Court File and Parties
COURT FILE NO.: 15-66979
DATE: 2020/07/08
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Doyle Salewski Inc., in its capacity as Trustee in Bankruptcy of Golden Oaks Enterprises Inc. and Joseph Gilles Jean Claude Lacasse and Doyle Salewski Inc., in its capacity as Receiver and Manager of Golden Oaks Enterprises Inc. and Joseph Gilles Jean Claude Lacasse
Plaintiffs/Responding Parties
– and –
LORNE SCOTT, PATRICK BRUNETTE, ERIC LANDRIAULT, MATTHEW DANIELS, VERICO THE MORTGAGE ADVISORS INC., VINCENT HO, JOHN MCKILLIP and SUSAN MCKILLIP
Defendants/Moving Parties
Counsel:
Gordon Douglas for the Plaintiffs
Stephen Cavanagh for the Defendant Eric Landriault
Denis Cadieux for the Defendant Patrick Brunette
Natalie Marie Leon for the Defendants Matthew Daniels and Verico the Mortgage Advisors Inc.
Alyssa Tomkins and James Plotkin for Lorne Scott and all other defendants except Vincent Ho
HEARD: In writing
Costs Endorsement on Motion to Strike
S. GOMERY, J.
[1] On January 30, 2020, I partially granted the defendants’ motions to strike out the plaintiff’s pleadings in this action. The defendants now seek costs.
[2] The plaintiff Doyle Salewski Inc. (“Doyle Salewski”) is the trustee in bankruptcy of Golden Oaks Enterprises Inc. (“Golden Oaks”) and of the company’s founder, Jean-Claude Lacasse. Golden Oaks operated a rent-to-own residential real estate operation funded primarily by short term promissory notes at usurious rates of interest. When Golden Oaks went into bankruptcy in 2013, it owed approximately $10 million to unsecured creditors. Doyle Salewski began numerous lawsuits against individuals and companies in Golden Oaks’ orbit, whom it alleged were knowingly or negligently complicit in a Ponzi scheme.
[3] This lawsuit is one of those actions. The defendants each provided professional services to Golden Oaks or allegedly promoted investment in it. In its Fresh as Amended Statement of Claim (the “Statement of Claim”), Doyle Salewski asserted three broad causes of action: a claim for contribution and indemnity, a claim for damages, and a claim for disgorgement and accounting. The overarching theory of the action is that the defendants are liable for losses suffered by the company and its unsecured creditors in the years prior to the bankruptcy, because their actions gave the company an aura of legitimacy that enabled Mr. Lacasse to lure investors in and caused creditors to do business with it.
[4] In my January 2020 decision on the defendants’ motions, I struck the claims for contribution and indemnity, without leave to amend. I struck the claims for damages but granted Doyle Salewski leave to amend the Statement of Claim to address identified deficiencies. I held that the claims for disgorgement and accounting could proceed based on the allegations pleaded, subject to the defendants’ right to seek dismissal based on limitations in a further motion. Success on the motion was therefore divided.
[5] Despite this, the defendants argue that their partial victory on the motions – in particular, the striking of the contribution and indemnity claims, without leave to amend – entitles them to costs on a substantial indemnity basis, payable forthwith. They further argue that costs should be paid by Doyle Salewski personally, rather than from the funds it holds for distribution to Golden Oaks’ unsecured creditors.
[6] Not surprisingly, Doyle Salewski has a different view. It argues that any costs should be based on partial indemnity rates and payable only from the bankrupt company’s estate. It also contends that no costs should be payable until the adjudication of the appeal in the companion case of Doyle Salewski v. Scott, 2019 ONSC 5108 (“DSI v. Scott 2019”), which involves many of the same parties.
[7] Each defendant or set of defendants has made separate cost submissions to which Doyle Salewski has responded in turn. A recurrent issue in the submissions is how to allocate work done by lawyers for the various parties to determine the costs properly attributable to work on the motions.
[8] The costs at issue are not at all trivial. The defendants together seek over $300,000 in substantial indemnity costs.
[9] Further to r. 57.03(1) of the Rules of Civil Procedure a judge should fix the costs of a contested motion and order them to be paid within 30 days, “unless the court is satisfied that a different order would be more just”. Having considered the submissions and the recent evolution of this case, I conclude that, in this case, it would be more just to delay a decision on costs pending the result of further motions to be adjudicated in the next few months.
[10] In response to my January 30, 2020 decision, Doyle Salewski reamended the Statement of Claim. At a case conference on June 17, 2020, the parties advised that the defendants do not think that the amendments remedy the deficiencies in the pleading identified in my decision. They are therefore bringing further motions to strike. These motions will be heard in writing, with final submissions due at the end of July.
[11] I cannot anticipate the result of these motions. They will not end the litigation, assuming that there is no new challenge to the claim for disgorgement and accounting. If, however, the claims for damages are struck, this will narrow the scope of Doyle Salewski’s claims considerably. The defendants could then argue that they clearly won this stage of the litigation. If, on the other hand, the new motions are dismissed, Doyle Salewski may argue that it has achieved the greater measure of success, overall, on the challenges to the viability of its three causes of action.
[12] Arguably, the motions that will be heard in writing are not new motions but a continuation of the earlier ones. At the case conference, counsel for the parties sparred about the scope of the new motions. Doyle Salewski said that the defendants should only be permitted to attack the fresh allegations in the reamended Statement of Claim and not repeat arguments they made in their earlier motions. Defence counsel contended that the new allegations must necessarily be read in the context of the pleading as a whole.
[13] I agreed with defence counsel on this point. In adjudicating the new motions to strike, I must necessarily consider whether the reamended Statement of Claim asserts tenable causes of action, taking into account both the original allegations and the new allegation. The parties will reiterate some of the same arguments they made on the earlier motions, for example with respect to the requisite elements of a claim in negligence. I will not be adjudicating entirely new issues, but rather determining whether the plaintiff has addressed the problems with the pleading I identified in my January 2020 decision.
[14] In these circumstances, it would be premature to determine costs based on the interim outcome produced by the first wave of motions to strike. The outcome on the further motions will inform the costs that the parties may claim on the motions that have already been argued.
[15] I therefore conclude that the costs of the defendants’ motions to strike argued in 2019 should be reserved pending adjudication of the further motions to strike. When a decision on these further motions is made, the parties will be asked to make submissions on costs associated with both sets of motions.
[16] I have signed this endorsement electronically and it is effective without further formality.
S. Gomery J.
Justice Sally Gomery
Released: July 8, 2020
COURT FILE NO.: 15-66979
DATE: 2020/07/08
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Doyle Salewski Inc., in its capacity as Trustee in Bankruptcy of Golden Oaks Enterprises Inc. and Joseph Gilles Jean Claude Lacasse and Doyle Salewski Inc., in its capacity as Receiver and Manager of Golden Oaks Enterprises Inc. and Joseph Gilles Jean Claude Lacasse
Plaintiffs/Responding Parties
– and –
LORNE SCOTT, PATRICK BRUNETTE, ERIC LANDRIAULT, MATTHEW DANIELS, VERICO THE MORTGAGE ADVISORS INC., VINCENT HO, JOHN MCKILLIP and SUSAN MCKILLIP
Defendants/Moving Parties
costs endorsement
Justice Sally Gomery
Released: July 8, 2020