Court File and Parties

COURT FILE NO.: CV-15-4731-00 DATE: 2017 11 30

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: SUKHUNDER SANDHU and 2207190 ONTARIO INC. – and – SIKH LEHAR INTERNATIONAL ORGANIZATION and MANJIT MANGAT and HARKHANWAL SINGH

BEFORE: LEMAY J.

COUNSEL: Paul Pape, Shantona Chaudhury and Justin Nasseri, for the Plaintiffs Simon Schneiderman, for the Defendant Sikh Lehar International M. Goyal, for the Defendants Manjit Mangat and Harkhanwal Singh

ENDORSEMENT

[1] In February 2017, I heard a three day trial for an issue in this matter. Written submissions were completed in April 2017, and my reasons were released in September 2017 (see Sandhu v. Sikh Lehar International Organization, 2017 ONSC 5680). It is now time to fix the costs for that trial.

Positions of the Parties

[2] The Plaintiffs seek costs in the sum of $219,619.70. The Plaintiffs are seeking costs on a substantial indemnity basis after January 4th, 2017, based on an offer to settle (“the Plaintiffs’ offer”) that they provided to the Defendants on that date. In addition, the Plaintiffs are relying on the following factors in support of their position:

a) Costs generally follow the result. b) The issues in the case were important. c) The conduct of the Defendants supports a higher award of costs due to their failure to close the transaction in 2016. d) The issues involved in this case were of great importance to the parties.

[3] The Defendant, Sikh Lehar International Organization (“Sikh Lehar”), argues that costs should be paid to the Plaintiffs, but should be limited to $90,142.00 plus HST and disbursements. Sikh Lehar relies on the following factors in support of its position:

a) The Plaintiffs’ Offer should not trigger substantial indemnity costs. b) The amount of time spent on the file by the Plaintiffs’ counsel was excessive, and their costs claim is unreasonable. c) The $20,000.00 disbursement for an opinion prepared by Reuben Rosenblatt, Q.C., was duplicative and should not be allowed.

[4] The Defendant, Sikh Lehar, argues that they should be provided with a credit for the time that was wasted by the Plaintiffs in moving this case forward, for their decision to abandon their specific performance claim late in the course of the action, and for the fact that the Plaintiffs failed to recover any costs for their claim relating to hauling dirt away from the property.

[5] The personal Defendants, Manjit Mangat and Harkhanwal Singh, have adopted the arguments of Sikh Lehar. They also argue that their legal costs, which are $25,000.00 for the entire trial, are significantly lower than the costs of the Plaintiffs. Finally, the Defendants state that they made an offer to settle (“the personal Defendants’ offer”) this case that, if the Plaintiffs had negotiated with them, would have resulted in reduced costs.

The Applicable Law

[6] In setting the costs for this case, I have to consider two legal questions. First, whether the offers to settle made by the parties trigger the cost consequences under Rule 49 of the Rules of Civil Procedure. Second, I must also consider the factors set out in Rule 57.01 of the Rules of Civil Procedure in assessing what the costs should be in this case. The most relevant of the factors under Rule 57, aside from the result in the proceeding and any offers to settle made in writing, are as follows:

a) The complexity of the proceeding. b) The amount claimed and recovered in the proceeding. c) Whether any step in the process was improper, vexatious or unnecessary.

[7] Before analyzing these factors, I should address one issue that arose as the parties were filing their costs submissions. Mr. Laframboise, who had been previous counsel to the Plaintiffs, provided submissions directly to me after the deadline for the Plaintiffs to provide their submissions had already passed. As a result of receiving these submissions, I convened a conference call with the parties and invited Mr. Laframboise to attend. He failed to do so. Mr. Pape advised me that he had requested Mr. Laframboise’s position on costs as he was preparing his own submissions, but that he did not receive Mr. Laframboise’s position before his own submissions were due. As a result, Mr. Pape did not include Mr. Laframboise’s submissions in his materials.

[8] During the conference call, I ruled that I would not consider Mr. Laframboise’s submissions. I made that ruling for three reasons. First, the submissions were late. Second, they did not come from counsel of record. Third, there was no explanation as to why these submissions were late. As a result, the costs for this action will be assessed without regard to Mr. Laframboise’s submissions.

Analysis and Reasons

Offer to Settle

[9] Offers to settle can be relevant in two ways. First, if an offer to settle triggers the cost consequences of Rule 49, then the Plaintiff would be entitled to costs on a substantial indemnity basis from the date of the offer. Second, an offer to settle is one of the factors a Court may consider under Rule 57 of the Rules of Civil Procedure.

[10] I start with the offer to settle tendered by the personal Defendants. I was only provided with a copy of the offer served by Mr. Mangat. However, I presume that Mr. Singh’s offer was the same. It was an offer that the Plaintiffs discontinue the action, and the Defendants would bear their own costs. There was approximately $2 million dollars at stake in this action. The Defendants’ offer would require the Plaintiffs to abandon their claims. Given the outcome of the case, this offer was not reasonable, and the Defendants should not be entitled to claim any benefit from this offer.

[11] This brings me to the Plaintiffs’ Offer. This offer was served on January 4th, 2017, and set out the following terms:

a) The Defendants would pay the Plaintiffs $1,960,000.00 plus prejudgment interest in accordance with the Courts of Justice Act. b) The Defendants would pay partial indemnity costs to be agreed upon or assessed. c) The offer was open for acceptance until one minute after the trial commenced.

[12] I start by noting that, while this offer represents only a modest compromise over the Plaintiff’s claim, the Plaintiffs were more successful than this offer at trial. Normally, this offer would trigger the cost consequences under Rule 49.

[13] However, counsel for Sikh Lehar argues that the subsequent offers that were made by both parties in this case meant that this Rule 49 offer was rescinded. In support of this position, he points to the decisions in, inter alia, OPB Realty Inc. v. Canada International Medical Suppliers Co. (2014 ONSC 6578), Diefenbacher v. Young et. al. (), and Stradiotto v. BMO Nesbitt Burns Inc. (2015 ONSC 1760).

[14] The series of subsequent offers all relate to whether the property would be purchased by the Plaintiffs, and what credits would be provided to the Plaintiffs for the monies already transferred to the Defendants. The subsequent offers were made by both sides, and all involve an attempt to reach an agreement on the sale of the property from Sikh Lehar to the Plaintiffs.

[15] On reading the offers, three facts clearly emerge. First, none of them involved a refund of the deposit. Second, the parties came close to reaching an agreement to resolve this matter. Finally, the original offer of January 4th, 2017 was not mentioned by either party anywhere in this exchange of correspondence.

[16] Counsel for Sikh Lehar pointed to the reasons in Diefenbacher, supra, in supporting his position. In that case, the Court of Appeal was considering two offers that had been made by the Plaintiffs. The first offer was less favourable to the Defendants than the second offer. Both offers appeared to have been Rule 49 offers. The Court of Appeal found that the making of the second offer had, by necessary implication, resulted in the withdrawal of the first offer.

[17] In reaching its conclusions, Carthy J.A. stated at paras. 20-21:

20 Conceding that the answer is elusive, I lean to adopting the parlance and normal understanding of a litigant that a decreasing offer by a plaintiff and an increasing offer by a defendant, without reference to the earlier offer, is by implication a withdrawal of the earlier offer. Its reality has disappeared in the ongoing negotiations and dealing between the parties and, prior to the present judicial debate of the issue, it is not sensible to consider that the parties would have thought to earlier office, in the context of costs consequences, after the second offer.

21 In the future, parties making second offers may choose to stipulate that the earlier offer (higher, in the case of a plaintiff’s offer) remains outstanding. This would eliminate any implication to the contrary and would leave intact the incentive to make more reasonable offers as events develop. At the same time, it would alert the opposing party to the risk that the second offer may be withdrawn or that the first offer may be operative when compared to the trial judgment. Thus, the decision in this case can be considered as reflecting the fair perception of the parties to the offers exchanged, rather than dictating a principle upon which Rule 49 should be applied.

[Emphasis added].

[18] My original judgment did not give the Plaintiffs an opportunity to provide reply submissions on costs. However, after reading Sikh Lehar’s position on this issue as well as relevant case law, I determined that the Plaintiffs should have the right to reply on this issue only. I have received and considered their submissions on this point.

[19] The Plaintiffs argue that the Diefenbacher, supra, decision should not be applied in this case, and advance three points in support of this position, as follows:

a. Unlike Diefenbacher, the subsequent offers in the case before me were not made under Rule 49. b. Unlike Diefenbacher, the subsequent offers in this case were not declining in nature. They cannot actually be compared to the Rule 49 offer as they were qualitatively quite different. c. The reasoning in the Court of Appeal’s decision in Mortimer v. Cameron () contradicts Diefenbacher, and should be applied in this case.

[20] As a fact, I accept the first two points advanced by the Plaintiffs on this issue. The subsequent offers were not made under Rule 49. In fact, they could not have been made under Rule 49, as they all involved the Plaintiffs purchasing the property, and the claim for specific performance had been abandoned by the Plaintiffs by early January.

[21] Similarly, it is difficult to compare the Plaintiffs’ Rule 49 Offer with the Plaintiffs’ other offers to purchase the property. Some questions will illustrate the problems in comparing the relative value of the Rule 49 offer and the subsequent offers: How much had the value of the property changed? Were there any defects in the property now that did not exist previously? Are all the leases still in place? What amounts, if any, would the temple be paying in rent as part of the agreement? I am not prepared to consider whether these offers are declining offers within the meaning of Diefenbacher, supra, as there is no way for me to actually answer the question.

[22] I also accept that the decision in Stradiotto, supra, is distinguishable on the basis that the offers in Stradiotto were declining offers, and the case before me does not involve declining offers. In any event, however, in Stradiotto, Mew J. found that the subsequent offers were not Rule 49 offers and, therefore, did not vitiate the first offer. This case does not assist the Defendants’ argument on costs.

[23] However, these two arguments need to be considered in light of two further points in the case law. One point favours Sikh Lehar’s position, and one point favours the Plaintiffs’ position.

[24] The point that favours Sikh Lehar’s position is outlined in the decision in OPB Realty Inc., supra. In that case, Perell J. was considering the question of whether an offer to settle remained open for the opposing party to accept in light of subsequent offers. Perell J. found that it did not, and made the following observations (at paragraphs 42 to 46):

42. In my opinion, this line of cases is dispositive of the case at bar. The case at bar is a case where the August 2013 offer increased the price for the settlement and by necessary implication OPB Realty withdrew its earlier offer. The case of Mills v. Raymond, supra, in particular, is very similar to the case at bar, and in that case, there was an implied withdrawal of an earlier offence to settle.

43. Therefore, the Defendants’ motion should be dismissed; there is no settlement, and the action should continue;

44. Although the above analysis is dispositive, having regard to the arguments made by the parties, there are a few additional matters that require comment.

45. The Defendants attempted to distinguish the line of cases that holds that a subsequent offer may be taken to withdraw an earlier offer with the argument that this line of cases does not apply if the subsequent offer is a time limited offer. The Defendant’s theory is that with the expiry of the replacement offer the never formally withdrawn offer becomes capable of acceptance and that is what occurred in this case at bar making the October 2012 offer capable of acceptance after the expiry of the time limited August 2013 offer.

46. This argument, however, was rejected in Kocsis v. Chippewas of Mnjikaning First Nation, supra. And I would reject it too. There is fairness in the case law that holds that offers to settle can be treated as withdrawn by necessary implication and the offer to settle regime should not operate as some sort of legalized schoolyard poison tag game with traps for the unwary.

[Emphasis added].

[25] Using this passage, it would be argued that the subsequent offers lulled Sikh Lehar into believing that the Rule 49 offer had been withdrawn, and they should not now be faced with the cost consequences of that Rule 49 offer.

[26] On the other hand, the Court of Appeal’s decision in Mortimer v. Cameron, supra, favours the Plaintiffs’ position. In that decision, Robins J.A. stated at paras. 62-64:

62 In my opinion, solicitor and client costs were properly awarded under rule 49.10. The plaintiffs obtained a judgment more favourable to them than the offer to settle which they made to the city and Stingray on March 20, 1989. The city and Stingray contend that this offer was withdrawn by subsequent offers, and, therefore, the plaintiffs had not complied with rule 49.10. I agree with the trial judge’s analysis of the subsequent offers and his conclusion that they did not operate so as to implicitly withdraw the March 20 offer.

63 In some circumstances a subsequent offer may, by necessary implication, constitute the withdrawal of a previous offer. This will occur where, for instance, the subsequent offer requires payment of a greater sum than the sum stipulated in the previous offer. In this case, however, the subsequent offers were more favourable to the defendants than the offer of March 20, 1980. While one would not expect the defendants to accept an earlier offer over a later one which was more beneficial to them, I do not think it can be implied that the earlier offer had been withdrawn.

64 On its face, the March 20 offer was open for acceptance until after the commencement of the trial. There were no circumstances which should have led the trial judge to infer that it had been withdrawn. The plaintiff’s recovery was substantially greater than their offer to settle. They fulfilled the letter and spirit of rule 49.10 and are entitled to the solicitor-and-client costs awarded to them.

[27] On this issue, I am of the view that the Plaintiffs position should prevail for three reasons.

[28] First, there is the fact that the January 4th, 2017 Rule 49 offer was never formally withdrawn in writing. While the Diefenbacher decision deals with this issue by noting that the offer is withdrawn by necessary implication, that finding was made where the second offer was also a Rule 49 offer and where the second offer was more favourable to the opposite party. Both factors are relevant to the reasoning in Diefenbacher, and neither are present in this case.

[29] In Diefenbacher, the fact that a second offer was made under the same Rule supports the inference that the first offer was withdrawn. In this case, the parties attempted to achieve a different resolution, but nothing was done to withdraw the original Rule 49 offer.

[30] The fact that an offer was more favourable to the receiving party may also be relevant to whether the previous offer was withdrawn. The previous offer would rarely be accepted by the receiving party if there was a better offer on the table. However, in this case, there was no “better” offer; there was just a different type of offer. Similarly, the fact that an offer less favourable to the receiving party was subsequently made might also be relevant to the question of whether the original offer had been withdrawn. Again, however, there was no “worse” offer in this case, just a different type of offer.

[31] This brings me back to the provisions of Rule 49.04 of the Rules of Civil Procedure. That Rule states:

Withdrawal

49.04 (1) An offer to settle may be withdrawn at any time before it is accepted by serving written notice of withdrawal of the offer on the party to whom the offer was made.

(2) The notice of withdrawal of the offer may be in Form 49B.

Offer Expiring after Limited Time

(3) where an offer to settle specifies a time within which it may be accepted and it is not accepted or withdrawn within that time, it shall be deemed to have been withdrawn when the time expires.

Offer Expires when Court Disposes of Claim

(4) An offer may not be accepted after the court disposes of the claim in respect of which the offer is made.

[32] The Rules states that a Rule 49 offer is in place until it is withdrawn in writing. This rule must mean something. To find that any subsequent offer of settlement resulted in the Rule 49 offer being withdrawn would be to significantly reduce the meaning of this Rule. Based on Rule 49.04, I am of the view that the reasoning in Diefenbacher only applies to cases where a subsequent Rule 49 offer is served. As a result, Diefenbacher does not apply in this case.

[33] Second, the parties must be entitled to explore settlement positions while also maintaining their positions (and their rights) if the matter proceeds to litigation. Accepting Sikh Lehar’s position in this case would allow them to escape the application of Rule 49 on a technicality, even though the Plaintiffs had complied with both the spirit and intent of the Rule. The Plaintiffs should be entitled to the benefits of Rule 49 when they have complied with its requirements. It is worth noting that, while I have distinguished Diefenbacher, supra, D.S. Ferguson J. rejected the reasoning of Diefenbacher in Gorman v. Powell () at para. 6.

[34] Third, the purposes of costs should be remembered. They include encouraging settlement. Narrowly reading the notice requirements in Rule 49.04 would reduce the circumstances in which Rule 49 offers would apply and would reduce the risks that would flow to parties who failed to accept reasonable offers. Given the intent of the costs rules, I am of the view that the Court should not be too quick to find that a Rule 49 offer has been withdrawn when there is no withdrawal of that offer in writing.

[35] I should also note that the decision in OPB Realty Inc., supra, dealt with the acceptance of an offer. OPB Realty focused on the fact that there was an increased offer which, by necessary implication, resulted in the withdrawal of the previous offer. As a result, I am of the view that it is distinguishable from the case before me.

[36] Therefore, the Plaintiffs are entitled to their substantial indemnity costs from January 4th, 2017 to the conclusion of the trial.

The Rule 57 Factors

[37] I should note that my comments on this issue in terms of assessing the reasonable amount of costs apply with more force to the pre-January 4th, 2017 costs. However, my assessment of the reasonableness of the costs, and of the Rosenblatt disbursement, apply to my overall assessment of costs.

Who Was Successful?

[38] The Plaintiffs were ultimately mostly successful, and should be entitled to recover costs. However, the Defendants rightly point out that the Plaintiffs were unsuccessful in their claim to be reimbursed for $80,000.00 of trucking services, and that the Plaintiffs lost a motion in June of 2016 that resulted in portions of their Affidavits being struck.

[39] In the circumstances, I agree that there should be a reduction in the costs. However, this reduction should be limited, as the Plaintiffs have not advanced a significant costs claim for any of this work. The bulk of those costs would have been claimed by Mr. Laframboise, and the work at trial would have mostly been subsumed in the larger issues.

The Complexity of the Proceeding

[40] This was a very complex matter, with a significant number of documents and legal issues. I am of the view that this factor supports a higher award of costs in favour of the Plaintiff.

[41] On this point, I should note the argument that the individual Defendants make about their costs of the action being only $25,000.00. Given that most of the legal work in advancing the position of the Defendants was done by counsel for Sikh Lehar, I do not find this to be a persuasive argument.

The Amount Claimed and/or Recovered in the Proceeding

[42] The amount both claimed and recovered in this proceeding is in excess of $2 million. The issues were significant to all parties. This factor clearly supports a higher award in favour of the Plaintiffs.

Whether Any Step in the Proceeding Was Unnecessary

[43] The Defendants claim that the Plaintiffs costs should be reduced because of the unnecessary attendances in June of 2016. In particular, there were two appearances before Tzimas J. on June 22nd and 23rd, 2016 that were only necessary because of the fact that the Plaintiffs’ trial affidavit was late. I agree with the Defendants that these appearances would not have been necessary if the Plaintiffs’ lawyer at the time, Mr. Laframboise, had ensured that the required submissions were prepared on time. However, the costs reduction should be limited because of the fact that the Plaintiffs’ costs claim does not include any time for these appearances.

The Time Spent by the Plaintiffs’ Counsel

[44] The Defendants state that the time spent by the Plaintiffs was excessive and unreasonable. The Plaintiffs disagree.

[45] I start by acknowledging that the work was undoubtedly done by the Plaintiffs’ counsel, that the case was complex, and that it would have been quite time consuming. In addition, as I have noted both in these reasons and in my judgment, this matter was quite complex. However, I am of the view that the amount of work done in advance of the trial exceeds what the Defendants should reasonably expect to pay. I have reached that conclusion for two reasons.

[46] First, there is the amount of time spent. Assuming a 40 hour billable work week, Mr. Pape spent over 3 ½ weeks preparing for this case. Ms. Chaudhury spent almost 4 weeks preparing for the case, and Mr. Nasseri spent just over 5 weeks preparing for this case. When added together, this is approximately three months of lawyer time. While much of that time would be time spent by a prudent counsel, it is not all time that the Defendants should be responsible for.

[47] Second, there is the number of lawyers involved in this file. It is not clear to me why it was necessary for three counsel to be involved in the preparation of this case for trial. This was a complex matter that clearly would require a senior and junior counsel. However, I am of the view that having three counsel intimately involved in this matter seems excessive and would likely have led to a duplication of effort.

[48] Then, there is the counsel fee. The 20 hours claimed for three days before me appears to me to be entirely reasonable. However, I am not prepared to accept that having three lawyers at court is something that the Defendants should be required to pay for. As a result, the counsel fee is reduced to 20 hours for 2 lawyers.

The Rosenblatt Disbursement

[49] The Plaintiffs are seeking reimbursement for approximately $30,000.00 in disbursements. The bulk of this amount, $20,000.00, is for an opinion letter prepared by Reuben Rosenblatt, Q.C., who is a well-known and well-regarded lawyer with considerable expertise in real estate.

[50] The Defendants object to this disbursement on the basis that it is unnecessary, and that the report did not make a contribution to the case.

[51] The Plaintiffs argue that Mr. Rosenblatt’s disbursement meets the test of reasonableness as set out in Hamfler v. 1682787 Ontario Inc. (2011 ONSC 3331). In particular, the Plaintiffs argue that Mr. Rosenblatt’s opinion made a contribution to the case.

[52] I accept the Defendants’ position on this issue, and disallow the Rosenblatt disbursement for three reasons. First, as I have noted in the previous section, the time spent by the Plaintiffs’ lawyers on this case was excessive. Second, as Mr. Schneiderman rightly points out, this opinion does not appear to have been necessary to the Plaintiffs in framing their position on this case. For example, the Rosenblatt opinion, rendered on February 15th, 2017, does not appear to have affected the Plaintiffs’ decision to abandon specific performance, which took place sometime earlier. Finally, the opinion included reviewing submissions, and was duplicative of the work that had been performed by Mr. Pape and his colleagues.

[53] The costs associated with the Rosenblatt disbursement are not to be recovered from the Defendants. The remainder of the disbursements do not appear to be unreasonable.

The Overall Assessment

[54] Costs are to be assessed in a holistic way, and not a mechanical way. As a result, having set out the various factors, I need to step back and consider what a reasonable award of costs would be having regard to all of the circumstances in this case.

[55] In the circumstances, I find that the Plaintiffs should be entitled to the following costs:

a. For the pre-January 4th, 2017 work, the sum of $25,000.00. b. For the work after January 4th, 2017, the Plaintiffs should be entitled to two-thirds of their substantial indemnity costs, in the sum of $90,218.90. The two thirds is arrived at by assuming that only two lawyers were necessary. I am not prepared to determine which two. c. For the counsel fee, $15,677.17, which is two-thirds of the substantial indemnity amount claimed. d. For disbursements, $6,242.42, which is the disbursements less the Rosenblatt opinion. e. For HST, the sum of $17,828.00.

[56] From these amounts, I am deducting $7,000.00 as a reasonable deduction to take into account both the time wasted in June of last year and the time spent on the issue of dirt removal. In my view, the end result is an amount that gives effect to the Plaintiffs’ Rule 49 offer and addresses the legitimate concerns raised by the Defendants.

[57] In the result, the Defendants are to pay the Plaintiffs the sum of $147,966.49 in costs.

LEMAY J. Released: November 30, 2017

COURT FILE NO.: CV-15-4731-00 DATE: 2017 11 30 ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: SUKHUNDER SANDHU and 2207190 ONTARIO INC. Plaintiffs

• and - SIKH LEHAR INTERNATIONAL ORGANIZATION and MANJIT MANGAT and HARKHANWAL SINGH Defendants ENDORSEMENT LEMAY J. Released: November 30, 2017