J.W. Quinn J.:

  1.       INTRODUCTION

[1]          We have a marvellous legal system in Ontario. Anybody is permitted to walk into a courthouse and commence a civil law suit about anything. The court will patiently provide all of the time and services reasonably (and, sometimes, unreasonably) necessary. The matter may go on interminably (and, usually, does) but our accommodating nature does not abate; our patience persists; we listen, we sit and we listen some more. However, when the law suit ends, the idioms arrive: the chickens come home to roost;[1] the jig is up;[2] the second shoe is about to drop;[3]the cat is out of the bag;[4] the fat lady sings;[5] one sows what one reaps;[6] and, here, so aptly, the cacophonous wail in the background is that of a piper, warming up and waiting to be paid[7] – the sum of $1,316,535.16, to be precise.

[2]          The costs of this action are now to be determined.


  1.    PERSONAL LIABILITY FOR COSTS

[105]       This brings me to the hottest issue on this costs hearing: whether, along with the plaintiff, Fridriksson and Klassen, non-parties to the action, should be jointly and severally responsible for the costs of the defendants.

[106]       If this issue is not decided in favour of the defendants, any costs order may be rendered meaningless. Counsel for the defendants submit that the plaintiff is a shell corporation. Evidence on the receivership motion (first mentioned at paragraph [36] above) shows that the assets of the plaintiff consist of the following; a bank balance overdrawn by $41,631.13; leasehold improvements valued at $2,971.00; the business lease itself, of unknown value; and some audiometric and office equipment, with an unknown value.[28] However, the impecuniosity of the plaintiff is not relevant. This is a costs hearing not a judgment debtor examination. Impecuniosity is not a factor in reaching my costs decision (but it may have practical implications in implementing my decision).

[107]       I will set out again s. 131(1) of the Courts of Justice Act which is key to this particular issue: [Underlining added]

131(1) Subject to the provisions of an Act or rules of court, the costs of and incidental to a proceeding or a step in a proceeding are in the discretion of the court, and the court may determine by whom and to what extent the costs shall be paid.

[108]       Do the underlined words “by whom” include non-parties? Or should they be interpreted to mean “by which of the parties”? I would not restrict my interpretation to the latter but, instead, give to the underlined words in s. 131(1) their plain and ordinary meaning. Section 131(1) has its origins in the Ontario Judicature Act, 1881, c. 5 which means that 134 years have passed without that plain and ordinary meaning having been amended. It is my view that “by whom” includes non-parties.

[109]       There is ample authority for the court to award costs against a non-party who is the real litigant and who has put forward someone else, a “man of straw,” in whose name proceedings are commenced: see, for example, Sturmer v. Beaverton (Town), [1912] O.J. No. 184, 25 O.L.R. 566 (Div. Ct.) at paras. 15 and 17; Curry v. Davidson, [1922] 23 O.W.N. 3 (Div. Ct.) at para. 5; and Rockwell Developments Ltd. v. Newtonbrook Plaza Ltd., 1972 CanLII 531 (ON CA), [1972] 3 O.R. 199 (C.A.) at paras. 33-37. However, this is not the situation before me. Neither Fridriksson nor Klassen, in their personal capacities, had legal standing to commence proceedings against the defendants. The plaintiff is not a “man of straw.” The fact that, of the $1,000,000.00 purchase price for the Niagara Falls Clinic, $250,000.00 came from the personal savings of Fridriksson (and the balance consisted of a loan guaranteed by Fridriksson personally and by his professional corporation), does not mean that Fridriksson could have commenced the within action in his own name. It only means that he is interested in the outcome and has a connection to the action. The same can be said of Klassen.

[110]       Counsel for the plaintiff understandably place great reliance upon paragraph 26 of Rockwell Developments Ltd. v. Newtonbrook Plaza Ltd., 1972 CanLII 531 (ON CA), [1972] 3 O.R. 199 (C.A.):

It is my view that a literal interpretation of the words . . . ‘and the court or judge has full power to determine by whom and to what extent the costs shall be paid’ would lead to obvious absurdities, and that the decisions to which I have already referred correctly held that such a literal interpretation should not be given to the words in question. In my view the words ‘by whom’ should be interpreted to mean ‘by which of the parties to the proceeding before the court or judge.’

[111]       With the greatest of respect to the Court in Rockwell Developments Ltd. v. Newtonbrook Plaza Ltd., the suggestion that a literal interpretation of s. 82(1) of the Judicature Act, R.S.O. 1970, c. 22, now s. 131(1) of the Courts of Justice Act, “would lead to obvious absurdities” is not sufficient reason to avoid a literal interpretation. The solution? Avoid the absurdities, not the literal interpretation. The law is never advanced by holding that words do not mean what they say.[29]

[112]       A case that is more factually relevant than any provided on behalf of the plaintiff, is Oasis Hotel Ltd. v. Zurich Insurance Co., 1981 CanLII 433 (BC CA), [1981] B.C.J. No. 690, 124 D.L.R. (3d) 455 (B.C.C.A.), relied upon by the defendants. There, a corporation owned a hotel that burned down under suspicious circumstances and the insurer denied the claim. An individual named Surowiec, along with his wife, were the sole directors, officers and shareholders of the corporation. The trial judge found the testimony of Surowiec to be patently untrue. In affirming the personal costs ordered by the trial judge, Lambert J.A., writing for the Court, held, at para. 23:

I conclude that there is no authority in Canada that either binds me or persuades me to the conclusion that in a case where the court is made the instrument to perpetrate a fraud, the court cannot award the costs of the proceedings that are instigated as part of the fraud to be paid by the active mind that put the fraud into effect and directed the institution of the court proceedings.

and at para. 29:

. . . I do not regard this case as a case about the piercing of the corporate veil . . . I am satisfied that the [personal costs] order made by [the trial judge] does not violate the sanctity of the corporate personality. This was a case of fraud. In such cases the individual who conceives and carries out the fraud cannot shield behind a corporation that he controls.

[128]       Although I have not received any submissions on the matter, I should think that the defendants (absent relevant offers to settle) would be entitled to their costs of the costs hearing on a partial indemnity basis. In the event that common sense continues to boycott this case and the parties cannot agree on those costs, counsel should contact the trial co-ordinator for further instructions.

_________________________________

The Honourable Mr. Justice J.W. Quinn

Full case here –

Citation: The Hearing Clinic (Niagara Falls) Inc. v. 866073 Ontario Limited, et al., 2015 ONSC 1177 (CanLII), <http://canlii.ca/t/ggf39>, retrieved on 2016-07-29
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