Court File and Parties

Court File No.: C20-73891 Date: 2021-03-08 Superior Court of Justice - Ontario

Re: Angelique Codina, Applicant And: Waypoint Vacation Co-operative Ltd., Waypoint Vacation Holdings Inc., WVCL Holding Corp., Checkpoint Holiday Travel Co-operative Inc., Wayfinder Vacation Services Inc., Stephen Elliott, and Dennis Elliott, Respondents

Before: Justice L. Sheard

Counsel: Stefan Juzkiw, for the Applicant Ruzbeh Hosseini, for the Respondents

Heard: In writing

Costs Decision

Overview

[1] This Application was purportedly brought under s. 68 of the Co-operative Corporations Act, R.S.O. 1990, c. C.35 (the “Act”). The applicant sought injunctive and other relief.

[2] The Act permits a member of a co-operative to sue for, and on behalf of, the co-operative, but s. 68(2) provides that an action shall not be commenced until the member has obtained an order of the court permitting the member to commence the action.

[3] The applicant did not seek the leave contemplated by s. 68(2) before commencing this application.

[4] The matter came before me on October 7, 2020. It could not be heard on that date for reasons set out in my Endorsement of October 7, 2020. The reasons included the following:

(i) the application required amendment to add a request for leave under s. 68(2); (ii) the applicant also sought to amend the application to add a party; (iii) the respondents intended to seek security for costs and, faced with that potential motion, the applicant wished to consider abandoning the claims against the two individuals and certain corporate respondents; and (iv) counsel for the respondents had been recently retained and needed an opportunity to file responding materials.

[5] The application was adjourned subject to a number of terms including, on consent, that the respondent, Stephen Douglas Elliott, maintain the status quo with respect to Waypoint Vacation Co-Operative Ltd. and Checkpoint Holiday Travel Co-Operative Inc.

[6] Costs of the October 7, 2020 hearing were reserved and the following timetable was set:

(i) the applicant was to deliver her amended Notice of Application and any supplementary affidavit by October 23, 2020; (ii) the respondents were to deliver their materials by November 27, 2020; (iii) the applicant’s reply materials were to be delivered by December 11, 2020; and (iv) the application and motion were adjourned to a long motions list for the week of December 14, 2020. On that return date, argument was to be limited to the issue of whether leave should be granted to the applicant pursuant to s. 68 of the Act.

[7] By Confirmation of Application dated December 14, 2020, filed on behalf of the applicant by Magdi Ahmed, a non-lawyer, the applicant sought an adjournment of the hearing from the week of December 14, 2020 to January 30, 2021. The basis for the request was, in part, that the applicant was incarcerated and awaiting a bail hearing.

[8] The matter came before me on January 5, 2021. The applicant was not present but Mr. Ahmed, a friend who also identified himself as a fellow Co-op member, attended on behalf of the applicant. The applicant had also written a letter to the court dated December 13, 2020, advising of her incarceration and seeking an adjournment of her application to January 30, 2021.

[9] As evidenced by my Endorsement of January 5, 2021, the respondents opposed the adjournment on the basis that the applicant was expected to be incarcerated for a lengthy period and would not be able to pursue her application. In addition, some of the relief sought by the applicant was moot, as explained in the responding affidavit filed by Stephen Elliott. Also, the respondents submitted that there was an urgency to resolving or dismissing the application so as not to risk losing a “restructuring opportunity” that was possibly available to the-Co-op members.

[10] The adjournment was granted, and the matter adjourned to (the placeholder date of) February 3, 2021, but the return of the application was marked peremptory upon the applicant and the conditions imposed in my Endorsement of October 7, 2020 were removed. Costs of the January 5, 2021 hearing were reserved.

[11] As noted in the January 5, 2021 Endorsement, Mr. Ahmed advised the court and that he and many other Co-op members would be willing to pursue the relief claimed by the applicant.

[12] The application came before me on February 5, 2021. On that date, the applicant was represented by counsel. The applicant’s counsel sought a two-month adjournment in order to put documents before the court showing that other members of the Co-op were prepared to step into the shoes of the applicant who remained incarcerated. Mr. Ahmed was present as an observer on the (Zoom) motion, together with three others who identified themselves as Co-op members. However, there was no evidence that Mr. Ahmed nor any other Co-op member had taken any steps to have their name added as an applicant or to assume carriage of the proposed derivative action from the applicant, who had been sentenced to a lengthy period of incarceration and unable to effectively pursue this application. Counsel for the applicant confirmed that his retainer was with the applicant only.

[13] The applicant’s request for an adjournment was not granted: the hearing had been marked peremptory upon her and it was clear that she was not in a position to proceed with her application. In addition, the respondents asserted that the existence of the applicant’s litigation was prejudicial to the interests of the Co-op, which was insolvent and whose assets were frozen by the Canada Revenue Agency. Further, while the applicant sought the appointment of an inspector, the applicant did not put forth the name of anyone who was willing and able to act as such. Also, the Co-op appeared to have no funds to pay for an inspector, and the applicant put forth no proposal as to who would pay the inspector to investigate the Co-op’s finances. Finally, counsel for the respondents submitted that there were remedies and recourse available to the Co-op members without the need for a court order.

[14] The application was dismissed on February 5, 2021: the applicant was not ready or able to proceed with her application; no other person or persons were put forth to step into the applicant’s shoes; there was a risk of adverse consequences to the Co-op and its members if the litigation was permitted to languish for months; there were other apparent avenues of recourse available to the Co-op members.

[15] At the February 5, 2021 hearing the respondents sought their costs of the application. As counsel for the applicant had no instructions from his client, written costs submissions were permitted. The parties’ costs submissions have been received and considered by this court in this decision.

Positions of the Parties

(i) The Respondents

[16] As the successful parties on the application, the respondents seek their costs. They ask that costs be fixed on a substantial indemnity scale, which is appropriate in that the applicant made, but did not prove, allegations of malfeasance, including the following:

(a) the individual respondents breached their fiduciary duties, in particular, that Stephen Elliott had set up a corporation with an “ulterior or unlawful purpose, namely to divert funds from the Waypoint Co-op for his own gain.”; and (b) the respondents had engaged in conversion of the Co-op’s assets, intentionally interfered with the rights and privileges of the members of the Co-op, and were unjustly enriched in the process; and (c) Stephen Elliott unduly called a members’ meeting in a bid to improperly reorganize and wind-up the Co-op.

[17] The respondents assert that substantial indemnity costs are appropriate where there are allegations of bad faith and that substantial indemnity costs may be awarded to “diminish frivolous and speculative litigation, to cause litigants to focus on the real issues, and to foster sober reflection above that of an emotional response”: see Sagan v. Dominion of Canada General Insurance Co., 2014 ONSC 2245, 29 C.C.L.I. (5th) 284, at para.3.

[18] The respondents seek substantial indemnity costs in the amount of $28,887.62. They submit that those costs were incurred at court attendances. With respect to the first court appearance on October 7, 2021, the respondents state that they spent four hours in the courthouse, including time spent in court on submissions because the applicant unreasonably refused to consent to adjourn the hearing, which adjournment was ultimately granted by the court.

[19] The respondents further assert that when the applicant wrote to the court by letter dated October 26, 2020, she failed to disclose that her criminal conviction appeal had been dismissed, asserting instead that “judgment has not been issued as yet”.

[20] Finally, the respondents asked the court to consider their offer to settle costs in the amount of $15,000, which is not accepted by the applicant.

[21] The respondents submit that the time spent was reasonable and justified as they were required to carefully review the four records filed by the applicant and to draft and deliver detailed responding materials.

(ii) The Applicant

[22] The applicant opposes the award of costs sought by the respondents and submits the following:

(a) her application was not frivolous and there should be no costs payable on the dismissal of the application on the basis that she was unable to proceed due to her incarceration; (b) other members of the Co-op have “showed the willingness to step up for the derivative action”; (c) the application was not decided on its merits; (d) in bringing the application, the applicant acted in good faith with the support of other Co-op members; (e) the applicant chose to amend her application to limit it to an order seeking leave to conduct an investigation of the Co-op’s finances; and (f) the respondents’ costs are excessive.

[23] As noted above, aside from the applicant’s assertions, there is no evidence before the court as to the views of other members of the Co-op and none have “stepped up” for the derivative action.

[24] In her cost submissions, the applicant seeks to argue the merits of the application despite her acknowledgement that the application was not determined on its merits.

[25] The applicant further submits that s. 68 of the Act does not provide for costs to be awarded to the respondents and that s. 68(5) states that, “unless the action is dismissed with costs, the judgment or order may include a provision that the reasonable costs of the action are payable to the plaintiff by the cooperative or the defendant as assessed as between a solicitor and the solicitor’s own client.”

The Law

[26] The general principles applicable to costs are well settled. The successful party is presumptively entitled to its costs, which are in the discretion of the court: see Courts of Justice Act, R.S.O. 1990, c. C.43, s. 131(1) “the CJA”.

[27] Rule 57.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, sets out factors I may consider in exercising my discretion:

Factors in Discretion

57.01 (1) In exercising its discretion under section 131 of the Courts of Justice Act to award costs, the court may consider, in addition to the result in the proceeding and any offer to settle or to contribute made in writing,

(0.a) the principle of indemnity, including, where applicable, the experience of the lawyer for the party entitled to the costs as well as the rates charged and the hours spent by that lawyer;

(0.b) the amount of costs that an unsuccessful party could reasonably expect to pay in relation to the step in the proceeding for which costs are being fixed;

(a) the amount claimed and the amount recovered in the proceeding;

(b) the apportionment of liability;

(c) the complexity of the proceeding;

(d) the importance of the issues;

(e) the conduct of any party that tended to shorten or to lengthen unnecessarily the duration of the proceeding;

(f) whether any step in the proceeding was,

(i) improper, vexatious or unnecessary, or

(ii) taken through negligence, mistake or excessive caution;

(g) a party’s denial of or refusal to admit anything that should have been admitted;

(h) whether it is appropriate to award any costs or more than one set of costs where a party,

(i) commenced separate proceedings for claims that should have been made in one proceeding, or

(ii) in defending a proceeding separated unnecessarily from another party in the same interest or defended by a different lawyer;

(h.1) whether a party unreasonably objected to proceeding by telephone conference or video conference under rule 1.08; and

(i) any other matter relevant to the question of costs.

[28] Overall, the objective is to fix an amount that is fair and reasonable, having regard for, among other things, the expectations of the parties concerning the quantum of costs: see Boucher v. Public Accountants Council for the Province of Ontario (2004), 71 O.R. (3d) 291 (C.A.), at paras. 26 and 38.

[29] In fixing costs, the overriding principle is reasonableness: see Boucher, at para. 37.

Analysis

[30] The application was dismissed in its entirety, and as the successful party, the respondents are presumptively entitled to their costs. The costs awarded include the costs reserved from prior court appearances.

[31] Applying the principles of reasonableness and the expectations of the parties as per Boucher, the starting point of my analysis is a consideration of the time/fees claimed by the respondents.

[32] In determining what amount is reasonable in this case, I have taken the following into account:

(i) the large volume of materials delivered by the applicant and her request for interlocutory injunctive relief to be heard on an urgent basis; (ii) the complexity of the proceeding as evidenced by the lengthy, detailed and voluminous affidavit materials filed by the applicant. The materials filed by the applicant required the respondents to retain counsel to review and prepare detailed responding affidavits; (iii) the serious issues raised by the applicant, including allegations of wrongdoing as against the respondents; (iv) the serious nature of the relief sought, which, if granted, could have had serious ramifications to the respondents and to members of the Co-op; (v) the conduct of the applicant that tended to lengthen unnecessarily the duration of the proceeding: the applicant’s refusal to consent to an adjournment of her application on October 7, 2020, requiring counsel for the respondents to attend court to argue for an adjournment, when it was, or ought to have been, apparent to the applicant that her application could not proceed on that date; and (vi) the application was scheduled to be heard as a long motion, which required the parties to prepare facta and books of authorities.

[33] In consideration of the foregoing, I conclude that the time spent by counsel as set out in the respondents’ cost outline dated February 12, 2021, is both reasonable and within the reasonable expectation of the applicant to pay, in the event that she was unable to obtain the leave of the court to bring the derivative action and her application was dismissed, with costs. With respect to the applicant’s reasonable expectations, it should be noted that although she was not represented by counsel, she is a lawyer by training, and would have had a better understanding than would a layperson of the cost consequences imposed on the losing party in litigation.

[34] The hourly rates charged by respondents’ counsel also appear reasonable: Ruzbeh Hosseini was called to the bar in 2009 and used an hourly rate of $225 on a partial indemnity basis. Sakina Babwani was called to the bar in 2017 and used an hourly rate of $150 on a partial indemnity basis.

[35] Overall, both the hours spent and the hourly rates charged appear reasonable and appropriate in the circumstances.

Is there any basis for awarding an elevated rate of costs?

[36] The respondents asked that costs be fixed on a substantial indemnity basis. I decline to do so.

[37] While the applicant did make allegations of misfeasance on the part of the respondents, or some of them, the application was dismissed on a procedural basis rather than on its merits. Therefore, I cannot conclude that it is appropriate to award costs against the applicant on a substantial indemnity basis for having made, but not proven, those allegations.

[38] I find no justification to deviate from the usual award of costs on a partial indemnity basis, to the successful parties, payable by the unsuccessful party.

Disposition

[39] In exercising my discretion under s.131 of the CJA and having considered and applied the principles set out under r. 57.01, the respondents’ costs are fixed in the amount of $17,675.77, inclusive of HST and disbursements, payable by the applicant.

Date: March 8, 2021 Justice L. Sheard

COURT FILE NO.: 20-73891 DATE: 20210308 ONTARIO SUPERIOR COURT OF JUSTICE B E T W E E N: Angelique Codina Applicant - and – Waypoint Vacation Co-operative Ltd., Waypoint Vacation Holdings Inc., WVCL Holding Corp., Checkpoint Holiday Travel Co-operative Inc., Wayfinder Vacation Services Inc., Stephen Elliott, and Dennis Elliott Respondents COSTS DECISION SHEARD J. Released: March 8, 2021