Court File and Parties

COURT FILE NO.: CV-22-00681586-00CL DATE: 20230321 SUPERIOR COURT OF JUSTICE – ONTARIO

RE: CERIECO CANADA CORP., Plaintiff AND: SAM MIZRAHI, JENNY COCO, BOSCO CHAN (a.k.a. Ye Chen), MIZRAHI COMMERCIAL (THE ONE) LP, MIZRAHI COMMERCIAL (THE ONE) GP INC., MIZRAHI DEVELOPMENT GROUP (THE ONE) INC., MIZRAHI INC., LIVESOLAR CAPITAL CORP., 10216267 CANADA CORP., COCO PAVING INC., 12823543 CANADA LTD. and SAM M INC., Defendants

BEFORE: Kimmel J.

COUNSEL: Edward Babin & Brendan Monahan, for the Plaintiff, Cerieco Canada Corp., Responding party on the stay motion, moving party on motion for leave to amend the Statement of Claim Scott Hutchison, Ewa Krajewska & David Postel, for the Defendants, Sam Mizrahi, Mizrahi Commercial (The One) LP, Mizrahi Commercial (The One) GP Inc., Mizrahi Development Group (The One) Inc., Mizrahi Inc., and Sam M Inc., Moving Defendants on the stay motion, respondents on motion for leave to amend the Statement of Claim Zachary Rosen, for Bosco Chan, Livesolar Capital Corp. and 10216267 Canada Corp. (appearing on January 20, 2023 on motion for leave to amend the Statement of Claim, appearing as observer only on earlier stay motion)

HEARD: Original Motion to Dismiss/Stay Heard: September 23, 2022, with supplementary written cost submissions dated November 18, December 7 and December 9, 2022 Motion for Leave to Amend Statement of Claim Heard: January 20, 2023, with supplementary written submissions dated January 26 and 31, 2023

Endorsement

motion for leave to file amended statement of claim and costs of both motion to dismiss/stay and leave to amend

The Motion to Stay/Dismiss

[1] The “Mizrahi Defendants”, Sam Mizrahi, Mizrahi Commercial (The One) LP, Mizrahi Commercial (The One) GP Inc., Mizrahi Development Group (The One) Inc., Mizrahi Inc., and Sam M Inc., brought a motion under rr. 21.02(3)(d) and 25.11 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 and s. 106 of the Courts of Justice Act, R.S.O. 1990, c. C.43 (“CJA”) for the dismissal or stay of this action (the “Stay Motion”) based upon the standstill provision (the “Standstill Provision”) contained in s. 13 of a Priority, Subordination and Standstill Agreement (the “KEB Agreement”). The motion was granted on November 2, 2022, subject to the caveat that leave could be sought by the plaintiff to deliver an Amended Statement of Claim that did not assert claims covered by the Standstill Provision: see Cerieco Canada Corp. v. Mizrahi, 2022 ONSC 6211 (the “Stay Endorsement”).

[2] Capitalized terms not specifically defined herein shall have the meaning ascribed to them in the Stay Endorsement.

[3] The relevant provisions of the Stay Endorsement include:

[61] CERIECO commenced this action against the Owner (one of the Credit Parties), in which it I have no difficulty concluding that it is, among other things, exercising remedies for alleged conspiracy, fraud, oppression and breach of contract, including damages in lieu of payment or recovery of the Subordinate Indebtedness. The claims asserted in this action are in respect of CERIECO’s subordinate debt, loan agreements, and security. These claims and remedies fall squarely within the standstill provision and comprise the core allegations in the statement of claim.

[63] If there are elements of the pleaded claims that do fall outside of the standstill provision, for example, the claim that the purported Release and SCA Amendment were procured by fraud and the consideration purportedly given to CERIECO for those agreements was diverted to the personal benefit of some of Bosco and Sam, those claims can be re-packaged and asserted separately, but the prohibited Enforcement Action claims cannot be pursued on the coattails of those claims.

[75] Meanwhile, to the extent not prohibited by the standstill provision, the plaintiff is free to seek relief against those defendants alleged to have been involved in the conduct complained of in the statement of claim. The example of the fraud claims involving the purported Release and SCA Amendment have been addressed already. The Mizrahi Defendants have agreed those claims can be carved out of any order made on this motion.

[80] Accordingly, the action will be stayed for 30 days from the date of this endorsement to afford the parties time to enter into a tolling agreement (if the plaintiff deems that to be necessary) and for the plaintiff to draft a new statement of claim that complies with the standstill provision. a. Any aspects of the relief sought by the plaintiff as against the Mizrahi Defendants that does not involve the enforcement of claims against the Owner for recovery of its debt or enforcement of security granted therefore may proceed by way of a new statement of claim. This includes claims regarding the alleged forgery and fraud associated with the signing of the purported Release and the SCA Agreement and payments made to Sam and Bosco in connection therewith.

The Plaintiff’s Motion for Leave to Amend the Statement of Claim

[4] In the Stay Endorsement, the court determined that any aspects of the relief sought by CERIECO that do not involve “recovery of its debt or enforcement of security granted therefore” are not covered by the Standstill Provision and may proceed with leave of the court.

[5] At the return of the Stay Motion, the Mizrahi Defendants conceded that the plaintiff’s claims seeking to restore the Release of certain guarantees and challenging the SCA Amendment, both of which had allegedly been signed on behalf of the plaintiff without its authority, and/or seeking to recover amounts said to have been improperly paid to parties other than the plaintiff in respect of those unauthorized agreements fall outside of the Standstill Provision. It was suggested that those claims could be carved out of any order made on their Stay Motion, as they were. That is the carve out that is reflected in the Stay Endorsement.

[6] The plaintiff delivered a proposed Amended Statement of Claim, parts of which the Mizrahi Defendants objected to because they say it includes claims that were stayed by virtue of the Standstill Provision and not carved out. The plaintiff thereafter brought a motion for leave to amend its Statement of Claim. That motion was heard on January 20, 2023.

The Plaintiff’s Position on the Motion for Leave to Amend the Statement of Claim

[7] The plaintiff maintains that none of the remaining claims in the proposed Amended Statement of Claim involve relief in respect of the enforcement of the Secured Indebtedness or the security therefore. Thus, they are all outside the scope of the Standstill Provision. The plaintiff insists that the remaining claims are in respect of the alleged unauthorized Release, SCA Amendment and other documents that Bosco purported to sign on the plaintiff’s behalf, including the Unauthorized Loan Transactions and Callian Guarantees that also involve alleged forgeries and frauds that are independent of and unrelated to the plaintiff’s claim for repayment of the Subordinated Indebtedness.

[8] These remaining claims are also incorporated into the oppression remedy claim that the plaintiff seeks to pursue. The plaintiff contends that it is entitled to pursue the oppression remedy claim against all of the defendants qua its status as a potential creditor in respect of the Subordinated Indebtedness (since there remains a chance that the stay will be lifted), qua creditor (for the amounts owing as a result of these remaining claims) and qua de facto shareholder under an alleged Profit Sharing Agreement.

[9] The plaintiff raised concerns about the Chan Defendants participating in this motion when they did not actively participate on the Stay Motion. While that is so, their passive participation in the Stay Motion does not prevent them, as interested parties in the motion for leave to amend, to ask the court to ensure that the proposed amendments to the Statement of Claim are consistent with the Stay Endorsement. However, they are not entitled to raise new issues or arguments about the scope of the prohibitions under the Standstill Provision or to ask the court to revisit the permitted carve out.

The Opposition to the Motion for Leave to Amend the Statement of Claim

[10] The Mizrahi Defendants have focused their objections on specific relief claimed in the proposed Amended Statement of Claim that they say falls within the Standstill Provision. They have not necessarily identified paragraphs dealing with background facts that could also be said to relate to various of the objected-to claims or causes of action. The “objected-to” paragraphs and claims are:

a. 1(a): claims for damages equal to amounts paid to the defendants or their affiliates pursuant to, among other purported agreements, the Unauthorized Loan Transactions and the Callian Guarantees;

b. 1(b): claims for damages equal to amounts paid to the lawyers representing the defendants alleged to be involved in the Unauthorized Loan Transactions and Callian Guarantees;

c. 1(c)(ii) and (iii), 167, 168 and 185: oppression claims against MCGP and Mizrahi Development Group;

d. 1(e) and 188: claim for punitive damages in the amount of the Subordinated Indebtedness;

e. 165, 170 and 176: claims for damages for knowing assistance and receipt, breaches of fiduciary duty, fraud and conspiracy in respect of the Release, the SCA Amendment and other agreements Bosco purported to sign on the plaintiff’s behalf (which would include the Unauthorized Loan Transactions and Callian Guarantees).

[11] The Mizrahi Defendants contend that the objected-to remaining claims in the Amended Statement of Claim go beyond what the Stay Endorsement permitted and improperly include claims like the oppression remedy claim predicated upon CERIECO’s standing as a creditor or pursuant to an alleged “Profit Sharing Agreement”. The Mizrahi Defendants submit that the alleged Profit Sharing Agreement is really just a way of re-characterizing the plaintiff’s loan advances in respect of the Subordinated Indebtedness.

[12] They also contend that the proposed amendments to the Statement of Claim improperly include claims relating to other frauds and forgeries committed by Bosco, such as the alleged “Unauthorized Loans Transactions” and the “Callian Guarantees” that the Mizrahi Defendants say are bound up with the Subordinated Indebtedness. The Mizrahi Defendants say these were alternative means by which some or all of the plaintiff’s Subordinated Indebtedness was to be used, and/or repaid and/or secured. If pursued, the Mizrahi Defendants contend that these claims might interfere with the orderly completion of the Project which they argue would undermine the purpose of the Standstill Provision.

[13] The Chan Defendants (Bosco Chan, Livesolar Capital Corp. and 10216267 Canada Corp.) support the objections of the Mizrahi Defendants. They do so insofar as the proposed Amended Statement of Claim includes claims against them that fall within the Standstill Provision.

Analysis: Motion for Leave to Amend the Statement of Claim

[14] The law on pleading amendments is not in dispute. That said, it is largely irrelevant to the issues to be decided on this motion. The main issue to be decided is whether the objected-to remaining claims in the proposed Amended Statement of Claim can be fairly read to fall outside the ambit of the Standstill Provision. The pleading should be read generously when considering this.

[15] The ancillary question of whether any of these remaining claims are not tenable or do not properly plead the causes of action must be considered and decided on the low threshold of whether it is “plain and obvious” that the impugned claim discloses no reasonable cause of action, taking the pleaded allegations as true unless they are patently unreasonable or incapable of proof. This latter question is mostly relevant to the continued plea of the oppression remedy claim.

[16] Since the Stay Motion was based on a broad point of contract interpretation and not a specific review of each cause of action pleaded, I do not agree with the plaintiff’s argument that the Mizrahi Defendants should have raised their specific objections to the oppression remedy claim in the context of that motion. The result of the Stay Motion was that the plaintiff must obtain leave to pursue any claims it wishes to advance that are not covered by the Standstill Provision and any objections to the claims that are being pursued are fair game.

Claims Relating to the Unauthorized Loan Transaction and Callian Guarantees

[17] Insofar as the damages claimed by the plaintiff in the objected-to paragraphs relating to the Unauthorized Loan Transactions and the Callian Guarantees are restricted to the amounts allegedly diverted to the other defendants (or their advisors) in respect of those unauthorized agreements signed by Bosco, based on that plea (which is all that the court is to have regard to on a pleadings motion such as this) I do not consider these to come under the Standstill Provision.

[18] Even if these agreements were part of a failed scheme to obtain additional financing, pay fees to the plaintiff and repay some of the Subordinated Indebtedness, the claim being advanced now in the proposed Amended Statement of Claim does not appear to be seeking to enforce those agreements. Rather, it seeks to hold any participating defendants accountable for amounts they improperly received or diverted to others as a result of their involvement in the negotiation and/or execution of those “unauthorized” agreements. Thus, the objected-to claims in paragraphs 1(a) and (b) of the proposed Amended Statement of Claim associated with the Unauthorized Loan Agreements or the Callian Guarantees do not appear to involve claims for recovery of the Subordinated Indebtedness or enforcement of security granted therefore. They relate to other alleged wrongdoing and damages.

[19] The Mizrahi Defendants assert that the third-party payments that form part of the damages claimed somehow form part of the Subordinated Indebtedness. I was unable to follow the thread of this argument. It may be that in substance that is so, but it is not apparent on the face of the pleading and that is all that I am permitted to consider on this motion. If, over time, it is determined that there are aspects of these claims that are prohibited by the Standstill Provision, they remain subject to the Stay Endorsement; however, at this stage of the pleadings I am not able to disentangle them. There are at least some aspects of these claims regarding unauthorized transactions that Bosco is alleged to have carried out in the name of the plaintiff that do not appear to be prohibited by the Standstill Provision.

[20] At this pleadings stage, I do not see a principled distinction between the claims, as pleaded, in connection with these agreements alleged to have been fraudulently executed by Bosco, and the Release and the SCA Amendment, which were not objected to and carved out of the orders and directions under the Stay Endorsement.

Claims for Knowing Assistance, Breaches of Fiduciary Duty, Fraud and Conspiracy

[21] The same is true about the objected-to claims in paragraphs 165, 170 and 176 of the proposed Amended Statement of Claim. On their face, these claims for knowing assistance and receipt, breaches of fiduciary duty, fraud and conspiracy are made in respect of the Release, the SCA Amendment and other agreements Bosco purported to sign on the plaintiff’s behalf (which may also include the Unauthorized Loan Agreements or the Callian Guarantees). When restricted in this way, these claims do not appear to involve claims for the recovery of the Subordinated Indebtedness or enforcement of security granted therefore.

[22] While it may be that some of the defendants were not involved in some or all of this alleged wrongdoing, and therefore should not be implicated in these claims, that is not something that can be sorted out on a pleadings motion.

[23] The same caveat applies to these claims as to the alleged fraud in respect of the Unauthorized Loan Agreements and Callian Guarantees in the previous section, namely that: If, over time, it is determined that there are aspects of these claims that are prohibited by the Standstill Provision, they remain subject to the Stay Endorsement; however, at this stage of the pleadings I am not able to disentangle them. There are at least some aspects of these claims regarding unauthorized transactions that Bosco is alleged to have fraudulently carried out in breach of his fiduciary duties (with the alleged knowing and assistance and receipt of alleged co-conspirators) in the name of the plaintiff that do not appear to be prohibited by the Standstill Provision.

Claims for Punitive Damages

[24] The above categories of claims have been permitted to stand on the basis that they do not involve claims for recovery of the Subordinated Indebtedness or enforcement of security granted therefore. However, any attempts to indirectly pursue the prohibited claims under the auspices of these “other” claims will not be permitted.

[25] I consider the claim for punitive damages in an amount equal to the Subordinated Indebtedness to be just that, a disguised attempt to recover the amounts of the loan advanced by the plaintiff. Accordingly, I find that the claims in paragraphs 1(e) and 188 of the proposed Amended Statement of Claim come within the scope of the Standstill Provision and these are not permitted claims.

Oppression Remedy Claims

[26] I turn now to deal with the oppression remedy claims.

[27] Whether the other objected-to claims for which leave is granted (discussed above), involving alleged knowing assistance, breaches of fiduciary duty, fraud and conspiracy in respect of the Release, the SCA Amendment and other agreements Bosco purported to sign on the plaintiff’s behalf (which may also include the Unauthorized Loan Agreements or the Callian Guarantees), can be said to rise to the level of oppressive activities under s. 241 of Ontario’s Business Corporations Act, R.S.O. 1990, c. B.16 or s. 248 of the Canadian Business Corporations Act, R.S.C. 1985, c. C-44 is not something that can be decided on a pleadings motion.

[28] If restricted to those claims, and remedies associated with reasonable expectations regarding the negotiation and execution of purportedly unauthorized agreements signed without the plaintiff’s knowledge that purport to bind the plaintiff, the plaintiff’s oppression remedy would not come within the Standstill Provision.

[29] The plaintiff maintains that it is restricting its oppression remedy claim in this manner. The plaintiff has deleted what used to be paragraph 165(f) in the Statement of Claim because it pleaded an expectation said to be held by the plaintiff regarding the repayment of the Subordinated Indebtedness. Paragraphs 165(g) and (h) would have to be read down to exclude any funds to be paid to the plaintiff, or interests of the plaintiff in the Project, arising from or in respect of the Subordinated Indebtedness and security granted therefore, to remain consistent with the line that the plaintiff seeks to walk in preserving its oppression remedy claim.

[30] However, that is not the end of the analysis on whether leave should be granted to the plaintiff to pursue the oppression remedy claim. There is a threshold issue that must be considered, namely whether the plaintiff has pleaded facts to support it bald assertion that it is a proper complainant under the oppression remedy in respect of the actions of the implicated corporation(s).

[31] To seek relief under the oppression remedy, a company’s actions, or the conduct of its the business and affairs, must be oppressive, unfairly prejudicial or unfairly disregard the reasonable expectations of a proper complainant. I asked the plaintiff to provide an outline of the paragraphs of the proposed Amended Statement of Claim particularizing the claims against the various corporate defendants in respect of which the oppression remedy is claimed.

[32] The particularized paragraphs plead facts associated with the allegations of knowing assistance, breaches of fiduciary duty, fraud and conspiracy in respect of the Release, the SCA Amendment and other agreements Bosco purported to sign on the plaintiff’s behalf (which may include the Unauthorized Loan Agreements or the Callian Guarantees). However, there is little in the identified paragraphs tying the Mizrahi Defendants to any of these allegations. The conduct of Bosco is directly implicated, but even the involvement of the corporate Chan Defendants is tenuous.

[33] The Mizrahi and Chan Defendants oppose the oppression remedy claims because they are devoid of any particulars in respect of many of the corporate defendants who the proposed Amended Statement of Claim purports to include as defendants to the oppression claims. However, beyond that, they maintain that, even if a connection to some corporate defendants had been established, the real problem with the oppression remedy claim is that the proposed Amended Statement of Claim does not plead a basis on which the plaintiff could be recognized as a complainant.

[34] The oppression remedy affords the court a wide discretion to grant any remedy it considers appropriate: see BCE Inc. v. 1976 Debentureholders, 2008 SCC 69, [2008] 3 S.C.R. 560, at para. 58. However, there are constraints. One of them is that for a plaintiff to take advantage of this remedy it must first have status as a proper complainant.

[35] A complainant under the oppression remedy must establish that the result or effects of corporate actions, the conduct of the business and affairs of a corporation or the exercise of the powers of the corporation’s officers and directors were oppressive, unfairly prejudicial to or unfairly disregarded the interests of the complainant so as to defeat the complainant’s reasonable expectations. A complainant can be a registered or beneficial security owner (shareholder), a director or officer or any other proper person.

[36] This is not a closed list and the court’s discretion in determining who may be a “proper person” to be a complainant is unfettered: see 1217174 Ontario Ltd. v. 141608 Canada Inc., 2017 ONSC 7698, 77 B.L.R. (5th) 10, at para. 35. However, proper persons must have a relationship with the corporation that gives rise to reasonable expectations and must be claiming under the oppression remedy in the capacity that alleges its reasonable expectations have been defeated. Put another way, the oppression remedy claims and reasonable expectations sought to be protected must be associated with the capacity in which the plaintiff qualifies to be a complainant for that purpose.

[37] For example, a creditor has been found to be a proper complainant: see Cohen v. Cambridge Mercantile Corp. (2007), 33 B.L.R. (4th) 248 (Ont. S.C.), at paras. 34-38. See also J.S.M. Corporation (Ontario) Ltd. v. The Brick Furniture Warehouse Ltd., 2008 ONCA 183, 234 O.A.C. 59, at para. 66. However, an oppression claim cannot be pursued qua creditor where the complainant is only alleged to have become a creditor by the allegedly oppressive conduct in question: see e.g., Lakehead Newsprint (1990) Ltd. v. 893499 Ontario Ltd. (2000), 23 C.B.R. (4th) 170 (Ont. S.C.), at para 37-38; Trillium Computer Resources Inc. v. Taiwan Connection Inc. (1992), 10 O.R. (3d) 249 (Gen. Div.).

[38] The plaintiff’s oppression claims are plagued by a disconnect. It seeks to rely on its status as a creditor or potential creditor to get in the door as a complainant, but then acknowledges that it cannot pursue oppression claims for defeated expectations in respect of the Subordinated Indebtedness and enforcement of security granted therefore because of the Standstill Provision. There is no question that the oppression remedy is theoretically available to the plaintiff qua creditor, but that it is precisely prohibited under the Standstill Provision.

[39] To get around this, the plaintiff pivots and seeks to cast a wide net of oppression remedy claims against all defendants in respect of the other alleged misconduct that has been demonstrated to fall outside of the Standstill Provision.

[40] The oppression remedy requires the complainant to pursue that remedy in relation to the capacity in which it qualifies qua complainant. If pursuing the remedy as a creditor, as the plaintiff is in this case, it must be in relation to alleged wrongs to its interests qua creditor. See Cohen v. Cambridge Mercantile Corp. (2007), 33 B.L.R. (4th) 248, at paras. 36 and 37.

[41] This has been a longstanding principle underlying oppression remedy claims: “The reasonable expectations of a shareholder or other potential complainant are not assessed in the abstract. They must be construed by reference to the context in which the complainant acquired their rights, and the context in which the conduct complained of transpired.” See CanBev Sales & Marketing Inc. v. Natco Trading Corp. (1996), 30 O.R. (3d) 778 (Gen. Div.), aff’d CanBev Sales & Marketing Inc. v. Natco Trading Corp. (1998), 42 O.R. (3d) 574 (C.A.).

[42] In light of the Standstill Provision and the Stay Endorsement, the plaintiff’s pursuit of an oppression remedy cannot now be predicated on its status as a creditor or even a potential creditor under the Subordinated Indebtedness since that would come within the Standstill Provision. Nor can the plaintiff’s pursuit be predicated on the alleged Profit Sharing Agreement, which I agree with the Mizrahi Defendants is just another way of attempting to re-characterize (and recover) the amounts the plaintiff advanced to the Project as some form of equity rather than debt. That too is captured by the Standstill provision.

[43] Paragraph 167 of the proposed Amended Statement of Claim specifically pleads the plaintiff’s status as a complainant under the oppression remedy to be predicated on the capacities that are tied to the Subordinated Indebtedness and prohibited by the Standstill Provision. Accordingly, it is plain and obvious that the proposed pleading, in its current form, is incapable of success (there being no capacity in which the plaintiff is disclosed to be an appropriate complainant). Thus, leave cannot be granted for the pursuit of the oppression remedy claims in the proposed Amended Statement of Claim.

Costs

[44] The parties agreed at the conclusion of the hearing of the Stay Motion to try to reach an agreement on costs. The court was advised that they were unable to do so and that they wished to make written submissions regarding costs after being advised of the outcome. They were afforded that opportunity and the court has received and reviewed their written cost submissions filed pursuant to the court’s earlier direction. The court deferred releasing the decision on costs so that the costs of both motions could be dealt with at the same time.

The Costs of the Stay Motion

Position of the Moving Defendants

[45] The Mizrahi Defendants seek $120,000 in costs of the action to date. This amount is slightly less than their partial indemnity costs of the action up to the hearing of the Stay Motion, according to their Bill of Costs.

[46] The Mizrahi Defendants claim their costs of the action on the basis that only a small proportion of the pleaded claim has survived this motion. They contend that the plaintiff’s claims have been transformed from seeking damages in excess of $200 million to seeking damages of approximately $7.5 million for knowing assistance and receipt, fraud and conspiracy.

Position of the Responding Plaintiff

[47] The plaintiff counters that the Mizrahi Defendants sought a complete dismissal (or permanent stay) of the entire action, whereas important claims for fraud and conspiracy with respect to Bosco’s unauthorized conduct, that was undertaken allegedly at Sam’s direction and with his knowledge and assistance, were expressly permitted to proceed.

[48] The plaintiff seeks its costs in the amount of $60,000, which it argues is intended to reflect what it considers to be the somewhat divided success between the parties on the Stay Motion (its partial indemnity costs indicated in its Bill of Costs were approximately double that amount for the Stay Motion).

[49] The plaintiff contends that it was “more” successful because of what it proposes to keep in the Amended Statement of Claim, subject to the court’s determination of the leave motion, covering a range of claims that the plaintiff hopes will survive the motion, such as:

a. The claims to set aside the SCA Amendment and to restore the Guarantee;

b. The claim for knowing receipt, knowing assistance, conspiracy and fraud with respect to the $7.5 million paid to Sam and Bosco and such other amounts paid to the defendants in connection with the conspiracy;

c. The claim for damages for fraud and conspiracy with respect to all amounts paid by Bosco to various third parties (with Sam’s knowledge and direction) as “professional”, “good faith” or other such fees in respect of the Unauthorized Loan Transactions;

d. The claim for damages with respect to the Callian Guarantees, and other matters relating to Callian Capital;

e. The appointment of an inspector under the oppression remedy to investigate the conduct described in the statement of claim, including the circumstances surrounding the execution of the Unauthorized Resolutions, the Subordination Agreements, the 102 Authorization, and other documents executed by Bosco purportedly on behalf of CERIECO; and

f. Any other claims CERIECO has made or may make that do not involve “recovery of its debt or enforcement of security granted therefore”.

[50] Alternatively, the plaintiff suggests that the court could order costs of this motion that reflect the divided success on this motion.

[51] The plaintiff further contends that, even if the court were inclined to award costs to the Mizrahi Defendants, the amount sought is not reasonable or proportionate. The plaintiff points out that the $120,000 in costs of the action claimed is nearly double the partial indemnity costs of the Mizrahi Defendants for just the Stay Motion. According to the Costs Outline of the Mizrahi Defendants dated October 4, 2022, their partial indemnity costs of the stay motion were $68,743.78, plus disbursements of $785.40. Even the Mizrahi Defendants’ full indemnity costs of the stay motion as indicated in the same costs outline is less than the costs they are claiming (the full indemnity costs are indicated to be $114,572.96).

[52] The plaintiff argues that any costs awarded to the Mizrahi Defendants should be for the motion only and should reflect a reasonable and proportionate amount of partial indemnity costs that takes into account the fact that the entire action was not stayed or dismissed.

Analysis and Decision on Costs of Motion to Stay/Dismiss

[53] Having regard to the relevant factors under r. 57.01:

a. The amount at issue on the stay motion was significant, representing by far the most significant monetary claims for $200 million.

b. What was left to be pursued (having regard to the court’s ruling on the motion to amend) in terms of dollar value are claims valued at far less, estimated to be $7.5 million, although the plaintiff argues that these claims may eventually have some bearing on other claims which may be pursued later.

c. Both sides agree that the motion involved complex issues and necessitated some permitted evidentiary considerations.

d. The motion was important to both sides from a legal and commercial perspective.

e. The parties accuse each other of taking aggressive positions on productions and in the conduct of examinations and suggest that these positions tended to lengthen the proceeding leading up to the determination of the motion.

[54] The Mizrahi Defendants were the overall successful parties on the Stay Motion and I find that they are entitled to an award of some partial indemnity costs of the motion. The parties agree that the appropriate scale of costs is partial indemnity.

[55] The action is continuing, and thus I am not going to award them their costs of the action. While a $7.5 million claim is relatively small compared to the claims that have been struck, it is still a significant claim and I see no basis on which to award the Mizrahi Defendants their costs of the action at this time.

[56] The partial indemnity costs of the Mizrahi Defendants of the stay motion are $68,743.78, plus disbursements of $887.50 (both inclusive of HST). They did not succeed in all aspects of the relief sought on their motion, as the action was not stayed or dismissed in its entirety.

[57] The plaintiff’s own partial indemnity Bill of Costs for the Stay Motion (which is almost double the amount of the partial indemnity costs of the Mizrahi Defendants) is one benchmark against which the court can assess the reasonableness and proportionality of what the Mizrahi Defendants are seeking and what the plaintiff ought reasonably to have expected to pay in costs.

[58] In the exercise of my discretion under r. 57 and s. 131 of the CJA and having regard to the relevant factors and the submissions of the parties, and in particular that the entirety of the action was not stayed or dismissed, I award the Mizrahi Defendants their partial indemnity costs of the stay motion fixed in the all-inclusive amount of $50,000 and payable by the plaintiff forthwith.

Costs of the Motion for Leave to Amend the Statement of Claim

[59] The plaintiff’s costs outline indicates all-inclusive partial indemnity costs of the motion for leave to amend the Statement of Claim in the amount of $39,646. This includes a little over $2,000 in fees (roughly) for reviewing the Stay Endorsement and drafting the proposed Amended Statement of Claim which are a cost of the outcome of the Stay Endorsement rather than a cost of the motion for leave to amend.

[60] The Costs Outline of the Mizrahi Defendants indicate all-inclusive partial indemnity costs of $26,353.18, which they say is a more reasonable and proportionate amount of costs for this motion. The difference in the amounts of the two sides’ partial indemnity costs of this leave motion, once adjusted, is just over $10,000. That establishes the range of reasonably expected and proportionate costs for the motion for leave to amend the Statement of Claim.

[61] Each side had some success and some failure on the motion for leave to file an Amended Statement of Claim, having regard to the objected-to paragraphs. However, looking at the motion in its totality, the Mizrahi Defendants were more successful given the court’s finding that the plaintiff has not put forward a tenable oppression remedy claim, which was the focus of much of the submissions. I find the Mizrahi Defendants to be entitled to some partial indemnity costs for this motion as well.

[62] Having regard to what was at stake, the time and effort involved in this motion and the overall outcome, and in the exercise of my discretion under Rule 57 and s. 131 of the CJA, I am awarding partial indemnity costs to the Mizrahi Defendants on the motion to amend the Statement of Claim fixed in the all-inclusive amount of $15,000.00 payable by the plaintiff forthwith.

Continuing Stay and Implementation

[63] At the conclusion of the hearing the leave motion on January 20, 2023 the parties agreed that the stay in paragraph 80(b) of the Stay Endorsement (that was previously extended on consent) shall continue for 30 days after this endorsement is released, and I so order.

This endorsement and the orders and directions contained in it shall have the immediate effect of a court order without the necessity of the issuance and entry of a formal order.

Kimmel J. Date: March 21, 2023