Gauci v. Sharma, 2016 ONSC 1097

Court File and Parties

Citation: Gauci v. Sharma, 2016 ONSC 1097 Court File No.: CV-14-10713-00CL Date: 2016-02-16

Superior Court of Justice – Ontario Commercial List

Re: Stephen Gauci, Applicant And Surinder Sharma, Raj Sharma, Ajay Sharma, Raaj Investment Inc. and Jane Alliance Holdings Inc., Respondents

Before: Conway J.

Counsel: Ronald Birken, for the Applicant Mark A. Klaiman, for the Respondents

Application Heard: December 14-16, 2015

Costs Endorsement

[1]

Background

This was an Application and Counter-application between the shareholders of Jane Alliance Holdings Inc. ("Jane Alliance") seeking various forms of relief with respect to the corporation. Mr. Gauci sought a declaration that he was a 50% shareholder of the corporation and was entitled to $60,000 for his management services. He also sought an auction sale of the corporation's Jane Street property. Mr. Sharma sought a declaration that Mr. Gauci was solely responsible for a $1.5 million second mortgage granted by Jane Alliance and for two $100,000 advances made by Jane Alliance to Butler Finance Corporation. All of these issues had been directed to a trial.

2By Minutes of Settlement signed days before the trial, the parties resolved all of the issues except for (i) whether Mr. Gauci was responsible for payment of the $1.5 million second mortgage, with interest thereon; (ii) whether Mr. Gauci was responsible for repayment of the two $100,000 advances; and (iii) the costs of the Application. Mr. Gauci withdrew his claim for the 50% shareholding in Jane Alliance and proceeded on the basis that he was a one-third shareholder. He did not pursue the $60,000 in management services. The parties agreed to conduct an auction of the Jane Street property.

[3]

Entitlement and Scale of Costs

On the two issues that proceeded to trial, I found in favour of Mr. Gauci. He now seeks his costs of trial. I agree that he is entitled to his costs. However, he seeks costs on a substantial indemnity basis in the amount of $75,000, all-inclusive. He relies on the offers to settle exchanged – Mr. Gauci offered to sell his shares to Mr. Sharma for $3.5 million, while Mr. Sharma offered to purchase the shares for $500,000. I am not prepared to award costs on a substantial indemnity basis. There is no basis for this court to determine at this point what Mr. Gauci's shares are worth or whether the recovery for his shares will exceed the amount of his offer. That will only be known once the auction is conducted. Partial indemnity is the appropriate scale.

4Mr. Sharma submits that any costs awarded to Mr. Gauci must be discounted to account for the issues on the Application that Mr. Gauci withdrew just before trial. In particular, Mr. Sharma submits that a substantial amount of time and disbursements focused on Mr. Gauci's claim for a 50% shareholding in Jane Alliance. I note that the parties reserved the issue of costs for the whole Application, not just for the issues that proceeded to trial.

5I agree that Mr. Gauci should not be entitled to claim costs for the time spent with respect to these withdrawn issues and that any costs award in his favour should be discounted accordingly.

[6]

Quantum of Costs

In fixing costs, the objective is to fix an amount that is fair and reasonable for the unsuccessful party to pay.¹ I have considered the Rule 57.01(1) factors. With respect to the trial, it proceeded for three days, the amount at stake was high, there were somewhat complex factual issues (including issues of credibility), and the issues were significant to the parties in sorting out their respective interests in Jane Alliance. Mr. Gauci was entirely successful on the issues that proceeded to trial. However, as noted above, Mr. Gauci commenced the Application seeking, among other things, a 50% shareholding in Jane Alliance and, after legal time and expense was incurred, chose not to pursue that issue.

7Considering and balancing all of the above factors, I conclude that a fair and reasonable costs award is for Mr. Sharma to pay Mr. Gauci the sum of $30,000, all inclusive. That amount is payable to Mr. Gauci within 30 days.

Conway J.

Footnotes

1. 1Boucher v. Public Accountants Council (Ontario) (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291 (C.A.)