SUPERIOR COURT OF JUSTICE – ONTARIO
COURT FILE NO.: CV-11-1830-SR
DATE: 2015-08-14
RE: Sofia Oliveira and Frederick Kurz v. Akbar Zareh and Maxcom Realty Inc. o/a Kingsway Real Estate Brokerage
BEFORE: M. J. Donohue, J.
COUNSEL:
Robert Kostyniuk, for the Plaintiffs
Alex Valova, for the Defendants
COSTS E N D O R S E M E N T
[1] In my decision I found that the Defendant, Akbar Zareh, real estate agent of the mortgagee bank, essentially stole a quantity of chattels, and damaged the house in doing so, a day before the real estate closing. He did so in the face of in spite of the expectations, instructions and undertakings of all parties concerned, that the chattels were to remain in the home and pass to the Plaintiff purchasers of the home.
[2] I dismissed the claim on the basis that this was not a case of conversion. The Plaintiff’s pleadings only plead a case of conversion and did not plead a constructive trust or any other equitable relief which, had they been pleaded, may well have founded a viable claim for relief as against Mr. Zareh. In addition, they never sought to introduce a new theory of liability during the trial or amend their pleadings to do so. In this case, the claim for property damage should have been brought by the Plaintiff against the bank to compel the bank to have acted against the real estate agent.
[3] I assessed the damages at $31,394.
[4] If the Plaintiff’s action had been properly constituted, with all the right parties before the Court, I would have found the conduct of Mr. Zareh to have warranted an award of punitive damages, as his actions deserved denunciation.
Behaviour of Mr. Zareh
[5] I found that Mr. Zareh, who owned and operated Kingsway Real Estate Brokerage, stole chattels without any colour of right.
[6] I found that Mr. Zareh hid the information that he removed chattels for four years.
[7] I found that he lied on his examination for discovery and hid a material witness.
[8] I found that he improperly held back photographs that were subject of undertakings until the Plaintiffs’ case had closed at trial.
[9] Finally, I found that other real estate agents should be deterred from acting in such a manner as Mr. Zareh did, as such behaviour abuses the trust real estate agents are given when allowed access to private property.
[10] In this context I invited submissions on costs.
Defendants Submission
[11] The Defendants sought their partial indemnity costs of $31,935.87 inclusive of disbursements ($2,957.20) and inclusive of HST.
[12] They sought their costs as the successful parties and on the basis of four offers to settle;
September 4, 2012
Dismissal without costs
May 28, 2013
$5,000 all inclusive
April 30, 2014
$5,000 payment and return of the piano, gym equipment and armoire
February 4, 2015
$25,000 all inclusive (Rule 49 Offer)
[13] The Defendants note that they had to bring a motion for undertakings as against the Plaintiffs. Justice Ricchetti ordered costs in their favour of $750. I have no indication that these costs were not paid.
Plaintiff’s Submission
[14] The Plaintiff sought their costs on a partial indemnity basis of $54,355.82 inclusive of disbursements ($1,885.68) and inclusive of HST.
[15] The Plaintiffs had served a Rule 49 offer on May 30, 2014, for $35,000, plus interest and partial indemnity costs.
Law and Analysis
[16] The award of costs is governed by s. 131 of the Courts of Justice Act, R.S.O. 1990, c. C.43 and by Rule 57.01 of the Rules of Civil Procedure. Section 131 gives the court a general discretion to fix costs. Rule 57.01 provides guidance in the exercise of that discretion by enumerating certain factors that the court may consider when assessing costs.
[17] In addition, Rule 49.10 of the Rules of Civil Procedure provides costs consequences where a party fails to accept an offer. Under Rule 49.1(2), where an offer to settle is made by a Defendant seven days before the commencement of the hearing and a Plaintiff obtains a judgment as or less favourable then the offer, the Defendant is entitled to costs on a partial indemnity basis from the date the offer was made “unless the Court orders otherwise”.
[18] In this case, the Plaintiff was unsuccessful and typically costs are awarded to the winner, especially where there is an offer to settle.
[19] The Court of Appeal in Elbakhiet v. Palmer, 2014 ONCA 544 at 30, [2014] O.J. No. 3302 has nicely summarized the narrow exception for a trial judge considering costs where there has been a Rule 49 offer. At para 30 the Court of Appeal stated:
It is only where a plaintiff's judgment is as favourable as or less favourable than the terms of the offer to settle that the defendant is entitled to costs in accordance with rule 49.10(2) “unless the court orders otherwise.” This court has narrowly construed this exception and the defendant will almost always be entitled to the benefit of rule 49.10 where the defendant's offer complies with rule 49.10. A narrow construction of the exception underlies the high interest in encouraging settlement of cases: see Niagara Structural Steel (St. Catharines) Ltd v. W.D. Laflamme Ltd. (1987), 1987 4149 (ON CA), 58 O.R. (2d) 773 (C.A.), at p. 777 and Starkman v. Starkman (1990), 1990 6793 (ON CA), 75 O.R. (2d) 19 (C.A.), at p. 27. As Morden J.A. said at p. 777 in Niagara Structural Steel:
[R]esort should only be had to the exception where, after giving proper weight to the policy of the general rule, and the importance of reasonable predictability and the even application of the rule, the interests of justice require a departure.
[20] The Court of Appeal in Niagara Structural Steel (St. Catharines) Ltd. v. W.D. Laflamme Ltd. (1987), 1987 4149 (ON CA), 58 O.R. (2d) 773 (C.A.) highlighted the reasons for generally following Rule 49.1 in stating:
[I]t is reasonable to assume that the occasions for the application of the exception should not be so widespread or common that the result would be that the general rule is no longer, in fact, the general rule. If this were to happen, the presumption in favour of the general rule and the resulting reasonable degree of predictability respecting the incidence of costs would disappear and the incentive policy of the rule would be substantially frustrated. Another consequence would be a more uneven application of the rule in litigation generally.
[21] In Serra v. Serra (2009), 2009 ONCA 395, 66 R.F.L. (6th) 40, at p. 42, the Court of Appeal stated the principles that surround modern costs awards as set out in Fong v. Chan (1999), 1999 2052 (ON CA) at para. 22:
(1) to partially indemnify successful litigants for the costs of litigation;
(2) to encourage settlement; and
(3) to discourage and sanction inappropriate behaviour.
[22] In this case, the actions of the Defendants, both in the action itself and in the litigation, were fraudulent and such conduct must be discouraged.
[23] In Mete v. Guardian Insurance Co. of Canada (1998), 1998 7177 (ON CA), 165 D.L.R. (4th) 457, [1998] O.J. No. 3836 (ONCA), the Ontario Court of Appeal upheld a Judges exercise of discretion in not making a costs award according to Rule 49 where the dishonesty of the Plaintiff who had made the Rule 49 offer, significantly lengthened the trial and increased costs for all parties. The Court of Appeal stated at para. 19:
I note that it was not merely negative findings of credibility against the plaintiff which caused the learned trial judge to make the award he did. Rather, the plaintiff was shown to have acted dishonestly in many respects, which made his every assertion and claim suspect and worthy of challenge. The trial judge found that the plaintiff Vincent Mete was “blatantly dishonest”.
[24] In David Polowin Real Estate Ltd. v. Dominion of Canada General Insurance Co, 2008 ONCA 703, [2008] O.J. No. 3997 the Court of Appeal stated at para. 32:
Courts will generally exercise their discretion to award costs against a successful party only in exceptional cases. Exceptional cases may include misconduct on the part of the successful party. See Wismer v. Javelin International Ltd. (1992), 1982 1891 (ON SC), 38 O.R. (2d) 26 (H.C.J.) at 34.
[25] In this case the Defendant lied and stole. His conduct was fraudulent. The tragedy of this case was that the proper action and proper parties were not before the Court. In ordering costs against the Defendants, despite the Rule 49 offer and success in the litigation, I would not be running contrary to the general warning by the Court of Appeal in Niagara Structural Steel.
[26] These facts and findings are unusual and are not of the common type that would cause the general rule for Rule 49 costs order to be made. In addition I am exercising the court’s discretion in sanctioning the conduct of the Defendants.
[27] I, therefore, exercise my discretion and award costs against the Defendants on a partial indemnity basis in the amount of $40,000.
M. J. Donohue, J.
DATE: August 14, 2015
COURT FILE NO.: CV-11-1830-SR
DATE: 2015-08-14
SUPERIOR COURT OF JUSTICE – ONTARIO
RE: Sofia Oliveira and Frederick Kurz v. Akbar Zareh and Maxcom Realty Inc. o/a Kingsway Real Estate Brokerage
BEFORE: M.J. Donohue, J.
COUNSEL: Robert Kostyniuk, for the Plaintiffs
Alex Valova, for the Defendants
COSTS ENDORSEMENT
M.J. Donohue, J.
DATE: August 14, 2015