2017 ONSC 1097
Court File and Parties
Court File No.: CV-14-0288 Date: 20170214 Ontario Superior Court of Justice
Between: NET CONNECT INSTALLATIONS INC. Plaintiff – and – MOBILE ZONE INC., MOHAMMAD SHAHZAD and SWATI DAMLE Defendants
And Between: MOBILE ZONE INC., MOHAMMAD SHAHZAD and SWATI DAMLE Plaintiffs by Counterclaim
- and – NET CONNECT INSTALLATIONS INC., ICT NORTH INC., WAYNE LAPLANTE and CHARLEEN WUNDERLICH Defendants by Counterclaim
Counsel: Christopher Salazar, Counsel for the Plaintiff/Defendants by Counterclaim Trent Morris, Counsel for the Defendants/Plaintiffs by Counterclaim
Heard: By Way of Written Submissions
Reasons for Decision on Costs
DiTomaso J.
Introduction
[1] The Moving Parties (Net Connect Installations Inc., ICT North Inc., Wayne LaPlante and Charleen Wunderlich) brought a Motion for Summary Judgment against the Responding Parties (Mobile Zone Inc., Mohammad Shahzad and Swati Damle) for monies owed to them as a result of an agreement and for the repayment of loans advanced to the Responding Parties and Systec Communications Inc., giving rise to the Small Claims Court action.
[2] The Moving Parties were entirely successful in their action and on their Motion for Summary Judgment. This court found that monies owing to them were fraudulently depleted by the Responding Parties from the bank accounts they controlled and moved those monies to Pakistan under a shroud of lies beyond the reach of the Moving Parties. This court held that these steps occurred even when the Responding Parties were on notice of an impending Mareva Injunction Application brought by the Moving Parties for fear that some depletion of assets belonging to them would in fact be moved beyond their reach. As it turned out and borne out by the nefarious conduct of the Responding Parties, this is exactly what happened in this case.
[3] At paragraph 163 of my Reasons for Decision, released November 30, 2016, the Moving Parties were entitled to broad ranging relief. They were also entitled to judgment against the Responding Parties for damages jointly and severally in the amount of the $155,836.32, being sums owing to the Moving Parties which were unlawfully diverted by the Responding Parties, together with prejudgment interest.
[4] There was also judgment awarded to the Moving Parties in respect of monies owed to them against various defendants in the amount of $21,000 in the Small Claims Court action, together with prejudgment interest. The total money judgment was in the amount of $176,836.32 plus prejudgment interest.
Position of the Parties
Position of the Moving Parties
[5] The Moving Parties seek their costs of the entire proceedings in the amount of $144,991.11 on a full indemnity basis, inclusive of HST and disbursements against the Responding Parties, Mobile Zone Inc., Systec Communications Inc., Mohammad Shahzad, and Swati Dhamle, jointly and severally. Alternatively, the Moving Parties seek their costs on a substantial indemnity or a partial indemnity basis, as set out in the Moving Parties’ bill of costs.
[6] The Moving Parties seek costs on a full indemnity basis on the grounds that this is one of those rare cases where the conduct of the Responding Parties warrants such an award.
[7] The Responding Parties served an Offer to Settle, on or around August 22, 2014, to resolve these proceedings fully and finally in the amount of $150,000 paid to Net Connect Installations Inc., plus partial indemnity costs if accepted after September 5, 2014. The Moving Parties assert that the judgment obtained was much more favourable to them than the Offer to Settle, thereby entitling them to partial indemnity costs to the date of the offer and substantial indemnity costs thereafter, unless otherwise ordered by the court. Nevertheless, the Moving Parties seek the payment of full indemnity costs.
Position of the Responding Parties
[8] The Responding Parties submit that there has not been egregious conduct on their part amounting to fraud or deceiving the court. They submit findings of deceit and fraud do not exist in this case. They assert the amount claimed is excessive due to “over-lawyering” on the part of the Moving Parties. It is also asserted that an award of costs is not warranted due to an abandoned Contempt Motion and matters dealt with by way of co-operation or consent between the Parties. The grounds submitted by the Responding Parties in support of their position can be outlined as follows:
(1) Proportionality; (2) Overlap/duplication; (3) Excessive costs claimed; (4) Abandoned Contempt Motion; and, (5) Co-operation/consent by the Responding Parties.
[9] It is submitted that costs are overstated and ought to be significantly reduced as a result of unsubstantiated allegations of fraud, excessive billing and the Moving Parties receiving costs of a Contempt Motion.
[10] The Responding Parties costs outline/bill of costs reflects fees on a partial indemnity scale in the amount of $64,221.01 inclusive of HST and on a full indemnity scale fees in the amount of $107,033.88 inclusive of HST. Disbursements were in the amount of $5,743.37.
Analysis
Legal Principles
[11] Costs are in the discretion of the court; see s. 131 of the Courts of Justice Act and Rule 57.01 of the Rules of Civil Procedure. Generally, costs follow the event and are payable within 30 days on a partial indemnity basis. However, in the appropriate circumstances, discretion can be exercised by the court to depart from this general rule.
[12] The purpose of a costs order is to advance the administration of justice by indemnifying successful litigants from costs of litigation, facilitating access to justice, including access for impecunious litigants, discouraging frivolous claims and defences, discouraging inappropriate behaviour by litigants in their conduct of proceedings and encouraging settlements. (See 394 Lakeshore Oakville Holdings Inc. v. Misek, 2010 ONSC 7238 at para. 10)
[13] The overarching principles applicable to costs awards are fairness and reasonableness. Imbedded in the principle of reasonableness is proportionality. (See Emmet v. Your Community Realty Inc., 2016 ONSC 7446)
[14] A departure from the general rule may occur in circumstances where one party to litigation has behaved in an abusive manner, led a defence in proceedings which is wholly devoid of merit and/or unnecessarily run up the costs of litigation. In such circumstances costs may be awarded on a higher scale.
[15] In Baryluk v. Campbell, 2009 ONSC 3900 at paras. 9-10, Hackland J. dealt with the matter of full indemnity;
I am of the opinion that this is one of the rare cases in which costs should be awarded on a full indemnity basis. As noted, I found that this action constituted a scurrilous attack on the administration of justice. The conduct of the defendants, judges of this court, was characterized by the plaintiff as case-fixing, abuse of public office, dishonesty and deceit in the circumstances where there was no basis on the facts pleaded or submissions made to the court to support such outrageous allegations. Reckless attacks on the integrity of judicial officers must be recognized as conduct requiring chastisement and deterrence.
There is ample authority for an award of full indemnity costs where unsubstantiated allegations of dishonesty, illegality, and conspiracy are advanced without merit. While full indemnity and substantial indemnity costs are an exception to the general rule and awarded only under special circumstances, allegations made or conduct by a party that is “reprehensible, scandalous, or outrageous” falls within the ambit of an award of full indemnity costs…
[16] In Pirbhai v. Singh, 2011 ONSC 1366, at para’s 119-120, Quinn J. stated the following:
I comfortably conclude that the extreme and pervasive conduct of Singh, which I have chronicled in these Reasons, warrants full-indemnity costs: (1) he added, perhaps, 25 days or more to the evidence in the trial and years to its length; (2) he was not forthright with his documentary disclosure; (3) he fraudulently created documents; (4) he repeatedly lied under oath; and, (5) he attempted to perpetrate a fraud upon the plaintiff and upon the court. What else must be present in this case to attract full-indemnity costs?
Equity requires that the plaintiff not be put to one penny of expense in his pursuit of justice.
[17] An overall sense of what is reasonable may be factored in to determine the ultimate award of costs. The fixing of costs is not simply a mechanical exercise; the fixing of a costs award should not begin and end with a calculation of hours times rates. (See Boucher v. Public Accountants Council (Ont.) at paras. 25-26; Davies v. Clarington (Municipality), 2009 ONCA 722, paras.50-52.
[18] In exercising its broad discretion to determine the issue of costs, the court may consider, among other things, the factors set out at Rule 57.1 which include, but are not limited to, the reasonable expectations of the unsuccessful Responding Parties, the amount claimed and recovered, the complexity of the proceeding, the conduct of any parties that lengthen the proceedings, any party’s denial or refusal to admit anything which should have been admitted.
Entitlement
[19] I have considered the submissions of the Responding Parties and find that they are wholly inaccurate, self-serving and entirely seek to minimize the egregious conduct of the Responding Parties.
[20] I find that the cost submissions of the Responding Parties completely fail to address the reprehensible conduct on their part. The allegation that findings of fraud and deceit do not exist in these proceedings is clearly wrong. The majority of their costs submissions relate to a motion commenced by the Moving Parties (the February 26, 2016 motion). It is alleged this motion was brought as a litigation tactic and had been abandoned. For reasons to follow, this allegation is rejected.
[21] Further, it is asserted that the Moving Parties’ costs are excessive, duplicated and/or inflated in comparison to the costs of the Responding Parties. I find that this is also untrue. In their totality, I reject the submissions made by the Responding Parties in respect of the costs, both on the basis of entitlement and quantum.
[22] I find this is one of those rare cases in which costs should be awarded on a full indemnity basis for the following reasons.
[23] Identifying the costs expectations of unsuccessful parties is a sensible objective where litigation of honest differences of opinion or difficult areas of law have occurred. However, in my view, the court should not concern itself with the expectations of demonstrated deceivers and liars, such as the Responding Parties in this case. (See Pirbhai v. Singh, 2011 ONSC 1366 at para. 108)
[24] In the case at bar, the Responding Parties clearly were involved in unlawful conduct and fabrication which solely were to blame for the unnecessary length and significant costs of these proceedings. Without question, the Responding Parties gained a full appreciation and expectation of the Moving Parties’ costs during the course of nearly three years of complex and expensive litigation caused by their own misconduct.
[25] Further, the Responding Parties served an Offer to Settle on or around August 22, 2014, to resolve the within proceedings fully and finally for $150,000 paid to Net Connect Installations Inc., plus partial indemnity costs if accepted after September 5, 2014 (the “Offer to Settle”). The Judgment is much more favourable to the Moving Parties than the Offer to Settle, which would ordinarily entitle the Moving Parties to partial indemnity costs to the date of the Offer to Settle and substantial indemnity costs thereafter, unless otherwise ordered by the court. Nevertheless, the Moving Parties quite reasonably ask for full indemnity costs.
[26] As I have stated, a court is entitled to award full indemnity costs and is justified in so doing in rare instances where a party to litigation adds delay and costs to the proceedings, is less than forthright with documentary disclosure, repeatedly lies under oath, fraudulently creates documents and/or attempts to perpetrate a fraud on the plaintiff and the court. (Rule 57.01(4)(d) of the Rules of Civil Procedure; Pirbhai v. Singh, 2011 ONSC 1366, at paras. 118-119) This is one of those exceptional cases where full indemnity costs are justified.
[27] The Moving Parties are entitled to full indemnity costs for the following reasons:
(i) The Moving Parties were wholly successful. Costs generally flow to the successful party following the event and the Moving Parties have engaged in no misconduct so as to limit or deny their costs; (ii) The within proceedings were complex, were of significant importance to the Moving Parties and involved substantial damages; (iii) The Court found that the Responding Parties: (a) Are in breach of contract; (Reasons of the Honourable Justice DiTomaso, dated November 30, 2016 (the “Reasons”) at para. 81) (b) Improperly removed funds owing to the Moving Parties “under a shroud of lies”, and then transferred some or all of the said funds to Pakistan (The Reasons at para. 81); (c) Generated a series of falsehoods communicated to the Moving Parties prior to and while stealing money owing to the Moving Parties (The Reasons at para. 124); (d) Fabricated the Alleged March and November 2013 Agreements with a “view to avoiding payment to the Moving Parties, justifying their unlawful conduct, and providing some specious foundation for meritless claims advanced by the Responding Parties” (The Reasons at paras. 107, 109, and 117); (e) Depleted the Mobile Zone bank account on March 10, 2014, with specific knowledge of the motion for an injunction to be heard the next day (The Reasons at para. 123); (f) Continued to dissipate assets despite the Mareva Injunction (The Reasons at para. 126); and, (g) Refused to move the within proceedings forward without being forced to do so by not less than four Court Orders (The Reasons at para. 156(iv)). (iv) The Responding Parties failed to admit the truth at any time; (v) The Judgment is more favourable to the Moving Parties than the Offer to Settle; (vi) The Moving Parties’ costs are reasonable in light of the required litigation steps including, but not limited to, a Mareva Injunction, the Responding Parties’ motion to set aside the Mareva Injunction resolved on consent for the Mareva to continue, numerous interlocutory motions, three days of examinations for discovery of Mohammad Shahzad alone and a two-day Summary Judgment Motion; (vii) An hourly rate of $275.00 per hour for counsel for the Moving Parties is reasonable considering the result achieved and the complexity of these proceedings caused solely by the conduct of the Responding Parties; (viii) The Responding Parties wasted significant court resources; and, (ix) Every step taken by the Moving Parties in these proceedings has been justified.
[28] I find awarding full indemnity costs against the Responding Parties advances the administration of justice by (1) indemnifying the Moving Parties for the costs of this litigation, (2) discouraging frivolous claims and defences, (3) discouraging inappropriate behaviour by litigants in their conduct of proceedings and (4) encouraging settlements.
[29] In conclusion, I find the Moving Parties were forced to commence and sustain these proceedings, bring motion after motion, and resolve these proceedings by way of a two-day Motion for Summary Judgment, solely as a result of the reprehensible and unlawful conduct of the Responding Parties.
[30] Accordingly, the Moving Parties are entitled to their full indemnity costs against the Responding Parties.
Quantum
[31] The Moving Parties seek their costs of the entire proceedings in the amount of $144,991.11 on a full indemnity basis inclusive of HST and disbursements against the Responding Parties jointly and severally. In support of this claim for costs, I have reviewed the costs outline submitted by the Moving Parties for costs on the Motion for Summary Judgment and for costs of the entire action.
[32] The Responding Parties seek a significant discount in costs claimed by the Moving Parties in respect of the February 26, 2016 motion and on the basis that costs claimed are excessive and duplicated.
[33] Regarding the Responding Parties assertion that the Moving Parties acted inappropriately in bringing its motion of February 26, 2016 before Eberhard J., and that the Responding Parties should be compensated by costs for same, this position is untenable and I reject same.
[34] The February 26, 2016 motion sought injunctive relief, productions from Mohammad Shahzad and contempt orders against Swati Damle and Mohammad Shahzad as a result of the Responding Parties’ continued dissipation of assets, despite the Mareva Injunction in place. This motion was resolved on consent by court order to, among other things, encumber a property owned by Swati Damle municipally known as 70 Forest Manor, in North York, Ontario and for the remainder of the motion not affecting the Forest Manor property resolved by further order of the court.
[35] On February 29, 2016, counsel for the Responding Parties indicated that he would draft an order for the remainder of the relief sought by the Moving Parties. Counsel for the Responding Parties took his time finalizing this court order as the Responding Parties wished to resolve the Mareva Injunction by confirming $100,000 in equity in the subject property, something that was not achieved. The February 26, 2016 motion was ultimately adjourned sine die on consent and it remains the same to date.
[36] Based on the aforementioned, the Moving Parties have not abandoned the February 26, 2016 motion, nor was the same pursued in bad faith. To the contrary, the motion was resolved at all stages on consent and ultimately prevented Swati Damle from continuing to dissipate her assets. Additionally, the Moving Parties attempted to have an order resolve the outstanding contempt relief. As such, the Moving Parties acted appropriately at all times in good faith. The Responding Parties are not entitled to costs of that motion nor are they entitled to a reduction in costs payable to the Moving Parties regarding the February 26, 2016 motion.
[37] As for the allegation by the Responding Parties that the costs sought by the Moving Parties are duplicated and/or inflated, I reject this argument as well for the following reasons.
[38] With respect to duplication, the within proceedings were made extremely complicated by the unscrupulous conduct of the Responding Parties prior to and during litigation which required, among other things, an ex-parte Mareva Injunction and numerous interlocutory motions to prevent the Responding Parties from dissipating their assets.
[39] I do not agree that this case was “over-lawyered”. When counsel having carriage was unavailable, he was assisted by junior and senior lawyers as required from time to time. This was both necessary and reasonable. In any event, the overwhelming majority of the legal work was completed by a junior lawyer at a junior lawyer’s billable rate.
[40] The Responding Parties have failed to provide legal authority which prohibits the recovery of costs for reasonable assistance with colleagues and have further failed to identify specifically what dockets offend the Responding Parties, other than to allege that Mr. Thomson had little involvement in these proceedings without offering any evidence for this allegation. Instead, the Responding Parties rely on generalized allegations when particularity is required.
[41] With respect to the Responding Parties’ allegations that the Moving Parties’ bill of costs are inflated in comparison to that of the Responding Parties, the role of the court on a costs disposition is not to second-guess successful counsel on the amount of time spent on the case or the allocation of counsel to the tasks at hand (Risorto v. State Farm Mutual Auto Insurance Co., at para. 10). Further, a disparity in legal fees incurred by the opposing parties is entirely to be expected in light of:
(a) The numerous motions the Responding Parties forced the Moving Parties to commence; (b) A review and comparison of the volume and accuracy of the Moving Parties’ motion materials, being more than 1000 pages of evidence, to the motion materials of the Responding Parties; and (c) A consideration of the preparedness of counsel for the Moving Parties and the requirement of the Moving Parties to complete reply submission in writing.
[42] A review of the Responding Parties’ bill of costs shows fees and disbursements on an actual-rate basis inclusive of HST in the amount of just under $113,000. A comparison of the amount claimed by the Moving Parties and the amount set out in the Responding Parties’ bill of costs give some perspective to the relative legal expenses of the Parties.
[43] It seems that the Responding Parties are attempting to persuade this court that the Moving Parties ought to have incurred less significant legal fees in attempting to stop the Responding Parties from stealing and absconding with over $180,000 belonging to the Moving Parties. Any such suggestion is absolutely preposterous. Quite to the contrary, the Moving Parties were obligated, at significant legal expense, to pursue the Responding Parties every inch of the way in this litigation. All of the steps taken by the Moving Parties are appropriately supported by the evidence in fulsome and complete detail.
[44] Accordingly, I find the Moving Parties costs are fair, reasonable and proportional and fix same in the amount of $144,991.11 inclusive of HST and disbursements on a full indemnity scale.
Conclusion
[45] For these reasons, the Moving Parties, Net Connect Installations Inc., ICT North Inc., Wayne LaPlante and Charleen Wunderlich are awarded costs in the amount of $144,991.11 against the Responding Parties, Mobile Zone Inc., Mohammad Shahzad, Swati Damle and Systec Communications Inc., jointly and severally, payable within the next 30 days.