ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: 3637/11
DATE: 2012-07-26

B E T W E E N:

Andrew Van Penuvchev

Michael Winterstein, for the Applicant

Applicant

• and –

Zoran Cocovski a.k.a. Zoran Cocov, Crosslink Development Corporation and Crosslink Bridge Corp.

James R. Smith, for the Respondents

Respondents

HEARD: July 24, 2012

The Honourable Mr. Justice B. H. Matheson

ENDORSEMENT

[ 1 ] This matter has been before me on four different occasions. I will refer to my reasons later.

[ 2 ] It was also before Mr. Justice Newbould on the 17 th day of February 2011.

[ 3 ] That order was appealed by the respondent. There was a consent order of the Court of Appeal that substantially upheld the order of Justice Newbould.

[ 4 ] The matter was transferred to the Welland court by Justice Newbould.

[ 5 ] On March 14, 2011 the matter was before Justice Whitten. Justice Whitten found that the notice of motion was given well in advance of the motions date. The respondent sought an adjournment because the respondent was on holidays in the United States.

[ 6 ] Justice Whitten made the following endorsement:

“For the respondent to plan a March break holiday in the face of the financial predicament the corporation is in and the impending time lines was reckless to say the least.”

“The appearance by Ms. Comegna as competent as she is, given the history of the relations between the parties and the numerous court orders, some of which have not been followed by the respondent namely, February 17, 2011 of Justice Newbould, April 15, 2011 of Justice Newbould and December 22, 2011 of Justice Matheson appears shamelessly tactical.”

[ 7 ] In my order of December 21, 2011 I found that the respondent was in substantial noncompliance of the order of Justice Newbould.

[ 8 ] In my order of March 27, 2012, I stated the following:

“I find that Cocovski has deliberately ignored most of the orders of the Superior Court and of the Court of Appeal. He has acted in an antagonistic manner to his business partner Penuvchev. He has taken no steps to correct the problems that prevent the company to move forward.”

“I have had the opportunity of seeing and hearing the respondent Cocovski on at least three hearings. I have found that he is not responsive to questions that are put to him. He is evasive and if he were allowed to continue as an officer and director of the respondent companies they would be in danger of collapse.”

[ 9 ] The applicant is now asking for costs. He is asking that the court award him costs on a full indemnity basis because of the conduct of the respondent. His counsel have also set out costs on a substantial indemnity basis and that of a partial indemnity basis.

[ 10 ] On a full indemnity basis that would amount to some $30,292.65. On a substantial indemnity basis the costs would be some $20,431.14. On a partial indemnity basis it would be some $13,820.64.

[ 11 ] In dealing with the question of costs, the court should look at the guidelines in exercising its discretion as set out in s.57.01of the Rules of Civil Procedure . It reads as follows:

57.01 (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.

[ 12 ] As stated, there are three regimes for awarding costs, full indemnity, substantial indemnity and partial indemnity.

Full Indemnity

[ 13 ] The courts have dealt with the issue of awarding full indemnity only if the conduct of the party against whom costs are awarded are egregious.

[ 14 ] Justice Nordheimer, in the case of 1307347 Ontario Inc. v. 1243058 Ontario Inc. , 2001 CarswellOnt 492 , stated the following:

5 In my view, as I indicated in my reasons, the costs of a successful motion for a finding of contempt should be awarded on a solicitor and client scale. There ought to be something approaching a complete indemnity to the successful party in such motions since to do otherwise would involve some cost or punishment to the successful party arising solely out of the conduct of the other party in violating a court order. As Warren J. said in Rogers Cable T.V. Ltd. v. I.B.E.W., Local 213 , [1994] B.C.J. No. 1035 (B.C.S.C.) at para. 8 :

In my view therefore, were I to award special costs, it would be to recognize that as between the parties to the litigation, the conduct of the contemnor was outrageous or scandalous and to provide as close to complete indemnity as possible for the party obliged to bring on the application. In my view, where there is contempt of Court, there is nothing offensive in an award of special costs which may both act as a form of chastisement to the contemner and provide indemnity for the complainant. In my opinion it is precisely for this type of situation that special costs were designed.

I note that the same conclusion has been reached in Ontario – see, for example, Leo Sakata Electronics (Canada) Ltd. v. McIntyre , [1996] O.J. No. 1437 (Ont. Gen. Div.) and Industrial Hardwood Products (1996) Ltd. v. International Wood & Allied Workers of Canada, Local 2693 (1999), [2000] O.J. No. 3510 (Ont. S.C.J.) .

6 Having said that, however, an award of solicitor and client costs does not mean that the successful party can claim whatever costs might have been charged to it by its solicitors for the work done on the matter. As Morden A.C.J.O. said in Murano v. Bank of Montreal (1998), 41 O.R. (3d) 322 (Ont. C.A.) at p. 248 :

In this regard, I think that the approach of Haines J. in Worsley v. Lichong , [1994] O.J. No. 614 (Gen. Div.) is the correct one. In para. 5 he said:

… I believe the fixing of costs still requires a critical examination of the work undertaken in order to determine that the costs claimed have been reasonably incurred and reflect what the court considers to be proper and appropriate in the circumstances given the complexity and significance of the proceedings held up against the backdrop of full indemnification.

[ 15 ] Justice Hackland dealt with the matter of full indemnity in Baryluk v. Campbell , 2009 CarswellOnt 3900 at paras. 9 and 10 , which read as follows:

9 I am of the opinion that this is one of the rare cases in which costs should be awarded on a full indemnity basis. As noted, I found that this action constituted a scurrilous attack on the administration of justice. The conduct of the defendants, judges of this court, was characterized by the plaintiff as case-fixing, abuse of public office, dishonesty and deceit in circumstances where there was no basis on the facts pleaded or submissions made to the court to support such outrageous allegations. Reckless attacks on the integrity of judicial officers must be recognized as conduct requiring chastisement and deterrence.

10 There is ample authority for an award of full indemnity costs where unsubstantiated allegations of dishonesty, illegality, and conspiracy are advanced without merit. While full indemnity and substantial indemnity costs are an exception to the general rule and awarded only under special circumstances, allegations made or conduct by a party that is “reprehensible, scandalous, or outrageous” falls within the ambit of an award of full indemnity costs …

[ 16 ] Justice Quinn in Pirbhai v. Singh , 2011 ONSC 1366 , 2011 CarswellOnt 1285 , at paras. 119 and 120 , stated the following:

119 I comfortably conclude that the extreme and pervasive conduct of Singh, which I have chronicled in these Reasons, warrants full-indemnity costs: (1) he added, perhaps, 25 days or more to the evidence in the trial and years to its length; (2) he was not forthright with his documentary disclosure; (3) he fraudulently created documents; (4) he repeatedly lied under oath; and, (5) he attempted to perpetrate a fraud upon the plaintiff and upon the court. What else must be present in this case to attract full-indemnity costs?

120 Equity requires that the plaintiff not be put to one penny of expense in his pursuit of justice.

[ 17 ] In my endorsements dated December 21, 2011, March 22, 2012, March 27, 2012 and that of Justice Whitten of March 14, 2012, the following observations were made of the conduct of Zoran Cocovski;

a. Mr. Cocovski is in substantial noncompliance with the order of Justice Newbould.

b. The degree of noncooperation has not abated.

c. I find that Cocovski has deliberately ignored most of the orders of the Superior Court and the Court of Appeal.

d. Justice Whitten stated that the conduct of Cocovski “was reckless to say the least” and his conduct was “shamelessly tactical”.

[ 18 ] No motion for contempt was sought by the applicant because of the conduct of the respondent.

[ 19 ] The awarding of full indemnity costs requires very egregious conduct, such as fraud or deceiving the court. I find that did not occur in this matter.

[ 20 ] Therefore, I will not award costs on a full indemnity basis.

[ 21 ] I find that the conduct of the respondent unduly delayed this matter. What should have been a short matter required many appearances in court. The respondent did not attempt to resolve this matter. It required his removal as an officer and director to keep the company in business.

[ 22 ] The counsel for Mr. Covovski has stated that the applicant’s lawyers spent an undue amount of time in bringing these motions. He also stated that the court should look at the issue of costs by applying the issue of proportionality.

[ 23 ] With respect, I disagree. The amount at stake, even from the perspective of the respondent, involves a considerable amount of funds. Counsel for the respondent indicated that it might amount to millions.

[ 24 ] In my opinion, counsel for the applicant needed the time and effort to ensure that the client was well-prepared for the motions.

[ 25 ] Counsel for the respondent has stated that the costs should be in the amount of $10,092.49 all inclusive. I disagree. The respondent caused the applicant to do much more work because of the conduct of the respondent.

[ 26 ] I have reviewed the costs outline of the applicant on a substantial indemnity basis and I do not find it to be out of line, taking into account the conduct of the respondent.

[ 27 ] Therefore, costs will be awarded in the amount of $20,431.14 all inclusive.

Matheson J.

Released: July 26, 2012

COURT FILE NO.: 3637/11

DATE: 2012-07-26

ONTARIO SUPERIOR COURT OF JUSTICE B E T W E E N: Andrew Van Penuvchev Applicant - and – Zoran Cocovski a.k.a. Zoran Cocov, Crosslink Development Corporation and Crosslink Bridge Corp. Respondents ENDORSEMENT Matheson J.

Released: July 26, 2012