Court File and Parties

COURT FILE NO.: CV-16-320 DATE: 2016-07-25

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Nahil Riad, Alber Helmy El Neklawy and Afaf Shehata v. 1965789 Ontario Inc. and Soniya P. Jain

BEFORE: M. J. Donohue, J.

COUNSEL: John Sedrak, for the Plaintiffs Derek Ketelaars, for the Defendants

COSTS ENDORSEMENT

M.J. Donohue J.

[1] I reserved costs on the motion to set aside the noting of default and to answer the demand for particulars. This is my decision.

[2] The defendants’ counsel provided a costs outline of $9,028.27. He estimated that half of the costs related to the motion to set aside the noting of default and half of the costs related to the demand for particulars.

[3] As the successful party on both issues he sought substantial indemnity costs of just under $4,000 as against the plaintiff on the demand for particulars. He sought full indemnity costs as against the plaintiffs’ counsel, personally, on the motion to set aside the noting in default in the amount of $4,500.

[4] I will review the matter chronologically.

[5] On January 21, 2016, the Statement of Claim was issued and served.

[6] On February 11, 2016, defendants’ counsel wrote to say that they were retained by the defendants and requested that no action be taken without notice to them.

[7] Plaintiffs’ counsel argued that such a letter was meaningless. He stated that every counsel writes such letters and often they are not actually retained. I found this submission to be disturbing.

[8] On February 11, 2016, just seven days after defendants’ counsel’s letter, plaintiffs’ counsel proceeded to note the defendants in default. He did not advise defendants’ counsel before doing so. This is contrary to paragraph 19 of an Advocates’ Society publication entitled, The Principles of Civility for Advocates which has been endorsed by the Court of Appeal on several occasions: Male v. The Business Solutions Group, 2013 ONCA 382, 115 O.R. (3d) 359, at para. 19; Groia v. The Law Society of Upper Canada, 2016 ONCA 471, at para. 135; Chippewas of Mnjikaning First Nation v. Chiefs of Ontario, 2010 ONCA 47, 265 O.A.C. 247, at para. 235; Candito v. Nmezi, 2015 ONCA 793; Denomme v. McArthur, 2013 ONCA 694. Paragraph 19 reads as follows:

Conduct that Undermines Cooperation among Advocates

19. Subject to the Rules of Practice, advocates should not cause any default or dismissal to be entered without first notifying opposing counsel, assuming the identity of opposing counsel is known.

[9] On March 1, 2016, defendants’ counsel served a demand for particulars. Plaintiffs’ counsel did not advise the defendants’ counsel that they had been noted in default and also did not answer the letter. At the motion, plaintiffs’ counsel said he was relying on Rule 19.02(3), which provides that a party noted in default is not entitled to notice of any step in the action.

[10] However, Rule 7.2-2 of the Law Society of Upper Canada’s Rules of Professional Conduct states as follows:

7.2-2 A lawyer shall avoid sharp practice and shall not take advantage of or act without fair warning upon slips, irregularities, or mistakes on the part of other legal practitioners not going to the merits or involving the sacrifice of a client’s rights.

[11] On March 21, 2016, plaintiffs’ counsel sought default judgment from the registrar asserting that the claim was for a debt or liquidated demand in money. The registrar declined to sign as it was a judgment on damages. Plaintiff’s counsel still had not advised defendants’ counsel of the noting in default.

[12] On April 12, 2016, defendants’ counsel phoned and left voicemail messages with plaintiffs’ counsel. Plaintiffs’ counsel did not return the calls.

[13] On April 27, 2016, defendants’ counsel wrote asking for a reply to the March 1, 2016 demand for particulars and asking if plaintiffs’ counsel could confirm that he received the demand letter. Plaintiffs’ counsel did not reply to the letter.

[14] Rule 7.2-5 of the Rules of Professional Conduct states:

7.2-5 A lawyer shall answer, with reasonable promptness, all professional letters and communications from other legal practitioners that require an answer and a lawyer shall be punctual in fulfilling all commitments.

[15] On May 16, 2016, defendants’ counsel wrote asking for a reply to their March 1, 2016 demand for particulars, failing which they would consider a motion to strike the Statement of Claim for delay. Plaintiffs’ counsel did not reply to the letter.

[16] On May 24, 2016, plaintiffs’ counsel moved ex parte for an order to obtain default judgment. The materials that he filed did not mention the defendants’ letters or phone calls, other than the initial February 5, 2016 letter sent by the defendants’ counsel. At the motion, Woollcombe J. set the matter down for an uncontested trial.

[17] On May 25, 2016, plaintiffs’ counsel replied to the defendants’ correspondence and advised for the first time that the defendants had been noted in default.

[18] On May 27, 2016, defendants’ counsel wrote requesting the date that they were noted in default and inquiring whether it was after their notice letter of February 5, 2016. Defendants’ counsel advised he would be seeking costs on a motion to aside the noting in default. Plaintiffs’ counsel did not respond with the information requested about the date of noting in default.

[19] On May 31, 2016, plaintiffs’ counsel wrote, making a flippant remark and suggested that the defendants submit a defence, following which “then I will think about setting aside the default judgment.” Default judgment had not in fact be obtained. I expect he meant to refer to setting aside the noting in default.

[20] On June 3, 2016, plaintiffs’ counsel wrote saying, “Derek, stop giving excuses. On my route to default judgment the judge was provided a copy of your correspondence and simply laughed.” He demanded a defence before he would consent to setting aside the noting in default.

[21] On June 7, 2016, defendants’ counsel provided a streamlined demand for particulars.

[22] On June 9, 2016, plaintiffs’ counsel gave a Response to the Demand, which largely referred back to the Statement of Claim and gave no particulars.

[23] On June 13, 2016, defendants’ counsel served and filed the motion to set aside the noting in default and to answer the demand for particulars.

[24] On July 8, 2016, defendants’ counsel served a factum on plaintiffs’ counsel regarding the motion.

[25] On July 8, 2016, plaintiffs’ counsel wrote saying he was “puzzled why the defendants are bringing a motion.” He states that, “as for setting aside the noting of default, I’ve given you ample opportunity to provide a defence.”

[26] It appears that plaintiffs’ counsel did not appreciate that the defendant may not file a defence unless the noting in default is set aside. In addition, the defendants had served a demand for particulars on March 1, 2016, which had been ignored, and a streamlined demand on June 7, 2016, which was answered by making references to the Statement of Claim. Without particulars, the defendants were unable to provide the Statement of Defence.

[27] On July 12, 2016, defendants’ counsel wrote inquiring if the plaintiffs’ counsel was filing responding materials on the motion as the next day was the filing deadline. Plaintiffs’ counsel responded that he was “undecided”. He wrote, “Usually I like to sit it out at the hearing and appeal to the Divisional Court where I am more likely to be successful.”

[28] I find this to be a contemptuous communication by an advocate to another advocate indicating his willingness to abuse the court’s process.

[29] On July 13, 2016, plaintiffs’ counsel provided a consent to the setting aside of the noting in default and agreed to get detailed particulars.

[30] Defendants’ counsel replied that the motion would then proceed only with respect to costs. At the motion, he explained that he had already served all his materials including and the factum.

[31] In reply, plaintiffs’ counsel withdrew his consent as the defendants wanted to argue costs. Plaintiffs’ counsel also refused to consent to the late filing of the factum he had received on July 8, 2016.

[32] Rule 7.2-1.1 of the Rules of Professional Conduct states:

7.2-1.1 A lawyer shall agree to reasonable requests concerning trial dates, adjournments, the waiver of procedural formalities, and similar matters that do not prejudice the rights of the client.

[33] Later on July 13, 2016, plaintiffs’ counsel wrote stating, “As David (legal assistant) has stated we are no longer consenting on removal of the noting of default and I will be submitting later this afternoon the outstanding document to the Superior Court of Justice for the completion and granting of Default Judgment.”

[34] The pursuit of default judgment in the face of a motion by the defence to set aside the noting in default is sharp practice. It is also an abuse of court resources and time.

[35] On July 19, 2016, plaintiffs’ counsel appeared at the motion wherein his responding materials were his own affidavit sworn July 13, 2016 (although it also states sworn June 16, 2016, the affidavit refers to events after that date).

[36] Defendants’ counsel raised the issue that pursuant to Rule 5.2-1 of the Rules of Professional Conduct, a lawyer who appears as advocate shall not testify or submit their own affidavit evidence unless permitted to do so by law. Defendants’ counsel then waived his objection so that the matter could proceed. I note, however, that plaintiffs’ counsel did not recognize that this was a rule and simply told the court, “I’ve never had a problem before.” This is an indication that plaintiffs’ counsel is unschooled in the Rules of Professional Conduct.

[37] As a preliminary matter, before the motion proceeded, plaintiffs’ counsel still refused to consent to the filing of the factum and book of authorities, despite having been served some nine days before. I allowed both to be filed to assist the court.

[38] The motion was argued and the defendants were successful.

[39] At the conclusion of my Ruling, at the request of defendants’ counsel, plaintiffs’ counsel confirmed that he was discontinuing his motion for the uncontested trial for a default judgment.

Costs Re the Demand for Particulars

[40] The defendants were successful on their motion and sought substantial indemnity costs as against the plaintiffs. Costs normally follow the event. Costs normally are on a partial indemnity scale.

[41] I determined that the demand for particulars had not been satisfied and the plaintiffs were ordered to provide particulars.

[42] In that regard, there is nothing unusual or complex in this case. Costs on a substantial indemnity scale or full indemnity scale are reserved for rare and exceptional cases where the conduct of the party against whom costs is ordered is reprehensible or where there are other special circumstances that justify costs on the higher scale: see Fouldis v. Robinson (1978), 21 O.R. (2d) 769 (C.A.); Davies v. Clarington (Municipality), 2009 ONCA 722, 100 O.R. (3d) 66; Paul M. Perell & John W. Morden, The Law of Civil Procedure in Ontario, 1st. ed. (Toronto: LexisNexis, 2010), at p. 633 [Perell & Morden].

[43] There is nothing here other than the plaintiffs’ simple non-response to the demand for particulars. I order the plaintiffs to pay partial indemnity costs of $3,000.

Costs Re Setting Aside the Noting in Default

[44] Substantial or full indemnity costs are ordered where there is reprehensible conduct in the course of the proceedings or when a party has behaved in an abusive manner and run up the costs of litigation: see Davies; Perell & Morden, at p. 663.

[45] Rule 57.07 of the Rules of Civil Procedure provides that where a lawyer for a party has caused costs to be incurred without reasonable cause or to be wasted by undue delay, negligence or other default, the court may order the lawyer to personally pay the costs.

[46] In Gunggo Co. Ltd. v. Tieu et al., 2016 ONSC 438, Sutherland J. wrote the following, at paras. 47-48:

47 In the decision of Standard Life Assurance Co. v. Elliott, Justice Molloy reviews several cases dealing with Rule 57.07. In reviewing these cases Justice Molloy refers to the decision of Granger J. in Marchand (Litigation Guardian of) v. Public General Hospital Society of Chatham, at paragraph 115, where Granger J. states:

(a) ...Although "bad faith" is not a requirement to invoking the cost sanctions of Rule 57.07 against a solicitor, such an order should only be made in rare circumstance and such orders should not discourage lawyers from pursuing unpopular or difficult cases. It is only when a lawyer pursues a goal which is clearly unattainable or is clearly derelict in his or her duties as an officer of the court that resort should be had to R.57.07.

48 More than mere responsibility is required by a lawyer to attract the consequences of Rule 57.07. The Divisional Court stated in Ben-Lolo v. Wang:

In interpreting Rule 57.07(1), the Divisional Court set out a two part test in Carleton v. Beaverton Hotel (2009), 96 O.R. (3d) 391 (Ont. Div. Ct.) at para. 21:

The first inquiry is whether the lawyer's conduct falls within Rule 57.07(1) in the sense of causing costs to be incurred unnecessarily and then the second step is to consider, as a matter of discretion (and applying the extreme caution principle) whether in the circumstances of the particular case the imposition of costs against the lawyer personally is warranted.

The Divisional Court referred to Marchand, above, where the judge stated that an order should be made against the lawyer personally only if the lawyer "pursues a goal which is clearly unattainable or is clearly derelict in his or her duties as an officer of the court"... .

... Moreover, as this Court said in Carleton, above, the court must go on to the second step and, applying the extreme caution principle, ask whether costs against the lawyer personally are warranted in the circumstances.

[Footnotes omitted.]

[47] I find in the circumstances of this case that I should exercise my discretion in this manner, given that plaintiffs’ counsel has been discourteous, abusive and unprofessional. In so doing, I note the following:

• He did not contact counsel to advise he was going to note them in default;
• He noted the defendants in default and gave no notice after the fact;
• He ignored correspondence;
• He ignored phone messages;
• He filed a default judgment motion with the court without providing the information regarding the defendants’ counsel’s demand for particulars, their correspondence and their phone calls;
• He did not advise defendants’ counsel the date that the noting in default occurred;
• He wrote unprofessional, discourteous, and disrespectful letters to opposing counsel;
• He filed material with the court on an ex parte matter that failed to disclose pertinent correspondence;
• He scheduled ex parte court time when he knew or ought to have known that the Defendants were actively seeking to defend the matter;
• He appeared on the motion on his own affidavit;
• He refused the consent to the filing of the factum which he had long been served with; and
• After all materials were prepared and served he consented to the motion but when the defendants sought to simply argue costs he withdrew his consent and fully argued the motion.

[48] In accordance with the test set out in Gunggo above, I am satisfied that Mr. Sedrak caused costs to be incurred unnecessarily. It is clear counsel pursued a goal that was clearly unattainable. Moreover, he was derelict in his duties as an officer of the court.

[49] Plaintiffs’ counsel must understand that court time is expensive. His decision to proceed with default judgment when he was aware or ought to have been aware that the defendants’ counsel was actively involved in the file and showed an intention to defend was wasteful and abusive.

[50] Plaintiffs’ counsel should be treating other counsel in the way he wishes to be treated.

[51] Costs are, in part, intended to modify behavior. This is a case where the lawyer should pay personally as well as his client. I order substantial indemnity costs of $4,000 to be paid. The plaintiffs are obligated to pay $2,000 and Mr. Sedrak, plaintiffs’ counsel, is to pay $2,000 personally.

M. J. Donohue, J.

DATE: July 25, 2016