



COURT OF APPEAL FOR ONTARIO

CITATION: Mauldin v. Cassels Brock & Blackwell
    LLP, 2013 ONCA 307

DATE: 20130508

DOCKET: C52912 and C52913

Winkler C.J.O., Laskin, Sharpe, Armstrong and Rouleau
    JJ.A.

C52912

BETWEEN

Fred Mauldin, Dan Myers, Robert Blomberg,
    Theodore Landkammer, Lloyd Chelli, Stephen Yee, Marvin Cleair, Carolyn Cleair,
    Richard Hanna, Douglas Laird, Charles Ivans, Lyn White and Athena Smith

Plaintiffs (Respondents)

and

Cassels Brock &
    Blackwell LLP, Gregory Jack Peebles and
Robert Hryniak

Defendants (
Appellant
)

C52913

AND BETWEEN

Bruno Appliance and Furniture, Inc.

Plaintiff (Respondent)

and

Cassels Brock &
    Blackwell LLP, Gregory Jack Peebles and
Robert Hryniak

Defendants (
Appellant
)

Sarit E. Batner and Moya J. Graham, for the appellant
    Robert Hryniak

Javad Heydary, David K. Alderson and Ruzbeh Hosseini,
    for the respondents

Paul Le Vay and Luisa Ritacca, for the defendant Cassels
    Brock

Jonathan L. Rosenstein, for the defendant Gregory Jack
    Peebles

Heard:  June 21, 22 and 23, 2011

On appeal from the order of
    Justice A. Duncan Grace of the Superior Court of Justice, dated October 22,
    2010, with reasons reported at 2010 ONSC 5490.

COSTS ENDORSEMENT

A.

background

[1]

Two sets of plaintiffs in two actions (the Mauldin action and the
    Bruno action) sued the defendants, Robert Hryniak, Cassels Brock LLP, and
    Gregory Jack Peebles, for investment losses arising from allegedly fraudulent investment
    schemes. The plaintiffs in the two actions (the Mauldin group and Bruno)
    brought motions for summary judgment against all of the defendants.

[2]

The two motions were heard together after the amendments to Rule 20 of
    the
Rules of Civil Procedure
, R.R.O. 1990, Reg. 194, had come into
    effect. The motion judge granted the motions as against Hryniak, but dismissed
    the motions as against Cassels Brock and Peebles on the basis that a trial was
    required to determine their liability. He awarded the Mauldin group damages of USD$1,190,401
    and awarded Bruno USD$1 million.

[3]

Hryniak appealed from the orders for summary judgment against him. His
    appeals were heard by a five-judge panel of this court, together with three
    other appeals from decisions under the amended Rule 20: see
Combined Air Mechanical
    v. Flesch
, 2011 ONCA 764, leave to appeal to the S.C.C. granted, [2012]
    S.C.C.A. 47, appeal heard and reserved (26 March 2013). This courts intention
    in
Combined Air
was to clarify for judges and litigants in the
    province of Ontario the nature of the test that applies for determining whether
    or not summary judgment should be granted, the scope and purpose of the new
    powers under the amended rule, and the types of cases that are amenable to
    summary judgment.

[4]

The court dismissed Hryniaks appeal from the motion judges order
    granting summary judgment in favour of the Mauldin group and allowed Hryniaks
    appeal from the motion judges order granting summary judgment in favour of Bruno.
    The parties were asked for written submissions on the costs of Hryniaks appeals
    and the costs of the summary judgment motion in the Bruno action. The parties
    were also asked to file written submissions on the order this court should make
    concerning the proceeds of a letter of credit in the amount of $950,000, which Hryniak
    posted as a condition of granting his motion to extend time to perfect his
    appeals: see
Mauldin v. Hryniak
, 2011 ONCA 67, 274 O.A.C. 353, at para.
    41, varied 2011 ONCA 126.

[5]

The letter of credit issue may be dealt with in short order. The Supreme
    Court of Canada has heard and reserved Hryniaks appeal from this courts
    decision upholding the summary judgment against him in favour of the Mauldin
    group. It would not be appropriate for this court to release all or even part
    of the proceeds secured by the letter of credit to the Mauldin group pending
    the disposition of this appeal. The parties may return to this court to deal
    with the letter of credit following the release of the Supreme Court of
    Canadas decision.

[6]

We now consider the costs issues.

B.

motion judges costs order

[7]

The motion judge ordered Hryniak to pay $275,000 in costs of the motions,
    plus $15,000 in disbursements. He stated, at para. 36, that the entitlement to
    this award should be shared by the Mauldin group and Bruno based on the
    principal amounts awarded to them in my reasons on the motions. He reserved to
    the trial judge the costs of any amount relating to the various
    cross-examinations and the Rule 39.03 examinations since they may be used at
    trial.

[8]

The motion judge went on to award the successful defendants their costs
    of the motions. He awarded $30,000 to Peebles, inclusive of disbursements and
    applicable taxes. He awarded Cassels Brock $75,000 in respect of the Bruno action
    and $65,000 in respect of the Mauldin action, inclusive of disbursements and
    taxes (at paras. 42 and 45). Liability for paying these costs was allocated
    between the Mauldin group and Bruno in proportion to the principal amounts they
    invested (at para. 66).

[9]

Finally, the motion judge considered the appropriateness of making a
Sanderson
or a
Bullock
order. A
Bullock
order requires an unsuccessful
    defendant to reimburse the plaintiff for the successful defendants costs; a
Sanderson
order requires the unsuccessful defendant to pay the successful defendants
    costs directly: see
Moore (Litigation Guardian of) v. Wienecke
,
[2006] O.J. No. 2044, at para. 11,
    revd 2008 ONCA 162, 90 O.R. (3d) 463 (C.A.), but affirmed on this point.

[10]

The
    motion judge considered the following two-step test for deciding whether to make
    a
Sanderson
order:

1.

As a threshold matter, was it reasonable for the plaintiffs to join the
    defendants in one action (or, as here, in one motion)?

2.

Is a
Sanderson
order fair and reasonable in the circumstances?

[11]


In answering the threshold question in the affirmative, the
    motion judge noted that the defendants asserted crossclaims against each other.
    It was thus reasonable for the plaintiffs to join the defendants when they
    filed their motions for summary judgment.

[12]

Concerning
    the second question, the motion judge concluded it was appropriate that Hryniak
    bear the responsibility for some, but not all, of the costs awarded to Cassels
    Brock and Peebles. The motion judge made several observations in reaching this
    conclusion, at para. 63. For example, he observed that Hryniaks ability to
    make allegations against Peebles  thereby perpetuating Cassels Brocks
    involvement  was partly attributable to Peebles conduct in allowing Hryniak
    to have access to Cassels Brocks trust account whenever he chose and
    seemingly without question.

[13]

The
    motion judge held that one-third of the costs awarded to Cassels Brock and
    Peebles should be payable by Hryniak. This meant that Hryniak was required to
    pay the all-inclusive amounts of $46,667 to Cassels Brock and $10,000 to
    Peebles. The plaintiffs were required to pay the all-inclusive amounts of $93,333
    to Cassels Brock and $20,000 to Peebles, with liability allocated in proportion
    to the principal amounts they invested.

C.

Parties POSITIONS ON COSTS

(1)

Hryniaks Submissions

(a)

Costs of the Motions
    and the Appeals

[14]

Hryniak
    acknowledges that the parties were not asked for submissions on the costs
    awarded on the summary judgment motion in the Mauldin action. He contends that the
    court needs to address this issue because the motion judge did not allocate the
    total costs award of $290,000 between the two actions. According to Hryniak,
    the work done on behalf of the plaintiffs on each motion was roughly the same
    and, accordingly, the total award should be equally divided.

[15]

Hryniak
    submits that the parties should bear their own costs of the Mauldin groups motion.
    Alternatively, he submits that the costs award to the Mauldin group be $108,750,
    all-inclusive. This amount represents 50 per cent of the total costs award reduced
    by a contingency of 25 per cent to reflect the inappropriate pursuit of summary
    judgment.

[16]

Regarding
    the costs of the appeal, Hryniak asks that the parties bear their own costs of
    the appeal in the Mauldin matter. Alternatively, he asks that costs of $32,000,
    all-inclusive, be awarded to the Mauldin group.

[17]

In
    respect of the Bruno motion, Hryniak requests costs in the amount of $145,000,
    all-inclusive. This represents one-half of the costs order in the plaintiffs
    favour on the summary judgment motions.

[18]

Hryniak
    requests costs of the appeal in respect of the Bruno motion in the amount of
    $32,000, payable forthwith. This amount represents half of his costs on a
    partial indemnity basis.

[19]

In
    support of his position on the costs of the motions and the appeals, Hryniak
    asks this court to take into account its comments in
Combined Air
, at para. 152,
that neither of these
    actions should have been the subject of summary judgment motions. The
    underlying motions were costly, which should result in a reduction of the cost
    awards in favour of the Mauldin group on both the appeal and the motion. The
    summary judgment motion was an inefficient proceeding. Hryniak will still need
    to defend himself at a trial against other causes of action that the Mauldin group
    are pursuing against him.

(b)

Sanderson
Order

[20]

Hryniak contends that the motion judges
Sanderson
order
    requiring him to pay one-third of the successful defendants costs of the
    summary judgment motions should be set aside. Considering the courts reasons
    regarding the inappropriateness of these summary judgment motions, the
Sanderson
order is no longer appropriate. Moreover, given that the appeal in the Bruno matter
    was allowed, there was no success by the plaintiff against any of these
    defendants and the
Sanderson
order is no longer available.

(2)

Mauldin groups and
    Brunos Submissions

(a)

Costs of the Motions
    and the Appeals

[21]

The
    position of the Mauldin group and Bruno is that this court should not interfere
    with the motion judges costs order.

[22]

The
    Mauldin group submits that there is no need for this court to revisit the
    motion judges costs order on the basis that it awarded a global figure to both
    sets of plaintiffs. The motion judge, at para. 36, allocated the costs award
    between the Mauldin group and Bruno based on the principal amounts awarded to
    them in his reasons on the motion. On this formula, the Mauldin group was
    awarded costs of $158,181.81 and Bruno was awarded costs of $131,818.18
    (all-inclusive).

[23]

The
    Mauldin group further submits that Hryniak is abusing the opportunity to make costs
    submissions concerning this motion by effectively launching an appeal from the
    costs order without having sought leave to appeal. It is not open to this court
    to review the merits of the costs order in the absence of an application for
    leave to appeal.

[24]

Regarding
    the costs of the appeal, the Mauldin group asks that Hryniak pay its costs
    forthwith, fixed on a substantial indemnity scale in the amount of $69,627.52,
    plus disbursements of $18,182. The conduct giving rise to the liability in this
    case is deserving of disapproval in the form of substantial indemnity costs:
    see generally,
Authorson (Litigation guardian of) v. Canada

(Attorney
    General)
(2002), 215 D.L.R. (4
th
) 544 (Ont. C.A.). According to
    the Mauldin group, given the uncertain state of the law on the test for summary
    judgment, it would be unfair to deny these plaintiffs their costs of the
    appeal.

[25]

In
    support of Brunos position that the costs of the motion remain as ordered by
    the motion judge, Bruno submits that this outcome is justified by Hryniaks
    reprehensible pre-litigation conduct, including not investing Brunos money,
    but using it for his own requirements. Bruno also points out that Hryniak did
    not appeal from the costs order of the motion judge.

[26]

With
    respect to the costs of the appeal, Bruno asks that Hryniak pay costs in the
    amount of $45,521.47 on a partial indemnity basis, or in the alternative, that
    no costs be payable on the appeal. The court may deviate from the general rule
    that costs follow the event when it is just and equitable to do so:
Wallace
    v. Allen
(2007), 86 O.R. (3d) 489 (S.C.J.), at para. 10. Hryniaks conduct
     both pre-litigation and his ongoing conduct  is so reprehensible that it is
    deserving of sanction.

[27]

In
    support of the alternative position that no costs be awarded on appeal, Bruno
    points out that this court considered a novel and important issue in the use of
    summary judgment under the new Rule 20. This is a factor in determining whether
    costs are to be made payable on appeal:
MDG Kingston Inc. v. MDG Computers
    Canada Inc.
, 2008 ONCA 656, at para. 40.

(b)

Sanderson
Order

[28]

The
    Mauldin group and Bruno submit that the motion judges
Sanderson
order
    should stand. The manner in which Hryniak chose to execute his fraud resulted
    in circumstances that caused the plaintiffs to include the remaining defendants
    in this action. In any event, no appeal of the
Sanderson
Order is
    properly before the court.

(3)

Co-Defendants
    Submissions on the
Sanderson
Order in respect of the     Bruno motion

[29]

Cassels
    Brock submits that a
Sanderson
Order is only appropriate where the
    moving party succeeds against at least one of the responding parties, and where
    the order would be just and fair in the circumstances. Considering that Bruno was
    entirely unsuccessful on the motion against all of the defendants, the
Sanderson
Order is no longer appropriate. Accordingly, Bruno should now be found responsible
    for the portion of the co-defendants costs that Hryniak was originally ordered
    to pay.

[30]

Cassels
    Brock further submits that it is not fair and equitable for it to continue to
    bear the risk of non-recovery of costs payable by Hryniak under the
Sanderson
order: see
Whaley v. Dennis,
[2006] O.J. No. 683 (S.C.J.), at para. 55.

[31]

Cassels
    Brock proposes that, in assessing the amount subject to the
Sanderson
order,
    this court should follow the motion judges approach of awarding costs in
    proportion to the amounts invested by each set of plaintiffs. Using this formula,
    Bruno should be liable for an additional $21,212.27 in favour of Cassels Brock.

[32]

Peebles
    adopts the submissions of Cassels Brock. He asks this court to set aside the
Sanderson
Order and to make the remaining costs in the Bruno motion payable by Bruno.

D.

anaylsis

[33]

As
    a preliminary point, there is no basis for Hryniaks position that the motion
    judge did not allocate the costs award between the two actions. The motion
    judge dealt with entitlement at para. 36 of his reasons by apportioning the
    costs award based on the principal amounts awarded on the motion.

[34]

Hryniaks
    submissions concerning the costs of the Mauldin groups successful motion for summary
    judgment were not requested by this court in its disposition of the appeal and
    are not properly before us.  Hryniak did not seek leave to appeal from the
    motion judges cost order in respect of that motion, including the motion
    judges
Sanderson
order in relation to the costs of the Mauldin
    groups motion.

[35]

Even
    leaving aside this procedural impediment to accepting Hryniaks position, we
    see no reason to depart from the principle that costs are awarded to the
    successful party. As this court pointed out in
Combined Air
, at para.
    156: Hryniaks defence to this action simply has no credibility. There is no
    reason to deprive the successful plaintiffs of their costs of the motion in the
    circumstances. Nor is there any reason to interfere with the
Sanderson
order in respect of the Mauldin groups motion given the outcome of the appeal.

[36]

However,
    the situation is different with respect to Hryniaks successful appeal from the
    summary judgment against him in the Bruno matter. As we stated in
Combined Air
,
    at para. 166: The evidence against Hryniak in that action was not nearly as
    overwhelming. We further explained that at least two genuine issues require a
    trial in that action, including the issue whether Hryniak made any statement
    that induced Bruno to invest with him. In these circumstances, we see no reason
    to depart from the general principle that costs follow the event.

[37]

We
    therefore set aside the motion judges costs order in favour of Bruno and in
    its place order that Hryniak receive his costs of Brunos summary judgment
    motion, to be reserved to the trial judge. This court ordered that affidavits
    and cross-examinations on the affidavits used on the summary judgment motion
    may be used at trial in the same manner as examinations for discovery. A significant
    amount of the costs incurred will serve to reduce the costs of bringing the
    action to trial. It is difficult, therefore, for this court to carry out a
    proper quantification of the costs of the motion. Hryniak has not filed
    materials in support of his request that costs be fixed that could assist this
    court in making such a determination. The trial judge will be in a better
    position to assess these costs in the light of the steps necessarily taken to
    bring the case to trial and the results at trial.

[38]

Since
    Brunos motion failed against all three defendants, we set aside the motion
    judges
Sanderson
order in respect of the costs of the Bruno motion. The
Sanderson
order reduced Brunos obligation to pay the costs awarded to
    Cassels Brock and to Peebles by $21,212.27 and $4,545.45 respectively. Bruno is
    now responsible for payment of these amounts. Hryniaks obligations to Cassels
    Brock and Peebles are reduced accordingly.

[39]

In
    awarding costs of the appeals, we see no reason to depart from the general rule
    that costs follow the event.  We would not, however, award the Mauldin group
    its costs on a substantial indemnity scale. Hryniak raised a number of serious
    and important issues surrounding the interpretation of Rule 20 that warranted
    consideration by this court. As a result, we award the Mauldin group the costs
    of the appeal on a partial indemnity scale. We consider a reasonable award, in
    the circumstances, to be $32,000, inclusive of disbursements and applicable
    taxes. We also award Hryniak his costs of his appeal from the order for summary
    judgment obtained by Bruno, fixed in the amount of $32,000, inclusive of
    disbursements and applicable taxes.

W.K. Winkler C.J.O.

John Laskin J.A.

Robert J. Sharpe J.A.

R.P. Armstrong J.A.

Paul Rouleau J.A.


