Court File and Parties

COURT FILE NO.: CV-21-00669891-0000 CV -21-00672956-0000 DATE: 20230906 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: MOHAMMAD ALI EKSIR, Applicant AND: MOHAMMAD HAMED YOUSUFZAY and 1898692 ONTARIO INC, Respondents

AND RE: MOHAMMAD HAMED YOUSUFZAY, Applicant AND: MOHAMMAD ALI EKSIR and 1898692 ONTARIO INC., Respondents

BEFORE: VERMETTE J.

COUNSEL: Rebecca Huang and Zina Rita, for Mohammad Ali Eksir Elliot Birnboim and Michael Crampton, for Mohammad Hamed Yousufzay

HEARD: In writing

Endorsement as to Costs

[1] On June 23, 2023, I released Reasons for Judgment dismissing the Application brought by Mohammad Ali Eksir and granting the Application brought by Mohammad Hamed Yousufzay (2023 ONSC 3793).

[2] The parties were not able to agree on costs and have delivered costs submissions.

1. Positions of the parties

a. Position of Mr. Yousufzay

[3] Mr. Yousufzay seeks full indemnity costs in the amount of $219,607.00. His bill of costs shows costs on a substantial indemnity basis in the amount of $175,686.00, and costs on a partial indemnity basis in the amount of $131,765.00.

[4] Mr. Yousufzay notes that he was successful in all his claims and in entirely defeating Mr. Eksir’s claims. He states that he is entitled to costs on a partial indemnity basis, and that there is strong reason to award substantial indemnity costs in this case.

[5] Mr. Yousufzay states that he diligently pursued settlement. He points out that he made multiple offers to settle that provided for Mr. Eksir to achieve his desired extrication on fair terms. Mr. Yousufzay argues that all of his offers were exceeded and that this can support an award of substantial indemnity costs in his favour, especially since this is accompanied by improper conduct – here, allegations of fraud. According to Mr. Yousufzay, Mr. Eksir’s rejection of his offers, which gave him the extrication at fair market value that he said he wanted, suggests bad faith.

[6] Mr. Yousufzay submits that he was successful in defeating the allegations of fraud asserted by Mr. Eksir, and that substantial indemnity costs are appropriately awarded where there are unproven allegations of fraud and dishonesty.

[7] Mr. Yousufzay argues that it was an abuse of process for Mr. Eksir to advance his Application as a separate claim from the prior action commenced by 1440825 Ontario Inc. (“Nipash”). He submits that Mr. Eksir’s Application was deliberate, tactical and for an ulterior purpose, and that a strong “corrective” costs order is appropriate given the ongoing litigation advanced by Mr. Eksir against Mr. Yousufzay.

[8] Mr. Yousufzay points out that his full indemnity costs are significantly less than Mr. Eksir’s partial indemnity costs. He states that the court must assess costs in a manner 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. He argues that the congruence between his actual costs and Mr. Eksir’s partial indemnity costs should be noted, particularly given the other considerations related to Mr. Eksir’s conduct. He submits that he did not have the resources to fund this litigation and the related litigation, that this was known by Mr. Eksir, and that anything other than a full indemnity costs award would leave him significantly out of pocket as he faces the continuing litigation from Mr. Eksir.

[9] Mr. Yousufzay argues that the quantum sought, $219,607.00, is less than the partial indemnity costs of Mr. Eksir and, therefore, constitutes a reasonable partial indemnity quantification within Mr. Eksir’s expectation.

b. Position of Mr. Eksir

[10] Mr. Eksir submits that it would be fair and equitable that this Court exercise its discretion not to award costs in this case. In the alternative, he submits that the fair and reasonable amount of costs in favour of Mr. Yousufzay would be the partial indemnity costs set out in Mr. Yousufzay’s bill of costs.

[11] Mr. Eksir states that contrary to Mr. Yousufzay’s submissions, he made multiple efforts to settle the disputes and was conciliatory in the offers.

[12] Mr. Eksir argues that there are good reasons in this case to deviate from the principle that costs generally follow the events because “Mr. Yousufzay had the money to repay the outstanding loans found by the Court and has failed to do the right thing.” Mr. Eksir states that by relying on his offers to buy Mr. Ekisr’s shares in 1898692 Ontario Inc. (“United Investment”), Mr. Yousufzay indicated to the Court that he has financial resources.

[13] Mr. Eksir’s position is that there is no basis for elevated costs in this case. He points out that outside of Rule 49.10, substantial indemnity costs should not be issued unless the court finds that the party has been guilty of egregious misconduct in the proceeding. Mr. Eksir submits that he did not engage in any egregious conduct in the proceeding. He also notes that Mr. Yousufzay made no submissions on how he could have met the test under Rule 49.10.

[14] Mr. Eksir states that his Notice of Application and affidavits alleged that Mr. Yousufzay engaged in unauthorized conduct, not fraudulent behaviour, with respect to United Investment.

[15] Mr. Eksir points out that in the Reasons for Judgment, this Court expressly refused to discuss Mr. Yousufzay’s arguments that Mr. Eksir engaged in an abuse of process. Mr. Eksir argues that Mr. Yousufzay’s submissions about his motivation for the litigation are novel and unfounded.

2. Discussion

a. Entitlement to costs

[16] Mr. Yousufzay was successful in both Applications. In my view, there are no factors in this case that militate against the general principle that costs should follow the event. Mr. Eksir’s argument that there should be no order as to costs because Mr. Yousufzay had the financial resources to repay his loans and did not do so is both unsupported and irrelevant. It is unsupported because I do not have evidence before me regarding Mr. Yousufzay’s financial situation and I do not know how he was planning to finance any purchase of Mr. Eksir’s shares, which may or may not have involved his personal resources. Mr. Eksir’s argument is also irrelevant because it is unrelated to, and does not further, the purposes of modern costs rules, which are to partially indemnify successful litigants for the cost of litigation, encourage settlement, and discourage and sanction inappropriate behaviour by litigants: see Serra v. Serra, 2009 ONCA 395 at para. 8.

[17] Thus, Mr. Yousufzay is entitled to costs.

b. Scale of costs

[18] As has been observed in many cases, costs on an elevated scale are exceptional and are reserved for those situations when a party has displayed reprehensible, scandalous or outrageous conduct: see Quickie Convenience Stores Corp. v. Parkland Fuel Corporation, 2021 ONCA 287 at para. 4. Such conduct includes making unsubstantiated allegations of fraud, misconduct or dishonesty: see Unisys Canada Inc. v. York Three Associates Inc. at paras. 15-16 (Ont. C.A.) and Reyes v. Esbin, 2016 ONSC 7755 at para. 72. This principle is not limited to allegations of fraud, contrary to Mr. Eksir’s submissions.

[19] In this case, Mr. Eksir made repeated allegations of dishonesty against Mr. Yousufzay. He attacked his integrity. I rejected these allegations and found that Mr. Eksir knew about the alleged dishonest transactions. I also made adverse findings of credibility against Mr. Eksir. In light of the allegations of dishonesty, my findings and the circumstances of this case, I conclude that an award of substantial indemnity costs is appropriate.

[20] However, I decline to grant full indemnity costs to Mr. Yousufzay. Full indemnity costs are reserved for rare and exceptional cases and, in my view, this case is not one of them. This case did not feature the type of grave misconduct that is usually found in cases where full indemnity costs are awarded. See Envoy Relocation Services Inc. v. Canada (Attorney General), 2013 ONSC 2622 at paras. 124-126. Further, the related litigation between Mr. Eksir and Mr. Yousufzay is not a proper factor for me to consider as I cannot assess the merits of the action commenced by Nipash.

[21] I also decline to order a higher amount of costs to Mr. Yousufzay on the basis that his full indemnity costs are lower than Mr. Eksir’s partial indemnity costs. The Court of Appeal has stated clearly that it is an error in principle to award partial indemnity costs that amount to substantial or full indemnity costs: see 790668 Ontario Inc. v. D’Andrea Management Inc., 2015 ONCA 557 at paras. 22-23. In my view, it would also constitute an error to award substantial indemnity costs that amount to full indemnity costs.

[22] Given my conclusion that the appropriate scale is substantial indemnity and this is not a case for full indemnity costs, I do not need to discuss the other arguments advanced by Mr. Yousufzay in support of an elevated scale of costs, including the offers to settle that were made. [1]

c. Quantum

[23] Mr. Eksir has not criticized the time spent by Mr. Yousufzay’s lawyers. Given that Mr. Eksir has not disclosed his own bill of costs to the Court, such criticism would have been “no more than an attack in the air”: see United States of America v. Yemec (2007), 85 O.R. (3d) 751 at para. 54 (Div. Ct.). I understand from Mr. Yousufzay’s submissions that Mr. Eksir’s bill of costs shows costs that are significantly higher than Mr. Yousufzay’s costs.

[24] I have reviewed Mr. Yousufzay’s bill of costs. I find that the rates of Mr. Yousufzay’s lawyers are reasonable. I also find that, in light of all the issues raised in the Applications, the time spent and the overall amount sought are generally reasonable. [2] However, I will apply a small reduction to the amount sought to take into account potential duplication of work between the timekeepers involved.

3. Conclusion

[25] Taking the foregoing into account, as well as the factors set out in Rule 57.01(1) of the Rules of Civil Procedure and the reasonable expectations of the parties, I find that the fair and reasonable award of costs in favour of Mr. Yousufzay is on a substantial indemnity basis in the all-inclusive amount of $170,000.00. In my view, this is an amount that Mr. Eksir should reasonably have expected to pay in the event that he was unsuccessful on the Applications.

[26] The costs are to be paid by Mr. Eksir to Mr. Yousufzay within 30 days.

Vermette J. Date: September 6, 2023

[1] With respect to Mr. Yousufzay’s allegation of abuse of process, I add that I did not rule on this issue in my Reasons for Judgment (see para. 153), and it is my view that a costs decision is not the appropriate forum to make findings on this point.

[2] Some information regarding rates and time spent is missing regarding Mr. Yousufzay’s former lawyer, but the overall amount claimed for that lawyer’s time appears reasonable.