COURT FILE NO.: CV-14-61854
DATE: 2021/02/04
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
6071376 CANADA INC.
Plaintiff/Moving party
– and –
3966305 CANADA INC. and MAHMOOD KHEDMATGOZAR
Defendants/Respondents
G. James Thorlakson for the Plaintiff
Charles Gibson & Ian Houle for the Respondents
costs ENDORSEMENT
Justice Sally Gomery:
[1] On January 11, 2021, I granted the plaintiff’s motion for a disclosure order in the context of its ongoing, but so far unsuccessful, efforts to execute its judgment for $1,196,682 against the defendants. The defendant Khedmatgozar attended a judgment debtor examination in August 2020, at which he refused to answer relevant questions about his financial affairs. The answers to undertakings he eventually delivered were unhelpful. I concluded that the plaintiff was entitled not only to answers to questions refused or taken under advisement, but to broader disclosure orders. Having won the motion, the plaintiff now seeks its costs.
[2] I already found that the plaintiff was entitled to costs in my January 11, 2021 decision. The only issue is the amount. The plaintiff contends that it is entitled to substantial indemnity costs of $13,954. The defendants propose partial indemnity costs of $5,000.
What factors are relevant to setting the quantum of costs in this case?
[3] Pursuant to s. 131 of the Courts of Justice Act and r. 57.01(1) of the Rules of Civil Procedure, a judge has wide discretion in fixing costs. The overall goal is to set costs that are fair and reasonable in the circumstances; Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 CanLII 14579 (ON CA), 71 O.R. (3rd) 291 (C.A.).
[4] I find that there are four r. 57.01 factors relevant to fixing the amount of costs payable to the plaintiff.
(i) The principle of indemnity
[5] The plaintiff’s bill of costs indicates that Mr. Thorlakson, a lawyer with twenty-five years at the bar, spent 9.4 hours on the motion. A junior lawyer and law clerk recorded another 38.7 hours. This generated total fees of $15,113.
[6] The defendants argue that the total hours and the hourly rate charged by Mr. Thorlakson ($650) are unreasonable.
[7] The plaintiff’s legal team was appropriate. Ordinarily I would not expect to see a lawyer with Mr. Thorlakson’s experience (and billable rate) arguing a disclosure motion. As he noted at the hearing, however, identifying and tracking down the defendants’ assets has proven to be challenging and requires a lawyer with expertise in forensic accounting.
[8] The decision to involve someone with Mr. Thorlakson’s experience was prescient for another reason. Because answers were delivered on the eve of the hearing, he had to reformulate his oral submissions at the last minute. Had Mr. Thorlakson been less experienced, he might not have had the wherewithal and expertise to pivot and present a compelling argument for relief beyond the orders originally proposed in the notice of motion.
[9] A junior lawyer and law clerk recorded much more time than Mr. Thorlakson. This shows appropriate delegation of the mundane aspects of the motion.
[10] The costs incurred by the plaintiff are somewhat higher than what I would expect to see, in Ottawa, on a two- hour disclosure motion. I do not, however, put much weight on the defendants’ contention that the time spent by plaintiff’s legal team is excessive, because no responding bill of costs has been filed. In the absence of a bill of costs from defence counsel, I assume that the fees that they charged are in the same ballpark as those charged by the plaintiff’s lawyers, notwithstanding any difference between the hourly rates charged by the two senior counsel on each side.
(ii) The complexity of the proceeding
[11] This should have been a straightforward motion. It was made more complex because the defendants provided incomplete answers or no answers at all to the plaintiff’s inquiries about what has happened to the money and assets held by Khedmatgozar since the parties first began doing business together, then complicated the situation by delivering further, largely unhelpful answers on the eve of the hearing.
(iii) The importance of the issues
[12] The motion was very important to the plaintiff. It has a judgment for over $1.5 million which it has, to date, been unable to execute. Its victories at trial and in the Court of Appeal are hollow unless it finds a way to collect.
[13] The defendants have shown little or no inclination to provide meaningful information to the plaintiff. At the hearing, defence counsel took the position that, if the plaintiff’s counsel did not ask questions that anticipated the defendants’ eventual answers to undertakings, the plaintiff would not have to wait until August 2021, the anniversary of the first judgment-debtor examination, to obtain further information. This underscores how, had the plaintiff not won the motion, it could not have counted on the cooperation of the defendants to obtain information about their assets.
(iv) The conduct of any party that unnecessarily lengthened the duration of the proceeding
[14] The examination giving rise to the motion took place in August 2020. Although they delivered some answers earlier, the defendants waited until the day before the hearing of the motion, to deliver answers to the undertakings, advisements and refusals at issue in this motion. Had they delivered the answers earlier, the plaintiff’s counsel could have avoided some of its preparation costs.
[15] Furthermore, the answers delivered were unhelpful and incomplete. For example, defence counsel did not take any steps, prior to the hearing, to obtain a copy of the share purchase agreement in connection with the sale of Khedmatgozar’s dental practice, supposedly his one remaining asset. In response to questions about the disposition of sale proceeds of property purchased using, in part, money owed to the plaintiff, defence counsel advised only that the proceeds had been used to pay a debt in Florida, without providing any details or supporting records.
[16] I find, as a result, that the defendants’ conduct unnecessarily lengthened the duration of the motion.
What cost award is reasonable?
[17] Taking into account the relevant r. 57.01 factors, I see no reason to discount the fees and disbursements claimed by the plaintiff in connection with the motion. The only question is whether the plaintiff should recover costs on a partial or substantial indemnity scale.
[18] In Mars Canada Inc. v. Bemco Cash & Carry Inc., 2018 ONCA 239., at para. 43, the Court of Appeal held that costs on a substantial indemnity basis should only be awarded “where there has been reprehensible, scandalous or outrageous conduct on the part of one of the parties”: Young v. Young, 1993 CanLII 34 (SCC), [1993] 4 S.C.R. 3, at p. 134. It added, however, that the kind of conduct that will justify an elevated level of costs “is not limited to conduct in the proceedings and can include the circumstances that gave rise to the litigation”: Mars Canada, at para. 43, citing Mortimer v. Cameron (1994), 1994 CanLII 10998 (ON CA), 17 O.R. (3d) 1 (C.A.), at p. 23; and Clarington (Municipality) v. Blue Circle Canada Inc., 2009 ONCA 722, 100 O.R. (3d) 66, at para. 30.
[19] In his decision at the trial of his action, the judge concluded that Khedmatgozar breached his fiduciary duty to the plaintiff, misappropriated its money and lied to its principals about what he had done. At the judgment debtor examination, Khedmatgozar refused to answer relevant and reasonable questions. Following the examination, he did not provide what information he undertook to provide in a timely way. The answers eventually delivered, on the eve of the hearing of the disclosure motion, were inadequate or meaningless.
[20] The defendants have furthermore not complied with their duties as judgment debtors and have frustrated the plaintiff’s attempts to execute its judgment. In circumstances like this, as held by the court in Carroll v. Stonhard Ltd. (2001), 53 OR (3d) 175, 2001 CanLII 28023, at para. 9, an award of costs on a substantial indemnity basis is appropriate.
[21] I therefore conclude that the plaintiff is entitled to substantial indemnity costs on the motion, in the amount of $13,954, inclusive of fees, disbursements and HST, payable within 30 days of this endorsement.
Justice Sally Gomery
Released: February 4, 2021
COURT FILE NO.: CV-14-61854
DATE: 2021/02/04
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
6071376 CANADA INC.
Plaintiff/Moving party
– and –
3966305 CANADA INC. and MAHMOOD KHEDMATGOZAR
Defendants/Respondents
costs ENDORSEMENT
Justice Sally Gomery
Released: February 4, 2021