Court File and Parties

COURT FILE NO.: CV-13-490665 DATE: 20210324

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: DIANA HORDO AND MICHAEL HORDO Plaintiffs/Appellants

AND:

ARNOLD H. ZWEIG Defendant/Respondent

BEFORE: Justice Glustein

COUNSEL: Diana Hordo and Michael Hordo (self-represented) Peter Smiley, for Arnold H. Zweig Debra Eveleigh, for Lawyers’ Professional Indemnity Company Antonio T. Antoniou and Ian Sinke, for the Law Society of Ontario

COSTS REASONS

Overview

[1] By Reasons for Decision dated February 12, 2021 (the Reasons), I dismissed (i) the Hordos’[^1] appeal of the decision of Master Muir dated November 26, 2019, (ii) the Hordos’ motion under Rule 59.06 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, to set aside the order of the Master on the basis of fraud or facts discovered after the order was made, and (iii) the Hordos’ motion for additional relief under a judge's jurisdiction, including an order that (a) LawPro (and possibly the LSO) pay interim costs for the Hordos’ prior counsel and for expert reports that the Hordos sought to file in the action, (b) LawPro and the LSO be declared vexatious litigants, and (c) a receiver be appointed for the LSO.

[2] I ordered the parties to deliver written costs submissions. I have now received and reviewed those submissions.

[3] In brief, I agree with the submissions of Zweig, the LSO, and LawPro that they are entitled to substantial indemnity costs, based on the Hordos’ conduct. In particular, the Hordos repeatedly alleged that Youd (Zweig’s lawyer), the LSO, and LawPro engaged in false representations, concealment or misconduct. They also accused Youd, the LSO, and LawPro of fraud, conspiracy, criminal conduct, and swearing false evidence. There was no support for any of those allegations, as I held in my Reasons.

[4] The Hordos impugned the professional integrity of Youd, the LSO, and LawPro, despite a clear warning from the Master in his costs reasons. The Master ordered substantial indemnity costs on the motion before him, and stated that the Hordos “should be aware of the serious nature of such allegations and the potential consequences if they are not proven”.

[5] Despite all of the above, including the Reasons which upheld the Master’s finding that the alleged conspiracy was baseless, the Hordos continue to impugn the integrity of Youd, the LSO, and Law Pro. In their costs submissions before this court, the Hordos allege that Youd, the LSO, and LawPro formed a “cabal” who engaged in “deceit” before the court, and who “ignor[ed] decisions of higher courts as well as the rules and regulations”.

[6] The Hordos further submit that (i) the LSO is “nothing more than a Hooveristic institution using intimidation, threat and bully-ism, against the public and any lawyer or paralegal who fails to tow [sic] the line of their anarchy contrary to their mandate under the Statute to protect the public and uphold the law”; and (ii) LawPro is part of a “shell game … misrepresent[ing]…the facts to the peoples of Ontario, and to all practicing lawyers and paralegals”.

[7] Given the above, I find that there has been “reprehensible, scandalous or outrageous conduct” on the part of the Hordos. Consequently, I order costs to be paid on a substantial indemnity scale. I fix those costs at $12,000 for Zweig, $9,000 for LawPro and $7,500 for the LSO (inclusive of disbursements and HST).

Facts

The Master’s decision on costs

[8] By separate reasons dated March 10, 2020, the Master ordered the Hordos to pay costs of the motion on a substantial indemnity basis. He held, at paras. 12-14:

In my view, the defendant and LSO are entitled to costs as the successful parties. I am also satisfied that it is appropriate that costs be paid on a substantial indemnity basis. The plaintiffs made very serious allegations against the defendant, his counsel and LSO. The plaintiffs' allegations against the defendant, his counsel and LSO included interfering with the plaintiffs' right to counsel, bribery, criminal breach of trust, perverting the course of justice, dishonesty, swearing false affidavits and various other similar misconduct. These allegations appear repeatedly throughout the plaintiffs' evidence. Specifically, they can be found, among other places, at paragraphs 39 and 43 of Mr. Hordo's affidavit sworn October 10, 2019 and at paragraphs 7, 8, 17, 18, 19, 23, 35, 36, 53, 54, 55 and 59 of Mr. Hordo's affidavit sworn October 28, 2019.

I addressed these allegations at paragraph 18 of my reasons for decision dated November 26, 2019, where I stated, in part, as follows:

18. In summary, there is simply no evidence of improper conduct on the part of Mr. Youd, LawPro, LSO or the defendant. The plaintiffs' allegations are pure speculation based on inference and conjecture and nothing more. They have failed to provide any direct evidence to support their serious allegations of misconduct.

The plaintiffs made very serious allegations that included criminal behaviour, dishonesty and other reprehensible conduct by the defendant, his lawyers and LSO. The plaintiffs failed to prove those allegations. Mr. Hordo is a retired lawyer. He should be aware of the serious nature of such allegations and the potential consequences if they are not proven. Substantial indemnity costs are warranted in the circumstances of this motion.

[9] The Master ordered costs payable on a substantial indemnity basis in the amount of (i) $8,000 to Zweig and (ii) $4,500 to the LSO. LawPro did not seek costs of that motion.

Conduct of the Hordos on this hearing

[10] Despite the clear wording of the Master’s costs endorsement, and the Master’s significant costs award, the Hordos continued to make serious allegations against Youd, the LSO, and LawPro on the appeal and the various motions before this court.

[11] It is not practical to list every serious allegation made in the Hordos’ motion material before the court, or in their written or oral submissions. The Hordos filed in excess of 1,100 pages of material with the court, all in support of a “conspiracy theory” which both the Master and this court found to be baseless.

[12] By way of a limited example, in their factums and supplemental motion records before this court, the Hordos accused Youd, the LSO, and LawPro of “fraud, conspiracy, and criminal conduct”, and “flagrant lies”. The Hordos accused Youd of knowingly swearing a false affidavit and accused his colleagues of “turning a blind eye” to this “criminal act”. The Hordos accused the LSO of having “lost its moral compass”, and in email correspondence accused counsel of “crimes”, acting with “nefarious purposes”, and having “perverted criminal minds”.

[13] The Hordos further accused Youd, BYLD, and counsel for LawPro and the LSO of having “set up to deceive the court and did so”, and that they collectively engaged in “fraud of misrepresentation, collusion, [and] conspiracy”.

Conduct of the Hordos on their costs submissions

[14] Despite (i) the Master’s decision that the conspiracy theory was baseless and the Master’s separate costs reasons, which set out the consequences of making unproven allegations attacking the integrity of Youd, the LSO, and LawPro, and (ii) the Reasons, in which I dismissed the appeal and the motions, the Hordos continue to attack the integrity of Youd, the LSO, and LawPro in their costs submissions before this court.

[15] In their costs submissions, the Hordos make the following submissions against Youd, the LSO, and LawPro:

(i) They engaged in conduct “through the RICO Cabal structure of LSO and its Ontario wholly owned Corporations, which intended to deceive and did deceive, as per the above Judicial errors, and which intended to deny access to Justice to skew Justice and which were successful”;

(ii) “[T]he LSO and its cabal members are the cornerstone of the administration of justice and are creating an inherent conflict of interest and bias in proceedings”;

(iii) They engaged in “deceit and [an] attempted charade” in relation to the delivery of a Sync file for the hearing;

(iv) They “are funded to continue prosecuting, ignoring decisions of higher courts as well as the rules and regulations”;

(v) “This case is an example of how the Law Society of Ontario has fallen into disrepute, becoming nothing more than a Hooveristic institution using intimidation, threat and bully-ism, against the public and any lawyer or paralegal who fails to tow [sic] the line of their anarchy contrary to their mandate under the Statute to protect the public and uphold the law”; and

(vi) LawPro is engaged in a “shell game” of “being the insurer”, which is “a misrepresentation of the facts to the peoples of Ontario”.

Quantum of costs sought

[16] Zweig seeks substantial indemnity costs of $16,210.52 (inclusive of HST), based on (i) substantial indemnity fees of $14,364 (calculated by a 1.5 multiplier of partial indemnity fees of $9,576), plus (ii) applicable HST on fees and disbursements of $1,846.52. The partial indemnity fees are calculated at 60% of actual fees.

[17] The LSO seeks substantial indemnity costs equal to its actual fees of $14,752.15 (all amounts inclusive of HST), based on a 1.5 multiplier of partial indemnity fees of $9,736.42. The partial indemnity fees are calculated at 66% of actual fees.

[18] LawPro seeks substantial indemnity costs equal to its actual fees and disbursements of $13,398.48, including $73.45 for disbursements (HST is only applicable to the cost of disbursements, as fees are claimed in respect of in-house counsel), based on a 1.5 multiplier of partial indemnity fees of $8,867.95. The partial indemnity fees are calculated at 66% of actual fees.

Analysis

The applicable law

[19] I rely on the following principles governing the award of substantial indemnity costs:

(i) Substantial indemnity costs should be ordered “only where there has been reprehensible, scandalous or outrageous conduct on the part of one of the parties”, “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”: Davies v. Clarington (Municipality), 2009 ONCA 722, 100 O.R. (3d) 66, at paras. 29-30, quoting Young v. Young, 1993 CanLII 34 (SCC), [1993] 4 S.C.R. 3, at p. 134 and Mortimer v. Cameron (1994), 1994 CanLII 10998 (ON CA), 17 O.R. (3d) 1 (C.A.), at p. 23;

(ii) I adopt the conclusion of the Master, at para. 8 of his costs reasons, that “[s]ubstantial indemnity costs may be appropriate in situations where a party alleges but fails to prove allegations of fraud, criminal conduct, dishonesty or other reprehensible conduct”: see also Lyons v. Todd, 2019 ONSC 2269, at para. 30; Investment Administration Solutions Inc. v. Pro-Financial Asset Management Inc., 2018 ONSC 2589, at para. 14;

(iii) Substantial indemnity costs have been ordered where (a) one party to the litigation has behaved in an abusive manner, brought proceedings wholly devoid of merit, and unnecessarily run up the costs of the litigation; (b) such a costs award is needed to sanction a party’s vexatious, contumelious or oppressive conduct of the whole litigation or a step in it; (c) a claim has been dismissed as an abuse of process, in particular where a defendant has been forced to respond to a plaintiff’s attempt to relitigate claims; (d) a plaintiff has made unfounded allegations of improper conduct that were seriously prejudicial to the character and reputation of the defendants; and (e) unsubstantiated allegations of dishonesty, illegality and conspiracy are advanced without merit: Best v. Lancaster, 2015 ONSC 6269, at para. 142;

(iv) “[M]alicious counter-productive conduct” or the “harassment of another party by the pursuit of fruitless litigation” may merit an award of costs on an elevated scale: Davies, at para. 45; and

(v) Striking at the integrity of a professional recklessly is a serious matter which can lead to the court ordering costs on a substantial indemnity scale: Mele v. Thorne Riddell (1997), 1997 CanLII 12124 (ON SC), 32 O.R. (3d) 674 (Gen. Div.).

[20] On the issue of the quantum of substantial indemnity costs, I adopt the following principles as set out by Justice Spies in Fram Elgin Mills 90 Inc. v. Romandale Farms Ltd., 2020 ONSC 1621, at para. 52:

(i) Rule 1.03(1) defines “substantial indemnity costs” as costs awarded in an amount that is 1.5 times partial indemnity;

(ii) Given the reference to partial indemnity costs, the Rule 57.01 factors still apply—the costs awarded on a substantial indemnity scale are to be determined on the basis of applying a factor of 1.5 to the amount of the partial indemnity costs as determined to be fair and reasonable;

(iii) [T]he reference to full indemnity in Rule 57.01(4) indicates that there is a difference between full and substantial indemnity costs; and

(iv) Therefore, substantial indemnity costs do not result in full indemnity to the winning party.

[21] I also adopt the following principles as to the determination of the quantum of substantial indemnity costs, as set out by Justice Mew in Chandra v. Canadian Broadcasting Corporation, 2015 ONSC 6519, at para. 62:

(i) While as a general rule of thumb, partial indemnity costs will often be fixed or assessed in an amount that equates with 60% of full indemnity costs, this will not always be so;

(ii) In determining how much to award for partial indemnity costs, a court must balance the discretionary factors set out in r. 57.01(1) and ultimately arrive at an amount that is reasonable and fair in the circumstances and that bears some relationship to the amount that an unsuccessful party could reasonably expect to pay;

(iii) Substantial indemnity costs are not determined by reference to full indemnity rates, or of full indemnity costs where full indemnity rates are reasonable, but, rather, are a function of the amount determined for partial indemnity costs;

(iv) The application of the factor of 1.5 under Rule 1.03 is subject to the indemnity principle (expressly referenced in Rule 57.01(1)(0.a)), such that no award of costs may exceed the legal fees and disbursements actually incurred by the party in whose favour costs are awarded;

(v) Costs on a full indemnity scale represent a complete indemnity for those costs that have been reasonably incurred; [and]

(vi) Costs on a full indemnity scale will usually, but not always, exceed substantial indemnity costs, but substantial indemnity costs will never exceed full indemnity costs.

Application of the law to the facts of the present case

[22] I address the issues of scale of costs and quantum below.

1. Scale of costs

[23] I fix costs on a substantial indemnity scale. I find:

(i) The Hordos made innumerable allegations impugning the professional integrity of Youd, the LSO, and LawPro, all of which were unsupported by any evidence before the court;

(ii) The submissions were particularly vitriolic, alleging “fraud”, “conspiracy”, “criminal conduct”, swearing a false affidavit, and “turning a blind eye” to a “criminal act”;

(iii) The Hordos made such submissions even though the Master had already (a) found their conspiracy theory to be baseless and (b) ordered substantial indemnity costs with an explicit warning that the Hordos “should be aware of the serious nature of such allegations and the potential consequences if they are not proven”;

(iv) Michael, as a retired lawyer, would have even a stronger knowledge of the importance of the professional reputations of Youd, the LSO, and LawPro; and

(v) Despite this court dismissing the appeal and the motions, the Hordos repeated the same type of allegations in their costs submissions before this court, demonstrating no understanding of the consequences of falsely impugning the reputation of Youd, the LSO, and LawPro. The Hordos submitted that Youd, the LSO, and LawPro were a “Cabal”, engaged in a “shell game” to “deceive” the court, who sought to “deny access to justice”, and “ignor[ed] decisions of higher courts as well as the rules and regulations”.

[24] The spurious allegations of professional misconduct, on their own, would have been sufficient to order substantial indemnity costs. When combined with the refusal of the Hordos to accept the Master’s comments on costs, and the filing of a wholly unnecessary record of more than 1,100 pages (the vast majority of which they did not rely upon but which nevertheless had to be reviewed by counsel), the conduct of the Hordos can only be described as “reprehensible, scandalous, or outrageous”, justifying an award of substantial indemnity costs.

2. Quantum of costs

[25] Zweig on the one hand, and the LSO and Law Pro on the other hand, took different approaches to the quantum sought for substantial indemnity costs.

[26] Zweig applied a 60% rate to the actual fees incurred to arrive at an amount which he would have sought as partial indemnity costs. He then applied a multiplier of 1.5 to that amount, which resulted in substantial indemnity costs equivalent to 90% of actual fees incurred.

[27] LawPro and the LSO sought payment of their actual fees, based on a partial indemnity rate of 66%, which resulted in claiming 100% of actual fees incurred (using a multiplier of 1.5).

[28] I address below the quantum of costs sought by each of Zweig, LawPro, and the LSO.

a. Costs sought by Zweig

[29] Zweig was the primary responding party to the motion before the Master, as the Hordos sought removal of Youd as counsel. On the present appeal, those same issues were before the court.

[30] The issue was important to Zweig—losing his counsel after many years of litigation would have resulted in significant cost and delay.

[31] Further, the Rule 59.06 motion led to the Hordos filing additional material which required additional review and preparation. The Hordos also relied on 19 separate grounds of appeal.

[32] On the other hand, much of the review of the material would have been incurred for the initial motion before the Master.

[33] I adopt the following comments from the Master’s costs decision, at para. 15, which I find apply equally to the appeal and motions at the present hearing:

The defendant had to respond to numerous forms of requested relief and lengthy affidavits from the plaintiffs. This was a complex motion from a factual perspective. The main issue was obviously important to the defendant as the plaintiffs were seeking to deny the defendant his choice of counsel.

[34] Zweig seeks approximately $16,000 as substantial indemnity costs, twice the amount of the initial motion. While I recognize that some additional time (as compared to the motion) would have been required to address the new issues and affidavits, as well as to review and prepare the appeal, I do not find that the additional work would merit a costs award twice that of the motion before the Master, and that such a costs award would not reflect the amount that an unsuccessful party would reasonably expect to pay.

[35] Consequently, based on the factors I have discussed above, I would have fixed partial indemnity costs at $8,000 (inclusive of taxes and disbursements). Applying a 1.5 multiplier, I fix substantial indemnity costs of Zweig at $12,000, inclusive of taxes and disbursements.

b. Costs sought by the LSO

[36] I adopt the following comments of the Master in his costs decision, at para. 16, which I again find apply equally to the appeal and motions at the present hearing:

I view the LSO costs request as somewhat excessive. I accept that it was necessary for LSO to respond to this motion with independent counsel. However, the relief requested that affected LSO was much narrower than the relief sought against the defendant. LSO's response to this motion was not as extensive or involved when compared to the defendant. In my view, it is fair and reasonable for LSO to receive 50% of the substantial indemnity costs requested by the defendant.

[37] There were some additional costs required for the appeal and the additional relief sought against the LSO. However, the additional issues regarding vexatious litigants and receivership were not complicated, and the remaining issues addressing production and discovery were also not complex.

[38] On the other hand, counsel cannot be criticized for reviewing the voluminous material delivered by the Hordos in support of their appeal and motions, particularly in light of the fraud on the court allegations in the Rule 59.06 motion. It is not surprising that such a review, and the preparation of a factum to summarize key evidentiary issues, would require some more time than the limited issues before the Master.

[39] However, as with Zweig, much of the material would have been reviewed in preparation for the motion before the Master.

[40] Consequently, based on the factors I discuss above, I would have fixed partial indemnity costs (inclusive of HST and disbursements) at $5,000. Applying a 1.5 multiplier, I fix substantial indemnity costs of the LSO at $7,500, inclusive of HST and disbursements.

c. Costs sought by LawPro

[41] The appeal and motion raised new and important issues against LawPro, concerning its jurisdiction as an insurer and its alleged participation in a fraud on the court. Those issues were important to LawPro both from the perspective of its regulatory position and its reputation.

[42] Under such circumstances, it was reasonable for LawPro to incur significant time to review all of the affidavits and material filed by the Hordos. The legal issue of jurisdiction was complex, and the factual background related to fraud required lengthy review.

[43] On the other hand, little time would have been required to address the limited appeal issues concerning production of documents or attendance at examination for discovery, since those issues would have been fully canvassed and prepared for the initial hearing before the Master.

[44] For the above reasons, I find that LawPro is entitled to more costs than the LSO, but less than Zweig, whose retainer of Youd was at stake and who was required to review all of the 19 separate grounds of appeal.

[45] Based on the factors I discuss above, I would have fixed LawPro’s partial indemnity costs at $6,000 (including disbursements and not including taxes). Consequently, I apply a multiplier of 1.5 and fix LawPro’s substantial indemnity costs at $9,000, which include disbursements and do not include taxes (except on the disbursement) as the LawPro costs are sought on behalf of in-house counsel.

Order and costs

[46] For the above reasons, I fix costs on a substantial indemnity scale in the amount of $12,000 for Zweig, $9,000 for LawPro, and $7,500 for the LSO, all amounts inclusive of disbursements and applicable taxes, payable by the Hordos within 30 days of this order.

GLUSTEIN J.

Date: 20210324

COURT FILE NO.: CV-13-490665 DATE: 20210324

ONTARIO SUPERIOR COURT OF JUSTICE

DIANA HORDO and MICHAEL J. HORDO Plaintiffs

AND:

ARNOLD H. ZWEIG Defendant

COSTS reasons Glustein J.

Released: March 24, 2021

[^1]: I use the same defined terms as in my Reasons.