Court File and Parties
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: WAYNE SAFETY INC.
Plaintiff
AND:
DIANA GENDELMAN, NATAN GENDELMAN, 12069253 CANADA INC., BEST SHOWA INC., HEALTH IN MOTION REHABILITATION INC., HEALTH IN MOTION MEDIA INC., ENABLED KIDS INC., 13829103 CANADA INC., 2663788 ONTARIO LTD., 14807031 CANADA INC., DDNG CORPORATION, ALEXANDER DOBRINSKI, 2325683 ONTARIO INC., DIAGNOSTIC SERVICES NETWORK INC., KINOFILM CORP., ALEXANDER BELYAKOV, EVGENY SHABANOV, OLGA SHABANOVA, STANISLAV BELYAKOV, 10478822 CANADA INC., 1303184 ONTARIO LTD., JOHN DOE and JANE DOE and other persons unknown who have conspired with the named Defendants
BEFORE: Justice Dunphy
COUNSEL: Mark A. Ross, Eric Brosseau & Anna Madsen, for the Plaintiff
Michael Krygier-Baum & Michael Myers, for the Defendants Kinofilm Corp., Alexander Belyakov, Evgeny Shabanov, Olga Shabanova and Stanislov Belyakov
HEARD: In Writing
COST ENDORSEMENT
1Following a settlement of this multi-party matter at the first day of trial, there remained an unresolved issue of costs between the plaintiff and the Kinofilm defednants (Kinofilm Corp., Alexander Belyakov, Evgeny Shabanov, Olga Shabanova and Stanislov Belyakov). As the parties were unable to resolve the matter, they made written submissions on the matter and this is my order as to cosrts.
2This matter was scheduled for trial before me on June 8, 2026. Intensive efforts had been pured into into attempting to settle this matter in advance of trial in the form of numerous pre-trial conferences conducted by Kimmel J. Ultimately, those efforts paid off and the case was resolved at the trial opening as to all issues except this single costs issue.
3At the risk of over-simplification, the core of the litigation was an allegation that an employee of the plaintiff had been quietly defrauding the plaintiff of significant sums of money through a variety of means using her status as bookkeeper to do so. The proceeds of this scheme were allegedly invested by her in a variety of real estate projects along with other of the defendants not all of which investments performed as hoped. For want of a better term, I shall refer to Ms. Gendelman and her spouse as the “principal defendants” to distinguish them from the Kinofilm defendants or the other remaining defendants.
4The plaintiff included as defendants in their statement of claim various other partners or co-investors with the principal defendants in those real estate ventures including the Kinofilm defendants. Their claim against the partners and co-investors was advanced on various theories including unjust enrichment and fraudulent conveyance among others. With the tap turned off on new money being injected into the developments by the principal defendants, the real estate projects they were managing and investing in with the other defendants eventually came to a halt. The subject properties were eventually sold and certain proceeds paid into court awaiting the outcome of trial. Among other issues raised by the claim and counterclaim of the Kinofilm defendants was the relative priority of the investments of the latter relative to the constructive trust alleged by the plaintiffs over the properties into which their funds had been diverted. The counterclaim claimed punitive damages and lost profits among other theories advanced.
5At the opening of trial, and following a brief adjournment to finalize details, the trial settled and a variety of consent orders were issued directing where to pay the proceeds that had been paid into court among other details. The plaintiff had settled its claims with all of the parties except the Kinofilm defendants and confirmed that they did not intend to lead any evidence to establish their claim against them. I called upon the Kinofilm defendants to lead evidence in support of their counterclaim. After a brief adjournment, the Kinofilm defendants confirmed that they too would not call any witnesses or pursue their counterclaim. There remained only the matter of costs.
6I asked for a brief summary of the parties respective position on costs in the event they were unable to reach agreement. They did not reach agreement and neither managed anything like brevity in their costs submissions either.
7The plaintiff’s position on costs is simple. They concede that their claim made substantial claims for relief against the Kinofilm defendants which they ultimately decided not to pursue. They did not deliver a Notice of Discontinuance and never undertook to do so. The plaintiff urges that no costs order be made and that I consider the two claims (i.e. claim and counterclaim), in effect, as a “wash”. Each made substantive and significant claims against the other, neither succeeded in proving their claim both having in effect decided against doing so in light of, among other things, the outcome of the other settlements.
8The Kinofilm defendants’ position is that I ought to view this as a “de facto” discontinuance under R. 23 of the Rules of Civil Procedure and act as if a Notice of Discontinuance – never promised and never delivered – had been issued. Following this logic, they submit that they should have had an an automatic right to costs and a further thirty days to consider what to do with their counterclaim. They claim a net payment of $500,000 as substantial indemnity costs net of any costs they might owe in the counterclaim.
9I did not agree with that position at trial when I called upon the Kinofilm defendants to confirm if they would lead evidence and I do not agree with it now.
10A Notice of Discontinuance requires either consent or leave of the court after the close of pleadings. Neither was present at any time. Despite the Kinofilm defendants dogged insistence on viewing the whole settlement process through the lens of R. 23., there was no discontinuance by any party of any claim at any time prior to the opening of trial. I thought I had made that position perfectly plain in open court. Rule 23 simply has no application here at all.
11That is not to say that there are no costs consequences of failing to prove the claim at trial nor that these are substantively any different than those prevailing under R. 23. However, both parties are presumptively entitled to their costs as defendants in the claims against each that were abandoned at trial. Neither of them led any evidence when given the opportunity to do so. Both claims are effectively dismissed for want of evidence.
12The Kinofilm parties have NOT been successful on their counterclaim and wishing it were so does not make it so. They and multiple other parties including the plaintiff decided that overall, they were content with what the settlements entered into and ordered on consent at the trial opening accomplished. Neither of the two claimants left theoretically standing chose to pursue the remaining claims they had any further. They each made substantial claims that were not granted or pursued.
13In my view the only just solution to the question of costs is to make no order as to costs in either direction. There was nothing abusive about the plaintiff’s initial claim against the Kinofilm defendants that requires sanction. It was a narrowly framed claim that was pursued reasonably as far as can be determined from a review of the procedural history set forth by both parties in great detail in their submissions. There is at least a presumptive entitlement of the Kinofilm parties to costs of that proceeding – not the ENTIRE proceeding, but that particular aspect of it.
14The Kinofilm defendants, for their part were in the precisely symmetrical position as regards their own counterclaim. The Counterclaim was included in an omnibus statement of defence, crossclaim and counterclaim. Very significant claims were made by Kinofilm against all of the other parties including the plaintiff. I see no basis to sanction Kinofilm for having brought the counterclaim but I cannot simply dismiss it as a mere bagatelle without significance when it comes to assessing the costs consequences of both claims for which no evidence was led at trial. The plaintiff is just as presumptively entitled to its costs.
15The task of breaking down what costs incurred by each side apply to which of the numerous claims, cross-claims and counterclaims that were in the mix until matters resolved is not a simple one. However, taking a wholistic view of the matter, I view the costs claims as being broadly equivalent and I see no utility in trying to parse through an artificial attribution of x number of hours out of y hours spent on the entire claim to this or that sub-issue. Both parties made substantive material claims against the other and both elected for their own reasons not to pursue them further.
16The costs consequences of both are and ought in justice to be broadly the same.
17I may no order as to costs in favour of either party. While each is in theory entitled to an order against the other, I find that the only just outcome values each of those claims as being effectively equivalent and off-setting.
Justice Dunphy
Date: June 30, 2026