Court File and Parties

COURT FILE NO.: 17-74260 and 18-75186 DATE: 2019-02-14 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Anwar Fares and Maya Bakhos, Applicants AND The Toronto-Dominion Bank, Respondent

AND

The Toronto-Dominion Bank, Applicant AND Anwar Fares, Maya Bakhos and 7865210 Canada Inc., Respondents

BEFORE: Madam Justice H.J. Williams

COUNSEL: Benjamin Frydenberg, Counsel for The Toronto-Dominion Bank Percy Ostroff, Counsel for Anwar Fares and Maya Bakhos

HEARD: Costs submissions in writing

Endorsement

[1] The Toronto-Dominion Bank was successful in its application to enforce guarantees against Anwar Fares and Maya Bakhos and in opposing the guarantors’ application for a declaration that the guarantees were invalid and unenforceable.

[2] The parties agree that TD, as the successful party, is entitled to costs.

[3] In its written costs submissions, TD says that it is entitled to costs on a partial indemnity basis but also requests costs on a substantial indemnity basis. I will treat these submissions as being in the alternative.

[4] TD’s partial indemnity costs total $24,671.52. Its substantial indemnity costs total $34,279.94. Both figures are inclusive of fees, disbursements and HST.

[5] The guarantors submit that a costs award of $12,500.00, inclusive of fees, disbursements and HST, would be reasonable.

[6] Section 131 of the Courts of Justice Act, R.S.O. 1990, c. C. 43 provides that, subject to the provisions of an Act or rules of court, the costs of and incidental to 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. Rule 57.01 of the Rules of Civil Procedure lists the factors a court may take into account in exercising its discretion to award costs under s. 131.

[7] In support of its argument for substantial indemnity costs, TD argues that the parties’ loan agreement under the Canada Small Business Financing Act requires the borrowers to pay the “fees and charges of [the lender’s] legal counsel, on a solicitor and client basis” and that the guarantees provide for legal fees related to enforcement to be paid on a “solicitor and own client basis.” [^1]

[8] Ontario’s Court of Appeal has said that, as a general proposition, when a contract provides for a certain scale of costs to be paid, a court, in exercising its discretion with respect to costs, will do so in a manner that reflects the agreement; the agreement of the parties cannot, however, exclude the court’s discretion in respect of costs and it is open to the court to exercise its discretion contrary to the agreement. (Bosse v. Mastercraft Group Inc., (1995), 123 D.L.R. (4th) 161 at para. 66 (Ont. C.A.))

[9] In this case, I am not oblivious to the financial burden the guarantors face already as a result of the failure of their business. Nonetheless, I see no basis for deviating from the costs provisions in the parties’ loan agreement and guarantees and I find that TD is entitled to its costs on a substantial indemnity (formerly a “solicitor and client”) basis.

[10] Having concluded that TD is entitled to substantial indemnity costs, I must consider the appropriate amount to be awarded.

[11] In Boucher v. Public Accountants Council for the Province of Ontario, (2004), 71 O.R. (3d) 291 (C.A.), the Court of Appeal said that costs “should reflect more what the court views as a fair and reasonable amount that should be paid by the unsuccessful parties rather than any exact measure of the actual costs to the successful litigant.”

[12] Rule 57.01(1) of the Rules of Civil Procedure was amended post- Boucher to add two factors to the list of those to be considered when costs are awarded, “the principle of indemnity, including…the rates charged and the hours spent” and “the amount of costs that an unsuccessful party could reasonably expect to pay…”

[13] In reference to the principle of indemnity, I note that the actual hourly rate charged by TD’s lawyer is significantly discounted from his usual hourly rate and is presumably a rate offered to a loyal client. With respect to the hours spent, I accept the guarantors’ argument that TD’s lawyer deals routinely with the issues that arose in this case and could be expected to handle them efficiently.

[14] I accept TD’s submission that the guarantors’ offers to settle were so low that they should have no bearing on the costs award. I also reject the guarantors’ argument that their costs liability should be reduced or waived because, under the Canada Small Business Financing Act, TD may be reimbursed by the federal government for any shortfall on the loan to the guarantors’ company; I consider the possibility or even the likelihood that TD may have recourse to compensation from another source to be irrelevant to the assessment of costs in these applications.

[15] Rule 1.03 of the Rules of Civil Procedure defines substantial indemnity costs as being 1.5 times the associated partial indemnity costs.

[16] Having concluded that the guarantors should pay substantial indemnity costs and having considered all of the factors in Rule 57.01 of the Rules of Civil Procedure, including the principal of indemnity, I find that the guarantors reasonably could have expected to pay fees approximating 1.5 times the amount of their own lawyer’s partial indemnity fees. The guarantors’ lawyer’s partial indemnity fees of $13,200.00, which includes a counsel fee of $750.00, translate into substantial indemnity fees of $19,800.00. I consider this amount to be both reasonable and proportionate in this case.

[17] With respect to disbursements, I accept the guarantors’ argument that TD should not be entitled to the cost of any flights to Ottawa. TD is entitled to its choice of lawyer, but there are many highly competent lawyers in Ottawa who could have represented TD’s interests in this matter without incurring travel-related disbursements. I will also disallow TD’s claim for $755.79 for “courier and taxi”, which strikes me as high and is unexplained.

[18] In conclusion, in respect of the two applications, I order the guarantors to pay TD $25,723.03, comprised of the following:

• Substantial indemnity fees of $19,800.00 plus HST of $2,574.00;
• Non-taxable disbursements of $301.00; and
• Taxable disbursements of $2,697.37 plus HST of $350.66.

Madam Justice H.J. Williams Date: February 14, 2019

Footnotes

[^1]: I note that there is disagreement about what the phrase “solicitor and own client” now means. What had once been “solicitor and client” costs in Ontario have been known as “substantial indemnity” costs since the Rules of Civil Procedure were amended in 2001. Since 2001, “solicitor and own client” has been interpreted to mean both “substantial indemnity” (Kakoutis v. The Bank of Nova Scotia, 2015 ONSC 3319) and “full indemnity” (Royal Bank of Canada v. Lunardi, 2016 ONSC 3382). As TD is requesting costs based on the lower of the two scales, that is to say, substantial indemnity rather than full indemnity scale, there is no need to belabour the point.