IN THE SUPREME COURT OF NEWFOUNDLAND AND LABRADOR

TRIAL DIVISION

Citation: John Doe (G.E.B. #36) v. R.C. Episcopal Corp., 2004NLSCTD212

Date: 20041110

Docket: 1999 01T 3234

 

BETWEEN:

              JOHN DOE (G.E.B. #36)                    PLAINTIFF/APPLICANT

 

AND:

                    THE ROMAN CATHOLIC

                EPISCOPAL CORPORATION      FIRST DEFENDANT

                OF ST. JOHN'S                                FIRST RESPONDENT

 

AND:

                    THE CHRISTIAN BROTHERS        SECOND DEFENDANT/

                 INSTITUTE INC.                              SECOND RESPONDENT

                                                                                                                                       

         Before:     The Honourable Mr. Justice James P. Adams

                                                                                                                                      

 

Place of Hearing: St. John's, Newfoundland and Labrador

 

Appearances:

 Geoffrey E. Budden and Stuart Morris Counsel for the Plaintiff/Applicant

  J. David Eaton, Q.C. Counsel for the Second Defendant/Second Respondent

  

Authorities Cited:

 

CASES CONSIDERED:  Holloway v. Holloway (2001), 199 Nfld. & P.E.I.R. 1 (NFCA)

 

RULES CONSIDERED: Rule 55 of the Rules of the Supreme Court, 1986

 

 

  REASONS FOR JUDGMENT

 

Adams, J.:

 

INTRODUCTION

 

[1]              This is an application for costs on an interlocutory application inter partes to vacate an order for service ex juris. 

 BACKGROUND

 [2]              The plaintiff/applicant is one of a group of approximately 40 other former residents of the former Mount Cashel Orphanage whose cases are being heard together who have commenced action for damages arising out of alleged sexual and physical assaults during the 1940's and 50's.  The action was commenced against the Roman Catholic Episcopal Corporation of St. John's (the "RCEC") and a corporation called The Christian Brothers Institute Inc. ("CBI").  The RCEC took no part in this application although it was served with it. 

 [3]              CBI is a corporation organized and existing under the laws of the State of New York, United States of America.  The Statement of Claim was issued in 1999.  On 3 March 2000, Hickman C.J. (retired) of this Court allowed an ex parte application for an order permitting CBI to be served out of the jurisdiction in New York.  The plaintiff had the Statement of Claim served on CBI in that jurisdiction. 

[4]              CBI filed an application on 12 April 2000 to have the ex juris service and order set aside (the "main application").  That application was supported by an affidavit of James B. Moffett.  Mr. Moffett is a member of the Congregation of the Brothers of the Christian Schools of Ireland (the "Christian Brothers") and the Province Leader of the St. Patrick's Province Centre of the Christian Brothers located in New Rochelle, New York.  He is also the President of CBI.  The main application to vacate the order for service ex juris was set to be heard commencing 8 December 2003. 

[5]              The Moffett affidavit contained a number of assertions of fact respecting the history, nature, role and activities of CBI.  The essence of these assertions were to the effect that not only did CBI not have a connection to Mount Cashel Orphanage, or Newfoundland generally, but that CBI carried out limited activities only, readily distinguishable from those of the Congregation of Christian Brothers and that those activities were only carried out within the State of New York. 

 

[6]              Following CBI's application the plaintiff brought on a series of applications for the purpose of obtaining information from CBI in order to test the various assertions made by Brother Moffett and contained in the application of CBI.  All these applications were resisted by CBI. 

 [7]              The plaintiff also engaged in other investigations to seek information designed to test Brother Moffett's assertions.  These investigations required counsel for the applicant and others associated with him to travel to Toronto, Canada, Vancouver, Canada, and to various places within the states of New York and New Jersey in the United States of America.  Plaintiff's counsel also made inquiries and investigations elsewhere in Canada, in the United States of America, in the Republic of Ireland and in the Republic of Italy.  The plaintiff also held examinations for discovery in the spring of 2003 and filed interrogatories on various individuals in St. John's and elsewhere. 

[8]              In late October, 2003 during the course of the above-mentioned investigations, counsel for the applicant became aware of a reported decision in a case from the Superior Court of New Jersey, Appellate Division (the "New Jersey litigation"), in which CBI and one Brother Vincent McNally sued an insurance company for damages for failure to defend and indemnify McNally and CBI in an underlying tort litigation in which McNally and the Christian Brothers Institute had been sued for damages for sexual assault allegedly committed by another Christian Brother.  At the relevant time, Brother McNally served as the religious superior of the high school where the assaults were alleged to have occurred, pursuant to an assignment there by CBI, and where Mr. Hoy (the complainant) attended school.  Mr. Hoy alleged that Brother McNally failed in his duty to him by not reporting the assaults to the appropriate authorities and by allegedly conspiring to conceal the assaults from them.

 [9]              During the course of the New Jersey litigation CBI filed an affidavit from Brother McNally dated January 1996 in which Brother McNally made statements regarding the control which CBI had over the Congregation of Christian Brothers and the various activities and geographical reach of CBI which are clearly inconsistent with the statements on similar topics made by Brother Moffett in his affidavit filed in this matter sworn the 6^th of June, 2000.  In an application dated 27 August 2004, CBI sought to withdraw the affidavit of James Moffett and replace it with an affidavit of Brian Walsh, who had taken over as President of CBI following Moffett's retirement.  The Court was informed that Walsh's affidavit would be essentially the same as that of Mr. Moffett on the material particulars of this application.  CBI had resisted making Brother Moffett available for cross-examination on his affidavit in Newfoundland, offering instead to have him examined through videoconferencing or in the State of New York, U.S.A.  It was taking the same position in respect of the affidavit of Brother Walsh.  In an earlier ruling I ordered that the plaintiff was entitled to cross-examine Brother Moffett.  No draft affidavit of Brian Walsh was ever filed with the Court. 

 

[10]         At the time Brother McNally made his affidavit (1996), he, Brother James Moffett and Brother Brian Walsh were three of the five directors of CBI.  All five directors served from 1993 to 2000.  Moffett had been on the Board of Directors since 1985. 

 

[11]         Counsel for CBI acknowledged that on their face, the affidavits of James Moffett and Vincent McNally are inconsistent.  These inconsistencies include the following statements:

 

(1)     "CBI has absolutely no authority or control over the members of the Congregation ...  It is the Congregation that has authority and control over its members."  (Moffett, para. 32)

 

(2)     "CBI controls where a Christian Brother is assigned to work and it is its decision as to how long I or any other Brother is to remain at Essex Catholic [High School] or any other school or institute." (McNally, para. 6)

(3)     "CBI has no authority or control over the Brothers in the Congregation."  (Moffett, para. 30)

 

(4)     "In my capacity as a Christian Brother, I have taken a vow of poverty and rely entirely on CBI for room, board and financial support.  I receive money from CBI for those expenses paid directly by CBI and I am under the direction and control of CBI's provincial headquarters in New Rochelle, New York."  (McNally, para. 4)

 

(5)     "... CBI is a non-profit association affiliated with the Roman Catholic Church."  (McNally, para. 1)

 

(6)     "CBI is not a papal institution and therefore is not recognized by the Holy See."  (Moffett, para. 27)

 

(7)     "The operations of [CBI] have always been and continues to be limited to the State of New York."  (Moffett, para. 26)

 

(8)     "In the fall of 1982, Essex Catholic [situate in New Jersey] was managed and staffed by the Christian Brothers pursuant to an agreement between CBI and the Archdiocese of Newark."  (McNally, para. 4)

 

[12]         The application to substitute the Moffett affidavit with the Walsh affidavit and the application to have Brother Walsh cross-examined by video conference was set to be heard on or about 1 October 2004.  The main application to have the order for service ex juris set aside was set to be heard during three weeks to commence on 2 November 2004.

[13]         When counsel for CBI was made aware during the first week of September, 2004, that the applicant had in his possession the McNally affidavit, he requested time to properly review the affidavit and to take appropriate instructions.  In correspondence to the Court dated 27 September 2004, counsel for CBI advised that CBI would be withdrawing its application to set aside service ex juris and that therefore the other incidental or related applications set for 1 October would be unnecessary.  In a letter to counsel for the plaintiff, written at or about the same time, counsel for CBI, in similar vein, wrote that in light of the McNally affidavit and other documents obtained from the New Jersey litigation file, based on the facts and the law relating to service ex juris, CBI had formed the opinion that the Court would uphold the order for service ex juris and therefore CBI had decided to withdraw its application to have the order set aside.  Counsel indicated that it still was pursuing the trial issue of whether CBI is the appropriate defendant on the main issues of liability alleged in the statement of claim.  CBI subsequently withdrew the main application to set aside the order for service ex juris. 

 

[14]         On this application for costs, CBI filed an affidavit of Anthony D. Dougherty, an attorney-at-law practicing in the City of New York, New York, U.S.A.  Mr. Dougherty appeared in this Court and was cross-examined on his affidavit by counsel for the applicant. 

 

[15]         Mr. Dougherty testified that he is general counsel to CBI, advising it on all day-to-day matters, and has done so since approximately 1998.  Prior to that, a lawyer by the name of John Duffy was general counsel to CBI.  Mr. Dougherty was a junior lawyer in the firm in which Mr. Duffy was a partner from 1991 until 1995.  He assisted Mr. Duffy in advising CBI.  He is familiar with the ongoing litigation in this court and is instructing CBI's counsel in respect of it. 

 

[16]         In 1992, Mr. Duffy became ill and was away from his office recuperating from  surgery for several months.  Mr. Dougherty was assigned to keep track of his correspondence and to either personally deliver the correspondence to him at his home or telephone him each evening to review the correspondence and to receive various assignments from Mr. Duffy. 

 

[17]         Mr. Dougherty indicated that Mr. Duffy was quite familiar with the New Jersey litigation and that he retained a law firm in New Jersey to represent CBI as he was not licenced to practice law in that state.  Counsel for the plaintiff produced out of the New Jersey litigation court file copies of correspondence dated 13 and 14 October 1992 from one Edward N. Fitzpatrick, counsel who had been retained by Mr. Duffy in New Jersey, addressed to counsel for the insurers of CBI.  Both of these pieces of correspondence were copied to Anthony Dougherty.  Mr. Dougherty testified that he did not specifically recall these letters but in keeping with his role at the time he would have delivered these documents or explained their contents to Mr. Duffy upon receipt.  In the 14 October 1992 letter, in reference to the New Jersey litigation, Mr. Fitzpatrick stated:

 "As has been indicated to the carrier earlier, this case is fraught with extremely high risk.  A judgment in the millions is quite possible and since the matter is over four years old, about 30 % interest will be added on.  The Christian Brothers Institute and Brother McNally will hold Providence Washington accountable for all damage assessed by the jury."

[18]         In his affidavit filed in this Court, Dougherty averred in paragraph 18:

 "Apparently in January 1996, Brother Vincent McNally prepared an affidavit with the assistance and under the instructions of Duffy and Fitzpatrick."

 He stated that while he was not associated with the same law firm with which Duffy was associated in 1996, he said that during his time of association with Duffy it was not usual for documents filed in litigation matters to be copied to CBI.  He said that he became aware of the substance of the McNally affidavit for the first time in early September when he was advised of it through CBI's counsel in this matter.  Both Duffy and Fitzpatrick have since died.   

[19]         Dougherty averred further in his affidavit in paragraphs 23 and 24 that:

 "To my knowledge and understanding the corporate structure of CBI and the structure of the Congregation of Christian Brothers as presented to this Courts (sic) by the affidavit of James Moffett is accurate.

 

My knowledge and understanding as expressed herein is based upon the prior teachings of Duffy, my review of the Certificate of Incorporation of CBI, and the Constitutions of the Congregation of Christian Brothers, both of which have been provided in the Moffett affidavit."

 

[20]         Mr. Dougherty witnessed the affidavit of James Moffett filed in this matter.

 

POSITIONS OF THE PARTIES 

[21]         The plaintiff submits that he has been put through significant and unnecessary delays and expenses over the past four and a half years in gathering information to refute the assertions made by James Moffett in his affidavit in support of the application to have the order for service ex juris set aside.  He says that at the time Moffett made his affidavit in June of 2000, Moffett and CBI knew or ought to have known of the McNally affidavit and the inconsistency of its contents with the statements contained in the Moffett affidavit as both Moffett and McNally were members of the Board of Directors of CBI at both relevant times.  He submits that Brother Moffett was at least reckless, if not deliberately untruthful, with respect to his assertions made as part of CBI's application of April 2000 and his own affidavit in June of that year which has given rise to these lengthy delays and significant costs to the applicant.  The applicant says that since CBI knew or ought to have known that its assertions were untenable in fact and law, he should be awarded his costs on a solicitor and client basis or such other basis as this Court deems mete and just on all applications and in respect of all of the investigations and other activities he has been forced to engage in to rebut the assertions set forth in the application of April 2000.

 

[22]         Counsel for CBI says that no costs should be awarded at this time as this was an interlocutory application and, while CBI has withdrawn its application to set aside the order for service ex juris, it still maintains that it is not a proper party to the action and the information turned up in the investigation for this interlocutory application will also be required on the main issues at trial.  In that case, if the Court ultimately determines that CBI is not a proper party, then CBI ought not to be held accountable for any costs associated with the action.  CBI submits that costs should therefore be costs in the cause.  Alternatively, CBI submits that if any costs are to be awarded at this time then they must only relate to the application to set aside the order for service ex juris.  CBI further submits that any costs awarded should be limited to party and party costs only as the applicant has not established a case for costs on any other basis.  CBI says that the applicant commenced this action and obtained the order for service ex juris without any evidence that CBI was a proper party.  CBI says that the applicant then set about gathering evidence to support his claim which is a most unusual manner in which to proceed.  It says that the evidence gathering efforts were not in respect of CBI's application but rather in support of the applicant's own burden of proof in establishing that he had a proper case for the issuance of an order for service ex juris.  Additionally, CBI submits that any time during which the applicant had the McNally affidavit in his possession but did not disclose it should be excluded from consideration of any cost award as the applicant had the onus of proof on the ex parte hearing and was obliged to make full and frank disclosure of all information he had in his possession. 

 

ISSUES

 

[23]         1.   Is the applicant entitled to its costs on this interlocutory application and, if so, on what basis? 

 

ANALYSIS

[24]         Costs are governed by Rule 55 of the Rules of Court and are in the discretion of the Court.  The following rules are of particular relevance to the issues in this matter: 

 

55.02. (1) Notwithstanding the provisions of rules 55.02 to 55.14, the costs of any party, the amount thereof, the party by whom, or the fund or estate or portion of an estate out of which they are to be paid, are in the discretion of the Court, and the Court may

 

(a)   award a gross sum in lieu of, or a sum in addition to any taxed costs;

 

(b)   allow a percentage of the taxed costs or allow taxed costs from or up to a specific stage of a proceeding; or

 

(c)   direct whether or not any costs are to be set off. 

 

...

 

         (3) The Court may deal with costs at any stage of a proceeding. 

 

55.04. (1) Unless the Court otherwise orders, the costs between parties shall be determined by a taxing officer according to the Scale of Costs in the Appendix to Rule 55.

 

...

 

55.05. (1) Unless the Court otherwise orders, the costs of any interlocutory application, whether ex parte or otherwise, are costs in the cause and shall be taxed upon the same scale as the general costs of the proceeding. 

 

            (2) Where an ex parte order does not contain any direction as to costs, the taxing officer shall deal with the costs of the application and order as provided in rule 55.05(1). 

 

...

 

55.14. (1) Where any thing is done or an omission is made, improperly or unnecessarily, by or on behalf of a party, the Court may order

 

(a) that any costs arising from the act or omission not be allowed to the party;

 

(b) the party to pay the costs of any other party occasioned by the act or omission; or

 

(c) a taxing officer to inquire into the act or omission with power to order or disallow any costs as provided in rule 55.14(1)(a) and rule 55.14(1)(b).

 

[25]         In Holloway v. Holloway (2001), 199 Nfld. & P.E.I.R. 1 (NFCA) the Court ordered costs against the successful appellant by applying Rule 55.14.  In that case, the appellant had taken an application under Rule 38 in the Trial Division to have a preliminary determination made on a particular point.  The Court found that the applicant before the trial judge had attempted to use Rule 38 as a "dry run" and was only prepared to be bound by the ruling if it favoured the applicant.  In the circumstances, it did not favour the applicant and the applicant therefore refused to be bound by the ruling and appealed the order to the Court of Appeal. 

 

[26]         The Court of Appeal was critical of this approach and ordered costs to be payable in favour of the respondent which lost the appeal because of the actions by the appellant in taking an unnecessary and improper application in the first place before the applications judge.  This resulted in unnecessary and unusual costs for the respondent both at the Trial Division and in the Court of Appeal. 

 

[27]         The applicant in the present application also relies on Rule 55.14 to ground his application for costs and that the costs should be on a solicitor/client basis. 

 

[28]         In Holloway, Wells, C.J.N., stated:

 

[67]  Rule 55.14(1) clearly provides a basis for a court ordering a party to pay the costs of another party, apparently without regard to litigation success or failure, in the specific circumstances identified by that rule.  In fact, I would conclude that the rule goes further than simply providing a basis on which a court "may" make the order provided.  While the discretion of the court is clearly preserved by the use of the word "may", a court ought to apply the rule in any case that falls within the specific circumstance described in the rule, unless the court, in its discretion judicially exercised, considers that there is good reason not to apply it.  The rule provides:

 

"55.14(1) Where anything is done or an omission is made, improperly or unnecessarily, by or on behalf of a party, the Court may order

 

(a) that any cost arising from the act or omission not be allowed to the party;

 

(b) the party to pay the costs of any other party occasioned by the act or omission; or

 

(c) a taxing officer to inquire into the act or omission with power to order or disallow any costs as provided in rule 55.14(1)(a) and rule 55.14(1)(b)."  (Emphasis added.)

 

The immediate question for determination therefore, is: do the circumstances of this case fall within the description of "any thing ... done ... improperly or unnecessarily, by or on behalf of a party"?

 

[70]  ... although awarding of costs under Rule 55.14(1) is limited to circumstances where impropriety or unnecessary harm is involved, the costs are not being awarded to "reprove misconduct and error".  They are awarded to reimburse the party acting properly, for costs "occasioned by the act or omission" of the party acting improperly.

 

[75]  I would therefore conclude, using Rule 55.14(1) as authority, that it is appropriate for a court to order that a successful party not recover costs and that the successful party pay costs to the unsuccessful party, or parties, at least in circumstances where:

 

(a)   the successful party, or a person acting on that party's belief, has done some thing that:

 

(i) is improper in the sense that it involved misconduct, directed at achieving for that party, a circumstance to which that party was not, at law, entitled, or

 

(ii) is not necessary in the sense that other procedures, to resolve the issues between the parties, could have been employed without unfairly impacting upon or disregarding the rights of the other party or parties;

 

(b) the thing done has caused the unsuccessful party to incur costs that would not otherwise have been incurred, and

 

(c) the costs ordered do not serve as a penalty but are confined to the amounts necessary to fully indemnify the unsuccessful party or parties for the costs incurred as a result of the improper action, that would not otherwise have been incurred. 

 

It is not suggested that the foregoing represents the only circumstances in which a court might award costs to an unsuccessful party under Rule 55.14.  As well, it is possible the rule could be employed to award to successful parties, costs that might not be otherwise awarded under the rules.  This decision however deals only with an unsuccessful party claiming costs against a successful party in circumstances of the nature of those present in this case. 

 

       (Emphasis added)

 

[29]         While Holloway was dealing with an unusual case in which the successful party was ordered to pay the costs of the unsuccessful party, the above principles also apply to the more normal circumstance where the unsuccessful party is ordered to pay the costs of the successful party.  Or, where as in this case, one party withdraws an application before it is heard, essentially accepting the other party's position, and the other party seeks costs for having to prepare for an unnecessary application. 

 

[30]         It is not necessary, in my view, to determine whether the assertions in the Moffett affidavit were designed to deceive the Court or were embarked upon mala fides.  Most charitably, the action of CBI in filing the Moffett affidavit without taking into account the McNally affidavit was very negligent, if not reckless.  In my view the situation clearly falls under the umbrella contemplated by Rule 55.14 and the interpretation of that rule in Holloway, supra.