COURT FILE AND PARTIES

COURT FILE NO.: CV-08-364277

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: HAIDER HUMZA INC., MISSISSAUGA AUTO CLINIC INC and MECCA WHOLESALE MEATS & CATERING INC. v. MOHAMMED RAFIQ aka MOHAMMED RAFIQ aka MUHAMMAD RAFIQ, SAIDA BANU RAFIQ, ZUBAID-UR-RAHMAN NAWAID HASHMI, ZARCO EXCHANGE CANADA INC., MULTIMEDIA MARKETING GROUP LTD., AJAZ KHAN, ZIA ISLAM carrying on business as PRO-TECH AUTOMOTIVE, CANADIANS CENTRAL AUTO LTD., AUTO SPECIALIST INC., SAM SANTINO carrying on business as SANTINO HAULAGE and A AND B AUTO LEASING & CAR RENTAL INC.

BEFORE: Master R. Dash

COUNSEL:
Murray Teitel, for the plaintiffs

Aswani Datt, for the defendant Mohammed Rafiq

COSTS ENDORSEMENT

[ 1 ] This endorsement concerns costs of the motion by the defendant Mohammed Rafiq (“Mohammed”) for a variety of relief heard and determined on September 13 and October 5, 2012. The motion was to dismiss the action for non-payment of my costs order of April 23, 2012 or to vary that order such that the payee be Mr. Datt rather than his client Mohammed Rafiq, to dismiss for delay, for leave to file an amended statement of defence by adding a counterclaim, for leave to file a third party claim and for assignment to case management. Costs were sought not only against the plaintiffs, but against their lawyer Murray Teitel and notice was given under rule 57.07(2).

THE PLEADINGS MOTIONS

[ 2 ] The two pleading issues were contested. Mohammed’s motion to amend the statement of defence of Mohammed and A and B Auto Leasing & Car Rental Inc. (“A&B”) to add a counterclaim “effective December 16, 2008” was withdrawn without prejudice to seek the same relief before a judge. It was withdrawn after I determined that by granting such relief, I would be varying the order of judge, which a master cannot do. Price J. had granted the relief three years earlier provided that the counterclaim was delivered within 30 days. To be clear I did not find that the counterclaim was untenable or that the plaintiffs would suffer prejudice as a result of the amendment. On the other hand Mohammed’s motion for leave to issue a third party claim was granted over the objections of the plaintiffs. The plaintiffs unsuccessfully argued I did not have jurisdiction. I found I was not varying the order of Whitaker J., but was rather making an order consistent with the judge’s order. I found that the issue of who owns A&B was common to the main action and the proposed third party claim. Mohammed was not entirely successful in that I would not permit the claim on the lease to proceed as part of the third party claim, and that A&B be named as a defendant, not a plaintiff, to be consistent with the order of Justice Whitaker. This was of little consequence since in either case Mohammed agreed A&B was named as a nominal party so that it would be bound by the decisions in the action and third party claim. I also rejected the plaintiffs’ argument that the motion must fail on grounds that the issue was not raised at the time the order of Whitaker J. was settled, based on abuse of process or estoppel. I also refused the plaintiffs’ request to adjourn the motion to deliver a third party claim until after the contempt motion. In my view, there was sufficient division of success on the two pleadings motions such that no costs should be awarded to either party on those issues.

TIMETABLE AND CASE MANAGEMENT MOTIONS

[ 3 ] Mohammed did not proceed with his motion to dismiss for delay and instead sought a timetable to schedule examinations for discovery and mediation in order to move the action forward to determination on the merits. The action was initially held in abeyance several years while awaiting completion of appeals in a related action. On June 20, 2011 Hoy J. determined that Mohammed was responsible for subsequent delay in the action, including his opposition to the appointment of a receiver-manager of A&B. Mohammed’s actions led to the plaintiffs’ motion before Master Graham to strike his defence for failure to pay the costs awarded by Hoy J. He was also responsible for the events that led to the plaintiffs bringing a contempt motion when he borrowed on behalf of A&B contrary to the order of Whitaker J., at a time when ownership of A&B had yet to be determined, and then used those funds to pay the costs awarded against him by Hoy J. It was at this point that the plaintiffs became responsible for the delay of the action. The action became mired by the plaintiffs’ dogged pursuit of their contempt motion, and what I had described in my April 23, 2012 endorsement of the plaintiffs’ “scorched earth” policy of seeking multiple examinations in support of that motion, including the examination of Mr. Datt, Mohammed’s litigation counsel. The plaintiffs continued to seek Mr. Datt’s examination even after Mohammed delivered an affidavit and submitted to cross-examination, admitting the fact of the borrowing (with a somewhat unlikely explanation) and admitting that the borrowed funds were used to pay Mohammed’s personal costs order and after evidence that Mohammed had independent legal advice and after receipt of Mr. Datt’s trust ledger. The plaintiffs continue to seek the striking of Mohammed’s defence even though the monies have been repaid and the contempt purged.

[ 4 ] Mohammed’s concern on the motion before me was the plaintiffs’ resistance to schedule any further litigation events, such as examinations for discovery, until after the contempt motion was determined, on the theory that the defence may be struck, a result I found to be extremely unlikely, Mohammed having since purged his contempt. The deadline for discoveries and for setting the action down as set at a status hearing had passed. The plaintiffs even wanted to delay Mohammed’s motion to amend his defence and issue a third party claim until after the contempt motion.

[ 5 ] Indeed, it may well have been the plaintiffs’ successes in the other action and earlier in this action that had emboldened them to take what I earlier described as a scorched earth policy and taking excessive and disproportionate legal steps. The plaintiffs have sidetracked this lawsuit about who owns A&B into a single minded purpose of punishing Mohammed for his transgressions in taking out the mortgage and putting all other substantive issues on hold until the contempt motion is dealt with. The plaintiffs, it appears, have lost sight of the forest for the trees.

[ 6 ] Mohammed was successful on the motion before me in that I fixed a timetable for litigation events including an order for discoveries in November 2012 and an order that a mediator was to be agreed and a mediation date fixed by mid December 2012, with the mediation to be conducted by June 2013. The events scheduled in this timetable were to proceed on the ordered dates, whether or not the contempt motion had been heard and determined, unless of course the defences were struck before the date of the examinations. Time limits were also set for the examinations of various parties, some of which were strongly resisted by the plaintiffs (with respect to Shahzad). A new deadline was also set by which the plaintiffs were required to set the action down (obviating the need for a motion scheduled for later in the month by the plaintiffs to extend the set down deadline), being an indulgence granted to the plaintiffs. In my view the timetable ordered was a significant victory for Mohammed and he should have his costs on a partial indemnity scale.

[ 7 ] Mohammed also moved to have the action assigned to Rule 77 case management. I was of the view that the action “cries out for case management”; however given the resource issue in the masters’ office in Toronto and the determination that based on the history of this litigation, the involved parties “would be a very large consumer of those judicial resources” the motion was refused without prejudice to renew the request if appropriate at a later date. I do not consider this a victory for the plaintiffs as otherwise it would be to reward them for their scorched earth policy as described in my April 23, 2012 endorsement, and for pursuing the contempt motion at the expense of complying with a court ordered timetable and refusing to proceed with the action on its merits pending the contempt motion. It was the actions of the plaintiffs as previously described and their approach to the April 23 rd costs order (to be described later in this endorsement) that led me to conclude that the parties would be a large consumer of case management resources. In the result I would award no costs to any party on the motion for case management, except to the extent that costs were incurred concurrently for both for the dismissal for delay/timetable motion and the case management motion, in that both rely on the same litigation history and factual matrix.

“NON-PAYMENT” OF APRIL 23, 2012 COST AWARD

[ 8 ] This leaves only the issue of Mohammed’s motion to dismiss the action for non-payment of my April 23, 2012 costs order or alternatively to vary my order of April 23, such that all of the costs ordered to be paid by the plaintiffs be paid to Mr. Datt, the lawyer for Mohammed, personally rather than to Mohammed. Although this issue ultimately proceeded on consent after the court gave its preliminary view on the matter, the events surrounding the payment of my April 23 rd costs order and the conduct of the plaintiffs’ lawyer, Mr. Teitel, cause the court great concern.

Should Costs be Awarded to Mr. Datt?

[ 9 ] On April 23, 2012 I released reasons respecting costs of a motion by the plaintiffs to conduct various rule 39.03 examinations in aid of a contempt motion. The contempt motion was brought because of the actions of Mohammed and his wife Saida causing A&B to borrow $50,000 contrary to an order of Whitaker J. The most contentious examination was that sought of Mr. Datt. I had determined that “Mr. Teitel wants to examine Mr. Datt under rule 39.03 solely in order to impeach Mr. Datt’s clients despite solicitor-client privilege or to provide evidence that Datt himself may be a co-conspirator in the placing of the unlawful mortgage”, that the allegations against Mr. Datt were akin to participation in his client’s “theft” and that “the purpose or at least the effect of examining Mr. Datt” would be to cause Mr. Datt to be disqualified as Mohammed’s lawyer since he “cannot be an advocate and witness in the same case”. I described the steps taken by the plaintiffs leading up to the contempt as “a scorched earth policy, or more charitably as excessive steps disproportionate to what was at stake.”

[10] I awarded Mohammed his “costs of successfully resisting the motion to compel an examination of his lawyer, Mr. Datt” which I described as “unnecessary and ill-advised and resulted in disproportionate costs to all concerned.” I awarded those costs on a substantial indemnity basis for a variety of reasons including the “outrageous and reprehensible conduct” of the scorched earth policy. I awarded costs of $20,500 to be paid by the plaintiffs to Mohammed within 30 days, with a right to set off against other costs of $3,000 owing by Mohammed to Haider Humza Inc. (“Haider”) if they remained unpaid (i.e. leaving a net payment of $17,500). The costs were payable by May 23 rd .

[11] Because of the serious allegations made personally against Mr. Datt and the relief sought personally against Mr. Datt (to attend examination), Mr. Datt retained counsel, Ms. Diaz to represent his interests on the motion. Thus Mr. Datt attended the motion to represent Mohammed and Ms. Diaz attended to represent Mr. Datt. I determined in paragraph 37 of my reasons that the costs payable to Mohammed:

should include the costs of Mr. Datt retaining his own counsel, Ms. Diaz, to protect his interests with respect to the relief sought against him personally. The plaintiffs have no-one to blame but themselves that they now have to pay the costs of two separate lawyers. Mr. Datt clearly had a separate interest to protect from that of his client given the allegations made against him akin to theft and the fact that the plaintiffs were seeking an examination of him to give evidence against the interests of his client.

[12] Mr. Datt delivered a single Bill of Costs in the name of his client Mohammed. I reiterated in paragraph 39 that the costs included the costs of both Mr. Datt representing Mohammed and Ms. Diaz representing Mr. Datt. I stated:

As to quantum, the plaintiffs are responsible for the costs incurred both by Mr. Datt, the lawyer for Mohammed as well as the costs of Ms. Diaz, the lawyer for Mr. Datt, which costs have been combined in one Bill of Costs... the plaintiffs’ should have known that their allegations would cause both Mohammed and Mr. Datt to separately incur costs.

[13] As it turned out in light of subsequent events, it was unfortunate that Mr. Datt combined Mohammed’s costs and Mr. Datt’s personal costs in a single Bill of Costs in Mohammed’s name since it resulted in a single order that the plaintiffs pay “to the defendant Mohammed Rafiq his costs of this motion.” Clearly a more appropriate order would have been to make separate awards to Mohammed and to Mr. Datt, but Mr. Datt could not have anticipated that the plaintiffs and Mr. Teitel would be taking steps to divert the costs awarded to Mohammed to another creditor of Mohammed, including the portion incurred personally by Mr. Datt.

[14] After the release of my reasons a number of events transpired to ensure that Mohammed would never see his costs award paid to or through Mr. Datt, while lulling Mr. Datt into believing they would be paid:

1. There are unpaid costs orders in another court action owing from Mohammed to Ayesha Rafiq (“Ayesha”), the shareholder of Haider and daughter-in-law of Mohammed, totalling $41,000. On April 30, 2012, Mr. Teitel proposed to Mr. Datt that the cost debts be set off against each other. Mr. Datt refused.

2. When Mr. Datt refused the set-off proposal, he stated that: “we expect the costs paid by the timeline” or he would bring a motion to strike pleadings. In response Mr. Teitel stated, still on April 30: “ My client has every intention of paying the costs on time .”

3. Notwithstanding his words of comfort to Mr. Datt, Mr. Teitel received instructions on an unspecified date after April 30 to have Ayesha garnishee the monies owing from Haider to Mohammed pursuant to the April 23 rd costs order. He did not tell Mr. Datt.

4. There was a dispute between Mr. Datt and Mr. Teitel about the form of the order and Mr. Datt had sent me his draft so that a formal order would be available to enforce when the payment came due on May 23 rd . Mr. Teitel wrote to me on May 7, 2012 and said: “ I have told Mr. Datt that my client has every intention of paying the costs within the time period you have prescribed, so I do not see what the huge urgency is .”

5. In the same letter of May 7, Mr. Teitel asked me to amend my order such the only payor of the costs award was Haider Humza and not “the plaintiffs”. On May 14 I indicated in an endorsement that the payor would be determined by reference to whoever was stated in the notice of motion as the moving party. (I did not have it front of me, but it turned out the motion was brought by only Haider Humza, not all of the plaintiffs.)

6. On May 10 or 11, Mr. Teitel was advised that the Ministry of Finance (“Ministry”) had filed a writ against Mohammed for $30,322 for unpaid retail sales tax. Mr. Teitel does not identify how he was advised. He understood however that if Ayesha garnisheed the monies owing by her company to Mohammed for costs and the monies were paid to the sheriff, it would all go to the Ministry as their writ took priority, and not to Ayesha’s company.

7. In a letter to me on May 14 Mr. Teitel made a pitch that in addition to changing the payor, that I consider ordering a set-off of the April 23 rd costs award against the orders for costs owing by Mohammed to Ayesha in the other action, which I refused to do as that matter was not properly before me. Mr. Teitel stated as one of his arguments in favour of set-off that “it would not put any money in the pocket of Ayesha if she were to garnishee Haider Humza Inc., because Mohammed Rafiq has other execution creditors, the most important of which is a government agency owed $35,000, which would take priority for the money.” Although this letter was copied to Mr. Datt, in my view it would not reasonably have alerted Mr. Datt to Mr. Teitel’s scheme to inform the Ministry (or to have Ayesha issue her own garnishment), particularly given the words of comfort Mr. Teitel gave before and after May 14 that Haider intended to pay the costs. Mr. Teitel however did not inform Mr. Datt that the costs would be paid to someone other than Mohammed.

8. On May 15 th , after receiving instructions, Mr. Teitel advised the Ministry about the debt now due from Haider to Mohammed. He did not warn Mr. Datt of his intention to do so.

9. In a letter of May 17 th Mr. Datt reminded Mr. Teitel that he had booked a motion and asked: “Please confirm that your client will pay the $17,500 cost order by May 24, 2012 in certified funds to my office .” As part of Mr. Teitel’s response dealing with various matters (including the form of the April 23 rd order) he asked what the August motion was for “other, of course, than costs which may be unpaid but which I have assured you my client fully intends to pay .” These words of comfort to Mr. Datt were untrue, or at least misleading.

10. On May 23 rd the costs award became due but they were not paid to Mohammed or to Mr. Datt.

11. On May 24 th the Ministry issued an “Accounts Receivable Enhanced Garnishment” addressed to Haider requiring Haider to pay to the Minister of Finance all monies payable by Haider to the Debtor, Mohammed and any monies that Haider will become liable to pay to Mohammed within the next 365 days to satisfy an indebtedness to the Ministry in the sum of $32,361.45. I have not been advised what date Haider and in turn Mr. Teitel received the garnishment. Mr. Teitel did not tell Mr. Datt about the garnishment, at least not until after Haider paid the money.

12. On May 29 th , after the costs were due, Haider paid the $17,500 to the Ministry and on May 30 Mr. Teitel faxed to Mr. Datt a copy of the garnishment notice.

[15] Of course I do not condone Mohammed not paying the costs owed by him to Ayesha nor do I condone his failure to pay his retail sales tax to the Minister of Finance. Likewise I do not fault Haider for paying the $17,500 costs owing to the Ministry once the garnishment was received. At that point it had no choice.

[16] I do fault the plaintiffs and even more so Mr. Teitel in two respects. Firstly, the $17,500 costs were payable by May 23 rd . Mr. Teitel had sent three letters to Mr. Datt or to the court that the costs would be paid on time . On May 23 rd the costs were not paid. No reason was provided to Mr. Datt. Instead Mr. Teitel and his client deliberately waited until the Ministry served its garnishment after May 23 rd and then paid the Ministry on May 29 th . Haider had not received and was not bound by the garnishment order on the date the costs became due. Those tactics cannot be condoned.

[17] Secondly, and of greater concern to the court, is the failure of Mr. Teitel to warn Mr. Datt of his intention to alert the Ministry and his plan not to pay the costs to Mohammed or to Mr. Datt, while continuing to lull Mr. Datt into a false sense of comfort that the costs would be paid to them and on time.

[18] If Mr. Datt had been warned, he could, as set out in Mohammed’s affidavit on this motion, “have requested an amendment of [the] cost decision in the order section to contain language consistent with the theme of the entire decision, that is, costs were payable to Aswani K. Datt.” It matters not whether Mr. Datt would have been successful on a motion to vary the operative term of my costs award to make all or part of the costs payable to Mr. Datt. What matters is that Mr. Datt was denied the opportunity to try because he was lulled into a false sense of security by Mr. Teitel’s words of comfort, not warned of Mr. Teitel’s true plans and therefore saw no need to seek an amendment. He had every reason to believe that all of the costs payable to Mohammed would be paid to Mohammed or to him and from that payment Mr. Datt’s costs would be paid.

[19] Rule 6.03(3) of the Rules of Professional Conduct provides:

A lawyer shall avoid sharp practice and shall not take advantage of or act without fair warning upon slips, irregularities, or mistakes on the part of other legal practitioners not going to the merits or involving the sacrifice of a client’s rights.

[20] Mr. Datt made a mistake in failing to ask me at the time of settling the April 23 rd order to make all or part of the costs payable to him personally as he had to retain counsel to represent him in the face of the allegations made against him by Mr. Teitel’s clients. In my view he would have had no reason to believe that the costs would be paid other than in the normal course to the payee, Mohammed, or to himself in trust for his client. Due to Mr. Teitel lulling Mr. Datt into a false sense of security that the costs would be paid on time and failing to warn him of his true intentions, Mr. Datt had no opportunity to rectify his earlier mistake.

[21] While it gives the court no pleasure to say this about a senior and experienced member of the bar, I am of the view that Mr. Teitel took advantage of this mistake and, in lulling Mr. Datt into a false sense of security and failing to warn, he has engaged in sharp practice.

[22] In Garten v. Kruk , 2009 58071 (ON SCDC) , [2009] O.J. No. 4438 (Div. Ct.) the court was dealing with the appeal of an order refusing to set aside a noting in default where the plaintiff’s lawyer refused to warn the defendant’s lawyer of his plan to do so. The court determined at paragraphs 26-27 that costs thrown away were incurred as a result of the plaintiff taking advantage of a slip by the defendant’s lawyers and quoting from the above provision of the Rules of Professional Conduct stated: “ Counsel have obligations to deal with each other fairly and not to take advantage of missteps by opposing counsel” and “ Counsel for the plaintiff had a professional duty to advise opposing counsel before taking steps to note the defendant in default”. The court’s message at paragraph 29 was that a failure by the court to intervene in such circumstances “reinforces what is sharp practice.”

[23] Mr. Teitel provides several excuses for his failure to warn Mr. Datt that his client had instructed him to inform the Ministry of the costs order. Firstly he says the form of order was to have costs paid to Mohammed and Mr. Datt took no steps to change the wording. As I stated earlier, Mr. Datt could not have anticipated that Mr. Teitel would take the steps he did to keep the monies out of the hands of Mohammed and Mr. Datt. The obligation was rather that of Mr. Teitel to advise the court at the time the order was being settled that he and his clients were orchestrating a strategy to pay the cost award to the Ministry as this was a matter solely within his knowledge.

[24] Secondly he says that when he received my endorsement of April 23 rd he had not read or had forgotten my comments (in paragraphs 37 and 39 quoted earlier in these reasons) that part of the costs were to compensate Mr. Datt for his counsel’s time and that when he read my reasons in which I made what he considered to be harsh comments about his and his clients’ motivations for seeking to examine Mr. Datt he was so upset that he stopped skimming my reasons and “certainly would not have cared how the Master arrived at the quantum or that some hours were calculated for Mr. Datt’s counsel”. As such he “was not aware that Mr. Datt would claim the costs were payable to him.”

[25] I find it hard to believe that a senior lawyer with the experience of Mr. Teitel would not, as part of his professional obligations to his clients, have read, and in detail, a decision from a judicial officer that affected his client’s rights. The mischief however is not that Mr. Teitel failed to realize that part of the costs awarded on April 23 rd were to compensate for Mr. Datt’s personal costs in retaining his own counsel, but that he failed to warn either Mohammed or Mr. Datt that the costs which he had promised time and again would be paid and on time, were never going to paid as promised, and that he would be advising the Ministry of the judgment for costs so as to frustrate not only the order for costs, but the very promises he had been making to Mr. Datt, a fellow lawyer. Indeed his motives are evident in the following statement made in his affidavit as to why he made the promises to Mr. Datt, who was considering a motion if the payment were made late: “I wanted to make sure that he did not start preparing motion records”. In his own words, Mr. Teitel admits he failed to warn in order to avoid Mr. Datt enforcing his or his client’s rights.

[26] The final reason given for failure to warn is stated thus by Mr. Teitel: “I did not want to tell Mr. Datt of my plans, since Mohammed is, in my opinion, mischievous, dishonest and conniving and might bring frivolous motions that would cause further delay or costs.” In my view such comments are a continuation of the scorched earth policies I described in my April 23 rd endorsement. They demonstrate that Mr. Teitel was going to take all steps to prevent Mohammed and Mr. Datt from seeing one cent of the costs award made against his client. In any event, even if Mr. Teitel’s opinion of Mohammed is accurate, it is not an excuse for breaching his professional obligations to warn Mr. Datt.

[27] I wish to be clear that I do not condone the behaviour of Mohammed in taking out the mortgage in the name of A&B (although any contempt has since been purged) or in failing to pay costs in the other action. His behaviour has been criticized and his credibility has been questioned by judges in other proceedings. The costs of this motion however are not concerned with Mohammed’s past behaviour, but rather with the litigation behaviour of the plaintiffs and their lawyer that led to the bringing of this motion

[28] On the return of the current motion on September 13, 2012, I gave both lawyers my preliminary view from having read the motion materials that whether or not Mr. Datt had erred in not asking for part of the costs to be made payable to him, it was a variation that would be just to make at this time under rule 59.06, in light of the subsequently discovered facts of the notification and ultimate payment to the Ministry. I also expressed the view that the only costs to be paid to Mr. Datt would be that portion of the costs attributed to the time of his counsel, Ms. Diaz and not the costs of Mr. Datt’s representation of his client. Concerns were initially expressed by Mr. Teitel that as the Ministry had been paid, such an order may require the Ministry to make a repayment and as such they should be put on notice as an affected non-party. After I gave my preliminary view that Haider should pay those costs and not the Ministry, even if this meant that Haider pay twice, at least to the extent of Ms. Diaz’s costs, Mr. Teitel and Mr. Datt and their clients conferred outside court and agreed to the order ultimately made. I enforced that agreement by an order varying my April 23, 2012 order such that that Haider pay Mr. Datt $6,000 personally for his own costs in resisting the motion to compel his attendance for examination and that the balance of $11,500 was payable to Mohammed and satisfied by the payment to the Ministry on the garnishee.

[29] Notwithstanding that the order was ultimately made on consent, I am of the view that Mr. Datt was required to bring this motion in order that he be paid the costs he incurred for retaining counsel, and that the situation arose as a result of Mr. Teitel’s actions in failing to warn and lulling Mr. Datt into a false sense of security. Even though Mr. Datt did not succeed in having all of the $17,500 costs payable to him, in that the only costs “belonging” to him were those he personally expended for Ms. Diaz, I consider recovery of those costs from Haider to have been a success to Mr. Datt. Mr. Datt should have his costs, payable to him, for that aspect of the motion. The costs are those of Mr. Datt and not his client, since the motion was to recover the costs belonging to Mr. Datt personally.

Should the Costs be Payable by the Plaintiff or its Lawyer?

[30] The question is who should pay those costs, Haider, or its lawyer Mr. Teitel? Mr. Teitel was put on notice under rule 57.07(2) that costs would be sought personally against him.

[31] Rule 57.07 provides as follows:

LIABILITY OF LAWYER FOR COSTS

57.07 (1) Where a lawyer for a party has caused costs to be incurred without reasonable cause or to be wasted by undue delay, negligence or other default, the court may make an order,

(a) disallowing costs between the lawyer and client or directing the lawyer to repay to the client money paid on account of costs;

(b) directing the lawyer to reimburse the client for any costs that the client has been ordered to pay to any other party; and

(c) requiring the lawyer personally to pay the costs of any party.

(2) An order under subrule (1) may be made by the court on its own initiative or on the motion of any party to the proceeding, but no such order shall be made unless the lawyer is given a reasonable opportunity to make representations to the cour.

(3) The court may direct that notice of an order against a lawyer under subrule (1) be given to the client in the manner specified in the order.

[32] In Burrell v. Peel Police Services Board , [2007] O.J. No. 4717 I summarized developments in the law related to costs personally against a lawyer:

11 In the recent decision of Walsh v. 1124660 Ontario Limited , 2007 4789 (ON SC) , [2007] O.J. No. 639 (SCJ) Lane J. had to determine whether to award costs personally against Mr. Guiste following a lengthy jury trial. Lane J. extensively reviewed the law with respect to costs personally against a solicitor, and its development since the Supreme Court of Canada decision in Young v. Young [1993] S.C.R. 3 and the subsequent passage of rule 57.07. I would summarize the law from that decision as follows:

1. It is no longer necessary to show abuse of process, contempt of court, bad faith or gross negligence to award costs personally against a solicitor. Rule 57.07 has enlarged the ambit of such orders to include costs incurred "without reasonable cause or to be wasted by undue delay, negligence or other default". It "is enough that the acts described in the Rule have occurred".

2. Courts however must be "extremely cautious" in making such awards given the duties of a lawyer to guard confidentiality of instructions and to "bring forward a client's case with courage", to represent a client "resolutely and honourably within the limits of the law", to "raise fearlessly every issue [and] advance every argument" that would assist his client's case, to "bring forward with courage even unpopular causes", and to "accept and argue cases without fear of costs orders against him should the case turn out to be a weak one".

12 Lane J. summarizes how these two principles work together in the following passage:

Another duty of counsel is to promote the client's case through fearless advocacy and the marshalling of all the evidence which may reasonably support that case. Here again, it would be subversive of the proper role of counsel for the court to "second-guess" the way in which this duty was performed, simply because the court thinks in hindsight that it might have been done better or differently or more wisely or less abrasively or more economically as to time. It is only where expense has been incurred without reasonable cause, or there has been waste of costs through undue delay, negligence or other default , that the court can intervene. It seems to me that the reasonableness of the expense is to be judged as at the time it was incurred, or foisted on the opposite party, and not with the benefit of hindsight.

[emphasis in original decision of Lane J.]

[33] This is not a case of fearless advocacy “within the limits of the law”, nor is it a matter of hindsight on how Mr. Teitel might have conducted this matter differently. He has caused Mr. Datt to incur the costs of bringing this motion “without reasonable cause” by his misleading statements about payment and his failure to warn. Alternatively or in addition such costs were caused by Mr. Teitel’s “negligence or other default”, such as by failure to read and appreciate relevant portions of my April 23 rd reasons. It is clear from the record that Mr. Teitel knew that his promises to pay the original costs order and on time would lull Mohammed and Mr. Datt into believing the costs would be paid to them and on time and knew that as a result Mr. Datt would have had no reason to take steps to vary my order or to enforce payment when due. Mr. Teitel admits that the failure to warn was deliberate. I have found this was sharp practice.

[34] In my April 23 rd endorsement I had contemplated costs personally against Mr. Teitel for the earlier motion, but elected not to do so. At that time I said:

Should Mr. Teitel be personally responsible for the costs? While I have no hesitation concluding that the actions taken by Mr. Teitel on this motion have “caused costs to be incurred without reasonable cause” within the meaning of rule 57.07, I am unable to conclude on the evidence before me whether the scorched earth policy undertaken by Mr. Teitel on behalf of the plaintiffs was indeed that of Mr. Teitel or whether it was undertaken entirely at the direction of Shahzad Rafiq, who was in court on each occasion with Mr. Teitel, or of Shahzad’s wife, who holds title to the shares of the plaintiff corporation. There is a fine line between resolutely representing the interests of your client to the best of your ability, and crossing over the line such as to attract rule 57.07 costs and I give Mr. Teitel the benefit of the doubt. The costs will be formally payable by the plaintiffs, but I leave it to Mr. Teitel and his clients to determine who will in fact pay those costs.

[35] This time a line has been crossed. Mr. Teitel has breached his duty to another lawyer not to take steps without fair warning and to take advantage of Mr. Datt’s mistake. He lulled Mr. Datt into believing the costs would be paid in accordance with the order and on time, while taking steps to frustrate that payment by informing the Ministry without any warning to Mohammed or Mr. Datt until after payment was made to the Ministry. The decision not to warn was his decision alone. Even if I am wrong and he acted on his client’s instructions, a lawyer should not take instructions from a client that would cause him to breach his professional obligations to another lawyer. It appears that no lesson had been learned from my criticism of the plaintiffs’ scorched earth policy set out in my earlier endorsement. It has instead been taken to a new level. Mr. Teitel has engaged in sharp practice and is no longer entitled to the benefit of the doubt. A message must be sent that the court will not abide such behaviour. This is an appropriate case for the costs award to be made personally against the plaintiffs’ lawyer.

Scale of Costs

[36] While I may have considered substantial indemnity costs as set out in the notice of motion, Mr. Datt indicated in argument that would be seeking all costs on a partial indemnity scale, perhaps in recognition of the fact that he obtained only a partial variation of my earlier costs order.

SHOULD THERE BE A SET-OFF AGAINST COSTS PAYABLE BY MOHAMMED TO AYESHA?

[37] I had considered setting off the costs award I am making today against the outstanding costs owing by Mohammed to Ayesha in another action. I am of the view that I have jurisdiction to make an order for the equitable set-off of mutual judgment debts (including debts relating to the payment of costs). The problem here is that there is no mutuality of debts in that Mohammed owes money to Ayesha whereas part of my order herein is for the payment of costs by Haider to Mohammed. Simply put, the parties are not the same, although they are related. It would also not be proper to set off costs payable to Mr. Datt personally with costs payable by his client.

[38] I am also cognizant that whatever cost award I make against Haider in favour of Mohammed will not be paid to Mohammed, but rather to the Ministry of Finance pursuant to its 365 day garnishment, at least until the indebtedness for retail sales tax is paid in full. I anticipate however that the costs that I have ordered Mr. Teitel to pay directly to Mr. Datt will be paid, using words Mr. Teitel has used with respect to Mohammed, without any “shenanigans”.

QUANTUM OF COSTS

[39] The final question is to ascertain the quantum of costs. In other words, what portion of the Costs Outline presented by Mr. Datt is attributed to the two matters where I have determined costs should be paid, namely the motion for a timetable (to be paid by Haider) and the motion to vary the costs awards (to be paid by Mr. Teitel) both on a partial indemnity scale.

[40] Mohammed’s costs outline seeks, for the entirety of the motion, costs on a substantial indemnity scale of $21,991.09 or on a partial indemnity scale of $16,270.46. These totals include HST plus disbursements of $515.44. They include 59.7 hours of Mr. Datt’s time, 6.5 hours of student time and 1.5 hours of a legal assistant. Mr. Datt’s actual hourly rate of $300 is reasonable, although the appropriate partial indemnity rate would be $200, not $225. Some of the time is not reasonable. For example Mr. Datt’s research concentrated on the law respecting garnishment of a solicitor’s trust account, which did not, even by analogy, apply to the factual matrix of the motion, and as such the research time and preparation of that part of the factum had no value. The time for correspondence and telephone calls seems somewhat excessive. The time preparing materials and attendance in court on issues dealing with the counterclaim, the third party claim and case management, for which no costs were awarded, must also be subtracted.

[41] On the other hand I recognize that the issues, both for those for which costs were awarded and those for which no costs were awarded were somewhat complex. The issues of adding pleadings to deal with the mortgage taken out by A&B in favour of Ayesha and the issue of the failure to warn were of significant importance to the defendant Mohammed.

[42] I am hampered because the time spent dealing with the different aspects of the motion is not broken down in the Costs Outline. I do gain some assistance by reviewing Mr. Datt’s attached time dockets. In any event the fixing of costs is not simply a mathematical exercise of multiplying rates by hours. The court must fix costs that are fair and reasonable and within what should have been the reasonable expectations of the plaintiffs.

[43] In my view costs (inclusive of HST and disbursements) of $2,500 attributed to the timetable motion and costs of $3,000 attributable to the “unpaid costs” motion both on a partial indemnity scale are fair and reasonable. While the plaintiffs’ own costs outline for the entire motion totals $5,824 on a partial indemnity scale and approximately $6,600 on a substantial indemnity scale, I recognize that this was the defendant’s motion and Mr. Datt put in considerably more time. In my view the amounts awarded should have been within the reasonable expectations of the plaintiffs.

ORDER

[44] The costs of the motion by the defendant Mohammed Rafiq for a variety of relief heard and determined on September 13 and October 5, 2012 shall be payable within 30 days as follows:

(1) The plaintiff Haider Humza Inc. shall pay to the defendant Mohammed Rafiq costs fixed in the sum of $2,500.

(2) The lawyer for the plaintiffs, Murray Teitel, shall personally pay to the lawyer for Mohammed Rafiq, Aswani K. Datt, costs fixed in the sum of $3,000.

Master R. Dash

DATE: October 30, 2012