Court File and Parties

COURT FILE NO.: CV-21-00655752-0000 DATE: 20220621

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: BH Frontier Solutions Inc., Plaintiff – AND – 11054660 Canada Inc. doing business as Canadian Choice Supply, 9428364 Canada Corporation, Kambiz Salami, Rongze Chai also known as Melinda Chai, Rumqi Xuhekamg Medical Equipment, Jiang Xiaoxain and Jiang Wanyin, Defendants

BEFORE: E.M. Morgan, J.

COUNSEL: David Milosevic, for the Plaintiffs Ran He, for the Defendants, 9428364 Canada Corporation, Kambiz Salami, Rongze Chai also known as Melinda Chai

HEARD: Cost submissions in writing

COSTS ENDORSEMENT

[1] After a two-day trial, I granted judgment in favour of the Plaintiff in respect of his claim against the Defendants 9428364 Canada Corporation (“942”), Kambiz Salami (“Salami”), and Rongze Chai also known as Melinda Chai (“Chai”) (the “Trial Defendants”). I held the Trial Defendants jointly and severally liable to the Plaintiff in the amount of $504,980.00.

[2] The Plaintiff seeks costs in the total amount of $124,867.43 on a substantial indemnity basis or $82,726.52 on a partial indemnity basis. Plaintiff’s counsel notes that the ground of liability in my judgment was fraudulent misrepresentation, and submits that a finding of fraud generally warrants substantial indemnity costs.

[3] Defendants’ counsel concedes that the Plaintiff is entitled to some costs, but submits that those costs should be fixed on a partial indemnity basis. It is also the Defendants’ view that the amounts sought by the Plaintiff are excessive, and are out of proportion to the Defendants’ own costs of $20,000 on a partial indemnity scale.

[4] With the greatest of respect to Defendants’ counsel, costs of $20,000 would be surprisingly low for a two-day trial. In today’s costs world, that would be on the slightly low side for a half-day summary judgment motion; for a two-day hearing, where not only did a documentary record have to be adduced and legal argument researched and prepared, but examinations in chief and cross-examinations had to be prepared for a hearing with viva voce evidence. In this context, the Defendants’ figure for costs is so low as to be unrealistic. I consider the amount quoted by the Defendants to have been formulated strategically rather than on an indemnity basis.

[5] While Plaintiff’s counsel is correct that the finding in the trial was fraud, it was not the egregiously fraudulent conduct that the Plaintiff attempted to prove. I did not find that the Defendants had schemed to get payment for goods and then intentionally fail to deliver them; rather, I found that the Defendants had falsely claimed to have a direct relationship with the manufacturer of the goods when they actually had an indirect relationship. That was misleading and helped induce the Plaintiff to enter into the purchase agreement, but it was not done with the intent of misappropriating the Plaintiff’s money. It was a fraud in the nature of excessive puffery about the Defendants’ business.

[6] It is true that a finding of fraud often results in substantial indemnity costs. That is because a fraud claim typically alleges conduct which attracts the court’s most serious approbation. The Court of Appeal has instructed that substantial indemnity costs ought to be reserved for cases in which there is “some form of reprehensive conduct, either in the circumstances giving rise to the cause of action, or in the proceedings, which makes such costs desirable as a form of chastisement.”: Davies v Clarington (Municipality), 2009 ONCA 722, at para 30. Had I found that the Defendants had engaged in a fraudulent transaction rather than in fraudulent misrepresentation about the transaction, the usual reasoning in support of substantial indemnity costs would have been applicable.

[7] As it is, the fraud engaged in by the Defendants was a somewhat less reprehensible form of fraud. While any fraud is unacceptable and the Defendants must pay some increased level of costs in light of their misdeed, it is not at the substantial indemnity level of conduct. I would exercise my discretion under section 131 of the Courts of Justice Act to award costs at the mid-point between the Plaintiff’s partial indemnity and substantial indemnity figures.

[8] The Trial Defendants shall pay the Plaintiff costs in the all-inclusive amount of $100,000. As with the judgment itself, this liability is on a joint and several basis.

Date: June 21, 2022 Morgan J.