COURT FILE NO.: 33-1539883/ 33-1539884 DATE: 2020/01/23 ONTARIO SUPERIOR COURT OF JUSTICE IN BANKRUPTCY and INSOLVENCY
IN THE MATTER OF THE BANKRUPTCY OF ROBERT MORRIS JR. MCEWEN AND CAROLINE ELIZABETH MCEWEN, OF THE TOWN OF PERTH, IN THE COUNTY OF LANARK, IN THE PROVINCE OF ONTARIO
B E T W E E N:
BARBARA LYNN CARROLL BY HER LITIGATION GUARDIAN SHANNON LUKNOWSKY, SHANNON LUKNOWSKY, JEFFREY CARROLL and SHANNON LUKNOWSKY AS EXECUTOR FOR THE ESTATE OF LORNE CARROLL Plaintiffs
and
ROBERT MCEWEN and CAROLINE MCEWEN Responding Parties
and
TRADERS GENERAL INSURANCE COMPANY, improperly described in Superior Court of Justice Court File Number CV-17-00073740-0000 as AVIVA CANADA INC., Person Affected by an Order obtained on Motion without Notice
BEFORE: Mr. Justice Stanley J. Kershman
HEARD IN OTTAWA: January 10, 2020 at Ottawa
APPEARANCE: Alan Rachlin, for Traders General Insurance Company – Moving Party Joseph Obagi, for the Plaintiffs Robert De Toni for Doyle Salewski Inc., Trustee in Bankruptcy
costs DECISION
KERSHMAN J.
[1] Costs outlines were submitted by all parties to this motion, and the issue of costs was argued on January 10, 2020.
[2] The costs amounts provided by each of the parties is as follows:
| Party | Partial Indemnity Basis | Full Indemnity Basis |
|---|---|---|
| Plaintiff | $25,438.16 | $36,026.67 |
| Trustee in Bankruptcy | $7,262.33 | $12,103.88 |
| Traders | $16,748.07 | $24,725.07 |
[3] In calculating the aforesaid figures, the Plaintiff and the Trustee in Bankruptcy included supplementary costs in relation to the supplementary submissions made.
[4] Traders did not claim supplementary costs in relation to their original request to make supplementary submissions after a decision from the Court of Appeal.
Plaintiffs’ Position
[5] The Plaintiffs argue that costs should be granted to them on a full indemnity basis for the following reasons:
- The motion brought by Traders to strike out the entire action was tantamount to a motion for summary judgment;
- Traders made serious allegations against Plaintiffs’ counsel, including misconduct amounting to contempt of court, which directly affect counsel’s reputation. The Plaintiffs rely on several cases in support of this submission, including DiBattista et al. v. The Wawanesa Mutual Insurance Company (2005), 78 O.R. (3d) 445 (Ont. S.C.); Upchurch v. Oshawa (City), 2014 ONCA 425, 27 M.P.L.R. (5th) 179; Re Cogan (2005), 74 O.R. (3d) 223 (Ont. S.C.); and Willmot Estate v. Willmot (2007), 34 E.T.R. (3d) 276 (Ont. S.C.); and
- The time spent and the rates claimed for the preparation and argument of the motion and supplementary submissions were appropriate.
Trustee in Bankruptcy’s Position
[6] The Trustee in Bankruptcy argues that, because it was served with the motion materials, it was required to respond to the motion; particularly in light of the allegations made in the motion.
[7] It also argues that it was required to respond to the supplementary submissions made by Traders because the Trustee in Bankruptcy had filed the original submissions.
[8] The Trustee in Bankruptcy seeks costs on a partial indemnity basis, submitting that this results in an appropriate award.
Traders’ Position
[9] Traders acknowledges that it was not successful on the motion and that it is required to pay costs. It argues that costs should be payable on a partial indemnity basis, and that the amount of costs should be similar to or less than the amount of partial indemnity costs that it has claimed; this being $16,748.07 inclusive of disbursements and HST.
[10] Traders argues that substantial indemnity costs or full indemnity costs should only be paid when unfounded allegations of fraud, dishonesty, or other improper conduct were seriously prejudicial to character or reputation: see e.g. DiBattista et al., para. 5.
[11] Traders submits that the word “trick” was used only by McLean J. in one of his decisions, and that there was no suggestion that Traders alleged that the Plaintiffs tricked the Court and/or the Trustee in Bankruptcy.
[12] In addition, Traders submits that there was no suggestion that fraud was perpetrated by either the Plaintiff or their counsel. They also argue that there was no reference to the Plaintiffs’ counsel being in contempt of court. There was an omission by the Plaintiffs’ counsel, Traders submits, but nothing fraudulent.
[13] In relation to the Trustee in Bankruptcy, Traders argues that the Trustee had to respond to the motion, but only concerning some narrow issues and not to the extent that the Trustee ultimately did.
[14] Traders argues that the Trustee’s partial indemnity costs, inclusive of disbursements and HST, should be no more than $4,000.
[15] Lastly, Traders submits that, on appeal, the Trustee in Bankruptcy was not awarded any costs.
Analysis
[16] Traders’ motion was argued over the course of one day, after which written submissions were provided by all parties. Thereafter, Traders’ counsel wrote to the Court and requested that it and the other parties be able to provide supplementary submissions based on a decision issued by the Court of Appeal of Ontario involving this case. The Court agreed that supplementary submissions could be made by all parties, and these were provided.
[17] After receipt of all submissions by all parties, the Court provided written reasons dismissing Traders’ motion in full.
[18] Traders sought leave to appeal the decision of this Court. That motion was heard by the Court of Appeal on December 17, 2019. Written reasons, dated January 7, 2020, were provided by the Court of Appeal dismissing the motion for leave to appeal.
[19] The parties agreed to postpone the issue of costs of this motion until such time as the leave to appeal motion was dealt with.
[20] The Court takes notice of the fact that the Trustee in Bankruptcy was not entitled to its costs on the leave to appeal motion. However, the Court finds that no costs being granted to the Trustee on that motion has no bearing on how this Court deals with the costs of the original motion.
Issues
Issue #1: What is the Scale and Quantum of Costs that Should be Granted to the Plaintiff?
[21] The Court notes that paragraph 23 of the Reasons for Decision on the motion reads as follows:
The moving party (“Traders”) acknowledges that there was no suggestion of fraud or impropriety on the part of the Trustee, and that there was no intentional omission on the part of the Plaintiff.
[22] In the original action, Carroll (Litigation Guardian of) v. McEwen, 2016 ONSC 2075, 37 C.B.R. (6th) 70, Justice McLean gave written reasons in relation to costs at paragraph 49:
It is so very concerning that notwithstanding this, an attempt would be made to enforce was essentially a non-enforceable offer. Its unenforceability was caused by the fact that the party who accepted the offer intended to change the rules of the game immediately after the offers acceptance was essentially a trick.
[23] This Court notes that the use the word “trick” by Justice McLean only occurs once in his decision.
[24] This Court also notes the following paragraphs in Traders’ factum:
- The plaintiffs did not meet the requisite standard of providing Justice Kershman with full and fair disclosure of all relevant and material information at their motion. In particular, they did not make it clear to the Court that the McEwens’ personal exposure to the plaintiffs had long been confined to their insurance liability policy limit with Traders by order of Master Roger, dated October 12, 2012, and affirmed by paragraph 3 of the judgment of Mr. Justice McLean…
- The statements contained within and the critical information not disclosed or highlighted by the plaintiffs’ motion materials resulted in a very one-sided, incomplete, misleading and inaccurate picture as to the McEwens’ liabilities, the plaintiffs’ status to bring their motion, and Aviva/Traders’ obligation to the McEwens.
- The plaintiffs also acted improperly in obtaining the Order on an ex parte basis, in circumstances where they knew that both their standing as creditors of the McEwens and the propriety and viability of the Bad Faith Claim would be vigorously contested.
- The effect of Justice Kershman’s ex parte Order was to permit an untenable lawsuit to be issued. In addition to an order setting aside Justice Kershman’s Order, Traders requests that the plaintiffs’ conduct be sanctioned by this Court by an order that Traders be fully indemnified with respect to its costs of bringing this motion.
[25] This Court cannot find any reference by Traders to the word “trick” within its factum. Traders did make reference to the word “trick” in their oral submissions, but only in relation to the McLean J. decision.
[26] Therefore, the Court finds that any use of the word “trick” by Traders was not its own allegation, but was rather a reference to the aforesaid McLean J. decision.
[27] Therefore, the Court does not find that there was any allegation of fraud or misconduct amounting to contempt of court against the Plaintiffs’ counsel.
[28] As can be seen in their factum, Traders requested that they be fully indemnified in order to sanction the Plaintiffs’ conduct.
[29] On this motion, the Court found that the section 38 motion in question was not an ex parte motion. This had been a submission that Traders argued vigorously. Traders also argued material non-disclosure by the Plaintiffs.
[30] Traders argued that there was a heavy onus on Plaintiffs’ counsel to provide full and proper disclosure. The Court found that both the Plaintiffs’ and the Trustee in Bankruptcy’s counsel had provided the appropriate amount of disclosure on all of the relevant facts in their supporting affidavits.
[31] In light of the foregoing, the Court exercises its discretion and allows the Plaintiffs their costs on a partial indemnity basis.
[32] Considering the factors in Rule 57.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, the number of hours claimed by the Plaintiffs’ lawyers was 66.3 for all of their lawyers. This compares with 61 hours for Traders’ counsel, an amount which did not include time for preparation of the supplementary submissions. The figure for Plaintiffs’ counsel did include an amount for time spent on supplementary submissions.
[33] The Court finds that the time spent by Plaintiffs’ counsel was appropriate in the circumstances.
[34] The Court also finds that the hourly rates charged by counsel for the Plaintiffs were appropriate given the number of years since counsel has been called to the Bar.
[35] This matter was important to all parties. It was tantamount to a motion for summary judgment because, had Traders been successful, the underlying action would not have proceeded any further. The matter was of moderate difficulty.
[36] On that basis, the Court awards the Plaintiffs costs of $25,438.16, inclusive of disbursements and HST.
Issue #2: What Costs Should be Granted in Relation to the Trustee in Bankruptcy?
[37] There was no allegation by Traders of fraud or impropriety as against the Trustee.
[38] The Trustee has requested costs on a partial indemnity basis.
[39] Having been served with the motion, the Trustee was within its rights to respond to the motion as it did. Traders argues that the Rules of Civil Procedure and/or the Bankruptcy Rules require the Trustee to be served. That is true. Nonetheless, once served, a party has the right to respond to the motion proportionately, and costs can follow as a consequence.
[40] Considering the relevant factors under Rule 57.01 of the Rules of Civil Procedure, the Court finds that the time spent by the Trustee was proportionate to the issues involved.
[41] As for the number of hours spent on this matter by counsel for the Trustee in Bankruptcy, the Court finds that this was appropriate. The total amount of time for Mr. De Toni was 21.8 hours. He was the only lawyer on the file. The time spent by the law clerk was 2 hours. This includes the time spent on the supplementary submissions. The Court notes that the time spent by all of Traders’ lawyers was approximately 61 hours, excluding time spent for supplementary submissions.
[42] The Court also finds that the hourly rates charged were appropriate considering the number of years that counsel has been called to the Bar.
[43] As stated previously, the matter was of moderate difficulty and was important to all sides. Had the motion been successful, it would have been tantamount to a successful motion for summary judgment.
[44] The Court therefore orders that costs of the Trustee in Bankruptcy on a partial indemnity basis are fixed at $7,262.33.
[45] The Court orders that all costs are to be paid within 21 days.
[46] Order accordingly.
Mr. Justice Stanley J. Kershman