Court File and Parties

COURT FILE NO.: CV-20-00653410-00CL DATE: 20240214 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: ANSON ADVISORS INC., ANSON FUNDS MANAGEMENT LP, ANSON INVESTMENTS MASTER FUND LP and MOEZ KASSAM, Plaintiffs AND: ANDREW RUDENSKY, Defendant

BEFORE: Cavanagh J.

COUNSEL: Robert W. Staley, Douglas A. Fenton, and Dylan H. Yegendorf, for the Plaintiffs John Polyzogopoulos and Connor Allison, for the Defendant Andrew Rudensky

HEARD: February 14, 2024

Costs Endorsement

[1] On January 15, 2024, I released an endorsement following the hearing of a motion by the Defendant Andrew Rudensky in which I set aside the noting in default of Mr. Rudensky by the Plaintiffs and the default judgment they obtained against him.

[2] This is my endorsement with respect to costs.

[3] Mr. Rudensky seeks costs of this motion as the successful party.

[4] The Plaintiffs oppose an order in favour of Mr. Rudensky for costs. The Plaintiffs submit that the parties should bear their own costs of the motion for default judgment and the motion to set aside the default judgment. In the alternative, the Plaintiffs submit that costs awarded to Mr. Rudensky on the motion to set aside the default judgment and noting in default should be offset against the costs awarded to the Plaintiffs on the default judgment motion (reduced for other issues with respect to Mr. Rudensky’s prosecution of this motion), and made payable in the cause (in the amount of $20,000).

[5] The Plaintiffs submit that Mr. Rudensky (i) knew that the Plaintiffs intended to add him as a defendant, (ii) received draft copies of the proposed Amended Claim at email addresses he used as early as the fall of 2021, (iii) was aware that the Plaintiffs attempted to serve him at the address of his mother-in-law and his wife’s step-father, and (iv) received by email copies of the default judgment materials (including the filed Amended Claim). The Plaintiffs submit that Mr. Rudensky is not without fault and he bears responsibility for the default judgment. The Plaintiffs submit that in such circumstances, the most equitable and just outcome is to direct the parties to bear their own costs of the default judgment motion and the set aside motion.

[6] I see no need to address the Judgment dated October 4, 2023 in which, at para. 4 of the Judgment, Mr. Rudensky is ordered to pay the Plaintiffs costs of $45,000 within 30 days. I made an order setting aside this Judgment.

[7] Rule 16.01(1) of the Rules of Civil Procedure provides that an originating process shall be served personally as provided in rule 16.02 or by an alternative to personal service as provided in rule 16.03. The Plaintiffs failed to serve Mr. Rudensky with the Amended Claim in compliance with this requirement. Rule 16.04 provides that where it appears to the court that it is impractical for any reason to effect prompt service of an originating process, the court may make an order for substituted service or, where necessary in the interests of justice, may dispense with service. The Plaintiffs did not seek an order under rule 16.04.

[8] The Plaintiffs were responsible for ensuring that Mr. Rudensky was served with the Amended Claim in compliance with the mandatory procedures for service prescribed by the Rules of Civil Procedure. The Plaintiffs failed to serve Mr. Rudensky with the Amended Claim. Because Mr. Rudensky was not served, he was not in default for failing to deliver a statement of defence within the prescribed time. Mr. Rudensky is not at fault for the Plaintiffs’ actions in requiring the registrar to note him in default (when he was not in default) and obtaining default judgment after successfully opposing Mr. Rudensky’s request for an adjournment of the motion for default judgment to allow him to move to set aside the noting in default with supporting evidence.

[9] Although Mr. Rudensky was aware, before the Amended Claim was filed, that the Plaintiffs intended to add him as a defendant and make claims against him, and he had been sent a draft of the proposed Amended Claim, and the Plaintiffs assert that the evidence shows that he knew they were attempting to serve him with the Amended Claim, there is no evidence that he knew or should have known that he was regularly served with the Amended Claim with the result that the time for him to deliver a statement of defence had begun to run. This is because Mr. Rudensky was not served with the Amended Claim.

[10] There is no basis in the evidence for me to find that Mr. Rudensky is at fault or bears responsibility for the default judgment.

[11] In their submissions with respect to costs, the Plaintiffs repeat their submission (first made in opposition to Mr. Rudensky’s motion) that Mr. Rudensky is at fault for delay in moving to set aside the noting in default until after Justice Osborne’s decision was released. I do not accept this submission.

[12] The Plaintiffs could have consented to Mr. Rudensky’s request for an adjournment to allow him to move to set aside the noting in default on proper evidence. If this had been done, the issue of whether Mr. Rudensky was irregularly noted in default could have been adjudicated without significant delay. Instead, the Plaintiffs asked Justice Osborne to deny the request for an adjournment and proceed to hear their motion for default judgment on an unopposed basis. The Plaintiffs informed Justice Osborne that Mr. Rudensky would not be prejudiced by denial of his request for an adjournment because he is fully at liberty to move to set aside his noting in default and any default judgment obtained on their motion. After Mr. Rudensky’s request for an adjournment was denied, and after Justice Osborne’s decision on the default judgment motion was released, that is what Mr. Rudensky did.

[13] The passage of time between the hearing of the Plaintiffs’ motion for default judgment and the release of Justice Osborne’s decision, followed by Mr. Rudensky’s set aside motion brought promptly thereafter, is not Mr. Rudensky’s fault. [1]

[14] In their costs submissions, the Plaintiffs seem to say that their own failure to ensure compliance with Mr. Rudensky’s procedural right to be regularly served with the Amended Claim should be overlooked because, by asserting his right to defend the action, he will have led the parties on a “time-consuming detour”, to the Plaintiffs’ prejudice, if he is ultimately unsuccessful in defending the Plaintiffs’ action. The Plaintiffs submit that, for this reason, costs should be awarded in the cause.

[15] I do not accept this submission. Mr. Rudensky is entitled to defend the action, and he and the Plaintiffs have procedural avenues open to them to have the action against him adjudicated in a fair and timely way. If Mr. Rudensky is unsuccessful in defending the Plaintiffs’ action on its merits, it does not follow that, as the Plaintiffs contend, he should be deprived of costs of his successful set aside motion.

[16] I conclude that, as the successful party on the motion, Mr. Rudensky is entitled to costs.

[17] Mr. Rudensky seeks his partial indemnity costs of his motion to December 8, 2023 (the date of an offer to settle) and substantial indemnity costs thereafter (on the ground that the result of the motion was more favourable to him than the offer to settle).

[18] On December 8, 2023, Mr. Rudensky offered to pay the Plaintiffs their costs of the default judgment motion and the set aside motion (in the amount of $45,000, the amount Justice Osborne had awarded for the default judgment motion) in exchange for the Plaintiffs consenting to an order setting aside the default judgment and noting in default. This offer was open for acceptance for 3 days, until December 11, 2023. The terms of the offer provided that if the offer was accepted after December 11, 2023 and before December 14, 2023, Mr. Rudensky would pay costs of $10,000. If the offer was accepted after that and before December 18, 2023, the parties would bear their own costs. If the offer was accepted after December 18, 2023, the Plaintiffs would bear their own costs and would pay Mr. Rudensky 90% of his partial indemnity costs of the set aside motion (in an amount to be agreed upon or fixed by the court). This offer was left open until one minute after the commencement of argument of Mr. Rudensky’s motion.

[19] Rule 49.02(1) of the Rules of Civil Procedure provides that a party to a proceeding may serve on any other party an offer to settle any one or more of the claims in the proceeding on the terms specified in the offer to settle. Subrule 49.02(2) provides that subrule (1) and rules 49.03 to 49.14 also apply to motions, with necessary modifications.

[20] In Graf v. Peritathamby et al., 2018 ONSC 3228, the motion judge noted that Rule 49.10, as adapted for application to motions, provides that where an offer is made at least seven days before the commencement of the hearing, is not withdrawn and does not expire before the commencement of the hearing, and is not accepted by the other party, and the party making the offer obtains an order as favourable as, or more favourable than the terms of the offer to settle, he/she is entitled to partial indemnity cost to the date of the offer to settle, and substantial indemnity costs from that date, unless the court orders otherwise.

[21] Mr. Rudensky submits that he “clearly beat” his offer to settle and, therefore, the costs consequences under rule 49.10 should follow.

[22] The offer to settle that was open for acceptance at the commencement of the set aside motion does not provide for any payment to be made to the Plaintiffs. It provides that, if accepted, the Plaintiffs would be required to pay 90% of Mr. Rudensky’s partial indemnity costs of the set aside motion. My endorsement granting Mr. Rudensky’s set aside motion does not make any order as to the costs of this motion, which was to be addressed following written submissions. For this reason, I do not agree that Mr. Rudensky has shown that he obtained an order that is as favourable as or more favourable than his offer to settle.

[23] Because Mr. Rudensky has not shown that he obtained an order that is as favourable as or more favourable than the terms of his offer to settle (that was open for acceptance at the time of the commencement of the set aside motion), I do not agree that the costs consequences under rule 49.10 apply.

[24] Mr. Rudensky is entitled to costs on a partial indemnity scale.

[25] Mr. Rudensky’s Bill of Costs claims costs on a partial indemnity scale in the amount of $79,253.40 comprised of fees of $69,370.50, HST on fees of $9,018.17, and disbursements (including HST) of $864.73.

[26] The Plaintiffs submit that Mr. Rudensky’s counsel spent an excessive amount of time on this motion (223.9 hours compared to 140 hours spent by the Plaintiffs’ counsel). The Plaintiffs submit that time spent preparing for cross-examinations which were cancelled should not be allowed. They submit that Mr. Rudensky’s reply factum was unnecessary, not agreed upon, and not accurate in its recitation of some facts, and that costs for the reply factum should be disallowed.

[27] I do not agree that time spent preparing for cross-examinations that did not proceed should be disallowed. Mr. Rudensky’s counsel were entitled to decide whether to proceed with cross-examinations of witnesses after witnesses for Mr. Rudensky were cross-examined. His counsel did not act unreasonably in preparing to cross-examine. I do not agree that time spent on the reply factum should be disallowed.

[28] I have reviewed Mr. Rudensky’s Bill of Costs. I am satisfied that the time expended by his counsel was not excessive or disproportionate. The motion was very important to Mr. Rudensky because, if he was unsuccessful, the default judgment against him would stand. Mr. Rudensky’s lawyers needed to bring themselves up to speed on the procedural history of the action, something of which the lawyers for the Plaintiffs were knowledgeable. The fact that Mr. Rudensky’s lawyers expended more time on the motion than did the Plaintiffs’ lawyers is not unexpected.

[29] I note that in their Costs Outline for this motion, the Plaintiffs’ fees on a partial indemnity scale are $62,556. This amount is approximately $7,000 less than the fees claimed by Mr. Rudensky on a partial indemnity scale, although the partial indemnity hourly rates of counsel for Mr. Rudensky are lower than those of counsel for the Plaintiffs.

[30] In Boucher v. Public Accountants Council (Ontario), the Court of Appeal, at para. 26, held that, overall, the objective in fixing costs is to fix an amount that is fair and reasonable for the unsuccessful party to pay in the particular proceeding.

[31] When I consider the factors in rule 57.01(1) of the Rules of Civil Procedure and the principle in Boucher, I conclude that it would be fair, reasonable, and proportionate for the Plaintiffs to pay Mr. Rudensky his partial indemnity costs fixed in the amount claimed. This amount is within a range of costs that the Plaintiffs would have reasonably expected to pay if they were unsuccessful on this motion.

[32] I fix costs to be paid by the Plaintiffs to Mr. Rudensky in the amount of $79,253.40. These costs are to be paid within 30 days in accordance with rule 57.03(1) of the Rules. I am not satisfied that a different order would be more just.

Cavanagh J. Date: February 14, 2024

Footnote

[1] In my endorsement on Mr. Rudensky’s motion, at para. 50, I found that it was not unreasonable for Mr. Rudensky to wait for the decision on the default judgment motion before bringing his motion.