COURT FILE NO.: 03-124/17
DATE: 20211112
ONTARIO
SUPERIOR COURT OF JUSTICE
IN THE MATTER OF AN APPLICATION TO PASS ACCOUNTS
B E T W E E N:
William and carol cochrane
Applicants/Trustees
- and -
benjamin cochrane
Respondent/Objector
Chris Graham, for the Applicants/Trustees
Brendan van Niejenhuis, Carlo di Carlo, Caitlin Milne and Saba Ahmad, for the Respondent/Objector
HEARD at Toronto: in writing
Reasons for Decision on costs
DAVIES J.
[1] When Benjamin Cochrane was 12 years old, he was hit by a car while riding his bicycle and suffered a serious brain injury. Benjamin’s parents, Bill and Carol Cochrane, brought an accident benefits claim against Co-operators General Insurance on Benjamin’s behalf. That lawsuit settled in 2000 when Benjamin was 16 years old for $475,000. The settlement money was invested in an annuity that will make monthly payments for Benjamin’s benefit for the rest of his life. The Court ordered the monthly payments be made to Bill and Carol in trust for Benjamin.
[2] Between September 2000 when the trust was established and March 2017 when Bill and Carol applied to pass their accounts, the trust received $418,675.25. Following a 14-day trial, I found that Bill and Carol had accounted for $253,144.11 of the $418,675.25 received. I found they had not accounted for $165,531.14. I also found that Bill and Carol were entitled to $15,000 in compensation from the trust. In total, I ordered Bill and Carol to repay the trust $150,531.14 or approximately 35% of the money received by the trust.
[3] Benjamin now seeks $567,157.64 in substantial indemnity costs, including $8.835.48 for disbursements. Benjamin argues that Bill and Carol’s conduct has been reprehensible and justifies an enhanced costs award. In the alternative, he seeks $426,952 in partial indemnity costs inclusive of disbursements and taxes.
[4] Bill and Carol argue there should be no costs ordered. In the alternative, Bill and Carol argue they should be awarded $50,000 in costs because they were more successful on the application to pass their accounts than Benjamin.
[5] There are three issues for me to decide:
a. Should costs be awarded in this case?
b. If Benjamin is entitled to costs, should costs be awarded on an enhanced scale?
c. If Benjamin is entitled to costs, are the costs claimed by Benjamin reasonable?
[6] I find that some costs should be awarded to Benjamin because he was the successful party. However, this is not an appropriate case for an enhanced costs order. I find that the costs claimed by Benjamin, even on a partial indemnity basis, are unreasonable and disproportionate. Bill and Carol are ordered to pay $90,000 in costs inclusive of tax and disbursements.
A. Should costs be awarded in this case?
[7] Benjamin argues that he is entitled to costs as the prevailing party because Bill and Carol were not able to pass their trust account as presented and were ordered to repay a substantial amount to the trust.
[8] Bill and Carol take the position that there was divided success because not all of Benjamin’s objections were upheld and he made several allegations that were not proven at trial. Bill and Carol take the position that they were more successful than Benjamin because 65 percent of the disbursements in their account were approved.
[9] I am satisfied that Benjamin was the prevailing party in this application. The onus was on Bill and Carol as trustees to account for all the money they received on Benjamin’s behalf. While they did not have a duty to pass accounts, Bill and Carol had a duty to be in a position at all times to prove they were administering the trust in an honest and prudent manner: Zimmerman v. McMichael Estate, 2010 ONSC 2947, at para. 31; Class v. Smith, 2018 ONSC 623, at para. 49; Tarantino v. Galvano, 2017 ONSC 3535, at para. 47; Wall v. Shaw, 2018 ONCA 929, at para. 23. Bill and Carol failed to keep proper records for the trust, which they were required to do. As a result, they were unable to establish they spent all the trust funds in accordance with the terms of the trust. While I did approve the majority of disbursements in the account, Bill and Carol cannot reasonably be seen as the successful party on their application to pass the account.
[10] Having said that, I agree with Bill and Carol that Benjamin took unreasonable positions in relation to many of the disbursements from the trust and advanced other arguments that were unsuccessful. For example, Benjamin’s position that Bill and Carol were obliged to dissolve the trust when he turned 18 was without merit. His position was inconsistent with the terms of the trust. It is also inconsistent with the position taken by Manulife in 2016 (when Benjamin was 32 years old) that the monthly payments still had to be paid to Bill and Carol. Benjamin also made unfair and unfounded allegations that Bill and Carol concealed the trust from him despite documentary evidence to the contrary. In my view, the unreasonable and unsubstantiated positions taken by Benjamin are more appropriate considered when assessing what costs he is entitled to, not whether he is entitled to costs at all.
[11] I find that as the successful party, Benjamin is entitled to some costs in this case.
B. Is an enhanced costs award justified in this case?
[12] As the successful party, Benjamin is presumptively entitled to costs on a partial indemnity scale. Costs on a higher scale can be awarded if I find Bill and Carol’s conduct during the litigation or leading up to the litigation was so reprehensible, scandalous or outrageous that it is worthy of sanction: Young v. Young, 1993 CanLII 34 (SCC), [1993] 4 S.C.R. 3; Davies v. Clarington (Municipality) et al., 2009 ONCA 722, 100 O.R. (3d) 66, at para. 29.
[13] I am troubled by some of Bill and Carol’s conduct. I made adverse findings against them in my reasons. I found they included disbursements in their trust account that should not have been included. I found several of the entries in the trust account could not have been accurate. I found the way the trust accounts were prepared was confusing and misleading. I also found that Carol fabricated documents to substantiate some of the disbursements in their account.
[14] I do not condone in any way the fact that Bill and Carol created documents to try to explain what happened to Benjamin’s trust funds. However, they testified that when the trust was established they were not told they had a duty to keep detailed records. As a result, they had very few receipts for the disbursements claimed and they were trying to reconstruct what happened with Benjamin’s money over a 17-year period. To the extent that I was critical of Bill and Carol, my criticism was focussed on their failure to keep records. I did not make any findings that Bill and Carol deliberately misused Benjamin’s trust funds or appropriated funds from the trust for their own use. In fact, I heard lots of evidence that Bill and Carol were loving, supportive, devoted parents to Benjamin.
[15] A finding that a party fabricated evidence for their own purpose is the type of conduct that could justify an enhanced cost awarded in some cases. While I found that Bill and Carol created documents to support payments from the trust, I am not satisfied they created the documents to conceal their actions. Bill and Carol did not understand their obligations as trustees. They did not know they were required to keep a record of every payment made from the trust. As a result, they were trying to account for what they did with their son’s money years later without receipts. Their actions were clearly misguided but do not, in my view, rise to the level of conduct that justifies an enhanced, punitive costs award.
[16] In addition, I am troubled by some of Benjamin’s conduct. Benjamin made many unsubstantiated allegations against his parents and took unreasonable positions. For example, Benjamin sought a certificate of pending litigation in relation to Bill and Carol’s home. That application was resolved on consent when Bill and Carol undertook not to encumber or sell their home pending the outcome of the trial. However, Benjamin made no effort at trial to claim an interest in Bill and Carol’s home. It is now clear that Benjamin had no such claim. It seems Benjamin was using the threat of a certificate of pending litigation to ensure Bill and Carol would be able to pay any judgment made in his favour. That is not the purpose of a certificate of pending litigation.
[17] In addition to alleging that Bill and Carol concealed the trust from him, Benjamin alleged his parents misappropriated his trust funds for their own use and acted in a fraudulent manner in their administration of the trust. While Bill and Carol were unable to account for all of the funds they received, there was no evidence they deliberately used trust funds for their own purposes or defrauded the trust.
[18] Benjamin also took unreasonable position on many of the disbursements from the trust. For example, Benjamin would not even acknowledge that he received money that was deposited from the trust into his own bank account. He also refused to acknowledge that his trust money was used to help pay his expenses like rent and car insurance when he had little or no income.
[19] This matter has been plagued from the beginning by the parties taking unreasonable positions. In addition to seeking a certificate of pending litigation, Benjamin also sought an interim order requiring Bill and Carol to pay $400,000 into court. Benjamin’s counsel set a date on the motion for interim relief without notice to Bill and Carol’s counsel. Benjamin’s motion for interim relief was denied. Bill and Carol brought a motion demanding that Justice Morgan recuse himself. That motion was denied. Bill and Carol also brought a motion to remove Benjamin’s lawyer as counsel of record. That motion was also denied.
[20] In dismissing Bill and Carol’s motion to remove Benjamin’s lawyer, McEwen J. criticized both sides for taking procedural steps that were “unfortunate and unnecessary.” He also noted that there was “unnecessary and unattractive sniping and arguing between counsel” during Benjamin’s cross-examination. McEwen J. wrote,
It is also expected by this Court that this behavior will cease and that the counsel involved focus on the important issues so critical to their clients. Far too much time has been spent in unnecessary personal, interlocutory skirmishes.
[21] Again, I do not condone how Bill and Carol conducted this litigation. And I do not condone the fact that they created receipts to try to substantiate some of the disbursements. However, Benjamin also acted in an unreasonable and arguable reprehensible manner. In the circumstances, Benjamin should not be rewarded for his unreasonable behaviour with an enhanced cost order against Bill and Carol.
[22] This is not an appropriate case in which to exercise my discretion to award costs on an enhanced basis.
C. What costs are reasonable?
[23] Having found that Benjamin is entitled to some costs, the last question is what costs would be fair and reasonable: Davies, at para. 52; Boucher v. Public Accountants Council for the Province of Ontario, 2004 CanLII 14579 (ON CA), 71 O.R. (3d) 291, (C.A.) at para. 24.
[24] In my view, the costs claimed by Benjamin are unreasonable for several reasons.
[25] First, Benjamin had four lawyers attend each day of the trial and has included the costs of four lawyers in his Bill of Costs. An unsuccessful litigant would not reasonable expect to pay for four lawyers to attend each day of a trial of this nature. The legal issues were straightforward. The factual record was large but four lawyers were not required to properly challenge the account on Benjamin’s behalf. It is reasonable for a litigant to have one senior and one junior lawyer attend court for a lengthy trial, but claiming the cost of four lawyers is not reasonable.
[26] Second, the total costs claimed is completely disproportionate to the amount of the claim and the amount recovered. Whether calculated on a substantial indemnity scale or a partial indemnity basis, Benjamin is seeking more in costs than he could have recovered if Bill and Carol’s accounting was rejected in full. Bill and Carol only received $418,675.25. Benjamin is seeking $567,157.64 in substantial indemnity costs. In the alternative, he seeks $426,952.08 in partial indemnity costs. An unsuccessful litigant on an application to pass a trust account would not reasonably expect to have to pay more in costs than they could ever have been ordered to repay the trust.
[27] The amount Benjamin is seeking in costs on a partial indemnity scale is close to three times the amount he recovered. Bill and Carol were ordered to repay the trust $150,531.14. Claiming $426,952.08 in costs, even on a partial indemnity basis, when Benjamin only recovered one third of the total value of the trust is disproportionate and unreasonable.
[28] Third, the number of hours claimed by Benjamin’s counsel is not proportionate to the complexity of this case. In total, Benjamin’s lawyers are claiming 1,197.8 hours. The work done by the two senior lawyers on the file accounts for almost half of the time claimed. I appreciate the record in this matter was lengthy and the accounts were prepared in a way that was confusing. However, the legal and factual issues in the case were straightforward.
[29] Fourth, some of the positions Benjamin took were unreasonable and added to the length and complexity of the case. There were 2,208 disbursements in the trust account. Benjamin objected to every single disbursement. Benjamin’s counsel did not cross-examine Bill or Carol before trial to narrow the issues. As a result, I heard days of evidence from Bill and Carol going through the account line by line. In the end, many of Benjamin’s objections were meritless. In my view, Benjamin failed to make admissions he ought to have made about many of the disbursements. Had Benjamin made reasonable admissions, the trial would have been much shorter.
[30] Benjamin also made several serious, unsubstantiated allegations against Bill and Carol. He accused them of misappropriating his trust funds for their own use. He accused them of hiding the trust from him. He accused them of not acting in his best interests. None of those allegations were substantiated at trial. While Bill and Carol failed to keep complete records for the trust and are responsible for the amounts they could not account for, the evidence did not support Benjamin’s other allegations. These allegations added to the length and complexity of the trial because Bill and Carol were required to adduce evidence to respond to the allegations in Benjamin’s Notice of Objection.
[31] This could have been very focused trial. Had genuine efforts been made by the parties and their counsel to narrow the issues, the trial could have been completed in a fraction of the time it ultimately took.
[32] To determine what costs are reasonable in this case, I started by cutting the costs claimed in half to reflect the fact that it is unreasonable to claim the cost of four lawyers. The starting point for partial indemnity fees would be approximately $186,000, which is slightly higher than what Bill and Carol claimed for partial indemnity costs in their Costs Outline (which was $180,451.85). However, I have also found that the hours claimed are unreasonable and Benjamin contributed to this being an unnecessarily lengthy trial. In my view, it would be fair, reasonable and proportionate to require Bill and Carol to pay Benjamin $90,000 inclusive of HST and disbursements.
[33] I expect counsel will be able to settle the terms of the final Order and agree on the pre-judgment interest without the need for a further attendance.
Davies J.
Released: November 15, 2021
COURT FILE NO.: 03-124/17
DATE: 20211112
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
William and carol cochrane
Applicants/Trustees
- and -
benjamin cochrane
Respondent/Objector
Reasons for Decision on costs
Davies J.
Released: November 15, 2021