Every week, Bell Temple LLP selects and reports on interesting and relevant decisions from the Ontario Superior Court of Justice, Ontario Court of Appeal, and Supreme Court of Canada.
This week’s case reports are written by Liam Mackrell
Relvas v. Auxly Cannabis Group Inc., 2023 ONSC 6394 (CanLII),<https://canlii.ca/t/k14nr>
This recent decision concerns the question of when the Court will approve a proposed settlement agreement in a class action. Class counsel requested approval of the Court for a settlement agreement in which the Defendant would pay $4,000,000 in exchange for a final settlement of all claims as against the Defendant.
The Court determined that the settlement represented an adequate advantage for the class in return for surrendering its right in litigation. In coming to this decision, the Court heavily weighed the arm’s length negotiations which led to the settlement. Counsel for the parties participated in two separate mediations with a professional mediator in negotiating the settlement. The Court noted that such arm’s length dealings between experienced counsel give rise to a presumption of a reasonable settlement.
The Court also considered the amount recovered in a parallel shareholder class action and the possible defences available to the Defendant. In a parallel shareholder class action, the Defendant was ordered to pay $3,800,000 for the same class period. Class counsel also assessed that the Defendant had defences to argue. Class counsel determined that settlement was the most advantageous way to achieve certain recovery for the Plaintiff class and a timely result for all parties involved.
It is also of note that the Court approved class counsel’s contingency fee of 30%, in the amount of $1,200,000. Class counsel’s retainer agreement set a contingency fee of 20%-30%. The Court stated that a 30% contingency figure is “presumptively valid”. The $4,000,000 award was also deemed not to constitute a “Mega Fund”, where the straight application of an agreed-to contingency fee percentage would not be appropriate. Class counsel also financed all disbursements, including cost awards, and invested the equivalent of approximately $900,000 in professional time into the class action.
Avdeeva v. Khousehabeh, 2023 ONSC 6402 (CanLII),<https://canlii.ca/t/k182f>
This is a costs endorsement following a judgment declaring that the Plaintiff is the sole owner a property under dispute. The Plaintiff had brought an action for a declaration that she is the sole owner of the subject property. An application was also brought by the Defendant for a declaration that he was entitled to a 50% interest in the subject property. The Defendant died after the start of the proceedings, and his was application was continued by his estate trustee. The Plaintiff sought costs on a substantial indemnity basis in the amount of $193,203.68 inclusive of HST, or alternatively $131,795.64 on a partial indemnity basis inclusive of HST. The Trustee sought costs on a partial indemnity basis in the amount of $179,166.63.
Costs of Multiple Issues with Divided Outcomes
The Plaintiff brought claims involving two properties and three promissory notes. The Plaintiff was only successful in the claim involving the above noted subject property. The Court stated that, where there are a number of issues before the court, it may have regards to the dominant issue at trial for the purpose of determining the successful party. The Court can also take into account success on individual issues, although not all issues will not necessarily bear equal weight. The Court determined that the main issue at trial was over the subject property because even if the Plaintiff was successful in her other two claims, the estate would not have been able to pay those claims. Since the Plaintiff was successful on the main issue in dispute, she is entitled to costs. The quantum of costs awarded to the Plaintiff will then ultimately be reduced by 30% in consideration to the divided success on the balance of issues in dispute in the action.
Scale of Costs
The court determined that substantial indemnity is the appropriate scale of costs due to the sufficiently reprehensible, scandalous and outrageous conduct of the Defendant, and subsequently the Trustee of the Defendant’s estate.
The Defendant was deemed to have taken advantage of the Plaintiff, an elderly woman, for his own financial gain. The Defendant held 1% of the subject property in trust for the Plaintiff pursuant to an express written agreement. The Defendant then claimed a constructive trust to 50% of the subject property and failed. The Court recognizes the principle from Barry v. Garden River Ojibway Nation 14 (1997), that “beneficiaries of a trust who are obliged to sue their trustees should receive their costs on a solicitor client scale”. The Plaintiff was obliged to sue the Defendant over the subject property when he should have been acting in her interest with respect to the same. In addition, the Defendant improperly took $109,500 from the mortgage on the subject property, lied to the court and during discoveries, attempted to defeat the litigation by entering an agreement of purchase and sale over one of the properties in dispute, and pursued his claim for 50% of the subject property with no persuasive evidence.
The Trustee caused trial of the actions to be adjourned by misrepresenting that documentary productions were complete, refused to be examined on the additional productions, failed to submit a willsay related to her personal knowledge of the documents, then sought to testify as to her personal knowledge on the same. She also raised issues at trial that had been considered by motions judges previously in the claim, which was deemed to be an abuse of process.
Costs Personally Against the Trustee
The Defendant passed during the litigation process and the proceeding was stayed. The Trustee took out an Order to Continue. The Court opined that generally costs will not be personally awarded against a trustee because of the important public policy consideration that individuals should not be disincentivized from assuming the role of trustee due to fear that they could be personally liable. Despite this important principle, the Court determined that the Trustee should be liable for costs incurred after she took steps to continue the proceeding. The Court stated that, in continuing the proceeding, the Trustee “continued meritless litigation in circumstances where the Estate had no assets, there was no evidence that the Estate had any debts, and she was the only beneficiary. Thus, litigation was continued for the personal benefit of the Trustee and not for the benefit of the Estate. She stood to gain a half interest in a home with a significant value with nothing to lose.” This decision highlights the courts willingness to order costs against a Trustee personally when the Trustee began, or continued, an action in their own interests as beneficiary.
The Court ultimately awarded the Plaintiff costs in the amount of $135,242.58, which is her costs on a substantial indemnity scale reduced by 30%. Costs were to be apportioned between the Estate and the Trustee personally, with the Estate liable for costs incurred prior to the Trustee taking steps to continue the proceedings, and the Trustee liable after that point.
