Court File and Parties

COURT FILE NO.: CV-20-00642957-0000

DATE: 20201020

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Riar et al., Plaintiffs

-and-

Khudal et al., Defendants

BEFORE: F.L. Myers J.

COUNSEL: K. Sherkin and E. Sherkin, for the plaintiffs

Aswani K. Datt, for defendants Financial Ties Limited, DIAM Danforth Property Inc., DIAM Developments Corporation, DIAM Fox Hill Property Inc., Mount Hope Developments Inc., Everest Developments Inc., 2335779 Ontario Inc., 2690607 Ontario Limited, 2341943 Ontario Inc., Syrm Holdings Inc., Syrm Land Development Corp., Shyamora Luxury Homes Inc., Homexperts Real Estate Inc., Moninder Khudal a.k.a Moninder S. Khudal, Ramanpreet Khudal a.k.a. Raman Khudal a.k.a. Ramanpreet Joshi, Yashbir Khudal and Sharanbir Khudal

COSTS ENDORSMEMENT

[1] By reasons dated September 21, 2020, reported at 2020 ONSC 6238, the court granted Mareva injunctions against the Khudal defendants and CPL’s against numerous properties owned by them or by corporations apparently related to them.

[2] The Plaintiffs seek substantial indemnity for their costs in the amount of $306,793.48, inclusive of disbursements and taxes. In the alternative, the Plaintiffs seek partial indemnity of $208,768.58.

[3] The overriding principle in assessing costs is to ensure that costs are fair and reasonable in the circumstances: Davies v. Clarington (Municipality), 2009 ONCA 722. Fairness and reasonableness are considered in light of the factors set out in Rule 57.01 and through the lens of what the responding parties ought reasonably to have anticipated paying.

[4] Based on hours and modest billing rates, the defendants’ incurred actual costs of $92,438.25 and partial indemnity costs of $55,462.95 on 225 hour billed by their former lawyer.

[5] The plaintiffs’ lawyers billed for 610 hours. The hourly rates billed by the plaintiffs’ lawyers were somewhat less modest than those of the defendants’ counsel.

[6] The bulk of the time spent by the plaintiffs’ counsel was in preparing affidavits and conducting examinations. Despite the defendants’ submission that there was too much duplication of effort on the plaintiffs’ side, I do not see it that way. Within each category of fees, senior counsel’s time is well below his junior colleagues (except for conducting the examinations and communicating with clients as one would expect). Work was moved down where possible. There are also some immaterial charges by juniors or support staff that give the Costs Outline an unfortunate optic and would have been best omitted.

[7] As I noted in the initial endorsement, the plaintiffs were facing defendants who chose to be opaque. Mr. Khudal denied understanding the finances of his businesses and required the plaintiffs to prove their case through others. It is to be expected that plaintiffs with no knowledge of the defendants’ finances who are compelled to adduce evidence from those adverse in interest would spend considerably more in professionals’ time than the defendants who sit back with arms folded and say, “prove it”.

[8] Nor am I impressed with the argument advanced by the defendants taunting the plaintiffs for catching only $40,000 in bank accounts and binding properties with CPL’s instead of appointing an “interim receiver” under the Court of Justice Act. An “interim receiver” exists only under the Bankruptcy and Insolvency Act (Canada). I am sure that had the defendants offered to consent to the appointment of a receiver and manager under the Courts of Justice Act, as they now suggest was more appropriate than the relief sought, the plaintiffs would have been pleased to oblige and save everyone the costs incurred.

[9] In the ordinary course, costs of a successful interlocutory injunction are reserved to the trial as the merits are not yet resolved. That is not a fair or reasonable outcome in this matter. There is no dispute that the plaintiffs are out tens of millions of dollars for which the defendants say they cannot account. The plaintiffs are chasing their own money where ever it now may be. The defendants gave evidence that I referred to as “facile” and put the defendants to the fullest of efforts to prove their case.

[10] As the Divisional Court pointed out in 2092280 Ontario Inc. v. Voralto Group Inc., 2018 ONSC 2305, at para. 28:

Judgments for damages cannot reasonably be expected to be affordable or collectable against fraudsters. If funds cannot be frozen in advance, a vital arrow in the civil law’s quiver to address serious fraud will be lost. This is a narrow exception to the general rule against prejudgment execution.

[11] In my view, the defendants are properly called upon to indemnify the plaintiffs for the costs that their lack of transparency required the plaintiffs to incur. While the Khudal children ask to be excluded from costs liability, based on the current evidence, they are propely impleaded as conduits for some of their parents’ spoils. They certainly have not separated themselves from their parents or acted with any independent interests to date.

[12] I would normally have some sympathy for the concern that the defendants have no ability to pay costs considering the Mareva injunctions freezing their assets. Yet a month has passed and they have not come forward seeking funds to live. Neither did they need to ask for access to funds to retain new counsel as they have already done. This leads me to infer that they have sources of funds.

[13] As the order made is interlocutory, I am not prepared at this time to award costs on a substantial indemnity basis. However, I expressly leave it open to the plaintiffs to ask the trial judge or the judge who disposes of the action with finality to increase this costs award if the judge finds in the plaintiffs’ favour. If the defendants succeed at trial, I am satisfied that the plaintiffs’ success on the motion and the defendants’ opacity still support an award of costs on a partial indemnity basis to the plaintiffs. However, if the plaintiffs succeed at trial, the defendants’ wrongdoing as then found may well support a review of the degree to which their conduct ought to have led to an award of substantial or full indemnity for their costs of the motion.

[14] Clients are entitled to retain counsel of their choice. I find the rates claimed by the plaintiffs on a partial indemnity basis to be within the range of reasonableness in the current market. Moreover, I find that where defendants have sole control of the relevant financial information and put the plaintiffs to their proof, they ought reasonably expect the plaintiff to incur double or even triple the effort that they invested. The defendants had ringside seats to the numerous affidavits and examinations conducted by the plaintiffs to prove that which the defendants knew and chose not to say.

[15] In all, in my view, the Khudal defendants ought to be and are hereby found jointly and severally liable for costs of the plaintiffs on a partial indemnity basis fixed in the amount of $175,000 all-in and payable forthwith.

[16] Notwithstanding rule 59.05, this Order is effective from the date it is made and enforceable without any need for entry and filing. In accordance with Rules 77.07 (6) and 1.04, no formal Order need be entered and filed unless appeal or a motion for leave to appeal is brought to an appellate court. Any party to this Order may nonetheless submit a formal Order for original signing, entry and filing when the court returns to regular operations

F.L. Myers J.

DATE: October 20, 2020