Court File and Parties

Court File No.: CV-24-00720464-0000 Date: 2025-08-07 Ontario Superior Court of Justice

Between:

Plaintiffs – and – Hao Chen, 1000709589 Ontario Inc., Mengqi Zhang, and Michael Wu

Defendants Masih Moazen-Safaei, Atlas Cloud Mining Inc., Farhad Eshfagh, 1000743019 Ontario Inc., Novin Commercial Exchange Inc., Mohammad Moazen Safaei, Sepideh Hamedinejad, Galaxy Trust Advanced International Inc., and Mohammadshahab Daeizadeh Kashan

Counsel: Benjamin Bathgate and Jessica Stansfield, for the Plaintiffs / Respondents, Hao Chen, 1000709589 Ontario Inc., Mengqi Zhang and Michael Wu

Irvin Schein and Amelia Phillips Robbins, for the Defendants, Masih Moazen-Safaei, Atlas Cloud Mining Inc., 1000743019 Ontario Inc., Novin Commercial Exchange Inc., Mohammad Moazen Safaei, Sepideh Hamedinejad, Galaxy Trust Advanced International Inc. and Mohammadshahab Daeizadeh Kashan

Howard Manis, for the Defendant, Farhad Eshfagh

Heard: In Writing

Costs Endorsement

JOHN CALLAGHAN J.

[1] The Plaintiffs seek their costs in relation to an ex parte Mareva, Norwich and preservation Order obtained against Masih Moazen-Safaei ("Masih"), 1000743019 Ontario Inc., Novin Commercial Exchange Inc. ("Novin"), Galaxy Trust Advanced International Inc. (the "Masih Defendants") and Farhad Eshfagh ("Farhad", collectively, the "Mareva Defendants"), and for responding to the Nov. 29, 2024 motion by the Mareva Defendants seeking to set aside the ex parte Order.

[2] Farhad, who was partially successful in that he succeeded in having the Mareva injunction lifted, also seeks costs.

[3] The Plaintiffs seek $280,323 in substantial indemnity costs or, alternatively, $191,641.22 in partial indemnity costs. Farhad seeks $160,505.48 in substantial indemnity costs or, alternatively, $107,003.66 in partial indemnity costs.

[4] The record was voluminous with cross-examinations of many of the parties and various undertakings.

[5] This litigation is far from over. This is clearly the first instalment in what will be a long and protracted fight. While the majority of interlocutory orders will stay in place until the matter is settled or further order of the court, there is no final determination as to whether the injunctions are warranted as there has yet to be final determination on the merits. There is a heated debate as to the facts. Any findings by me are subject to further determination by the trial judge who will have the benefit of viva voce evidence and a more fulsome record. While I have concluded that there is strong prima facie case of fraud, that is not a final determination.

[6] In the circumstance, I am of the view that it is premature to set any cost award. Justice Robert Sharpe writing extra-judicially in Injunctions and Specific Performance, 2nd ed. (looseleaf), at pp. 2-91, made the following observation:

Where the defendant successfully resists the plaintiff's motion for an interlocutory injunction, costs may be awarded forthwith. It has been held that where the motion was groundless and based upon unfounded allegations of fraud, deceit, and conspiracy, it may be appropriate for the court to fix the costs on a solicitor and client scale and require that they be paid forthwith. On the other hand, it would be unusual to award costs of an interlocutory injunction motion of the successful plaintiff prior to trial. As there has been no final determination of the rights of the parties, but rather an order to protect the plaintiff's position pending trial, the preferable course is to reserve the question of costs to the trial judge. (emphasis added)

[7] The above observation has been adopted by a number of courts: *Quizno's Canada Restaurant Corp. v. 1450987 Ontario Corp.*, at para. 9; *The Matter Corporation v. Southside Construction Management Limited*, 2025 ONSC 590, at para. 16; *Earhart v. Bath Institution (Warden)*, 2017 ONSC 6489, at para. 4; *Capital SCL v. Spotless Consultancy*, 2022 ONSC 4192, at para. 4; *Wang v. Kesarwani*, 2017 ONSC 6821, at para. 129. The observations of Justice Sharpe apply equally in this case. Indeed, in this case, the plaintiffs provided an undertaking in damages in the event that the interlocutory orders were not warranted, reflecting that any award at this stage may be found to be unwarranted based on a full trial record. A costs award at this stage when the matter is going to require a determination on the merits is not only premature but may ultimately be unwound.

[8] All cost awards are a matter of discretion for the court: s. 131 of the Courts of Justice Act. In this case, there was extensive examinations that would clearly suffice for the better part of what would constitute discovery. There was also extensive investigation and documentary discovery done by both sides. While there may be more to come, there is no doubt that what has taken place to date is of continuing value to the litigation. Indeed, much of what I am being asked to assess now will be of value going forward which underscores the appropriateness of waiting to determine which is the successful party and whether the factual foundation of the orders survives the trial process: *TDL Group Ltd. v. 1060284 Ontario Ltd.*, at para. 41; *Liu et al. v. Chai et al.*, 2025 ONSC 2747, at para. 7.

[9] Accordingly, I am of the view that costs should be in the cause. If the Plaintiffs are successful, they will be entitled to their costs to date. If the Defendants succeed the calculation of damages will not require an unwinding of a cost award in favour of the Plaintiffs. However, I recognize the possibility that other circumstances may intervene between now and the time of trial, or that the trial might be delayed for reasons which are not yet apparent, such that some other disposition of these costs might become more appropriate. To allow for those contingencies, I have added the provision making this disposition of the costs subject to any further order of the court.

[10] The same applies to Farhad's request. There is currently a debate as to which side is entitled to costs given that the injunctive relief remains for part of the order, but the Mareva has been lifted; both sides claim victory and costs. As distributive costs awards are rare (if not, non-existent; see *Oakville Storage and Forwarders Ltd. v. C.N.R.*, 5 O.R. (3d) 1), it would make more sense for a judge assessing the totality of the proceeding to assess the ultimate issue of costs. Accordingly, these costs should also be determined in the cause.

[11] I do think it appropriate for me to address one issue. It is suggested by the Plaintiffs that there ought to be an award of substantial indemnity costs for the conduct of the Defendants on this motion. Principally, they assert that the Defendants "cherry picked" evidence, "adducing voluminous yet selectively incomplete affidavit evidence, failing to answer reasonable questions on cross-examination and taking meritless positions."

[12] In my view, there was no conduct warranting substantial indemnity costs as against the Defendants. In *Young v. Young*, [1993] 4 S.C.R. 3, at p. 134, McLachlin J. (as she then was) held that substantial indemnity costs are "generally awarded only where there has been reprehensible, scandalous or outrageous conduct on the part of one of the parties". Abella J.A. (as she then was) in *McBride Metal Fabricating Corp. v. H. & W. Sales Co.*, 59 O.R. (3d) 97, at para. 39, set out when such award would be appropriate:

Apart from the operation of rule 49.10 (introduced to promote settlement offers), only conduct of a reprehensible nature has been held to give rise to an award of solicitor and client costs. In the cases in which they were awarded there were specific acts or a series of acts that clearly indicated an abuse of process, thus warranting costs as a form of chastisement.

[13] The underlying philosophy was described by Robins, J.A. in *Mortimer v. Cameron*, 17 O.R. (3d) 1, at p. 23, as being appropriate "in rare and exceptional cases to mark the court's disapproval of the conduct of a party in the litigation": citing Orkin, The Law of Costs, 2nd ed. (1993), pp. 2-91 to 2-92.

[14] The parties are engaged in vigorous and contentious litigation. While I have dismissed much of the Defendants' arguments, in my view, none warrant the chastisement of the court.

[15] This sentiment equally applies to the claim for substantial indemnity costs by Farhad. He submits that the Plaintiffs ought to pay substantial indemnity costs for persisting with the Mareva against him which I have now lifted. The conduct by the Plaintiffs in persisting was appropriate and not worthy of the court's chastisement. There was nothing reprehensible in the Plaintiffs awaiting this Court's determination to see if the Mareva should be lifted.

[16] Accordingly, there was no conduct before me that warrants substantial indemnity costs.

[17] With above comment, I am exercising my discretion to order partial indemnity costs in the cause at trial or, if appropriate by further order of the court.

Callaghan J.

Released: August 7, 2025