Court File and Parties

Court File No.: CV-10-97944 Date: 2020-03-26 Superior Court of Justice – Ontario

Between: MEJJ Enterprises Inc., Plaintiff And: 2130997 Ontario Incorporated, James Jensen, and Peer Jensen, Defendants And: Mohan Roopchand, by counterclaim Defendant

Counsel: Trent Morris, for the Plaintiff Larry Franschman, for the Defendants 2130997 Ontario Incorporated, James Jensen, and Peer Jensen Zachary Silverberg, for the Defendant Mohan Roopchand by counterclaim

Heard: By written submissions

Ruling on Costs

LEIBOVICH J.

[1] MEJJ Enterprises sued the defendants, James and Peer Jensen, and their corporation, for unpaid property taxes and lease payments pursuant to their commercial lease agreement. The defendants did not dispute that there was unpaid property taxes and some rent owing, but they counterclaimed against MEJJ Enterprises and its owner, Mohan Roopchand, claiming, in essence, that they failed to build an enclosed structure, as promised, that would allow them to operate all year, and as a result, they were unable to pay the rent and property taxes and they lost their business. The defendants claimed that Mr. Roopchand was personally liable. The trial was heard over six days. The events took place over a decade ago. For the reasons set out in my decision MEJJ Enterprises Inc. v. 2130997 Ontario Incorporated, 2020 ONSC 761, I found that the plaintiff never promised to build a deck for the defendants and did not act in bad faith. I dismissed the defendants’ counterclaim and allowed the plaintiff’s claim but for slightly less than the amount sought. The parties provided their written submissions with respect to costs. This is my decision with respect to costs.

Positions of the Parties

[2] The plaintiff is seeking costs, inclusive of HST and disbursements, in the amount of $148,167.87. The plaintiff submits that even though they only sought to recover from the defendants damages in the amount of $73,743.41, he successfully defended against the defendants counterclaim of $5,000,000. The plaintiff submits that he is entitled to costs on a substantial indemnity basis because the defendants made unproved allegations of fraud and deceit.

[3] The defendants submit that no costs be payable to the plaintiff in accordance with Rule 57.01(2). The delay caused by the plaintiff, the numerous changes of counsel were all designed to frustrate the defendants’ attempts to properly litigate the issues and exacerbate the harm caused to them.

Law and Analysis

[4] The jurisdiction of this court to award costs is found in s. 131(1) of the Courts of Justice Act, R.S.O. 1990, C. 43:

131(1) Subject to the provisions of an Act or rules of court, the costs of and incidental to a proceeding or a step in 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.

[5] Rule 57.01(1) of the Rules of Civil Procedure sets out the factors for the court to consider on an award of costs:

57.01(1) In exercising its discretion under section 131 of the Courts of Justice Act to award costs, the court may consider, in addition to the result in the proceeding and any offer to settle or to contribute made in writing,

(0.a) the principle of indemnity, including, where applicable, the experience of the lawyer for the party entitled to the costs as well as the rates charged and the hours spent by that lawyer;

(0.b) 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;

a. the amount claimed and the amount recovered in the proceeding;

b. the apportionment of liability;

c. the complexity of the proceeding;

d. the importance of the issues;

e. the conduct of any party that tended to shorten or to lengthen unnecessarily the duration of the proceeding;

f. whether any step in the proceeding was,

i) improper, vexatious or unnecessary, or

ii) taken through negligence, mistake or excessive caution;

g. a party's denial of or refusal to admit anything that should have been admitted;

h. whether it is appropriate to award any costs or more than one set of costs where a party,

i) commenced separate proceedings for claims that should have been made in one proceeding, or

ii) in defending a proceeding separated unnecessarily from another party in the same interest or defended by a different solicitor; and

i. any other matter relevant to the question of costs.

2. The fact that a party is successful in a proceedings or a step in a proceedings does not prevent the court from awarding costs against the party in a proper case.

[6] The myriad of factors listed in Rule 57.01 ensures that a court considers all the relevant circumstances which allows the court to determine an amount that is fair and reasonable for the unsuccessful party to pay in a particular proceeding rather than what the actual costs were of the successful litigant: see Boucher v. Public Accountants Council for the Province of Ontario (2004) 71 O.R. (3d) 291 (C.A.); Zesta Engineering v. Cloutier (2002), 164 O.A.C. 234 (C.A.); Moon v. Sher, (2004), 246 D.L.R. (4th) 440 (C.A.); Mars Canada Inc. v. Bemco Cash & Carry Inc., 2018 ONCA 239, [2018] O.J. No. 1340, at para. 43.

Substantial or Partial Indemnity?

[7] The plaintiff seeks costs on a substantial indemnity basis because the defendants made allegations of fraud and deceit. I disagree. An award of costs on a substantial indemnity basis is exceptional. It can arise from the conduct of the unsuccessful party where it rises to a level that is considered reprehensible, egregious and worthy of sanction. As the Court of Appeal stated in Davies v. Clarington, 2009 ONCA 722 at para. 40:

In summary, while fixing costs is a discretionary exercise, attracting a high level of deference, it must be on a principled basis. The judicial discretion under rules 49.13 and 57.01 is not so broad as to permit a fundamental change to the law that governs the award of an elevated level of costs. Apart from the operation of rule 49.10, 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. As Austin J.A. established in Scapillati, Strasser should be interpreted to fit within this framework -- as a case where the trial judge implicitly found such egregious behaviour, deserving of sanction.

Also see Mars Canada Inc. v. Bemco Cash & Carry Inc. at para. 43.

[8] In this case, the plaintiff, almost immediately after evicting the defendants, launched an action for rent and property taxes owing. The defendants responded with a defence and counterclaim. The essence of the defendants’ defence and counterclaim was that the plaintiff promised to build them a deck and failed to do so, resulting in their default on the rent and property taxes and the loss of their business. While I did not rule in favour of the defendants, I do not find their conduct at all reprehensible deserving sanction. The defendants simply fought hard and lost. As stated in Davies v. Clarington at para. 45:

Of course, a distinction must be made between hard-fought litigation that turns out to have been misguided, on the one hand, and malicious counter-productive conduct, on the other. The former, the thrust and parry of the adversary system, does not warrant sanction: the latter well may. In Apotex v. Egis Pharmaceuticals (1991), 4 O.R. (3d) 321, [1991] O.J. No. 1232 (Gen. Div.), substantial indemnity costs were justified as a means [at para. 8] "to discourage harassment of another party by the pursuit of fruitless litigation . . . particularly where a party has conducted itself improperly in the view of the court". For other examples of abuses of process leading to elevated costs, see Dyer, at pp. 184-85 O.R. [Emphasis added]

[9] Any costs award will be on a partial indemnity basis.

The Plaintiff’s Bill of Costs

[10] The plaintiff’s bill of costs is problematic. It refers to work done by eight counsel retained over the years by the plaintiff. I have been provided categories of work but not when it was performed. A more detailed bill of costs setting out when the work was done in this case was critical, especially given the number of lawyers and the fact that little was done on the file after the initial filing of the plaintiff’s statement of claim. The plaintiff’s action was dismissed for delay on July 11, 2012. The dismissal for delay was set aside on January 13, 2016.

[11] The plaintiff was involved in related litigation involving Mr. Chau. The plaintiff’s trial involving Mr. Chau started on February 29, 2012. At the commencement of that trial, Mr. Muyal was removed as counsel of record for the plaintiff. Prior to that, Mr. Chapman and Ms. Couto had represented the plaintiff and both were previously removed from the record. It appears that the bill of costs is an attempt to have the Jensens pay for legal fees incurred for the Chau litigation. If this is not the case, it was incumbent on the plaintiff to explain how those legal fees related to this action, especially since it appears that Mr. Chapman, Ms. Couto, and Mr. Muyal had been discharged for a number of years by the time the Jensen litigation started moving again in 2016. For example, Mr. Hussain was counsel for the plaintiff at the discoveries which finally took place in August 2017. The bill of costs reflect his time spent preparing for and attending the discoveries and dealing with related answers and undertakings. The bill of costs also shows eight hours spent by Mr. Hussain dealing with the affidavit of documents. However, the bill of costs also has eight hours spent by Mr. Chapman, Ms. Couto, and Mr. Muyal working on the same thing even though they had been discharged by February 29, 2012.

[12] The defendants are not required to pay for the waste and duplication resulting from so many different lawyers. The plaintiff has the responsibility in ensuring that the bill of costs has accounted for this waste. This has not been done. The plaintiff has explained that the hours billed for the entirety of the case should be deemed reasonable as it is less than the total hours set out in the defendants’ bill of costs. This submission does not assist the plaintiff. The plaintiff claims that he has billed for 279.2 hours while the defendants have billed for 333 hours. The plaintiff’s numbers are incorrect. Using the bill of costs provided, the plaintiff has billed for 354.2 hours. In addition, the defendants’ bill of costs, while not as detailed as I would like, does show the work done for each litigation step and references the dates of those litigation steps. There is also no issue that the defendant’s billings relate to only this action. It is difficult to compare each billing given the lack of itemization by the plaintiff, but the plaintiff is incorrect when he states that the reasonableness of his bill is further reflected by the fact that for each party over half of their amount claimed is for time spent preparing and attending the discovery and trial. Only 163.2/354.2 hours, or 46% of the time, claimed by the plaintiff was for time spent preparing and attending the discovery and trial. The defendants’ bill of costs reflects that 64% of their hours claimed were time spent preparing and attending the discovery and trial. I need not comment on the overall amount of legal hours set out in the defendants’ bill of costs, but given that there were few litigation steps in this action the allocation of labor set out in the defendant’s bill of costs makes much more sense.

[13] There are additional problems in the plaintiff’s bill of costs. Trial Counsel for the plaintiff has also not been able to review the accounts of any of the lawyers, except his own and Mr. Hussain’s. In addition, the bill of costs has allocated 50 hours of time to Mr. Chapman without any accounting of how that time was spent.

[14] In my view, the only hours spent that I can, based on the information I have been provided, reasonably assign costs to are the hours spent by Mr. Hussain and Mr. Morris. There is no issue that the time they spent was in furtherance of this litigation, and their accounts have been reviewed by trial counsel. Similarly, only Mr. Hussain and Mr. Morris’s reasonable disbursements will be subject to recovery. I will not include the time spent by Mr. Hussain in preparing for and attending mediation as “Costs and disbursements incurred as a result of participating in voluntary mediation should not be included in awards of costs determined by the Court.” Saltsov v. Rolnick, [2010] O.J. No. 5606 at para. 9, and Noble v. North Halton Golf and Country Club Ltd., [2018] O.J. No. 5883 at para. 16.

[15] Mr. Hussain and Mr. Morris’ legal fees, at a partial indemnity rate, amount to $42,102. I note that it appears evident that a number of Mr. Hussain’s listed disbursements are estimates and not exact amounts spent. Therefore, I have reduced the disbursements accordingly and after adjustments they amount to $5000.

Delay in the proceedings

[16] The defendants submit that “plaintiffs’ delay and conduct in the action was designed to exacerbate the harm to the defendants, leaving them without means” and asks that costs be denied pursuant to 57.01(2). Rule 57.01(1)(e) also authorizes a trial judge, in awarding costs, to consider the conduct of any party that tended to shorten or lengthen unnecessarily the duration of the proceeding.

[17] The trial itself was not unduly lengthened. Mr. Morris and Mr. Franschman ran an efficient trial, and were both the models of professionalism and effectiveness.

[18] However, it took almost a decade for this matter to come to trial. As set out above, the defendants blame the plaintiff. There is good reason for that assertion. The plaintiff’s action was dismissed for delay on July 11, 2012. On January 13, 2016, the dismissal was set aside and a new deadline for setting the matter down for trial was set for January 13, 2017. Discoveries were set to be completed by September 30, 2016. They were not. A new timetable was agreed to by the parties on June 30, 2016, allowing the defendants to amend their statement of defence and requiring discoveries to be completed by November 15, 2016. They were not. Discoveries were completed by the end of August 2017. Mr. Hussain was counsel for the plaintiff during the discoveries and he filed the trial record book on September 29, 2017. Mr. Roopchand has had eight counsel on this file. As mentioned, there has been overlap with these proceedings and the proceedings involving Mr. Chau. Since the default was set aside on January 13, 2016, my review of the materials reveals that Mr. Roopchand has had at least three counsel: Mr. Quance, Mr. Hussain, and Mr. Morris.

[19] The information that I have also shows that the defendants had two counsel, Mr. Pathak and Mr. Franschman. Mr. Franschman was retained on May 11, 2015. According to counsel’s submissions, “This was a matter of exceptional importance to the defendants but they had no money to pursue the matter. Their counsel, not a trial lawyer, attempted to assist them on contingency given an understanding gained from the Chau matter of Roopchand’s inequities.” These submissions explain the lack of activity on the part of the defendants to pursue their counterclaim until Mr. Franschman was retained. I also note that the defendants filed an amended statement of claim in 2016, six years after the action was commenced.

[20] In my view, it would not be appropriate to not award costs or reduce the costs award as a result of delay. Both parties did not push the matter forward for many years. I have also already reduced the costs award to ensure that there is no duplication because of the many lawyers spent on the file. Finally, I note that the delay in some way assisted the defendants as it was due to Mr. Franschman’s knowledge from the Chau litigation, which proceeded first, that he was able to be retained on a contingency basis.

Conclusion

[21] I therefore order that the defendants pay costs to the plaintiff in the amount of $42,102 plus HST and disbursements in the amount of $5,000. The defendants shall have four months to pay.

The Honourable Justice H. Leibovich

Released: March 26, 2020