COURT FILE NO.: CV-15-2933-00 DATE: 2018 12 13
ONTARIO SUPERIOR COURT OF JUSTICE
B E T W E E N:
DARIA SULAIMAN Joseph Irving, for the Plaintiff Plaintiff
- and -
RENATA MIELCZAREK, ALEKSANDRA MIELCZAREK, and JAMES WILLIAM SINCLAIR Self-Represented Defendants
HEARD: May 24 and 25 and August 9, 2017, at Brampton, Ontario
Price J.
Costs Endorsement
OVERVIEW
[1] This endorsement addresses the costs of a motion by Renata Mielczarek to consolidate her application for remedies under section 248 of the Business Corporations Act as an oppressed shareholder and her later application to extend those remedies to the successors of the original corporation, and an action by one of the principals of the successor corporations against Ms. Mielczarek’s daughter, Aleksandra Mielczarek.
BACKGROUND FACTS
[1] Renata Mielczarek is a shareholder of Oko Blu Mediterranean Restaurant and Lounge Inc., which operated a restaurant under the name Oko Blu. In 2015, she alleged that two brothers, Hanna Eid and Issa Eid, who had become 50% shareholders of Oko Blu, had conspired with each other and with others to remove her from the business and deprive her of the value of her shares. Because Renata’s daughter, Aleksandra Mielczarek (“Ms. Mielczarek”), is more fluent in English than her mother, Renata made a written assignment of her cause of action to Aleksandra, who applied to this court in court file no. CV-13-1432-00 for a remedy under section 248 of the Business Corporations Act as an oppressed shareholder.
[2] On September 16, 2013, Miller J. found that Hanna Eid and Issa Eid had oppressed Ms. Mielczarek. Justice Miller ordered that the shares of Oko Blu be valued and that the respondents buy Ms. Mielczarek’s 50% shares, failing which the respondents’ shares would be transferred to her.
[3] In 2015, Ms. Mielczarek complained that the respondents had impeded the Valuator’s access to the business by causing the original corporation, Oko Blu, to become bankrupt and transfer its assets, including its lease, to a new corporation with a similar name, Oko Blue Lounge Inc. The respondents then established a third corporation, Le Royal Lux Inc., to operate the banquet hall, the most profitable part of Oko Blu’s business, and refused the Valuator access to the records of that business on the basis that it was owned by a different corporation than was the subject of Justice Miller’s Order.
[4] On December 4, 2014, this Court appointed Paddon & Yorke Inc. a Supervisor of Le Royal Lux Inc., and ordered that no shares be issued by it and no assets be sold until the issues in the proceeding were determined. It ordered that Le Royal Lux Inc. and its principals, Dalia Sulaiman and Ammer Sulaiman, be added as parties to the action, and that the issues of Hanna Eid’s and Issa Eid’s liability, and the ownership of the common shares of Le Royal Lux Inc. be determined at a long motion on April 23, 2015. It reserved the costs of the motion to that hearing. The respondents appealed unsuccessfully from that Order to the Divisional Court.
[5] Ms. Mielczarek made a new application to the court in court file No. CV-15-0103-00 for remedies against the original respondents, Hanna Eid, Issa Eid, and Oko Blu, and the new companies, Le Royal Lux Inc. and Le Royal Resto & Lounge Inc. and their principals, Barwa Rashid, Dalia Sulaiman, and Ameer Sulaiman. She later moved to consolidate the first and second application, which resulted in an Order dated August 9, 2017, consolidating them under court file no. CV-13-1432-00, naming Hanna Eid, Issa Eid, Le Royal Lux Inc., Le Royal Resto & Lounge Inc., Oko Blu Mediterranean Restaruant and Lounge Inc., Barwa Rashid, Ameer Sulaiman, and Dalia Sulaiman as respondents.
[6] On June 25, 2015, Dalia Sulaiman, one of the respondents in Ms. Mieczarek’s proceedings, commenced an action under court file no. CV-15-2933-00 against Ms. Mielczareka and her daughter, Aleksandra Mielczarek, and their family friend and sometime legal assistant, James Sinclair, for causing a security interest for an assignment of book debts that was never, in fact, made to Ms. Mielczarek to be registered under the Personal Property Security Act in September 2014. Ms. Sulaiman asserted that she discovered the registration in March 2015, when financing the purchase of a new home, and that as a result, of the registration, which Ms. Mielczarek says was removed two days after Ms. Sulaiman complained to her, the Bank charged her a penalty of $15,000. Ms. Sulaiman claimed damages of $340,000, including punitive and exemplary damages.
[7] Ms. Mielczarek characterized Ms. Sulaiman’s action as intimidation and retaliation for Ms. Mielczarek’s oppression application. She asserted in her supporting affidavit that she registered the security interest to ensure that she was notified of any effort by Ms. Suleiman to sell assets of Oko Blu or its successors which might be in breach of Justice Miller’s Order.
[8] On May 24, 2017, Ms. Mielczarek moved in Ms. Sulaiman’s action to consolidate Salia Sulaiman’s action, Court File Number CV-15-2933, with the earlier oppression actions, court files CV-13-1432-00 and CV-15-0103-00, or to have the actions heard together. The motion was adjourned at the respondents’ request to require Ms. Mielczarek to amend her affidavit sworn March 30, 2017, to add an acknowledgement that she understood the contents, although it was in English, and to allow the respondents’ lawyer, Mr. Irving, to cross-examine her on the amended affidavit. Ms. Mielczarek amended her affidavit as requested, and arranged for an interpreter for Mr. Irving’s cross-examination of her.
[9] On July 17, 2017, Ms. Mielczarek served an amended Motion Record, Factum, and Book of Authorities on the respondents and on the same day, Ms. Mielczarek and her husband, Walter Mielczarek, attended, in response to the respondents’ Notice of Examinations, and were cross-examined on their affidavits. At the conclusion of the cross-examinations, Mr. Irving requested that Issa Eid be examined on a previous affidavit, and Aleksandra Mielczarek immediately telephoned Mr. Eid and requested that he attend to be cross-examined. The cross-examination of Mr. Eid took place on July 24, 2017. The respondents served their factum on August 7, 2017.
[10] The motion was heard on August 9, 2017. As noted above, the Court made an Order that day consolidating Ms. Mielczarek’s first and second application under court file no. CV-13-1432-00, and on August 10, 2017, the Court released a further Order and reasons, directing that that proceeding be tried with Ms. Suleiman’s action. The Court ordered that if the parties were unable to agree on the costs of the motion, they could make written submissions. The Court has reviewed their submissions and this endorsement will address the costs issue.
PARTIES’ POSITIONS
Ms. Mielczarek’s position
[11] The applicants seek their costs in the amount of $10,104.25, inclusive of disbursements and H.S.T. They rely on their presumptive entitlement to costs based on their success in the motion, and on the respondents’ unreasonable conduct in insisting that Ms. Mielczarek deliver an amended affidavit and hire an interpreter for the cross-examination of her, in seeking to file a factum that was not faxed until two days before the hearing of the motion, and in trying to have the motion further adjourned to await transcripts that they had not ordered to be expedited, as well as in bringing the action by Ms. Suleiman which, as noted above, the applicants characterize as a vehicle to intimidate Ms. Mielczarek and retaliate for her oppression application.
The Respondents’ position
[12] The respondents submit that a proper award of costs in this matter, on a partial indemnity scale, should be in the range of $2,000.00 to $3,000.00, inclusive of HST and disbursements. They submit that their reasonableness is evident from the position they took in the motion, which the Court rejected, that there were no issues of fact and/or law in common in the proceedings, and that the fact that Ms. Mielczarek failed, in her Factum or oral argument, to advert to Ms. Mielczarek’s motivation in registering the PPSA security, which arises from Ms. Sulaiman’s claim for punitive damages, should disentitle her to greater costs associated with the extensive recitation of facts and other issues that Ms. Mielczarek raised in her material.
ANALYSIS AND EVIDENCE
a) General principles
[13] Justice Boswell set out the general principles governing costs assessments in George v. Landles, where he stated:
The award of costs is governed by section 131 of the Courts of Justice Act, R.S.O. 1990 c. C.43 and by Rule 57.01 of the Rules of Civil Procedure. Section 131 provides for the general discretion to fix costs. Rule 57.01 provides a measure of guidance in the exercise of that discretion by enumerating certain factors that the court may consider when assessing costs. In addition, the Court must always be mindful of the purposes that costs orders serve. As Perell J. summarized in 394 Lakeshore Oakville Holdings Inc. v. Misek, 2010 ONSC 7238, [2010] O.J. No. 5692 (S.C.J.), at para. 10:
Modern costs rules are designed to advance five purposes in the administration of justice: (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 (internal citations omitted).
Ultimately, in fixing an amount for costs, the overriding principles are fairness and reasonableness: Boucher v. Public Accountants Council for the Province of Ontario (2004), 71 O.R. (3d) 291 (C.A.); and Moon v. Sher (2004), 246 D.L.R. (4th) 440 (C.A.). In assessing what is fair and reasonable in the circumstances, the Court is not to engage in a mechanical exercise, but rather must take a contextual approach, applying the principles and factors discussed above, to settle on a figure that is fair and reasonable in all the circumstances: Gratton-Masuy Environmental Technologies Inc. (c.o.b. Ecoflow Ontario) v. Building Materials Evaluation Commission, [2003] O.J. No. 1658, at para. 17.
[14] The Court is guided by the factors set out in Rule 57.01(1) of the Rules of Civil Procedure. The Court may consider, among other factors, the following:
(a) The complexity of the proceeding; (b) The importance of the issues; (c) The conduct of any party that tended to shorten or to lengthen unnecessarily the duration of the proceeding; (d) Any offers to settle; (e) The principle of indemnity; (f) The concept of proportionality, which includes at least two factors: (i) The amount claimed and the amount recovered in the proceeding; and, (ii) 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; (g) Any other matter relevant to the question of costs.
b) Importance and complexity of the motion
[15] The motion was of importance to the parties because its outcome was likely to determine whether the findings that the court made in Ms. Mielczarek’s actions would inform the court’s disposition of Ms. Sulaiman’s action, in which she claims the very substantial amount of $340,000.00.
[16] The motion was moderately complex, and was made more complex owing to the respondents’ insistence that Ms. Mielczarek amend her affidavit, their cross-examination of Mr. and Ms. Mielczarek and Mr. Eid on their affidavits, their failure to expedite the transcripts and their late service of their factum, all of which gave rise to or arguments and prolonged the hearing. The motion raised procedural issues as to the common issues of fact and law and the basis for consolidating proceedings pursuant to the Rules.
c) Reasonableness and offers to settle
[17] The general rule in a determination of entitlement to costs is that costs follow the event, and will be awarded on a partial indemnity scale. In special circumstances, costs may be awarded on a higher scale, but those cases are exceptional and generally involve circumstances where one party to the litigation has behaved in an unreasonable manner, and/or unnecessarily run up the costs of the litigation. I find that the respondents’ efforts to segregate Ms. Suleiman’s action from the actions by Ms. Mielczarek that clearly were the context which gave rise to her the later action was unreasonable and attract costs on a higher scale. Additionally, I find that the respondents conduct in the motion, for the reasons set out above, added unnecessary delay and expense to its resolution.
[18] Neither of the parties tendered any offers to settle that would affect the determination of costs.
d) Indemnity - The hourly rates charged
[19] In determining the appropriate hourly rates to be assigned to the lawyers involved in the motion, the court follows the approach taken by Aitkin J. in Geographic Resources. That is, the starting point is the successor of the Costs Grid, namely, the “Information for the Profession” bulletin from the Costs Sub-Committee of the Rules Committee (the “Costs Bulletin”), which can be found immediately before Rule 57 in the Carthy or Watson & McGowan editions of the Rules, and sets out maximum partial indemnity hourly rates for counsel of various levels of experience.
[20] The Costs Bulletin suggests maximum hourly rates (on a partial indemnity scale) of $80.00 for law clerks and $225.00 for lawyers of under 10 years’ experience. The upper limits in the Costs Bulletin are generally intended for the most complex and important of cases.
[21] The Costs Bulletin, published in 2005, is now dated. It is appropriate to adjust the hourly rates in the Costs Bulletin to account for inflation since 2005. Based on the Bank of Canada’s Inflation Calculator the 2018 equivalent of the hourly rates in the Costs Bulletin are approximately $99.00 for law clerks and $280.00 for lawyers with under 10 years’ experience.
[22] Rule 1 of the Rules of Civil Procedure defines substantial indemnity costs as "costs awarded in an amount that is 1.5 times what would otherwise be allowable in accordance with Part I of Tariff A" - i.e. they are 1.5 times the partial indemnity rate. Costs calculated on a substantial indemnity scale represent something less than full recovery. Courts have estimated substantial indemnity costs to be approximately 90% of costs on a full recovery basis.
[23] The hourly rate for law clerks, adjusted for inflation, on a substantial indemnity scale is $148.50 and the hourly rate for lawyers of less than 10 years’ experience is $420.00.
[24] The court is guided by the rates in the Costs Bulletin, not the actual hourly rates charged. Actual rates charged are relevant only as a limiting factor, in preventing the costs awarded from exceeding the actual fees charged. The Costs Subcommittee’s rates apply to all lawyers and all cases, so everyone of the same level of experience starts at the same rate.
[25] The court adjusts the hourly rate, or the resulting fees, to reflect unique features of the case, including the complexity of the proceeding, the importance of the issues, and the other factors set out in Rule 57.01(1). If an excessive amount of time was spent, or too many lawyers worked on the file, the court reduces the resulting amount of fees accordingly. Such adjustments are unnecessary in the present case, as Ms. Mielczarek and Mr. Sinclair were self-represented.
[26] The applicants’ materials were prepared in a proper and lawyerly manner and were helpful to the court. Their oral argument was reasonable and did not add unnecessary time to the hearing.
[27] For the foregoing reasons, I find that the $200.00 hourly rate claimed by the applicants are reasonable.
e) Indemnity - The time spent on the motion
[28] The applicants spent a total of 46.51 hours on the motion. I am deducting 6.82 hours for the time spent on the respondents’ motion for summary judgment, and .49 hours spent by Mr. Sinclair in his correspondence with the Law Society regarding an exemption. These deduction leave a balance of 39.2 hours.
[29] Some reduction must be made to take account of the fact that the applicants would have been required to attend as witnesses for the respondents’ cross-examination of them. They would not have been required to attend at the motion itself had they been represented. I am mindful of the fact that, even at the cross-examination, the applicants were performing a dual role, as both witnesses and advocates. For these reasons, a deduction of one half the time spent at the cross-examinations is appropriate and I therefore ½ of the 4.5 hours spent at the examinations on July 17, 2017. This amounts to a reduction of 2.25 hours @ $200.00, or $450.00.
[30] These deductions leave a balance of $7,390.00. The respondents did not submit a Costs Outline setting out the time their lawyer, Mr. Irving, spent on the motion, which would permit me to compare the time spent by each of the parties. This court has held on more than one occasion that when one party attacks another’s costs as excessive but declines to put its own dockets before the court, the attack “is no more than an attack in the air.”
[31] The respondents submit that they paid $4,800.00 to their own lawyers and that “a reasonable amount of costs to be paid by the Respondents should reflect the fact that the Applicants are self-represented and the amount that the Respondents paid their lawyer, which amount was based upon the total amount charged to them.” I disagree. The respondents provided no Costs Outline setting out how Mr. Irving arrived at the amount he charged the respondents. Without such evidence, the amount the respondents say they were charged is not a proper basis upon which to reduce the costs to be paid to the applicants.
[32] The fact that the applicants were self-represented should not disentitle them to costs, for the reasons this Court set out in Bergen v Sharpe, 2013 ONSC 74188, at para. 36 to 85. The total costs allowed to self-represented litigants must reflect the objectives of a costs order. They must be proportional to the interests at stake in the motion and within the range of what the respondents should have expected to pay if unsuccessful. However, to discount the costs claimed by the successful party based solely on the fact that they are self-represented would allow the unsuccessful litigants to litigate with relative impunity. This would encourage unreasonable conduct of litigation and would serve as a disincentive to settle.
[33] Based on my observations of the oral argument and written material filed, I find the time spent by the applicants was reasonable.
f) Other matters relevant to the determination of costs: Disbursements
[34] In fixing costs, the court need not undertake a line by line analysis of the hours or expenses claimed, nor should it second guess the amounts claimed unless they are clearly excessive or overreaching. The respondents assert that the amount of $602.25 + $29.98 for HST for disbursements is unreasonable. The only specific objection they make is to mileage. I am deducting the amount of $120.40 that is claimed for mileage and parking. No specific objection is made to the other disbursements, which I find to be reasonable and which will be allowed in the amounts claimed, for a total of $481.85 plus $29.98 HST.
g) Proportionality and the reasonable expectation of the unsuccessful parties
[35] I find that the total costs, as adjusted, of $8,862.53 that the applicants claim are proportional to the interests at stake in the motion, having regard to the amount of Ms. Sulaiman’s claim and reasonably reflect the multiple hearings and attendances for cross-examinations on affidavits. I find that the amount is within the range that the respondents should have expected to pay if unsuccessful on the motion.
CONCLUSION AND ORDER
[36] For the foregoing reasons, it is ordered that:
The respondents shall forthwith pay to the applicants their costs of the motion, fixed in the amount of $7,901.33, consisting of the following: a) Fees: $7,390.00 b) Disbursements: $481.35 c) HST: $29.98 TOTAL: $7,901.33
The respondents shall pay post-judgment interest at 3% on the costs amount payable, from the date of this Order.
Price J.
Released: December 13, 2018