Court File and Parties

COURT FILE NO.: CV-20-00652424-0000 DATE: 20210303 SUPERIOR COURT OF JUSTICE – ONTARIO

RE: REPUBLIC DEVELOPMENTS INC., Applicant AND: MUHAMMAD MOEEN BUTT and ASMA MOEEN BUTT, Respondents

APPLICATION UNDER THE RULES OF CIVIL PROCEDURE, R.R.O. 1990, REG. 194 S.14.05(3)(D), (E) and (H)

BEFORE: S.F. Dunphy J.

COUNSEL: Matthew B. Lerner and Katherine R. Costin, for the Applicant Taheratul Haque and Obaidul Hoque, for the Respondents

HEARD at Toronto: in writing

Reasons for Decision - Costs

[1] On January 28, 2021, I heard an application seeking specific performance of an apparently routine real estate transaction. The parcel of land in question was intended by the buyer to become part of a block of land being assembled with a view to development. The respondents raised a flurry of issues seeking to back out of the transaction, none of which survived close examination.

[2] I allowed the application the following day and delivered reasons for judgment, reserving the matter of costs to be decided after receipt of written submissions. I have now received and reviewed those and this is my decision on costs.

[3] The facts are extensively reviewed in my earlier reasons and will not be repeated here. In summary, the application concerned a commercial property in Toronto located near a public transit station. About a week after a quite standard agreement of purchase and sale was signed back by the respondents, the respondents started asking if there was a way to back out of the transaction. No allegation that was then raised that there was no agreement at all. It is not likely a coincidence that the applicant completed negotiations and signed agreements with a number of neighboring landowners in the block of land the applicant was seeking to assemble in this same time frame. The applicant did not agree to walk away from the bargain it made, and this application ultimately followed seeking specific performance of the agreement.

[4] Substantial indemnity costs are sought by the applicant. Fees and disbursements adding up to $108,669.91 are detailed in the applicant’s Costs Outline on a Substantial Indemnity Basis while the claim on a partial indemnity scale is $73,522.03. These are both significant claims having regard to the length of the hearing and the amount at issue.

[5] The respondents took no specific issue with the time or disbursements recorded by the applicant. However, they strenuously resist the claim for substantial indemnity costs and indeed suggest that any award of costs beyond $40,000 would be excessive in the circumstances. For the respondents, this was a simple, one-day hearing whereas the costs claimed are more consistent with a multi-day trial. They fault the applicant for failing to make a formal Rule 49 Offer to Settle. They say that the amount of costs claimed is high relative to the purchase price of the property ($1.4 million) and they plead that the respondents as small business-people do not have the means to bear such a large award. They characterize their own behaviour in advancing their case as being in good faith and simply an instance of putting the applicant to the proof of its claim.

[6] Unsurprisingly, the applicant disagrees. The applicant notes that it made an offer to settle the claim ten days before the hearing when it offered to close the original purchase as soon as practicable with each side bearing its own litigation costs. This offer was rejected without any counter-offer. Had the respondents agreed to fulfill their contract at that time instead of putting the applicant to the “proof of its claim”, their own costs of proceeding to a hearing would have been saved and they would also have avoided the applicant’s claim for over $100,000 they now face.

[7] As I find myself in substantial agreement the points made by the applicant in its Costs Outline, I shall not summarize those points further before turning to my own decision.

[8] Substantial indemnity costs ought to be reserved for the small minority of cases where the circumstances justify it. This is such a case.

[9] In my view, the complexity of the proceeding, the conduct of the respondents throughout in seeking to cause delay and friction, the importance of the issues and the nature of the allegations asserted but not proved warrant the imposition of substantial indemnity costs here.

(i) Complexity of the proceedings

[10] While the case ought not to have been a complex one, the respondents raised issue after issue on the slenderest of foundations with a view to making it so. The Agreement of Purchase and Sale was on a standard form of agreement of the sort used in tens of thousands of similar transactions per year and fully executed by the proper parties. The respondents nevertheless sought to deny that a contract had ever been concluded – an allegation first raised months after the fact - alleging that one of the two respondents had deliberately withheld a signature (on a part of the agreement that did not require it) to render it invalid. They alleged one respondent coerced the other to sign the agreement. They first alleged that the executed agreement had been taken away by the applicant’s agent without permission – i.e. stolen – before modifying that claim to one of an express (and unproved) agreement not to release the agreement to the applicant until cleared to do so. They demanded a detailed examination of each iteration of the applicant’s development plans as if the precise plans for the assembled block of land as opposed to the existence and development potential of the assembled block of land were the decisive turning point in the battle to avoid specific performance. A baffling pleading of the Statute of Frauds was advanced. The foregoing description is by way of example only. Issue after issue was raised, examined minutely and at great expense but resulted in little to no useful or relevant information at the hearing. Few of any of the issues raised in the litigation were raised when the respondents first sought to back out of the transaction in October 2019, a factor which did not speak loudly for the good faith with which these positions were advanced.

(ii) Conduct causing delay

[11] The case was also conducted in a way to maximize friction, delay and expense. Lengthy and unfocused cross-examination, unwillingness to approve routine orders as to form and content were the minor tactics employed. Ignoring a court-ordered case timetable and filing a lengthy factum replete with new issues on the eve of the hearing was a more significant tactic and one that appeared designed to provoke a request from the applicant for an adjournment (which did not emerge) or else to ambush the applicant at the hearing. What I have described as the “minor tactics” are – unfortunately – all to prevalent in the litigation tactics armoury, are productive of little more than added expense, delay and friction but in moderate doses does not normally figure in an award of substantial indemnity costs. Ignoring the court-ordered timetable, particularly with the tactical overtones I have described, is a factor that bears considerably more weight.

(iii) Importance of issues

[12] This was asymmetrical litigation. The respondents were seeking to resile from a $1.4 million sale of a property they agreed to sell at a price and terms they themselves named and that they tried unsuccessfully to sell less than a year previously at only a slightly higher price. For the applicant, the property was an integral piece of a development opportunity that it was assembling that involved many, many multiples of the cost of just this one parcel of land. The loss of this parcel would at best negatively alter and at worst destroy a multi-million-dollar redevelopment project. While the respondents might theoretically have been liable for some or all of those economic losses, there is nothing to suggest that they would have had any realistic prospect of making good even a fraction of the applicant’s potential economic losses were specific performance not to have been granted in this case.

[13] Were these economic considerations the prime factor that explains the respondents’ conduct of this litigation or merely a coincidence? The direct evidence supporting that conclusion is not before me but I can certainly observe quite confidently that this litigation was conducted in every respect as if it were so.

(iv) Unproved allegations

[14] Dishonesty is not a claim to be lightly advanced and, if advanced without foundation, very often attracts sanction in the form of costs.

[15] The respondents did so here and with as flimsy a foundation as can be described. The allegations against the applicant’s real estate agent amounted to dishonesty no matter how much sugar coating is applied. It was first alleged that he had simply taken the fully executed agreement of purchase and sale that the respondents did not intend to deliver or act upon. In other words, that he stole it. That was a ridiculous allegation for which there was never a scintilla of good faith foundation. The respondents sought to retreat from that position when it became obvious it could not be maintained. Instead, they advanced the idea that there was an express agreement allowing him to take the agreement away with him providing he would hold it until given permission to release it. In other words, an agreement to hold the document in escrow as a trustee. This allegation was as false and baseless as the first.

[16] This was the most serious of the allegations of dishonesty but there were others. I found much of the sworn evidence given by both respondents to be highly implausible. That was a charitable description that can be translated “probably intentionally false” without inaccuracy. I have grave doubts that the positions adopted by the respondents were advanced in good faith. The number of dead-ends pursued or pursued with little or no realistic hope of success suggests this quite strongly.

Disposition

[17] I am thus persuaded that the respondents’ conduct is worthy of being sanctioned by an order requiring them to pay costs on a substantial indemnity scale. Costs on that scale will still leave the applicant with significant un-compensated losses stemming from the ill-starred effort of the respondents to back out of what they knew or ought to have known was a binding sale transaction. Both the scale and the amounts claimed are fair and reasonable in the circumstances.

[18] The respondents are ordered to pay the applicant’s costs of this proceeding on a substantial indemnity scale that I fix in the amount of $108,669.61 inclusive of taxes and disbursements.

[19] My order of specific performance ought to have been performed last week. I ordered the applicant to pay a portion of the purchase price payable at closing to its counsel to be held in trust pending receipt of my ruling on costs. The amount so directed ($120,951.54) was an estimate that was expected to and does exceed the amount of my actual costs order today. I am thus directing the applicant’s counsel to remit $108,669.61 to the applicant Republic from the amount held in trust with the balance of the purchase price withheld in respect of costs of this litigation to be remitted to the respondents or as they may in writing direct. This direction does not apply to any other amounts that may be subject to an escrow or holdback arrangement at closing.

[20] Orders accordingly.

S.F. Dunphy J. Date: March 2, 2021