Court File and Parties

COURT FILE NO.: 3914/08 DATE: 2020-07-02

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

MCAP SERVICE CORPORATION Plaintiff – and – LAWYERS’ PROFESSIONAL INDEMNITY COMPANY Defendant – and – MALKIT MANGAT a.k.a. GURDISH MANGAT and JUJHAR MANGAT Third Parties

COUNSEL: Ian K. Latimer, for the Defendant Ted Laan, for Jujhar Mangat Malkit Mangat, Self-represented

HEARD: June 29, 2020

CONLAN J.

I. Introduction

The Substance of the Matter and the Parties

[1] This is a motion brought by the Defendant, the Lawyers’ Professional Indemnity Company (“LPIC”), against the Third Parties, Malkit Mangat also known as Gurdish Mangat (“Malkit”) and Jujhar Mangat (“Jujhar”), collectively referred to herein as the “Mangats”.

[2] The Plaintiff, MCAP Service Corporation, took no part in the motion. LPIC and Jujhar are each represented by counsel, while Malkit represents himself. Given the current health crisis due to COVID-19 and the partial suspension of the Superior Court of Justice’s normal operations, the motion was heard by audioconference on June 29, 2020. Submissions were delivered on that date by counsel for LPIC and by counsel for Jujhar. Although present at the hearing of the motion, because he had filed no materials, Malkit made no submissions other than to confirm that he supports those advanced by counsel for Jujhar.

What LPIC Wants

[3] To understand what relief is being sought by LPIC (or “LawPro” as identified by its counsel in the written materials), set out below are the following taken directly from the Notice of Motion: paragraphs 1 through 6 under the heading “the motion is for” and paragraphs 1 through 21 under the heading “the grounds for the motion are”.

THE MOTION IS FOR:

1. An order that LawPro is entitled to its costs (the “Enforcement Costs”) set out in LawPro’s bills of costs attached as an exhibit to the affidavit of Tiziana Moretti (Exhibit “A”, pp. 25-123), on a partial indemnity scale, to enforce a judgment (the “Judgment”) dated December 5, 2012 (entered March 14, 2013) obtained against the third parties, Malkit Mangat a.k.a. Gurdish Mangat (“Malkit”) and Jujhar Mangat (“Jujhar”).
2. An order fixing the Enforcement Costs or, in the alternative, referring the Enforcement Costs to an Assessment Officer for assessment.
3. If necessary, an order abridging the time for the service, filing and hearing of the motion.
4. An order validating service of LawPro’s motion record in the manner in which it was served.
5. The costs of this motion.
6. Any further relief that this Honourable Court deems just.

THE GROUNDS FOR THE MOTION ARE:

1. In accordance with Judgment, Malkit and Jujhar were ordered to pay to LawPro’s insured Salma Sheikh also known as Salma Dar (“Sheikh”), the sum of $70,000.00 (the “Principal Sum”) and Sheikh’s costs (the “TPC Costs”) of the third party claim. The Judgment bears interest at the rate of 3% per year commencing on March 6, 2013.
2. Sheikh later assigned the Judgment to LawPro.
3. Malkit and Jujhar refused to pay the Principal Sum and TPC Costs. As a result, LawPro’s former lawyers Sack Goldblatt Mitchell LLP, now Goldblatt Partners LLP (“Goldblatt”) took steps to enforce the Judgment.
4. The steps undertaken by Goldblatt did not result in the recovery of any money.
5. LawPro then retained Speigel Nichols Fox LLP (“SNF”) to enforce the judgment.
6. SNF’s approach to collection of a debt or judgment involves understanding the debtor before any enforcement step is taken. This understanding means getting to know the debtor throughout his or her life to the present time. SNF obtains this understanding from piecing together information from various sources, such as an extensive review of the underlying action in which the judgment or debt arose and conducting various public searches.
7. SNF completed its work relating to Malkit and Jujhar and then formulated a road map or strategy of the most effective way to collect the amounts set out in the Judgment.
8. Initially, SNF took less costly enforcement steps. This resulted in payment of $25,175.72 to LawPro.
9. Malkit and Jujhar refused to pay the balance owed under the Judgment. Instead, they significantly delayed LawPro’s collection proceedings by making offers to settle that did not even cover the Principal Amount and by each filing consumer proposals under the Bankruptcy and Insolvency Act. Ultimately, LawPro discovered that the proposals did not reflect the respective true financial situations of Malkit and Jujhar.
10. LawPro declined the offers to settle and voted against the consumer proposals. This caused the consumer proposals to fail.
11. On April 11, 2017, LawPro commenced an action against Malkit, his spouse, and third mortgagees, Devinder Singh Bains and Surjit Kaur Bains, for a declaration that the third mortgage registered against Malkit’s property municipally known as 44 St. Georges Place, Brampton, Ontario was a fraudulent conveyance.
12. This action also requested an order allowing LawPro to register a certificate of pending litigation (“the CPL”) against the property. LawPro obtained the order and, on May 1, 2017, registered the CPL.
13. In May 2017, LawPro took out an appointment from the court to assess the TPC Costs.
14. In July 2017, after failed attempts to settle the matter, LawPro scheduled a judgment debtor examination of Malkit and was in the process of arranging Jujhar’s examination.
15. Shortly thereafter, LawPro received from Jujhar payment of the balance of the Principal Amount plus accrued interest.
16. Recently, the parties settled the assessment of the TPC Costs. Malkit and Jujhar are to pay $35,000.00 and accrued interest to Lawpro on or before May 3, 2019, failing which LawPro may move to obtain an order, on consent, for $40,000.00 and interest. To date, neither Malkit nor Jujhar has remitted payment.
17. It was only after LawPro took costly enforcement proceedings and dealt with the consumer proposals that Malkit and Jujhar paid the balance of the Principal Sum plus accrued interest.
18. Due to the actions of Malkit and Jujhar, LawPro has incurred significant Enforcement Costs, which are set out in LawPro’s bill of costs attached as an exhibit to the affidavit of Tiziana Moretti (Exhibit “A”, pp. 25-123).
19. If LawPro is not compensated for all of the steps that it took to enforce the Judgment, then LawPro would not receive fair and reasonable costs to enforce the Judgment.
20. Section 131(1) of the Courts of Justice Act.
21. LawPro relies on Rules 1.04, 1.05, 16.01, 16.05, 37, and 60.19 of the Rules of Civil Procedure.

[4] On a partial indemnity scale, the total sum of the enforcement costs being sought by LPIC is $51,749.39.

II. Analysis

Short Conclusion

[5] For the reasons that follow, the principal relief being sought by LPIC, that is an order that it is entitled to the enforcement costs that it seeks, is denied. Only the relief sought in the alternative at clause 2 of the prayer for relief in its Notice of Motion, that is an order referring the enforcement costs to an Assessment Officer for assessment in accordance with the directions given herein, is granted. Otherwise, in terms of substantive as opposed to procedural relief, the motion is dismissed.

The Position of LPIC is Contrary to the Plain Wording of the Courts of Justice Act, R.S.O. 1990, c. C.43, as amended (“CJA”) and the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, as amended (“Rules”)

[6] Subject to other legislation or the Rules, “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” – subsection 131(1) of the CJA.

[7] A judgment creditor, like LPIC, “is entitled to the costs of the following steps on a partial indemnity scale, unless the court on motion orders otherwise: (1) an examination in aid of execution, (2) the issuing, service, filing, enforcement and renewal of a writ of execution and notice of garnishment, and (3) any other procedure authorized by these rules for enforcing the order” – sub-rule 60.19(1).

[8] An observer may ask, why the words “any other procedure authorized by these rules for enforcing the order”? The reason for that is straightforward – because there are enforcement steps authorized by Rule 60 which are not expressly mentioned in sub-rule 60.19(1), for example a motion for a contempt order under Rule 60.11.

[9] LPIC takes the position that the words “unless the court on motion orders otherwise”, in the preamble to the three items specifically mentioned in sub-rule 60.19(1), authorize the Court to award enforcement costs of any kind provided they are reasonable. That would include the types of enforcement costs being sought here, such as costs related to settlement efforts (about $10,000.00) and costs related to the Mangats’ bankruptcy proposals (more than $13,000.00) and costs related to an entirely independent action brought by LPIC against the Mangats regarding an alleged fraudulent conveyance (more than $22,000.00), which action has been defended and remains outstanding.

[10] The Mangats, on the other hand, submit that sub-rule 60.19(1) is exhaustive. Only those items specifically mentioned therein are recoverable.

[11] I agree with the position advanced on behalf of the Mangats.

[12] Initially, and up until very shortly before the hearing of the motion, LPIC was forced to acknowledge that its position on the motion was without any authority to support it (paragraph 74 of its factum). At the hearing of the motion, however, LPIC relied very heavily on a recent case, Aldebert v. Country Boy Services, 2020 ONSC 3136, specifically paragraphs 24 and 25, reproduced below in their entirety.

[24] In my view, this court does have jurisdiction to award reasonable costs incurred in the enforcement of a judgment:

a) Rule 60.19 does not expressly exclude the award of other costs as Country Boy claims. Clear language would be necessary to exclude the court’s inherent jurisdiction to control its process which includes awarding costs of enforcing court orders;

b) The wording of s.131 of the CJA is broad enough to grant a court jurisdiction to award costs incurred in the enforcement of a judgment of the court because enforcing a judgment/court order for payment is an incidental to this proceeding. Further, issuing a garnishment is a “step” in this proceeding.

In 469804 Ontario Ltd. v. 723146 Ontario Ltd., Cullity J. concluded at para. 16 that:

…I do not believe that costs of enforcement, or collection, are costs “of and incidental to a proceeding or a step in a proceeding” for the purposes of s.131 of the Courts of Justice Act if the meaning of “proceeding” is limited to actions and application as it is in the Rules of Civil Procedure.

With the greatest of respect, I disagree with Justice Cullity’s conclusion. Execution on a payment order made by the court is incidental to the proceeding – what can be more incidental than to enforce a court order for payment? Even Justice Cullity recognized that in certain circumstances costs could be awarded (para. 17):

It is, of course, unwise in matters of practice and discretion to exclude the possibility of exceptional cases but I see no justification in the affidavits, and bills of costs, filed on this motion for departing from what I conceive to be the general rule set out in rule 60.19.

c) The wording of Rule 60.19(2)(d) expressly gives the court the jurisdiction to award further costs, whether assessed by an assessment officer or the court, without being limited to the items in the prior three sub paragraphs. There would be no need for such wording in (d) if the execution creditor was limited to the items in rule 60.19(2)(a) through (c); and;

d) Lastly, it makes little sense that a judgment debtor could, through deliberate, flagrant or improper actions, take steps to avoid payment thereby causing the judgment creditor to incur additional unnecessary costs by such actions, without a remedy being available to this court. Country Boy’s counsel, eventually during submissions, conceded that the court would have jurisdiction to award costs where a judgment debtor acted in bad faith or forced the judgment creditor to take unreasonable and unnecessary steps to collect on a judgment but submitted that the threshold to award such costs should be high and are not met in this case.

[25] I am satisfied that this court has jurisdiction to award costs of enforcement beyond those set out in Rule 60.19(2)(a) through (c) where appropriate.

[13] With great respect, I take a different view of sub-rule 60.19(1). I agree with the decision of Justice Cullity in 469804 Ontario Ltd. v. 723146 Ontario Ltd., the leading authority relied upon by the Mangats. In particular, I find persuasive the following comments of Cullity J. at paragraphs 14 through 19 of His Honour’s decision.

14. The remaining matter in dispute relates to the plaintiff’s entitlement to recover costs incurred in its attempts to enforce the judgment and to settle with the defendants. These – in an amount of $61,827.36 – as I have indicated, were included in the amount of $266,803.84 claimed in the letter of November 26, 2001, from the plaintiff’s solicitor.

15. On this question I believe there is force in the submissions of counsel for the defendants that the only such costs that the plaintiff is entitled to recover are those permitted pursuant to rule 60.19(1) which reads as follows:

A party who is entitled to enforce an order is entitled to the costs of an examination in aid of execution and the issuing, service, enforcement and renewal of a writ of execution and notice of garnishment, unless the court orders otherwise.

16. Although no authorities were cited on the question, I do not believe that costs of enforcement, or collection, are costs “of and incidental to a proceeding or a step in a proceeding” for the purposes of section 131 of the Courts of Justice Act if the meaning of “proceeding” is limited to actions and applications as it is in the Rules of Civil Procedure. Subject to the provisions of rule 60.11 dealing with motions for contempt, steps taken to enforce judgment obtained in an action are not, I believe, to be considered as steps in the action. If that is correct, the authority to award costs of enforcing a judgment, where separate proceedings have not been commenced, would appear to be found in rule 60.19 and not in the Courts of Justice Act. Where motions for contempt, or other proceedings, have been brought, costs lie within the jurisdiction of the court that deals with them.

17. Read literally, the words of rule 60.19 do not appear to confer a discretion to award costs incurred in matters other than those mentioned specifically. The discretion appears to be limited to disallowing costs with respect to the specified steps in enforcing an order although there will, of course, be an element of discretion in determining the quantum of the costs to be allowed in connection with them. If, on the contrary, the rule does permit the court to award costs in respect of other matters connected with the enforcement of an order – or if, contrary to the above, recourse can be had to section 131 or to the inherent jurisdiction of the court – I see no reason to award costs, on the facts of this case, to those incurred by the plaintiff as part of the negotiations for a settlement. Settlements are essentially consensual and are not proceedings in any usual sense of the term. If costs incurred in the course of negotiations are to be paid, the obligation to do this must normally be found in the terms of an agreement between the parties. It is, of course, unwise in matters of practice and discretion to exclude the possibility of exceptional cases but I see no justification in the affidavits, and bills of costs, filed on this motion for departing from what I conceive to be the general rule set out in rule 60.19.

18. Although, on assessment, the former Part 1 of Tariff A may provide the starting point with respect to matters referred to in the rule that occurred before this year, there was not only the discretion to increase the amounts to be awarded, for example, in respect of examinations in aid of execution (tariff item 19), but, also, the general discretion of the court conferred by rule 58.05(1). In the exercise of that discretion – and in view of the defendant’s lack of co-operation with the plaintiff’s attempt to obtain satisfaction of the judgment – I am directing that the plaintiff is to receive an hourly allowance determined in accordance with the partial indemnity scale in the costs grid that, effective January 1, 2002 became Part I of the Tariff A for time spent by its solicitor in preparing for, and attending on, examinations in aid of execution, including any for which certificates of non-attendance were issued and for the time spent on any other matters referred to in rule 60.19. Costs of preparation and attendance at motions for contempt and any other motions are to be excluded to the extent that they have not previously been awarded by the court. Cost of any attendances on the client, correspondence with the defendants’ solicitor, and any other costs, that do not fall within rule 60.19 are not to be awarded.

19. In summary, the plaintiff is not entitled to fees and disbursements claimed in respect of services rendered by its solicitor since the judgment – other than the costs referred to in rule 60.19, those that are dealt with in orders of the Court of Appeal and other orders of this court and those, if any, that have been agreed between parties. To the extent that such costs have not already been fixed and cannot be agreed between the parties, they are to be assessed. The costs pursuant to rule 60.19 are to be assessed using the hourly rates applicable to the partial indemnity scale. Alternatively, if the parties wish me to fix the costs, I will do this upon receipt of a revised bill of costs of the plaintiff – and any further written submissions from either party with respect to its contents – within 30 days of the release of these reasons. An attendance in chambers may be necessary.

[14] If LPIC is correct, and if we assume for the moment that the term “proceeding” in subsection 131(1) of the CJA includes events post-judgment, such as enforcement steps, then why would sub-rule 60.19(1) exist? LPIC has no answer to that question. It makes no common sense that the Rules Committee would fashion a Rule that explicitly delineates judgment enforcement steps whose costs are recoverable if there is in fact no limit on the categories of enforcement costs that may be recovered as they are entirely discretionary as provided for by subsection 131(1) of the CJA.

[15] To further explain this point, by analogy, the Rules, and Rule 37 specifically, does not expressly delineate what types of costs are recoverable with regard to a motion. Why not? In my opinion, the answer is simple – because, unlike the costs associated with the enforcement of a judgment or an order [sub-rule 60.19(1)], the costs of a motion (which is a step in a proceeding) fall squarely within the purview of subsection 131(1) of the CJA in that they are not restricted to certain items that are recoverable.

[16] Further, if LPIC is correct in its interpretation of sub-rule 60.19(1), then there is a whole new meaning to the phrase “unless the court orders otherwise”. That is a common phrase used in legislation and rules of practice of all sorts. It does not normally mean the same thing as “including but not limited to”, or even simply “includes”, yet that is precisely what LPIC is suggesting. Surely, the Rules Committee knows how to connote a meaning that is not exhaustive. In fact, the Rules are replete with clear indications of just that, for example in one of the very first Rules, Rule 1.03, where, in sub-rule (1), the term “document” is defined as follows: “includes data and information in electronic form” (emphasis added). That clearly signals to the reader that there are other things that may be considered a “document” besides the items specifically mentioned. Not so, however, with sub-rule 60.19(1).

[17] Frankly, there is nothing in the plain wording of sub-rule 60.19(1) to suggest that the list therein of recoverable enforcement costs is only a partial list.

[18] In my view, what the words “unless the court orders otherwise” in sub-rule 60.19(1) plainly mean is that the judgment creditor may or may not recover costs of the items mentioned thereunder. In other words, the phrase is intended to connote discretion in terms of recoverability, not open-endedness on what items attract enforcement costs.

[19] For example, a judgment creditor who continues to conduct judgment debtor examinations with no realistic hope of uncovering anything new or different from that recently conducted should not expect to be compensated for the costs of all of those examinations. There is a discretion to “order otherwise”, even though an examination in aid of execution is an item expressly referred to in sub-rule 60.19(1).

[20] A review of the French version of sub-rule 60.19(1) only serves to further reinforce my opinion. There, the words in question, “unless the court orders otherwise”, are placed at the beginning of the preamble, “[s]auf ordonnance contraire du tribunal rendue”, clearly signaling that the specific items that follow (“suivantes”) are presumptively (but not automatically) recoverable by the judgment creditor. The French version of the text in no way supports an interpretation that the list of items specifically mentioned in the sub-rule is not exhaustive.

The Position of LPIC is Also Inconsistent with the Evolution of the Rule

[21] Besides being incongruous with any reasonable interpretation of the plain meaning of the words found in subsection 131(1) of the CJA and sub-rule 60.19(1), I am of the opinion that LPIC’s position is contrary to the evolution of the Rule.

[22] When Justice Cullity made the decision referred to above, the wording of the Rule was slightly different and more restrictive than its current form. Why would the Rules Committee go from the former version to something that has no limit at all except for reasonableness, yet continue to expressly delineate certain items that are recoverable in terms of judgment enforcement costs? It would not do so, in my view. What it did, rather, was to simply expand the list of explicitly mentioned items that are recoverable.

There are Good Policy Reasons to Support this Court’s Interpretation of the Rule

[23] Finally, in my opinion, there are good policy reasons for expressly limiting the types of things that are recoverable in costs in an effort to enforce a judgment or an order. It is entirely consistent with the reality, as harsh as it may sound, that a judgment is not the equivalent of money in hand. The creditor may choose, out of principle for example, to expend more resources and more money to collect a judgment than what the judgment is worth (which is exactly what happened here, given that the $51,000.00 in costs sought, when added to the $35,000.00 in costs already adjudged, exceed $70,000.00, the principal amount of the judgment), but the “proceeding” is effectively at an end, and proportionality is key, and thus the Rules logically put the creditor on notice that only certain items are going to be recoverable.

[24] In addition, sub-rule 60.19(1) is entirely compatible with the value that our justice system places on settlements, which agreements often include money actually exchanging hands. Such a settlement is attractive to a creditor because it means certain money as opposed to a judgment and limited recoverability of enforcement costs down the road.

[25] It seems to me that sub-rule 60.19(1) is a valuable tool in the lesson of prudent litigation. In a society where litigiousness runs rampant, it is a check on would-be suitors before they rush to issue their claims. If you are “successful” in obtaining a judgment, that success must be realized through enforcement, and you will not be compensated for chasing a delinquent ad nauseam, and thus perhaps that should be a consideration at the very outset of the suit and remain in your mind throughout.

The Result

[26] In the end, with great respect for the contrarian view, I am convinced that LPIC’s interpretation of sub-rule 60.19(1) is wrong. Thus, it cannot recover the vast majority of the costs that it seeks on this motion, regardless of how distasteful the conduct of the Mangats may have been, and no matter how broadly or generously or liberally this Court is required, generally, to interpret the Rules, and putting aside the remarkably competent enforcement work that was done by counsel on behalf of LPIC.

[27] I pause here to add something, though unnecessary to the result. Even if LPIC is correct about its interpretation of sub-rule 60.19(1), which interpretation I reject, I would not have allowed LPIC to recover the majority of the enforcement costs that it seeks. With reference to paragraph 9 herein, and using round figures, I would have disallowed the $22,000.00 and the $13,000.00 completely, as the former quantum must await the adjudication of the independent fraudulent conveyance action, and the latter sum which relates to the Mangats’ bankruptcy proposals is too remote to be considered judgment enforcement costs. Further, I would have reduced the $10,000.00 to something more reasonable on account of settlement efforts. At some point, LPIC ought to have recognized that it could not continue to essentially negotiate with itself. That arithmetic would have left LPIC with an award of judgment enforcement costs of less than $16,000.00, even on LPIC’s interpretation of what is eligible for recovery (a small fraction of the almost $52,000.00 sought).

[28] In all of the circumstances, the matter must be referred to an expert, an Assessment Officer, who will assess the allowable costs in accordance with these reasons. For clarity, this Court directs that only those costs that are associated with the items explicitly delineated in sub-rule 60.19(1), which three items are further amplified by clauses (1.1) through (5) of Rule 60.19, shall be eligible for recovery on a partial indemnity scale.

[29] Of course, if the parties choose to settle the quantum of enforcement costs to be awarded in favour of LPIC in advance of an appointment with an Assessment Officer, which I would encourage them to do, that will obviate any further delay.

[30] Otherwise, the motion brought by LPIC is dismissed.

[31] In the normal course, the Mangats would be entitled to some costs. If those cannot be settled, I will accept written submissions limited to two pages on each side, excluding attachments. The Mangats shall file within thirty calendar days of the date of these reasons, and LPIC shall file within fifteen calendar days of its counsel’s receipt of the Mangats’ submissions. Without leave of the Court, no reply is permitted.

[32] I thank both counsel, Mr. Latimer and Mr. Laan, for their helpful assistance with this matter.

(Original signed by)

Conlan J.

Released: July 2, 2020

COURT FILE NO.: 3914/08 DATE: 2020-07-02

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN: MCAP SERVICE CORPORATION Plaintiff – and – LAWYERS’ PROFESSIONAL INDEMNITY COMPANY Defendant – and – MALKIT MANGAT a.k.a. GURDISH MANGAT and JUJHAR MANGAT Third Parties

REASONS FOR DECISION Conlan J.

Released: July 2, 2020