Court File and Parties

COURT FILE NO.: FS-22-29253 DATE: 2023-09-18 ONTARIO SUPERIOR COURT OF JUSTICE

RE: Hugh Kuang, Applicant (Moving Party) AND: Diana Young, Shawn Yeung, Theodore Wang, Gracia Wall, 2174112 Ontario Inc., 2394049 Ontario Inc., 2690212 Ontario Inc., 2305969 Ontario Inc., Diana Young Professional Corporation, Respondents (Responding Parties)

BEFORE: Kristjanson J.

COUNSEL: Christopher Mamo, Harold Niman, Ken Dekker, Karen Law, Shaun Laubman, Counsel for the Applicant Patrick Summers, counsel for Shawn Yeung, Theodore Wang, Gracia Wall Ted Evangelidis, Counsel for 2174112 Ontario Inc., 2394049 Ontario Inc., and 2690212 Ontario Inc. Olena Brusentsova, Counsel for 2305969 Ontario Inc. and Diana Young Professional Corporation Diana Young, Self Represented

HEARD: In writing

Endorsement

Kristjanson, J

[1] These are the costs of a long motion dealing with the interpretation of the term “usual and ordinary course of business” used in an interim preservation order: Kuang v Young, 2023 ONSC 2429. The applicant seeks partial recovery fees of $104,965.92 including HST. The partial recovery costs of the corporate respondents are $94,561.76 including HST, and $133,329.11 on a substantial recovery basis. Despite the similar costs incurred, the respondents submit the applicant should be awarded costs of $25,000.00, payable in the cause. I award costs of $98,000.00, inclusive, payable in 30 days, an amount I find to be reasonable and proportionate, in context.

[2] Costs orders are in the discretion of the court pursuant to section 131(1) of the Courts of Justice Act, R.S.O. 1990, c. C.43. The Court of Appeal in Mattina v. Mattina, 2018 ONCA 867 at para. 10 held that modern family cost rules are designed for the fundamental purposes of: (1) partially indemnifying successful litigants; (2) encouraging settlement, (3) discouraging and sanctioning inappropriate behaviour by litigants, and (4) ensuring, in accordance with Rule 2(2), that cases are dealt with justly. Reasonableness and proportionality are the touchstone considerations to be applied in fixing costs. I also consider the factors set out in Family Law Rule 24(12), including the behaviour of each party, time spent, and legal fees, to evaluate reasonableness and proportionality considering the importance and complexity of the issues.

Proportionality: Complexity of Issues, Similarity of Costs

[3] The costs determination must reflect proportionality to the issues argued. There should be a correlation between legal fees incurred (for which reimbursement is sought) and the importance or monetary value of the issues at stake.

[4] All parties believed this to be a critical motion. I presume that’s why they each spent more than $100,000.00 on the motion. While the corporate respondents claim partial recovery costs of $94,561, their substantial recovery costs were $133,329.11. As a practical matter, the interpretation decision set a blueprint for how the corporate respondents would be allowed to operate pending trial. This explains, in part, the very high costs incurred by the parties.

[5] The corporations are worth hundreds of millions of dollars, and the issues were complex, given the corporate structures and the intercorporate money transfers. But more than this, I found that “in the guise of an interpretation motion, the respondents seek to change the terms of the preservation order.” I also found that the activities the respondents sought to define as the ordinary course of business were “vague, and so broad, as to permit wholesale liquidation of all corporate assets.” I found the respondents had delayed the motion, and I expressed significant concerns about the compliance by the respondents with court orders.

[6] The respondents gave the court very little assistance in dealing with issues of time and cost, apart from suggesting that costs of $25,000 should be awarded, notwithstanding their own significant legal costs. They did not point to any fees that should not be included, nor did they point to any hourly rates that were excessive. They did criticize the use by the applicant of seven legal professionals. They suggest that only two legal professionals were required. On this, I note that the respondent corporations have six different timekeepers on their file. More compelling is not the number of legal professionals, but the similarity in costs incurred.

[7] High-stakes litigation brings with it high costs consequences. Neither party can be surprised at the costs since their costs are similar. And the similarity in fees often demonstrates whether the fees sought are contextually reasonable and proportionate, and within the expectation of the opposing parties.

Late Delivery of Respondent Affidavits, Delay, Failure to Comply with Court Order

[8] I also consider the reasonableness of behaviour of the parties, and the extent to which this contributed to costs. From the Form 14C motion confirmations, both sides relied on voluminous affidavit evidence – for Mr. Kuang, 1408 pages of affidavit evidence, and for the respondents, 1561 pages of affidavit evidence.

[9] The delay caused by the respondents by the late delivery of Ms. Young’s fourth affidavit contrary to the court-ordered timetable clearly drove up costs. In November, Justice Diamond timetabled deadlines for all materials. The respondents late delivered Ms. Young’s 487-page affidavit, on the same day as the deadline for Mr. Kuang’s responding materials. This required an urgent case conference. Justice Diamond adjourned the motion date by more than two months “due to the respondents’ recent late service and filing of supplementary motion materials beyond the dates set out in the timetable.” Responding on a tight timeline always requires more legal work, usually more legal professionals, and sometimes (as here), additional steps like a case conference to secure additional time.

[10] The respondents also raised issues that had nothing to do with issues on the motion. For example, they sought the release of mortgage discharge funds paid into court in a Commercial List matter, without giving notice to the affected parties.

[11] All of this drove up Mr. Kuang’s costs. The respondents have adopted a scorched earth policy in this litigation. Costs are an inevitable reflection of ill-advised, scorched earth policies.

Not Divided Success

[12] The respondents rely on divided success to seek a reduction of Mr. Kuang’s costs. I do not agree. While the applicant did not get all the relief he sought, he was in my view overwhelmingly successful on the key issues on the motion, and is entitled to his costs.

[13] “Success” requires a contextual analysis, considering the importance of the issues that were litigated, and the amount of time and expense that were devoted to the issues which required adjudication: Arthur v. Arthur, 2019 ONSC 938 at para. 14; Slongo v. Slongo, 2017 ONCA 687 at para. 3. What was critical was to ensure that the respondent corporations did not strip the businesses of their assets, under the guise of the ordinary course of business. That was the focus of my decision, and taking a contextual approach, this was the crux of the motion. Mr. Kuang’s argument that he be reintegrated into the mortgage approval business (which occupied little time at the motion, or in the materials), was of far less significance. Some of the other issues raised were simply not addressed by the court, given the limited time.

No Offers to Settle

[14] None of the parties made an Offer to Settle. This is perhaps not surprising. This was an interpretation motion, not conducive to settlement. While not a strictly bifurcated issue, there was practically no middle ground. The interpretation sought by the respondents would have gutted the preservation order, as I made clear in my decision on the substantive issues. For this reason, I do not regard the lack of offers to settle as indicia of unreasonable behaviour by either side.

Joint and Several Liability

[15] The applicants ask that the respondents Diana Young, 239, 269 and 217 be jointly and severally liable for the costs. In my decision, I ordered that the Responding Moving Parties 217, 239 and 269, the only parties filing a factum and making oral submissions, were to file responding costs submissions. Ms. Young thus had no notice or ability to file responding costs submissions. In the future, notice should be given to Ms. Young if costs are to be sought against her, and given the opportunity to respond.

Conclusion

[16] I order the respondents to pay to the applicant costs of $98,000, inclusive of HST and disbursements, within 30 days. This is an amount which I find to be reasonable and proportional in the circumstances, for the reasons set out above.

Order

1. This Court orders that the Respondents 2174112 Ontario Inc., 2394049 Ontario Inc., and 2690212 Ontario Inc., are jointly and severally liable to pay to the Applicant Hugh Kuang costs of $98,000.00, inclusive of HST and disbursements, within 30 days.

“Justice Kristjanson”

Released: September 18, 2023