offer at the time, she would have, for all practical purposes recovered full indemnity costs of the actions.

[31] However, Ms. Buzanic would not provide her consent to a dismissal of the action without promise of compensation which was well in excess of her legal costs, and to which Ms. Buzanic was not, in Manulife’s opinion, entitled.

[32] On or around April 12, 2018, having made no progress in negotiations to resolve the matter, Manulife elected to discontinue its action against Ms. Buzanic. Manulife did so with the full knowledge and expectation that, pursuant to Rule 23.05 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (the “Rules”), Ms. Buzanic would be entitled to an award of her reasonable legal costs involved in defending the action.

[33] On October 18, 2018, this matter appeared before me. At the time, Manulife had not been able to file their response materials and/or cross-examine Ms. Buzanic on her affidavit. Despite the opposition of Ms. Buzanic’s counsel, I adjourned the matter to permit Manulife to file responding materials.

[34] On or about October 19, 2018, subsequent to the matter being adjourned, counsel for Ms. Buzanic wrote to Manulife’s counsel advising that Ms. Buzanic would now require payment of $75,000 in order to settle the matter, and that this figure would increase to $100,000 if the parties proceeded with cross-examinations on affidavits filed.

[35] Manulife did not cross-examine Ms. Buzanic on her affidavit. They simply disclosed their investigative reports outlining the facts listed above.

Position of the Parties

[36] Ms. Buzanic seeks an Order for her costs on a full indemnity basis. She also seeks a punitive order for “damages at large for abuse of the legal process” in the amount of $100,000 by Manulife. According to Ms. Buzanic, Manulife’s conduct has been high-handed and outrageous, and requires a punitive order of $100,000 be made against Manulife for specific and general deterrence purposes. To proceed as they did caused unnecessary stress and pain when Manulife should have known that Ms. Buzanic had no involvement in the fraud.

[37] Manulife takes the position that it has been stymied in its attempts to bring this matter to a conclusion without engaging the scarce resources of the Court, through Ms. Buzanic’s unreasonable demands for compensation far in excess of the legal costs actually incurred by her in relation to this matter. Manulife takes the position that it had a bona fide cause of action which had to be brought to an end for other reasons.

Analysis

Ability of the Court to Award Costs in a Discontinued Action

[38] If all or part of an action is discontinued, any party to the action may, within thirty days after the action is discontinued, make a motion respecting the costs of the action. 23.05 (1) of the Rules.

[39] Rule 57.01 of the Rules sets out the factors to be considered including the amount of costs an unsuccessful party would expect to pay and the complexity of the proceeding.

[40] Costs awards under section 131 of the Courts of Justice Act, R.S.O. 1990, c C. 43, are highly discretionary.

[41] Assessing costs is not simply a matter of arithmetic, where dockets are tabulated. The overarching principle is that the court’s assessment should be fair and reasonable in light of all the circumstances. [emphasis added]

[42] Section 57.01 provides as follows:

57.01 (1) In exercising its discretion under section 131 of the Courts of Justice Act to award costs, the court may consider, in addition to the result in the proceeding and any offer to settle or to contribute made in writing,

(0.a) the principle of indemnity, including, where applicable, the experience of the lawyer for the party entitled to the costs as well as the rates charged and the hours spent by that lawyer;

(0.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;

(a) the amount claimed and the amount recovered in the proceeding;

(b) the apportionment of liability;

(c) the complexity of the proceeding;

(d) the importance of the issues;

(e) the conduct of any party that tended to shorten or to lengthen unnecessarily the duration of the proceeding;

(f) whether any step in the proceeding was,

(i) improper, vexatious or unnecessary, or

(ii) taken through negligence, mistake or excessive caution;

(g) a party’s denial of or refusal to admit anything that should have been admitted;

(h) whether it is appropriate to award any costs or more than one set of costs where a party,

(i) commenced separate proceedings for claims that should have been made in one proceeding, or

(ii) in defending a proceeding separated unnecessarily from another party in the same interest or defended by a different lawyer; and

(i) any other matter relevant to the question of costs. R.R.O. 1990, Reg. 194, r. 57.01 (1); O. Reg. 627/98, s. 6; O. Reg. 42/05, s. 4 (1); O. Reg. 575/07, s. 1.

[43] The controlling principle for awarding costs is that the sum awarded reflect the fair and reasonable expectations of the unsuccessful litigant: Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291 (C.A.) at para. 24.

[44] In exceptional cases, costs may be awarded on a substantial indemnity scale. See Foulis v. Robinson (1978), 1978 1307 (ON CA), 21 O.R. (2d) 769 (C.A.). Costs on a substantial indemnity scale are reserved for rare and exceptional cases, where the conduct of the party against whom costs is ordered is reprehensible or where there are other special circumstances that justify costs on the higher scale. See St. Elizabeth Home Society v. Hamilton (City), 2010 ONCA 479.

Punitive Damages or Costs for Abuse of Process

[45] Punitive damages may be awarded in situations where a litigant’s misconduct is so malicious, oppressive and high‑handed that it offends the court's sense of decency. Punitive damages bear no relation to what a litigant should receive by way of compensation. Their aim is not to compensate, but rather to punish. They are in the nature of a fine which is meant to act as a deterrent to the defendant and to others from acting in this manner: Hill v. Church of Scientology of Toronto, [1995] 2 SCR 1130, 1995 59 (SCC).

[46] The Plaintiff takes the position that this Court has no jurisdiction to award punitive damages under 23.05. I agree with the Plaintiff on this point. The Defendant has not even commenced a claim for damages as against the Plaintiff. In the circumstances, it would be improper to entertain Ms. Buzanic’s request for “punitive damages”.

[47] A superior court, however, does have the ability to award costs for abuses pursuant to its power to control its own process. That power is part of a superior court’s inherent jurisdiction: Canada (Attorney General) v. Pacific International Securities Inc., 2006 BCCA 303, 209 C.C.C. (3d) 390, at para. 28. In R. v. Chapman (2006), 2006 1178 (ON CA), 78 O.R. (3d) 778, at para. 16, the Court of Appeal recognized that, pursuant to the power to control its own process, a superior court can order parties to pay costs for frivolous or abusive proceedings or in cases involving misconduct. See also R. v. Fercan Developments Inc., 2016 ONCA 269.

[48] In this case, I don’t agree with Ms. Buzanic that Manulife’s conduct was high-handed or malicious. Manulife’s representative (Mr. MacKay) met with someone purporting to be Ms. Buzanic both at her home and at a coffee shop prior to approving the line of credit. Mr. MacKay explained that he had a good recollection of being inside the Medhat property. Even if this was not Ms. Buzanic who met with Mr. MacKay, the fact that the meeting occurred in the subject address itself would justify suspicions that Ms. Buzanic may have been complicit in the fraud.

[49] In addition, FNF Canada received from Manulife the sum of $18,950 of which $10,641 was payable to CIBC Card Services and $8,309 was payable to Royal Bank of Canada. It is understood that these payments were made on Ms. Buzanic’s outstanding credit cards. As a result, it was reasonable for Manulife to conclude that the “real” Ms. Buzanic would have received the benefit of at least the $18,950. Moreover, these cheques had been issued by FNF Canada and were sent to Ms. Buzanic’s Medhat address.

[50] The documentation sought by Manulife’s title insurer (Ms. Buzanic’s credit card statements) was reasonably requested to determine whether Ms. Buzanic was either aware of and possibly a participant in the fraud (which was in excess of $500,000), or at least benefited from it. In my view, it was reasonable for them to insist on this information as part of their investigation. Ms. Buzanic, however, refused to cooperate by providing the requested credit card statements.

[51] In the face of that refusal, Manulife (through its title insurer) could either choose to walk away, or avail itself of the legal mechanisms in place to pursue a claim against Ms. Buzanic for their losses. In my view, their choice to pursue the action was not an “improper” one.

[52] Our legal system is intended to assist parties with sorting out disputes of this nature. It provides the mechanisms for a just determination on the merits. If litigants are too easily chastised for seeking out the assistance of the courts, litigants may become hesitant to pursue legitimate claims. As it is, the costs of litigation can be a substantial obstacle. In my view, to add additional disincentives would hardly be in the interests of justice. “Punitive” cost awards should be reserved for truly exceptional cases.

[53] I also accept that the factual record supports that the action was ultimately discontinued by Manulife’s title insurer given the negative publicity flowing from Ms. Buzanic going to the media.

[54] In the circumstances, I am not prepared to order any “punitive” costs against Manulife pertaining to an alleged “abuse of process”. I am also not prepared to award any costs incurred beyond the point of discontinuance. In my view, if Ms. Buzanic wants to seek costs for pain and suffering and/or negligence, she should bring the appropriate action. I am not prepared to grant such relief on the record before me.

[55] Having regard to all the circumstances, I will award costs to Ms. Buzanic for the action in the amount of $12,000 all inclusive.

Justice C.F. de Sa

Released: January 17, 2019

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Manulife Bank of Canada Plaintiff

-and-

Lucrezia Buzanic Defendant

REASONS FOR DECISION

Justice C.F. de Sa

Released: January 17, 2019