ONTARIO SUPERIOR COURT OF JUSTICE
Parties
B E T W E E N:
THERESA YOGARANIE PAULPILLAI in her capacity as the ESTATE TRUSTEE FOR THE ESTATE OF RICHMOND GABRIEL PAULPILLAI, THERESA YOGARANIE PAULPILLAI and MANEHARRAN PAULPILLAI Applicants
- and -
JOSHUA AKANNI YUSUF, MEERC INC., ALL SAINTS UNIVERSITY LIMITED, ALL SAINTS UNIVERSITY SCHOOL OF MEDICINE LIMITED and MEDICAL EDUCATION EXAMINATION RESOURCE CENTER Respondents
Counsel
Edwin G. Upenieks and Angela H. Kwok, for the Applicants Osborne G. Barnwell, for the Respondents
Costs Endorsement
Before: Fowler Byrne J. Date: 2020 05 29
A. Background
[1] This is my decision on costs following my Reasons for Judgment in this matter which were reported at 2020 ONSC 851 and released on February 6, 2020.
[2] The Application was commenced by the family of Richard Paulpillai, who sought the court’s assistance to divide up a business enterprise that owned and operated two medical schools in the Caribbean. Following the death of one of the partners, the parties attempted to split the enterprise but had encountered numerous difficulties. Accordingly, litigation ensued.
[3] In my Reasons for Judgment, I granted the Applicant’s request for the appointment of a monitor and for injunctive relief prohibiting the Respondent Joshua Yusuf from competing and released the sum of $1 million to the Applicants, to be accounted for to the monitor. For the most part, the remainder of the issues were converted to an action.
[4] The history of this Application is fractured. The first time the parties appeared before me, a tentative settlement had been reached. Unfortunately, that settlement fell apart. The matter was brought back before me, and following cross-examinations and two days of argument, my Reasons for Judgment were released.
[5] The Applicants seek partial indemnity costs in the sum of $169,000.00 for the legal proceedings in Ontario, plus partial indemnity costs in the sum of $104,000.00 for counsel in St. Vincent and the Grenadines, where one of the medical schools was located. The Applicant also seeks the right to claim substantial indemnity costs against counsel for the Respondents, at a later date, pursuant to r. 57.07 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.
[6] The Respondents argue that due the misconduct of the Applicants, and in particular their counsel, the costs of the Application should be awarded to the Respondents on a full indemnity basis. No motion has been brought seeking this particular relief against Applicants’ counsel, and if this court was to consider this request, the Applicants’ counsel request an opportunity to make submissions to the court. In addition, the Respondents argue that I have demonstrated an inability to act impartially and a reasonable apprehension of bias, and they request that I recuse myself from making a decision on costs.
B. Materials Filed
[7] Written submissions on costs were served and filed in an unorthodox manner. In my Reasons for Judgement dated February 6, 2020, I made the following order:
The parties are encouraged to resolve the issue of costs themselves. If they are unable to do so, both parties are to provide their written costs submissions, double spaced, single sided, limited to 2 pages, exclusive of Costs Outline and case law, to be served and filed no later than February 28, 2020; responding submissions, with the same size restrictions, shall be served and filed no later than March 20, 2020; if submissions are not received by both parties on or before February 28, 2020, costs will be reserved to the trial judge.
[8] The Applicants served their written submissions in accordance with my judgment and filed them in the usual fashion in advance of the suspension of the court’s regular operations. No submissions were received from the Respondents by February 28, 2020. Out of an abundance of caution, the Respondents’ counsel was contacted to determine whether they might have filed submissions that had been misplaced in the court house, as happens from time to time. Respondents’ counsel confirmed that no submissions had been filed and that they interpreted my endorsement to mean that if they choose not to make submissions, the issue of costs would automatically be referred to the trial judge (as the matter had been converted to an action). While this was not the intention of my order with respect to costs, it was conceded that perhaps the endorsement could be misinterpreted.
[9] Accordingly, in order to alleviate any prejudice to the Respondents, on May 1, 2020 I clarified my endorsement with respect to costs and granted the Respondents additional time to provide their written submissions (over the objections of the Applicants), with additional time to the Applicants to file their response.
[10] The Respondents’ counsel maintains that I exceeded my authority in granting this extension, that they should not be required to make any submissions and that costs should be left for the trial judge. The Respondents’ counsel then sought leave to bring an urgent motion pursuant to the Notice to the Profession dated March 15, 2020 wherein he sought an order that I vary my order granting them an extension, or in the alternative, that I recuse myself from the costs decision. Leave was not granted for two reasons. First, the urgency was self-made. The Respondents were originally allowed until February 28, 2020 to make their submissions. On May 1, 2020, they were granted an extension to May 15, 2020. It was not until May 12, 2020 that the Respondents’ brought a motion seeking to vary my order granting them an extension. Secondly, no authority was offered as to why this extension should be varied under r. 57.06(2)(a), except that the Respondents did not agree with it.
[11] The Respondents finally filed their written submissions within the extended deadline. The Applicants filed their response to the submissions of the Respondents. The Respondents then filed a “sur-reply” to the Applicants’ response.
[12] Accordingly, the following materials were before me:
a) From the Applicants: bound written submissions, their Costs Outline and case law;
b) From the Respondents: an e-mail dated May 15, 2020 to which was attached written submissions, two attachments on the “reasonable apprehension of bias”, a Costs Outline, case law, a third attachment with respect to “the reasonable apprehension of bias” to which was attached two letters and one case, an excerpt of a factum with no cover page, and a compendium of transcript excerpts dated August 2019;
c) Response from the Applicants, comprising of submissions and case law;
d) “Sur-reply” from the Applicants, consisting of an e-mail dated May 25, 2020, to which was attached submissions, and two e-mail exchanges from 2018.
[13] The issue of costs is but another indicator of the acrimonious nature of this litigation. What should have been brief, straight forward costs submissions which could have been resolved prior to the suspension of regular court operations have evolved into an exchange of letters, allegations by the Respondents of misconduct on the part of the Applicants’ solicitors, allegations of racial bias, and lengthy submissions from both parties that exceed the strict requirements set out in my judgment. Also, there was no provision for a “sur-reply” to cost submissions in my judgment. The parties have lost sight of r. 57.01(7) which indicates that costs are to be determined in the simplest, least expensive and most expeditious process.
C. Law
i. General Principles
[14] Section 131 of the Courts of Justice Act, R.S.O. 1990, c. C.43, provides that costs of and incidental to a proceeding are in the discretion of the court. “In Ontario, the normative approach is first, that costs follow the event; second, that costs are awarded on a partial indemnity basis; and third, that costs are payable forthwith, i.e. within 30 days. Discretion can, of course, be exercised in exceptional circumstances to depart from any one or more of these norms”: DUCA Financial Services Credit Union Ltd. v. Bozzo, 2010 ONSC 4601, at para. 5.
[15] Rule 57.01(1) “lists a broad range of factors for the court to consider, including the result achieved in the proceeding, the complexity of the proceeding, the importance of the issues and whether any step in the proceeding was improper, vexatious or unnecessary”: DUCA, at para. 6.
[16] As stated by Armstrong J.A. in Boucher v. Public Accountants Council for the Province of Ontario (2004), 71 O.R. (3rd) 291 (C.A.), the fixing of costs involves more than merely a calculation using the hours docketed and the cost grid. At para. 24. Armstrong J.A. cites approvingly to para. 4 of the Court of Appeal’s decision in Zesta Engineering Ltd. v. Cloutier: “In our view, the costs award should reflect more what the court views as a fair and reasonable amount that should be paid by the unsuccessful parties rather than any exact measure of the actual costs to the successful litigant.”
[17] Rule 49 may also be operative and impact an award of costs if any offers to settle were served.
ii. Award of Full or Substantial Indemnity Costs
[18] The Respondents want the costs of this Application paid to them on a full or substantial indemnity basis. There are circumstances in which a costs award should depart from the partial indemnity scale and should be awarded on a substantial or full indemnity basis. The first such circumstance is when a party conducts themselves in a reprehensible manner. In Hunt v. TD Securities Inc. (2003), 66 O.R. (3d) 481 (C.A.), the Court of Appeal for Ontario, citing Mortimer v. Cameron (1994), 17 O.R. (3d) 1 (C.A.), and McBride Metal Fabricating Corp v. H & W Sales Co. Inc. (2002), 59 O.R. (3d) 97 (C.A.), stated at para. 123,
Costs on the solicitor-and-client scale should not be awarded unless special grounds exist to justify a departure from the usual scale.
Such orders are not to be made by way of damages, or on the view that the award of damages should reach the plaintiff intact, and are inappropriate where there has been no wrongdoing. [page 509]
An award of costs on the solicitor-and-client scale, it has been said, is ordered only in rare and exceptional cases to mark the court's disapproval of the conduct of the party in the litigation. The principle guiding the decision to award solicitor-and-client cost has been enunciated thus:
[S]olicitor-and-client costs should not be awarded unless there is some form of reprehensible conduct, either in the circumstances giving rise to the cause of action, or in the proceedings, which makes such costs desirable as a form of chastisement.
[19] As stated by McLachlin J. (as she then was) in Young v. Young, [1993] 4 S.C.R. 3, at p. 134, solicitor and client costs are generally awarded only where there has been reprehensible, scandalous or outrageous conduct on the part of one of the parties. The fact that an application has no merit is no basis for awarding solicitor and client costs.
[20] Another instance when it may be appropriate to award costs on a substantial or full indemnity basis is when one party alleges fraud and dishonesty, and they were unsuccessful in proving it. As stated in Hamilton v. Open Window Bakery Ltd., 2004 SCC 9, [2004] 1 S.C.R. 303, at para. 26:
An unsuccessful attempt to prove fraud or dishonesty on a balance of probabilities does not lead inexorably to the conclusion that the unsuccessful party should be held liable for solicitor-and-client costs, since not all such attempts will be correctly considered to amount to “reprehensible, scandalous or outrageous conduct”. However, allegations of fraud and dishonesty are serious and potentially very damaging to those accused of deception. When, as here, a party makes such allegations unsuccessfully at trial and with access to information sufficient to conclude that the other party was merely negligent and neither dishonest nor fraudulent (as Wilkins J. found), costs on a solicitor-and-client scale are appropriate: see, generally, M. M. Orkin, The Law of Costs (2nd ed. (loose-leaf)), at para. 219.
iii. Award of Costs Against Counsel
[21] Counsel for the Respondents claim their costs should be payable by the Applicants’ counsel. The Applicants want a cost order now against the Respondents, but with leave to seek costs against counsel for the Respondents’ counsel, if necessary, at a later date.
[22] Rule 57.07(1)(c) allows the court to order that counsel pay the costs of a proceeding if that lawyer caused costs to be incurred without reasonable cause or to be wasted by undue delay, negligence or other default. This is an exceptional remedy. As recently stated by Gascon J. in Quebec (Director of Criminal and Penal Prosecutions) v. Jodoin, 2017 SCC 26, [2017] 1 S.C.R. 478, at para. 29:
…an 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.
[23] A two-part test is to be applied when determining whether a lawyer should be liable to pay costs under r. 57.07(1). First, it must be determined if the lawyer caused costs to be incurred unnecessarily, as set out in the rule. Bad faith is not required but it must be shown that a lawyer pursued a goal which was clearly unattainable or was clearly derelict in their duties as an officer of the court. Second, the judge must still exercise their discretion, apply extreme caution, and only apply this rule in clear cases, and not simply because the conduct of a lawyer may appear to fall within the circumstances of r. 57.07(1): Galganov v. Russell (Township), 2012 ONCA 410, 350 D.L.R. (4th) 679, at paras. 17-22.
iv. Reasonable Apprehension of Bias
[24] While not applicable to the merits of costs, the Respondents have again raised this argument in seeking that I recuse myself from this costs decision.
[25] As stated by Feldman J.A. in A.M. v. J.M., 2016 ONCA 644, at para. 55:
The test for reasonable apprehension of bias was recently stated by this court in Martin v. Martin, 2015 ONCA 596, 127 O.R. (3d) 1, at para. 68: “Would a reasonable and informed person viewing the matter realistically and practically and having thought it through conclude that the judge, consciously or unconsciously would not decide fairly”. The threshold for finding a reasonable apprehension of bias is extremely high. There is a strong presumption in favour of the judge’s impartiality and the question of a reasonable apprehension requires a highly fact-specific inquiry: Martin, at para. 71.
D. Analysis – Preliminary Issues
i. Reasonable Apprehension of Bias
[26] The Respondents argue that I have “demonstrated a reasonable apprehension of bias” for seven reasons. The first five rely on my decision in the main Application. In essence, the Respondents disagree with my decision on the merits and claim that I made the decision I did because of my bias against them. The sixth reason relates to my decision to allow the Respondents additional time to file their cost submissions, which was made to their advantage, not having filed their costs submissions by the first court-ordered deadline. Lastly, they rely on my decision to refuse them the chance to argue a motion for my recusal on an urgent basis in accordance with the Notice of the Profession dated March 15, 2020.
[27] The opening line of the Respondents’ submissions states:
“The Respondents renew their request that her Honor Madame Justice Fowler-Byrne recuse herself as her conduct thus far, shows an inability to act impartially…” (emphasis mine).
[28] The Respondents have already asked that I recuse myself. They were not granted leave to bring this motion as it was not deemed urgent in accordance with the Notice to the Profession dated March 15, 2020. This issue has been decided, but nonetheless, given that it was raised again, I will make the following comments.
[29] No evidence was presented to support the Respondent’s claim of bias. The Respondents argue that my decision in the main Application shows some bias to favour the position of the Applicants. Despite this allegation, no evidence was presented that could even suggest bias: no statements of mine made while in court, nor any excerpts of my Reasons for Judgment.
[30] The Respondent also maintains that I showed bias by allowing the Respondents an additional three and one-half months to make their cost submissions, over the objections of the Applicants. This extension was granted to the Respondents, over what was a clear endorsement with respect to costs submissions, out of an abundance of caution and to alleviate any prejudice to the Respondents. Finally, the Respondents argue that by failing to grant them leave to bring an urgent motion, I again show bias. Again, other than disagreeing with my decision, the Respondents have provided no evidence as to why this decision shows bias.
[31] In summary, the Respondents have failed to show that a reasonable and informed person viewing the matter realistically and practically, and having thought it through, would conclude that this judge, consciously or unconsciously would not decide the matter fairly.
ii. Costs Against Counsel: r. 57.07
[32] I have reviewed all the materials filed, including any materials that exceeded the size restriction I put in place and any submissions that were not permitted, such as the “sur-reply”.
[33] It is evident that the Respondents’ counsel has repeatedly made serious allegations about the conduct of the Applicants’ counsel without any supporting evidence. Mr. Barnwell, counsel for the Respondents, has also alleged that he is the victim of racial discrimination and that this court exercised a bias against him. Mr. Barnwell even filed a complaint against the Applicants’ counsel to the Law Society of Ontario, which complaint was subsequently closed.
[34] There are many allegations of disreputable conduct on the part of the Applicants’ counsel, but no evidence was produced to show conduct on the part of the Applicants’ counsel that caused costs to be incurred without reasonable cause or to be wasted by undue delay, negligence or other default, as contemplated by the Rule. Accordingly, there will be no costs made against the Applicants’ counsel.
iii. Reserving Right to Seek More Costs
[35] The Applicants seek their costs against the Respondent, with leave to seek them against the Respondents’ counsel at a later date.
[36] It is not this court’s place to grant such leave. The Applicants did not seek costs against the Respondents’ counsel personally at this stage. A decision as to costs has been made. If the Applicants’ wish to reopen the issues of the costs of this Application at a later date, they can make their arguments to the judge before whom they appear.
E. Analysis – Determination of Costs
[37] Having dispensed with these preliminary issues, I will review the various factors enumerated in r. 57.
i. Result
[38] While the Applicants sought many items of relief, the most significant requests were the request for the appointment of a monitor to attend to the orderly division of the two medical schools, an order prohibiting Dr. Yusuf from operating a competing medical school and an order converting the remainder of the Application to an action. The Applicants were successful on these issues.
[39] Both parties sought an order for an interim disbursement of funds. The Applicants sought the sum of USD$2,000,000. The Respondents sought an order that each party be given USD$1,000,000. The Applicants were partially successful in that only the Applicants received a disbursement, limited to USD$1,000,000.
[40] The Respondents opposed the appointment of a receiver but instead sought an order that the parties’ accountant continue his accounting. This was dismissed in favour of the appointment of the monitor.
[41] Accordingly, viewing the Application, the Applicants’ two motions and the Respondents’ one motion as a whole, the Applicants were successful.
ii. Experience, Hours Spent and Rates Charged
[42] Mr. Upenieks, counsel for the Applicants, charges $525 per hour, with a partial indemnity rate of $315 per hour. This is not unexpected given that he has been practicing for over 35 years. Mr. Barnwell, counsel for the Respondents, has been practicing for 27 years, and charges a full hourly rate of $500. The full hourly rates of Mr. Figliomeni ($325) and Ms. Kwok ($225) are not unreasonable given their level of experience. Mr. Barnwell also utilized the services of his office assistant, who charged a full indemnity rate of $200. It is not known if this assistant is an administrative assistant, a student, a clerk or a lawyer.
[43] The Applicant claims that the three lawyers and law clerk spent a total of 684.9 hours on this matter. The Respondents claim that their counsel and his assistant spent a total of 304 hours on this matter. Interestingly, the total partial indemnity fees claimed by all four members of the Applicant’s law firm totaled $130,847.50, while the total partial indemnity fees claimed by Respondent’s counsel and his assistant was $118,196.25, which is not a substantial difference. This could be explained by Mr. Barnwell’s claimed partial indemnity rate of $425 per hour. This rate is higher than what is contemplated by partial indemnity. Given Mr. Barnwell’s full rate of $500 per hour, a more appropriate partial indemnity rate would be $300 per hour. Using this more appropriate rate, the partial indemnity fees claimed by Mr. Barnwell are actually closer to $77,000, and his assistant’s fees should also be reduced to $5,400.
[44] The Applicants have sought an order that the Respondents also pay for the legal fees of counsel retained in St. Vincent and the Grenadines on a partial indemnity basis, fixed at $104,000.
[45] No evidence was presented of these fees; no invoices or dockets were produced. Counsel from St. Vincent and the Grenadines submitted no Costs Outline, nor any written submissions. It is also not clear whether the legal expenses incurred in St. Vincent and the Grenadines were in relation to this litigation, or for litigation in that jurisdiction, or for corporate matters. It is not possible for this court to determine what is fair and reasonable without this information. Accordingly, I decline to make any order with respect to legal fees for counsel retained in St. Vincent and the Grenadines.
iii. Expectation of Costs to Pay
[46] Unfortunately, the Costs Outline provided by the Applicants is lacking in particulars. There is no way to determine how much was spent on each particular step in the proceeding, whether more than one counsel charged for any attendance, and which counsel completed what task. These are important considerations. It would not be unreasonable for a junior associate or clerk to spend a great deal of time drafting and researching, but it would be unreasonable for senior counsel to charge the same amount of time for this same service when others could do the work for him. In some instances, it may not be appropriate for counsel to charge for more than one counsel to attend at court. The court is left with the task of determining what is fair and reasonable without these important details.
[47] That being said, while the partial indemnity costs claimed by Mr. Barnwell are somewhat elevated, it shows that the Respondents were well aware that the partial indemnity fees associated with this application could be as high as $118,000.
iv. Complexity and Importance of Issues
[48] The issues before the court are complex. There is a sophisticated corporate structure in place that operates a holding company and two medical schools over three legal jurisdictions. Elements of corporate law, estate law and accounting are at play.
[49] The facts before the court are fiercely contested. A trial will be necessary. An independent accountant, in the form of a monitor, is required to make sure the parties’ financial transactions and corporate divorce are fair and just. It is not surprising that costs were accumulated to such an extent over a two-day hearing.
v. Conduct of Party that Shortened or Lengthened Proceeding
[50] The Respondents maintain that the Application should never have been commenced because the Partnership Agreement had an arbitration clause and the by-laws of the All Saints University in St. Vincent and the Grenadines prohibited law suits. Nonetheless the Application was commenced. The Respondents maintain that this is an abuse of process, a waste of resources for the court and for the parties, and unnecessarily lengthened the proceedings.
[51] This issue was addressed in the Reasons for Judgment. I found that the Application could proceed for several reasons, one of which was the Respondents’ failure to bring a timely motion to stay the proceedings and instead responding to the proceedings and bringing their own motion.
[52] The Applicants maintain that it was the Respondent Dr. Yusuf’s conduct, or rather failure to facilitate the orderly division of the medical schools as originally agreed, which necessitated the commencement of this litigation.
[53] As indicated earlier, this matter was initially resolved on the first appearance on February 1, 2019. Unfortunately, the Applicants alleged that the Respondents did not honour the settlement and brought the matter back to court. Both parties then participated in a lengthy hearing that lasted two days spread over four months, plus multiple cross-examinations. One of these hearing days was delayed by the Respondent’s attempt to remove the Applicant’s counsel of record, without serving a Notice of Motion or supporting evidence. A telephone conference was required just to set a schedule. Numerous communications came from counsel for the Respondents alleging improper conduct of the other counsel, even after the hearing was heard and before my decision was released. There was also more delay in receiving submissions on costs, as set forth herein.
[54] The delay inherent in complicated litigation cannot be attributed to either side. Both parties are entitled to fully represent their clients. However, the almost half day wasted when the Respondents sought to have the Applicants’ counsel removed from the record without drafting or serving any materials was an unnecessary waste of time. Even though the Respondents were given leave to bring such a motion, with the proper materials, no such motion was ever brought.
vi. Offers to Settle
[55] No Offers to Settle were exchanged on the Application or on the three motions heard by me.
F. Conclusion
[56] For the foregoing reasons, and considering what is fair and reasonable for such a hearing, I make the following order:
a) The Respondents shall pay to the Applicants their costs of this Application, including the two motions brought by the Applicants and the one motion brought by the Respondents within this Application, fixed in the sum of $85,000, inclusive of fees, disbursements and taxes, payable within 30 days.
[57] Finally, it appears that the final order has not been settled. Accordingly, both parties shall attend a teleconference to settle the order on June 11, 2020 at 9:00. a.m. Both parties shall file a Microsoft Word version of their preferred order with my assistant Sara.Stafford@ontario.ca at least two days prior to the teleconference. Each party will have ten minutes to make submissions. The call-in telephone number is 866-500-5845 or 416-212-8014, and the conference ID is 8887364.
Fowler Byrne J.
