COURT FILE NO.: CV-15-1888-00A1
DATE: 2021 04 21
ONTARIO
SUPERIOR COURT OF JUSTICE
RE: Sonia Preiano and Gianluca Preiano, Plaintiffs
AND
Giuseppe Cirillo, the Estate of Giuseppe Cirillo and Antonia Cirillo, Defendants
BEFORE: The Honourable Justice LeMay
COUNSEL: John Gray, on behalf of his firm
Grace Cirillo, Self-Represented
COSTS ENDORSEMENT
LEMAY J
[1] The Defendants are all being represented by Grace Cirillo. Ms. Cirillo is the representative for the Estate of Giuseppe Cirillo and the litigation guardian for Antonia Cirillo. The dispute before me involves the fees of the Cirillo’s former counsel, Mr. John Gray. These fees have been hotly contested by Ms. Cirillo. On November 4th, 2020, Miller J. granted a charging order (2020 ONSC 6781) in Mr. Gray’s favour on costs owing by the Plaintiff to the Defendants.
[2] Ms. Cirillo brought a motion to set aside the November 4th, 2020 decision and Order of Miller J. The motion to set aside Miller J.’s Order was returnable February 19th, 2021. I dismissed that motion by way of written reasons dated February 22nd, 2021 (see 2021 ONSC 1367). It is now time to fix the costs for the motion before me.
The Position of the Parties
[3] Mr. Gray seeks costs in the sum of $5,911.03 inclusive of HST and disbursements. These costs are sought on a substantial indemnity basis for the following reasons:
a) An offer to settle the motion on terms that were at least as reasonable as the outcome was made by Mr. Gray and refused by Ms. Cirillo.
b) Ms. Cirillo has made unsubstantiated allegations of fraud against Mr. Gray, and these unsupported allegations should attract substantial indemnity costs.
c) Ms. Cirillo has needlessly complicated and dragged this motion out.
[4] Ms. Cirillo, on the other hand, appears to be seeking to have the costs of this motion delayed until the hearing of the assessment. In the alternative, Ms. Cirillo seems to be suggesting that either she receive costs or that Mr. Gray be denied his costs on the basis of his conduct. Ms. Cirillo also continues to assert that she disagrees with the merits of my decision.
Issues
[5] In order to address these submissions, I will begin by setting out the applicable legal principles in general terms. Then, I will address the following issues:
a) Whether costs should be deferred and, if not, who should be entitled to costs?
b) Should costs be awarded on a substantial indemnity basis either because of the Offers to Settle or because of either party’s conduct?
c) Are the costs sought reasonable?
Applicable Legal Principles
[6] The principles that I am to apply in this case come from Rules 49 and 57 of the Rules of Civil Procedure R.R.O. 1990 Reg. 194. Rule 49 sets out the rules that apply when formal offers to settle are made, including costs consequences where a party does not accept an offer to settle and the offering party does as well (or better) than the offer at the hearing. Rule 49 applies, with necessary modifications, to motions. As a result, it is possible to trigger the costs consequences under Rule 49 with an offer to settle a motion. In the alternative, the Court has the discretion to take into account any offer to settle. See Rule 49.13.
[7] Rule 57.01 sets out a series of principles that apply to fixing costs. For the purposes of the costs of this motion, the most relevant of those principles are:
a) The result in the proceeding;
b) What the reasonable expectations of the losing party would be;
c) The complexity of the proceeding;
d) The importance of the issues;
e) The conduct of any party that tended to lengthen the duration of the proceeding; and
f) Whether any step in the proceeding was improper, vexatious or unnecessary.
[8] Finally, Rule 57 requires me to adopt the “simplest, least expensive and most expeditious process for fixing costs”. In addition, costs are generally fixed by the judicial officer hearing the matter and ordering an assessment is generally the exception rather than the rule.
[9] With these principles in mind, I now turn to the issues that have been raised by the parties’ submissions.
Issue #1 – Should Costs Be Deferred? Who Should Get Costs?
[10] Ms. Cirillo asks that costs be deferred until after the assessment of costs proceeding has been concluded. I reject that submission for two reasons:
a) The motion before me is not related to the assessment of Mr. Gray’s account that is proceeding before an assessment officer at some point.
b) The Court has an obligation to fix costs in the most expeditious and least expensive manner possible. Requiring the parties to delay the fixing of costs until after some indeterminate event is not something that should be done without good reason. I do not see grounds for doing it in this case.
[11] This brings me to the question of who should be entitled to costs for this motion. Mr. Gray was completely successful on this motion and costs generally follow the result. Ms. Cirillo argues that Mr. Gray’s conduct should deprive him of costs for two reasons. Those reasons, and my conclusions on them, are as follows:
a) Mr. Gray wasted Court and taxpayers time in the February 4th, 2021 attendance. I reject this submission. My review of the Court file suggests that Mr. Gray’s observation that Ms. Cirillo’s motion was a “moving target” was correct. In addition, the February 4th, 2021 motion date was originally booked by Ms. Cirillo. The lost time for that appearance is Ms. Cirillo’s responsibility.
b) Ms. Cirillo disagrees with my decision. Again, this is not a reason for me to deny Mr. Gray his costs. My decision may be appealed, but my decision is the basis for my costs award. Therefore, I am not prepared to accept Ms. Cirillo’s assertion that “John Gray has unclean hands.” I have made my findings about the merits of the motion already, and Ms. Cirillo’s motion was meritless. There was also no evidence before me of any misconduct on the part of Mr. Gray.
[12] In addition, Ms. Cirillo’s submissions make mention of subsequent events. These events relate to different Court hearings and different parts of the Court proceeding. Therefore, they are irrelevant to the question of the costs for the motion before me.
[13] For the foregoing reasons, I have determined that I will fix the costs for the motion before me and that Mr. Gray is entitled to costs. This brings me to the question of the quantum of those costs.
Issue #2 – What Scale Should Costs Be Paid On?
[14] Mr. Gray seeks substantial indemnity costs on the basis of the offers to settle and on the basis of Ms. Cirillo’s unfounded allegations of fraud. I accept both those arguments and will set out my reasons for doing so.
a) The Offers to Settle
[15] Mr. Gray made two separate offers to settle. On January 25th, 2021, before preparing any materials, Mr. Gray served an Offer to Settle the action on the basis that the motion would be dismissed with costs payable to Mr. Gray. The offer was otherwise a valid Rule 49 offer in that it was made at least seven (7) calendar days before the hearing and was open until one minute after the commencement of the Defendants’ motion.
[16] A second offer was made on February 10th, 2021. The only difference in this offer was that it permitted the release to the Plaintiffs of the real estate file, on terms.
[17] At the motion, Mr. Gray achieved precisely the result that he had set out in his February 10th, 2021 offer. However, the production of the real estate file was only ordered because Mr. Gray acted more than reasonably and consented to its production on terms.
[18] As a result, I find that, based on the offers to settle, Mr. Gray is entitled to substantial indemnity costs from at least February 10th, 2021 to the hearing of the motion. Ms. Cirillo should have accepted Mr. Gray’s offer and should not have proceeded with the arguments on the motion. There is an interesting question on whether the offer of January 25th, 2021 triggers the substantial indemnity costs consequences in Rule 49. However, given my disposition of the second issue, I do not have to answer that question.
b) The Allegations Against Mr. Gray
[19] In both her materials and her submissions before me, Ms. Cirillo took the position that Mr. Gray engaged in fraud in both obtaining the Order of Miller J. and in fraud under the Income Tax Act. I found that none of these allegations were supported by any evidence.
[20] Mr. Gray now asks for costs on a substantial indemnity basis, and directs my attention to the decisions in Bargman v. Rooney [1998] O.J. No. 5528 (Ont. Gen. Div.) and Expoed Inc. v. Anaca Technologies Ltd. 2017 ONSC 6513. The law in this area is helpfully summarized by Myers J. in Expoed as follows (at paras. 2-4):
[2] In response to the defendant’s request for punitive costs, the plaintiff relies on the instructive decision of Strathy J. (as he then was) in Nazarinia Holdings Inc. v. 2049080 Ontario Inc., 2010 ONSC 2559, <http://canlii.ca/t/29jl2>. In that case, Strathy J. set out the basic approach in assessing enhanced costs in these cases as follows:
[10] I start with the proposition that substantial indemnity costs are very much the exception and should only be awarded in "rare and exceptional cases to mark the court's disapproval of the conduct of the party in the litigation": Hunt v. TD Securities Inc. (2003), 2003 3649 (ON CA), 66 O.R. (3d) 481, [2003] O.J. No. 3245 (C.A.) at para. 123. The conduct in question must be "reprehensible, scandalous or outrageous": Young v. Young, [1993] 4 S.C.R. 3, 1993 34 (SCC), 1993 34, at para. 250; United States of America v. Yemec (2007), 2007 65619 (ON SCDC), 85 O.R. (3d) 751, [2007] O.J. No. 2066 (Div. Ct.) at para. 30.
[11] I also note that it is not every case of unsuccessful allegations of fraud that will result in an award of substantial indemnity costs. In Hamilton v. Open Window Bakery Ltd., 2004 SCC 9, [2004] 1 S.C.R. 303, [2003] S.C.J. No. 72, Arbour J., after referring to Young v. Young, stated 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.
[12] I respectfully adopt the observations of Lax J. in Manning v. Epp, [2006] O.J. No. 4239 (S.C.J.) at paras. 7 – 9:
Costs on the higher scale can be awarded as a form of chastisement and as a mark of the court's disapproval of a litigant's conduct. This is intended to punish as well as to deter others from engaging in similar conduct. Unproved allegations of fraud frequently attract awards on the higher scale. Unproved allegations of breach of trust, conspiracy, misrepresentation, breach of fiduciary duty, and the like, may also attract this kind of award: Beaver Lumber Co. v. 222044 Ontario Ltd. (1997), 5 C.P.C. (4th) 253 (Ont. Gen. Div.) at p. 256.
Cost sanctions are imposed for these kinds of unproved allegations because they are rooted in assertions of dishonesty and deceit and go to the heart of a person's integrity: Bargman v. Rooney (1999), 30 C.P.C. (4th) 259 (Ont. Gen. Div.) at pp. 268-269; Dyer v. Mekinda Snyder Partnership Inc. (1998), 1998 14847 (ON SC), 40 O.R. (3d) 180 (Gen. Div.) and see cases referred to at pp. 184-185. Where serious allegations of dishonest or illegal acts are made, but are so inadequately pleaded that they are not permitted to go forward, costs consequences should likewise follow. These allegations have stood in the public record and over the heads of the defendants. The plaintiffs admitted that the allegations were akin to or as serious as fraud. The allegations were made against public officials in the course of carrying out their public duties. To strike recklessly at the integrity of a person occupying a position of public trust is a serious matter.
The task for the court is to punish and deter unwarranted allegations and egregious conduct, but without discouraging the tenacious pursuit and advancement of serious claims of impropriety in a proper case. This was not a serious claim of impropriety. Essentially, the plaintiffs sought to recover damages in respect of a solicitor's retainer in which they had no prospective economic interest and made unsupported allegations of illegal conduct on the part of the Mayor and his co-defendants. The allegations were designed to harm and embarrass. It is appropriate to award costs to the Epp defendants on a substantial indemnity scale.
[3] In assessing the costs in Nazarinia Holdings Strathy J. considered that the defendant made a fraud allegation in its factum so as to keep its options open for trial. It also reported the alleged fraud to the police. But it failed to put evidence forward to prove the fraud at trial. Strathy J. awarded punitive costs on a substantial indemnity basis in that case.
[4] I agree that not every unsubstantiated allegation of fraud need inexorably lead to a punitive costs award. On the other hand, a party that makes an allegation of fraud ought to reasonably expect a punitive costs award if the party fails to prove its allegation. Arbour J. found unsubstantiated allegations of fraud amounted to sufficiently reprehensible conduct to attract a punitive costs award where the defendant had access to information to know that the other party was merely negligent and was not dishonest. Lax J. found that allegations that are not seriously made and advanced but were made for an ulterior purpose attract punitive costs. Lax J. started with the proposition that unsubstantiated allegations of fraud should attract punitive costs but distinguished those cases from cases in which a party tenaciously pursues serious claims of dishonesty in a proper case. The latter would not attract a punitive costs award where the allegations were reasonably based.
[21] Myers J. went on to award substantial indemnity costs on the basis that the Plaintiff in Expoed had made fraud allegations and had not even tried to prove them. Myers J. observed (at para. 12) that “if the Plaintiff had a serious basis to allege deliberate wrongdoing by the Defendant, it ought to have proven its claim or at least tried to do so.”
[22] In addition, the Court of Appeal has also held that unproven allegations of dishonesty as well as fraud are capable of attracting substantial indemnity costs. See McNaughton Automotive Ltd. v. Co-Operators General Insurance Co. 2008 ONCA 597 at para 45.
[23] In this case, other than asserting that she was knowledgeable about tax law, Ms. Cirillo did nothing to demonstrate that Mr. Gray was engaged in any fraudulent conduct. Ms. Cirillo simply asserted that there was fraud and blamed Mr. Gray. As I noted in my original decision, this was a very serious allegation and there was nothing in the record before me to support it. As Myers J. noted, Ms. Cirillo should have tried to prove this claim if there was merit to it.
[24] As the cases cited by Myers J. observe, there is a balancing between sanctioning parties that make scurrilous allegations of fraud and ensuring that there is no chilling effect on parties who do have serious allegations of fraud that need to be litigated even if they are litigated unsuccessfully. In this case, that balance favours an award of substantial indemnity costs. The allegations made by Ms. Cirillo were meritless on the record before me, and there was an obligation on Ms. Cirillo’s part to advance at least some evidence to support these allegations.
[25] It is also no answer to argue that the allegations of fraud are going to be presented before the assessment officer and, therefore, I should not be determining this issue. Miller J. already determined that a charging order should be granted. Ms. Cirillo sought to set that discretionary order aside on the basis of fraud. Even on this interlocutory motion, Ms. Cirillo was obligated to step forward with at least some evidence, especially since she was seeking to have me reconsider a discretionary decision previously made by another judge of this Court. Discretionary decisions attract a high level of deference. The Courts should be discouraging litigants from re-litigating discretionary decisions without good reason.
[26] I hasten to add, as I did at paragraph 27 of my original reasons, that my findings in respect of fraud apply to the record before me and that nothing binds the assessment officer from reaching a different conclusion on a different record.
[27] Finally, I am cognizant of Ms. Cirillo’s status as a self-represented litigant. This is a factor that would normally cause the Court to apply the rules with respect to costs more leniently. However, I note again that Ms. Cirillo was seeking to have a discretionary decision set aside and advanced unsupported allegations of fraud in her efforts to set that discretionary decision aside. This is conduct that is worthy of sanction.
Issue #3 – Are the Costs Sought Reasonable?
[28] The costs that Mr. Gray is seeking are reasonable, with one small exception.
[29] I start with the reasonable expectations of the losing party. Ms. Cirillo herself submitted a bill of costs that was for more than $4,000.00. In the circumstances, a request for costs of less than $6,000.00 from the other side does not appear to be either unreasonable or outside of the reasonable expectations of the losing party in this case.
[30] Then, there is the nature of the motion. While this was an uncomplicated motion, the motion was an attack on Mr. Gray’s professional integrity. It is, therefore, not unreasonable to expect that Mr. Gray would vigorously defend himself in this motion. The expenditure of time on this motion, which is approximately 10 hours, is not unreasonable.
[31] This is especially true when it is remembered that Ms. Cirillo unilaterally chose a motion date of February 4th, 2021 and then unilaterally amended her motion record the day before this motion, making the motion returnable on February 19th, 2021. This was conduct that tended to lengthen the proceedings in this case. Contrary to Ms. Cirillo’s submission, Mr. Gray did not waste Court time and taxpayers’ money at the February 4th, 2021 appearance.
[32] The only docket in Mr. Gray’s account that is not supported is the docket for the counsel fee. The motion only took forty-five minutes to argue, and it was argued by ZOOM. Therefore, the counsel fee should be limited to one hour rather than two hours and I have reduced the fees accordingly.
Conclusion
[33] For the foregoing reasons, I am of the view that costs in this matter should be paid by Grace Cirillo and/or the Defendants in this action on a substantial indemnity basis in the sum of $5,400.00 inclusive of HST and disbursements. Those costs are to be paid within ten (10) calendar days of the release of these reasons.
[34] As a final matter, I note that Mr. Gray has asked for the Court’s assistance in completing the Order from the motion as Ms. Cirillo is refusing to send him a draft Order. In response to this submission, Ms. Cirillo states “a draft Order is prepared after an endorsement for costs, if any, is submitted. There will be no handwritten dollar amounts on an Order prepared by me.” This is an unreasonable position, as I have regularly included handwritten amounts of costs on Orders. In any event, however, the release of the costs endorsement should assist the parties in completing the Order.
[35] If the parties have any issues with respect to the Order, an appointment may be made with the Trial Coordinator to speak to me to settle the terms of the Order.
LEMAY J
Released: April 21, 2021
COURT FILE NO.: CV-15-1888-00A1
DATE: 2021 04 21
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Sonia Preiano and Gianluca Preiano
Plaintiffs
- and -
Giuseppe Cirillo, the Estate of Giuseppe Cirillo and Antonia Cirillo, Defendants
Defendants
COSTS ENDORSEMENT
LEMAY J
Released: April 21, 2021