Case considered: Conway v. Zinkhofer, 2009 ABQB 417
PDF version: Not Your Usual Self-Represented Litigant?
The perception within the justice system is that self-represented litigants have below average literacy and comprehension levels: see the Alberta Self-Represented Litigants Mapping Project, Final Report, January 12, 2007 at 10. However, according to recent research, members of any social group may become self-represented litigants and between 60 and 65% had at least some post secondary education. One group of self-represented litigants is the group who could access representation but prefer to self-represent (Final Report at 15). Although a small percentage of the self-represented litigants (5% or less), the group includes those often referred to as “vexatious litigants” and judges report that this group of self-represented litigants are particularly time consuming and difficult to deal with (Final Report at 16). This appears to be an apt summary of the male respondent in this case, Fred Zinkhofer.
The latest decision by Madam Justice Colleen Kenny in the ongoing saga of Conway v. Zinkhofer is a rare decision on the awarding of solicitor-client costs for steps taken to try to collect on a judgment. The case involves a dispute among shareholders over property owned by River Rock Lodge Corporation (RRLC) in Fernie, B.C. and the issue of what amount should be paid by the applicants to the respondents for their interest in RRLC. It began as a relatively straight-forward application under the Business Corporations Act, R.S.A. 2000, c.B-9, in chambers in June 2004. It evolved through numerous interim applications and case management meetings into a seven week trial. The back-story to the litigation helps to explain why things got so out of hand.
Fred Zinkhofer, the male respondent, was a partner in a Calgary law firm with Brian Conway and Thomas Taylor, two of the applicants. In 1999 or 2000, Zinkhofer became embroiled in proceedings and hearings with the Law Society of Alberta and he was eventually disbarred from the practice of law on June 23, 2004. This of course affected the relationship between Zinkhofer, Conway and Taylor. Taylor testified that Zinkhofer had lied to him and Conway about the Law Society matters (see Justice Kenny’s Reasons for Judgment, July 2006, in the main action, Conway v. Zinkhofer, 2006 ABQB 453, at paras. 18 and 19). For his part, Zinkhofer raised allegations of malice and bad faith on the part of the applicants after the law suit began. Justice Kenny found that these allegations were unfounded and unproven. As a result of his false allegations, a higher than usual cost award was made against Zinkhofer at the end of the trial. While one might have thought that such a sanction would lead to more cooperative behaviour, Justice Kenny’s latest cost order indicates not. It also suggests that one of the most frustrating self-represented litigants may well be one who is legally trained but not subject to professional regulation.
This is Justice Kenny’s fourth published decision in this matter; there are also four Court of Appeal decisions appealing a number of her interlocutory and final orders. Fred Zinkhofer represented himself and his wife, the other respondent, in all of these matters and basically lost every one of them. Although he and his wife “won” the main action in the sense that a monetary award was made in his favour, the main action arose as a result of an application by the applicants to buy out the Zinkhofers’ interest in RRLC and the main issue was the value of the Zinkhofer shares.
How did there come to be a monetary judgment in favour of the applicants, the costs of the enforcement of which was the subject matter of this order, when the matter began as a question of how much the applicants should pay the respondents, the Zinkhofers? For the answer to this, we need to turn to Justice Kenny’s July 2007 decision on the costs to be awarded following the trial and her judgment: see Conway v. Zinkhofer, 2007 ABQB 2. The applicants made two offers to settle the issue of the amount to be paid for the Zinkhofer shares in RRLC. The first, made in July 2004, only one month after the action started, was for $450,000. Zinkhofer did not accept that offer. A second offer was made in September 2005 which added $250,000 to the earlier offer, bringing the total offer of settlement to the sum of $700,000. Even before that, in December 2004, the applicants paid the Zinkhofers the sum of $500,000 under the terms of an interim settlement agreement, as a pre-payment on any amount found to be owed for the shares. Justice Kenny found that the Zinkhofers’ shares were worth $478,000, so the Zinkhofers were overpaid by roughly $22,000. In addition, the applicants had filed a counterclaim and Justice Kenny awarded approximately $64,000 on the counterclaim. In addition, the applicants sought double solicitor-client costs based on their formal offer to settle, which was greater than the amount awarded and would therefore attract increased costs, and Zinkhofer’s allegations of fraud which, if unproven, also normally attract increased costs. Justice Kenny set the costs to be paid by Zinkhofer at $200,000 for fees, plus disbursements of almost $93,000, and then she increased the amount for the fees payable to the applicants by another $100,000 because of the unsubstantiated allegation of fraud. She did award Zinkhofer costs of $18,800 for steps taken prior to December 2004, which could be set off against the amount Zinkhofer owed. Justice Kenny declined to award the applicants full solicitor-client costs because then the amount the Zinkhofers’ owed the applicants would almost total the amount the applicants paid them for their shared in RRLC. Nevertheless, have a look at some rough math:
Zinkhofer owes as an overpayment for the shares: $ 22,000
plus Zinkhofer owes for the counterclaim: $ 64,000
plus Zinkhofer owes for trial costs and disbursements: $393,000
Less amount Zinkhofer owed for pre-December 2004 costs: ($18,800)
Total Zinkhofer owed when judgment handed down: $460,200
Of course, Zinkhofer appealed both the judgment and the solicitor-client costs award and lost both appeals at the Court of Appeal, thereby attracting more costs against him: see Conway v. Zinkhofer, 2008 ABCA 392. We don’t have enough information to know exactly how accounts stood in the end, but it would appear that this latest costs order would have Zinkhofer digging into his own pocket, rather than just eating up the $478,000 price paid to him. He could have had $700,000 had he accepted the second offer to settle but, because of his conduct during and now after the litigation, it would appear he has nothing. This might seem excessively harsh, but as the Manitoba Law Reform Commission noted (at 49) in its September 2005 Report 111 on Cost Awards in Civil Litigation, “solicitor and client costs are awarded in rare and exceptional circumstances when a party’s conduct is reprehensible or outrageous. Concerns over over-indemnification properly give way to the principle of punishing wrong-doing.”
After the Judgment Roll was filed in December of 2006, Zinkhofer immediately asked for a stay of its enforcement. Subsequently, the parties attended 20 times before Justice Kenny, filing 17 affidavits and receiving 11 formal orders, to deal with the applicants’ efforts to enforce their judgment and Zinkhofer’s efforts to stay that enforcement. Justice Kenny noted (at para. 3) that the Zinkhofers have the assets to pay the applicants the judgment amount and court ordered costs, so inability to pay is not the problem.
According to the applicants, the Zinkhofers’ failure to liquidate their assets to pay the
judgment and costs is a continuation of their trial tactics. For example, two properties owned by the Zinkhofers were to be listed for sale, but Zinkhofer used his legal training to put a number of road blocks in the way of the applicants collecting their judgment.
According to Zinkhofer, he and his wife were merely looking for an orderly liquidation process. He also argued that the $77,000 in solicitor client costs that the applicants were seeking for post-judgment costs were excessive.
Justice Kenny briefly reviewed the law on the granting of costs. As this most recent order is her second written costs order between these parties in this action, her reasons this time around are not extensive. Rule 601 of the Alberta Rules of Court, Alta. Reg. 390/1968, gives a judge a broad discretion to set costs bearing in mind a number of factors. Nevertheless, the applicants were seeking solicitor-client costs, which are awarded only in special circumstances. Justice Kenny (at para. 24) relied upon Jackson v. Trimac Industries Ltd. [1993] A.J. No. 218 and the factors and circumstances listed in that decision as justifying solicitor-client costs. She did not deal with each of the 20 appearances before her individually. As she noted (at para. 28), she has been dealing with Conway v. Zinkhofer for many years – she was even the case management judge – and she had, as she put it, “a good sense of the history.” She concluded there were a number of court appearances post-judgment that were a direct result of the Zinkhofers’ desire not to pay the judgment and not to allow any enforcement of the judgment despite his substantial assets. She was satisfied that the number of attendances were the direct result of the Zinkhofers’ attempts to frustrate any efforts by the applicants to enforce their judgment. As a result, she awarded a lump sum of $45,000 fees plus reasonable disbursements. The amount awarded might not have been as much as the applicants sought (as it appears they sought $77,000), but by awarding a lump sum, Justice Kenny did save the applicants the time and expense of a taxation of their costs.
Will this be the end of the matter? Are two enhanced costs awards against him enough to stop Zinkhofer’s frustrating conduct? Perhaps not. Zinkhofer has been a self-represented litigant throughout these proceedings, with the legal training and ability to self-represent (albeit not that well). The Alberta Self-Represented Litigants Access to Justice Mapping Project’s Final Report described Zinkhofer’s type of self-represented litigants – “self-represented litigants who could access representation but prefer to self-represent”- in the following words:
People in this group have the resources for legal representation but choose to self- represent because they believe they can do as good or better job than a lawyer. They are usually well educated and distrust the legal profession. They may have received legal advice, which they choose not to accept. Often these SRLs are involved in cases they view as a personal cause (at 16).
This description appears apt for Zinkhofer, even though he is not merely well educated but also legally trained. As a disbarred lawyer, representing himself is the only law he can practice these days.