COURT FILE NO.: CV-07-0390-00
DATE: 2015 12 03
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
1442810 ONTARIO INC.
John R. Hart, for the Plaintiff
Plaintiff
- and -
DALJIT S. SAROHIA, PARMIT K. PARHAR, ALSO KNOWN AS PARAMJIT J. PARAIHARI AND DALCAN ENTERPRISES INC.
Cameron R. B. Fiske, for Daljit S. Sarohia and Dalcan Enterprises Inc.
Vipin Sharma, for Parmit K. Parhar
Defendants
AND BETWEEN:
DALJIT S. SAROHIA, PARMIT K. PARHAR, ALSO KNOWN AS PARAMJIT J. PARAIHARI AND DALCAN ENTERPRISES INC.
Plaintiffs by Counterclaim
- and -
1442810 ONTARIO INC., AHMED MANSURY, BALJIT S. GILL, RE/MAX REALTY
Ron E. Folkes, for Baljit S. Gill and RE/MAX Realty
Defendants by Counterclaim
COSTS ENDORSEMENT
EMERY J.
[1] When it started this action, all 1442810 Ontario Inc. (formerly Red Apple Convenience Inc.) wanted was payment in the amount of $66,383.84 plus interest from Dalcan Enterprises Inc. (“Dalcan”) for the balance of the purchase price Dalcan had promised to pay for the purchase of the assets of the Red Apple Convenience Store in Mississauga, Ontario.
[2] Dalcan and its principals Daljit Sarohia and Parmit Parhar had given 1442810 Ontario Inc. (“1442810”) a promissory note as evidence of their indebtedness to pay that balance, with interest, within one year of Dalcan’s purchase of those assets in October 2005. That payment was never received.
[3] Unfortunately for all concerned, not only did Dalcan, Mr. Sarohia and Ms. Parhar refuse to pay 1442810 under the promissory note, they defended the action alleging false misrepresentations made by Ahmed Mansury, the sole principal of 1442810, and brought a counterclaim to set aside the transaction and to claim damages in excess of the purchase price alleging fraud and other wrongful conduct against 1442810 and Mr. Mansury.
[4] In the course of the litigation, Dalcan, Mr. Sarohia and Ms. Parhar also joined Baljit Gill and his broker, Remax Realty, to the counterclaim, alleging negligence and other causes of action as against them to seek damages.
[5] The court has granted judgment to 1442810 on its claim for payment of the promissory note plus interest, and dismissed the counterclaim against 1442810 and Mr. Mansury (the “144 parties”) as well as against Mr. Gill and Remax Realty (the “Gill parties”). All of those parties now seek their costs of the action and counterclaim.
[6] I have received the cost submissions from Mr. Hart on behalf of the 144 parties and from Mr. Folkes on behalf of the Gill parties. The 144 parties seek their costs on a substantial indemnity basis for obtaining judgment in the action and for dismissal of the counterclaim. The Gill parties also seek costs on a substantial indemnity basis for successfully defending the counterclaim.
[7] Despite the similar positions taken by the 144 parties and the Gill parties in the action, the 144 parties have a different legal basis to seek costs and I shall address their claim for costs first.
The 144 Parties Claim for Costs
Entitlement
[8] There is no reason to depart from the normal rule that costs follow the event and that the losing party to an action pay costs to the successful party: Bell Canada v. Olympia and York Developments Ltd. (1994), 17 O.R. (3d) 138 (Ont. C.A.).
Level of Costs
[9] The 144 parties seek their costs of the action on a substantial indemnity basis for two reasons. First, 1442810 relies upon an offer to settle that was served on the defendants on or about April 24, 2013, in which it agreed to accept the total sum of $85,000, inclusive of interest, in complete and final satisfaction of the promissory note. This offer to settle further stated that 1442810 would accept costs as agreed upon by counsel, or as assessed on a partial indemnity basis.
[10] 1442810 acknowledges that it has the onus under Rule 49.10 of proving that the terms of the offer to settle were more favourable than the judgment obtained. Mr. Hart has provided a calculation in the submissions of the 144 parties that the interest accruing between October 3, 2005 and October 4, 2011 at the simple interest rate of 5% per year amounts to $19,915.15, notwithstanding the terms of the promissory note that interest would run at the rate of 5% simple interest for one year, following which interest would be compounded monthly, not in advance. The total owing under the promissory note as at October 4, 2011 calculated on this basis would therefore be $86,298.99, not including costs.
[11] Mr. Hart also submits that costs would be a “non-factor” as a court would likely award 1442810 its costs on a partial indemnity basis if judgment on the promissory note were granted.
[12] Mr. Hart therefore submits that 1442810 has satisfied the burden of proof of establishing that its offer to settle dated April 24, 2013 contained terms more favourable than the amount awarded at trial.
[13] In exercising my discretion to award costs in any proceeding under section 131 of the Courts of Justice Act, I am to consider any offer to settle in addition to the factors set out under Rule 57.01. In addition to the offer to settle made by 1442810 dated April 24, 2013, Mr. Hart refers to an offer to settle made by 1442810 to accept payment of $65,000 on February 4, 2011, all inclusive, to completely settle the action. 1442810 retendered that offer on May 17, 2011. The defendants rejected that offer to settle on May 20, 2011.
[14] Mr. Hart further submits that an offer to settle was made at a pretrial conference before Justice Wilcox on September 26, 2012. At that pretrial conference, the defendants indicated they would accept a return of 50% of the $100,000 paid into court to discharge the security interest of 1442810 when Dalcan had sold the Red Apple Convenience store in May of 2010. In response, 1442810 offered to provide the defendants with $40,000 of the amount held in court, with 1442810 to receive the balance of funds.
[15] In addition to this offer, the Gill parties offered to contribute $2,500 as a payment to Mr. Sarohia and Ms. Parhar. This would have amounted to a recovery by the defendants of $42,500 and would have saved them the risk and expense of trial. According to the costs submissions made by 1442810, Mr. Sarohia personally indicated to Justice Wilcox that he was not prepared to settle and that he wanted a trial.
[16] The most recent offer to settle dated April 24, 2013 was never revoked. Therefore, I consider it to be the offer to settle made by the plaintiff in writing open at the time the trial of this action commenced on September 9, 2014.
[17] I am persuaded that 1442810 obtained a result at trial in the form of judgment on its promissory note against all defendants, plus interest, that was more favourable than the terms of its offer to settle dated April 24, 2013. Since the defence of the defendants to the promissory note action was intertwined with the claims made on their counterclaim, Mr. Mansury was required to defend those claims at great expense. He was completely vindicated when the counterclaim was dismissed against him as well as 1442810. I therefore consider that 1442810 is entitled to its costs of the action on a substantial indemnity basis, and that both 1442810 and Mr. Mansury are entitled to their costs to defend the counterclaim on a substantial indemnity basis for being completely successful on having the counterclaim dismissed.
[18] The second ground that 1442810 and Mr. Mansury advance to seek costs on a substantial indemnity basis involves the defendants’ allegations made in the statement of defence and their counterclaim of fraudulent conduct against 1442810 and Mr. Mansury. I made findings of fact in paragraphs 106 to 131 of my Reasons for Judgment and concluded at paragraph 132 that “upon review of all the evidence, I find that there has been no fraudulent misrepresentation or negligent misrepresentation made by Mr. Mansury to Dalcan Enterprises”.
[19] In DiBattista v. Wawanesa Mutual Insurance Company 2005 CanLII 41985, Justice Coats provided a concise review of the case law that supports the principle that costs should be awarded on a substantial indemnity basis where a party has made unfounded allegations of fraud, dishonesty or other improper conduct that is serious prejudicial to the character or reputation of the other party. Justice Coats stated that:
[5] I have reviewed the case law submitted by counsel and am satisfied that costs should be awarded on a substantial indemnity basis where unfounded allegations of a fraud or dishonesty or other improper conduct seriously prejudicial to the character or reputation of the party are made (131843 Canada Inc. v. Double "R" (Toronto) Ltd., [1992] O.J. No. 3879, 7 C.P.C. (3d) 15 (Gen. Div.); Bisyk (No. 2) (Re) (1980), 1980 CanLII 1843 (ON SC), 32 O.R. (2d) 281 (H.C.J.); Unisys Canada Inc. v. York Three Associates Inc., [2000] O.J. 3622, 100 A.C.W.S. (3d) 31 (S.C.J.), affd 2001 CanLII 7276 (ON CA), [2001] O.J. No. 3777, 150 O.A.C. 49 (C.A.); Mele v. Thorne Riddell (1997), 1997 CanLII 12124 (ON SC), 32 O.R. (3d) 674, [1997] O.J. No. 443 (Gen. Div.); Toronto-Dominion Bank v. Berthin, [1994] O.J. No. 2590 (Gen. Div.)). I have considered both the allegations made and the evidence adduced in the course of the trial by the plaintiffs against all defendants. This went well beyond the questioning of credibility or presenting their case vigorously.
[20] I consider the allegations made by Mr. Sarohia of fraudulent, dishonest or other improper conduct against Mr. Mansury in this action were not only unfounded, but arbitrary and made to unfairly impair Mr. Mansury’s position at trial. Mr. Sarohia made allegations that Mr. Mansury misrepresented the sale of the Red Apple Convenience Store to him and that a significant portion of the store inventory purchased by Dalcan was missing or damaged.
[21] Mr. Sarohia went further and testified that Mr. Mansury manufactured the agreement of purchase and sale with Mr. Pravin Chandra in May of 2005 to artificially establish the purchase price he would accept for the Red Apple Convenience store. Mr. Sarohia was given an opportunity to confirm or to retract that position at trial. Despite having that opportunity, Mr. Sarohia remained steadfast in alleging that Mr. Mansury had conducted himself fraudulently by constructing this artifice without giving any evidence to support his allegations.
[22] I find that the claim Mr. Sahoria advanced against Mr. Mansury alleged fraudulent conduct of an intentional nature, and that he knew or ought to have known that alleging conduct of this nature would be or could be seriously prejudicial to Mr. Mansury’s reputation or character.
[23] Counsel for Dalcan and Mr. Sarohia rely upon Opfermann v. Taylor et al [2014] ONSC 2723 to distinguish the facts of this case from those decisions where unfounded allegations of fraudulent misrepresentation or conduct were not made out at trial to justify substantial indemnity costs. Counsel for Dalcan and Mr. Sarohia argue that Mr. Justice Mew in Opfermann ordered only personal indemnity costs against Taylor because he alleged that the adverse party was liable for act of non-disclosure, which is a form of recklessness (at paragraphs 149-152).
[24] Mr. Fiske argues that Justice Mew ordered partial indemnity costs payable by Taylor despite finding that Taylor was liable in civil fraud, because of the finding by the court that his conduct took the form of reckless and not intentional. Mr. Fiske seeks to apply this principle to the facts at hand by stating that Dalcan and Mr. Sarohia asserted at trial that Mr. Mansury’s fraudulent actions were reckless and not intentional when they were made. I disagree with the defendants’ submissions for the reasons set out above.
[25] I therefore find that Mr. Mansury is entitled to his costs for defending the counterclaim on a substantial indemnity basis.
Quantum
[26] This was an action commenced in 2007 to recover judgment on a promissory note in the amount of $66,383.84. After seven years of litigation and 12 days of trial in which the defendants insisted on litigating every issue pleaded in the initial statement of defence and counterclaim and in the fresh as amended statement of defence and counterclaim subsequently delivered by Dalcan and Mr. Sarohia, costs have spiraled out of control.
[27] Mr. Fiske states in paragraph 11 of the written submissions made on behalf of Dalcan and Mr. Sarohia that “the hours submitted by counsel for the plaintiff and the defendants by counterclaim appear to be only slightly excessive.” He submits that the time of junior counsel for each of the defendants to the counterclaim should be omitted and that Dalcan and Mr. Sarohia and Ms. Parhar had only one counsel each at any given time.
[28] Mr. Fiske also argues that Dalcan should be ordered to pay all of the costs awarded on the counterclaim. This ignores the fact that all three of the parties who defended the action also made the counterclaim against the expanded field of defendants to the counterclaim that included Mr. Mansury, Mr. Gill and Remax Realty. Therefore, the counterclaim and the resulting liability for costs is of their own making.
[29] I am also directed by Rule 1.04(1.1) to make orders when applying the rules that are proportionate to the importance and complexity of the issues, and to the amount involved in the proceeding. This direction would apply to the exercise of my discretion based on the factors set out in rule 57.01(1).
[30] While I recognize the amount claimed in the action amounted to $66,383.84 may seem disproportionate to the costs claimed by 1442810, the rule speaks of the amount involved in the proceeding, which I take to be both the action and counterclaim. On the combined claim of the plaintiffs’ action for payment of $66,383 under the promissory note and the counterclaim for damages of at least $410,000, the costs claimed by 1442810 and Mr. Mansury are proportionate to the combined amount of $476,383 involved in the proceeding.
[31] I also find that the proliferation of the causes of action advanced on the counterclaim justify a senior counsel as well as an associate counsel to represent each of the 144 parties and the Gill parties up to and including trial.
[32] I have considered the applicable factors under rule 57.01(1). Having regard to those factors, I see no reason to award less than the costs claimed in the amount of $115,530.26 by the 144 parties for the action and to defend the counterclaim. I find the fee component to be fair and reasonable in view of any explanation by Dalcan or Mr. Sahoria about how the hours submitted for Mr. Hart and Ms. Lidakis are “slightly excessive”. Mr. Hart’s hourly rate of $350 as a senior trial lawyer with a 1982 call, the rate of $200 an hour for Ms. Lidakis who was called to the bar in 2009, and the disbursements of $5,575.61 are all reasonable. 1442810 and Mr. Mansury are therefore awarded their costs on a substantial indemnity basis for the action and for defending the counterclaim in the amount of $115,530.26.
The Gill Parties Claim for Costs
Entitlement
[33] The Gill parties were entirely successful on defending the counterclaim. They are entitled to their costs.
Level of Costs
[34] I was not provided with any information about an offer to settle that the Gill parties made to any or all of the defendants and plaintiffs by counterclaim except for an offer to settle, as amended and served on August 26, 2013, where they agreed to contribute $10 with respect to damages and costs on the counterclaim.
[35] In my respectful view, an offer on these terms was tantamount to the proverbial offer of a defendant to agree to a dismissal of the action without any contribution whatsoever, without costs. Therefore, the dynamics discussed in the Court of Appeal decisions Scapillati v. A. Potuin Construction Ltd. (1999), 1999 CanLII 1473 (Ont. C.A.) and Schwark v. Cutting, 2010 ONCA 299 would apply here.
[36] In Scapillati and Schwark, the Court of Appeal observed that Rule 49.10 does not address a situation where an offer is served by a defendant who is entirely successful in having the action dismissed. The rule has no application in cases where the plaintiff fails to recover judgment. That said, the Court of Appeal has found that the factors set out under Rule 57.01 which I am to consider together with any offer to settle made, along with Rule 49.13 that allows me to take into account any offer to settle made in writing, are applicable when exercising my discretion as to costs.
[37] In Davies v. Clarington (Municipality) 2009, 2009 ONCA 722, Justice Epstein for the court directed that exercise of discretion when fixing costs must be on a principled basis. The court has set a high standard for the awarding of costs at an elevated level apart from any case that falls within Rule 49.10 in the following way:
[40] In summary, while fixing costs is a discretionary exercise, attracting a high level of deference, it must be on a principled basis. The judicial discretion under rules 49.13 and 57.01 is not [page77] so broad as to permit a fundamental change to the law that governs the award of an elevated level of costs. Apart from the operation of rule 49.10, elevated costs should only be awarded on a clear finding of reprehensible conduct on the part of the party against which the cost award is being made. As Austin J.A. established in Scapillati, Strasser should be interpreted to fit within this framework -- as a case where the trial judge implicitly found such egregious behaviour, deserving of sanction.
[38] I note my observation in paragraph 148 of the Reasons for Judgment that Justice Baltman in 1505986 Ontario Inc. v. Surma, 2010 ONSC 3907, discussed the risk a dual agent is exposed to when acting for both sides to a transaction, a risk that Mr. Gill would have or should have fully appreciated and willingly took. I also note my finding in paragraph 156 of the Reasons for Judgment that Mr. Gill failed to provide a certificate signed by Mr. Mansury, and that he did not obtain a written waiver signed by an officer or director of Dalcan to that disclosure under section 33 of the Real Estate and Business Brokers Act. Although he suffered no sanction for that omission or failure to comply with his statutory duty, neither should he be rewarded.
[39] In accordance with the articulation of those principles by Justice Epstein in Davies v. Clarington, I conclude that the Gill parties are entitled to their costs but on a partial indemnity basis only. I reach this conclusion as Dalcan and Mr. Sarohia were not found responsible for reprehensible conduct or egregious behaviour directed towards the Gill parties that would warrant the sanction of the court by an award of costs at a higher level.
Quantum
[40] I find the costs claimed for Mr. Folkes as a senior counsel at the bar having been called in 1974, and for his associate, A. Ricky Rye, who was called to the bar in 2012, for total fees, disbursements and HST on a partial indemnity basis totalling $60,047.28 to be reasonable and fair.
Costs Ordered
[41] I therefore award costs to 1442810 and Mr. Mansury in the amount of $115,530.26 on a substantial indemnity basis, and costs to Baljit Gill and Remax Realty in the amount of $60,047.28 on a partial indemnity basis, payable by Dalcan Enterprises Inc. and Daljit S. Sarohia, jointly and severally.
[42] I make no order as to costs against Parmit K. Parhar as all claims against her have been stayed by her assignment in bankruptcy under section 69(1) of the Bankruptcy and Insolvency Act, RSC 1985, ch. B-3.
EMERY J.
Released: December 3, 2015
COURT FILE NO.: CV-07-0390-00
DATE: 2015 12 03
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
1442810 ONTARIO INC.
Plaintiff
-and-
DALJIT S. SAROHIA, PARMIT K. PARHAR, ALSO KNOWN AS PARAMJIT J. PARAIHARI AND DALCAN ENTERPRISES INC.
Defendants
AND BETWEEN:
DALJIT S. SAROHIA, PARMIT K. PARHAR, ALSO KNOWN AS PARAMJIT J. PARAIHARI AND DALCAN ENTERPRISES INC.
Plaintiffs by Counterclaim
-and-
1442810 ONTARIO INC., AHMED MANSURY, BALJIT S. GILL, RE/MAX REALTY
Defendants by Counterclaim
COSTS ENDORSEMENT
EMERY J.
Released: December 3, 2015