Court File and Parties

COURT FILE NO.: CV-16-0695-00 DATE: 2018 11 19 ONTARIO SUPERIOR COURT OF JUSTICE

B E T W E E N:

2265535 ONTARIO INC. and 2092225 ONTARIO INC. Applicants

Counsel for Applicants: Jonathan Kulathungam

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VIJAYANT SOOD, RAKESH SOOD, JYOTIKA SOOD, ASHIMA SOOD, NISHA SOOD, NAZIRA LALJI, JINDAL HOLDINGS INC., 2138629 ONTARIO INC., SANHU-MALWA HOLDINGS INC. and 10 ACRE STORE & RESTAURANT INC. and ZULKARIAIN LALJI Respondents

Counsel for Respondents: Jack Berkow

HEARD: November 29, 2016, at Brampton, Ontario

BEFORE: Price J.

COSTS ENDORSEMENT

[1] On November 29, 2016, two and a half months after this court made an order dated August 9, 2016, appointing an auditor to audit the financial affairs of the Respondent corporations 2138629 ONTARIO INC., SANDHU-MALWA HOLDINGS INC. and 10 ACRE STORE & RESTAURANT INC. (“Corporate Moving Parties”), the audit had not been undertaken.

[2] When the Applicants moved to settle the form of the Order and have it signed; the Respondents sought to vary the Order or set it aside, pursuant to Rule 59.06(a) and (b) of the Rules of Civil Procedure, on the ground of fraud or mistake. They relied on the fact that Mr. Singh, the affiant of the affidavit that the Applicants had relied on, had failed to disclose that he had signed an Audit Waiver, thereby depriving himself of his automatic right to require an audit, and that in September 2015, he had been convicted of possession of dried opium poppies for the purposes of trafficking, and had later filed a consumer proposal under the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, in which he had failed to disclose liabilities of $309,302.48, and that he was ineligible at law to make the Consumer Proposal, based on the fact that he had been indicted for possession for the purpose of trafficking, and that his undisclosed liabilities and conditional sentence for trafficking were likely to render him unable to pay the Respondents’ costs of the proceeding and of the audit, if he was unsuccessful.

[3] The Applicants submit that they were under no obligation to disclose the Audit Waiver, or Mr. Singh’s liabilities, and that the undisclosed facts would not have affected the outcome. They submitted that the August 9, 2016 Order was not the result of fraud or mistake and should not be set aside.

[4] In its decision dated April 11, 2017, this Court found that Mr. Singh’s liabilities were not material to the decision made. The motion was not one for security for costs, in which the Applicant’s impecuniosity may have been relevant. The Court held that the Applicants were entitled to their audit and that the undisclosed facts, if known by the court on August 9, 2016, would not have resulted in a different outcome. It therefore dismissed the Respondents’ motion to set aside the August 9th Order and directed that as the costs that counsel estimated at the beginning of the hearing were substantially different than those claimed in the outcome, they could submit written arguments if they were unable to resolve the issue of costs. The Court has reviewed their submissions and this endorsement will address the issue of costs.

POSITIONS OF THE PARTIES

[5] The Applicants seek their costs of the motion on a substantial indemnity scale in the amount of $15,356.92 or, in the alternative, on a partial indemnity scale in the amount of $12,825.72. They rely on their presumptive entitlement to costs based on their success in the motion, and seek their costs on a substantial indemnity scale based on the Respondents’ failure to prove their allegations of fraud.

[6] The Respondents argue that given a purported “involvement of BVD Petroleum”, costs should be reserved. The Applicants argue that costs should be dealt with based on the materials that were before the court when the motion was heard, and that fresh evidence or further argument should not be entertained in costs submissions. Moreover, they submit that the issues relating to BVD Petroleum were argued before Ricchetti J. in April 2017 and that his decision regarding the alleged involvement of BVD had no bearing on the issue of costs.

ANALYSIS AND LAW

a) The appropriate scale of costs

[7] The motion arose from the Respondents’ failure to comply with the Order of Ricchetti J. dated February 12, 2016. As I found in my earlier reasons, the only way the Respondents are likely to comply with their disclosure obligations is by an audit. The Respondents’ motion delayed the audit for an additional 10 months, it is appropriate that costs be ordered on a substantial indemnity scale.

[8] The Respondents were aware, even before they brought their motion, of the arguments that the Applicants’ would make, and chose to maintain their allegation of fraud and proceed with their motion. Their conduct was unreasonable, and reflected an attempt to delay matters to gain a strategic advantage over the Applicants.

[9] Because the motion arose from, and was made necessary by, the Respondents’ failure to comply with Ricchetti J.’s Order dated April 11, 2017, and by their failure to cooperate in the settling of the form of that Order, and because the Respondents made allegations of fraud which they failed to substantiate, and because the Respondents’ actions continue to reflect a deliberate effort to delay the proceeding to gain strategic advantage, the Applicants are entitled to their costs on a substantial indemnity scale.

b) The lawyers’ hourly rates and time spent

[10] I have considered the factors set out in s. 57.01 of the Rules of Civil Procedure. The Applicant’s lawyer, Jonathan Kulathungam was called to the Bar of Ontario in 1999 and had practiced law for 18 years when the motion was argued in November 2017. He was at the upper end of the range of costs that could be claimed by a lawyer who had practiced law for between 10 and 20 years, according to “Information for the Profession” bulletin from the Costs Sub-Committee of the Rules Committee (the “Costs Bulletin”), which can be found immediately before Rule 57 in the Carthy or Watson & McGowan editions of the Rules. The Bulletin sets out maximum partial indemnity hourly rates for counsel of various levels of experience, and assigns a maximum rate of $300.00 for lawyers with between 10 and 20 years’ experience.

[11] The Court normally adjusts the rates in the Costs Bulletin for inflation (see First Capital (Canholdings) Corp. v. North American Property Group, 2012 ONSC 1359, and 2041094 Ontario Inc. v. Aplus General Contractors, 2018 ONSC 6711, para. 22). Mr. Kulathungam’s maximum partial indemnity rate of $300.00 per hour in 2005 was the equivalent of $361.99 in 2017, which I round down to $360.00. That translates to $540.00 per hour on a substantial indemnity scale, using the formula prescribed by Rule 1 of the Rules of Civil Procedure, which defines substantial indemnity costs to mean "costs awarded in an amount that is 1.5 times what would otherwise be allowable in accordance with Part I of Tariff A" - i.e. 1.5 times the partial indemnity rate. [^1]

[12] Mr. Kulathungam claims a substantial indemnity rate of $400.00 per hour, which is conservative. His actual rate of $575.00 is closer to the maximum he could claim on a substantial indemnity scale.

[13] Mr. Kulathungam delegated work, where possible, to his Junior Counsel, who was called to the Bar in 2014, and who therefore was entitled to claim a maximum hourly rate of $225.00 according to the Costs Bulletin in 2005. That is the equivalent of $271.49 in 2017, which I round down to $270.00. That translates to $406.50 on a substantial indemnity scale, and the Applicants have claimed only $300.00 for the Junior Counsel on a substantial indemnity scale. Again, the rate claimed is conservative.

[14] I find the 32.7 hours claimed for the work done on the motion to be reasonable. The Respondents own costs amounted to $12,460.89 on a substantial indemnity scale, which is only 19% less than the amount ($15,356.92) that the Applicants’ claim on that scale. It is not surprising that the Applicants were required to expend a greater amount of time in the prosecution of the motion than the Respondents were in opposing it.

c) The Respondents’ reasonable expectations regarding costs

[15] Having regard to the Respondents’ own costs, the costs claimed by the Applicants was within the range of what they should reasonably have expected to pay if unsuccessful in the outcome.

CONCLUSION AND ORDER

[16] For the foregoing reasons, it is ordered that:

1. The Respondents shall forthwith pay the Applicants’ costs of the motion, fixed on a substantial indemnity scale in the amount of $15,356.92, inclusive of fees, disbursement, and HST.

Price J.

Released: November 19, 2018

[^1]: See Hanis v. University of Western Ontario, 2006 ONSC 23155, [2006] O.J. No. 2763, per Power J.