Court File and Parties
COURT FILE NO.: CV-160706 DATE: 2019-05-01 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: ZAKA ULLAH KHAN, Plaintiff / Respondent AND: KRYLOV & COMPANY and DEVRY SMITH FRANK LLP, Defendants / Moving Parties
BEFORE: Justice James Stribopoulos
COUNSEL: Mr. Mirel Giugaru, for the Defendant / Moving Party, Krylov & Company Mr. Louis P. Covens, for the Defendant / Moving Party, Devry Smith Frank LLP Mr. Zaka Ulluah Khan, Self-Represented
Costs Endorsement
[1] This is a brief costs endorsement following a successful motion for summary judgment brought by the defendants.
[2] The plaintiff, Mr. Khan, initiated an action against the two defendants, both law firms.
[3] Krylov & Company acted for Mr. Khan in a personal injury tort action that he commenced following a car accident. Devry Smith Frank LLP (DSF) acted for the other driver in that action. DSF was retained by the other driver’s insurer, TD General Insurance. The personal injury tort action ultimately settled.
[4] In this action, Mr. Khan alleged that the two defendants conspired together to conceal from him the actual amount paid by TD to settle his claim and then misappropriated the difference between what the insurer actually paid and what he ultimately received. In essence, Mr. Khan pleaded the torts of fraud and conspiracy against the defendants.
[5] The defendants jointly brought a motion for summary judgment, which was decided in their favour: see Khan v. Krylov & Company, 2019 ONSC 1666. In its decision on the motion, the court made the following comments relevant to costs:
[86] In closing, I would be remiss if I failed to mention that I am troubled by the allegation in Mr. Khan’s materials that his repeated requests for a copy of his file and the Full and Final Release document went unanswered by Krylov & Company. (At the time there was clearly no outstanding account, the firm’s fees and disbursements having been fully paid from the settlement proceeds.) The fulfillment of such routine requests should not require the intervention of the Law Society or the involvement of another lawyer.
[87] There is no evidentiary foundation for Mr. Khan’s allegations of fraud and conspiracy. Nevertheless, it is not difficult to imagine how a lawyer’s former client, especially if the relationship ends on a sour note, could begin to draw somewhat paranoid conclusions about the lawyer’s motives or conduct if the lawyer fails to respond to repeated requests for a copy of the client’s file or an important document from the file.
[88] In its materials on the motion, Krylov & Company did not respond to this aspect of Mr. Khan’s allegations. Given this, I have refrained from drawing any conclusions as to whether or not the firm failed to provide Mr. Khan with the materials he was seeking and whether or not this may have contributed to the commencement of this action. It would be sensible for both Krylov & Company and Mr. Khan to address these questions should costs submissions be necessary.
[89] Should costs be in issue, written submissions may be submitted. The defendants may each submit no more than five-pages of submissions (not inclusive of their respective Bills of Costs or any other supporting materials) to be served and filed by no later than March 29, 2019. Mr. Khan may serve and file responding submissions, also no longer than five pages (not inclusive of any supporting materials), by no later than April 12, 2019. Reply submissions should only be filed if requested by the court.
[6] The parties have now submitted written materials regarding costs for the motion and the action.
[7] The defendants seek costs on a substantial indemnity basis. In support of their claims for enhanced costs, they each cite their success on the motion, and the fact that Mr. Khan unsuccessfully levelled allegations of fraud and conspiracy against them. Krylov & Company seeks costs in the amount of $26,875.66, inclusive of H.S.T. and disbursements, whereas DSF seeks costs in the amount of $18,886.39, inclusive of H.S.T. and disbursements.
[8] The court’s authority to order costs is derived from s. 131(1) of the Courts of Justice Act, R.S.O. 1990, Chap. C.43, and Rule 57 of the Rules of Civil Procedure. In light of the relevant factors, I turn to consider the claim of each defendant for costs. I begin with Krylov & Company's claim.
[9] As the quoted excerpt from the court’s decision makes clear, the court specifically invited Krylov & Company, should it seek costs, to use the opportunity to answer Mr. Khan’s allegations that, despite his repeated requests, the firm failed to provide him with either a copy of the Full and Final Release or his file.
[10] In its submissions, Krylov & Company argues that Mr. Khan did not offer any evidence to substantiate his allegations regarding the firm’s failure to furnish him with either a copy of the Full and Final Release or a copy of his file. Given this, it submits that it is unnecessary to answer what are effectively unsubstantiated allegations. Further, it notes that Mr. Khan’s complaint against Krylov & Company remains outstanding before the Law Society of Ontario. It argues that the complaints process is the appropriate forum in which to address the firm’s alleged failure to properly serve Mr. Khan in their lawyer and client relationship. Finally, having been successful on the motion, which also dismissed the action, Krylov & Company submits that it is entitled to costs.
[11] In my view, there is evidence before the court that, despite Mr. Khan’s repeated requests, Krylov & Company failed to provide him with a copy of the Full and Final Release or his file. That evidence consists of Mr. Khan’s affidavit and the attached exhibits. In particular, one of the exhibits is a retainer agreement that Mr. Khan executed to hire another lawyer. That lawyer was specifically retained by Mr. Khan, at no small expense, solely to secure a copy of the Full and Final Release. Given this evidence, which now stands uncontradicted, the court makes the following findings.
[12] First, that after its account was paid from the settlement proceeds, Krylov & Company failed to answer Mr. Khan’s repeated requests, initially for a copy of the Full and Final Release, and eventually for a copy of his entire file.
[13] Second, Krylov & Company’s lack of responsiveness led Mr. Khan to retain a different lawyer to obtain a copy of the Full and Final Release. Ultimately, that lawyer was successful in securing a copy of that document from DSF. Unfortunately, by that point, that firm only had a faxed copy of the document (having sent their only original copy to TD).
[14] Third, the effect of Krylov & Company’s failure to provide Mr. Khan with a copy of the Full and Final Release, combined with Mr. Khan’s misunderstanding of the meaning of the fax date and time stamp on the copy he ultimately received from DSF, fuelled his mistaken belief that he had been cheated by the defendants. That belief was only fortified when that same faxed copy of the document was attached to an affidavit filed on the motion by Krylov & Company and erroneously represented as a true copy of the original.
[15] Fourth, Krylov & Company’s failure to properly serve Mr. Khan after its account was paid was instrumental in planting the seed of malfeasance in his mind that ultimately germinated into this unnecessary action.
[16] Finally, the court finds that but for Krylov & Company’s failure to respond to Mr. Khan’s repeated requests, which appear to the court to have been perfectly appropriate and reasonable requests for a client to make of his lawyers, this action would never have been commenced.
[17] Given all of this, despite Krylov & Company’s success, the court declines to award the firm either its costs on the motion or in the action. Rather, given that Krylov & Company’s own behaviour was instrumental in precipitating this unnecessary action, under Rule 57.01(2) of the Rules of Civil Procedure, this is one of those rare cases in which it is proper to award costs against a successful party.
[18] The position of DSF is entirely different. DSF shoulders none of the responsibility for this action. Rather, the firm’s involvement stems from its misfortune in acting as counsel in an action in which the opposing law firm did not properly serve its client. In the circumstances, DSF is deserving of costs.
[19] That said, given all of the circumstances, this is not a case in which the high threshold for substantial indemnity costs is satisfied. The Court of Appeal has instructed that “elevated costs should only be awarded on a clear finding of reprehensible conduct on the part of the party against which the cost award is being made”: Davies v. Clarington (Municipality), 2009 ONCA 722, at para. 40. Although in some cases where a claim of fraud is unsuccessful it may be appropriate to make an enhanced order for costs, there is no automatic rule requiring that result: see Hamilton v. Open Window Bakery Ltd., 2004 SCC 9, [2004] 1 S.C.R. 303, at para. 26. Ultimately, costs decisions depend on the particular circumstances of the litigation and the actions of the parties.
[20] Although Mr. Khan’s claim failed, he did not advance it in bad faith. Rather, he was motivated to bring this action because his former lawyers did not respond to his entirely reasonable requests. Mr. Khan overreacted to this development by concluding that he was the victim of fraud and conspiracy. However, I am not satisfied that Mr. Khan was in a position to appreciate that his claims were without merit before the hearing of the motion when the defendants finally produced the two original versions of the Full and Final Release. Accordingly, I am not convinced that Mr. Khan engaged in “reprehensible conduct”. To the contrary, his reaction was entirely understandable albeit misconceived.
[21] In the end, Mr. Khan overreacted to an unfortunate situation that was not of his making. To be sure, Mr. Khan shares some of the blame for assuming the worst based on his honest but mistaken belief regarding the significance of the date and time stamp on the copy of the Full and Final Release he ultimately received from DSF. Given this, I do not believe it would be appropriate to award Mr. Khan costs beyond his disbursements in this action.
[22] For these reasons the court makes the following orders relevant to costs.
[23] First, an Order shall issue directing Krylov & Company to pay Mr. Khan costs only in relation to his disbursements, fixed in the amount of $2,983.99, inclusive of H.S.T., payable forthwith.
[24] Second, an Order shall issue directing Mr. Khan to pay costs to Devry Smith Frank LLP, on a partial indemnity basis, fixed in the amount of $10,378.88, inclusive of disbursements and H.S.T., payable forthwith.
