NEWMARKET COURT FILE NO.: CV-17-133507-00A1 DATE: 20200727 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Computron Systems International Inc., Plaintiff/Moving Party AND: Husain Ladhani o/a GTA Wholesale, Amina Ladhani o/a GTA Wholesale, Enayat Abdulhusain Ladhani o/a GTA Wholesale, Techlogics Canada Inc. and Faisal Rashid, Defendants/Respondents AND: Amin Rhemtulla, Zebeen Rhemtulla and Prosonic Canada Inc., Third Parties/Respondents AND BETWEEN: Techlogics Canada Inc. and Faisal Rashid, Plaintiffs by Counterclaim AND: Computron Systems International Inc., Defendant by Counterclaim AND BETWEEN: Husain Ladhani o/a GTA Wholesale, Amina Ladhani o/a GTA Wholesale, Enayat Abdulhusain Ladhani o/a GTA Wholesale, Plaintiffs by Counterclaim AND: Computron Systems International Inc., Defendant by Counterclaim

BEFORE: The Honourable J. Dawe

COUNSEL: B. Sherman and S. Hariri, for Computron Systems International Inc. J. Spotswood and A-C. Norwood, for Husain Ladhani o/a GTA Wholesale, Amina Ladhani o/a GTA Wholesale, Enayat Abdulhusain Ladhani o/a GTA Wholesale Counsel J.M. Gray, for Techlogics Canada Inc. and Faisal Rashad

HEARD: In Writing

Endorsement

[1] As discussed at length in my May 26, 2020 summary judgment decision, [1] this case arose out of a series of sales between the parties of what turned out to be counterfeit copies of “Beats” branded headphones. Computron Systems International Inc.’s discovery that the headphones it had bought and contracted to buy were not authentic Beats products led to a complex web of claims, counterclaims, crossclaims and third party claims.

[2] In my previous Ruling I granted summary judgment: (i) in favour of Computron against both Husain Ladhani and Techlogics Canada Inc., and (ii) in favour of Ladhani in his crossclaim against Techlogics. I later issued a corrigendum correcting a calculation error in the amount of damages Techlogics was ordered to pay to Ladhani.

[3] I dismissed all of the other claims, counterclaims, crossclaims and third party claims, with the exception of Ladhani’s third party claim against Prosonic Canada Inc., who has been noted in default.

[4] I must now decide who should receive their costs, and how much they should receive.

[5] As Perrell J. noted in Amelin Resources, Inc. v. Victory Energy Operations, L.L.C., 2019 ONSC 239 at para. 13:

The most general rule about costs, not to be departed from without good reason, is that costs at a partial indemnity scale follow the event, which is to say that normally costs are ordered to be paid by the unsuccessful party to the successful party on a partial indemnity scale.

[6] I must consider and balance multiple factors, including the non-exhaustive list set out in Rule 57.01(1) of the Rules of Civil Procedure. I must also bear in mind that “the overarching principles to be applied in dealing with the costs of any proceeding are reasonableness, fairness and proportionality”: Barbour v. Bailey, 2016 ONCA 334 at para. 9.

1) Relevant factors

a) To what extent were Computron and Ladhani “successful parties”?

[7] Computron and Ladhani were both “successful parties” in the sense that they both brought motions for summary judgment that were granted in their favour. However, neither got everything they were asking for, and while Ladhani obtained summary judgment in his favour against Techlogics, he also had summary judgment granted against him in favour of Computron.

[8] Computron obtained compensatory damage awards against both Ladhani and Techlogics of what were essentially in the amounts it was seeking by the time its summary judgment motion was argued, although these amounts were substantially less than what it had originally sought in its Statement of Claim. [2] It also succeeded in having the various counterclaims against it by Ladhani and Techlogics dismissed, although none of these counterclaims appears to have ever been seriously pursued.

[9] However, Computron did not succeed in obtaining judgment in its favour against Techlogics’s principal Faisal Rashid personally, nor did it succeed in obtaining an award of punitive damages against either Techlogics or Rashid, both of which it had sought in its summary judgment motion.

[10] Computron also did not succeed in obtaining judgment against Husain Ladhani’s parents, although at the summary judgment motion hearing it took the position that it would abandon this claim if it were granted summary judgment against Ladhani and Techlogics.

[11] I would characterize Computron as being very largely, but not entirely, successful.

[12] Ladhani initially opposed Computron’s motion for summary judgment against him and filed a factum in which he took the position that Computron’s motion should be dismissed. However, by the time of the hearing he had changed his position and was now conceding that summary judgment should be granted against him. He did achieve a small measure of success as against Computron by pointing out some mistakes in Computron’s calculation of its damages, which Computron acknowledged to be errors that should be corrected. This slightly reduced the amount that Ladhani was ultimately ordered to pay to Computron in damages. Ladhani’s parents were also successful in having Computron’s action against them summarily dismissed.

[13] Ladhani argues that he was “entirely successful” in his own motion for summary judgment against Techlogics because he was “awarded damages against Techlogics for an amount equal to [his] liability to Computron.” This is incorrect: Techlogics was only ordered to reimburse Ladhani for his damages to Computron arising from the sale of the headphones that Ladhani had purchased directly from Techlogics. I did not accept Ladhani’s argument that he should also be awarded damages against Techlogics in relation to the headphones he had bought from the third party, Prosonic Canada Inc. As a result, Ladhani came away from his own summary judgment motion with less than he was asking for.

[14] However, it should be noted that Ladhani did also succeed in having the crossclaims against him by Techlogics dismissed, although Techlogics did not actively pursue these crossclaims.

[15] I would characterize Ladhani as substantially unsuccessful as a respondent to Computron’s summary judgment motion, and as only partially successful in his own summary judgment motion. In the context of the litigation as a whole, Ladhani came away as a net loser.

[16] For its part, Techlogics was substantially unsuccessful in its efforts to resist having summary judgment granted against it in favour of either Computron or Ladhani. However, it did successfully avoid being ordered to pay punitive damages to Computron, and also avoided being ordered to compensate Ladhani in relation to the headphones Ladhani had bought from Prosonic. Techlogics’s principal Rashid was also successful in avoiding having damages awarded against him personally in favour of Computron.

[17] I would characterize Techlogics as very substantially but not entirely unsuccessful in relation to both summary judgment motions.

[18] Techlogics argues that this is a case of “divided success” and that the parties should accordingly all bear their own costs. I would not go that far, since in my view Computron and Ladhani were both much more successful than Techlogics, even if neither was entirely successful.

[19] However, I do agree that Computron and Ladhani’s failures to achieve complete success is a relevant consideration, as is Ladhani’s overall status as a substantially unsuccessful party in the litigation as a whole.

b) Should Computron and Ladhani be denied costs because they failed to continue this case under the Rule 76 simplified procedure?

[20] Techlogics argues further that since Computron and Ladhani each ultimately obtained less than $100,000 in monetary damages from any other party, they should both be denied their costs pursuant to Rule 76.13(3) to sanction them for not bringing or continuing their claims and crossclaims under the Rule 76 simplified procedure. In the alternative, Techlogics argues that they should at least be denied any costs connected with the cross-examinations of the various affiants, on the grounds that no cross-examinations would have been permitted if the proceedings had been brought under the simplified procedure (see Rule 76.04).

[21] I would not give effect to either of these arguments.

[22] In my view, Rule 76.13(3) has no application here because of subrule 76.13(3), which provides that “[s]ubrule (3) does not apply if this Rule was unavailable because of the counterclaim, crossclaim or third party claim of another party”. In this case, Techlogics responded to Ladhani’s crossclaim against it by launching its own crossclaim seeking $600,000 in damages against Ladhani. Although Techlogics does not seem to have ever seriously pursued this crossclaim, it never formally abandoned it, and as long as the crossclaim remained outstanding none of the other parties could have continued their own claims, crossclaims and third party claims under the simplified procedure: see Rule 76.7(b)(ii). Accordingly, Techlogics cannot complain that Computron and Ladhani should have recast the proceedings under Rule 76 once the damages they were seeking dropped below the Rule 76 threshold.

[23] As a result, there is also in my view no justification for denying Computron and Ladhani their costs associated with cross-examining the affiants, which all parties were entitled to do as long as the case continued under the ordinary procedure.

[24] In any event, if there had been no cross-examinations it is extremely unlikely that I would have been able to grant summary judgment. I doubt that a summary trial under Rule 76.12, in which the affiants would have been cross-examined in court, would have been cheaper or more cost-effective than the approach that was actually taken of cross-examining them out of court. Accordingly, I would not have been inclined to disallow Computron and Ladhani their costs arising from the cross-examinations in any event.

c) Offers to settle

[25] In the months leading up to the hearing of the summary judgment motions Computron and Ladhani both made offers to the other parties to settle the litigation. Computron made one such offer, while Ladhani made three different offers at different times. Significantly, these offers were all made conditional on their acceptance by both of the opposing parties.

[26] The costs sanctions in Rule 49.10 are only available when the party who made the offer ultimately obtains a result that is “as favourable or more favourable than the terms of the offer to settle”.

[27] In broad terms, Computron’s offer and Ladhani’s first two offers were all much more favourable to Techlogics than the result Techlogics ultimately obtained. Ladhani’s third offer was less favourable to Techlogics than his earlier offers had been, but was still more favourable to Techlogics than the eventual judgment.

[28] However, the situation as between Computron and Ladhani is different. Ladhani’s offers were all less favourable to Computron than the result Computron ultimately achieved. Assessing whether Computron’s own offer was more or less favourable to Ladhani is more complicated. The offer would have required Ladhani to pay some $1,400 less to Computron than he has now been ordered to pay, but would also not have given him any compensation from Techlogics. Since Computron’s offer was stated to be “valid on the basis of all parties settle [sic] all claims”, accepting it would at least arguably have required Ladhani to give up his claim for indemnification from Techlogics, which would have left him much worse off than he is now. While Computron’s counsel may have meant “all claims” to only mean those involving Computron directly, it is Computron’s burden to prove that its offer was at least as favourable to Ladhani as the eventual judgment. In my view, the ambiguity in the wording of Computron’s offer weighs against Computron in the Rule 49.10 analysis.

[29] For several reasons, I do not think any of these offers should be seen as triggering cost consequences under Rule 49.10.

[30] It is questionable whether an offer that is expressly made conditional on its acceptance by multiple parties can ever engage Rule 49.10: see, e.g., Lumsden v. Delpeche at para. 18 (Ont. S.C.J.); Ksiazek v. Newport Leasing Ltd. at paras. 22-23 (Ont. S.C.J.); Wilson v. Quinn [2002] O.J. No. 120 at para. 16 (S.C.J.); Dryden (Litigation Guardian of) v. Campbell Estate, [2001] O.J. No. 4095 at para. 3 (S.C.J.).

[31] In any case, Ladhani’s offers to settle were more favourable to Techlogics than the ultimate judgment but were less favourable to Computron. Computron’s offer was also more favourable to Techlogics, but was at least arguably less favourable to Ladhani. Since all of the offers required them to be accepted by all parties, I do not think it would be fair to penalize Techlogics with costs sanctions for not settling the case on terms that at least one of the other parties would not have accepted even if Techlogics had agreed to them.

[32] Moreover, even if Computron’s offer were interpreted as not requiring Ladhani to abandon his crossclaim against Techlogics for indemnification, I would still be inclined not to treat the offer as justifying any cost sanction under Rule 49.10. As between Computron and Ladhani, the offer was only marginally more favourable to Ladhani than the eventual judgment. In Celanese Canada Inc. v. Canadian National Railway Co., Borins J.A. noted (at para. 33):

[A]n element of compromise is not an essential feature of an offer to settle, but where fairness is a relevant consideration its absence can be a factor for the court to consider in deciding whether to order “otherwise” under rule 49.10(1).

[33] If it had been necessary for me to do so, I would have exercised my discretion not to impose costs sanctions under Rule 49.10.

[34] All that said, the existence of Computron and Ladhani’s offers to settle the litigation remains a relevant factor for me to consider when assessing costs: see Rule 49.13.

d) Other factors

i) The conduct of the parties

[35] Among other things, Rule 57.10(1) calls for courts to consider how the parties conducted themselves during the litigation: see Rule 57.10(1)(e), (f) and (g).

[36] The parties in this case all point the finger at one another. Computron notes that Ladhani changed counsel and sought an adjournment of the summary judgment motion hearing, and blames Techlogics more generally for refusing to acknowledge that Computron had been trying to purchase genuine Beats products. For his part, Ladhani accuses Techlogics’s principal Rashid of giving “misleading, inconsistent and uncorroborated evidence, which unnecessarily lengthened the conduct of the litigation”. Techlogics in turn blames Ladhani for changing his position about whether he and Computron had known that the headphones at issue were not genuine Beats products.

[37] In my view all three parties did some things that tended to lengthen and complicate the proceedings. They can all be faulted for making a blizzard of counterclaims, crossclaims and third party claims, most of which they never seriously pursued, which turned a relatively straightforward commercial dispute into something that appeared much more complicated. Computron and Ladhani eventually stepped back from their more extravagant claims and made concessions that narrowed the issues. However, they only did so late in the proceedings. Ladhani, in particular, only conceded his own liability towards Computron in oral argument at the summary judgment motions hearing, having previously filed a factum opposing Computron’s request for summary judgment against him.

[38] Ladhani’s change of position on the issue of whether he had known that the headphones he was buying and reselling were counterfeit, and whether he had conveyed this information to Computron, also caused some confusion and unnecessary complication. In particular, while Ladhani’s counsel did give timely notice to the other parties that Ladhani would be moving to amend his pleadings to conform with his evidence, the motion to amend was only brought a day before the scheduled hearing of the summary judgment motions and was made returnable on the hearing date. Although I granted the amendment and found that Techlogics was not prejudiced by the short formal notice, it would have streamlined the hearing if this issue had been addressed and resolved at an earlier date.

[39] While Ladhani correctly notes that I did not accept substantial portions of Rashid’s evidence, I also did not accept significant aspects of Ladhani’s evidence or the evidence of Computron’s principal, Amin Rhemtulla.

[40] That said, I agree that of the three parties Techlogics bears the most blame, both for the dispute arising in the first place, and for not taking reasonable steps to address the problems that its own actions had created. Conversely, while Computron may perhaps be fairly characterized as the party that bears the least blame for the underlying dispute, after the dispute arose Mr. Rhemtulla’s highly confrontational and combative stance towards Ladhani and Techlogics was notably unhelpful.

[41] On the whole, none of the parties come away from this litigation immune from criticism.

ii) Complexity of the proceedings (Rule 57.01(1)(c))

[42] Computron and Techlogics characterize the proceedings as “not overly complex”, while Ladhani describes them as “moderately complex”.

[43] I find Ladhani’s description more accurate. The underlying disputes between the three main parties were relatively straightforward but still required me to make assessments of testimonial credibility and reliability on a fairly sizeable evidential record that included affidavits from all parties and transcripts of the cross-examinations of the affiants, who were each cross-examined twice.

[44] Computron’s attempt to pierce Techlogics’s corporate veil and obtain judgment against Mr. Rashid personally also complicated the case, as did its claim for punitive damages. The multiplicity of claims, counterclaims, crossclaims and third party claims brought by all of the parties were a further source of complication, although most of these claims had been abandoned or were no longer being seriously pursued by the time the summary judgment motions were heard.

iii) The importance of the issues (Rule 57.01(1)(d))

[45] Although the three-way dispute in this case was over what were relatively modest sums by commercial litigation standards, the amount at stake was significant to the parties. However, the case did not raise any broader legal questions of general public importance.

iv) Other relevant matters ((Rule 57.01(1)(i))

[46] Ladhani’s counsels’ submissions were particularly well-presented and helpful. Among other things, they shouldered the task of working out an accurate calculation of Computron’s damages, and came up with a figure that Computron ultimately accepted as correct.

2) Balancing the relevant factors

[47] Taking all of these factors into account, I am not persuaded that there are compelling reasons in this case to depart from the ordinary rule that the successful parties should receive their costs on a partial indemnity basis. I do not accept either Computron or Ladhani’s arguments as to why they should receive either substantial or full indemnity costs against Techlogics.

[48] I also do not accept Techlogics’s submission that this is an appropriate case to make all the parties bear their own costs. Although neither Computron nor Ladhani were entirely successful, as discussed above, Techlogics came away from this litigation as the clear loser.

[49] I also do not accept Techlogics’s alternative argument that Computron should pay Rashid’s costs. Although Rashid was “successful” insofar as Computron’s attempt to obtain damages against him personally failed, he and Techlogics were jointly represented and Computron and Ladhani both obtained substantial awards against Mr. Rashid’s company. Having regard to the relationship between Rashid and Techlogics and the way in which they approached their joint defence, it would in my view be highly artificial to treat Techlogics and Rashid as separate parties for the purpose of awarding costs. I will instead treat Computron’s lack of success against Rashid as a factor to be taken into account when determining how much Techlogics should be required to pay in costs to Computron.

[50] Ladhani and his parents were also jointly represented, as were Computron and its principals, Amin and Zebeen Rhemtulla, and I will take the same approach with them.

i) Computron

[51] Computron puts its total costs on a partial indemnity basis as slightly more than $20,000, all inclusive. However, its Bill of Costs does not provide any breakdown of how its counsels’ work was divided as between its separate claims against Ladhani and Techlogics.

[52] The overall costs Computron seeks are in my view proportionate to the amount that was at stake and the judgment it ultimately obtained, which was for almost $114,000, and were reasonable having regard to the work that had to be done to prepare for and argue the summary judgment motions. I do not agree with Techlogics that it was unreasonable for three lawyers and a law clerk to have worked on this file. To the contrary, it was in my view sensible to reduce as much as possible the amount of time that had to be spent by higher-priced senior counsel. While I agree that it might have been preferable for Computron to have provided more detailed dockets and a line-item breakdown of its disbursements, I do not consider Computron’s failure to provide this information significant, particularly since Techlogics’s own Bill of Costs provides even less detail about its own disbursements.

[53] The more difficult question is how Computron’s costs should be divided between the two defendants. Computron’s monetary claim against Ladhani was nearly three times larger than its claim against Techlogics, which had already returned most of Computron’s purchase money. Both defendants initially opposed Computron’s motion for summary judgment. However, well before the hearing Ladhani had resiled from his claim in his pleadings that Computron had known all along that the headphones it was buying were counterfeit, and now maintained that both he and Computron had both been duped into believing that they were authentic Beats products. By the time the affidavits were exchanged and cross-examinations had been conducted, it would have become apparent that Computron’s summary judgment motion was likely to be fought primarily between Computron and Techlogics. Indeed, at the hearing Ladhani conceded that Computron should be granted summary judgment against him, although he continued to dispute that his parents could properly be held liable.

[54] In these circumstances, I think that a fair apportionment of Computron’s costs as between Ladhani and Techlogics would be an equal division. I am also reducing Computron’s overall costs award by $2,000 to reflect its incomplete success as against both Techlogics and Rashid and as against Ladhani’s parents. The net result is that Computron is awarded costs in the amount of $18,000, apportioned as $9,000 payable by Techlogics and $9,000 payable by Ladhani.

ii) Ladhani

[55] Ladhani seeks its costs on a partial indemnity basis of slightly under $49,000, all inclusive.

[56] This is more than twice what Computron is seeking. While some of this difference can in my view be fairly attributed to the especially high quality of Ladhani’s counsels’ work, the biggest explanation for the discrepancy is that Ladhani was both the respondent on Computron’s summary judgment motion and the moving party in his own motion for summary judgment against Techlogics. As discussed above, Ladhani can in my view only properly claim his costs in relation to his own motion.

[57] Ladhani’s $49,000 Bill of Costs can be broken down as follows:

(i) $4,800 for work his previous counsel did preparing his pleadings. Only a relatively small portion of this work related to the preparation of Ladhani’s crossclaim against Techlogics. Moreover, as discussed above and at paras. 29-30 of my May 26, 2020 Reasons, Ladhani’s initial pleadings included a number of assertions that he later resiled from in his evidence and sought to amend. In these circumstances I am not prepared to award Ladhani any portion of these costs as against Techlogics;

(ii) Approximately $800 is attributable to work Ladhani’s current counsel did after they were first retained to review the case and taking instructions. Since Ladhani’s crossclaim against Techlogics was at that point only one of Ladhani’s multiple claims – he had also counterclaimed against Computron and brought third party claims against Prosonic and the Rhemtullas – I do not think that it would be fair to attribute more than a small portion of these costs to Techlogics;

(iii) Approximately $4,000 is attributable to work Ladhani’s current counsel did in the late summer of 2018, shortly after they were retained, preparing a motion seeking to have Computron’s previously-scheduled summary judgment motion adjourned and to have a timetable set. Ladhani ultimately withdrew this motion a few weeks before it was to be heard, apparently because the underlying issues had been resolved between counsel. I am not persuaded that Ladhani should receive any costs in relation to this withdrawn motion, and certainly not as against Techlogics;

(iv) Approximately $8,000 is attributable to general correspondence with counsel, taking instructions, and preparing offers to settle. In the context of what was a three-way dispute I think only half of this amount – $4,000 – can properly be awarded against Techlogics;

(v) The balance of Ladhani’s Bill of Costs – approximately $24,000 – is attributable to work done preparing for the summary judgment motions. Although by the time the motions were argued Ladhani was conceding his own liability to Computron and focusing entirely on his own claim against Techlogics, for much of the relevant time – including when the cross-examinations were conducted – both summary judgment motions were still in play. In the absence of a more detailed breakdown of how this time was actually spent, I would attribute only half of it – $12,000 – to Ladhani’s crossclaim against Techlogics.

[58] The net result is that while I am satisfied that Ladhani should have his partial indemnity costs as against Techlogics, I would set these costs as $16,000 rather than the $49,000 requested. In my view, this lower figure is reasonable and proportionate to the size of the judgment of $73,488 that Ladhani was awarded as against Techlogics.

3) Disposition

[59] In the result, I am awarding costs to Computron in the amount of $9,000 payable by Ladhani and $9,000 payable by Techlogics, and also awarding costs to Ladhani in the amount of $16,000, payable by Techlogics.

The Honourable Justice Dawe Date: July 27, 2020

[1] 2020 ONSC 3188.

[2] Computron had initially sought $200,000 in special damages and $200,000 in damages for loss of goodwill, but ultimately did not pursue the latter claim.