Court File and Parties

COURT FILE NO.: 58383/18

DATE: 2019/09/30

SUPERIOR COURT OF JUSTICE - ONTARIO

BETWEEN:

RANDAL MOUNSEY and RICHARD MOUNSEY, Plaintiffs

AND:

HOLLISWEALTH a division of INDUSTRIAL ALLIANCE SECURITIES INC., Defendant

BEFORE: R.B. Reid, J.

COUNSEL: P.A. Mahoney, Counsel, for the Plaintiffs D.M. Kraft, Counsel, for the Defendant

HEARD: July 11, 2019; final costs submissions due August 26, 2019

COSTS ENDORSEMENT

[1] In this action the plaintiffs claimed entitlement to tax-free savings account (“TFSA”) funds on deposit with the defendant. Deborah Mounsey, the sister of the plaintiffs, established the account and designated the plaintiffs as beneficiaries. Ms. Mounsey died June 27, 2016.

[2] The plaintiffs sought summary judgment against the defendant. At the motion hearing, the entitlement of the plaintiffs to the TFSA funds was conceded by the defendant.

[3] The parties were granted permission to file written submissions on costs after the hearing, in part because it was inappropriate to disclose offers to settle in advance of my decision on the motion.

[4] Summary judgment was granted, as per the terms of my endorsement dated July 12, 2019. I declined to order pre-judgment interest on the award, since the account continued to grow from the date of Ms. Mounsey’s death to the date of liquidation, by over 5 percent per year, which rate is greater than the court rate.

[5] Based on the defendant’s concession as to the plaintiffs’ entitlement to the TFSA funds, the main issue on the motion was about who should be responsible for costs. The terms of the parties’ offers to settle confirmed that focus. The plaintiffs’ offer dated June 7, 2019 proposed that the defendant pay to the plaintiffs the TFSA funds plus interest, plus costs. The defendant responded with an offer dated June 11, 2019 agreeing to pay to the plaintiffs the TFSA funds plus interest, but with no costs.

The Mounsey Estate litigation:

[6] In a separate action, estate beneficiaries litigated their entitlement to the Mounsey estate assets, including the TFSA. Neither the plaintiffs nor the defendant were parties to that litigation.

[7] The plaintiffs in this action had requested that the defendant pay out the account proceeds to them pursuant to the beneficiary designation. The defendant advised them of the claim being advanced by the estate, and that the defendant considered the account to be “frozen” pending resolution of the competing claims.

[8] Correspondence was exchanged between counsel for the plaintiffs and for the defendant in December 2017 and January 2018 confirming their positions.

[9] The plaintiffs started this action on August 31, 2018.

[10] In September 2018, the defendant received and forwarded to the plaintiffs a copy of a court order in the estate action dated June 21, 2018 which stated in paragraph one that:

[T]he parties, and any and all financial institutions or institutions [sic] are restrained from dissipating, transferring, distributing, wasting, selling, disposing or otherwise dealing with any financial account, pension, and/or insurance policy that was owned by the late Deborah May Mounsey (the “Deceased”), or in the Estate of the Deceased, or formerly held by the Deceased and passing by right of survivorship to the Respondents or any 3rd party except with the consent of the parties hereto, or pending further order of this court.

[11] The defendant took the position that the order required the TFSA account to remain frozen and suggested that this action be withdrawn. The plaintiffs did not accept that the order applied to the TSFA and in due course required the filing of a statement of defence.

[12] In my view, the TFSA was clearly caught by the wording of the order, such that the defendant was prohibited from dealing with the funds short of a further court order.

[13] On October 25, 2018, counsel for the plaintiffs was advised in writing by counsel in the Mounsey estate litigation that the parties in that action had settled the dispute, a term of which was that the plaintiffs would receive the proceeds of the TFSA account. Counsel requested that the plaintiffs sign Minutes of Settlement and a release. On November 6, 2018, counsel for the plaintiffs responded that, because the plaintiffs were not parties to the estate action, they would not be executing the proposed Minutes or release.

[14] An order was made on January 24, 2019 in the estate litigation pursuant to the settlement of that matter.

[15] Paragraph six of that order provided as follows:

THIS COURT ORDERS that the tax free savings account held with Hollis Wealth, bearing account no:. 38C276W that designates Randy Mounsey and Rick Mounsey as the beneficiaries, shall be distributed to Randy Mounsey and Rick Mounsey in equal shares.

[16] A copy of the January 24, 2019 order was received by the defendant on May 22, 2019 and the defendant then advised counsel for the plaintiffs that the funds would be paid out, either directly to the plaintiffs or pursuant to their direction. Since no response was received from the plaintiffs, the funds remained available for distribution when the motion was argued before me.

The Summary Judgment Motion:

[17] This summary judgment motion was dated May 15, returnable June 6, 2019. The motion requested summary judgment granting the relief sought in the statement of claim and costs.

[18] The statement of claim sought payment of the sum of $75,000 or alternatively damages in the same amount plus aggravated, exemplary and punitive damages in the amount of $25,000, pre-judgment interest and costs.

[19] The actual amount of the tax free savings account, as of June 10, 2019 was $46,598.51. The amount in the account at the date of Ms. Mounsey’s death was $40,224.

[20] In oral submissions on the motion, counsel for the plaintiffs did not seek any damages over and above the actual amount of the account proceeds plus interest but did seek an order for costs on a full or substantial indemnity basis.

[21] The plaintiffs submitted the defendant should have sought an interpleader order under rule 43 of the Rules of Civil Procedure since it was aware of the competing claims of the plaintiffs and the Mounsey estate and claimed no beneficial interest in the property itself.

[22] The defendant submitted that the summary judgment motion was unnecessary, particularly in view of the order of June 21, 2018 and its willingness to pay out the funds pursuant to the further order of May 22, 2019 in the estate litigation matter.

Positions of the Parties:

[23] The plaintiffs sought partial indemnity costs to the date of its offer, and substantial indemnity costs thereafter, for a total of $15,582.03 inclusive of HST and disbursements. Alternatively, it sought partial indemnity costs in the all-inclusive amount of $13,367.23.

[24] The defendant submitted that it acted appropriately throughout and that no costs should be payable by it to the plaintiffs. Rather, costs incurred by the defendant should be deducted from the account proceeds prior to payment to the plaintiffs, in the nominal all-inclusive amount of $2,500.

Analysis and Conclusion:

[25] I have reviewed and considered the factors applicable to the exercising of the court’s discretion as to costs permitted by s. 131 of the Court of Justice Act found in rule 57.01 of the Rules of Civil Procedure.

[26] The plaintiffs were successful in establishing their entitlement to the TFSA funds totalling $46,598.51. As noted, the TFSA entitlement was conceded, and the additional damages were not sought in the oral hearing. The plaintiffs were not successful in securing any additional award requested in the statement of claim and in the summary judgment motion.

[27] The terms of neither party’s offer to settle was superior to the terms of my decision: interest was not awarded, and the costs dispute is the subject of this endorsement.

[28] The amount at stake was relatively modest, and the matter was not complex. As a matter of proportionality, it would not be a reasonable expectation that an unsuccessful party could be liable to pay a significant percentage of the amount claimed by way of costs.

[29] Prior to the commencement of the action, the defendant had refused to pay the TFSA funds to the plaintiffs on the basis of the competing claim being made by the Mounsey Estate beneficiaries. At that point, it was not unreasonable for the plaintiffs to have started the claim. However, when in the following month the plaintiffs learned of the June 21, 2018 order in the estate matter preventing the disbursement of funds, it was not reasonable to proceed as if the order did not exist. The plaintiffs could have either waited (incurring no or minimal further costs) or moved to join the estate litigation.

[30] Further, when the plaintiffs learned in October, 2018 (within two months of the commencement of this claim) of the impending settlement of the Mounsey Estate matter pursuant to which it was agreed that they would receive the TFSA account funds, there was no reason for further litigation. When the January 24, 2019 order was made, this claim became moot except for the additional damage claim advanced by the plaintiffs (which was not pursued in the summary judgment motion). The fact that the order did not immediately come to the attention of the plaintiffs is not determinative, since inquiries could have been made as to the status of the estate matter. The result of those inquiries would have obviated the need for a summary judgment motion as to the plaintiffs’ entitlement to the TFSA funds.

[31] The defendant submitted that the parties had divided success in the summary judgment motion in that the claim for interest and additional damages by the plaintiffs was not successful. On that basis, the defendant submitted that no costs be awarded to the plaintiffs.

[32] Of greater consequence to the costs claim, in my view, is the reasonableness of the plaintiffs’ actions. The steps taken by the plaintiffs in pursuing this separate claim against the defendant knowing that the estate litigation was ongoing were not reasonable, certainly from the point in the month after the action was commenced when the plaintiffs received notice of the outstanding order of June 21, 2018. Subrule 57.01(e) provides that the conduct of a party that tended to lengthen unnecessarily the duration of the proceedings is a relevant factor in exercising the court’s discretion as to costs.

[33] I find that the defendant did not act improperly in resisting the plaintiffs’ demand for payment, at the very least from the date it became aware of the terms of the June 21, 2018 order. It could not accede to the plaintiffs’ demand for release of the TFSA funds. While it had an option to interplead, it was under no obligation to do so.

[34] In view of all the foregoing factors, I conclude that the plaintiffs are not entitled to an award of costs against the defendant.

[35] Finally, I turn to the question of whether the defendant, as fund-holder, should be entitled to costs to be paid from the fund.

[36] I accept that the defendant did not act unreasonably in resisting payment, for the reasons set out above, nor did the dispute about payment arise from a poorly executed beneficiary designation which could be the responsibility of the defendant. Rather, the claim by the Mounsey Estate beneficiaries appears to have been based on an allegedly problematic beneficiary designation by the deceased in her holograph will.

[37] As a result, there will be a costs award in favour of the defendant against the plaintiffs in the proportionately modest, all-inclusive amount of $2,500, payable from the TFSA account funds prior to distribution to the plaintiffs.

Reid J.

Date: September 30, 2019