Spektor v Bharti, 2023 ONSC 2472

Court File and Parties

COURT FILE NO.: CV-22-678104 RELEASED: 2023/04/24 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Michael Spektor and Serafene Consulting Ltd. v. Stan Bharti and Forbes & Manhattan Inc. And by counterclaim: Stan Bharti v. Michael Spektor and Serafene Consulting Ltd.

BEFORE: Associate Justice Graham HEARD: March 27, 2023

COUNSEL: R. Aaron Rubinoff and John Siwiec for the plaintiffs Cole Pizzo for the defendants (moving parties)

Reasons for Decision

(Defendants’ motion for security for costs)

1The plaintiff Michael Spektor (“Spektor”) is a Ukrainian national who resides primarily on the Greek island of Crete and in Vienna, Austria. The plaintiff Serafene Consulting Ltd. (“Serafene”), of which Spektor is the sole shareholder, is incorporated in the British Virgin Islands. Serafene does not carry on business in Ontario.

2The defendant Stan Bharti (“Bharti”) resides in Toronto, Ontario. Bharti is the founder and executive chairman of the defendant Forbes & Manhattan Inc. (“Forbes”), a private merchant bank with its headquarters in Toronto. Bharti and Spektor have known each other for many years.

3In the statement of claim, Spektor alleges that between 2012 and 2014, he, through Serafene, loaned Bharti $10 million(U.S.) for Bharti to invest in a diamond mining project in the Marange area of Zimbabwe (“the Marange project”). Once repaid, Spektor, through Serafene, would collect profits through his equity interest in the Marange Project. Spektor alleges that he provided his $10 million(U.S.) investment based on Bharti’s representations that they would be partnering with each other and that Bharti would also invest $10 million(U.S.) in the project. Spektor alleges that Bharti presented the Marange Project as a viable diamond mine that would be extremely profitable.

4Spektor pleads that he provided Bharti with his $10 million(U.S.) investment in two tranches of $5 million, the first on September 14, 2012 and the second on July 29, 2014. On or about June 2, 2015, Bharti returned approximately $2.9 million to Serafene. Other than a brief summary provided on or around March 1, 2017, Barthi and Forbes have not provided any details of how Spektor’s loan funds were used. Spektor alleges that Bharti has told him that he would reimburse him for his losses from the unpaid loan but he failed to do so.

5The parties’ business arrangements with respect to the Marange Project were contained in a Memorandum of Understanding dated September 14, 2012, an Amended and Restated Memorandum of Understanding dated June 16, 2014, and a Loan Agreement dated June 16, 2014 (“the Agreements”).

6Spektor and Serafene claim damages of $8.5 million(U.S.) for negligent misrepresentation and fraudulent misrepresentation, and in the alternative for breach of contract or unjust enrichment, arising from their unpaid loans to Bharti and Forbes. They allege breaches of the terms of the Agreements relating to reporting requirements and the permitted use of the loan funds. They allege ongoing damages caused by Bharti’s “fraudulent misrepresentations and acts of deceit.” They also claim punitive damages of $500,000.00.

7Other than admitting who they are, Bharti and Forbes deny all of the allegations in the statement of claim. In their statement of defence, they allege that Bharti told Spektor that investing in diamond mining projects in Africa was “entirely speculative” and there was no guarantee that the Marange project would yield any profit. They plead that by November 2014, it was determined that the Marange project site could not be profitably mined and that the plaintiffs knew or ought to have known by 2015 that their investment was not profitable. They deny any misrepresentation.

8By way of counterclaim, the defendants allege that in 2015, to help Spektor, Bharti applied for and provided Spektor with an American Express Card in Bharti’s name. The defendants plead that the parties agreed that Spektor would use the card and would forward payment of the balance to Bharti every month. Spektor made monthly payments to Bharti for the statements from 2015 to October 2018 but stopped paying as of when the November 2018 payment was due. Bharti counterclaims against Spektor for repayment of $378,078.88 for outstanding American Express Card charges. The plaintiffs plead in their reply, and the defendants pre-emptively deny in their statement of defence, that Bharti agreed to pay for Spektor’s expenses on this American Express Card as repayment of his investment.

The motion

9As indicated, Spektor is a Ukrainian national who ordinarily resides in Greece and Austria and Serafene is a British Virgin Islands corporation. The defendants now move for an order that the plaintiffs post security for costs of their action. In their draft bill of costs, they calculate substantial indemnity costs of $451,000.00 and partial indemnity costs of $318,000.00. In their notice of motion, they seek an order for security for costs totalling $400,000.00 payable in four installments. In argument, defendants’ counsel submitted that they were seeking security based on $318,000.00 for partial indemnity costs, payable in installments.

Applicable rule and case law

10The defendants seek an order for security for costs under Rule 56.01(1)(a) and (d) of the Rules of Civil Procedure:

56.01(1) The court, on motion by the defendant or respondent in a proceeding, may make such order for security for costs as is just where it appears that,

(a) the plaintiff or applicant is ordinarily resident outside Ontario; . . .

(d) the plaintiff or applicant is a corporation or a nominal plaintiff or applicant, and there is good reason to believe that the plaintiff or applicant has insufficient assets in Ontario to pay the costs of the defendant or respondent;

11The parties agree on the case law applicable to motions for security for costs as stated in paragraphs 33-38 of the defendants’ factum:

• As stated by Quinn J. in Morton v. Canada (Attorney General) (2005), 2005 ONSC 6052, 75 O.R.(3d) 63 (at paras. 38, 39 and 42):

38 Under rule 56.01(1), the court may make such order “as is just”. This affords the court the widest discretion imaginable.

39 In considering what is “just” I expect it has been said before that a court is balancing two rights: the right of successful defendants in an action to the uneventful payment of their costs; and, the right of plaintiffs to their day in court for the trial of a meritorious action. . . .

42 Despite the generous discretion available, where the need for security for costs is made out, the court, absent exceptional circumstances, should order security in the amount of the actual anticipated costs and not become weak-kneed at that prospect. This is not to say, however, that the full anticipated costs of the entire action must be ordered. Where an action is in its procedural infancy, with examinations yet to be scheduled, a pay-as-you-go order is usually the most appropriate one and I find that to be so here.

• The initial onus is on the defendants to show that it “appears” that one (or more) of the six factors set out in Rule 56.01(1) exists. (See: Hallum v. Canadian Memorial Chiropractice College (1989), 1989 ONSC 4354, 70 O.R.(2d) 119 (HCJ))

• As stated by Master Dash in Health Genetic Center Corp v. Reed Business Information Ltd., 2014 ONSC 6449 (at para. 4):

4 There is a two-step process under rule 56.01(1)(d). The initial onus is on the defendants to satisfy the court that it “appears” that there is “good reason to believe” that the corporate plaintiff has insufficient assets to satisfy a costs award. They need not go so far as to actually prove that the plaintiff has insufficient assets. If the defendants satisfy the first stage of the enquiry, the onus switches to the plaintiff to either demonstrate that it has sufficient and appropriate assets in Ontario to satisfy any order for costs or alternatively satisfy the court that an order for security for costs would be unjust, for example, by demonstrating that the plaintiff is impecunious and the action is not devoid of merit. . . .

• Merits have a role in any application under rule 56.01 but on a continuum with rule 56.01(1)(a) at the low end. The analysis is not such as in a motion for summary judgment and is primarily on the pleadings with recourse to evidence filed on the motion (Padnos v. Luminart Inc., 1996 ONSC 11781 at paras. 4 and 7).

• If the case is complex or turns on credibility, it is generally not appropriate to make an assessment of the merits at the interlocutory stage. The assessment of the merits should be decisive only where the merits may be properly assessed on an interlocutory application and success or failure appears obvious (Wall v. Horn Abbott Ltd., 1999 NSCA 7240, [1999] N.S.J. No. 124 (CA) at para 83; followed by Master Glustein, as he then was, in Coastline Corporation Ltd. et al. v. Canaccord Capital Corporation et al. 2009 ONSC 21758, [2009] O.J. No. 1790)

12In addition, the plaintiffs rely on Yaiguaje v. Chevron Corporation, 2017 ONCA 827 (at para. 25):

25 [E]ach case must be considered on its own facts. It is neither helpful nor just to compose a static list of factors to be used in all cases in determining the justness of a security for costs order. There is no utility in imposing rigid criteria on top of criteria already provided for in the Rules. The correct approach is for the court to consider the justness of the order holistically, examining all the circumstances of the case and guided by the overriding interests of justice to determine whether it is just that the order be made.

Issues on the motion

13The plaintiffs do not dispute that Spektor is ordinarily resident outside Ontario and that Serafene has no assets in Ontario. However, they submit that Spektor owns 2.9 million shares in Black Iron Inc. (“BKI”), which is a company in the defendant Forbes’ portfolio, and with respect to which Bharti is an insider. The current price of Black Iron’s shares is approximately 7.5 cents, so their current value exceeds $200,000.00, which the plaintiffs submit constitutes sufficient assets to provide the defendants with the security for costs that they are seeking. As set out below, the defendants dispute this contention.

14The plaintiffs acknowledge in their factum (para. 54) that there are two issues to be determined on the motion:

(i) Are Mr. Spektor’s Black Iron shares sufficient assets to defeat the defendants’ motion for security?

(ii) Considering the justness of the requested order for security for costs holistically as required by Yaiguaje, supra, should the court require that the plaintiffs post security, and if so, in what amount?

15Both sets of parties agree that the merits of the action are not a factor on this motion so there is no need to assess the merits in these Reasons.

Submissions of the defendants (moving parties)

16As stated in their factum (para. 56), the plaintiffs acknowledge that the defendants have met the initial onus of satisfying the court that the matter falls within rule 56.01(1) in that the plaintiff Mr. Spektor is ordinarily resident outside Ontario (56.01(1)(a)) and the corporate plaintiff Serafene has no assets in Ontario (56.01(1)(d)). However, the plaintiffs argue that Mr. Spektor’s shares in BKI are sufficient assets in Ontario to satisfy any potential costs award so no order for security for costs is necessary.

17The defendants submit that Mr. Spektor’s BKI shares cannot be sufficient assets. BKI’s sole asset is a mining lease over land in southeastern Ukraine that, owing to the Russian invasion, is close to areas of active combat. BKI’s shares currently trade at $.07-.08 per share, having declined in value from $.21 per share since December 20, 2021. The shares’ volatility makes it impossible to know what they will be worth at a point at which the defendants may achieve a result in the action that will entitle them to costs.

18The defendants rely on an exhibit to Mr. Spektor’s affidavit consisting of a data sheet from TMX Money which provides metrics with respect to BKI shares. This document indicates that as of September, 2022, the 50 day average trading volume for BKI was 121,000 shares per day. It is therefore unlikely that Mr. Spektor could sell all 2.9 million shares at once and even if he could, the sudden sale of that volume of shares would very likely reduce the price significantly. Accordingly, the price of Mr. Spektor’s BKI shares is too volatile and the shares are insufficiently liquid an asset to defeat the motion for security.

19The defendants also rely on BKI’s “Management’s Discussion and Analysis” dated May 5, 2022, intended for release to shareholders. The section of this document headed Outlook – Outbreak of War in Ukraine includes the following statements:

• “The Company’s future operations may be affected by the war between Russia and Ukraine” following the invasion launched by Russia on February 24, 2022.
• “Any further escalation, imposition of sanctions in areas which the Company operates, outbreak of war into other countries or regions or other escalation may have a material adverse effect on the Company’s ability to develop the Project due to, among other factors, diversion of resources of the Ukrainian government to resolving such conflict particularly from its Ministry of Defence who hold essential land for Project development, withdrawal of the Company’s personnel from Ukraine for their safety, difficulty in getting foreign consultants on site, inability to secure financing due to increased risk profile of the Project, destruction of property due to the Ukraine war or expropriation or de-facto expropriation of the Project and all associated assets. . . . ”

20The defendants submit that in these statements, BKI is saying “buyer beware”, and the uncertainty described has affected and may very well continue to affect the share price. The plaintiffs have provided no evidence to respond to these concerns.

21With respect to the quantum of costs for which the defendants seek security, counsel submits that Mr. Spektor’s BKI shares even at their current value are not sufficient.

22As indicated, the defendants seek an order that the plaintiffs post security for their anticipated partial indemnity costs of $318,000, payable in installments, and submit as follows with respect to the quantum of security:

• The plaintiffs have not challenged the defendants’ rates or the estimated quantum. In their factum (para. 82) the plaintiffs challenge the defendants’ claim for security of $80,000.00 more than their calculated partial indemnity costs but they do not say that the proposed partial indemnity costs of $318,000 are unreasonable.
• The defendants’ bill of costs is based on a straightforward course of litigation, consisting of the usual steps of documentary production, oral discovery, pre-trial conference and trial.
• Security based on partial indemnity costs of $318,000.00 is proportionate to the 8.5 Million(U.S.) claimed by the plaintiff.
• The fact that the payments would be in installments makes it less onerous for the plaintiff than posting all of the security at once. (Security for costs is almost invariably ordered payable in installments so this submission would not change my approach to the issue of quantum.)

23Finally, the plaintiffs have the onus to either demonstrate appropriate assets or that an order for security for costs would be unjust. Mr. Spektor has provided no evidence that he would not be able to post security in the amount sought, so an order that the plaintiffs post security would not prevent them from proceeding with the action.

Submissions of the plaintiffs

24Plaintiffs’ counsel submits that the quantum of any security required should be assessed based on the holistic approach to security for costs from para. 25 of Yaiguaje, supra. In this regard, they submit that the following factors should be considered:

• The exigibility of Spektor’s shares in Black Iron;
• The plaintiffs were obliged to commence their action in Ontario by a forum selection clause in one of the Agreements drafted by the defendants;
• The defendants are wealthy and do not need the protection of an order for security for costs;
• The defendants have failed to discount their costs to take into account that some of those costs would be incurred to advance their counterclaim.

25With respect to the exigibility of Mr. Spektor’s BKI shares, the plaintiffs refer to a page from the defendant Forbes & Manhattan Inc.’s website stating that it has a wide portfolio of companies, including Black Iron Inc.. The president of BKI is on the Board of Directors of Forbes, reflecting a strong relationship between the defendants and BKI. Also, the defendant Bharti is listed as an insider of BKI.

26With respect to the liquidity of the BKI shares, counsel submits that Mr. Spektor sold 55,000 shares for cash on approximately May 4, 2021. At that time, Fred Leigh of Forbes, who holds the BKI shares in trust for Mr. Spektor, described the shares as “very, very liquid” and they were traded on eight other stock exchanges. (It is important to note that this communication was well before the Russian invasion of Ukraine in February, 2022 which dramatically changed the circumstances with respect to BKI’s Ukraine mining lease.)

27Counsel also submits that the share price has stabilized at approximately 7.5 – 8 cents since at least August, 2022 and the shares are liquid in the sense that there is a market for them. Further, in a document titled Black Iron General Project Update from September, 2022, BKI represents that “management has been reviewing new potential projects to generate shareholder value.” The plaintiffs submit that the current value of the BKI shares of more than $200,000, on a motion for security of $318,000, is a factor that the court should consider in exercising its discretion on a holistic basis.

28With respect to the forum selection clause, counsel submits that the fact that the plaintiffs are litigating against the defendants in Ontario because they are contractually required to do so should be considered in setting the amount of security and puts “downward pressure” on what that amount should be.

29With respect to their submission that the defendants are affluent and do not need the protection of security for costs, the plaintiffs rely on Providence Grace Inc. v. Yardistry Ltd., 2022 ONSC 3983, at para. 50, where Vermette J., after citing Yaiguaje, supra, states:

50 Thus, the impact of not making an order for security for costs on the defendant can be a legitimate factor to consider at the second stage of the test for security for costs when considering the overall justness of the order sought.

30The plaintiffs also submit that the defendants did not file any reply evidence from Mr. Bharti with respect to his means and their failure to do so should have a downward impact on the quantum of any security. (I do not accept this argument. While it would be open to moving defendants on a security for costs motion to provide evidence as to the adverse effect of a court’s refusal to grant a security for costs order, there is no obligation on them to do so and the absence of evidence in that regard is not a basis to refuse to order security.)

31Finally, with respect to the counterclaim, counsel relies on Paramount Franchise Group v. Mian et al., 2022 ONSC 4533 (at para. 11):

11 . . . Where the facts on which a counterclaim is based are in large part the same facts and circumstances raised by the plaintiff’s claim, this militates against an order for security for costs.

32The plaintiffs’ claim includes pleadings that Spektor and Bharti continued to communicate until 2019, which included the period that Spektor used Bharti’s Amex card, so the plaintiffs submit that there are facts in common to both the claim and the counterclaim. Therefore, the existence of the counterclaim should reduce the quantum of security that should be posted.

33Counsel submits that the factors reviewed above, and particularly the existence of the shares and the counterclaim, should reduce any security ordered to an amount closer to $100,000 than to the $318,000 sought by the defendants.

Reply submissions of the defendants

34Defendants’ counsel submits that the plaintiffs’ submissions with respect to taking a holistic view of the circumstances should not distract from the point of security for costs, which is to protect the defendants’ ability to recover costs if awarded.

35With respect to the exigibility of the shares, counsel reiterates that the issue remains as to whether the shares will be sufficient security at a point when an award of costs may be made against the plaintiffs.

36With respect to the email from Fred Leigh of Forbes relating to the liquidity of the BKI shares, defendants’ counsel reiterates his submission with respect to the recent trading volume of those shares, which would affect both their liquidity and their price. Also, the fact that BKI is part of Forbes’ portfolio and that the president of BKI is on the Board of Directors of Forbes does not affect whether Mr. Spektor’s BKI shares would constitute sufficient assets to negate or reduce the requirement for security.

37Defendants’ counsel refers to the second paragraph of the Black Iron General Project Update from September, 2022, which states that Black Iron is engaged in discussions with Ukraine’s Ministry of Defence regarding use of the ore body for which Black Iron has the mining licence in Ukraine. The update refers to efforts being focussed on a contract to transfer the land “upon there being peace in Ukraine.”

38Regarding the forum selection clause, the defendants submit that the plaintiffs negotiated and agreed to the clause.

39With respect to the defendants’ means, it is the plaintiffs’ onus to show that an order for security for costs would be unjust. The plaintiffs have not demonstrated that an order that they post security would prevent them from proceeding with their action.

Analysis and decision

40The plaintiffs accept that the defendants have met their initial onus to demonstrate that the plaintiffs fall within sub-rules 56.01(1)(a) and (d). As stated above, the first issue is whether an order for security is unnecessary or should be for a reduced amount owing to Mr. Spektor’s ownership of 2.9 million BKI shares. I accept that the relationship between the defendant Forbes & Manhattan and BKI means that the defendants could get access to Mr. Spektor’s BKI shares if they are ever awarded costs in this action. However, that relationship has nothing to do with the liquidity or value of those shares at a point at which the plaintiffs might be required to pay costs. The real issue is whether those BKI shares have sufficient value and are sufficiently liquid to either negate the requirement for an order for security or to warrant a reduced amount of security.

41The war in Ukraine has already reduced the BKI share price from $.21 in December, 2021 to at most $.08 now, and BKI has informed their shareholders of the ongoing risks to their mining property. There can therefore be no assurance that the current share price is stable.

42Further, Mr. Spektor relies on his holding of 2.9 million BKI shares at a current price of approximately $.08 per share. First, this quantity of shares is more than 23 times the relatively recent average daily trading volume of 121,000 shares per day, so there is no assurance that 2.9 million shares could be sold all at once. Second, any attempt to sell 2.9 million shares would inevitably result in a further reduction in the share price with a corresponding reduction in any costs recoverable by the defendants. Mr. Spektor’s BKI shares are therefore neither sufficiently liquid nor of sufficiently secure value to enable the plaintiffs to avoid an order to post security for costs.

43As indicated above, the plaintiffs have not taken issue with the quantum of security based on the defendants’ partial indemnity costs of $318,000.00. However, the plaintiffs submit that the fact that they are required to litigate in Ontario by a forum selection clause in an Agreement drafted by the defendants is a factor that should reduce any security that they are required to post.

44If the plaintiffs did not want to be bound by a forum selection clause requiring them to litigate in Ontario, they could have refused to sign the Agreements. Also, the plaintiffs provide no evidence that, but for the forum selection clause, they would have chosen to litigate against the defendants somewhere else. Ontario is where the defendants carry on business and have assets. The circumstances underlying the action have no connection with either Greece or Austria, where Mr. Spektor resides, or with the British Virgin Islands where the plaintiff corporation Serafene is incorporated. The only other possible forum is Zimbabwe where the Marange project is located but there is no evidence that the plaintiffs own any assets there. I therefore do not accept the plaintiffs’ submission that the forum selection clause should impact any security for costs order.

45The plaintiffs also submit that because the defendants are wealthy, they would not be adversely affected by the court declining to order security. They rely on the statement in Providence Grace Inc., supra that “the impact of not making an order for security for costs on the defendant can be a legitimate factor to consider . . . when considering the overall justness of the order sought.”

46This passage in Providence Grace Inc. is based on the following from Yaiguaje v Chevron Corporation, supra (at para. 26 (c)):

26(c) In contrast to the position of the appellants[plaintiffs], Chevron Corporation and Chevron Canada have annual gross revenues in the billions of dollars. It is difficult to believe that either of these two corporations, which form part of a global conglomerate with approximately 1,500 subsidiaries, require protection for cost awards that amount or could amount to a miniscule fraction of their annual revenues.

47The plaintiffs in Yaiguaje were a group of indigenous Ecuadorian villagers who sued in Ontario to enforce a $9.5 Billion(U.S.) judgment obtained in Ecuador for damages for environmental pollution. The above passage is from the Ontario Court of Appeal’s decision overturning a motion judge’s order that the Ecuadorian plaintiffs post security for costs of the Ontario action including appeals.

48The Court of Appeal relieved the Yaiguaje plaintiffs from having to post security which would have been to the benefit of a very large oil company. In this case, both Mr. Spektor and Mr. Bharti are affluent, sophisticated business people; their circumstances are not remotely comparable to the relative positions of the parties in Yaiguaje. The ruling in Yaiguaje is not a basis to deprive the defendants in this case of security for costs in a commercial action in which the parties are of relatively equal wealth and bargaining power.

49To summarize, as stated in Morton, supra, the exercise of the court’s discretion on a security for costs motion requires the balancing of “the right of successful defendants in an action to the uneventful payment of costs; and, the right of plaintiffs to their day in court for the trial of a meritorious action.” Mr. Spektor is ordinarily resident outside Ontario (R. 56.01(1)(a)), and there is good reason to believe that the corporate plaintiff Serafene has insufficient assets in Ontario to pay the costs of the defendants (R. 56.01(1)(d)). For the reasons set out above, Mr. Spektor’s BKI shares are not sufficiently liquid or of sufficiently stable value to negate the need for security, and the forum selection clause in the parties’ Agreements and the defendants’ affluence do not make an order for security unjust.

50The main function of an order requiring a non-resident plaintiff with no assets in Ontario to post security for costs is to level the playing field between the parties with respect to their respective costs exposure in the event that they are unsuccessful in the litigation. There is no evidence that the plaintiffs Mr. Spektor and Serafene do not have the resources to post security, so an order that they post security would not compromise their access to justice. The defendants are therefore entitled to an order that the plaintiffs post security to protect their right to “the uneventful payment of costs.”

51The defendants seek security for partial indemnity costs of $318,000.00 based on partial indemnity fees plus HST of $267,518.00 and an estimated $50,000.00 for disbursements. The plaintiffs submit that the defendants have failed to discount their costs to take into account that some of those costs would be incurred to advance their counterclaim.

52I accept that the security ordered should not include the costs of advancing the counterclaim. However, the issues on the counterclaim are narrow and will be much less time-consuming than the issues in the main action. Further, the plaintiffs’ claim in the main action is for $8.5 Million(U.S.) and the counterclaim is for $378,078.88.

53A reasonable discount of the security requested would be 10% of the partial indemnity fees plus HST of $267,518.00, or approximately $27,000.00, which would reduce the fees to $240,000.00. The estimated disbursements of $50,000.00 are not particularized and are simply described as “Anticipated Disbursements up to and including trial: transcriptionist, transcripts, filing fees, experts, etc..” Typically the largest disbursements in an action are for experts but there is no evidence as to what experts the defendants might require or how much their reports and testimony might cost. At this point, I will make an allowance of $30,000.00 for disbursements.

54For the above reasons, the plaintiffs shall post security for costs with the Accountant of the Superior Court of Justice in the total amount of $270,000.00 based on $240,000.00 for partial indemnity fees plus HST and $30,000.00 for disbursements. The total security of $270,000.00 shall be posted in the following installments:

1. For costs incurred to date including preliminary matters, pleadings, affidavits of documents, productions and mediation: $32,000.00 payable within 60 days of the release of these Reasons;
2. For examinations for discovery: $28,000.00 payable 30 days before the first date scheduled for examinations for discovery;
3. For the pre-trial conference: $30,000.00 ($10,000.00 fees + $20,000.00 disbursements) payable 60 days before the pre-trial conference;
4. For preparation for and attendance at trial: $180,000.00 ($170,000.00 fees + $10,000.00 disbursements) payable 90 days before the date scheduled for the commencement of trial.

Costs

55At the hearing, the defendants filed a costs outline calculating partial indemnity costs of the motion of approximately $36,000.00. The plaintiffs unsuccessfully argued that Mr. Spektor’s Black Iron shares were sufficient assets and that security for costs was not necessary, and never offered to post any security. The defendants submit that they were justified in pursuing the motion to a hearing.

56The plaintiffs submit that a figure of $36,000 is excessive, particularly given that there was divided success, because the defendants reduced their demand with respect to security from $400,000.00 to $318,000.00. They submit that divided success should warrant no order of costs or alternatively, that any costs payable should not exceed $10,000.00.

57The fundamental principle with respect to awards of costs is set out by the Court of Appeal in Boucher v. Public Accountants Council (2004), 2004 ONCA 14579, 71 O.R. (3d) 291 at paragraph 26:

. . . The express language of rule 57.01(3) makes it clear that the fixing of costs is not simply a mechanical exercise. In particular, the rule makes clear that the fixing of costs does not begin and end with a calculation of hours times rates. The introduction of a costs grid was not meant to produce that result, but rather to signal that this is one factor in the assessment process, together with the other factors in rule 57.01. Overall, as this court has said, the objective is to fix an amount that is fair and reasonable for the unsuccessful party to pay in the particular proceeding, rather than an amount fixed by the actual costs incurred by the successful litigant. [emphasis added]

58I accept the plaintiffs’ submission that the security of $400,000 originally sought by the defendants was unreasonably high. However, any impact of the defendants’ reduction in the security sought to $318,000.00 is negated by the fact that even following the reduction, the plaintiffs still never offered to post any security but continued to make the arguments set out above. I did accept the plaintiffs’ submission that any security should be reduced to take into account the time required to prosecute the counterclaim. This outcome alone would translate into only a modest reduction in the defendants’ costs.

59However, I am also of the view that the defendants’ partial indemnity fees of $29,655.00 (not including counsel fee on the motion), used to calculate the total figure for partial indemnity costs, is excessive for a two hour motion for which the case law is well-established and there were no cross-examinations. How can the defendants’ fees for a two hour motion be more than their own anticipated fees of $28,785.00 for examinations for discovery?

60Acknowledging the defendants’ almost complete success on the motion (save for the reduction in costs to take the counterclaim into account), and with a view to fixing “an amount that is fair and reasonable for the unsuccessful party to pay in the particular proceeding”, I fix the defendants’ recoverable costs of this motion at $20,643.73 based on $20,000.00 for fees and HST and $643.73 for disbursements. The plaintiffs shall pay these costs within 60 days.