Court File and Parties
MOTION HEARD: 20220224
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Peter Black, Geordie Brown and PCF Acquisition Corp., Plaintiffs
AND:
John McDonald, Defendant
BEFORE: Associate Justice Jolley
COUNSEL: John McDonald, in person, moving party defendant
David Steinberg, counsel for the responding non-parties Geoffrey Adair and Adair Barristers
HEARD: 24 February 2022
REASONS FOR DECISION
A. Background
1John McDonald (“McDonald”) represented the plaintiffs in their professional negligence action against Gowlings. That action was dismissed after a lengthy trial in 2008 and resulted in significant costs award against the plaintiffs.
2The plaintiffs then consulted with Geoffrey Adair about an appeal. In that context, they received advice from him that they had a claim in solicitor’s negligence against McDonald. The plaintiffs then commenced this action, in which they were represented by Adair.
3On 28 November 2018, the parties settled the action on a without costs basis, signed minutes of settlement and exchanged a mutual full and final release. Further to the settlement, the action was then dismissed without costs by order made 18 December 2018 on consent of all parties.
4McDonald brings this motion pursuant to Rule 57.07 seeking an order that Adair or his firm Adair Associates (“Adair”) personally pay the costs he incurred in defending this action throughout the time Adair represented the plaintiffs.
5Adair argues that the issue of costs has already been determined with the consent of McDonald. Alternatively, he argues that his conduct does not meet the threshold of rule 57.07(1) and no costs against him are warranted.
6For the reasons outlined below, the defendant’s motion is dismissed.
B. The issue of costs is res judicata
7In December 2016, Adair removed himself as counsel for the plaintiffs, with the consent of his clients. The defendant entered into discussions with the plaintiffs’ new lawyer and ultimately the parties agreed to dismiss the action without costs.
8The defendant argues that, despite his agreement that he would not receive costs, he is entitled to costs of the action from Adair. He makes two arguments: first, it was implicit in an earlier order that he intended to continue to seek costs; and second, Adair has conceded that entitlement.
9I disagree with both of these submissions.
10On the first argument, the action was administratively dismissed for delay on 9 May 2017. On 17 May 2017 the defendant wrote to advise that he was prepared to consent to an order setting aside the dismissal provided either Adair and/or Black paid his costs accrued to 23 January 2017 in the amount of $164,607 or agreed to post security for costs of $250,000. That proposal was not acceptable to either Black or Adair.
11The parties then appeared at a case conference before then Master Wiebe on 24 November 2017 and an order issued setting aside the dismissal on the consent of the defendant. The order contained a specific provision that “This court further orders that John McDonald’s motion for costs returnable January 29, 2018 is adjourned to a date to be determined.”
12The defendant argues that Adair was alerted to the fact that McDonald was not abandoning his costs motion and that he had leave of the court to bring it back on in future. I do not disagree, but it does not follow that that interim order permitted him to bring on his motion for costs after the action had been dismissed – and dismissed with his agreement that no party would seek or receive costs.
13It may have been open to the defendant to include a provision such as was included in the order of Master Wiebe carving out the costs motion or otherwise holding the dismissal in abeyance until the motion could be dealt with. But having agreed not to seek costs (and, tangentially, not to have the plaintiffs seek any costs against him as part of the terms of the dismissal order), I find it is not open to the defendant to seek them now.
14I was not taken to any caselaw that would support a proposition that this interim adjournment order would somehow survive a consent final dismissal order with contrary terms.
15The defendant did not proffer evidence that he misunderstood the terms of the order. No motion was ever brought to vary the order on the basis of mistake or otherwise under rule 59.06.
16On the second ground, the defendant sought to bring “a motion within a motion” in reply to introduce correspondence between him and Mr. Steinberg that he argued showed a concession on the part of Mr. Steinberg that the motion could properly proceed. There were no motion materials filed and no evidence that would meet the test for leave to file new materials part way through a motion.
17I requested that the parties review the correspondence at the afternoon recess. After the review, Mr. Steinberg advised that he not oppose their introduction as he was of the view that they were of no consequence.
18The first email in question was from Mr. Steinberg to Mr. McDonald dated 29 January 2019 and stated:
Further to yours of January 7, 2019, if you remain intent on bringing a motion against Mr. Adair for costs, please propose dates in and after June when the court is available to hear your motion. We can then select a mutually convenient date.
I confirm that you will be relying on the motion record you previously delivered, consisting of a notice of motion (with initial return date of November 1, 2017) and supporting affidavit of Dale M. Ross sworn August 29, 2017, with attached exhibits. If you intend on serving any further material please do so at this time.
19Mr. McDonald relies on this email as a concession from Mr. Steinberg and Adair that he is not estopped from bringing this motion. I do not read the email as taking that position. It simply addresses scheduling the motion.
20The second email is also from Mr. Steinberg to Mr. McDonald dated 20 November 2020. In the email Mr. Steinberg states:
I did not consent to your writing to the court and, effectively, making submissions with reference to our past correspondence. In my view, it was and is not appropriate for you to be effectively arguing your position in this matter. The historic correspondence can be put before Master Jolley when she hears the proceeding in due course, in whatever form it may take.
21Mr. McDonald relies on this email as a concession that he could hand up the 29 January 2019 email to the court during the motion, should it become relevant. First, there is no evidence from Mr. McDonald that he understood this to be the arrangement reached between him and Mr. Steinberg or that he relied on that exchange to decide not to file supplementary materials to introduce this evidence.
22Second, I do not read this email in this way, nor would it be appropriate for the parties to decide that the court need not see their materials in advance in the usual course. I take Mr. Steinberg to mean he would not object to the email being included in Mr. McDonald’s motion materials, or supplementary materials, not that it could be led without notice and in reply.
23In any event, I have read the emails and find they are not a concession by Adair that the defendant’s motion is not barred by the consent dismissal without costs order.
24It is a fundamental principle of our courts that parties cannot relitigate matters that have already been determined. This includes matters that were before the court and “could have been determined but were not”. (See Ntakos Estate v Ntakos 2021 ONSC 2492 at paragraphs 69 and 70, referencing the Court of Appeal decision in The Catalyst Capital Group Inc. v. VimpelCom Ltd. 2019 ONCA 354). This principle applies whether the final decision was arrived at after a trial or by way of the consent of the parties, as here (see D’Addario v. EnGlobe Corp. 2012 ONSC 1918 at paragraphs 268, 269). In this instance, the parties agreed that neither would receive costs of the action and embodied that agreement in a court order. The issue of costs has been finally determined.
C. Costs against Adair not warranted in any event
25Had I found the motion was not barred by the dismissal order, I find that the evidence in the record does not meet the high bar required before costs should be ordered against a lawyer personally.
(i) The test to be met before costs are awarded against a lawyer personally
26Rule 57.07(1) (c) provides:
57.07 (1) Where a lawyer for a party has caused costs to be incurred without reasonable cause or to be wasted by undue delay, negligence or other default, the court may make an order,
(c) requiring the lawyer personally to pay the costs of any party.
27The provision is compensatory in nature. As noted in Galganov v. Russell (Township) 2012 ONCA 410 at paragraph 14, “[rule 57.07] is designed to protect and compensate a party who has been subjected to costs being incurred without reasonable cause, not to punish a lawyer:.”. The lawyer’s undue delay, negligence or other default must have caused costs to be incurred or incurred without reasonable cause before the lawyer may be required to pay the other side’s costs.
28The parties agree that the two-step test set out in Galganov governs. The first step is to determine whether the conduct of the lawyer falls within the scope of rule 57.07(1). The second is to consider the actions in the context of the litigation as a whole, applying the “extreme caution” principle. As stated in Galganov:
[18] The first step is to inquire whether the lawyer’s conduct falls within rule 57.07(1) in the sense that it caused costs to be incurred unnecessarily. Rule 57.07(1) refers specifically to conduct that “caused costs to be incurred without reasonable cause or to be wasted by undue delay, negligence or other default”. The court in Marchand held that mere negligence can attract costs consequences in addition to actions or omissions which fall short of negligence. The court confirmed that “bad faith” is not a requirement for imposing the costs consequences of rule 57.07(1) and concluded, at para. 122, that “[i]t is only when a lawyer pursues a goal which is clearly unattainable or is clearly derelict in his or her duties as an officer of the court that resort should be had to [r]. 57.07.”
[19] In determining whether a lawyer’s conduct falls within rule 57.07(1), the court must consider the facts of the case and the particular conduct which has been attributed to the lawyer: see Marchand, at para. 115.
[20] In Rand Estate v. Lenton, 2009 ONCA 251, [2009] O.J. No. 1173, at para. 5, this court noted that rule 57.07(1) requires an examination of “the entire course of litigation that went on before the application judge so that the application judge can put in proper context the specific actions and conduct of counsel.” This holistic examination of the lawyer’s conduct produces an accurate tempered assessment.
[21] Although the conduct as a whole must be considered, a court must consider specific incidents of conduct in determining whether the conduct falls within rule 57.07(1). In Carleton, the court confirmed, at para. 20, that a general observation “does not permit identification of what conduct may have contributed to delay and unnecessary costs.” Further, the absence of specific evidence or circumstances considered in making a general observation precludes meaningful appellate review of the criteria of rule 57.07(1). Above all, the legal test under rule 57.07(1) is not concerned with a lawyer’s professional conduct generally, but whether such conduct, including the conduct of the litigation, caused unreasonable costs to be incurred: Carleton, at para. 18.
[22] The second step is to consider, as a matter of discretion and applying the extreme caution principle enunciated in Young, whether, in the circumstances, the imposition of costs against the lawyer personally is warranted. The "extreme caution" principle, as stated in Young, means that "these awards must only be made sparingly, with care and discretion, only in clear cases, and not simply because the conduct of a lawyer may appear to fall within the circumstances described in [r]ule 57.07(1)": Carleton, at para. 15.
(ii) The defendant has not demonstrated that the action was frivolous or abusive or bound to fail
29The defendant is seeking his costs against Adair, not for a specific step in the action, but for the entire action. McDonald argues that by commencing this action on behalf of his clients, Adair has caused McDonald to incur the entire costs of defending the action without reasonable cause. The list of professional services for which he seeks costs starts with time spent to review the statement of claim and covers all steps through to the end of Adair’s retainer.
30McDonald agues that the action was frivolous and an abuse of process because the plaintiff sought damages from him when he was not responsible for any of their damages. There is no judicial finding that the entire action was frivolous or vexatious or even brought unreasonably. There is no trial finding that the action was without merit and that it should have been evident to Adair from the outset that it was bound to fail. To the contrary, Associate Justice Wiebe was required to comment on the merits of the case to some extent in the context of his decision on the defendant’s motion for security for costs. In his reasons dated 25 April 2018 (2018 ONSC 2825) on whether “there is good reason to believe that the action was frivolous and vexatious”, AJ Wiebe stated:
[16] Having examined the Black action based on the presented evidence, I find that the Black action is neither clearly without merit nor is being conducted for an improper purpose, First, there is no evidence from Mr. McDonald, and the initial onus to meet the governing test in Rule 56.01(1)(c) rests on Mr. McDonald. This is a major impediment.
[17] Second, the decision of the trial judge, Madam Justice Mesbur suggests that there may be substance to the allegations of negligence Mr. Black makes against Mr. McDonald. In paragraph 199 Her Honour noted that the plaintiffs called no expert evidence to establish the appropriate standard of care and Gowlings' breach of the standard of care. She noted that the plaintiffs relied on a 44 year old case to argue that such expert evidence was not necessary, but in analyzing the decision she found that it was not good authority for the proposition. In paragraph 300, Her Honour also noted that, while the plaintiffs had served a huge damages expert report, they chose not to call the expert at trial. The result was that there was, in Her Honour's words, "no expert evidence at all on the substantial question of damages." In her costs ruling (after she dismissed the claim), Justice Mesbur noted that Mr. McDonald's submissions were so "unusual," she had no idea what the plaintiffs' position on costs was. Mr. McDonald admitted in argument that he was curiously "instructed' not to make submissions on costs. Her Honour awarded Gowlings $632,572.24 in costs.
[18] Given Her Honour's comments and rulings, the affidavit of Mr. Black in this motion is telling. He stated that Gowlings made three offers to settle on the eve of trial, one being for a payment by Gowlings of $100,000 all inclusive, the second for a payment of $300,000 all inclusive, and the third one for a payment of $750,000 all inclusive. He stated that Mr. McDonald advised against accepting all three offers and that he recommended a $2 million all inclusive counter-offer, which advice was accepted, and the counter-offer was made and not accepted. There was no cross- examination on Mr. Black's affidavit, and Mr. McDonald filed no evidence. Therefore, these statements carry significant weight.
[19] As a result, given the state of the plaintiffs' evidence at trial as identified by Her Honour, it is, in my view, a real issue as to whether Mr. McDonald was negligent and in breach of contract as to his representation of and advice to Mr. Black in the Gowlings Action, at least in relation to settlement discussions and evidence preparation. It does not appear that Mr. Black is pursuing a collateral or improper purpose in this action.
31Adair filed an affidavit on this motion that outlined his reasons for recommending the lawsuit and he was not challenged on that explanation. There is no evidence before me that the action was frivolous or bound to fail or pursued at the behest of Adair for an improper purpose.
(iii) Costs should have been sought at the time the step was taken before the Judicial Officer who determined the step
32In any event, I find that the more appropriate time to allege that a step taken in the proceedings was unreasonable or caused undue delay was at the time the step was taken and before the judicial officer who heard the motion. Among other things, the defendant seeks costs from Adair in relation to a motion before then Master Brott on a status hearing heard 8 March 2013, a motion before Master Muir on a timetable matter heard 20 June 2013, a second attendance before Master Muir on a timetable matter heard on 7 November 2013, a further motion before Master Muir to set aside an administrative dismissal heard 6 March 2014 and a motion before Master Abrams in relation to mediation heard 13 July 2015. It is those judicial officers who were in the best position to determine whether the motion or step was unreasonable or caused undue delay, whether an award of costs was appropriate and, if so, whether an order Adair personally pay any costs award also warranted.
33That was the process the defendant followed in a motion heard by Master Haberman. The motion was argued on 16 December 2010 and the decision released 7 January 2011, with the parties granted the opportunity to speak to costs if they could not be resolved. Master Haberman fixed those costs on 10 February 2011 and McDonald advised at that time that he wished to seek an order that those costs be made payable jointly and severally by the plaintiff Black and the Adair firm. The motion was then adjourned so that Adair’s associate could make submissions. The motion on that aspect of costs was argued on 25 November 2011 and a decision released 6 December 2011. Because she had heard the original motion, Master Haberman was able to conclude that the evidence tendered on that motion was “sparse, vague and glosses over what really matters” and that the associate had misled the court in his affidavit material filed in support of the motion. She also found their motivation in bringing the motion was highly suspect. With her contextual knowledge of that motion, she was able to determine that costs against the associate were warranted.
34When questioned why he did not follow that process for the other motions for which he now claims costs, McDonald candidly advised that that step took too long and delayed the process. It took over a year from the date the plaintiffs’ original motion was heard and dismissed to the date of the decision awarding costs against Adair’s associate personally. While I acknowledge that it may have taken time to argue the personal costs motion, that did not require the rest of the action to come to a standstill in the interim and did not necessitate the action being delayed. Even if it did cause delay that remained the appropriate process to follow.
35Further, some of these motions already dealt with costs. All had the opportunity to do so. In the order of Master Muir made 20 June 2013 he determined that the defendant’s motion was premature so no costs in favour of the defendant would have flowed from that decision. He similarly found on 7 November 2013 that the defendant’s motion was premature. When he did hear the plaintiffs’ motion to set aside the administrative dismissal in March 2014, he expressly determined that there should be no costs to either side. I have not been given any basis on which I could now override that determination made some eight years ago.
36While it is not clear from the record filed what costs order Master Abrams made, what is clear is that the parties filed costs submissions and were given the opportunity to supplement them and she determined she would make her ruling on costs on that basis.
(iv) The evidence does not meet the high bar to warrant payment of costs personally
37Lastly on this point, if I am to rely on their orders or any endorsement they made as the basis for an award of personal costs, there is no indication of conduct in those judicial records that would meet the rule 57.07(1) test.
38The defendant argues there were other instances of “negligence or other default” on the part of Adair that warrant personal costs. Again, there is no finding or even suggestion of negligence in the decisions set out above, absent the decision of Master Haberman, which has been satisfied.
39As for “other default” the defendant points to Adair’s failure to obtain a continuation order in respect of the corporate plaintiff and to an assignment of interest from Brown to Black that he says is suspect. McDonald alleged that Brown had earlier assigned this same interest to his trustee in bankruptcy and that this subsequent assignment was fraudulent or a preference.
40Without delving into these issues in detail, I find that it was not clear that a continuation order was needed. The corporate plaintiff filed for receivership in 2002 but the receivership ended in 2004, years before this action was commenced.
41Nor is it clear that the assignment was fraudulent or a preference. There was no judicial finding on the point. While Master Muir noted in his decision to set aside the administrative dismissal that there may be concerns about the continuation and the assignment, he found they were matters to be determined at trial or on a separate motion. Similarly, while Master Abrams noted in her endorsement of 19 March 2015 that questions had been raised about the assignment, she also stated that those questions had not been answered.
42Even if assignment was invalid without the consent of the trustee as earlier assignee, it does not follow that the assignment was either fraudulent or preferential. More importantly, the defendant has not suggested or led evidence of any causal connection between those alleged defaults and wasted costs or undue delay. Black was still separately pursuing his own claim against McDonald. There is no evidence that extra costs were incurred because two plaintiffs were suing McDonald, rather than one.
43The same point can be made concerning what the defendant says were Adair’s numerous refusals on his clients’ examination for discovery and which resulted in increased costs. The appropriate remedy would have been to bring a motion on the refusals and ask for costs against Adair in that context. It would not be appropriate at this stage for me to effectively conduct a refusals motion to determine the relevance of the questions and then sort out costs and determine whether costs were warranted against Adair personally for refusing the questions.
44The argument that the plaintiffs’ failure to set the action down and the resultant administrative dismissal caused delay or costs was already dealt with by Master Muir. Having heard the parties’ arguments, he was satisfied that the overall delay had been satisfactorily explained. He noted that exchange of productions and discovery of the defendant were all completed by September 29, 2020 and concluded: “I see no undue delay in the progress of this action. It is less than four years old and most of the delay can be explained by the extended time required to deal with the motion to amend and its costs consequences.” (Black v. McDonald 2014 ONSC 1453 at paragraph 11).
(v) There was insufficient evidence concerning costs in any event
45Given my conclusions above, I will make only minor comments about the costs claimed. First, they were not attested to by McDonald or even signed off by him by way of a bill of costs or similar document. They were attached as an exhibit to the affidavit of his partner, the sole purpose of which was to put documents before the court. The affidavit did not provide context for or explain any of the attached exhibits. The costs document was entitled Claim for Costs and was a list of professional services by McDonald on a partial indemnity rate of $600, totalling roughly $180,000. It encompassed all steps in the action, including preparing the affidavit of documents, preparing for his own examination and attending to be examined, steps qua litigant and not qua lawyer, and all correspondence on the file. The deponent of the affidavit to which this exhibit was attached did not have any information about the costs claimed. McDonald advised on the record of his partner’s cross-examination on this document that he did not keep dockets and prepared the costs outline, down to the decimal points, from his memory. I am not suggesting that costs were not incurred but they were not supported by evidence or supporting documents or by the testimony of the deponent.
46Second, as noted in Fong v Chan 1999 CanLII 2052 (ON CA), 1999 46 O.R. (3d) 330 (CA) at paragraph 26, “self-represented litigants, be they legally trained or not, are not entitled to costs calculated on the same basis as those of the litigant who retains counsel. … The self-represented litigant should not recover costs for the time and effort that any litigant would have to devote to the case. Costs should only be awarded to those lay litigants who can demonstrate that they devoted time and effort to do the work ordinarily done by a lawyer retained to conduct the litigation and that, as a result, they incurred an opportunity cost by forgoing remunerative activity. As the early Chancery rule recognized, a self-represented lay litigant should receive only a “moderate” or “reasonable” allowance for the loss of time devoted to preparing and presenting the case. This excludes routine awards on a per diem basis to litigants who would ordinarily be in attendance at court in any event. Following this principle, any costs award would not encompass the items set out in the Claim for Costs nor on the scale sought.
47Nor is there reliable evidence of lost opportunity costs. This claim was advanced by attaching a document entitled Black Trial Brief to the affidavit of McDonald’s partner. The brief was a listing of the various events that had taken place in the file (statement of defence, Haberman order, supplementary factum, Justice Pepall order, etc.) in date order. While the title page contained a note that “this trial brief index was, in part, maintained as evidence that the processes involved in this action involved an opportunity cost that prevented the defendant paying full attention to other revenue producing files”, there was no evidence from him or his partner about what revenue producing files were neglected, how much time was taken away from other files or what remunerative opportunities were otherwise presented and turned down due to McDonald’s time commitment on this file.
48The defendant is understandably upset about being sued and exposed to a claim for $3,000,000, particularly one recommended by Adair who gave advice to the defendant’s former clients that he was negligent. It is evident from the outset that he intended to seek costs from Adair. His statement of defence requested costs from Adair “in view of the impecuniosity of Black and Brown”. There was no evidence of improper conduct by Adair at that time, as all he had done was recommend, presumably, that the plaintiffs sue their former lawyer. Additionally, as became apparent on the later motion for security for costs, Black was not impecunious. Given the caution to be used before awarding costs against a lawyer personally, it must take more than proffering a legal opinion that a party was negligent or recommended a lawsuit before costs should be awarded.
49The motion is dismissed. Each party has filed a costs outline. If they cannot agree on costs, they may each file submissions by 28 March 2022 not to exceed three pages.
Associate Justice Jolley
Date: 7 March 2022