2021 NLCA 46, 2021 NLCA 46

John J. Henley and Christopher M. Henley (appellants) v. BrianA. Henley (first respondent) and Janet M. Henley Q.C. (secondrespondent) (20/77) Indexed As: Henley v. Henley 2021 NLCA 46 7 C.A.N.L.R. 27 Court of Appeal of Newfoundland and Labrador Green, Welsh and O’Brien JJ.A. August 6, 2021

Summary: Following an adjournment requested by the parties during the hearing of the appeal, an agreement was reached on the substantive issuesof the appeal resulting in a consent order endorsed by the Court. The sole remaining issue on the appeal was costs. Held: Application for additional evidence dismissed, costs ordered against the respondents. Welsh J.A. (Green and O’Brien JJ.A. concurring): Additional evidence regarding the respondents’ offer to settle was unnecessary. Sufficient evidence was before the Court to decide the related issue on appeal (paragraphs 8-11).

The respondents’ offer to settle could not be relied upon to support an award of costs against the appellants who had good reasons forrejecting the offer. The appellants were essentially successful on the appeal, and were therefore entitled to an order for costs undercolumn 3 of the scale of costs (paragraphs 12-16). The respondents’ approach to the appeal did not assist in limiting the issues or in promoting the efficient use of the resources of the Courtand the parties (paragraphs 17-25).

The second respondent’s position that the appellants were guilty of criminal conduct regarding their affidavits was without foundation,should not have been raised on the appeal, and was deserving of censure (paragraphs 27-41). Costs were ordered against the second respondent on a solicitor-client basis for costs incurred in excess of the costs payable undercolumn 3 (paragraphs 42-45). Cases cited: Holloway v. Holloway, 2001 NFCA 17, 199 Nfld. & P.E.I.R. 1 Pelley v. Pelley, 2003 NLCA 6, 221 Nfld. & P.E.I.R. 1 Petten v. E.Y.E. Marine Consultants (1999), (NL SC), 179 Nfld. & P.E.I.R. 94 (Nfld. S.C.T.D.) Williams v.

Thomas Development Corp., 2007 NLCA 54, 269 Nfld. & P.E.I.R. 290 James v. Canadian Trust of the Church of Jesus Christ of Latter Day Saints (1998), (ON CA), 165 D.L.R. (4th) 227(B.C. C.A.)

Statutes considered: Criminal Code , sections 131 , 134 , 136 and 138 Rules considered: Court of Appeal Rules , NLR 38/16, rule 58 Rules of the Supreme Court, 1986 , rule 20A Counsel: Geoffrey E. Budden and Allison S. Conway, for the appellants; Douglas Wright, for the first respondent; Nicholas G. Avis Q.C., for the second respondent. The appeal was heard on May 11, 2021 and June 18, 2021 before Green, Welsh and O’Brien JJ.A.

The following judgment was filed on August 6, 2021 by Welsh J.A. for the Court. ______________________________________________________________ Welsh J.A.: [ 1 ] Costs is the sole remaining issue in this appeal. This unusual situation arose following an adjournment requested by the parties during the hearing of the appeal. At that time, an agreement was reached on the substantive issues, resulting in a consent order endorsed by the Court. To complete the matter, all parties are now requesting elevated costs of the appeal.

BACKGROUND [ 2 ] The parties, who are siblings, are in a protracted dispute regarding disposition of their father’s estate. All are beneficiaries and executors under the will. The dispute giving rise to this appeal relates to affidavits filed by the appellants in the Supreme Court, General Division in response to an application for directions filed by the first respondent. At the hearing of that application, counsel for the second respondent objected to the manner in which the affidavits were prepared, suggesting that the appellants “got together and put together a story”.

This led the applications judge to suggest that the respondents would need to look at the preparatory material, that is, earlier drafts of the affidavits and related correspondence.

The question of solicitor-client privilege with respect to such material was alluded to, but was not dealt with in any detail, nor were principles of law regarding the privilege applied. [ 3 ] Without further consideration, the applications judge ordered the appellants, John and Christopher Henley, to provide to the first and second respondents, Brian and Janet Henley, “the five drafts of John Henley’s affidavit and all emails and communications regarding those five drafts”.

It is that order that was challenged on this appeal. [ 4 ] However, during submissions by the second respondent at the hearing of the appeal, the request was made for an adjournment. It was hoped that all issues, including costs, would be resolved by agreement. Ultimately, the Court endorsed a consent order which dealt with the substantive issues under appeal by setting aside the applications judge’s order. Unfortunately, the question of costs of the appeal was not settled. The hearing continued after additional facta addressing the costs issue had been filed.

ISSUES [ 5 ] This appeal involves issues regarding (1) an offer to settle, (2) a request for additional evidence, (3) success on the appeal, and (4) an allegation of criminal conduct. ANALYSIS [ 6 ] Party and party costs in this Court are governed by rule 58 of the Court of Appeal Rules , NLR 38/16 , which provides, in relevant parts:

(1) The Court may make such order as to costs as it considers appropriate, including an order for a lump sum payment or an order on a basis other than is provided in the scale of costs attached to and forming part of these rules. ...

(4) The Court may award costs in accordance with any column or combination of columns under the scale of costs, and in exercising its discretion for this purpose, the Court may consider

... (

d) the manner in which the proceeding was conducted, including any conduct that tended to shorten or unnecessarily lengthen the duration of the matter; ... [ 7 ] The scale of costs is comprised of five columns with column 3 being the default standard of party and party costs. Solicitor and client costs provide for indemnification at an elevated level beyond column 5 costs ( Holloway v. Holloway , 2001 NFCA 17 , 199 Nfld. & P.E.I.R. 1 , at paragraphs 91 and 92 ). Respondents’ Offer to Settle [ 8 ] The respondents seek costs for the appeal on a solicitor and client or solicitor and own client basis.

They submit that the appeal was unnecessary because they made an offer to settle which should have been accepted. Respondents’ Application for Additional Evidence [ 9 ] The first respondent made an application for additional evidence regarding the respondents’ offer to settle in these terms: 37. It is [the first respondent’s] position that there are no contentious facts surrounding the making of the Offer, the timing of the Offer, the timing of the refusal of the Offer by the Appellants or the reasons for the refusal of the Offer.

It is [the first respondent’s] position that if there is no disagreement among counsel as to these essential facts, then no further evidence should be required and these facts can be entered pursuant to questioning from the Panel . 38. If it is found to be necessary that the few essential facts can only be determined after a trial of the facts upon the submission of evidence, it is the position of [the first respondent] that the underlying facts are primarily to be found in e-mail correspondence and attachments to e-mail correspondence between counsel.

Some of the facts underlying the initial making of the Offer and the initial refusal of the Offer are grounded in two telephone conference calls among Geoff Budden, Q.C. as appellate counsel for the Appellants, John Bruce as Applications counsel for the Appellants, and respective counsel for [the respondents]. (Emphasis added.) [ 10 ] The second respondent joins in this submission. The appellants oppose the application. [ 11 ] At the hearing, it became clear that there was, in fact, no need to pursue the request for additional evidence.

The facts the Court considers necessary to address the offer to settle issue were available with the agreement of counsel. Accordingly, no additional evidence was adduced. In the result, I would dismiss the application. Effect of the Offer to Settle [ 12 ] In the court appealed from, rule 20A of the Rules of the Supreme Court, 1986 addresses costs consequences when an offer to settle is refused. That rule has no application in this Court, and the Court of Appeal Rules do not include a rule regarding costs consequences related to failure of a party to accept an offer to settle.

As a result, the respondents submit that they are not relying on a settlement rule in their request for costs.

Rather, they submit that, by failing to accept the offer, the appellants’ conduct warrants an order in costs at an elevated level. [ 13 ] For two reasons, the appellants reject the respondents’ submission that the offer would have precluded the need for the appeal: first, the offer did not include indemnification for the costs of the appeal already incurred by the appellants who had filed the transcript, appeal book and factum before the offer was made; and, second, the respondents offered only that they would not enforce the order, which is different from conceding that the applications judge had erred in making the order, or agreeing to have the order set aside. [ 14 ] I am satisfied that the appellants had good reasons for rejecting the respondents’ offer.

With respect to the substantive issues on appeal, the submissions regarding error by the applications judge involved questions of solicitor-client privilege. The appellants had legitimate reasons for believing they had a reasonable possibility of success in overturning the applications judge’s decision. They commenced the appeal and filed their materials without delay. After the notice of appeal was filed, the respondents had ample time to make an offer to settle, which would have avoided further costs by the appellants.

In the circumstances, the appellants validly incurred costs which the respondents refused to reimburse. [ 15 ] In addition, an undertaking by the respondents not to enforce the order would not have provided the certainty sought by the appellants who were seeking clarity as to the solicitor-client privilege attaching to drafts prepared prior to finalizing a document. [ 16 ] In the result, the respondents’ offer to settle cannot be relied upon to support an award of costs against the appellants.

Response to the Appeal [ 17 ] On the basis that the appellants refused to accept their offer to settle, the respondents submit that they had no option but to argue that the applications judge had not erred in making the order, and that the appeal should be dismissed. That proposition is not persuasive.

In fact, it was open to the respondents to take no position, or to consent to or concede the appeal, and limit their submissions to the question of costs. [ 18 ] The respondents’ decision to oppose the appeal resulted in additional time and costs related to written materials as well as additional time in court for the hearing. Indeed, the hearing was extended to two days and additional facta were required as a result of the timing of the consent order.

[ 19 ] In the result, the respondents’ approach did not assist in limiting the issues or in promoting the efficient use of the resources of either the Court or the parties. Success on the Appeal [ 20 ] The consent order endorsed by this Court states: 1. The first part of the Interlocutory Order of the Honourable Justice Vikas Khaladkar is set aside by consent of the parties and with approval of the Court.

The Appellants are not required to provide the five drafts of John Henley’s affidavit, nor the e-mails and communications regarding those five drafts, to the Respondents. [ 21 ] While the consent order does not state that the applications judge erred, the judge’s order was set aside, that is, it was rendered of no effect; it was no longer available to be enforced or relied upon. I would, on that basis, accept the appellants’ submission that they were essentially successful on the appeal.

This conclusion provides a basis on which to order costs in favour of the appellants. [ 22 ] However, for purposes of assessing an award of costs, the respondents submit that the appellants’ claim of success must be considered in light of the fact that counsel for the appellants (different from counsel on appeal) did not clearly raise the question of solicitor-client privilege, as applicable to the drafts and related communications, or object before the applications judge made the order. It was on reflection and with the assistance of new counsel that the order was challenged.

Had the issue been raised at first instance, the respondents submit, an appeal may not have been necessary, or at least, there would have been an analysis by the applications judge to inform an appeal. [ 23 ] A position taken by counsel in the court appealed from may be changed on appeal. Such a change is not per se a basis on which to deny the appellants their costs of the appeal.

Rather, it is a factor that may be considered in determining whether costs should be ordered, and, if so, the applicable scale of costs. [ 24 ] In this case, the manner in which the application for directions proceeded in the court appealed from, which gave little time for reflection by counsel, and the importance of the question of solicitor-client privilege, taken together with the manner in which this appeal has proceeded lead to the conclusion that the appellants’ change in position is not a factor which should result in the denial of party and party costs for the appeal. [ 25 ] I would add that the respondents’ submissions addressing the merits of the appeal with respect to solicitor-client privilege are irrelevant for purposes of determining a costs order.

The consent order disposed of the substantive issues related to solicitor-client privilege, removing those issues from consideration and determination on the appeal. [ 26 ] Applying the above considerations, I am satisfied that an award of costs to the appellants is warranted under column 3 of the scale of costs in the Court of Appeal Rules . The remaining question is whether an elevated level of costs should be awarded against the second respondent based on her allegations of criminal conduct by the appellants.

Allegations of Criminal Conduct Second Respondent’s Request [ 27 ] The second respondent, in oral and written submissions, made allegations of criminal conduct against the appellants. The first respondent does not join with those submissions. Accordingly, this portion of the decision applies only to the second respondent. [ 28 ] The allegations relate to the affidavits submitted by the appellants in the court appealed from. The second respondent submits that the affidavits are false, states that they amount to criminal conduct, and specifies provisions in the Criminal Code which are said to be applicable.

In particular, reference is made to sections 131 (perjury), 134 (corroboration), 136 (contradictory evidence by a witness), and 138 (false affidavit). For the following reasons, I am satisfied that the allegations of criminal conduct are inflammatory, reprehensible, and without foundation. [ 29 ] The affidavit submitted by John Henley was comprehensive. Christopher Henley adopted John’s affidavit, swearing: 1. I have personal knowledge of the matters herein deposed unless otherwise noted. 2. I make this affidavit in response to [the affidavits filed by the respondents]. 3.

I reference and adopt by reference herein the following paragraphs contained in the affidavit of John Henley dated January 13, 2020 filed in the within matter. 3.1 Paragraphs 3 to 18 inclusive, 19, 20, 21 and 29 to 37 inclusive. 4. With respect to Paragraph 22, I did review the information and agree with the explanation and conclusion provided by John Henley. 5. With respect to Paragraphs 23-27, I am aware of the contents referenced therein. 6. With respect to Paragraph 28, I did send the referenced email at John Henley’s request.

That affidavit was sworn on January 13, 2020. [ 30 ] There was cross-examination on the above affidavit in the court appealed from. In alleging criminal conduct in relation to the affidavits, the second respondent submits that the appellants colluded in the preparation of their affidavits. He submits that the failure of the appellants to state that they had worked together in the preparation of the affidavits resulted in a false affidavit which amounted to criminal conduct.

[31] That submission is not persuasive. To the extent that Christopher was adopting John’s affidavit by reference, presumably forpurposes of efficiency, it could be expected that they would have had discussions about the contents of the main affidavit. Therespondents had the opportunity to test the affidavits by means of cross-examination. The extent to which the appellants’ approach mayhave affected the validity or persuasiveness of the affidavits would be a matter for the judge in assigning weight to that evidence.

Thereis no basis on which to conclude, and the applications judge did not find, that there was improper collusion or criminal conduct. [32] The second respondent also submits that Christopher Henley’s affidavit was false because it refers to the affidavit that was“filed” by John Henley when, in fact, that affidavit had not yet been filed when Christopher’s affidavit was sworn. Again, this is a mattergoing to the weight to be given to Christopher’s affidavit. It is not a basis on which to conclude that there was criminal conduct. [33] In

summary, the second respondent’s position that the appellants were guilty of criminal conduct regarding their affidavits iswithout foundation and should not have been raised on the appeal. Accordingly, the allegations cannot support an award of costs againstthe appellants. Appellant’s Request [34] On the other hand, the appellants submit that the raising of such unfounded allegations in both the written and oral submissionsshould be censured by a higher award of costs in their favour.

Counsel for the second respondent submits that he is entitled to make suchallegations for consideration by the Court without repercussions because those submissions are clothed with privilege. [35] This is not a question of privilege. Privilege may be relevant should the appellants commence a separate action against thesecond respondent, for example, in defamation. However, judicial authority supports the conclusion that unfounded allegations directedto the reputation of the opposing party may result in an increased level of costs. [36] In Pelley v.

Pelley, 2003 NLCA 6, 221 Nfld. & P.E.I.R. 1, Wells C.J.N.L. summarized circumstances when solicitor-client costsmay be awarded in the discretion of the Court. He approved the following principles, quoting from the decision in Petten v. E.Y.E.Marine Consultants (1999), (NL SC), 179 Nfld. & P.E.I.R. 94 (Nfld. S.C.T.D.). In particular, regarding conduct thatmay result in solicitor-client costs: [40.] ... 75. ... [In Young v.

Young, (SCC), [1993] 4 S.C.R. 3] McLachlin, J., speaking for the majority, described thecircumstances under which solicitor and client costs should be awarded against a party to litigation, in the following terms at p. 283: Solicitor-client costs are generally awarded only where there has been reprehensible, scandalous or outrageous conduct on the part of oneof the parties. Accordingly, the fact that an application has little merit is no basis for awarding solicitor-client costs ... ... 79. What does reprehensible, scandalous or outrageous conduct encompass? In [Perry v.

Heywood et al., (1997) (NL SC), 175 Nfld. & P.E.I.R. 253 (Nfld. C.A.)], Cameron J.A., agreed with statements in other cases that “reprehensible” was “a wordof wide meaning” and that: It can include conduct which is scandalous, outrageous or constitutes misbehaviour, but it also included milder forms of misconduct. Itmeans simply “deserving of reproof or rebuke”. ... 80. ... The court always retains an inherent jurisdiction to express its disapproval of the conduct of a party in litigation by theawarding or withholding of costs.

The awarding of solicitor-client costs thus serves both a compensatory and a punitive function. ... In Pelley, in concurring reasons, Cameron J.A. agreed with the basic principles quoted by Wells C.J.N.L. [37] In Williams v. Thomas Development Corp., 2007 NLCA 54, 269 Nfld. & P.E.I.R. 290, while an elevated level of costs was notawarded, the Court accepted: [113] It is clear that the relevant paragraphs (48 to 59) in Dr. Williams’ factum are inflammatory, without any foundation, and shouldnot have been included in the submissions.

The remedy requested by counsel for Thomas Development and Modern Paving was to strikethese paragraphs from Dr. William’ factum. This is a measured response in the circumstances. In similar circumstances in the future, Iwould consider a request in the nature of costs against the party making inflammatory and unfounded allegations before this Court. [38] In James v. Canadian Trust of the Church of Jesus Christ of Latter Day Saints (1998), (ON CA), 165 D.L.R.(4th) 227 (B.C. C.A.), the Court cautioned against a party making reckless allegations: [39] ...

The judge also commented about the harm done to the defendant’s reputation as a result of having to defend against allegationsof wrongdoing, noting that such harm continues as long as unfounded charges remain on the public record. At p. 677 Dambrot J. [inMele v. Thorne Riddell (1997), (ON SC), 32 O.R. (3d) 674 (Gen. Div.)] wrote: Where unfounded allegations of fraud or improper conduct seriously prejudicial to the character or reputation of a party are made in anaction, a court may depart from the usual scale of costs and award costs on a solicitor-and-client scale ...

A plaintiff who proceeds in thismanner must be prepared for the cost consequences if the allegations turn out to be unfounded. [39] In this case, the second respondent made unfounded allegations of criminal conduct against the appellants. From the outset, thefirst respondent refused either to make similar allegations or to support the second respondent’s position. During the first hearing, theallegations of criminal conduct were the subject of discussion which should have caused the second respondent to carefully review her

position. Indeed, the second respondent had an opportunity to withdraw the criminal conduct allegations at either of the hearings before this Court. Instead, counsel became more insistent in pursuing the allegations during the second hearing dealing with costs. [ 40 ] Further, it is apparent that these unfounded allegations were an issue of some importance to the appellants who advised the Court that this was the basis on which they were seeking solicitor-client costs against only the second respondent.

The allegations were made in open court in both written and oral submissions, and were potentially damaging to the appellants’ reputations. The allegations were inflammatory and without foundation. The second respondent and her counsel were in a position to consider the effect of the strongly- worded allegations. [ 41 ] In the circumstances, I am satisfied that the second respondent’s conduct is worthy of rebuke or reproof such that a departure from an award of costs on the usual scale is appropriate. Solicitor-Client Costs [ 42 ] The appellants submit that an award of solicitor-client costs is appropriate.

I agree. [ 43 ] The scale of costs in the Rules is comprised of 5 columns, with column 3 being the default column. Costs under column 5 are higher to accommodate factors such as are listed in rule 58(4)(

a) to (h). The factors enumerated in paragraphs (

a) to (

c) and (

f) relate to: the amounts claimed, importance of the issues, complexity or novelty of the issues, and seniority of counsel. Only (

d) and (

e) relate to the conduct of the parties. Paragraph (

d) refers to the manner in which the proceeding was conducted, and (

e) refers to the failure of a party to admit anything that should have been admitted. [ 44 ] While the enumerated factors are not comprehensive and paragraph (

h) refers to consideration of any other relevant matter, the factors to be assessed in awarding costs under any of the columns, including column 5, are generally directed to factors other than reprehensible or scandalous conduct or conduct deserving of reproof or rebuke. Where those considerations are engaged, a higher level of costs would be appropriate; generally, costs on a solicitor-client basis. Of course, in an appropriate case, the court may order costs under column 5 to express disapproval of conduct.

Apportionment of Costs [ 45 ] I would order costs jointly and severally against the first and second respondents under column 3 of the scale of costs in the Court of Appeal Rules . I would also order costs on a solicitor-client basis against the second respondent for costs incurred in excess of the costs payable under column 3.

SUMMARY AND DISPOSITION [ 46 ] In

summary:

(1) Issues related to the offer to settle were disposed of without the assistance of additional evidence;

(2) The offer to settle cannot be relied upon to support an award of costs against the appellants;

(3) The appellants were essentially successful on the appeal, and are entitled to their costs of the appeal under column 3 of the scale of costs;

(4) The second respondent’s unfounded allegation of criminal conduct is deserving of censure, with an award of solicitor-client costs. [ 47 ] Accordingly, the substantive issues on appeal having been determined by means of a Court-endorsed consent order, I would dismiss the application for additional evidence, and order costs of the appeal as set out in paragraph 45, above. Application for additional evidence dismissed; costs ordered against the respondents.