CITATION: Landmover Trucks Inc. v. Bhullar, 2017 ONSC 3196
COURT FILE NO.: CV-16-2526-00
DATE: 20170602
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: LANDMOVER TRUCKS INC., JASWINDER BOPARAI and JASDEV SIDHU, Applicants
AND:
HARBIR SINGH BHULLAR, 1515073 ONTARIO INC., HK UNITED TRUCKS LIMITED, JARNAIL SIGNH MAND a.k.a. JARNAIL SINGH, KARNAIL SINGH MAND a.k.a. KARNAIL SINGH, TARLOCHAN MAND and QUICKFIX TRUCK TRAILER REPAIRS Respondents
BEFORE: EMERY J
COUNSEL: JAMES S.G. MACDONALD and IRA NISHISATO for the Applicants
YADVINDER S. TOOR, for the Respondents HK United Trucks Limited, Jarnail Singh Mand a.k.a. Jarnail Singh, Karnail Singh Mand a.k.a. Karnail Singh, Tarlochan Mand and Quickfix Truck Trailer Repairs
HOWARD SHANKMAN, for the Respondents Harbir Singh Bhullar and 1515073 Ontario Inc.
HEARD: May 1, 2017
REASONS FOR DECISION ON COSTS
AND SENTENCE FOR CONTEMPT
[1] Counsel for the parties appeared before me on May 1, 2017 to make submissions on three matters. The first was to make further submissions on the costs the plaintiffs are claiming for the motion where HK United Trucks Limited (“HK United”) and Karnail Singh (collectively, the “HK defendants”) were found in contempt. The sanction hearing with respect to that contempt immediately followed.
[2] The defendant HK United also brought a motion to set aside the order made by Justice Tzimas on June 6, 2016 (the “original order”), intending it to be heard at the same time. It was this order that the court found the HK defendants to have breached as the basis to find them in contempt of court. Submissions were not completed on that motion within the time allocated for the hearing of all matters on May 1, 2017. The HK United motion was therefore adjourned to July 6, 2017 for submissions to continue.
[3] I have been asked to decide the issue of costs and on the sentence this court shall impose for the contempt found on the plaintiff’s motion prior to the continuation of the motion to set aside the original order. This is my decision with respect to both those issues.
Costs
[4] Mr. James MacDonald has carriage of the plaintiffs’ file at Davis Webb LLP. However, Mr. Ira Nishisato of Borden Ladner Gervais LLP in Toronto was retained to argue the motion for contempt. The costs submissions filed by Mr. MacDonald explain that he had a trial before the Superior Court of Justice in Toronto on the two consecutive dates the plaintiffs’ motion was scheduled for hearing in Brampton. The plaintiffs made a decision to proceed with those dates or risk a deferral of the entire matter until a long motion date later in 2017. Mr. Nishisato was therefore retained to argue the contempt motion as counsel.
[5] The costs submissions further explain that Mr. Nishisato “was retained in large part due to his competence, experience and expertise in the law relating to injunctive relief orders and contempt hearings.”
[6] The written submissions on costs initially filed by the plaintiffs claim Mr. MacDonald’s time to prepare the motion materials relating to the contempt motion, and to attend the cross-examinations on affidavits. He also drafted the factum for the motion. Mr. Nishisato incurred time reviewing and revising the factum, prepared for the argument of the motion, and attended before the court to argue the contempt motion on October 13, 2016 for the plaintiffs.
[7] The plaintiffs filed two costs outlines to claim the time for both lawyers on the contempt motion. One costs outline seeks the costs of Mr. MacDonald on a full indemnity scale for fees of $30,006.75, plus HST of $3,900.88, and disbursements of $3,382.92, for a total of $37,290.55.
[8] The plaintiffs filed a second costs outline for Mr. Nishisato’s services. In that second costs outline, the plaintiffs seek costs for Mr. Nishisato’s time on a full indemnity basis of $50,750.00 for preparatory work, $5,250.00 for his counsel fee on October 13, 2016, applicable HST on those amounts of $7,280.00, and disbursements with applicable taxes of $1,186.87 for a total of $64,466.87.
[9] The responding defendants contest the plaintiffs’ claim for costs on the following basis:
The scale of the costs claimed;
Duplication of time between counsel for whom costs are claimed; and
The overall quantum on those costs.
Appropriate Scale of Costs
[10] The plaintiffs rely on various findings in my endorsement on the contempt motion as the basis for seeking costs on a substantial indemnity or a full recovery basis. The specific findings they rely upon are:
a. The conduct of the HK United defendants was intentional;
b. The conduct was designed to serve their own interests; and
c. The intention behind that contemptuous conduct was to permit HK United the use of the nine vehicles that the HK defendants were ordered to return to Landmover, instead to earn income for HK United.
[11] In Einstoss v. Starkman, 2003 2304, Justice Laforme, sitting as he was as a judge of this court, ordered a contemnor to pay costs on a substantial indemnity basis after reviewing the authorities that recognized contempt as a basis for awarding costs on that scale. Justice Laforme began his analysis by recognizing circumstances where substantial indemnity costs are warranted:
That substantial indemnity costs as opposed to partial indemnity costs will only be awarded in rare and exceptional cases;
Where the acts of a defendant are a deliberate attempt to frustrate the proceedings by fraud or deception; where the conduct of the defendant is calculated to harm the plaintiff; or where the unreasonable conduct of the defendant compounds the complexity of the proceedings.
[12] These observations are in keeping with general principles traditionally employed by the appellate courts. Substantial indemnity costs are generally not awarded by the court unless the parties seeking costs at that level can satisfy the court that the party against whom costs are sought has behaved in a reprehensible or egregious manner, or in such other manner deserving chastisement. The court must consider these factors as the threshold for awarding costs at a higher level: Mortimer v. Cameron, 1993 568 (Ont. C.A.) and reviewed with approval by the Court of Appeal in Davies v. Clarington (Municipality of), 2009 ONCA 722.
[13] The courts have addressed the availability of imposing substantial indemnity costs in the context of contempt orders in 1307347 Ontario Inc. v. 1243058 Ontario Inc., [2001] O.J. No. 585 and in Niagara (Region Municipality) Police Services Board v. Curran, 2002 49405 (ON SC), [2002] O.J. No. 179. Justice Laforme in Einstoss observed that while substantial indemnity costs are frequently imposed in contempt cases, this is not always so: see Dabkus v. Dabkus Estate, [1997] O.J. No. 96 and Sussex Group Ltd. v. Silvester, 2002 27188 (ON SC), [2002] O.J. No. 4350. For example, the court in Cunningham v. North York Bransen Hospital, [1997] O.J. No. 2574 awarded costs on a partial indemnity level for contempt that involved a minor breach of an injunction.
[14] After balancing the principles discussed in each line of the cases, Justice Laforme concluded as follows:
…Substantial indemnity should be awarded in the contempt action only if the contempt itself or the conduct of the contempt trial evinces a deliberate attempt at frustration. This no doubt will occur frequently but it is no doubt unnecessarily inevitable, since the contempt itself may not be sufficiently egregious.
[15] I take the view from the Einstoss decision and other cases where a party has been found in contempt, together with the general principles set out by the Court of Appeal, that costs on a substantial indemnity level are sometimes necessary, but not necessarily so. The fact that contempt has been found against a party is a factor towards the assessment by the court whether the conduct of that party has been reprehensible or egregious to justify a costs order on an elevated basis. The more deliberate the breach of an order and the more harm that the breach has caused to the innocent party, the more indicative the contemnors conduct has been reprehensible or egregious.
[16] My view is reinforced by the comments made by Justice Laskin in SNC-Lavalin Profac Inc. v. Sankar, 2009 ONCA 97. In SNC-Lavalin, the Court of Appeal did not disturb the award of the motions judge below of substantial indemnity costs because of what the motions judge characterized as “flagrant and intentional breaches” of the court’s orders.
[17] The plaintiffs submit that the conduct of the HK defendants show a deliberate decision to use the vehicles that Justice Tzimas ordered the HK defendants to return. The plaintiffs submit that substantial indemnity costs should be awarded because of the deliberate acts of the HK defendants that qualify as reprehensible and egregious conduct.
[18] The plaintiffs argue that the conduct of the HK defendants left them with few options but to bring a motion for contempt. They argue that being successful on a motion should not carry with it the expense of having to bring a motion to enforce an order the court would expect the HK defendants to obey. It is very difficult to find a fault in this reasoning.
[19] The HK defendants remind the court that they brought a motion on July 12, 2016 to set aside the order of Justice Tzimas. I further note that the HK defendants entered into a consent order on July 27, 2016 that all funds that the HK defendants shall pay for the vehicles HK United purchased from Mr. Bhullar’s company should be paid directly to Davis Webb LLP in trust. It would appear that the HK defendants took steps to act responsibly to address the order made by Justice Tzimas by retaining counsel shortly after the order was made. They provide these reminders to support their position that if the court awards costs to the plaintiffs, it should only be at a partial indemnity level.
[20] I consider the conduct of the HK defendants detailed in my reasons for finding the HK defendants in contempt of court to warrant costs at a higher level. However, I find that the conduct of the HK defendants, while unjustifiable, has not been flagrant or sufficiently egregious to warrant substantial indemnity costs at the maximum level (approximately 95% of counsel’s actual rate), let alone full recovery costs. Instead, the conduct was significantly unacceptable that costs should be assessed at the lower range of the substantial indemnity scale. Those costs should be fixed at 80% of what I would consider a normalized value of what the plaintiffs’ actual expenditure for legal services should be.
Duplication of time between Counsel
[21] Mr. MacDonald seeks costs for his fees in the amount of $30,006, net of time he would otherwise claim for other issues that has already been discounted. Of the $30,006 claimed, he seeks 75% of that amount for costs of the motion for contempt, and 25% for the motion to set aside the order of Justice Tzimas that has not yet been determined. Mr. MacDonald therefore seeks all or part of $22,500 for the work he put into the contempt motion.
[22] The costs outline of Borden Ladner Gervais for Mr. Nishisato’s role as counsel on the motion for contempt seeks legal fees of $56,000. Mr. Nishisato bills his time out at $875 an hour.
[23] The issue of costs for multiple counsel was discussed by Justice Riley in Magnussen Furniture Inc. v. Mylex Ltd., 2007 14338. Justice Riley approached this issue in the context of the overall objective enshrined by the Court of Appeal in Boucher v. Public Accountants Council for the Province of Ontario (2004) 2004 14579 (ON CA), 71 O.R. 3d 291 that the court should fix costs in an amount that is fair and reasonable for the unsuccessful party to pay. Justice Riley considered the question whether the amount claimed by two counsel was fair and reasonable where a coordinated, team approach is used, barring evidence of any “duplication of effort”.
[24] What would be a fair and reasonable amount for the court to award as costs to a successful party having two lawyers must be considered also in the context of the nature and complexity of the proceeding. Where two counsel have provided services for which costs are claimed, the role each of those counsel performed must be considered. Such was the case in Magnussen.
[25] In Rimando v. Jackiewicz, Justice Quinn recognized the synergies of what impressed him to be the formidable team approach by two senior counsel representing the successful plaintiff in a medical malpractice action. Although counsel in Rimando were partners from the same firm, the principles with respect to the costs claimed by both Mr. MacDonald and Mr. Nishisato should apply here. In the case before me, there would appear to be no overlap between the services provided by Mr. MacDonald in preparing the motion materials, and the counsel Mr. Nishisato provided except for two exceptions: Mr. Nishisato’s review of the motion materials and his input into revising the plaintiffs’ factum.
[26] Instead of a synergy created by joining forces, the working model employed by Mr. MacDonald and Mr. Nishisato was more a division of labour. Accordingly, Mr. Nishisato’s time for review of the material prepared by Mr. MacDonald, or his input on revising the factum approaches a duplication of effort that should not be borne by the HK defendants. Mr. Nishisato’s time for the preparation of argument for the motion and his input into revising the factum should be adjusted to recognize that Mr. MacDonald has already claimed costs for preparing those materials in the first place.
Overall Quantum
[27] I have already discussed the principles for exercising my discretion under s. 131(1) of the Courts of Justice Act and the governing principles for assessing costs in the Costs Endorsement released on March 14, 2017. Applying those principles, together with my determination of the issues above, I am awarding costs on the following basis:
For the legal fees of Mr. MacDonald, I award 80% of $22,500 to arrive at $18,000, disbursements in the amount of $3,382.92 and applicable HST; and
For the legal fees of Mr. Nishisato, I allow 80% of $20,000 to prepare for the hearing, including the review of materials and input into revising the plaintiff’s factum, as well as 80% of the $5,250 claimed for the counsel fee, for a total of $20,200, plus disbursements in the amount of $1,050.33 and applicable HST. The adjustment of the amount awarded for fees is also made to normalize Mr. Nishisato’s hourly rate for the purposes of this costs award.
[28] The plaintiffs are therefore awarded their costs for the contempt motion, fixed in the amount of $42,633.25, plus applicable HST. These costs are payable 30 days after my decision is released on the motion of the HK defendants to set aside the order of Justice Tzimas.
Sanction Hearing and Sentence
[29] The applicable principles for the sentence to impose on a finding of contempt at a sanction hearing were set out by the Court of Appeal in Boily v. Carleton Condominium Corporation 145, 2014 ONCA 574. At paragraph 90 in Boily, Justice Epstein sets out the following factors relevant to make a determination of the appropriate sentence:
[90] The following are the factors relevant to a determination of an appropriate sentence for civil contempt:
a) The proportionality of the sentence to the wrongdoing;
b) The presence of mitigating factors;
c) The presence of aggravating factors;
d) Deterrence and denunciation;
e) The similarity of sentences in like circumstances; and
f) The reasonableness of a fine or incarceration.
[30] In addition to those principles, the court has applied the principle of proportionality to ensure that the sentence fits the circumstances of the contempt. In this way, the sentence must “fit” the gravity of the wrongdoing to reflect the applicable principles.
[31] The parties agree that a fine would be the appropriate kind of sentence to impose on the HK defendants for their contempt. The fine would be payable to the Provincial Treasurer: Susin v. Susin, 2014 ONCA 733.
[32] Any fine a court imposes as a penalty for the contempt of a party in a business context should compel obedience with the court order that party has breached: College of Optometrists of Ontario v. SAH Optical Limited, 2008 ONCA 685, 93 OR 3d 139. As the Court of Appeal stated in that case, it is essential that any monetary penalty that the court imposes not be, or appear to be a license fee for further disobedience. Applied to the current circumstances, the fine must be of a sufficient amount to sanction the HK defendants for deliberately breaching the original order. It must also be of a sufficient amount that it is not seen or taken in stride as the cost of doing business.
[33] The HK defendants gave evidence on the motion for contempt that the nine vehicles were not returned to Landmover because they were required for the business of HK United to fulfill its contracts with third parties in 2016.
[34] The evidence on the motion also shows that Landmover’s revenue according to its financial statements for 2014 came to $1,315,402. Of the 22 vehicles that Mr. Bhullar transferred to 151 and which were then transferred to HK United Truck Ltd., the nine vehicles represented 42% of Landmover’s 2014 revenue, or $563,743.71.
[35] According to the evidence, HK United Truck Ltd. had annual revenues of $19,000,000 in 2015. This compares to revenue for Landmover in a comparable business of $899,000 shown in its financial statements for that year.
[36] The HK defendants submit that Landmover’s calculations assume that all nine vehicles were employed by HK United during the 2016 construction season to fulfill its contractual obligations. They submit that this is an issue for trial. However, I note that HK’s motion materials on the contempt motion made it clear in more than one place that all nine vehicles were required in the field to perform the work HK United was contracted to complete in 2016.
[37] I was advised at the sentencing hearing that the HK defendants have filed no evidence of the amount of revenue generated from its use of the nine vehicles during 2016. The year 2016 is relevant as the year Justice Tzimas ordered HK United to return the nine vehicles to Landmover.
[38] The HK defendants also ask this court to consider deciding the fine based only on the profit margin Landmover earned in 2015, instead of gross revenues of $899,104. The net income, after deductible expenses shown on Landmover’s financial statements for 2015, was $16,665. HK United argues that Landmover was deprived of this profit by the transfer of vehicles. The HK defendants argue that a fine should not be assessed using gross revenues as the plaintiffs did not incur overhead on operating or servicing the vehicles after they were transferred.
[39] On applying the sentencing principles in Boily, I must apply the principle of proportionality of the sentence to the wrongdoing. This would make the loss of potential profit to Landmover relevant.
[40] The HK defendants refer to the decision of the Court of Appeal in Susin as authority for the principle that contempt proceedings in civil actions should not be a substitute for recovering damages by an injured party.
[41] There is no dispute that the defendants HK United Trucks Limited and Karnail Singh have complied fully with the orders made in my Endorsement dated February 1, 2017 to purge that contempt.
[42] I must also consider the presence of mitigating factors. In this regard, I accept that the HK defendants have complied with my order dated February 1, 2017 to park all nine vehicles and to provide an affidavit and other documentation to the lawyers for the plaintiffs with the odometer reading of each vehicle recorded. Those vehicles remain parked.
[43] I also accept the fact that Karnail has offered his apology to the court for breaching the order of Justice Tzimas.
[44] I note the presence of the aggravating factors set out in my decision finding Karnail and HK United in contempt. Those aggravating factors can be balanced with the mitigating factors that include the fact that HK United has now purged its contempt.
[45] The amount of the fine should be sufficient to reflect the principles of deterrence and denunciation for the willful disobedience of Karnail and HK United when they breached the order of Justice Tzimas. I also acknowledge that the amount should be tempered to reflect reasonableness, and to show judicial restraint for a court order that has ultimately been followed.
[46] Finally, I look to other cases with similar circumstances to determine similar sentences that have been imposed. The Susin case involved a dispute between siblings over the estate of their late father. The motions judge had imposed a fine of $10,000 that was set aside on appeal. The court found that the fine was not necessary in that case to meet the goals of deterrence and the needs to stress the importance of respect for the court’s process, instead limiting the sentence to 3 days imprisonment.
[47] In SNC-Lavalin Profac Inc. v. Sankar, the Court of Appeal reduced the fine from $150,000 to $10,000 on the facts of that case.
[48] Upon applying the Boily factors and the evidence given by Landmover, notably the profit margin for Landmover’s operation in 2015, I order that:
HK United Trucks Ltd. shall pay a fine of $10,000; and
Karnail Singh Mand, also known as Karnail Singh shall pay a fine in the amount of $2,500.
[49] These fines shall be paid to the Provincial Treasurer or Minister of Finance, as the case may be, within 30 days.
[50] The costs of this sanction hearing are hereby reserved to the same date the motion of the HK defendants to set aside the order of Justice Tzimas is scheduled to resume. Proof that the fines imposed by this court have been paid shall be provided at that time.
Emery J
DATE: June 2, 2017
CITATION: Landmover Trucks Inc. v. Bhullar, 2017 ONSC 3196
COURT FILE NO.: CV-16-2526-00
DATE: 20170602
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: LANDMOVER TRUCKS INC., JASWINDER BOPARAI and JASDEV SIDHU, Applicants
AND:
HARBIR SINGH BHULLAR, 1515073 ONTARIO INC., HK UNITED TRUCKS LIMITED, JARNAIL SIGNH MAND a.k.a. JARNAIL SINGH, KARNAIL SINGH MAND a.k.a. KARNAIL SINGH, TARLOCHAN MAND and QUICKFIX TRUCK TRAILER REPAIRS Respondents
BEFORE: EMERY J.
ENDORSEMENT
EMERY J
DATE: June 2, 2017