Reprehensible, unfounded claims of fraud-like behaviour against son justified award of costs: court
The Ontario Superior Court of Justice has awarded 750,000 in costs in favour of a man who recently won a damages suit that his father filed against him.
In Falsetto v. Falsetto et al., 2022 ONSC 5089, the plaintiff is the father of the defendant. The plaintiff transferred money to the defendant on several occasions between November 2010 and July 2015. The defendant used the funds to acquire and develop several properties and obtain three large apartment buildings.
The plaintiff then filed an $11-million damages suit with the Superior Court against the defendant and his companies. He sought the return of the funds used by the defendant to acquire the properties and the gross sale price of the homes the defendant built on the Wilmont and Skeena properties.
The plaintiff alleged that he did not intend to transfer the funds to the defendant as a gift but intended that the purchased properties were to be put in his name or be held in trust for him − either on a specific, resulting, or constructive trust. He also alleged that the defendant breached his fiduciary duty when he acted as the plaintiff’s power of attorney to acquire the properties.
On July 5, the Superior Court released a decision in favour of the defendant. The judge found that the plaintiff gifted the funds to the defendant, and therefore, dismissed his claim for a special, resulting, or constructive trust and his allegation of a breach of fiduciary duty.
The defendant’s companies then sought costs on a substantial indemnity basis of $1,080,285. They alleged that the plaintiff failed to prove “a serious allegation similar to fraud” against the defendant. The defendant also sought costs, arguing, inter alia, that the plaintiff had misled the court in the materials filed to obtain certificates of pending litigation (CPLs) against the properties.
The Superior Court held that the “reprehensible” and “unfounded” claims of fraud-like behaviour against the defendant justified the award of costs. It ordered the plaintiff to pay 750,000 in costs to the defendant and his companies, plus harmonized sales tax and disbursements of 43,959.26.
The court noted that the plaintiff made the following allegations during the trial: (a) the defendant engaged in “elder abuse”; (b) the defendant “stole all his money”; and (c) the defendant executed a scheme to misappropriate the plaintiff’s life savings by registering the properties in his own name rather than in the plaintiff’s name.
To attract an award of costs on the higher scale, the court said that the conduct involved must be “reprehensible, scandalous, or outrageous.” In this case, the court found that the plaintiff’s allegations of dishonesty and deceit were all “serious” allegations, “very damaging” to the defendant, and made “without any evidence or memory of what happened.”
“No evidence was presented at trial that [the plaintiff] suffered from a medically caused inability to remember the recent past and so the only alternative is that [the plaintiff] decided to revoke his gifts to [the defendant] for reasons that are unknown,” Justice Robert Smith wrote. “Whatever his reason, [the plaintiff’s] conduct is reprehensible and should be sanctioned and deterred by the court.”
The plaintiff argued that no costs should be awarded against him, or he should only be ordered to pay $100,000 in costs because he would become “impecunious” if the requested costs would be granted. The court disagreed.
In granting the costs, the court determined that making serious accusations of a fraudulent nature against the defendant was “reprehensible.” It also considered the facts that the plaintiff misled the court in the materials filed to obtain CPLs – “which counterbalances the weight of the impecuniosity factor” – and that he owns a house ranging from $800,000 to $1,000,000 that remain unused for the past five years.
“In this case, [the plaintiff’s] actions and his circumstances are not the rare sympathetic circumstances to justify a substantial reduction in costs,” Justice Smith wrote.