COURT FILE NO.: CV-18-597958 DATE: 2018 1220 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Twelve Gates Capital Group Inc. Plaintiff – and – Mizrahi Development Group (The One) Inc. and Sam Mizrahi Defendants

Robert Cohen and Stephanie Kerzner, for the Plaintiff Nadia Campion and Eric Brousseau, for the Defendants

HEARD: October 10, 2018

Nishikawa J.

Overview

[1] The Plaintiff, Twelve Gates Capital Group Inc. (“Twelve Gates”), commenced an action against the Defendants, Mizrahi Development Group Inc. (“MDG”) and Sam Mizrahi, for breach of contract and quantum meruit. The Plaintiff alleges that MDG breached an agreement pursuant to which it retained Twelve Gates to find an equity partner for MDG’s development project. Twelve Gates further alleges that the Defendants were unjustly enriched by 18 months of work performed by Lawrence Cogan, a “senior employee” of Twelve Gates, to obtain an equity partner for the project.

[2] In this motion, the Defendants seek the following relief:

(a) An order striking the claim as against Mr. Mizrahi without leave to amend on the basis that it discloses no reasonable cause of action or, alternatively, that it is frivolous and vexatious;

(b) An order requiring Twelve Gates and Mr. Cogan to give an undertaking not to interfere in or disrupt MDG’s economic relations with its lenders; and

(c) Security for costs in the amount of $225,000.

[3] At the motion hearing, Twelve Gates’ counsel did not oppose an order for security for costs but objected to the amount MDG sought.

[4] For the reasons that follow, I grant the Defendants’ motion to strike the Plaintiff’s claim against Mr. Mizrahi, without leave to amend, and for security for costs of $200,000. I dismiss the motion for injunctive relief.

Factual Background

[5] At the hearing, a preliminary issue arose with respect to the use of evidence on this motion under the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. The Defendants have submitted affidavit evidence in support of the motion to strike the Statement of Claim as frivolous and vexatious under r. 21.01(3)(d), the motion for injunctive relief, and the motion for security for costs. The Plaintiff, who submitted no affidavit, objects to any evidence being considered on the motion to strike under r. 21.01(1)(b). In addition, the Plaintiff argues that on a motion under r. 21.01(3)(d), the court may consider evidence on the issue of whether the claim is frivolous, vexatious, or an abuse of process, but not on the claim’s merits.

[6] For the purposes of clarity, I have not considered the Defendants’ evidence in determining the r. 21.01(1)(b) motion to strike for failure to disclose a reasonable cause of action. The facts in this section are taken solely from the Statement of Claim. The Defendants’ evidence will only be considered in the context where it is permissible to consider such evidence for the specific relief being sought.

The Parties

[7] The Defendant, MDG, is the developer of a mixed-use development known as One Bloor West. The Defendant, Mr. Mizrahi, is an officer, director, and shareholder of MDG.

[8] The Plaintiff, Twelve Gates, is a corporation incorporated in Ontario in July 2015.

The Alleged Agreement

[9] The Defendants are developing a commercial and residential condominium tower to be located at 1 Bloor Street West in Toronto on the southwest corner of Bloor Street and Yonge Street (the “Project”). The Project is designed to have four storeys of underground parking, eight storeys of retail outlets, and eighty-one storeys of condominium units. The Project will be Canada’s tallest residential building when it is completed.

[10] The Project has a construction budget of approximately one billion dollars. The Defendants have obtained mortgage financing of approximately $200 million and require construction financing of approximately $400 million to complete retail podium and underground parking construction.

[11] The Statement of Claim alleges that:

… it was ultimately agreed among Twelve Gates and the defendants that the defendants would retain Twelve Gates to locate a ‘soul-mate’ equity partner for the Project and to assist in negotiating an equity transaction involving the defendants and the ‘soul-mate’ equity partner. In consideration for the performance of its mandate, as aforesaid, the defendants agreed to pay Twelve Gates an ‘advisory services consulting fee’ in the amount of three percent (3%) of any equity Twelve Gates helped to acquire for the Project, plus a ‘profit participation’ in the Project (the ‘Agreement’).

[12] The Statement of Claim further alleges that the parties agreed that Twelve Gates had the option of allocating all or part of the consideration payable to it as an equity injection into the Project, securing an equity interest for itself.

The Alleged Breach

[13] Twelve Gates alleges that in May 2016 Mr. Mizrahi requested that Mr. Cogan temporarily step aside from the negotiations while the Defendants completed negotiations with RioCan, a potential investor. It is alleged that during this time, the Defendants undermined the terms Mr. Cogan procured by failing to obtain certain Rezoning Approvals (the “Rezoning Approvals”). Mr. Mizrahi advised Twelve Gates that the transaction with RioCan would not be proceeding, as RioCan would not provide the equity injection without the Rezoning Approvals in advance.

[14] The Plaintiff alleges that the Defendants misled Twelve Gates and RioCan into believing that the Rezoning Approvals would be obtained in advance of equity financing’s closing, and that this breached the Agreement. This breach impeded Twelve Gates’ ability to secure RioCan as an equity partner for the Project and prevented Twelve Gates from acquiring the benefits of the Agreement, namely the consulting fee and the profit participation.

Unjust Enrichment

[15] The Plaintiff alleges that “each of the Defendants” has been unjustly enriched by the contributions made by Twelve Gates, including 18 months of work performed by Mr. Cogan to assist with the Project and negotiate with RioCan. The Plaintiff alleges that Mr. Cogan’s efforts obtained RioCan’s funding for certain marketing. The Plaintiff also claims that Mr. Cogan’s efforts “allowed the Defendants to create substantial excitement, enthusiasm, competitive leverage and interest in financing for the Project with other potential investors and lenders, which ultimately allowed the Defendants to negotiate and secure hundreds of millions of dollars of financing from” other investors.

[16] The Plaintiff seeks damages of $15 million for breach of contract and unjust enrichment, or alternatively, damages calculated on a quantum meruit basis.

Issues

[17] The Defendants’ motion raises the following issues:

(a) Does the Statement of Claim disclose a reasonable cause of action against the individual defendant, Mr. Mizrahi?

(b) Alternatively, is the claim against Mr. Mizrahi frivolous or vexatious?

(c) Should this court grant an injunction requiring the Plaintiff and Mr. Cogan to give an undertaking not to interfere with MDG’s economic relations?

(d) What amount of security for costs is appropriate in the circumstances?

Analysis

Should the Claim be Struck as Disclosing No Reasonable Cause of Action?

[18] On a motion to strike a claim under r. 21.01(1)(b), the defendant must demonstrate that it is “plain and obvious” that the Statement of Claim discloses no reasonable cause of action. For the purposes of the motion, the facts alleged in the Statement of Claim are presumed to be true. The threshold for sustaining a pleading under r. 21.01 is low, and a claim should be struck only in the clearest of cases: Ontario Consumers Home Services Inc. v. EnerCare Inc., 2014 ONSC 4154, at para. 10.

[19] The allegations in the Statement of Claim pertaining to Mr. Mizrahi specifically are as follows:

• Mr. Mizrahi is an officer, director, shareholder, and “guiding mind” of MDG;
• Beginning in January 2015 Mr. Cogan “communicated frequently” with Mr. Mizrahi;
• By the spring of 2015 Mr. Cogan and Mr. Mizrahi discussed a “strategic alliance” by which Twelve Gates would locate an equity partner for the Project;
• The Plaintiff spent significant time and resources arranging meetings between Mizrahi and multi-billion dollar companies;
• Mr. Cogan introduced Mr. Mizrahi to senior executives of RioCan;
• Mr. Cogan “was successful in repairing the credibility concerns about Mizrahi” conveyed by RioCan;
• On May 24, 2016 Mr. Mizrahi sent a letter to Twelve Gates requesting that Mr. Cogan temporarily step aside from the negotiations; and
• On May 24, 2016 Mr. Mizrahi notified Twelve Gates that a transaction with RioCan would not be proceeding.

[20] The case law is clear that officers, directors, and employees are protected from personal liability for acts carried out under a corporate name. As the Court of Appeal stated in Scotia McLeod Inc. v. People’s Jewellers Ltd. (1995), 26 O.R. (3d) 481 (C.A.), at pp. 490-491:

The decided cases in which employees and officers of companies have been found personally liable for actions ostensibly carried out under a corporate name are fact-specific. In the absence of findings of fraud, deceit, dishonesty or want of authority on the part of employees or officers, they are also rare.[…] In every case, however, the facts giving rise to personal liability were specifically pleaded. Absent allegations which fit within the categories described above, officers or employees of limited companies are protected from personal liability unless it can be shown that their actions are themselves tortious or exhibit a separate identity or interest from that of the company so as to make the act or conduct complained of their own.

[21] The Court of Appeal went on to say that a corporation’s directors or officers may cause it to sign a contract, since it can only operate through human agency. This does not mean that “if the actions of the directing minds are found wanting, that personal liability will flow through the corporation to those who caused it to act as it did.” Scotia McLeod, at p. 491.

[22] In this case, the Plaintiff pleads causes of action for breach of contract and unjust enrichment. The Plaintiff does not allege any tortious conduct on the part of Mr. Mizrahi that is separate from MDG. In fact, other than as detailed above, the Plaintiff alleges no specific acts or conduct on the part of Mr. Mizrahi. There is no allegation that Mr. Mizrahi acted outside the scope of his authority, to pursue an interest separate from that of MDG, or as anything other than MDG’s directing mind. As a result, the Statement of Claim fails to plead any facts that could support a claim for personal liability on Mr. Mizrahi’s part. See Ontario Consumers, at para. 69.

[23] The Plaintiff relies upon the allegation in the Statement of Claim that “the defendants,” including Mr. Mizrahi personally, entered into an agreement with Twelve Gates. The Plaintiff argues that Mr. Mizrahi is a “co-contracting party” in his personal capacity. Similarly, Twelve Gates argues in its factum that the claim against Mr. Mizrahi for unjust enrichment cannot be struck because Mr. Mizrahi is “an owner of the Project with [MDG]”. The Plaintiff’s position is that because the Statement of Claim alleges that the Agreement gave it the option to convert its consulting fee into an equity interest in the Project, the equity interest could come from either owner: MDG or Mr. Mizrahi.

[24] The Statement of Claim contains no specific allegation that Mr. Mizrahi has an ownership interest in the Project. Twelve Gates alleges only that “the defendants acquired several properties” with the intention of developing the Project and that “it was ultimately agreed among Twelve Gates and the defendants that the defendants would retain Twelve Gates….” The Statement of Claim further alleges that “each of the defendants has been unjustly enriched….”

[25] The above allegations pertaining to “the defendants” are insufficient to state a cause of action against Mr. Mizrahi personally. A plaintiff cannot avoid having their pleading struck by making allegations against “the defendants” generally: 460635 Ontario Ltd. v. 1002953 Ontario Inc. (1999), 127 O.A.C. 48 (C.A.), at paras. 7-8. In 460635 Ontario Ltd., the Court of Appeal held that “‘properly’ pleaded’ as it relates to personal liability of corporate directors, officers and employees must be read as ‘specifically pleaded’, a separate claim must be stated against the individual in his personal capacity” (at para. 8). In TSSC Corporation No. 2123 v. Times Group Corporation, 2018 ONSC 4799, Allen J., citing ACI Brands Inc. v. Aviva Insurance Co., 2014 ONSC 4559, and Lobo v. Carleton University, 2012 ONSC 254, stated that “there must be a distinction, a differentiation made between the claims against officers/directors and the corporation. To simply use a conjunctive or a disjunctive or both to extend liability to a principal is not sufficient to establish liability” (at para. 67).

[26] In the cases that the Plaintiff relies upon, specific facts indicated that the individual defendants may have also entered into the contracts at issue in their personal capacity and could thus be sued personally: Proulx v. Canadian Cove Inc., 2014 ONSC 3493; University Plumbing and Heating Ltd. v. HTS Engineering Ltd., 2010 ONSC 3709, 95 C.L.R. (3d) 298. In Wyman v. Kadlec, 2014 ONSC 4710, the individual defendant was held liable for unjust enrichment because he benefitted personally from the plaintiff’s work, for example, by tasks which the plaintiff performed as favours that went beyond the scope of an agreement with the corporate defendant. In this case, Twelve Gates has not pleaded any specific benefit to Mr. Mizrahi to support its unjust enrichment claim against him.

[27] Other than referring to the Defendants together in the plural, the Statement of Claim contains no facts or allegations that would suggest that Mr. Mizrahi entered into the agreement personally. The Statement of Claim does not allege that he has a personal interest in the Project, other than as the principal of MDG, that would support a claim for unjust enrichment. If there is a basis upon which to allege that Mr. Mizrahi entered into the agreement in his personal capacity, Twelve Gates would be expected to plead it. The Plaintiff should not be able to avoid having its claim struck by making vague, non-specific allegations about the Defendants generally.

[28] It is plain and obvious that the Statement of Claim discloses no reasonable cause of action against Mr. Mizrahi. Accordingly, I grant the Defendants’ motion to strike.

Should the Claim be Struck as Frivolous, Vexatious, or an Abuse of Process?

[29] Since I am striking the Statement of Claim against Mr. Mizrahi on the basis that it does not disclose a reasonable cause of action, I need not address the Defendants’ alternative argument that the claim may be struck as frivolous, vexatious, or an abuse of process. In the event that I am mistaken in striking the claim under r. 21.01(1)(b), I would nonetheless dismiss the claim pursuant to r. 21.01(3)(d).

[30] While I take the allegations in the Statement of Claim as true for the purposes of the r. 21.01(1)(b) motion, I may consider evidence on the issue of whether the claim is frivolous, vexatious, or an abuse of process under r. 21.01(3)(d): Currie v. Halton Regional Police Services Board (2003), 179 O.A.C. 67 (C.A.), at para. 10. An action that is clearly without merit may qualify as frivolous, vexatious, or an abuse of process. However, this authority should only be invoked in the clearest of cases: Salasel v. Cuthbertson, 2015 ONCA 115, 124 O.R. (3d) 401, at para. 8.

[31] In Ontario Consumers, O’Marra J. struck the claim against the individual defendants as an abuse of process where there were no allegations regarding any of their acts or conduct other than in their role as employees or directors, finding that the claim appeared to be either tactical harassment or an inappropriate attempt to get discovery of senior personnel (at paras. 69-70). As detailed above, the Statement of Claim is devoid of specific allegations pertaining to Mr. Mizrahi. Without any acts, conduct, or interest alleged on the part of Mr. Mizrahi, the claim against him has no merit.

[32] Moreover, the Defendants rely upon email and text communications made by Mr. Cogan and excerpted below, threatening to go to the media or to MDG’s lenders as demonstrating that the claim against Mr. Mizrahi is intended to harass or extort from him. The threats lend credence to the Defendants’ argument that naming Mr. Mizrahi as a defendant is vexatious and an abuse of process. Based on this evidence, together with the lack of specific allegations regarding Mr. Mizrahi’s personal interest in the Project or that his conduct was outside the scope of his authority, I conclude that the claim is frivolous, vexatious, and an abuse of process, and should be struck.

Should this Court Grant Leave to Amend?

[33] As stated by the Court of Appeal in Miguna v. Ontario (Attorney General) (2005), 205 O.A.C. 257 (C.A.), at para. 22, “It is only where it is clear that the plaintiff cannot allege further material facts that he knows to be true to support the allegations that leave to amend will be refused.” A court should not exercise its discretion to grant leave to amend where there is no reason to believe that the party’s case could be improved further by amendment: TSSC, at para. 88.

[34] Based on the allegations in the Statement of Claim, Mr. Cogan was intimately involved in the discussions with MDG, and specifically, with Mr. Mizrahi. He was thus in a position to allege statements or specific tortious conduct by Mr. Mizrahi that would support a cause of action against him. This is not a situation where a plaintiff is unable to discover the particulars before commencing the proceeding. Since he has not made any allegations that would support a claim against Mr. Mizrahi, it is unlikely that further particulars could be alleged in the Statement of Claim.

[35] The Statement of Claim as against Mr. Mizrahi is struck without leave to amend.

Should This Court Require an Undertaking from the Plaintiff and Mr. Cogan?

[36] The Defendants seek an interlocutory injunction requiring the Plaintiff and Mr. Cogan to provide an undertaking not to interfere with or disrupt MDG’s economic relations with its lenders. The Defendants’ request fails because there is no legal basis for ordering such relief.

[37] The Defendants seek injunctive relief because, when MDG refused to pay Twelve Gates’ invoice for over $18.5 million, Mr. Cogan sent text and email messages threatening to use his connections to undermine MDG’s commercial relationships with its lenders and other third parties. Mr. Cogan further threatened to disclose the parties’ dispute to the media. For example, on November 28, 2016 Mr. Cogan sent a text message to Joshua Lax of MDG stating:

Trust me Joshua it’s not in Sams interest to have someone with my last name and my reputation crying foul on a publicly profile project. My God, you should do your boss a favor and wake him up. If I don’t hear from someone in your Camp shortly, it’s no different than saying Lawrence why don’t you write one of your state-of-the-art chronologies over the holidays.

[38] On May 16, 2018, the day after MDG’s counsel, Ms. Campion, accepted service of the Statement of Claim in this proceeding, Mr. Cogan sent a text message to Mr. Lax stating, in part:

You don’t think that Sam was going to get away from screwing me what I brought every deliverable that was asked of me.

If we don’t move to a quick settlement the matter will be leaked to the Press and we will use our strong relationships with your lenders and your Chinese lender who’s also a client at the law firm who’s litigating you to put extreme pressure on this matter and request that they potentially abort their financing Arrangements it will certainly create a lot of bad will….

If you’re smart you would advise him not to fight this as it will only hurt him because everybody that’s aware of this thinks what he did to me was extremely disgusting.

[39] The following day, Ms. Campion sent a letter to Twelve Gates’ litigation counsel, Mr. Cohen, seeking confirmation that Twelve Gates would cease and desist from engaging in such conduct and confirming that Twelve Gates and Mr. Cohen’s firm would not communicate with the lenders or the media in respect of the Defendants. Mr. Cohen responded on the same day, confirming that “[m]y client undertakes to cease and desist from any similar types of communications.” Ms. Campion sought a further undertaking, stating that the undertaking provided was insufficient to address the Defendants’ concerns regarding communication with MDG’s lenders. Mr. Cohen refused to provide a further undertaking on the terms requested.

[40] I dismiss the Defendants’ motion for an interlocutory injunction because, on the circumstances of this case, there is no legal basis for the relief sought. An injunction is “a remedy ancillary to a cause of action”: R. v. Canadian Broadcasting Corp., 2018 SCC 5, 417 D.L.R. (4th) 587, at para. 24. The purpose of an injunction is to preserve or maintain a situation so that the relief ultimately granted in an underlying proceeding is not rendered moot or ineffective: Celenza v. Remax Premier Inc., 2017 ONSC 7334, at paras. 26-27, 36. Here, the Defendants have brought no proceeding against the Plaintiff or Mr. Cogan, and there is no underlying cause of action.

[41] In R. v. CBC, the Supreme Court of Canada held that the Crown’s application for an interlocutory injunction was in support of its application against the CBC for criminal contempt. There was no entitlement to an injunction on its own. The Supreme Court stated that “[a]n injunction is not a cause of action, in the sense of containing its own authorizing force. It is, I repeat, a remedy” (at para. 25). The Defendants are not entitled to an ancillary remedy when they make no claim for relief.

[42] The unavailability of injunctive relief in the circumstances becomes clear when the test from RJR-MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311, is applied. The Defendants’ motion fails at the first step of demonstrating a serious issue to be tried. The Defendants point to the seriousness of the threats Mr. Cogan made. This is not, however, the issue to be tried in this proceeding. In this case, the issue to be tried is the Plaintiff’s claim for breach of contract and unjust enrichment.

[43] Based on the Supreme Court’s decision in R. v. CBC, it is arguable that the higher threshold of a strong prima facie case applies, since the Defendants seek a mandatory order compelling an undertaking: R. v. CBC, at para. 18. I need not determine this issue, since the Defendants cannot meet the lower standard of a serious issue to be tried. It becomes more evident that the Defendants are not entitled to injunctive relief when attempting to apply the higher standard, since they would have to demonstrate some likelihood of success at proving their claim: R. v. CBC, at para. 17. The Defendants have made no claim.

[44] The cases that the Defendants rely upon to argue that courts have granted injunctions to prevent conduct “akin to extortion” do not apply. In all of those cases, the plaintiff sought the injunction: Ceridian Canada Ltd. v. Azeezodeen, 2014 ONSC 3801, aff’d 2014 ONCA 656, 69 C.P.C. (7th) 40; Zuckerman-Honickman Inc. v. MPI Packaging Inc., 2009 CarswellOnt 3052 (S.C.); Yaghi v. WMS Gaming Inc., 2003 ABQB 680, 18 Alta. L.R. (4th) 280.

[45] While the Defendants rely upon the court’s inherent jurisdiction to control its proceedings, there is simply no authority upon which the court may order injunctive relief against the Plaintiff where the Defendant has brought no claim. The National Gympsum Co. v. Dorrell case that the Defendants rely upon does not assist because it relates to the inherent jurisdiction of the court to require undertakings or to make orders regarding the use of documents produced in discovery: National Gympsum Co. v. Dorrell (1989), 68 O.R. (2d) 689 (S.C.), at p. 701.

[46] Moreover, the Defendants seek an injunction not only against the Plaintiff, but specifically against Mr. Cogan. While it is clear that Mr. Cogan sent the text and email messages, he is not a party to this proceeding. Even if there were a basis upon which this court could order injunctive relief against the Plaintiff, the Defendants have provided no authority to support an order requiring an undertaking from a non-party.

[47] In any event, since Twelve Gates gave an undertaking “to cease and desist from similar communications,” as an employee, Mr. Cogan would be expected to abide by his employer’s undertaking. Twelve Gates interprets this undertaking as limited to precluding threatening communications to the Defendants. Nonetheless, it does not appear from the evidence on this motion that the Plaintiff has taken steps to make good on any threats since they were initially made in May 2018.

[48] Twelve Gates has invoked this court’s process and jurisdiction by commencing this proceeding and retaining counsel. Having engaged this court’s process, the Plaintiff should be taken to understand that the remedy for the alleged claim is through the court’s process, and not through reprisal or self-help. The court expects that as a party before it, Twelve Gates will respect the court’s process and its ability to arrive at a fair adjudication of its claim. Twelve Gates is no doubt aware of the consequences of interfering with MDG’s economic relations with its lenders, or conducting the litigation in an abusive or vexatious manner.

What Amount of Security for Costs is Appropriate in the Circumstances?

[49] The Defendants seek security for costs in the amount of $225,000 and have submitted an anticipated bill of costs that reflects this amount. Twelve Gates is prepared to pay $150,000 in four installments. The Defendants submit that Twelve Gates is a shell corporation with no assets or financial resources to satisfy an adverse costs award. Its registered address is a residential address not owned by Twelve Gates or any of its officers or directors. Moreover, Twelve Gates is not in compliance with its statutory filings. Twelve Gates has chosen not to provide any evidence on this motion, whether pertaining to its financial circumstances or otherwise.

[50] Defendants’ counsel notes that in another proceeding commenced by Twelve Gates, Twelve Gates Capital v. Eminence Living (CV-17-568865, the “Eminence Proceeding”) it breached an order for security for costs and a costs order. In that case, Twelve Gates consented to $300,000 in security for costs in four installments. Plaintiff’s counsel advised at the hearing that the Eminence Proceeding is more complex than this case, and that Twelve Gates has since paid the first installment and costs award.

[51] Since the Plaintiff does not oppose a security for costs order, I will address only the issue of the amount sought by MDG. An order for security for costs, and its amount, is within the court’s discretion. Courts have ordered that security for costs be paid by instalment pursuant to the court’s authority under r. 56.04: Coastline Corp. v. Canaccord Capital Corp., [2009] O.J. No. 1790 (Master), at para. 7 (xiii).

[52] I find that under the circumstances, $200,000 in security for costs, paid in installments, is appropriate. In arriving at this amount, I have considered the significant amount at issue in this proceeding, Twelve Gates’ lack of assets, and the fact that the Plaintiff does not seriously dispute the Defendants’ anticipated bill of costs. I note that the Defendants’ anticipated bill of costs included costs of this motion.

[53] The Plaintiff shall pay security for costs on the following schedule:

(a) An initial payment of $75,000 within thirty (30) days of this order;

(b) A further payment of $25,000 within forty-five (45) days after the completion of the last examination for discovery;

(c) A further payment of $50,000 within forty-five (45) days after the completion of the first pre-trial conference; and

(d) A further payment of $50,000 within five (5) business days after the commencement of trial.

Conclusion

[54] Based on the foregoing, I grant the Defendants’ motion to strike the claim against Mr. Mizrahi without leave to amend on the basis that it states no reasonable cause of action. I order Twelve Gates to pay security costs of $200,000 on the schedule detailed above. I dismiss the motion for an order requiring the Plaintiff and Mr. Cogan to provide an undertaking not to interfere with MDG’s economic relations with its lenders.

Costs

[55] I received both parties’ costs outlines at the hearing. The Defendants’ costs on a partial indemnity basis are $38,665.52. The Plaintiff’s costs on a partial indemnity basis are $26,039.22. Both amounts include disbursements and HST. The Defendants’ disbursements were $3,301.14, while the Plaintiff’s were $426.58.

[56] Pursuant to the Courts of Justice Act, R.S.O. 1990, c. C.43, s. 131(1), the court has broad discretion when determining the issue of costs. The overall objective of fixing costs is to fix an amount that is fair and reasonable for the unsuccessful party to pay in the circumstances, rather than an amount fixed by actual costs incurred by the successful litigant: Boucher v. Public Accountants Council for the Province of Ontario (2004), 71 O.R. (3d) 291 (C.A.). Rule 57.01(1) of the Rules of Civil Procedure sets out the factors to be considered by the court when determining the costs issue. I have considered these factors, as well as the proportionality principle in r. 1.04(1.1) of the Rules of Civil Procedure, while keeping in mind that the court should seek to balance the indemnity principle with the fundamental objective of access to justice.

[57] Both parties submit that the matters were of above average complexity and were important to the parties, given the amount at issue in the proceeding and the potential liability of the individual Defendant. The Defendants were successful in striking the claim against Mr. Mizrahi but were not successful in obtaining injunctive relief. The Plaintiff consented to an order for security for costs, but not until a week before the hearing, although notice of the motion was served in June 2018.

[58] Given the foregoing, I fix costs of the motion on a partial indemnity basis at $19,500.00, inclusive of disbursements and HST, to be paid by the Plaintiff within 30 days of this order.

Nishikawa J.

Released: December 20, 2018

COURT FILE NO.: CV-18-597958 DATE: 20181220 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Twelve Gates Capital Group Inc. Plaintiff – and – Mizrahi Development Group (The One) Inc. and Sam Mizrahi Defendants

REASONS FOR JUDGMENT Nishikawa J. Released: December 20, 2018