Superior Court of Justice – Ontario (Commercial List)
CITATION: MFC v. Mady Collier, 2016 ONSC 4182
COURT FILE NOS.: CV-15-10850-00CL CV-15-5209 CV-15-521418 CV-15-10882-00CL
DATE: 20160629
IN THE MATTER OF THE COMPANIES’ CREDITORS ARRANGEMENT ACT, R.S.C. 1985, C. C-36, AS AMENDED
AND IN THE MATTER OF A PLAN OF COMPROMISE OR ARRANGEMENT OF MADY COLLIER CENTRE LTD.
Applicant
Court File No.: CV-15-520917-CL
A N D B E T W E E N:
MFC Structures Limited
Plaintiff
– And –
Mady Collier Centre Ltd., Mady Contract Division Ltd., Mady Contract Division (2009) Ltd., Mady Development Corporation, David Mady, Gregory Puklica, Len Rosetto, Marko Juricic, Charles Mady, Jeffrey Slopen also known as Jeffrey Mark Slopen, Dennis Bacon, Randolph Kinat, Matt Jaecklein, Wolf von Teichman, Derek Sorrenti, and Olympia Trust Company in trust for Pasquale Zangari, David W. Yungblut, Sandra E. Erb, Balvinder Kaur, Murray Oliver, Jennifer A. Witzel, Clark Hortsing, Neil Guenther, Lisa Bursey, Mike Redman, Isaac A. Kuepfer, David Paff, Betty Scott, Christopher Mitchell, Kaloutee Ramcharran, Carl Ribey, David Whidden, and David Sorrenti as Trustee for David Doublilet, R.T. Consulting Inc., Laura Gina Vettese, Quincy Investments Ltd., Wayne Malott, Pieter van Baaren, Carol van Baaren, Glenn Snider, Carolyn Snider, Ruth Arlin, Nick Simone, Ali Asghar Jussain, 1225697 Ontario Ltd., Donald Paff, Gangia Mangal, Maureen Mearns, Mustak Alt, Sayed Jalees, Ursula Fret, Andrea Hanak,
Defendants
A N D B E T W E E N:
Dircam Electric Limited
Plaintiff
– And –
Mady Contract Division Ltd., et al.
Defendants
Court File No.: CV-15-521418
A N D B E T W E E N:
Dircam Electric Limited
Plaintiff
– And –
Mady Contract Division Ltd., Jade-Kennedy Development Corporation, 2305992 Ontario Inc., David Mady, Gregory Puklicz also known as Greg Puklicz Len Rosetto, Marko Jurcic, Charles Mady, Jeffrey Slopen also known as Jeffrey Mark Slopen, Dennis Bacon, Randolph Kinat, Matt Jaecklein also known as Matthew Jaecklein, and Wolf Von Teichman
Defendants
A N D B E T W E E N:
Court File No.: CV-15-10882-00CL
IN THE MATTER OF THE CONSTRUCTION LIEN ACT, R.S.O. 1990, c. C.30, AS AMENDED
AND IN THE MATTER OF AN APPLICATION MADE BY JADE-KENNEDY DEVELOPMENT CORPORATION FOR THE APPOINTMENT OF A TRUSTEE UNDER SECTION 68(1) OF THE CONSTRUCTION LIEN ACT, R.S.O. 1990, c. C.30, AS AMENDED
BEFORE: L. A. Pattillo J.
COUNSEL: Kevin D. Sherkin for the Moving Parties M. P. Gottlib for Respondents Charles Mady Sr., David Mady, Greg Puklicz, and Jeffrey Slopen and for proposed Respondents Charles Mady Jr., Pamela Mady, Carrie Mady and Jeffrey Bolton Rodney Godard for Respondents Mueller and Kersey David Taub and Ellad Gersh, for Vincenzo Petrozza, and Jawad Rathore Evert Van Woudenberg for Miller, Johnson, Penady (Barrie), and Penady (Stoney Creek)
COSTS ENDORSEMENT
Introduction
1On April 2, 2015, I released reasons for decision dismissing the motion of, among others, MFC Structures Limited (“MFC”) and Dircam Electric Limited (“Dircam”) (collectively the “Moving Parties”) for, among other things, a Mareva injunction (2015 ONSC 2111). At the conclusion of my reasons, I indicated that the Mareva defendants were entitled to their costs and, as none of them had provided costs outlines, invited written cost submissions. I have subsequently received cost submissions and cost outlines on behalf of the above noted defendants and the Moving Parties.
Background
2The Moving Parties are construction lien creditors of the Respondents Mady Collier Centre Ltd. (“MCCL”), Jade-Kennedy Development Corporation (“JKDC”) and 144 Park Ltd. (“144 Park”). All three companies are subject to court protection either pursuant to the Construction Lien Act, R.S.O. 1990, c. C.30 (the “CLA”) or the Companies Creditors Arrangement Act, R.S.C. 1985, c. C-36. They were part of a group of companies controlled and run by the Mady family (the “Mady Group”).
3Initially, the Moving Parties sought the Mareva injunction against 16 individuals and 39 corporations (the “Respondents”). Their motion record, which consisted of five volumes with over 2100 pages, was served on some of the Respondents late on March 26, 2015 and was initially returnable on March 27, 2015. The motion material made various allegations of breach of trust and fraud against the Respondents and particularly Charles Mady Sr., David Mady, Greg Puklicz, and Jeffrey Slopen as well as Charles Mady Jr., Pamela Mady, Carrie Mady and Jeffrey Bolton who they proposed be joined as Respondents (collectively the “Mady Respondents”) in respect of their involvement in MCCL, JKDC and 144 Park and other companies in the Mady Group. The Moving Parties further alleged the remaining Respondents had been part of the Mady Group’s alleged fraud.
4On March 27, 2015, the matter came before me. I directed that the motion material be served on the remaining Respondents and, given the allegations and the relief sought, that it be heard by me on March 31, 2015.
5At the outset of the motion on March 31, 2015, the Moving Parties advised that they were only seeking a Mareva against seven individuals and three companies: the Mady Respondents Charles Mady Sr., David Mady, Greg Puklicz, and Jeffrey Slopen; Jawad Rathore (“Rathore”) and Vincenzo Petrozza (“Petrozza”); Mady Contract Division Ltd., Mady Contract Division (2009) Ltd. and Mady Development Corporation.
6As noted, for reasons released April 2, 2015, I dismissed the Moving Parties motion. I found that, in addition to not establishing a prima facie case for breach of trust or fraud, the Moving Parties had not provided any evidence of dissipation of assets and had not made full and fair disclosure.
Cost Submissions
a) The Mady Respondents
7The Mady Respondents seek their costs on a substantial indemnity basis in the total amount of $72,651.94. They submit that substantial indemnity costs are warranted given that the Moving Parties advanced unfounded allegations of fraud and other improper conduct against them.
8They further submit, given the short notice and the focus of the allegations upon them, that they were forced to investigate and respond to the allegations raised by the Moving Parties within a very short time period requiring more resources. In response, the Mady Respondents filed the affidavit of Charles Mady Sr., which responded to the many allegations of wrongdoing. Their costs sought represent 90% of the actual hourly rates charged for the hours expended which they submit are reasonable given the seriousness of the issues and the short response time required.
9The Moving Parties submit that the Mady Respondents (and the other Respondents entitled to costs) should only be awarded costs on a partial indemnity basis. They submit that their motion, while unsuccessful, was not without merit and that therefore partial indemnity is both fair and reasonable and in accordance with the reasonable expectations of the parties. They submit that the evidence tendered was not complex and that they proceeded on the basis of a bona fide belief that trust funds had been diverted from MCCL to other Mady Group entities in violation of the CLA. They characterize the claim as a breach of trust claim rather than an allegation of fraud per se.
10The Moving Parties further take issue with the hours and rates charged by the counsel for the Mady Respondents and that they had to proceed “full out” for three days given that a lot of the evidence relied on by the Moving Parties came from Charles Mady Sr. in the related court protection proceedings. They submit the costs incurred by the Mady Group were excessive in the circumstances and not within the reasonable expectations of the Moving Parties whose costs for the motion on a substantial indemnity scale totaled $30,899.75.
11Finally, the Moving Parties submit that the matter of costs of the motion should await a determination of whether the Mady Respondents are successful in the related breach of trust actions as it is the alleged conduct in those actions that gave rise to the motion.
b) Rathore and Petrozza
12Rathore and Petrozza seek full indemnity costs of $36,047.51 (substantial indemnity of $31,842.06).
13Rathore and Petrozza are the CEO and COO respectively of Fortress Real Developments Inc. (“Fortress”) which has a long history of working with the Mady Group to develop land. The Moving Parties alleged that they were part of the Mady Group’s alleged fraud based on allegations they were directors of a couple of companies in the Mady Group. They also raised a prior unrelated Ontario Securities Commission (“OSC”) investigation involving the two individuals. Rathore and Petrozza filed affidavits in response denying any wrongdoing and explaining the business of Fortress.
14Rathore and Petrozza submit they are entitled to elevated costs based on the allegations of fraud against them without a “shred of evidence to substantiate the claim”. Further, the inclusion of their prior issues with the OSC which were totally unrelated to their dealings with the Mady Group, constitutes reprehensible conduct worthy of sanction: Cossette Communications Inc. v. Breton, (2011) CarswellOnt 14840 (Ont. S.C.J.) at para. 30.
15Rathore and Petrozza submit that the amount claimed is fair and reasonable given the seriousness of the relief sought, the nature of the allegations made against them and the compressed time frame.
16The Moving Parties submit they drew what they submit was a reasonable connection to Fortress, Rathore and Petrozza with respect to the diversion of trust funds. They take issue with the characterization that they engaged in a “smear” campaign against the Fortress defendants and distinguish Cossette on the basis of its facts. They also submit that the time and rates for the Fortress lawyers are excessive having regard to the circumstances of the case and are well beyond what the Moving Parties could reasonably have expected to pay if unsuccessful.
c) The Penady Respondents
17Glenn Miller, David Johnson, Penady (Barrie) Ltd., Penady (North Barrie) Limited and Penady (Stoney Creek) Ltd. (collectively the “Penady Respondents) seek their costs on a substantial indemnity basis in the total amount of $14,781.53. The Penady Respondents submit that the Moving Parties alleged serious misconduct against them which was entirely without basis and completely refuted by the affidavit of David Johnson.
18The Moving Parties state that on receipt of an unsworn copy of the Johnson affidavit, on March 30, 2015, they offered to withdraw the motion against Johnson and Miller upon receipt of a sworn copy of the affidavit. Counsel for the Penady Respondents did not respond and ultimately appeared at the motion on March 31, 2015. In the circumstances, they submit the Penady Respondents are not entitled to costs of their counsel’s attendance at the motion.
19Apart from the scale of costs claimed, the Moving Parties have raised no other issue with the Penady Respondents’ costs as claimed.
d) Mueller and Kersey
20Jonathan Mueller and Harold Kersey claim costs on a partial indemnity basis in the total amount of $2,679.88. The costs claimed relate to the review of the motion material and attendance at the motion. Mueller and Kersey filed no responding material.
21The Moving Parties submit that they did not proceed against them and made no submissions to the court concerning them and accordingly there is no basis for an order of costs in their favour. The Moving Parties further submit that Mueller and Kersey’s counsel consented to the withdrawal of the motion as against them on a without costs basis prior to the motion.
Discussion
22Given the nature of the relief sought, I do not consider that the issue of costs should be left to the conclusion of the breach of trust actions. The Moving Parties’ motion raised separate, standalone issues and the Responding Parties are entitled to receive their costs of the motion at this stage.
23The Moving Parties motion sought substantial and serious relief against the Respondents. In support of their claims, they made serious allegations of breach of trust and fraud against the Respondents and particularly the Mady Respondents and Rathore and Petrozza. In the end they were totally unsuccessful. They were unable to establish a prima facie case of fraud or breach of trust which they alleged. Further, I found that they failed to make full and fair disclosure in their motion material. In the circumstances, therefore, I conclude that this is a clear case for substantial indemnity costs.
24In respect of Rathore and Petrozza, I conclude they are entitled to full indemnity costs. In addition to asserting fraud against them without any basis, the Moving Parties raised prior issues they had with the OSC which I found were totally inappropriate and were raised to smear the two gentlemen. As a result, the Moving Parties conduct is sufficient to warrant full indemnity costs.
25I am also of the view that the Penady Respondents should receive their substantial indemnity costs as claimed. Given that the Moving Parties did not agree to withdraw their motion against the Penady companies, counsel was justified in attending the motion and the Penady Respondents should be compensated for such attendance.
26Finally, I have no issue with the time spent by counsel on behalf of their clients in responding to the Moving Parties’ motion as set out in the cost outlines. The issues were serious and complex and the time period to respond was compressed by the Moving Parties. In such circumstances, I recognize that counsel were faced with tight time pressures and need to expend significant resources to meet those time pressures.
27Although the amount of costs incurred are high, particularly in respect of the Mady Respondents, they were the main targets of the motion. The Moving Parties clearly should have realized that if they engaged in such a proceeding, alleging the type of wrongful conduct they did that the Respondents would respond and in so doing would incur substantial legal costs. In the circumstances, it cannot be said that such substantial costs could not have been within the Moving Parties reasonable expectations.
28In my view, the costs claimed by the Respondents are fair and reasonable in all the circumstances.
29Accordingly, for the above reasons, I order costs against the Moving Parties as follows, payable forthwith:
In respect of the Mady Respondents - $72,651.94
In respect of Rathore and Petrozza - $36,047.51
In respect of the Penady Respondents - $14,781.53
In respect of Mueller and Kersey, if counsel agreed to a withdrawal without costs in advance of the motion, they are not entitled to costs. If not, they are entitled to their partial indemnity costs of $2,679.88 as claimed. In the event counsel are unable to resolve the issue of whether there was an agreement between them as alleged by the Moving Parties, I can be spoken to.
L. A. Pattillo J.
Date of Release: June 29, 2016