Court File and Parties

COURT FILE NO.: C-435-13 DATE: 2018/09/20 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: IRIS R. POWELL and THE CLASSIC PLUS WOMAN INC., Plaintiffs AND: SEAN SILVA, MOHAMED AFZAL SAHADAT, ISHAN DHANAPALA, DHANA CORPORATION and FIRST FINANCIAL CONSULTING SERVICES (FFCS) LTD., Defendants

BEFORE: D.A. Broad

COUNSEL: Richard Campbell, for the Plaintiffs Osborne G. Barnwell, for the Defendants, Mohamed Afzal Sahadat, Ishan Dhanapala, Dhana Corporation and First Financial Consulting Services (FFCS) Ltd.

COSTS ENDORSEMENT

[1] The parties have been unable to settle the question of costs. Mr. Barnwell, Counsel for the Defendants Mohamed Afzal Sahadat, Ishan Dhanapala, Dhana Corporation and First Financial Consulting Services (FFCS) Ltd. has delivered his costs submissions, as has Mr. Campbell, Counsel for the Plaintiff Iris R. Powell. Mr. Barnwell has also delivered a reply to the costs submissions of the plaintiff Ms. Powell. Mr. Silva, who was self-represented, did not deliver any costs submissions.

Position of the Defendants Mohamed Afzal Sahadat, Ishan Dhanapala, Dhana Corporation and First Financial Consulting Services (FFCS) Ltd.

[2] Mr. Barnwell submits that his clients, including Mr. Sahadat against whom judgment was granted to Ms. Powell in the sum of $26,700 plus interest, ought to be awarded their costs on a substantial indemnity basis against Ms. Powell. In the alternative, he submits that costs are to be awarded against Mr. Campbell personally pursuant to rule 57.07 of the Rules of Civil Procedure on two bases, first, that he caused costs to be incurred unnecessarily by bringing the action in the Superior Court rather than the Small Claims Court, and second, that he caused the costs to be incurred unnecessarily by advancing an unsupportable claim for damages for business losses for failure to repay a loan.

[3] Mr. Barnwell, on behalf of his clients, submit that the case was “in every respect” a Small Claims Court matter. Moreover, the basis of the litigation was driven by an animus harboured by Ms. Powell towards Mr. Sahadat, and that fraud was the “theme throughout the litigation” and there were allegations of breach of trust and breach of fiduciary duty. Mr. Barnwell submits that these allegations represent “reprehensible conduct” on Ms. Powell’s part warranting a higher scale of costs.

[4] Mr. Barnwell claims substantial indemnity costs totaling $96,566.81 comprising 82,581.25 in fees, HST in the sum of $10,735.56 and disbursements in the sum of $3,250. In the alternative, he claims partial indemnity costs in the sum of $82,443.23 comprised of fees in the sum of $70,082.50, HST in the sum of $9,110.73 and disbursements in the sum of $3,250.

Position of the Plaintiff Iris R. Powell

[5] Mr. Campbell, on behalf of Ms. Powell, submits that Mr. Barnwell’s clients ought to be jointly and severally liable to her for her costs of the action on a partial indemnity basis in the sum of $80,997.03, comprised of fees in the sum of $64,172.50, HST on fees in the sum of $8,342.43, disbursements in the sum of $7,682.80 and HST on taxable disbursements in the sum of $799.30.

[6] Mr. Campbell submits that the defendants (with the exception of Mr. Silva) “made the truth a moving target.” They all acted throughout in concert taking joint positions in their pleadings, the discovery evidence and their evidence at trial. He says that if any of the defendants admitted the truth of what had happened, the trial could have been avoided or greatly simplified and shortened. Moreover each of the defendants (except Mr. Silva) counterclaimed against the plaintiff alleging breach of contract, breach of fiduciary duty and unjust enrichment, all of which claims were abandoned at trial.

Guiding Principles

[7] Section 131(1) of the Courts of Justice Act, R.S.O. 1990, c. C.43, as amended, provides that "subject to the provisions of an Act or rules of court, the costs of and incidental to a proceeding or a step in a proceeding are in the discretion of the court, and the court may determine by whom and to what extent the costs shall be paid."

[8] The factors to be considered by the court, in the exercise of its discretion on costs, are set forth in subrule 57.01(1) of the Rules of Civil Procedure, as follows:

57.01 (1) In exercising its discretion under section 131 of the Courts of Justice Act to award costs, the court may consider, in addition to the result in the proceeding and any offer to settle or to contribute made in writing, various factors, including:

(0.a) the principle of indemnity, including, where applicable, the experience of the lawyer for the party entitled to the costs as well as the rates charged and the hours spent by that lawyer;

(0.b) the amount of costs that an unsuccessful party could reasonably expect to pay in relation to the step in the proceeding for which costs are being fixed;

(a) the amount claimed and the amount recovered in the proceeding;

(b) the apportionment of liability;

(c) the complexity of the proceeding;

(d) the importance of the issues;

(e) the conduct of any party that tended to shorten or to lengthen unnecessarily the duration of the proceeding;

(f) whether any step in the proceeding was,

(i) improper, vexatious or unnecessary, or

(ii) taken through negligence, mistake or excessive caution;

(g) a party's denial of or refusal to admit anything that should have been admitted;

(h) whether it is appropriate to award any costs or more than one set of costs where a party,

(i) commenced separate proceedings for claims that should have been made in one proceeding, or

(ii) in defending a proceeding separated unnecessarily from another party in the same interest or defended by a different lawyer; and

(i) any other matter relevant to the question of costs.

[9] The Court of Appeal has observed that modern costs rules are designed to foster three fundamental purposes: (1) to indemnify successful litigants for the cost of litigation; (2) to encourage settlements; and (3) to discourage and sanction inappropriate behavior by litigants (see Fong v. Chan, [1999] O.J. No. 4600 (Ont. C.A.) at para. 24).

[10] Justice Perrell in the case of 394 Lakeshore Oakville Holdings Inc. v. Misek, 2010 ONSC 7238, [2010] O.J. No. 5692 (Ont. S.C.J.) reformulated the purposes of the modern costs rules, at para. 10, as follows:

(1) to indemnify successful litigants for the costs of litigation, although not necessarily completely; (2) to facilitate access to justice, including access for impecunious litigants; (3) to discourage frivolous claims and defences; (4) to discourage the sanctioning of inappropriate behaviour by litigants in their conduct of the proceedings; and (5) to encourage settlements.

[11] The usual rule in civil litigation is that costs follow the event and that rule should not be departed from except for very good reasons (see Gonawati v. Teitsson, 2002 CarswellOnt 1007 (Ont. C.A.), and Macfie v. Cater, [1920] O.J. No. 71 (Ont. H.C.) at para 28).

[12] It is well known that the overall objective in dealing with costs is to fix an amount that is fair and reasonable for the unsuccessful party to pay in the particular circumstances of the case, rather than an amount fixed by the actual costs incurred by the successful party (see Zesta Engineering Ltd. v. Cloutier, [2002] O.J. No 4495 (C.A.) at para. 4). The expectation of the parties concerning the quantum of costs is a relevant factor to consider. The court is required to consider what is "fair and reasonable" having regard to what the losing party could have expected the costs to be (see Boucher v. Public Accountants Council (Ontario), [2004] O.J. No. 2634 (Ont. C.A.) at para. 26 and Coldmatic Refrigeration of Canada Ltd. v. Leveltek Processing LLC, [2005] O.J. No. 160 (Ont. C.A.)).

Analysis

[13] The following were the results in the proceeding:

(a) The plaintiff Ms. Powell recovered judgment against the defendant Mr. Sahadat in the sum of $26,700.00 plus interest; (b) The plaintiff Ms. Powell’s action was dismissed against all other defendants; (c) The action of the plaintiff The Classic Plus Woman Inc. was dismissed against all defendants; and (d) The counterclaim of the defendants Mohamed Afzal Sahadat, Ishan Dhanapala, Dhana Corporation and First Financial Consulting Services (FFCS) Ltd. was dismissed.

[14] I do not accept the submission of Mr. Barnwell that the plaintiff Ms. Powell should not be entitled to any costs and should be responsible to pay costs to his clients on the basis that the action should have been brought in the Small Claims Court. Rule 57.05(1) of the Rules of Civil Procedure provides that if a plaintiff recovers an amount within the monetary jurisdiction of the Small Claims Court, the court may order that the plaintiff shall not recover any costs. The amount that Ms. Powell recovered against Mr. Sahadat exceeds the Small Claims Court limit of $25,000.

[15] I am not satisfied that there are very good reasons to depart from the general rule that costs should follow the event in the proceeding, subject to my comments below respecting the plaintiff The Classic Plus Woman Inc. As such, Ms. Powell is entitled to costs against Mr. Sahadat, and the defendants Ishan Dhanapala, Dhana Corporation and First Financial Consulting Services (FFCS) Ltd. are entitled to costs against Ms. Powell.

Claim for Costs of the Plaintiff Iris R. Powell

[16] Rules 76.13(2) and (3) of the Rules of Civil Procedure provide that if the plaintiff commences and continues an action under the ordinary procedure and obtains a judgment in the amount of $100,000 or less, exclusive of interest and costs, she or he shall not recover any costs unless the court is satisfied that it was reasonable for the plaintiff to have commenced and continued the action under the ordinary procedure.

[17] There were two main components to Ms. Powell’s claim, firstly, that Mr. Sahadat and the other defendants were liable to repay her monies that she advanced together with additional monies to cover the amount that she was contractually required to pay to Principis, and secondly, that she was entitled to recover business losses she said she suffered as a result of the defendants’ failure to pay the monies to her. Although Ms. Powell was awarded $20,000 plus an additional amount representing a proportionate amount of the additional monies that she was required to pay Principis against Mr. Sahadat, she was entirely unsuccessful in substantiating any claim for business losses on the basis that such losses are not recoverable at law for failure to pay a debt, except in very limited circumstances which were not applicable.

[18] Ms. Powell’s claim for costs against Mr. Sahadat should be discounted significantly, on the principle of proportionality, by reason of the fact that Ms. Powell was unsuccessful on one of the two major issues at trial. The amount that she recovered, exclusive of interest, represented 26.7% of the amount of damages claimed in her Statement of Claim prior to the amendment at trial and 13.35% of her claim for damages following the amendment.

[19] In my discretion I would not strictly apply rules 76.13(2) and (3) of the Rules of Civil Procedure to deny Ms. Powell’s claim for costs in its entirety, but her claim for costs should also be discounted to account for the discovery length that would not have been permitted had the action been commenced under the simplified procedure. I would also take into account the fact that Ms. Powell maintained claims for breach of trust and breach of fiduciary duty against the defendants throughout the proceeding and only abandoned those claims during final submissions at trial.

[20] I would not allow recovery of the disbursements for the report of the plaintiffs’ expert Mr. Figov and for his attendance at trial. As indicated, the plaintiffs’ claim for business losses was denied and moreover it was found at trial that Mr. Figov was not asked to calculate the business loss sustained by Classic Plus Woman on the basis alleged in the Statement of Claim (see para. 108 of the Reasons for Judgment). The claim for Mr. Figov’s fees totalled $4,000 in Ms. Powell’s Bill of Costs.

[21] Applying the foregoing considerations I fix Ms. Powell’s costs against Mr. Sahadat on a partial indemnity basis in the sum of $19,000, comprised of $15,000 in respect of fees, HST on fees in the sum of $1,950 and disbursements estimated in the sum of $2,050.

Claim for Costs of the Defendants Ishan Dhanapala, Dhana Corporation and First Financial Consulting Services (FFCS) Ltd.

[22] In my view the parties on both sides share blame for the length of the trial and the unwarranted complexity of the proceeding. In essence the plaintiffs’ claim was for repayment of a loan advance. The plaintiffs’ claim for consequential business losses was tenuous at best and was ultimately unsuccessful. The action should have been commenced under the Simplified Procedure.

[23] However, the defendants, with the exception of Mr. Silva, contributed to the complexity of the case by advancing confusing and unsupportable positions in their pleadings and in advancing a counterclaim which had no foundation and only abandoning it mid-way through the trial.

[24] It is noted that the Bill of Costs submitted by Mr. Barnwell does not differentiate between the costs incurred by Mr. Sahadat, who was unsuccessful in the action, and the defendants Ishan Dhanapala, Dhana Corporation and First Financial Consulting Services (FFCS) Ltd. who were. In the absence of any guidance on the appropriate allocation as between the defendants in the Bill of Costs, I would allocate 50% of the costs claimed to the defendants Ishan Dhanapala, Dhana Corporation and First Financial Consulting Services (FFCS) Ltd.

[25] Applying the principle in Zesta Engineering Ltd. v. Cloutier and the principle of proportionality I fix the costs of the defendants Ishan Dhanapala, Dhana Corporation and First Financial Consulting Services (FFCS) Ltd., on a partial indemnity basis, in the sum of $23,450, comprised of fees in the sum of $20,000, HST thereon on the sum of $2,600 and disbursements in the sum of $850. I would not allow the claim for disbursements for research on Lexis in the sum of $2,400 in the absence of any authority that those charges are properly recoverable as a disbursement.

[26] I see no basis for any award of costs to be made against Mr. Campbell personally. In making this finding I have had regard to the “extreme caution” principle enunciated by the Supreme Court of Canada in Young v. Young, [1993] 4 S.C.R. 3, and confirmed by the Court of Appeal in Galganov v. Russell (Township), 2012 ONCA 410, 294 O.A.C. 13 (C.A.).

[27] I would not order any costs against The Classic Plus Woman Inc. The naming of that corporation as a plaintiff did not add to the complexity, length or costs of the proceeding and the parties paid little or no attention to the corporate plaintiff during the trial or in submissions.

Disposition

[28] On the basis of the foregoing it is ordered that:

(a) the defendant Mohamed Afzal Sahadat shall pay to the plaintiff Iris R. Powell costs in the sum of $19,000; (b) the plaintiff Iris R Powell shall pay to the defendants Ishan Dhanapala, Dhana Corporation and First Financial Consulting Services (FFCS) Ltd. costs in the sum of $23,450.

[29] These amounts are to be paid within 30 days.

D.A. Broad, J. Date: September 20, 2018