COURT FILE NO.: CV-19-70573

DATE: 20220912

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Business Development Bank of Canada, Plaintiff

AND:

IMEX Systems Inc. and Damodar Arapakota, Defendants

BEFORE: Justice D.A. Broad

COUNSEL: Rosemary A Fisher, for the Plaintiff

Damodar Arapakota – self-represented

COSTS ENDORSEMENT

[1] The parties have been unable to resolve the issue of costs of the plaintiff’s action against the defendant Damodar Arapakota, including the plaintiff’s motion for summary judgment, and have each delivered written submissions on costs.

[2] The plaintiff seeks costs of the summary judgment motion and the proceeding on a full indemnity basis in the amount of $101,516.82. This amount is comprised of fees in the sum of $85,866 inclusive of attendance fee on the motion for summary judgment, disbursements in the sum of $4,056.11 and HST on fees and taxable disbursements in the sum of $11,594.71.

[3] The plaintiff says that it was entirely successful on the motion and the action and is entitled to an award of costs. It says that the amount it seeks for costs is equivalent to or less than what Mr. Arapakota could have reasonably expected to pay if unsuccessful on the summary judgment motion. The plaintiff also points to the contractual obligation in the guarantees by which Mr. Arapakota agreed to be responsible for any legal or other fees incurred by the plaintiff in the enforcement of the guarantees.

[4] The plaintiff submits that Mr. Arapakota submitted voluminous affidavit materials, brought three motions to stay, dismiss and/or transfer the proceeding and refused to acknowledge or admit basic facts within the proceeding. He also insisted on cross-examining three BDC employees and a clerk in the office of counsel for the plaintiff.

[5] The plaintiff argues that a contextual approach must be taken to consideration of the appropriate costs. While the principle of proportionality is to be considered, it is not determinative. Determining proportionality should not be a purely retrospective inquiry based on the award and should not be used as a sword to under-compensate a litigant for costs legitimately incurred (see Dang v Anderson, 2017 ONSC 2150).

[6] The plaintiff also submits that substantial indemnity costs will be awarded where allegations of bad faith are not made out (see Ottawa Convention Centre Corp v Treefort Hip Productions Inc., 2018 ONSC 6550).

[7] The plaintiff adds that Mr. Arapakota unreasonably delayed the proceeding throughout.

[8] Mr. Arapakota argues that the amount sought by the plaintiff is out of proportion to the amount in issue, being the sum of $142,589.32. Moreover, he says that substantial indemnity costs are generally awarded only where there has been reprehensible, scandalous or outrageous conduct on the part of one of the parties, and the fact that positions taken had little merit or were unsuccessful does not justify the awarding of substantial or full indemnity costs (see Laczko v Alexander, 2012 ONCA 872).

[9] Mr. Arapakota submits that, in reviewing the cost details produced by counsel for the plaintiff, there appeared to be a number of time entries for work done that are duplicative, unnecessary or unsubstantiated. He says that the plaintiff incurred various disbursement charges with no explanation as to how they were necessary.

[10] Mr. Arapakota takes the position that the valid and directly attributable costs incurred by the plaintiff, including disbursements, on a full indemnity basis amount to $38,904 plus applicable HST and that the appropriate award of costs on a partial indemnity basis would be $23,342.40 plus HST for a total of $26,376.91.

Guiding Principles on Costs Generally

[11] Section 131(1) of the Courts of Justice Act, R.S.O. 1990, c. C.43, as amended, provides that "subject to the provisions of an Act or rules of court, the costs of and incidental to a proceeding or a step in a proceeding are in the discretion of the court, and the court may determine by whom and to what extent the cost shall be paid."

[12] The factors to be considered by the court, in the exercise of its discretion on costs, are set forth in sub-rule 57.01(1), including, in particular, the principle of indemnity at para. (0.a) and the amount of costs that an unsuccessful party could reasonably expect to pay at para. (0.b).

[13] The usual rule in civil litigation is that costs follow the event and that rule should not be departed from except for very good reasons (see Gonawati v. Teitsson [2002] CarswellOnt 1007 (Ont. C.A.), 2002 CanLII 41469 and Macfie v. Cater, 1920 CanLII 401 (ON SC), [1920] O.J. No. 71 (Ont. H.C.) at para 28).

[14] Sub rule 57.01(4) provides that the court has the discretion to award all or part of the costs on a substantial indemnity basis or award costs in an amount that represents full indemnity. While full indemnity and substantial indemnity costs are an exception to the general rule and awarded only under special circumstances, allegations made or conduct by a party that is "reprehensible, scandalous, or outrageous" falls within the ambit of an award of full indemnity costs (see Baryluk v Campbell, [2009] O.J. No. 2772 (S.C.J.) at paras. 8-10).

[15] It is well known that the overall objective in dealing with costs is to fix an amount that is fair and reasonable for the unsuccessful party to pay in the particular circumstances of the case, rather than an amount fixed by the actual costs incurred by the successful party. The expectation of the parties concerning the quantum of costs is a relevant factor to consider. The court is required to consider what is "fair and reasonable" having regard to what the losing party could have expected the costs to be (see Boucher v. Public Accountants Council (Ontario), 2004 CanLII 14579 (ON CA), [2004] O.J. No. 2634 (Ont. C.A.) at para. 26 and Coldmatic Refrigeration of Canada Ltd. v. Leveltek Processing LLC, 2005 CanLII 1042 (ON CA), [2005] O.J. No. 160 (Ont. C.A.)) The amount awarded for costs must reflect some form of proportionality to the actual issues argued, rather than an unquestioned reliance on billable hours and documents created (see Mason v. Smissen, [2013] O.J. No. 4229 (Ont. S.C.J.) at paras. 5 and 6 and the cases therein referred to).

Discussion

[16] It is not disputed that the plaintiff was completely successful in the action against Mr. Arapakota and is entitled to an award of costs against him.

[17] Although Mr. Arapakota put forward every conceivable defence regardless of their merit and took an aggressive approach to the litigation by engaging in extensive cross-examinations of BDC employees and a clerk in the plaintiff’s counsel’s office and binging motions to stay, dismiss or transfer the proceeding, his conduct cannot be characterized as “reprehensible, scandalous, or outrageous” so as to support an award of elevated costs. However, Mr. Arapakota’ s approach in advancing every possible defence does go to what should have been his reasonable expectation that the plaintiff would be required to incur substantial costs in addressing each defence advanced by him, notwithstanding their lack of merit.

[18] In my view, the question of proportionality in this case is informed more by approach adopted by Mr. Arapakota in advancing virtually every conceivable defence than by the amount in dispute.

[19] I am not satisfied that the terms of the guarantees executed by Mr. Arapakota support an automatic award of full indemnity costs. The wording of the four guarantees was identical in this respect and provided as follows:

Each party signing below (the “Guarantor”) … unconditionally guarantees payment to BDC of all amounts owing under the Loan, together with interest from the date of demand plus fees and costs incurred by BDC in the enforcement of this Guarantee.”

(underling added)

[20] The guarantees did not specify the scale of “fees and costs” upon which the liability of the guarantor to pay costs would be determined, whether partial, substantial or full indemnity.

[21] In my view, the plaintiff is entitled to the costs of the action, including the motion for summary judgment, on a partial indemnity basis.

[22] I am not satisfied that the time dockets for counsel produced by the plaintiff disclose unnecessary or duplicative attendances. Nor am I satisfied that any of the disbursements claimed by the plaintiff were improper or not recoverable.

[23] The amount claimed alternatively by the plaintiff on a partial indemnity basis of fees in the sum of $56,671.56, disbursements of $4,056.11 and HST of $7,799.44 for a total of $68,527.11 is well within the reasonable expectations of Mr. Arapakota given the issues raised by him that the plaintiff was required to address.

Disposition

[24] It is ordered that the defendant Damodar Arapakota pay to the plaintiff costs fixed on a partial indemnity basis in the sum of $68,527.11 within 30 days hereof.

D.A. Broad, J.

Date: September 12, 2022