COURT FILE NO.: CV-23-93516-ES
DATE: 2024/09/04
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
KELLY PIDGEON
Applicant
– and –
KEVIN DAFOE
Respondent
Michael S. Rankin, counsel for the applicant
John Polyzogopoulos, counsel for the respondent
HEARD: February 26, 2024 (By videoconference)
RULING ON COSTS
Corthorn J.
Introduction
[1] The applicant and the respondent are siblings (sister and brother, respectively). The parties are the children of the late Beryl Dafoe (“the Deceased”), who passed away in March 2023. In her Last Will and Testament, the Deceased named the parties as estate trustees of her estate (“the Estate”) and as equal beneficiaries of the Estate.
[2] In early November 2023, the court heard a motion by the applicant, brought without notice to the respondent. The applicant requested interim relief to address the conduct of the respondent in the days and weeks following the death of their mother. The applicant alleged that the respondent (a) misappropriated in excess of $500,000 from the Estate, and (b) had, for approximately five months, refused to communicate with the applicant about the Estate, including the alleged misappropriation of funds.
[3] On November 2, 2023, the court made an interim order for the preservation of the Estate assets (“the interim order”). The interim order includes terms in the nature of a Mareva injunction, and in the nature of a Norwich order. The court required the applicant to bring her motion, on notice to the respondent, on November 14, 2023; the applicant did so.
[4] When the parties were before the court on November 14, 2023, it was clear that they had, through their respective counsel, been engaged in meaningful settlement discussions. Rather than hear the motion, the court adjourned it and directed the parties to continue their settlement discussions in an effort to resolve the motion.
[5] As a result of the practical approach taken by both parties, they resolved the motion. The parties appeared before the court on November 15, 2023, at which time the court made an order on the consent of the parties (“the consent order”).
[6] The consent order provides for (a) variation of some of the terms of the interim order, (b) terms pursuant to which the Mareva injunction and Norwich disclosure order would be terminated, (c) the return by the respondent of $500,000 to the Estate, (d) preservation of the parties’ respective rights in the administration of the Estate, (e) the removal of the respondent as an estate trustee, and (f) other relief related to the administration of the Estate.
[7] The court encouraged the parties to resolve the issue of costs of the motion; they were unable to do so. The parties each delivered a bill of costs and written submissions. The applicant delivered both initial and reply submissions.
The Position of the Parties
a) The Applicant
[8] The applicant’s primary position is that she is entitled to her costs of the motion on the full indemnity scale. In support of that position, the applicant points to what she describes as the respondent’s breach of his fiduciary duties in an egregious manner.
[9] The applicant relies on factors listed in r. 57.01(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. For example, the applicant describes herself as wholly successful on the motion. As another example, the applicant points to the importance to both parties of the outcome of the motion. The applicant submits that her costs are proportionate to the value of the Estate assets. The applicant submits that the quantum of her full indemnity costs is within the range the respondent could reasonably have expected to pay.
[10] The applicant seeks full indemnity costs of $87,234.54, broken down as follows:
Fees (inclusive of HST) $ 86,812.82
Disbursements (inclusive of HST) $ 421.72
[11] In the alternative, the applicant seeks her costs of the motion on the substantial indemnity scale in the amount of $78,511.08 ($78,131.53 for fees, plus $379.55 for disbursements, with both amounts inclusive of HST).
[12] Last, the applicant’s position is that the terms of the respondent’s November 9, 2023 offer (“the Offer”) do not entitle the respondent to a set-off for any portion of the costs he incurred in response to the motion.
b) The Respondent
[13] At the outset of his oral submissions, the respondent’s counsel informed the court that the respondent acknowledges that he should pay a portion of the applicant’s costs. The respondent asks the court to consider the following factors when determining the portion of the applicant’s costs he is to pay.
[14] First, with one exception, the terms of the Offer are virtually the same as the terms in the consent order. That exception is the inclusion in the consent order of terms related to the respondent’s removal as estate trustee. The respondent asks the court to give “considerable weight” to the Offer.
[15] The respondent submits that he is entitled to set off, against costs awarded to the applicant, his costs on the partial indemnity scale, from the date of the Offer forward. The respondent’s costs on the partial indemnity scale, to November 13, 2023, total $33,432.60 ($30,200.00 for fees; $3,926.00 for HST on fees; and $306.60 for disbursements).
[16] Second, the respondent’s position is that regardless of the scale on which the court fixes the applicant’s costs, the costs claimed are unreasonable. The respondent submits that the applicant’s approach to this proceeding was unnecessarily excessive. The respondent describes the applicant as having utilized a sledgehammer when the use of a scalpel would have been both effective and cost-efficient.
[17] Third, the respondent asks the court to consider the applicant’s conduct outside the proceeding. The respondent refers to the applicant’s participation, together with the respondent, which participation the applicant acknowledges, in an act of deceit related to the Estate assets. After the Deceased’s death, and during a telephone call with an employee of Tangerine, the applicant impersonated the Deceased. The parties made that call to secure the transfer of funds from the Deceased’s account with Tangerine, to the account which the parties jointly held at another institution (“the joint account”).
[18] Fourth, the respondent emphasizes the principle of proportionality. The respondent questions the amount of the fees claimed in the context of both what he asserts is a moderate estate and the amount he asserts is really in dispute.
The Issues
[19] With the respondent acknowledging that the applicant is entitled to her reasonable costs of the proceeding, subject to a possible set-off for a portion of the respondent’s costs, the court determines the following issues:
On what scale are the applicant’s costs fixed?
In what amount are the applicant’s costs fixed?
Do the terms of the Offer entitle the respondent to a set-off for his costs of the proceeding, from the date of the Offer forward, on the partial indemnity scale?
[20] Before determining each of those issues, I will briefly review the general principles derived from the case law and the sources of the court’s discretion to award and fix costs.
Costs – General Principles
[21] The overall objective when awarding costs is to fix costs in “an amount that is fair and reasonable for the unsuccessful party to pay in the particular proceeding”: Boucher et al. v. Public Accountants Council for the Province of Ontario (2004), 2004 CanLII 14579 (ON CA), 71 O.R. (3d) 291, at para. 26.
[22] Section 131(1) of the Courts of Justice Act, R.S.O. 1990, c. C.43, gives the court the discretion to “determine by whom and to what extent the costs [in a proceeding] shall be paid.” When exercising its discretion, the court considers the factors listed in r. 57.01(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.
[23] Principles specific to the respective positions of the parties before this court – for example, those related to the Offer or to breach of fiduciary obligation – are discussed in the court’s analyses below.
Issue No. 1 – On what scale are the applicant’s costs fixed?
[24] The applicant asks the court to fix her costs on the full indemnity or, in the alternative, substantial indemnity scale. The respondent’s position is that the appropriate scale upon which to fix the applicant’s costs is the partial indemnity scale. Each party submits that the conduct of the other party is relevant to the scale on which the court fixes the applicant’s costs.
[25] The challenge for the court is that the parties resolved the motion on consent, without a hearing on the substantive issues, and without findings made regarding the conduct of the parties.
[26] At the heart of the applicant’s position is the respondent’s unilateral decision to transfer approximately $500,000 of the Estate’s assets and distribute the funds as the respondent chose – including to his daughter. The applicant describes that conduct as reprehensible, egregious, and a breach of the respondent’s fiduciary duties in his capacity as one of two estate trustees of the Estate. The applicant submits that such conduct is worthy of sanction by awarding her costs on the full indemnity scale.
[27] In his written submission on costs, the respondent’s position is that once the subject funds were transferred from the Tangerine account to the joint account, he had both the discretion and entitlement to make the payments to himself as he did. In his written submissions, the respondent acknowledges that he “should have consulted the Applicant before making any such payments.”
[28] In oral submissions, counsel for the respondent made the same acknowledgement on behalf the respondent, and went one step further. In oral submissions, counsel for the respondent addressed the potential conflict of interest for the respondent because of his alleged status as a creditor of the Estate (for approximately $500,000) and his role as one of two estate trustees.
[29] The respondent attempts to downplay the significance of his conduct by portraying the value of the Estate as “modest” and by relying on an arithmetic calculation of the amount in dispute as restricted to $100,000.
[30] For the purpose of determining the scale upon which the applicant’s costs are payable, I focus on the nature of the conduct, not the monetary amounts involved. To do otherwise would detract from the general principle that breach of a fiduciary duty is conduct worthy of sanction.
[31] I also consider the applicant’s conduct in her capacity as one of the two estate trustees. In her supporting affidavit, the applicant acknowledges that she participated with the respondent in a scheme to facilitate the transfer of funds from the Deceased’s account with Tangerine to the joint account. The applicant passed herself off as the Deceased, during a phone call with Tangerine, to facilitate the transfer of approximately $489,000.
[32] The applicant’s evidence is that the phone call with Tangerine occurred on the day after the Deceased’s death. The applicant’s evidence is that the phone call in which she participated was the respondent’s second phone call to Tangerine in an effort to secure a transfer of the funds. The respondent’s initial and solo effort to secure the transfer of the funds by telephone was not successful.
[33] Had the applicant not participated in the phone call to Tangerine, impersonating the Deceased, the respondent may not have had ready access to the funds to later transfer to himself unilaterally. The applicant does not suggest that she played no role in the respondent gaining easier access to the funds; yet she offers no explanation for her conduct.
[34] In Net Connect Installation Inc. v. Mobile Zone Inc., 2017 ONCA 766, 140 O.R. (3d) 77, at para. 8, the court highlights that there is “a significant and important distinction between full indemnity costs and substantial indemnity costs.” In the same paragraph, the court summarizes the narrow and very narrow circumstances that justify an award of costs on the substantial and full indemnity bases, respectively:
An award of costs on an elevated scale is justified in only very narrow circumstances – where an offer to settle is engaged or where the losing party has engaged in behaviour worthy of sanction: Davies v. Clarington (Municipality) (2009), 2009 ONCA 722, 100 O.R. (3d) 66 (C.A.) at para. 28. Substantial indemnity costs is the elevated scale of costs normally resorted to when the court wishes to express its disapproval of the conduct of a party to the litigation. It follows that conduct worthy of sanction would have to be especially egregious to justify the highest scale of full indemnity costs.
[35] I am unable to conclude that the circumstances in the matter before this court fall into the “very narrow circumstances” that justify an award of costs on an elevated scale. Surely a party, such as the applicant, who comes to court having perpetrated a deceit on a financial institution is not entitled to costs on an elevated scale. Even if the applicant’s conduct were less egregious than the respondent’s conduct – and I make no finding in that regard – the circumstances do not fall within the scope of “the very narrow circumstances” intended by the Court of Appeal for Ontario in Net Connect.
[36] The applicant is awarded her costs of the motion on the partial indemnity scale.
Issue No. 2 – In what amount are the applicant’s costs fixed?
[37] In her bill of costs, the applicant sets out partial indemnity costs in the total amount of $52,340.72. The applicant asks the court to fix the fees at $52,087.69 and disbursements at $253.03, both inclusive of HST.
a) Fees
[38] I start by considering the work included in the $52,087.69 claimed for fees, inclusive of HST.
[39] From the applicant’s bill of costs, it appears that amount includes all of senior counsel’s and associate counsel’s time to prepare the written costs submissions, prepare for the costs hearing, and attend on the costs hearing. The monetary amount for the work related to the issue of costs is $6,552.00.
[40] The costs incurred by the applicant to address the issue of costs are distinct from the costs of the motion. I calculate the starting point from which to fix the applicant’s costs, on the partial indemnity scale, as $45,535.69 ($52,087.69 - $6,552.00).
[41] To arrive at the total of $52,087.69, the applicant’s counsel reduced senior counsel’s time by 5.5 hours (from 60.1 hours to 54.8) and a junior lawyer’s time by 22.3 hours (from 94.2 to 71.9). The junior lawyer is not the same individual as the associate counsel who worked on the costs portion of the matter.
[42] The following factors from r. 57.01 are relevant to fixing the applicant’s costs.
▪ The principle of indemnity (r. 57.01(1)(0.a))
[43] I am satisfied that the time spent on the matter was reasonable. The reduction in both senior counsel’s and the junior lawyer’s time addresses potential duplication of effort between them.
[44] The respondent’s refusal to communicate with the applicant left her and her counsel with no choice but to pursue the collection of the relevant information on their own. When doing so, the applicant and her counsel faced inefficiencies and hurdles they would not have faced if the respondent had been co-operative.
[45] The respondent is critical of the applicant’s strategy. He submits that a much less aggressive approach was all that was necessary.
[46] Given the respondent’s unilateral decision to transfer approximately 63 percent of the Estate assets, it is not surprising that the applicant felt compelled to pursue the return of the funds in the manner chosen. The strategic choices made by the applicant do not negatively impact the amount of costs to which she is entitled.
[47] I turn next to the hourly rates for senior counsel (1987 call) and the junior lawyer (2022 call). The senior counsel’s hourly rate of $750 inclusive of HST, equates to $665 exclusive of HST. The junior lawyer’s hourly rate of $345 inclusive of HST, equates to $305 exclusive of HST.
[48] The hourly rates for senior counsel and the junior lawyer are in line with the hourly rates charged by lawyers with similar levels of experience whose time is included in the respondent’s bill of costs. The respondent does not take issue with the hourly rates of either senior counsel or the junior lawyer.
[49] I find the hourly rates of senior counsel and the junior lawyer are reasonable.
▪ The respondent’s reasonable expectations (r. 57.01(1)(0.b))
[50] In his bill of costs, the respondent includes fees, on the partial indemnity scale, in the amount of $34,126.00, inclusive of HST. As the applicant notes in her reply submissions, the respondent’s bill of costs includes work done up to and including November 13, 2023. The respondent’s bill of costs does not include work related to the issue of costs.
[51] I compare the $34,126.00 claimed by the respondent with the $45,535.69 starting point calculated above.
[52] First, it is not surprising that the work required on behalf of a moving party exceeds the work required on behalf of a responding party. Second, the work on behalf of the applicant includes at least two steps the respondent was not required to take. The applicant had a notice of application prepared, issued and served. The applicant first brought her motion without notice; her counsel prepared for and attended on a hearing in which the respondent was not involved.
[53] I find that the fees incurred by the applicant are within the reasonable expectations of the respondent.
▪ The amount claimed and the amount recovered in the proceeding (r. 57.01(1)(a))
[54] On her motion, the applicant sought the return, by the respondent, of the $500,000 he had transferred from the joint account to himself. The consent order requires the respondent to return all of the funds within 25 days of the date of the consent order. The applicant recovered, for the benefit of the Estate, one hundred percent of the money she sought to recover.
▪ The complexity of the proceeding (r. 57.01(1)(c))
[55] I agree with the applicant that the manner in which the respondent transferred the funds to himself, and thereafter to others, resulted in challenges for the applicant and her counsel. A significant amount of work was done in an effort to satisfy the tests for entitlement to each of a Mareva injunction and a Norwich order.
▪ The importance of the issues (r. 57.01(1)(d))
[56] The issues were important to both parties. The applicant was concerned with the dissipation of approximately 63 percent of the Estate’s assets – assets for which she is, in her role as estate trustee, responsible. The respondent’s ability to manage his personal and other finances was, for a time, impacted by the interim order.
▪ The conduct of any party that tended to unnecessarily lengthen the duration of the proceeding (r. 57.01(1)(e))
[57] For months, the respondent refused to communicate with the applicant. That conduct pre-dates the litigation. Regardless, that conduct contributed to the commencement of the proceeding and to the strategic discussions made by the applicant.
▪ A party’s denial of or refusal to admit anything that should have been admitted (r. 57.01(1)(g))
[58] It was not until the costs portion of the proceeding that the respondent acknowledged (a) the potential existence of a conflict of interest given his role as one of two estate trustees and his alleged status as a creditor of the Estate, and (b) that he should have consulted with the applicant before transferring $500,000 of the Estate assets to himself.
▪ Summary (Fees)
[59] I am satisfied that the fees claimed by the applicant are reasonable. I fix the fee portion of the applicant’s costs, on the partial indemnity scale and inclusive of HST, at $45,535.69.
b) Disbursements
[60] The disbursements incurred, of $421.72 on a solicitor-client basis, are entirely related to service of documents. The respondent does not take issue with the disbursements incurred.
[61] In her bill of costs, the applicant reduces the disbursements claimed to $379.55 (on the substantial indemnity scale) or $ 253.03 (on the partial indemnity scale). I am not familiar with reducing the disbursements incurred to accord with the scale on which costs are payable. The applicant is entitled to the full amount of the disbursements incurred.
[62] I fix the disbursements in the amount of $421.72, inclusive of HST.
c) Summary – The Applicant’s Costs
[63] I fix the applicant’s costs, on the partial indemnity scale, in the total amount of $45,960.00 ($45,535.69 + $421.72, rounded off).
[64] The remaining issue to be determined is whether the terms of the Offer entitle the respondent to set off against the costs awarded to the applicant, a portion of his costs on the partial indemnity scale.
Issue No. 3 – Do the terms of the Offer entitle the respondent to a set-off for his costs of the motion, on the partial indemnity scale, from the date of the Offer forward?
[65] On November 6, 2023, the applicant served the respondent with the interim order. He retained counsel on November 7, 2023. On November 9, 2023, the respondent’s counsel sent a letter, by email, to the applicant’s counsel. The Offer is set out in that letter.
[66] The respondent acknowledges that the Offer does not comply with r. 49.10. The respondent asks the court to consider the Offer and exercise the court’s discretion, pursuant to r. 49.13, to “take into account any offer to settle, made in writing, the date the offer was made and the terms of the offer.”
[67] Principles applied when considering an offer that does not comply with r. 49.10, include the following principles:
• The court is to take a more holistic approach than it takes when considering technical compliance with rr. 49.10 or 49.11. (See: Lawson v. Viersen, 2012 ONCA 25, 108 O.R. (3d) 771, at para. 46; and Elbakhiet v. Palmer, 2014 ONCA 544, 121 O.R. (3d) 616, at para. 33.)
• Where an offer to settle complies with the spirit of Rule 49, the offer is to be given considerable weight. (See: Lawson, at para. 49; and Elbakhiet, at para. 33.)
[68] The respondent’s position is that the terms of the Offer are “virtually identical” to the terms of the consent order. The applicant’s position is that there are significant differences between the terms of the Offer and the terms of the consent order.
[69] I agree with the applicant, and find that the differences between the terms of the Offer and the terms of the consent order are significant. Listed below are examples of the differences between the terms in those two documents:
• The respondent offered to deposit $489,950 in the joint bank account within sixty days of the date of the order, once made. The consent order requires the respondent to return that amount, with interest (for a total of approximately $497,000), to the joint bank account and to do so within twenty-five days of the date of the consent order.
• The Offer does not include the removal of the respondent as an estate trustee. The Offer calls for the respondent to continue as an estate trustee. The Offer also includes a term which requires the consent of both estate trustees to the withdrawal of funds from the joint account. The consent order provides for the removal of the respondent, effective immediately, as an estate trustee.
• The consent order requires the respondent to commence an application, within sixty days of the date of the consent order, to pass his accounts as estate trustee for the period from March to November 2023. The consent order entitles the applicant, in her capacity as estate trustee, to seek an accounting from the respondent for the period from March 2023 forward. The Offer does not include any terms regarding the respondent’s accountability for his conduct from March 2023 forward.
• The Offer provides for immediate termination of the terms of the interim order. Pursuant to the consent order, the Mareva injunction and Norwich provisions of the interim order are terminated following the respondent’s compliance with certain terms of the consent order – including the deposit of $497,000 in the joint account within twenty-five days of the date of the consent order.
• The Offer provides for the deferral of a decision on costs of the motion to the judge hearing the application. The consent order provides for costs of the motion to be determined by the motion judge.
[70] The scenario flowing from the terms of the consent order is vastly different than the scenario that would have resulted from acceptance of the Offer.
[71] I give the Offer the weight it is due. I find, however, that the Offer does not provide the applicant with the measures of certainty she reasonably pursued regarding the (a) return of the full value of the Estate assets unilaterally transferred by the respondent to himself in March 2023, and (b) the administration of the Estate from March 2023 forward.
[72] The Offer does not entitle the respondent to set off, against the applicant’s costs, his costs on the partial indemnity scale.
[73] In his bill of costs, the respondent identifies costs on the partial indemnity scale totalling $33,432.60. The respondent’s bill of costs does not set out the portion of the costs incurred between November 7, 2023 (when the respondent retained counsel) and November 9, 2023 (when the Offer was made). The court is therefore unable to fix the costs to which the respondent would be entitled, on the partial indemnity scale, if the court had reached a different conclusion after comparing the terms of the Offer with the terms of the consent order.
[74] If the parties require that the court fix the respondent’s costs on the partial indemnity scale (from November 9, 2023 forward) – for example, for the purpose of consideration of this ruling at an appellate level – then counsel shall arrange a case conference before me. If arranged, the case conference will be (a) virtual, and (b) to determine the logistics for the court to fix the respondent’s costs on the partial indemnity scale.
Disposition
[75] The respondent shall pay to the applicant her costs of the motion on the partial indemnity scale and fixed in the amount of $45,960.00. Pursuant to r. 57.03, the respondent shall pay that amount within thirty (30) days of the date of this ruling. The order taken out pursuant to this ruling shall include that the costs award is subject to post-judgment interest from the date of this ruling.
[76] The parties achieved mixed success on the issue of costs. As a result, neither party is entitled to their costs related to the costs portion of the applicant’s motion.
Madam Justice Sylvia Corthorn
Released: September 4, 2024
COURT FILE NO.: CV-23-93516-ES
DATE: 2024/09/04
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
KELLY PIDGEON
Applicant
– and –
KEVIN DAFOE
Respondent
RULING on costs
Madam Justice Sylvia Corthorn
Released: September 4, 2024