Court File and Parties

COURT FILE NO.: CV-10-409280 DATE: 20160626 SUPERIOR COURT OF JUSTICE – ONTARIO

RE: ARIF HAYAT, Plaintiff

AND:

MUSHTAQ RAJA, MARYAT INVESTMENTS INC., MINAJ TRANSPORT INC., MUNAZA RAJA, JANISH RAJA AND DIRECT EX LOGISTICS INC., Defendants

AND BETWEEN:

MUSHTAQ RAJA, MARYAT INVESTMENTS INC. AND MINAJ TRANSPORT INC., Plaintiffs by Counterclaim

AND:

ARIF HAYAT, Defendant to the Counterclaim

BEFORE: Stinson J.

COUNSEL: Ron Sleightholm, for the Plaintiff Areesha Raja, for the Defendants other than Maryat Investments Inc. Gordhan Ambwani, for the Defendant Maryat Investments Inc.

HEARD at Toronto: By written submissions

Endorsement as to Costs

[1] In my Reasons for Judgment released November 7, 2016, I awarded the plaintiff $475,000 as against Mushtaq Raja (“Mushtaq”), Minaj Transport Inc. and Maryat Investments Inc. In relation to the plaintiff’s claims involving Direct Ex, I ordered Direct Ex to issue shares to the plaintiff sufficient to make him a 50% shareholder of the corporation, to repay him his $36,179 loan and I ordered Mushtaq to pay the plaintiff $36,179. I dismissed the action against Munaza Raja and Janish Raja (“Munaza and Janish”). I further dismissed the counterclaims of Mushtaq, Minaj and Maryat.

[2] In my Supplementary Reasons for Judgment released February 23, 2017, I dismissed Maryat's cross-claim against Mushtaq.

[3] The parties subsequently made written submissions concerning costs. This endorsement addresses those submissions.

Liability for Costs

[4] The plaintiff seeks costs as against all defendants except Munaza and Janish. For their part, Munaza and Janish seek costs as against the plaintiff. The plaintiff requests that I make no order as to costs in favour of Munaza and Janish.

[5] Dealing first with the plaintiff's request for costs, in the ordinary course, a successful party is entitled to an award of costs as against an unsuccessful party. There is no reason to depart from that principle in relation to the plaintiff's claim for costs as against Mushtaq, Minaj and Maryat. I therefore order those defendants to pay costs to the plaintiff.

[6] Ordinarily, the same principle would warrant an award of costs in favour of Munaza and Janish as against the plaintiff. In my view, however, such an award is not justified in this case. Munaza and Janish played minor roles in this proceeding. They were joined as defendants because the plaintiff was uncertain what had happened to his money and what role they had played in its disappearance.

[7] Neither Munaza nor Janish was separately represented. All defendants were originally represented by one counsel. At trial, Munaza and Janish were represented by the same counsel as Mushtaq and Minaj. The burden of the defence was carried by Mushtaq, Minaj and Maryat. No separate activities or proceedings (such as examinations for discovery or motions) were conducted by or on behalf Munaza and Janish. There were no separate pleadings involving those individuals. If anything, they were included as defendants out of an abundance of caution by a plaintiff who was, as I found, kept in the dark by Mushtaq.

[8] I therefore conclude that this is a case in which no extra costs were incurred by Munaza and Janish, and therefore no order as to costs should be made in their favour.

[9] I would add only that if I were disposed to make an order as to costs in favour of Munaza and Janish, I would make a Sanderson order directing that any costs awarded in their favour be paid directly by Mushtaq. Mushtaq bears complete responsibility for the events giving rise to the litigation and he should therefore bear all costs that might be ordered to be paid by the plaintiff.

Scale of Costs

[10] Ordinarily, costs are awarded and assessed on a partial indemnity basis. In this case, however, the plaintiff seeks the rare and exceptional award of costs on a substantial indemnity basis. As the Court of Appeal affirmed in Oz Optics Ltd. v. Timbercon, Inc., 2012 ONCA 735, at para. 16:

substantial indemnity costs are warranted when one of the parties is guilty of reprehensible conduct either prior to the litigation or during the litigation itself ….

[11] In the present case, the essence of my decision is that Mushtaq defrauded the plaintiff. He misrepresented the uses to which the plaintiff's funds were being applied; he lied about the need to furnish a personal guarantee to the landlord; he falsely stated that he had invested a significant sum into the business; he lied about the purchase price; he converted most of the proceeds of sale of the shares of Maryat; and he used significant sums of money supplied by the plaintiff to pay personal expenses. I have no hesitation in concluding that this is a case for costs on a substantial indemnity scale, in light of Mushtaq’s misconduct.

[12] Another ground for an award of substantial indemnity costs is an unproven allegation of fraud. Here, the defendants pleaded that the plaintiff had fraudulently converted funds belonging to the restaurant while he acted as manager. I found that this allegation was not proven. This reprehensible conduct during the course of the litigation also warrants the sanction of an award of costs on a substantial indemnity scale. The fact that Munaza and Janish continued to assert that unfounded allegation at trial is a further ground to deny them an award of costs.

[13] I am alert to the fact that Maryat was separately represented at trial, and that it no longer advanced the allegation of fraud against the plaintiff during the trial. Nevertheless, it did so in its initial pleading.

[14] More importantly, as I found in my Reasons for Judgment, Maryat was the beneficiary of the fraudulent conduct of Mushtaq while he assembled the funds necessary to acquire the restaurant business. As I noted in paragraph 129 of my reasons, it is "not open to Maryat to disown or to disclaim knowledge of Raja's fraudulent conduct" since at the time it was carried out, he was Maryat's directing mind.

[15] I therefore conclude that the plaintiff's costs should be assessed on a substantial indemnity basis as against all paying defendants.

Quantum of Costs

[16] The plaintiff seeks substantial indemnity fees for the entire proceeding (before HST) of $142,278.55, plus disbursements. At my request, the Raja Defendants (the defendants other than Maryat) submitted a bill of costs in which their partial indemnity costs are stated to be more than $222,000. Upon reviewing that bill of costs, I believe the amounts are more accurately their substantial indemnity costs. It is thus apparent that the legal expenses incurred by those defendants were approximately 50% greater than those incurred by the plaintiff. On its face, this suggests that the amount of time spent by the plaintiff's lawyers was not excessive by comparison to the amount of time spent by the Raja Defendants' lawyers.

[17] The Raja Defendants submit that the amount sought by the plaintiff on account of costs is disproportionate to the amount claimed in the action. This was a complicated case, which was made more complex by the failure of Mushtaq to properly account for the plaintiff's money and his failure to produce the documents that ought to have been available. The amount recovered ($475,000) is a significant sum and the amount claimed for costs is not disproportionate in the circumstances.

[18] The scheduled trial was delayed twice at the request of the defendants, which increased the costs. Once the trial got underway, the Raja Defendants insisted on conducting a voir dire in relation to the admissibility of audio recordings and translations of same, in which their position was wholly unsuccessful. This, too, increased costs and delayed proceedings. The defendants’ failure to make proper production was a further fundamental cause of increased costs.

[19] In their written submissions, the Raja Defendants reference offers to settle tendered on their behalf. The first was an offer for a dismissal without costs. It has no significance. The second was a proposal to pay $250,000, by instalments. The judgment obtained by the plaintiff is almost twice that sum. The second offer is therefore of no significance either.

[20] The Raja Defendants also refer to a request to admit served by them, which the plaintiff declined to admit. I agree with the plaintiff's submission that the facts portion of that document was less a statement of fact than a statement of the evidence that Mushtaq intended to present at trial. I found him not to be a credible witness and many of the facts contained in the request to admit were rejected by me. I therefore do not consider that the plaintiff's refusal to admit the facts contained in the request to admit had any material impact on the trial.

[21] Having regard to the issues in the case, the amount in dispute, the complexities of the matter and the expenses to which the plaintiff was put in order to prove its case, I believe the amount claimed by way of fees is both fair and reasonable. Additionally, having regard to the legal costs incurred by the defendants, the amount claimed by the plaintiff for costs must have been within the defendants’ reasonable expectations.

Separate Position of Maryat

[22] Until shortly before the commencement of trial, the defence of Maryat was carried by the same counsel who acted for the other defendants. As a result, Maryat is in the same position as the other defendants concerning the costs incurred over that time frame. As I have already noted, Maryat is bound by the conduct of Mushtaq in any event.

[23] At trial, Maryat was separately represented. The only portion of the trial for which Maryat might be treated differently than the other defendants concerns the voir dire regarding the admissibility of the recordings and translations. Since that issue was primarily advanced by the Raja Defendants, I would reduce the trial costs awarded against Maryat by $5,000.

[24] Apart from the foregoing, there is no proper basis for treating the costs awarded against Maryat any differently than the costs awarded against the Raja Defendants. Although in its submissions, Maryat repeated the view that it was an innocent purchaser for value, that is incorrect. The purchaser was PB 10 Investments Ltd. which was not a party to the action. The oppression remedy was made out with respect to the operations of Maryat and the conduct of its business affairs, by reason of the activities of Mushtaq as its directing mind at the relevant time.

Separate Position of Direct Ex

[25] In their submissions, the Raja Defendants do not distinguish the position of Direct Ex. Properly speaking, however, Direct Ex played only a minor role in the proceedings, both factually and at trial. I did, however, conclude that an oppression remedy was warranted arising from the conduct of the affairs of Direct Ex. In the circumstances, I would make only a minor award of costs as against Direct Ex, $20,000.

Disbursements

[26] No issue was taken with respect to the disbursements claimed. I would therefore allow them in full.

Summary

[27] I therefore award the plaintiff costs as against the defendants Mushtaq Raja and Minaj Transport Inc. as follows:

Fees $142,278.55 HST on fees $ 18,496.21 Total fees including HST $160,774.76 Disbursements inclusive of HST $ 30,305.42 Total fees and disbursements $191,080.18

[28] In relation to Maryat Investments Inc., I would reduce the costs award by $5,000 on account of fees and $1,500 on account of HST, for a total reduction of $6,500. Thus the total award for costs in favour of the plaintiff as against the defendant Maryat is $184,580.18.

[29] In relation to Direct Ex Logistics Inc., I award the plaintiff costs of $20,000.00

[30] I award no costs in favour of or against the defendants Munaza Raja and Janish Raja.

Stinson J. Date: June 26, 2017