Reasons on Costs

Court File No.: CV-12-110665-00
Date: 2025-06-17
Superior Court of Justice – Ontario

Re: Kenneth James, Plaintiff
And: HSBC Bank of Canada and HSBC Securities Canada Inc., Defendants

Before: J.R. McCarthy
Counsel:
Nicholas Businger, for the Plaintiff/Responding Party
Mark Evans and Ara Basmadjian, for the Defendants/Moving Parties
Heard: By written submissions

Introduction

These are reasons on costs.

Defendants’ Entitlement to Costs

[1] The Defendants were entirely successful in their motion for summary judgment and are presumptively entitled to costs of the motion and the underlying action.

[2] They seek costs on a substantial indemnity basis for the combined amount of $371,885.64, made up of $89,499.88 for the motion and $282,385.76 for the underlying action.

[3] The responding party does not dispute the moving party’s entitlement to costs but suggests the more modest sum of $62,648.44.

Basis for Awarding Costs

[4] Costs should generally be awarded on a partial indemnity basis absent the operation of an offer to settle or where the losing party has engaged in behaviour worthy of sanction: see Davies v Clarington (Municipality) et al., 2009 ONCA 722 at para. 28.

[5] I am not satisfied that there has been the kind of reprehensible or scandalous action on the part of the responding party which might alone warrant an award of costs on a substantial indemnity basis. The determination of the issues involved the application of the wording of certain account agreements and a consideration of a limited evidentiary record. The responding party is certainly guilty of misplaced and unfounded allegations against HSBC. This was regrettable, unwise, and unwarranted but I am not satisfied that they alone rose to the level required for a costs sanction.

[6] That said, the damages amount claimed was significant ($2 million) and included a punitive component. This was not a simple claim for return of funds or loss of opportunity damages for unlawfully freezing accounts. HSBC had to take the claim very seriously as it was facing the prospect of a large judgment.

[7] The issues were of great importance to HSBC: they included the bank’s rights to freeze customer accounts under challenging circumstances, which featured the involvement of third-party authorities and actors. The court found no genuine issue for trial and indeed concluded that HSBC acted entirely within its contractual right to freeze and restrict James’ accounts. Moreover, the court found nothing on the evidentiary record which even hinted at the kind of callous and high-handed conduct necessary to attract a punitive damages award. On the contrary, the court found the allegations of conspiracy against HSBC to be bald and woefully inadequate.

Length and Complexity of Litigation

[8] The litigation was lengthy (more than a decade) and involved events which took place as far back as 2012. The claim itself was issued in August 2012. The Plaintiff himself sought substantial indemnity scale costs in his statement of claim. As a lawyer of some experience, he must have appreciated that seeking large sums of money (including punitive damages) without some solid basis in fact, participating in protracted litigation spanning twelve years and unsuccessfully resisting a multi-issue summary judgment motion were likely to expose him to a significant costs award.

[9] James unnecessarily complicated the summary judgment motion by filing an affidavit which contradicted admissions he had made on key issues in his examination for discovery of May 31, 2018. Those admissions were: that he was bound by the terms of the account agreements; that those account agreements governed the operation of the accounts; and that he was not seeking any damages related to his practice of law.

Offer to Settle and Plaintiff’s Conduct

[10] Most importantly, HSBC served an offer to settle on January 29, 2018, prior to examinations for discovery. While the offer was a dismissal of the action without costs, James should have accepted it. He had had more than five years since the events in question to consider his position and gauge the evidence. He was given more than a month within which to consider the offer for a dismissal without costs. And he had more than six and a half years after March 9, 2018 to concede defeat and pay only partial indemnity costs. He declined to do so.

[11] No impartial or fair consideration of the evidentiary record then or now could have predicted even a remote chance of success for the Plaintiff’s claim. His refusal to accept that HSBC had not received any funds from his HSBC Hong Kong account was particularly unreasonable considering the crushing weight of evidence. The refusal of James to “throw in the towel” in the face of a hopeless case resulted in seven more years of litigation with the accompanying expense and the inevitable result of a dismissal of the action.

[12] HSBC has matched or bettered its offer in achieving the dismissal of the action without costs. Now HSBC finds itself significantly out of pocket as a result of defending the matter over seven years and incurring significant legal bills along the way (which appear to total $528,049.30). The principle of indemnity weighs in favour of a significant costs award. So too does the principle of proportionality given the amounts claimed, the nature of the damages sought and the summary dismissal of the action.

[13] I have concluded that the operation of the unaccepted offer, the Plaintiff’s unfounded claim for punitive damages, his unwillingness to concede that HSBC had no access to the HSBC Hong Kong account funds, his contradiction of discovery admissions, factored in alongside the principles of indemnity and proportionality, all combine to warrant damages on a substantial indemnity scale.

Assessment of Bill of Costs

[14] I have reviewed the Defendants’ bill of costs carefully. At first glance, it appears excessive. But if one considers that the activity on the file spanned more than 12 years, and involved pleadings, documentary and oral discovery, numerous appearances for case conferences, triage court, a status hearing and the summary judgment motion, it appears less so.

[15] That said, the amounts claimed for the underlying action remain excessive given that the matter did not proceed to trial and did not involve multiple parties. There also appears to be large blocks of time when little to nothing happened on the file (notably August 31, 2013 to January 31, 2016; January 31, 2020 to February 28, 2021; and November 2021 to April 30, 2022). Neither party offered much of an explanation why the matter lagged during these time periods.

[16] The costs amount suggested by the Plaintiff is far too low. It does not realistically account for the length of the litigation, the failure to accept the offer, the seriousness of the issues, the amount claimed and recovered, the conduct of James in denying previous admissions and failing to accept hard facts, and the costs actually incurred by the Defendants.

Costs Award

[17] I would award costs of the summary judgment motion on a substantial indemnity scale in the amount of $75,000 inclusive of fees, disbursements and HST.

[18] I would award costs of the underlying action on a substantial indemnity scale in the amount of $150,000 inclusive of fees, disbursements and HST.

[19] Those costs are fair and reasonable. They are proportional to the importance of the issues, the amounts claimed, and the result achieved.

[20] The total award of costs for the motion and underlying action combined is therefore fixed at $225,000 payable by the Plaintiff to the Defendants and payable forthwith.

[21] There shall be an order to go in accordance with these reasons.

J.R. McCarthy
Date: June 17, 2025