CITATION: 1056949 Ontario Ltd v. City View Platers Inc., 2016 ONSC 1880
COURT FILE NO.: CV-09-4992-SR
DATE: 2016 03 16
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: 1056949 ONTARIO LTD. v. CITY VIEW PLATERS INC. AND CVPI HOLDINGS INC.
BEFORE: EMERY J.
COUNSEL: S. Werbowyj, for the Plaintiff
J. Kulathungam, for the added party on motion, Kamal Bharadwaj
S. Rasul, for the Corporate Defendants (moving parties)
HEARD: September 4 and October 9, 2015
ENDORSEMENT
[1] When I dismissed the motion of the defendant corporations on January 29, 2016 at 2016 ONSC 269, I invited the parties to make written submissions if costs were requested. I have now received the written submissions of Mr. Werbowyj on behalf of the plaintiff seeking costs on a partial indemnity basis in the amount of $43,692.13, and on a substantial indemnity scale in the amount of $65,894.37.
[2] Mr. Werbowyj also submits that as Mr. Rasul obtained authority from the court to proceed with the motion to set aside the two judgments against the defendant corporations, he should bear responsibility for costs personally.
[3] Mr. Kulathungam seeks costs on behalf of the added party, Kamal Bharadwaj, in the amount of $37,853.82 on a partial indemnity basis, and costs on a substantial indemnity scale in the amount of $46,871.22. It would appear that Mr. Bharadwaj seeks costs personally against Mr. Rasul as well.
[4] Mr. Rasul filed costs submissions on behalf of the defendant corporations. It is not clear if he is seeking costs for the motion under Rule 57.01(2) notwithstanding the defendant corporations were the unsuccessful parties. The costs submissions of the defendant corporations are primarily directed to allegations of misfeasance against Mr. Bharadwaj, and not necessarily the plaintiff. According to the costs submissions of the defendant corporations, Mr. Rasul has “invested” $70,000 in legal fees to seek an order setting aside the default judgments.
[5] The plaintiff seeks costs as the successful party. In civil actions in Ontario, costs generally follow the event, and the successful party is generally awarded costs payable by the unsuccessful party. Costs are in the discretion of the presiding judge pursuant to the authority given under s. 131(1) of the Courts of Justice Act. While this discretion is far-reaching, s. 131(1) states that this authority is subject to an act or the rules of court, which invokes the guidance of the factors given under Rule 57.01(1) and, if applicable, any other subrule under Rule 57.01.
[6] I do not consider the defendant corporations to be entitled to costs as the unsuccessful parties. Therefore, costs are awarded to the plaintiff as the successful party: Bell Canada v. Olympia and York Developments Ltd. (1994), 1994 239 (ON CA), 17 O.R. (3d) 135 (Ont. C.A.).
[7] The plaintiff states that the defendant corporations were unsuccessful on their argument that there was evidence of an agreement to restrict the damages claimed by the plaintiff in each action. The plaintiff repeated its position that there was no agreement directly or indirectly with either defendant corporation, and made the submission that the motions of the defendant corporations were part of a plan to “scoop the insurance proceeds”. The plaintiff states that it has been put to significant expense by Mr. Rasul to respond to this motion. The plaintiff argues that the financial consequences should be borne by Mr. Rasul as the director who had obtained authority to act for the defendant corporations to continue the motions.
[8] The plaintiff seeks costs against the defendant corporations and against Mr. Rasul personally on a substantial indemnity basis. The law is clear about the requirements to award costs on an elevated basis. The scope of discretion for the court to exercise was articulated by the Court of Appeal in Davies v. Clarington (Municipality), 2009 ONCA 722 at paragraph 40 as follows:
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 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.
[9] The Court of Appeal in Toronto Star newspapers Ltd. v. Fraleigh, 2011 ONCA 555, affirmed the principle in Davies that elevated costs can only be justified in two circumstances: where there is an offer to settle that applies, or where there has been a “clear finding” of reprehensible conduct by the party against whom costs are sought. The requirement to find such conduct before elevated costs are to be considered can be traced back to the founding of that principle in Young v. Young, 1993 (S.C.C.) and Mortimer v. Cameron, 1993 563 (Ont. C.A.).
[10] While I might have grounds to consider reprehensible or egregious conduct having regard to the history of this motion on the part of Mr. Rasul as against Mr. Bharadwaj, the same cannot be said of the allegations he has made and in his submissions on costs as against the plaintiff. I therefore find there to be no basis on which to conclude that the defendant corporations have acted in a reprehensible or egregious manner to entitle the plaintiff to costs on a substantial indemnity basis, or on any other elevated level.
[11] I turn next to the factors set out under Rule 57.01(1). The motion was argued over the span of one-and-a-half days. The plaintiff submits that the issues were factually complex and legally sophisticated. The issues required numerous pleadings, cross-examinations and court appearances to obtain the orders over the four years it took to have the motion heard. The outcome of the motion was clearly important to each of the parties. This is especially the case for the plaintiff which had already received the payment of the remaining $608,000 out of court pursuant to Justice Lemon’s order in July 2015.
[12] When I review the costs outline filed by Mr. Werbowyj on behalf of the plaintiff, I am mindful that any award of costs must be fair and reasonable.
[13] The notions of fairness and reasonableness for a costs award are embedded in the common law. More to the point, the court held in Boucher et al. v. Public Accountants Council for the Province of Ontario et al., 2004 14579 (ON CA), [2004] 71 O.R. (3d) 291 (Ont. C.A.) that costs awards should reflect what the court views as a fair and reasonable amount that should be paid by an unsuccessful party rather than an exact measure of the actual costs incurred by the successful party. In Zesta Engineering Ltd. v. Cloutier, 2002 25577 (ON CA), [2002] O.J. No. 4495 (Ont. C.A.) the court also directed trial courts to consider what an unsuccessful party could reasonably expect to pay as a measure of what would be fair and reasonable for a costs award.
[14] When I review the costs outline of Mr. Werbowyj filed on behalf of the plaintiff, I am reminded that he was required to attend on several motions since the defendant corporations brought the first motion to set aside the default judgments in April 2012. However, some of the motion preparation for which 37.6 hours is claimed was likely redundant even though I have no doubt Mr. Werbowyj had to prepare repeatedly. The complication is the fact that the amount of preparation claimed makes the cost of preparing for the motion unwieldy. The excessive preparation time unfortunately results in a claim for preparation time that may be considered unreasonable when viewed objectively. I therefore reduce that preparation time by half.
[15] I also reduce the counsel fee for attending on the motions on July 9, 2015 as that related to obtaining payment out of court from Justice Lemon, and for attending in court on August 7, 2015, August 28, 2015, September 4, 2015. I make this adjustment as the costs for those three attendances were also claimed under the time claimed for the motions described on page four of the costs outline.
[16] I therefore reduce the claim for partial indemnity costs for fees in the amount of $38,030 to $24,000, plus $3,120 for HST. In addition, I award $718.23 for disbursements including HST. The plaintiff is therefore awarded costs in the total amount of $27,838.23 against the defendant corporations, jointly and severally.
[17] I do not consider the law to give the plaintiff the right to seek costs personally against Mr. Rasul. I do not see such authority under s. 246 of the Business Corporations Act even though Justice Price granted Mr. Rasul the ability as a complainant to continue the motions to defend each of the plaintiff’s actions.
[18] I note that Mr. Kulathungam made reference to the decision of the Supreme Court of Newfoundland and Labrador, Trial Division, in NPV Management Ltd. v. Anthony et al (No. 2), 2007 NLTD 61 as authority to recover costs against Mr. Rasul personally had those costs been awarded. In NPV, Justice Faour exercised the broad discretion given to the court under s. 53 of the Judicature Act that is similar to s. 131(1) of the Courts of Justice Act in Ontario. The court in NPV considered costs in the context of an action where the Statement of Claim had been struck because the claim was, at its essence, a derivative claim for which leave had not been sought. The plaintiff had commenced a new action which had been struck on the basis of res judicata.
[19] Justice Faour found the principles on a motion for security for costs to be analogous to the circumstances of the claim for costs before him. In NVP, the defendants had argued that the plaintiff was impecunious and could not satisfy an award, and that the true beneficiaries of the action should bear the responsibility and risk of proceeding with the action. While Justice Faour observed that normally the court will not look to the principals behind a corporate litigant to pay or post security for costs, he recognized that the court has the ability to do so: Maple Leaf Foods Inc. v. North Atlantic Sea Farms Corp. 2005 Carswell NFLD 42.
[20] I know of no Ontario authority that would allow me to award costs against Mr. Rasul personally just because he obtained permission from the court to continue a motion on behalf of a corporate defendant. I note that Justice Faour made reference in NVP to the decision of Justice Mesbur in Mega Blow Moulding Ltd. v. Sarantos, 2001 28374 (ON SC), 2001 CarswellOnt. 3021. In that case, the articles of a plaintiff corporation required at least two directors for a quorum. Accordingly, the resolution of only a single director could not be said to properly authorize the commencement of the subject action.
[21] In Mega Blow Mouldings, the defendants were seeking an order for security for costs, and costs of a motion for an interlocutory injunction the plaintiff corporation had brought and abandoned. Justice Mesbur declined to make an order against the individual behind the plaintiff’s action personally as he was not a shareholder, officer or director of the plaintiff and was not separately represented before the court. Justice Mesbur stated that, under those circumstances, it would be patently unfair that a costs order be made against an individual without his having a reasonable opportunity to make submissions.
[22] Mr. Bharadwaj adopts the plaintiff’s submissions. He repeats the position that Mr. Rasul was acting with ulterior motives to protect his own interest and that he was not acting altruistically to represent the best interests of the corporations to meet his fiduciary duty as an officer and director. Mr. Bharadwaj also refers to the allegations of fraud and conspiracy made against him in the costs submissions filed by Mr. Rasul on behalf of the defendant corporations. Mr. Bharadwaj states that this is sufficient to entitle him to costs on a substantial indemnity basis, and for the court to make those costs payable by Mr. Rasul personally.
[23] I consider that it would be unfair to make a costs award against Mr. Rasul personally given that it was initially reasonable for him to make a motion to set aside the default judgments. Mr. Bharadwaj had not informed him as the other director that he had been served with statements of claim in 2012. Even though Mr. Rasul was a director of each defendant corporation, he was never put on notice that the adverse parties would seek costs against him personally.
[24] In paragraph 46 of the endorsement dismissing the motion, I note that Justice Price made an order to allow Mr. Bharadwaj to make submissions on that part of the motion to set aside the default judgments. Even though Mr. Bharadwaj brought a cross motion seeking intervener status, Mr. Bharadwaj was never actually named as an intervener and has never been a party to these proceedings. I also made reference in the endorsement to the fact that Mr. Rasul was never a party to either action.
[25] I therefore consider it inappropriate to award costs to Mr. Bharadwaj as he was only granted standing by Justice Price on April 4, 2014 to make submissions. It would appear he was never granted the right or status to participate in a comprehensive fashion as a party or as an intervener to entitle him to costs, or for that matter to attract costs consequences had the motion gone the other way.
Emery J
DATE: March 16, 2016
CITATION: 1056949 Ontario Ltd v. City View Platers Inc., 2016 ONSC 1880
COURT FILE NO.: CV-09-4992-SR
DATE: 2016 03 16
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: 1056949 ONTARIO LTD. v. CITY VIEW PLATERS INC. AND CVPI HOLDINGS INC.
COUNSEL: S. Werbowyj, for the Plaintiff
J. Kulathungam, for the added party on motion, Kamal Bhardwaj
S. Rasul, for the Corporate Defendants (moving parties)
ENDORSEMENT
EMERY J.
DATE: March 16, 2016