Kaptor Financial Inc. et al v. SF Partnership, LLP et al, 2016 ONSC 6607

CITATION: Kaptor Financial Inc. et al v. SF Partnership, LLP et al, 2016 ONSC 6607

COURT FILE NO.: CV-12-463214

DATE: 2016-10-24

SUPERIOR COURT OF JUSTICE – ONTARIO

COMMERCIAL LIST

B E T W E E N:

KAPTOR FINANCIAL INC., 2025610 ONTARIO LIMITED and INSIGNIA TRADING INC.

Plaintiffs

and

SF PARTNERSHIP, LLP, SHORE NEWMAN & ROSE LLP, ERIC INSPEKTOR, LYNETTE INSPEKTOR, RICK ARNONE, JACK BARKIN, ALAN BIRNBAUM, MOMIR DEJANOVIC, HARVEY GOLDBERG, KLARA ROMM, BARBARA SHUSTER, DARREN INSPEKTOR and RUSSEL INSPEKTOR

Defendants

BEFORE: Newbould J.

COUNSEL: Jeffery Larry, for the Plaintiffs Alex MacFarlane, for Crowe Soberman Inc., Trustee in Bankruptcy and Receiver of 2025610 Ontario Ltd., Kaptor Financial Inc. and Insignia Trading Inc. Eric Inspektor, for himself

ENDORSEMENT

[1] On August 30, 2016 I ordered that the plaintiffs and the Trustee/Receiver were entitled to costs of the motions brought by the plaintiffs and the cross-motion brought by Mr. Inspektor.

[2] The plaintiffs seek costs on a substantial indemnity basis, as does the Trustee/Receiver.

[3] The normal rule is that costs are to be paid on a partial indemnity basis. However, conduct of a party that is reprehensible, scandalous or outrageous are grounds for costs to be awarded on a substantial or complete indemnity basis. See Young v. Young, 1993 CanLII 34 (SCC), [1993] 4 S.C.R. 3. The conduct giving rise to such an award can be conduct either in circumstances giving rise to the cause of action or in the proceedings themselves. See Orkin, The Law of Costs, 2nd ed. at para. 219.1; Ford Motor Company of Canada v. Ontario Municipal Employees Retirement Fund (2006), 17 B.L.R. (4th) 169 (Ont. C.A.) and Mortimer v. Cameron (1994), 1994 CanLII 10998 (ON CA), 17 O.R. (3d) 1 (C.A.).

[4] Unfounded allegations of improper conduct seriously prejudicial to the character or reputation of a party can give rise to costs on a substantial indemnity scale. See 131843 Canada Inc. v. Double "R" (Toronto) Ltd. (1992), 7 C.P.C. (3d) 15 per Blair J. (as he then was). In Re Bisyk (No. 2) (1980), 1980 CanLII 1843 (ON SC), 32 O.R. (2d) 281; aff’d [1981] O.J. No. 1319 (C.A.), Robins J. (as he then was), held that unproven allegations of undue influence in the preparation of a will were allegations of improper conduct seriously prejudicial to the character or reputation of a party deserving of costs on a solicitor and client basis. Both of these cases were referred to with acceptance in Davies v. Clarington (Municipality) (2009), 2009 ONCA 722, 100 O.R. (3d) 66 (C.A.) at para. 47.

[5] In this case, the position of Mr. Inspektor that the settlement release was no bar to the claim of Trendi Dezign Incorporated was doomed to fail and an abuse of process in an attempt to circumvent the settlement. As stated in my endorsement allowing the motion of the plaintiffs, what Mr. Inspektor was attempting to do amounted to an end-run around the clear terms of a release negotiated to protect the participants from this very situation. This entitles the plaintiffs to their costs on a substantial indemnity basis. Moreover, the completely unsubstantiated allegations of Mr. Inspektor in his argument regarding costs of Mr. Larry breaching an undertaking given to the court are grounds for the higher level of costs.

[6] Regarding the Trustee, Mr. Inspektor’s motion materials made several serious and unsubstantiated allegations against the Trustee/Receiver designed to discredit Crowe Soberman. These allegations which were completely unrelated to the relief sought, included allegations that Crowe Soberman was part of a conspiracy with Steven Uster to expose Mr. Inspektor’s theft of funds from the Kaptor Group, ignored material facts in its reports to the Court, and in fulfilling its Court ordered duties and statutory obligations as Court-Appointed Receiver of the Kaptor Group engaged in “creative accounting” and disregarded generally accepted accounting (GAPP) principles.

[7] Mr. Inspektor’s allegations have been filed in the public record. To make reckless allegations with respect to the integrity of a court-officer occupying a position of public trust is a serious matter. This is not the first time that Mr. Inspektor has brought proceedings in his fight with the litigation committee. The Trustee/Receiver says that this motion was part of a troubling trend in the receivership/bankruptcy proceedings of the Kaptor Group, in which Crowe Soberman has been forced to spend considerable time and resources at the expense of the estates in addressing and responding to Mr. Inspektor’s efforts to advance his own personal interests. In this the Trustee/Receiver appears to be right. In the circumstances the Trustee/Receiver is entitled to costs on a substantial indemnity basis.

[8] Mr. Inspektor has not taken issue with the amounts claimed by the plaintiffs and the Trustee/Receiver. His argument is that neither should be awarded any costs because he says that Mr. MacFarlane breached an undertaking to the Court regarding an unredacted TD Bank document and that Mr. Jeffery was complicit in this. I do not agree. There was no breach of an undertaking by providing a copy of the document to the Court at my request.

[9] The amounts claimed by the plaintiffs and by the Trustee/Receiver are very reasonable. I fix the costs of the plaintiffs at $35,668.06 inclusive of fees, disbursements and HST and the costs of the Trustee/Receiver at $14,197.79 inclusive of fees, disbursements and HST. These costs are to be payable within 30 days.

Newbould J.

Date: October 24, 2016