Court File and Parties
COURT FILE NO.: CV-14-61854
DATE: 2019/10/24
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
6071376 Canada Inc. Plaintiff
– and –
3966305 Canada Inc. & Mahmood Khedmatgozar Defendants
COUNSEL:
G. James. Thorlakson & James Wishart for the Plaintiffs
Charles Gibson and Ian Houle for the Defendants
WRITTEN SUBMISSIONS: August 9, 2019, September 18, 2019 and October 7, 2019
Reasons on Costs
Tausendfreund, J.
Overview
[1] The reasons for judgment were released June 25, 2019. The paragraph on the issue of costs reads as follows:
Based on the reprehensible conduct of Mahmood visited on the Plaintiff Principals, but subject to the effect any Rule 49 offers may have on the question of costs, I find that the Plaintiff is entitled to its costs on a substantial indemnity basis. If the parties are unable to resolve the issue of costs within 45 days, I invite counsel to provide me with written submissions on the issue of costs.
[2] The parties were unable to resolve the matter of costs. I received written submissions on costs from the Defendants on August 9, 2019, from the Plaintiff on September 18, 2019 and a reply response from the Defendants on October 7, 2019.
[3] The Defendants raise as an issue the appropriate calculation of pre-judgment interest (“PJI”). The resolution of that issue may impact the possible application of Rule 49 offers served by the Defendants. I now turn to that question.
[4] The Defendants served two settlement offers:
Offer to Settle dated November 30, 2017 • The Defendants will pay the Plaintiff $650,000 all inclusive including damages, interest, legal fees and disbursements payable over a 5-year period in equal annual installments commencing September 30, 2018 with interest on any outstanding balance calculated annually at 3%.
Offer to Settle dated November 8, 2018 • The Defendants will pay the Plaintiff the all-inclusive sum of $1,000,000 including damages, interest and costs payable in 32 equal quarterly installments of $30,000 and one final installment of $40,000. The first installment will be payable 90 days after the acceptance of this offer which expires 5 minutes after the recommencement of the trial.
[5] Both of the Defendants’ offers were made at least 7 days before the commencement of trial, were not withdrawn and did not expire before the recommencement of the hearing. Neither offer was accepted by the Plaintiff.
[6] To determine if the Plaintiff obtained a judgement as favourable as or less favourable than the terms of either of these two offers to settle, I must resolve the quantum of PJI to which the Plaintiff is entitled.
[7] The Defendants state that the applicable interest rate for PJI must be calculated on a quarter-by-quarter basis using the rates set for each quarter by the Ministry of the Attorney General, as per the Courts of Justice Act. Based on that premise, the Defendants calculate that amount of PJI to which the Plaintiff should be entitled is $114,703. Both sides correctly based their calculation on the commencement dates of PJI as detailed in paragraph 58 of the Reasons for Judgment which states as follows:
I find that the Plaintiff is entitled to receive from the Defendants, on a joint and several basis, the sum of $515,600 with pre-judgment interest (PJI) calculated as follows:
a. On 40% of the sale proceeds of $508,776, PJI calculated as of June 6, 2006;
b. On 40% of the mortgage principal reduction of $126,451, PJI calculated as of June 6, 2006;
c. On 40% of the vendor take-back mortgage payout of $635,246 and on 40% of interest on that mortgage in the amount of $18,528, PJI calculated as of December 1, 2006.
[8] Counsel for the Plaintiff calculated the applicable PJI based on the PJI rate as defined in ss.127(1)[^1] and 128(1)[^2] of the Courts of Justice Act. The parties agree that general damages due to the Plaintiff total $653,978. PJI on that sum is calculated not on a quarter by quarter basis, as the Defendants urge, but on one rate, as defined in ss. 127 and 128 of the Courts of Justice Act, see Agribrands Purina Canada Inc. v. Kasamekas, 2011 ONCA 460 at para. 74. That sum I calculate to be $342,705.
[9] The Defendants also take the position that the Plaintiff is not entitled to PJI on 40% of the net rental proceeds of the Hull Project.
[10] Paragraph 59 of the Reasons for Judgment reads as follows:
The Plaintiff is also entitled to receive from the Defendants, on a joint and several basis, 40% of the net rental profits of the Hull Project, calculated from the date of purchase to the date of sale. If the parties are unable to agree on the amount, they may apply to the court for terms and directions.
[11] The Defendants state that paragraph 59 does not include a reference to PJI on the 40% of the net rental profits of the Hull Project due to the Plaintiff. This was an oversight. There is no reason why the Plaintiff should not be entitled to PJI on an amount to which it was entitled. I note that paragraph 59 states that if the parties were unable to agree on the amount of rental profits of the Hull Project due to the Plaintiff, they may apply to the court for terms and directions. I also note that s.128(1) of the Courts of Justice Act provides for entitlement of PJI for an amount due in a judgment.
[12] I find that the Plaintiff is entitled to receive from the Defendants PJI calculated on 40% of the net rental profits generated by the Hull Project from the date of acquisition to the date of sale of that property. The Plaintiff has calculated that amount to be $138,378 plus PJI of $68,632. I accept these calculations.
[13] The total judgment due to the Plaintiff for general damages, PJI plus punitive damages is $1,196,682.
[14] I find that the Defendants’ offers to settle did not meet the threshold contemplated by Rule 49.10(2). The judgment to which the Plaintiff is entitled is more favourable than either of the two offers made by the Defendants.
[15] The Defendants submitted their Bill of Costs on a substantial indemnity basis totalling $283,299. The Plaintiff’s Bill of Costs I find to be proportional to the complexity of the proceedings and the importance of the issues at stake. The Plaintiff will be entitled to costs on a substantial indemnity basis which I fix at $300,000, all in.
Tausendfreund, J.
Released: October 24, 2019
6071376 Canada Inc. v.3966305 Canada Inc. et al.
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
6071376 Canada Inc. Plaintiffs
– and –
3966305 Canada Inc. & Mahmood Khedmatgozar Defendants
REASONS on costs
Tausendfreund, J.
Released: October 24, 2019
[^1]: ss. 127(1) In this section and in sections 128 “prejudgment interest rate” means the bank rate at the end of the first day of the last month of the quarter preceding the quarter in which the proceeding was commenced, rounded out to the nearest tenth of a percentage point;
[^2]: ss. 128(1) A person who is entitled to an order for the payment of money is entitled to claim and have included in the order an award of interest thereon at the prejudgment interest rate, calculated from the date the cause of action arose to the date of the order.