Court File and Parties

Court File No.: CV-19-617353 Date: 2020-03-11 Superior Court of Justice - Ontario

Re: Voysus Connection Experts Inc., Plaintiff And: Tayyab Shaikh, Anisha Shaikh, Afira Saleem, aka Afira Shaikh, Faazil Shaikh, Geetika Srikrishnakumar, Humaira Bangee, Rahil Shaikh, Memnu Shaikh, Nasir Shaikh, Raisha Shakh, Adnan Saleem, Iki Hasnoo, aka Iqbal Hasnoo, Jean Marie Pitter, Shadi Abdullah, Shehtabbanu Shaikh, Shahnawaz Shaikh, Riyaz Shaikh, Talhah Shaikh, Abdulqader Shaikh, Maham Shaikh, Umer Faruq Shaikh and John Does #1-10, Defendants

Before: Nishikawa J.

Counsel: Larry Keown and Nicholas Reinkeluers, for the Plaintiff Bradley Phillips and Peter Askew, for the Defendants Tayyab Shaikh and Anisha Shaikh

Heard: In writing

Costs Endorsement

Overview

[1] In April 2019, the Plaintiff, Voysus Connection Experts Inc. (“Voysus”), commenced an action against the Defendants, who are all former employees of the Plaintiff, alleging fraud, conspiracy, breach of fiduciary duty, breach of trust, unjust enrichment and conversion.

[2] On May 24, 2019, Voysus obtained an ex parte Mareva injunction restraining the Defendants, Tayyab Shaikh and Anisha Shaikh (together, the “Defendants”), from dissipating the proceeds of the sale of their home, until the return of the motion on notice (the “Mareva Order”).

[3] In my endorsement dated November 20, 2019, I dismissed Voysus’ motion to continue the Mareva Order. I also dismissed Voysus’ motion to strike certain evidence that the Defendants had taken from Voysus and disclosed in their responding records but ordered that the Defendants maintain the confidentiality of those records: Voysus Connection Experts Inc. v. Shaikh, 2019 ONSC 6683.

[4] The parties subsequently made submissions on costs. The Defendants seek substantial indemnity costs of both the Mareva motion and the motion to strike based on Voysus’ failure to make full and frank disclosure on the ex parte motion and the serious allegations of fraud made against them. Their substantial indemnity costs on the Mareva motion are $113,123,58.00, including HST and $16,902.79 in disbursements. The Defendants’ costs on a partial indemnity basis are $82,001.38 including disbursements and HST. Their substantial indemnity costs on the motion to strike total $16,977.39, including $135.99 in disbursements and HST.

[5] In comparison, Voysus’ costs on a substantial indemnity basis on the Mareva motion total $139,002.38, including HST and $5,071.52 in disbursements. Voysus’ substantial indemnity costs on the motion to strike are $23,249.06. However, this includes disbursements of $5,071.52 which appear to relate to the motion to strike. Their costs on the motion to strike are therefore closer to $18,177.54.

[6] Voysus submits that the Defendants are not entitled to substantial indemnity costs on the Mareva motion and that the Defendants’ costs are excessive. Voysus further submits that the Defendants are not entitled to costs on the motion to strike because success was divided.

Analysis

[7] In dismissing the Mareva motion, I found that Voysus had failed to make full and frank disclosure on the ex parte motion before Myers J. I further found that Voysus refused to answer relevant questions on cross-examination, contrary to Myers J.’s express direction.

[8] Where a party obtains a Mareva injunction without proper disclosure, costs on a substantial indemnity basis may be warranted as “parties and counsel need to know that the court will not countenance such a serious breach of this all important obligation.” Parallel Medical Services Ltd. v. Ward, [2002] O.J. No. 1498, at para. 27.

[9] In United States v. Yemec, 85 O.R. (3d) 751 (Div. Ct.), at paras. 30-32, the Divisional Court upheld the motion judge’s award of substantial indemnity costs where the appellants’ failure to make full and frank disclosure to the court in their motion for the ex parte orders was not inadvertent. The appellants had also advanced a position on the motion contradictory to the evidence in their possession. However, the Court held that the motion judge erred in law in stating that there was a “plethora” of cases in which substantial indemnity costs were ordered for a party’s failure to make adequate or accurate disclosure, whether willfully or through inadvertence. The Divisional Court found that the motion judge disregarded the high threshold of willful misconduct required and that costs at the highest level are reserved for those “rare and exceptional cases to mark the court’s disapproval of the conduct of the party in the litigation.” (Internal citations and quotations omitted.)

[10] As a party seeking extraordinary relief from the court, Voysus’ failure to fulfil its duty of full and frank disclosure and its disregard of Myers J.’s direction are no doubt conduct worthy of reproach. In this case, however, the Defendants’ conduct in this motion is also less than exemplary and also unnecessarily increased the costs. The Defendants sought to use documents and video surveillance that they had taken from Voysus, contrary to their express obligations as former employees. This led to Voysus’ motion to strike. The Defendants had also made surreptitious recordings of interactions with Voysus employees.

[11] Moreover, as noted in my reasons, the Mareva motion was unnecessarily sidetracked by both parties’ attempts to demonstrate that the other party’s affiants had a motive to lie. Rather than making a genuine attempt to put forward relevant facts and evidence, both parties were preoccupied with casting the other in a negative light. As a result, much time was spent on evidence of questionable relevance that unduly lengthened the proceeding. More than 12 cross-examinations were conducted. While the Defendants point to Voysus’ costs on the motion as even higher than theirs, this does not support that the Defendants’ costs were reasonable but, rather, confirms that both parties’ conduct caused costs to escalate unacceptably.

[12] Accordingly, and while the court does not approve of the Plaintiff’s conduct on the Mareva motion, this is not a rare and exceptional case warranting substantial indemnity costs.

[13] On the motion to strike, I reject Voysus’ suggestion that success was divided. For the reasons given in my Endorsement, the motion to strike was misconceived. A confidentiality order was made to protect the integrity of the court’s process. However, the motion would not have been necessary had the Defendants not sought to use documents and records obtained in breach of their obligations. As a result, each party will bear their own costs on the motion to strike.

[14] Pursuant to the Courts of Justice Act, s. 131(1), the Court has broad discretion when determining the issue of costs. The overall objective of fixing costs is to fix an amount that is fair and reasonable for the unsuccessful party to pay in the circumstances, rather than an amount fixed by actual costs incurred by the successful litigant: Boucher v. Public Accountants Council for the Province of Ontario (2004), 71 O.R. (3d) 291 (C.A.). The court must also consider the principle of proportionality in R. 1.01(1.1) of the Rules of Civil Procedure, while keeping in mind that the court should seek to balance the indemnity principle with the fundamental objective of access to justice.

[15] Rule 57.01(1) of the Rules of Civil Procedure sets out the factors to be considered by the court when determining the issue of costs.

(1) In exercising its discretion under section 131 of the Courts of Justice Act to award costs, the court may consider, in addition to the result in the proceeding and any offer to settle or to contribute made in writing,

(0.a) the principle of indemnity, including, where applicable, the experience of the lawyer for the party entitled to the costs as well as the rates charged and the hours spent by that lawyer;

(0.b) the amount of costs that an unsuccessful party could reasonably expect to pay in relation to the step in the proceeding for which costs are being fixed;

(a) the amount claimed and the amount recovered in the proceeding;

(b) the apportionment of liability;

(c) the complexity of the proceeding;

(d) the importance of the issues;

(e) the conduct of any party that tended to shorten or to lengthen unnecessarily the duration of the proceeding;

(f) whether any step in the proceeding was,

(i) improper, vexatious or unnecessary, or

(ii) taken through negligence, mistake or excessive caution;

(g) a party’s denial of or refusal to admit anything that should have been admitted;

(h) whether it is appropriate to award any costs or more than one set of costs where a party,

(i) commenced separate proceedings for claims that should have been made in one proceeding, or

(ii) in defending a proceeding separated unnecessarily from another party in the same interest or defended by a different lawyer; and

(i) any other matter relevant to the question of costs.

[16] Some of the factors have been addressed above. The matter was of moderate complexity. A hearing scheduled for August 14, 2019 was adjourned by Myers J. on the basis that the parties were not prepared. Given the serious allegations made against them, and that the order restrained the Defendants’ ability to use the proceeds of the sale of their house, the matter was important to them. It is worth noting that the proceeds that were restrained by the Mareva Order were $142,367.13, giving rise to questions of proportionality.

[17] Based on the foregoing considerations, I fix the Defendants’ costs of the Mareva motion on a partial indemnity basis at $70,000.00, including disbursements and HST. This includes costs incurred in the preparation of the costs submissions.

Nishikawa J. Date: March 11, 2020