Court File and Parties

COURT FILE NO.: CV-22-00687209-0000 DATE: 20230621 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

LI YANG (CANADA) HOLDINGS CO. LTD. and DANIEL EXECUTIVE (CANADA) HOLDINGS CORP. Plaintiffs – and – LYSR MANAGEMENT LTD., 2708042 ONTARIO INC., RINA SHINCHI, YANGGUANG LIN, ZI MU LI, RENXIANGYU ZHANG, LOCATION WAY INC., WEI ZHENG, JOHN DOE, JANE DOE and OTHER PERSONS UNKNOWN WHO HAVE CONSPIRED WITH THE NAMED DEFENDANTS Defendants

Counsel: Ford Wong, for the Plaintiffs Darryl Singer and Nadia Condotta for the Defendants, Wei Zheng and Location Way Inc. William Murray, for the Defendant, Lin Samuel Eng, for the Defendants, LYSR Management Ltd., 2708042 Ontario Inc., 2786584 Ontario Inc., Rina Shinchi and Yangguang Lin

HEARD: May 1, 2023

papageorgiou j.

Costs Endorsement

[1] By reasons dated May 1, 2023, I granted a Mareva injunction as against the Defendants Yuangguang Lin (“Lin”), Rina Shinchi (“Shinchi”), 2708042 Ontario Inc. (“270Ont.”) and 2786584 Ontario Inc. (“278Ont.”), LYSR Management Ltd. (“LYSR”), Wei Zheng (“Zheng”) and Location Way Inc. (“Location Way”).

[2] The definitions used in this costs endorsement are the same as those used in that decision. There were two groups of Defendants against whom the Order was made defined as the Lin Defendants and the Zheng Defendants.

The Court’s Discretion

[3] Pursuant to s. 131(1) of the Courts of Justice Act, R.S.O. 1990, c. C.43, costs are in the discretion of the court. Rule 57 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, sets out the factors which courts should have regard to when awarding costs. The overall 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”: Zesta Engineering Ltd. v. Cloutier, at para. 4; Boucher v. Public Accountants for the Province of Ontario (2004), 71 O.R. (3d) 291 (Ont. C.A.), at para. 26; Davies v. Clarington (Municipality) et al., 2009 ONCA 722, 100 O.R. (3d) 66, at para. 52; G.C. v. Ontario (Attorney General), 2014 ONSC 1191.

[4] Judges have a duty to fix or assess costs in reasonable amounts and have a duty to make sure that the hours spent are reasonably justified: Pagnotta v. Brown, [2002] O.J. No. 3033 (Ont. S.C.), at para. 25.

[5] Further, there must be practical and reasonable limits to the amounts awarded for costs and those amounts should bear some reasonable connection to the amount that should reasonably have been contemplated: Toronto (City) v. First Ontario Realty Corp. (2002), 59 O.R. (3d) 568 (Ont. S.C.), at para. 26; Gratton-Masuy Environmental Technologies Inc. v. Building Materials Evaluation Commission, [2003] O.J. No. 1658 (Ont. S.C.).

[6] I will address the criteria in r. 57.01(1) first and then the issue of whether substantial indemnity costs should be awarded.

Quantum Sought

[7] The Plaintiffs seek $163,479.38 on a full indemnity basis, $123,651.85 on a substantial indemnity basis or $82,208.20 on a partial indemnity basis.

The Successful Party

[8] The Plaintiffs were entirely successful and are presumptively entitled to their costs.

Complexity and Importance

[9] The matter was complex. It involved complex factual issues regarding multiple financial transactions and multiple interrelated parties as well as complex legal issues. The Plaintiffs’ produced a 7-volume record which established a compelling case that the Defendants had engaged in fraudulent transactions.

[10] Although the matter was scheduled for a two hour hearing, the facts were so complex that it required a full day hearing and also supplementary submissions.

Conduct Tending to Lengthen or Complicate the Motion

[11] I found that Lin had filed a false affidavit dated November 25, 2022 alleging that one of the Plaintiffs, Li Yang, did not have authority to commence the proceeding because the Defendant Shinchi was a Director and sole Shareholder and had not authorized this proceeding. This allegation was made after the triage judge raised an issue as to whether the action was properly constituted because Shinchi appeared to be a Director of the Plaintiff Li Yang.

[12] This caused the Plaintiffs to incur additional time retrieving evidence required to address the false assertions, which evidence showed that Shinchi was no longer a Director or Shareholder. I found that the Lin Defendants filed this false affidavit evidence in the hopes that it would result in the termination of this motion. This was dishonest.

[13] The Lin Defendants assert that the Plaintiffs should be denied their costs for this affidavit on the basis that all that was required was documents showing that Shinchi had transferred her shares. He also argues that the Plaintiffs were precluded from filing this affidavit because it is dated November 29, 2023 and the timetable indicated that affidavit evidence had to be filed by November 25, 2023. I am not persuaded by this argument.

[14] The record shows that the Plaintiffs did not realize until a zoom meeting with the Defendants on November 24, 2022 that the Lin Defendants would be providing a false affidavit regarding this issue and as such, sworn affidavit evidence was required. In the end, once the Plaintiffs’ affidavit evidence was received, the Lin Defendants did not even seek to challenge it. I add that there is nothing in Centa J.’s endorsement of November 15, 2022 which states that the Plaintiffs were precluded from serving any additional affidavits. It simply wasn’t contemplated that there would be this need to address this false evidence.

[15] The Lin Defendants also complain that the Plaintiffs did not conduct cross examinations by November 28, 2022 and as such the motion had to be adjourned and that this should also be taken into in the costs order. In this respect, once the Lin Defendants filed this false evidence, it was necessary for the Plaintiffs to provide a fulsome response and there simply was insufficient time to do so and conduct cross examinations as well. The Plaintiffs prepared a factum setting out these facts and seeking to reschedule the motion and to amend the timetable established by Centa J., which was granted.

[16] The motion was then adjourned to February 1, 2023 to permit the Plaintiffs to conduct cross examinations. Because the Plaintiffs failed to confirm the motion, the matter was struck from the list and had to be rescheduled. I agree that this caused some additional costs and I will be taking this into account.

[17] Ultimately, the only Defendant who filed any affidavit evidence on behalf of the Lin Defendants. The Zheng Defendants did not file any evidence.

[18] I found that Lin’s evidence corroborated the Plaintiffs’ evidence as to the fraudulent scheme perpetrated by the Defendants.

[19] Given that the Defendants provided no evidence which contradicted the Plaintiffs’, their defence to the motion was devoid of merit before me and thus caused costs to unnecessarily be expended.

Reasonable Foreseeability of a Significant Costs Order

[20] It was reasonably foreseeable to the Defendants that this matter would result in a significant costs order, in favour of whomever was successful.

[21] Centa J. warned in his scheduling endorsement of November 15, 2022 that this matter could result in a “very large costs order.” Even before this matter was argued, the Wei Defendants (as defined in my reasons) submitted a costs request to the Plaintiffs in the amount of $75,000.

Time Spent and Rates Charged

[22] The Lin Defendants question particulars of the Plaintiffs’ docketed time, in particular:

Issue	Time claimed	Lin Defendant’s position
Emails and other correspondence between the Plaintiffs and their counsel and also to Defendants	65 hours	10 hours
Preparation of Affidavits	150 hours	50 hours
Review responding materials	35 hours	10 hours
Attend cross examination, review transcripts and undertakings	40 hours	25 hours
Research and factums	74	20
Written submissions	44.2	16

[23] The Lin Defendants have provided their own dockets which show that their counsel spent 100 hours and that the total billable time was $50,400. I note here that after the Mareva injunction was made the Lin Defendants disclosed assets and bank account information which revealed that they had no money. I query how they are able to afford a lawyer who has already charged them this amount.

[24] In any event, in my view, the materials which were required to be prepared by the Plaintiffs were complex because of the nature of the case which involved the allegation that fraud had been perpetrated through a series of complex business transactions, and multiple interrelated parties. There was significant work which was required to be done, and the job which the Lin Defendants had was simply not the same since all they did in their materials was essentially corroborate the case that the Plaintiffs had put together. The Plaintiffs’ affidavit material comprised over 600 pages compared to the Defendant Lin’s materials which were under 200 pages.

[25] I also disagree that the Plaintiffs should be disentitled to the costs of their first factum which related to the need for the adjournment because of Lin’s false affidavit or that the time spent by the Plaintiffs communicating with their counsel or the Defendants was unnecessary. I accept that the issues would have required significant communications by the Plaintiffs with their counsel. The fact that the Lin Defendants chose not to spend as much time informing their counsel does not mean that the Plaintiffs’ time was not reasonable. Again, once the case was put together by the Plaintiffs, all the Lin Defendants did was corroborate most of it. This would not have required as much communication.

[26] With respect to disbursements, the Lin Defendants assert that there is insufficient back up or explanation in respect of the disbursements paid to Paquette & Associates and Nulis Law Clerk Services Inc. I agree with this submission and will not be awarding these disbursements.

[27] They also argue that the disbursements related to corporate and other searches will be useful for the action as it proceeds and therefore cannot be awarded at this stage. I disagree; these searches were required for the motion. The fact that they will also be useful in the proceeding is beside the point.

[28] The Zheng Defendants did not provide any itemized concerns regarding the Plaintiffs’ costs claim, but also point out that the February motion date had to be adjourned because of the Plaintiffs’ failure to confirm the motion. They also assert that they should pay less in costs than the Lin Defendants because the Plaintiffs did not have to review any materials from the Zheng Defendants since they filed none. That does not mean that the Plaintiffs’ did not incur significant costs in proving their motion as it pertained to the Zheng Defendants although I agree that this should result in some lower amount to be paid by the Zheng Defendants.

[29] The Zheng Defendants primarily challenge the costs claimed as not being within their reasonable expectations or being fair and reasonable. They did not provide their own Bill of Costs for comparative purposes but nevertheless assert that costs should be limited to $20,000 to be shared among all the Defendants. I point out again that the Zheng Defendants sought costs in the amount of $75,000 from the Plaintiffs in April 2023, before the motion had even been argued.

[30] I add that after the Mareva injunction was made the Zheng Defendants disclosed that they had closed their prior bank accounts in or around February 2023 around the time when the Mareva injunction was scheduled to proceed, and took the position that they need not disclose any funds which had been in those accounts, only the contents of the new accounts they opened. I find this conduct highly suspicious and I did order disclosure of the documents related to the deposits in such prior accounts.

[31] Neither the Lin Defendants nor the Wei Defendants challenge the rates charged by the Plaintiffs’ counsel which I find fair and reasonable.

Substantial Indemnity Costs

[32] The Court has the discretion to award substantial indemnity costs, but such costs are “rare and exceptional” and only warranted where there has been reprehensible, scandalous or outrageous conduct on the part of a party: Duca Financial Services Credit Union Ltd. v. Bozzo, 2010 ONSC 4601 at para 5 and Foulis v. Robinson and most recently Mars Canada above at para 43. One of the purposes of a higher costs order is to discourage inappropriate behaviour by litigants in the conduct of proceedings and it is appropriate to award costs on a higher scale in circumstances where a defence is wholly devoid of merit and/or unnecessarily runs up the costs of litigation: Net Connect Installation Inc. v. Mobile Zone Inc., 2017 ONCA 766.

[33] In this case substantial indemnity costs are appropriate as against the Lin Defendants because of their false affidavit. This conduct was scandalous and reprehensible. I add that their defence was wholly devoid of merit. So was the Zheng Defendants’ since they did not provide any defence and yet ran up the cost of the motion.

Conclusion

[34] Taking into account all of the arguments, I am awarding the Plaintiffs $50,000 against the Wei Defendants on a substantial basis and $60,000 against the Lin Defendants on a substantial indemnity basis. This takes into account some of their arguments as to why costs should be reduced and represents a $13,000 reduction from the substantial indemnity costs which the Plaintiffs have claimed.

[35] I am awarding disbursements in the amount of $1,730 to be shared equally by the Lin Defendants and the Zheng Defendants.

[36] These costs shall be paid within 30 days.

[37] In my view, these costs are fair and reasonable and within the reasonable contemplation of these Defendants.

June 21, 2023 Justice Papageorgiou