The Court heard an Appeal and Cross-Appeal of a Costs Decision following a lengthy Trial. The dispute related to a discretionary trust in respect of the ownership of businesses previously owned by the late father of the Appellant Plaintiff and one Respondent. Throughout the Action, the Appellant raised many causes of action and allegations, including claims that virtually everyone on the opposite side had engaged in fraud and other misconduct. After Trial, the Trial Judge awarded two sets of Costs, one to the Corporate Defendants and one to the Individual Defendants, who had been represented separately for some years. The Trial Judge awarded both sets of Respondents Costs calculated on four times Column 5 of Schedule C up to the close of the Appellant’s case at Trial, and on single Column 5 thereafter. The Trial Judge lowered the scale of Costs after that point because the Appellant then dropped one of his claims. The Appellant appealed Costs separately from his (unsuccessful) Appeal on the merits. The Respondents cross-appealed the restriction of Costs to single Column 5 for the latter part of the Trial.

The Appellant appealed on a number of grounds. The Appellant objected to any fees in excess of single Column 5 of Schedule C, on the basis that some of the matters the Trial Judge considered with respect to Costs were irrelevant, including the quantum of the successful Party’s legal fees. However, the Court of Appeal held that actual legal bills were relevant. Party-party Costs were designed to amount to approximately half of a reasonable legal bill. Schedule C was not binding on a Judge, nor was it presumed to be correct. Whether actual legal bills are too high may go to weight, but not to the relevance of such bills.

The Appellant further argued that the Respondents’ legal bills were not, in fact, paid by the Respondents. However, the legal test to recover party-party Costs is not what has been paid, but rather whether the Party was liable to pay the lawyer. Payment of fees by a third party such as an insurer was not a bar to recovering Costs.

The Court further held that the Trial Judge, in assessing Costs, did not err in considering the many wasteful motions brought by the Appellant. The Court held that prolonged interlocutory warfare was not irrelevant in the assessment of a Costs award. Rule 10.33 expressly provides that unnecessary conduct, or conduct lengthening or delaying the Action,is relevant in an assessment of Costs.

The Appellant further argued that the Trial Judge erred in relying on the Appellant’s unshakeable belief in a valid trust. However, the Court held that the Trial Judge’s point was not the Appellant’s motivation, but rather his extraordinary persistence and continual searching for new reasons to reach the same conclusion. The Court held that while the Appellant’s motivation or beliefs were not relevant, his conduct was. The Court further rejected the Appellant’s argument that the Trial Judge should not have considered the Appellant’s constant, unfounded accusations of impropriety by the Respondents in his assessment of Costs. The Court was not aware of any Canadian authority questioning the relevance of that factor. Moreover, consideration of that factor was mandated by Rule 10.33.

The Appellant further argued that the two groups of Defendants, who were separately represented, should share a single set of Costs. The Court held that the issue was whether separate counsel or defences were reasonably necessary.The test in respect of this issue does not relate to the end result of the Claim. Rather, if the interests of the various Parties’ were not the same across the board, separate counsel was needed. The Court held that although there was some overlap in the various Defendants’ interests, the issues facing each set of Defendants were distinct. Moreover, that the Appellant consistently alleged misconduct by certain Parties and regularly changed his grounds of suit, made separate counsel even more important. A Party accused of dishonest conduct, such as fraud, is entitled to his or her own counsel. The Appellant continually added to his list of alleged misconduct, and for the most part, not all Parties were alleged to be guilty of a single accusation. That alone showed diversity of interest. The Respondents were not obliged to dismiss or not take seriously the allegations by a persistent litigant involving individual reputations and significant sums of money. Moreover, no unnecessary duplication of work was alleged between the two sets of counsel for the Respondents. In this context, the Court dismissed the Appeal.

With respect to the Cross-Appeal, the Respondents argued that they should not have been restricted to single Column 5 after the close of the Appellant’s case. The Court held that, although the Appellant dropped one of his claims at that stage, he did not drop any factual allegations. Moreover, the pleas of misconduct were never formally withdrawn.

The Court held that the application of Schedule C is purely optional for a Judge. The huge sums of money at issue in the Claim were far higher than those contemplated in Column 5. Further, the Schedule C amount did not change with the new Rules; rather, it was drafted by an ad hoc Committee approximately 16 years ago. The Court held that the Trial Judge reduced Costs after the close of the Appellant’s case on the basis that even a late narrowing of the issues should be encouraged, and was consistent with the principles set out in Rule 1.2. The Court held that although the Trial Judge’s discretion to reduce Costs after a Claim is withdrawn should be respected on Appeal, a three-quarters reduction was not proportional, and could not be justified.

The Court further held that the Respondents did not lead evidence at Trial that was unnecessary. Further, the Trial Judge’s Reasons demonstrate that the Respondents won the Trial largely because of the witnesses they called. Further, single Column 5 would be inadequate for any suit respecting such sizeable assets, even if it ran smoothly and without misconduct. However, the Trial Judge gave that factor no weight whatsoever. The Court further noted that the undoubted, incessant misconduct by the Appellant received no weight at all during the second part of the Trial, which was the point at which the Respondents defended themselves against such allegations. The Trial Judge further failed to give any weight whatsoever to the great complexity of the Claim.

The Court held that it was entitled to interfere with discretionary decisions such as Costs where improper weight was given or not given to relevant factors. The Trial Judge’s Reasons showed that a number of important factors received no weight at all. In this context, and given that the Costs award was well over $300,000.00, the Court determined that it was appropriate to intervene. The Court allowed the Cross-Appeal and increased Costs for the latter part of the Trial from single Column 5 to triple Column 5.