CITATION: Growth Capital Corp. v. 2221448 Ontario Inc. d.b.a. Caliber Express, 2020 ONSC 3063
COURT FILE NO.: CV-18-599322
DATE: 20200515
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
GROWTH CAPITAL CORP.
Plaintiff
– and –
2221448 ONTARIO INC. DBA CALIBER EXPRESS, VARINDERPAL BRAR AND NEERAJ SHARMA
Defendants
Amanda C. McLachlan/Nina Butz, for the Plaintiff
Kenneth H. Page, for the Defendant Neeraj Sharma No one appearing for 2221448 Ontario Inc. or Varinderpal Brar, although served
READ: May 13, 2020 (written submissions on costs received on April 17 and 29, 2020)
Kimmel J.
REASONS FOR DECISION - COSTS
[1] In my reasons for decision granting summary judgment to the plaintiff released on March 26, 2020, I made the following orders:
a. The plaintiff shall have judgment against all of the defendants for breach of contract, based upon their joint and several liability under the Master Agreement and the Personal Guarantees for the claimed amounts of CDN $407,576.20 and USD $2,579.60, plus pre-judgment interest from and after April 8, 2019 and post-judgment interest, pursuant to the Courts of Justice Act;
b. The plaintiff’s judgment against Brar includes liability for the Fraud Claims against him for fraudulent misrepresentations made by him in respect of the Rejected Invoices and Non-Existent Entity Invoices, totalling $82,900.00 and $128,923.00, respectively;
c. The plaintiff’s Fraud Claims against the defendant Sharma are dismissed;
d. Any amounts received by Caliber in respect of the Customer Directly Paid Invoices are declared to be held in trust by Caliber for Growth Capital pursuant to the deemed trust provisions contained in section 2.5 of the Master Agreement; and
e. The costs of this motion and the action shall be determined by agreement of the parties or by further order of this court to be made based upon the written submissions of the plaintiff and the defendant Sharma.
[2] I asked the parties who participated in the motion (Growth Capital and Sharma) to exchange their costs outlines at or shortly after the hearing. In my reasons for decision I encouraged counsel to attempt to reach an agreement on costs. They were not able to do so. I have since received their respective submissions on costs and Bills of Costs.
The Parties’ Positions on Costs
[3] Growth Capital seeks its substantial indemnity costs of the motion and the action against Brar, in the amount of $60,024.26 (inclusive of all fees, calculated at 90% of the full indemnity rate for the professionals involved, plus disbursements and taxes). This award is sought on the basis of the judgment that was awarded against him both in contract and for fraudulent misrepresentation. Brar did not appear on the motion and has made no submissions on costs.
[4] Growth Capital considers that its success against Sharma was divided since Sharma was found liable in contract, but not in tort and not for any fraud or misrepresentation. Growth Capital thus argues that each of Growth Capital and Sharma should bear their own costs of the action and motion as against Sharma.
[5] Sharma is seeking his substantial indemnity costs of the action and the motion from Growth Capital on the grounds that the Fraud Claims alleged against him were dismissed, and that those were the only claims he defended on the merits on the summary judgment motion. The Bill of Costs submitted by Sharma’s counsel indicates partial indemnity fees of $12,417.75 (at 60% of actual fees inclusive of taxes, plus total disbursements of $452.58) and actual costs of $20,695.95 (inclusive of taxes), which at the substantial indemnity rate, would translate into a claim of $18,626.36).
[6] Growth Capital points out that Sharma’s position on the summary judgment motion, that he was only resisting the Fraud Claims against him, was taken after he filed for bankruptcy protection. Prior to that, he had been resisting all of the claims against him in the action, both in contract and in tort. Growth Capital also argues that an allegation of fraud does not automatically entitle a litigant who successfully defends such a claim to substantial indemnity costs. See Canadian Western Trust Company v. 1324789 Ontario Inc., 2019 ONSC 5948, at paras. 6-7.
Decision on Costs
[7] The nature of the findings against the individual defendants is significant because they both filed for bankruptcy in 2019 after the action was commenced. As I noted in my reasons for decision on the summary judgment motion, Sharma made no secret that he was concerned about a judgment being made against him that might survive his bankruptcy, if and when he is discharged.
[8] Growth Capital was permitted to prosecute this action against the bankrupt parties, Sharma and Brar, for the purpose of establishing liability and valuing Growth Capital’s claims against them, which will also include any costs awards made against them.
Costs Against Brar
[9] Brar was found to have intentionally or recklessly misrepresented the accuracy of the invoices that Caliber purchased and that are the subject of the claims it makes in this action. Brar has not participated in the action since filing for bankruptcy protection. The plaintiff has been put to considerable expense to prosecute the action and obtain a judgment against him and the company. He has been the cause of some of the delays and speedbumps and there is now a finding against him in respect of Growth Capital’s Fraud Claims.
[10] Having considered the submissions of the parties, and having regard to the Rule 57.01 factors that are to guide the exercise of my discretion in awarding costs under s. 131 of the Courts of Justice Act, R.S.O. 1990, c. C-42, I am awarding Growth Capital its substantial indemnity costs of this action and the summary judgment motion as against Brar, in the all-inclusive amount claimed of $55,000.00. While this number is somewhat arbitrary, in my view there should be some discount from the claimed substantial indemnity costs awarded against Brar to reflect that, despite the significant overlap in the claims against the two individuals, there were some aspects of the claims that were specific to Sharma and Brar should not be responsible for the costs of the plaintiff’s pursuit of those claims. This $5,000.00 reduction in the claimed substantial indemnity costs is intended to recognize that.
[11] I have considered the applicable factors under Rule 57, and in particular, the level of experience, allocation of responsibilities and hourly rates of the plaintiff’s legal representation. The number of hours that they have indicated for the various tasks cited appear to be reasonable, as do the listed disbursements. The court should try to give effect to the principle of indemnity in a case such as this where the plaintiff’s claims do not appear to be unreasonable and have not been challenged.
[12] The nature of the claims against Brar, and in particular the fact that he made fraudulent misrepresentations to Growth Capital, is another relevant factor to the award of costs against Brar. The existence of a proven fraud is an example of the type of reprehensible conduct that justifies an award of substantial indemnity costs. See Elekta Ltd. v. Rodkin, 2012 ONSC 2062, at para. 41; Parsons Canada Ltd. v. Nathoo, 2013 ONSC 5975, at para. 39. The Court of Appeal’s guidance in this area is that substantial indemnity costs are available in cases where an unsuccessful party has engaged in reprehensible conduct worthy of the court’s sanctions. See Mars Canada Inc. v. Bemco Cash & Carry Inc., 2018 ONCA 239, at para. 43.
Costs Against Caliber
[13] Caliber is in default. I rendered judgment against Caliber on the summary judgment motion. Substantial indemnity costs against Caliber are not requested and no grounds have been identified that would warrant an award of substantial indemnity costs against Caliber for its joint and several liability in contract.
[14] Although not addressed directly in Growth Capital’s submissions, a judgment such as this would ordinarily attract an award of partial indemnity costs against Caliber for the motion and the action. The partial indemnity costs claimed in Growth Capital’s Bill of Costs are $41,931.83 (inclusive of all fees, calculated at 60% of the full indemnity rate for the professionals involved, plus disbursements and taxes).
[15] I find Caliber to be jointly and severally liable with Brar for the partial indemnity portion of the costs award against Brar, in the lesser amount all-inclusive amount of $40,000.00. This amount of partial indemnity costs for an action such as this that required not only documentation but witness testimony about the transactions at issue is within the realm of what the losing party should reasonably expect to pay in costs. It is not out of proportion with the amount that was at issue in this action.
Costs Relating to Sharma
[16] The success was divided in the claims against Sharma. His position that he was only resisting the Fraud Claims on the summary judgment motion would not relieve him of the responsibility for Growth Capital’s costs of pursuing him up to the point at which that position was declared. While it is not broken out in the plaintiff’s Bill of Costs it is clear that there were significant costs incurred in the action outside of the summary judgment motion. Taking that into account, and taking into account the fact that the motion was required, this is a case of divided success.
[17] The plaintiff’s position of no costs in respect of the motion as it relates to the claims against Sharma is a reasonable one. I agree with Growth Capital’s submission that this is a case in which the fact that Growth Capital’s Fraud Claims were not proven against Sharma does not automatically entitle Sharma to his costs. See Canadian Western Trust.
[18] In support of his request for costs, Sharma relies on Turtle Creek Landscape Inc. v. Summit Auto Brokers Inc., 2018 ONSC 512, aff’d 2018 ONCA 95. That case involved “bald and unsupported allegations” of fraud, including unproven allegations of evidence tampering against the defendants and their counsel. That case is distinguishable. Nor do I consider the conduct of Growth Capital in this case to be deserving of the court’s disapproval or that substantial indemnity (or any) costs should be awarded to Sharma to reflect the court’s disapproval of those claims having been made. This is not the type of situation contemplated by the Court of Appeal in the Mars Canada case.
[19] In the exercise of my discretion and having regard to the authorities cited by the parties as well as the applicable factors under s. 131 of the Courts of Justice Act and Rule 57, I am not awarding any costs of the action or the summary judgment motion to, or against, Sharma.
[20] Pursuant to Rule 59.05, this costs endorsement is effective from the date it is made and is enforceable as a Judgment without any need for entry and filing. In accordance with Rule 1.04, no formal Judgment need be entered and filed unless an appeal or a motion for leave to appeal is brought to an appellate court. Any party to this endorsement may nonetheless submit a formal Judgment for original signing, entry and filing when the court returns to regular operations.
Kimmel J.
Released: May 15, 2020
COURT FILE NO.: CV-18-599322
DATE: 20200515
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
GROWTH CAPITAL CORP.
Plaintiff
– and –
2221448 ONTARIO INC. DBA CALIBER EXPRESS, VARINDERPAL BRAR AND NEERAJ SHARMA
Defendants
REASONS FOR DECISION – COSTS
Kimmel J.
Released: May 15, 2020