Court File and Parties

COURT FILE NO.: CV-20-0455 DATE: 2020 12 18

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

DAVID BACCHUS Norman Groot for the Plaintiff Plaintiff

• and -

SARA LORRAINE MUNN, JOHN DOE, JANE DOE and DOE CORPORATIONS Howard Cohen, Carolyn Gandy and Sabrina Waraich for the Defendants Defendants

HEARD: August 12th, 2020. Written Submissions completed October 20th, 2020

Reasons for Decision

LEMAY J

[1] On August 12th, 2020, I heard a motion for a Mareva injunction brought by the Plaintiff. This was the second Mareva injunction that the Plaintiff sought in this action. The first was decided by Bielby J. in a series of endorsements in June of this year. At the August 12th, 2020 hearing, most of the matters were resolved on an uncontested basis. However, the costs of the hearing before me were not resolved on consent.

[2] Part of the reason that the costs of the August 12th, 2020 hearing were not resolved was because the parties disagree on the effect of the orders that I issued on that day, and on whether those orders were on consent. The Plaintiff argues that the Orders were not on consent, that it was his motion that forced the Orders to be issued and that he should be entitled to substantial indemnity costs for this motion. He also argues that, because the Defendant engaged in improper transfers of funds to her counsel, any costs order should be payable out of the Defendant’s counsel’s trust account.

[3] The Defendant, on the other hand, argues that the Orders were on consent, that the Plaintiff’s conduct prior to the motion was unreasonable and unnecessarily increased the costs on this motion. The Defendant also argues that the Plaintiff’s counsel made scandalous and unjustified allegations that the Defendant’s counsel, Mr. Cohen, was complicit in a fraudulent transaction. As a result, the Defendant asks for costs to be paid personally by Mr. Groot.

[4] I have determined that the Defendant is entitled to recover some costs for this motion, but only from the Plaintiff and not from Mr. Groot personally. I have fixed those costs in the sum of $5,000.00, inclusive of HST and disbursements. To understand the reasons for my decision, some background is required.

Background

a) The Parties and the Relationship

[5] Much of the background relating to this case is described in other reasons that I have released since the August 12th, 2020 hearing (see 2020 ONSC 6650 and 2020 ONSC 6548). However, I will provide a brief background in these reasons.

[6] The Plaintiff is a businessman in his mid-50’s. The Defendant is currently in her 30’s and has worked in the sex trade. The parties were in a relationship, and the nature of that relationship is disputed.

[7] Both parties agree that the relationship started out with the Defendant providing sexual services to the Plaintiff. The Defendant asserts that the relationship never changed. The Plaintiff asserts that the relationship did change, and that the parties were planning a life together.

[8] In 2019, the Plaintiff discovered that the Defendant had misled him. Specifically, the Plaintiff had been told by the Defendant that she was working for Carnival Cruises in Miami for 2019, but in fact the Defendant had been in the Hamilton area the entire time.

[9] As a result of this discovery, the Plaintiff ended his relationship with the Defendant and began this action. The Plaintiff claims damages for fraud and a host of other claims related to approximately $800,000.00 that was transferred from the Plaintiff to the Defendant.

b) The Action and the Mareva Injunction

[10] The Plaintiff’s action was commenced in January of 2020, and his claim was served on the Plaintiff at the beginning of February, 2020. At the beginning of March, 2020, the Defendant served her Statement of Defence and counterclaim.

[11] The Plaintiff was attempting to obtain documents to trace the funds that the Defendant had received from him throughout April and May of 2020. The Plaintiff did not get the documentation he was looking for from the Defendant. Therefore, on May 28th, 2020, the Plaintiff brought an urgent ex parte motion seeking a Mareva-like Order.

[12] Part of the relief that was sought in this Mareva order related to disclosure. In particular, the Defendant had purchased a home in Stoney Creek. The closing date for this purchase was originally in early June but it was moved to the end of August. As a result, the Plaintiff was seeking further disclosure relating to the property purchase.

[13] Bielby J. granted an interim Order on June 3rd, 2020 on an interim basis freezing the Defendant’s assets and requiring the home builder, Empire Homes, to provide the Plaintiff with particulars and other disclosure relating to the property purchase. The Plaintiff was required to serve the materials on the Defendant, and a date was to be scheduled.

[14] The motion then returned to Court before Bielby J. on June 18th, 2020. By way of reasons dated June 24th, 2020, Bielby J. dissolved the Mareva injunction. However, he did find that there was urgency with respect to the disclosure of the financial records in the Defendant’s possession. He also found that the Plaintiff had established a strong prima facie case.

c) The Events After the Order of Bielby J.

[15] As part of Bielby J.’s order, the Defendant was obligated to provide the Plaintiff with certain financial disclosure in a prompt manner. On the records before me, it appears that some, but not all, of that disclosure was provided in accordance with the timelines set out by Bielby J.

[16] In addition, in reviewing the disclosure, counsel for the Plaintiff became concerned because of transfers that had been made in February of 2020, after the litigation had commenced. Those transfers were the movement of approximately $500,000.00 from the Defendant’s bank account to the trust accounts of Mr. Cohen and of her real estate lawyer.

[17] As a result, on July 7th, 2020, the Plaintiff sought to have the Order of Bielby J. varied. The grounds for this variation application included the fact that the Defendant had made transfers to her litigation counsel (Mr. Cohen) and her real estate counsel, and those transfers had not been disclosed to Bielby J. and were not known to the Plaintiff at the hearing of the motion before Bielby J. The Plaintiff also argued that Bielby J. had made an error because a CPL was not available on these facts.

[18] The matter was originally scheduled to proceed as a motion before me on July 31st, 2020. However, on the consent of the parties it was adjourned until August 12th, 2020.

[19] The Defendant served an Offer to Settle on August 10th, 2020. This Offer to Settle encapsulated many of the points that I included in the Order I made at the conclusion of the hearing on August 12th, 2020. In addition, the Defendant had made previous suggestions and/or offers to try and resolve the motion at the beginning of August.

d) The Hearing on August 12th, 2020

[20] At the conclusion of the hearing on August 12th, 2020, I made an order in the following terms:

1. The Defendant, Ms. Munn, agreed to be bound by a series of undertakings, which form part of a Court order. In addition, any other party who has knowledge of these undertakings is also bound by them as if they are a Court order and I so order. Those undertakings are as follows: a) The Defendant undertakes to ensure that real estate counsel provides an undertaking, to both Plaintiff and the Court, that all funds currently held in trust will be used for the closing of 24 Cactus Crescent, Stoney Creek. b) The Defendant undertakes to ensure that real estate counsel provides an undertaking not to transfer any funds to any entity or individual, including the Defendant, on the direction of anyone or any entity for any purpose other than for the closing of the Stoney Creek property. c) The Defendant undertakes to ensure that real estate counsel provides an undertaking to use funds solely for closing and, should the deal fail for any reason, pay all funds (excluding legal fees and disbursements in an amount to be agreed to or set by the Court) into Court to the credit of the present action, or subject to further Court Order. d) The Defendant undertakes to ensure that real estate counsel provides an undertaking to advise Plaintiff’s counsel of any increase in the mortgage commitment amount, from the current commitment of $334,990.00.
2. The name of the real estate counsel is to be disclosed to counsel for the Plaintiff.
3. Counsel for the Plaintiff is not to contact real estate counsel without leave of the Court. This provision was ordered not on consent.
4. The Defendant Munn is to produce, as soon as possible, an updated mortgage financing statement from the prospective mortgage provider to be utilized for the purchase of 24 Cactus Crescent, as required by the Order of Bielby J. dated June 24th, 2020.
5. The Defendant will through her counsel and, forthwith upon receipt, provide Plaintiff’s counsel with the information on the land titles registry for 24 Cactus Crescent.
6. The Defendant will consent to a Certificate of Pending Litigation (“CPL”) to be registered against 24 Cactus Crescent, with said CPL to be registered coterminous with the closing.
7. The parties acknowledge that case management would be highly beneficial for this matter and will write to Ricchetti R.S.J. to request the appointment of a case management judge.
8. Until Ricchetti R.S.J. appoints a case management judge, no motions may be brought by any party without my leave.
9. The parties shall prepare and file their proposed discovery and litigation plans by August 26th, 2020. A copy of those plans is to be provided to my judicial assistant regardless of whether I am appointed the case management judge.
10. If I am appointed the case management judge, then the parties will attend before me by way of a teleconference at 9:00 a.m. on September 11th, 2020. The dial-in information is the same as it was for this morning’s teleconference.

[21] My understanding was that this Order was, with the exception of the term prohibiting Mr. Groot from contacting real estate counsel, made on consent. In his submissions on costs, however, the Plaintiff states “A new Order was issued by Justice LeMay. The order was not made on consent. It was compelled by the Plaintiff’s motion.”

[22] Given that there was a dispute between the parties about whether my order was on consent, I ordered a transcript of the proceeding and provided copies to the parties prior to requiring them to make submissions. It was a proceeding conducted by teleconference, so the transcript is not perfect. However, it does contain a number of exchanges where I am persuaded that the Orders above were made on consent. How we got to that consent, and whether the motion was necessary in the first instance, is a different matter.

[23] There were also a number of requests for discovery of documents that were made by the Plaintiff that were part of the August 12th, 2020 motion. Those were all adjourned as I came to the conclusion that case management was advisable in this matter, and made a recommendation to that effect to Ricchetti R.S.J.

[24] Since the appearance on August 12th, 2020, there have been a number of case conferences, and the action is continuing to move forward. None of those motions or subsequent appearances are relevant to the issues I have to determine in this decision.

Issues

[25] The facts and submissions of the parties reveal the following issues that I must determine:

1. Who was the successful party? Who should pay costs to whom?
2. What should the amount of costs be?
3. Should counsel for the Plaintiff be required to pay the costs personally?

[26] I will deal with each issue in turn.

Issue #1 – Who Should Pay Costs to Whom?

[27] This issue requires me to consider the following sub-issues:

1. What was the outcome of this motion? Who was the successful party on this motion?
2. Is the Defendant’s Offer to Settle a factor that should be considered in fixing costs?
3. Was either party’s conduct in this matter unreasonable?

[28] A consideration of these sub-issues will also require me to consider the factors that Courts are required to consider under Rule 57.01 of the Rules of Civil Procedure.

1. What was the Outcome of this Motion?

[29] The Plaintiff argues that his “Rule 59.06 motion to vary be accepted due to the issue of the Plaintiff’s legal costs, but the behavior and tactics of litigants in deliberately withholding crucial documents…” should not be condoned in this case. As a result, it appears that the Plaintiff is arguing that he was successful on the merits of the motion and that the conduct of the Defendant was unreasonable.

[30] The problem with the Plaintiff’s submission that he was successful on the motion is that I didn’t accept the Plaintiff’s motion to vary the terms of Bielby J.’s order. Instead, I considered the submissions of the parties and crafted an Order that, as I have explained above, was mostly on consent. My endorsement noted that the one point in the Order that was not on consent was my direction that Mr. Groot not contact the Defendant’s real estate counsel. Finally, the Order did not address the issue of documentary disclosure.

[31] Therefore, I reject the Plaintiff’s argument that this motion was adjourned, or still before the Court, or somehow or other I had varied Bielby J.’s Order. I had done none of these things. Based on the facts with which I was presented, I made an order that I believe was fair in the circumstances. The bulk of the relief that the Plaintiff sought was not ordered and the Defendant was successful in resisting that relief.

[32] This last conclusion requires me to make a couple of observations on the merits of the underlying motion. Although I did not make a specific Order dismissing the Plaintiff’s motions, I was (and remain) troubled by the Plaintiff’s desire to re-litigate the Mareva injunction for two reasons:

1. The only new information that the Plaintiff could point to in support of his motion to vary Bielby J.’s order was the fact that the Defendant had not disclosed that she had transferred money to her litigation counsel and her real estate counsel. There should have been no surprise that monies were transferred to both counsel, and this was not sufficient reason to vary Bielby J.’s Order.
2. The Plaintiff’s claim that Bielby J. had been wrong to consider the availability of a CPL in this case is not supported by either the law, or the ultimate remedy that was ordered in this case. In any event, if the Plaintiff was concerned about Bielby J.’s decision, it was appealable to the Divisional Court.

[33] Based on these two observations, I am of the view that there was not a great deal of merit to the Plaintiff’s motion. I do not view the Plaintiff’s motion as having either been granted or adjourned. I disposed of some of the issues in the motion.

[34] That being said, the Plaintiff does have a point in his submission that the Order that was issued was compelled by the Plaintiff’s motion. Sometimes consent Orders can be obtained because one party served and filed a motion record. Certainly, there is some merit to that submission here. I am not sure that the Defendant would have agreed to a CPL on her property and to other undertakings in the absence of the Plaintiff’s motion.

[35] When all of these factors are considered, in my view the Defendant was the successful party on this motion. However, that success was mixed, and the Defendant should not be entitled to a complete award of costs for this motion. She was required to provide the Plaintiff with relief in order to obtain her success. This brings me to the offer to settle.

2. Should the Defendant’s Offer to Settle be Considered in Fixing Costs?

[36] Yes. It is a factor that favours an award of costs to the Defendant.

[37] The Defendant’s offer to settle does not meet the criteria for a Rule 49 offer. It was not served in accordance with the timelines under Rule 49 and it is not an offer where the Defendant did as well or better than all of the terms that were actually ordered. In particular, the Defendant was only prepared to provide undertakings as part of her offer to settle, but I actually made a Court order.

[38] On this point, I am troubled by counsel for the Defendant’s submission that “the offer to settle sent by Defendant’s counsel two days before the hearing of the motion, as per Rule 49.10 in ordinary course [sic] should result in Defendant receiving costs.” This submission is unsupportable, as it is contradicted by the clear terms of Rule 49.03. Rule 49.10 does not apply in this case as the offer to settle was not made seven days before the motion.

[39] However, the Offer to Settle was an effort on the part of the Defendant to find a reasonable compromise to the issues raised by the Plaintiff’s motion. It is, in other words, a factor that the Court should consider in assessing the reasonableness of the Defendant’s conduct. In addition, the offer that was made was close to the Order that I made.

[40] The Plaintiff, on the other hand, single-mindedly pursued a re-hearing of the Order of Bielby J. and even, once the consent terms were agreed to, the Plaintiff took the position that the Defendant had consented to his motion to vary. As I have set out above, this was not my view of the outcome of this case. In addition, this conduct tended to lengthen the proceeding, especially once the Defendant’s offer had been served. This brings me to the next issue.

3. Was Either Party’s Conduct Unreasonable?

[41] To a certain extent, both parties should bear some of the responsibility for this motion. I start with the Defendant. From the hearing of the motion before Bielby J. until the hearing of the motion before me, it is arguable that the Defendant was not moving in a prompt enough manner to disclose the documents that were being sought, and to provide the information that Bielby J. had ordered her to provide.

[42] However, the Plaintiff had also adopted an aggressive approach to the issues at play in the litigation. In particular, by seeking to re-litigate the Mareva injunction almost immediately after it had been argued is concerning to me. In addition, the unwillingness of the Plaintiff to acknowledge that this matter ended up being determined mostly on consent is concerning to me. Finally, as counsel for the Defendant correctly notes, the motion brought by the Plaintiff was needlessly complex, and included various heads of relief where a CPL would have (and did) achieve most of what the Plaintiff sought.

[43] In the end, when the conduct of the parties is considered, it suggests a modest award of costs in favour of the Defendant.

Conclusion

[44] When all of these factors are considered, I am of the view that the Plaintiff should be required to pay the Defendant a moderate amount of costs for this motion. This amount should be moderated significantly from the Defendant’s claim for costs in part because the Plaintiff also achieved some success on this motion.

Issue #2 – The Quantum of the Costs

[45] The Defendant is seeking her actual costs for this motion in the sum of $54,173.90. In the alternative, the Defendant claims partial indemnity costs in the sum of $33,868.27.

[46] There are two major problems with the Defendant’s bill of costs, as follows:

1. There is considerable duplication in the time that has been spent by the lawyers. As an example, each of the three lawyers involved in this case spent at least five hours in preparation for hearing, and two of the lawyers spent most of two business days in preparation for this hearing. These costs seem excessive, although I do not doubt that they were incurred.
2. There are entries in the Defendant’s bill of costs that include preparation of the discovery plan and other tasks that are not related to this motion.

[47] I also note that the Plaintiff’s claim for costs was for substantial indemnity costs in the amount of approximately $26,000.00, which is around half of what the Defendant is claiming in substantial indemnity costs. The Plaintiff’s costs estimate is a reasonable estimate of what the losing party would expect to pay on a substantial indemnity basis if all of the issues in this motion had been argued, including the production issues that were deferred. The costs that the Defendant seeks, on both a substantial indemnity and a partial indemnity basis, are unreasonable and not justified on the facts before me.

[48] The Defendant’s claim must be reduced from this $26,000.00 to take into account three key factors, as follows:

1. This is not an appropriate case for substantial indemnity costs. The Defendant was not completely successful on this motion. Further, although the Plaintiff’s motion lacked merit, it resulted in an Order that provided the Plaintiff with a benefit. As a result, I do not see any reason to award costs beyond the partial indemnity scale.
2. The motion that I heard did not deal with disclosure issues as I postponed those to a later date. As a result, some of the time that would otherwise be properly claimed is related to an issue that was not considered.
3. The Defendant was not completely successful on this motion. She suggested a compromise that the Court ultimately adopted, but there is still an element of compromise present, and the Plaintiff also accepted parts of the compromise.

[49] As a result, these factors suggest a significant reduction from a total reasonable substantial indemnity fee of $26,000.00. In my view, when all of the factors are considered together, an appropriate amount of costs for this motion is $7,500.00 inclusive of HST and disbursements. These are, as I have explained, fees that are set on a partial indemnity basis.

Issue #3 – Should the Plaintiff’s Counsel Pay the Costs Personally?

[50] No.

[51] In support of her position that the Plaintiff’s counsel should pay costs personally, the Defendant points to Mr. Groot’s accusation that Mr. Cohen made intentional misrepresentations to Bielby J. at the hearing of the original Mareva injunction. In support of this position, counsel cites Best v. Ranking (Lancaster) 2015 ONSC 6279 and 1250294 Ontario Ltd. v. 2141065 Ontario Inc. 2014 ONSC 4132.

[52] In conducting an inquiry into whether costs should be payable by a lawyer personally, the Court asks two questions:

1. Does the lawyer’s conduct fall within Rule 57.07(1)?
2. If so, then as a matter of discretion, is this a case where the costs should be awarded against the lawyer personally?

[53] In exercising the discretion under the second part of the test, judges must do so cautiously. It is only in the clearest of cases that an award of costs should be made against counsel personally. These orders are made sparingly, and with the greatest of care. See Bailey v. Barbour 2014 ONSC 3698 at para. 37 and the cases cited therein.

[54] In this case, even if I was satisfied that Mr. Groot’s conduct met the first branch of the test, I would not exercise my discretion in this case in part because the Plaintiff did achieve something out of this motion. As a result, this is not one of those “clearest of cases” in which an award of costs should be made against Mr. Groot personally.

Conclusion

[55] For the foregoing reasons, I have determined that the Plaintiff should pay the Defendant the sum of $7,500.00 in costs inclusive of HST and disbursements on account of the August 12th, 2020 motion. Those costs can be set-off against any costs awards that the Defendant owes to the Plaintiff. If the Defendant has satisfied those costs awards, then the costs are payable within thirty (30) days of the release of these reasons.

LEMAY J Released: December 18, 2020

COURT FILE NO.: CV-20-455 DATE: 2020 12 18 ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: David Bacchus Plaintiff - and - Sara Lorraine Munn, John Doe, Jane Doe and Doe Corporations Defendants REASONS FOR DECISION LEMAY J Released: December 18, 2020