Court File and Parties

COURT FILE NO.: CV-22-00645328

DATE: 20220512

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Saeed Darvish-Kazam, Applicant

– AND –

Pazkaz Enterprises Inc., Rave Inc., Michael Pazaratz, and Lynda Cooper, Respondents

BEFORE: Justice E.M. Morgan

COUNSEL: John Longo, Danielle Muise, and Josh Suttner, for the Applicant

John Mather and Jadeney Wong, for the Respondents

HEARD: Costs submissions in writing

COSTS

[1] The Applicant brought a wide-ranging shareholder oppression action against the Respondents. Had he been successful, his claim would have resulted in the dismantling of the shareholder structure of the operating company, Rave Inc. (“Rave”), the deprivation of interest in Rave by a major investor, the Defendant, Linda Cooper, and likely Rave’s insolvency and ultimate demise. The Application was for the most part dismissed, and the Applicant was not successful in accomplishing what he appeared to set out to do.

[2] The one point on which the Applicant was successful was that I ordered audited financial statements to be produced in accordance with the requirement in Part XII of the OBCA. The fact is, that should not have been controversial. The case law has consistently held that the statutory requirement of audited statements is mandatory. Nevertheless, this demand was resisted by the Respondents as part of their overall response to the otherwise unmeritorious Application. As a result, the Applicant required a court Order to enforce his right to audited statements.

[3] The Respondents, who were largely successful in the Application, seek partial indemnity costs in the amount of $83,204.16 up until the date of an Offer to Settle served February 15, 2022, and substantial indemnity costs of $28,564.99 thereafter. To this they add disbursements in the amount of $2,695.40, for a total of $114,464.55 (tax included). Respondents’ counsel submits that the Offer would have given the Applicant more than he achieved in court, thus invoking Rule 49 of the Rules of Civil Procedure and claiming substantial indemnity for costs incurred after the Offer date.

[4] It is not easy to tell whether the Respondent’s Offer is more generous than the judgment that the Applicant received. The Offer outlines a proposed change in the share structure of Rave, and a conversion of various debts and investments into shareholder loans. This is not a case where there is a direct cash value to a settlement or judgment.

[5] What I do know is that the Respondents’ Offer omitted the one thing that the Applicant clearly deserved: audited financial statements. It is therefore hard to fault the Applicant for not accepting the Offer. It lacked something to which they had a statutory right and which there is no reason for them to have to relinquish. In their shoes, I would have foregone most of their other claims but pressed ahead on the one that was a winner but which the Respondents were unwilling to concede.

[6] Accordingly, I am of the view that the Respondents are not entitled to substantial indemnity costs after the Offer date; they are entitled to partial indemnity costs both before and after that date. Instead of $25,278.75 after February 15, 2022, the amount for that period is, according to the Respondents’ Bill of Costs, $16,852.50. Respondents’ counsel’s entire Bill, on a partial indemnity basis, therefore comes to $100,956.66.

[7] Taking into account the Applicant’s success on the audit issue, my admittedly rough assessment is that the Respondents were 75% successful in resisting the Application. The Respondents’ recovery should therefore be reduced by that percentage. Further, I will round the numbers off for the sake of convenience.

[8] The Applicant shall pay the Respondents costs in the all-inclusive amount of $75,000.00.

Date: May 12, 2022 Morgan J.