ONTARIO SUPERIOR COURT OF JUSTICE
SMALL CLAIMS COURT
Toronto
ORDER OF THE COURT
Claim No. SC-23-00002796-0000
B E T W E E N
NAGHMEH HARANDI; HASHEM SEYEDJALILI
and
Plaintiff(s)
ELHAM TAGHAVI SHOUSHTARI; MAHMOOD SHATERPOURKHIABAN; ELUX DESIGN GROUP INC.; FRANK LORETO
Defendants(s)
BEFORE: Deputy Judge Mirilyn Sharp
HELD BY: ☒ In person ☐ Videoconference ☐ Teleconference ☐ In writing ☐ Hybrid
DATE: March 16, 2026 at 10:00 AM EST
EVENT TYPE: Continuation of Trial Appealable – Expenses and Costs APPEARING:
Plaintiffs: NAGHMEH HARANDI AND HASHEM SEYEDJALILI
Representaive:
Defendant: FRANK LORETO
Respresentative: KRISTEN HOGG and DELILA BIKIC
ORDER OF THE COURT
- By Order dated March 23, 2026, I determined Mr. Loreto must reimburse the Plaintiffs for:
(a) their $35,000.00 deposit together with pre judgment interest from January 30, 2023 (the day the funds were deposited into his Trust Account) at the pre-judgment interest rate of 4% payable within 30 days after the release of this Endorsement; and
(b) any money the Plaintiffs spent on lawyers in their attempts to recover the $35,000.00 deposit up to a maximum of $15,000.00 together with pre judgment interest from February 7, 2023 (the day the funds were improperly released by Mr. Loreto) at the pre- judgment interest rate of 4% payable within 30 days after the release of this Endorsement.
- With respect to the expenses in (b), I held as follows:
The Plaintiffs’ lawyer, Ms. Rahi wrote numerous emails to Mr. Loreto after he had released the deposit, and in an effort to retrieve it. Only Mr. Loreto knew it was irretrievable. Ms. Rahi no doubt charged the Plaintiffs for her time. The Plaintiffs also retained litigation counsel (Weston Powell and Ocean Enbar) who assisted the Plaintiffs in seeking to recover their deposit money in this proceeding. Their names appear on the Plaintiffs’ Claim and/or on the various Orders arising from the earlier Settlement Conferences. The Plaintiffs are entitled to be reimbursed for any money they spent on lawyers in their attempts to recover the $35,000.00 deposit up to a maximum of $15,000.00. But for Mr. Loreto’s wilful blindness in the face of all the red flags that were readily apparent, the deposit would not have been released, and the Plaintiffs could have been made whole before incurring those costs.
I asked the Plaintiffs to file with the court by no later than 4 pm on March 26, 2026 a list of all expenses they incurred in their efforts to recover their $35,000.00 deposit, together with supporting documentation including any invoices from their lawyers for time and expenses incurred after February 7, 2023 (including invoices from Ms. Rahi, Weston Powell, and Ocean Enbar), and including any receipts for filing fees, service of the Plaintiffs’ Claim, or any other expense related to recovering their deposit. I indicated in my decision that it was my intention to award the Plaintiffs the full amount of these expenses up to a maximum of $15,000.00 provided the expenses are reasonable.
With respect to costs, I encouraged the parties to resolve the issue of costs keeping in mind Rule 19.05, Rule 19.06, and s. 29 of the Court of Justice Act (the “CJA”) and held that if the parties could not agree, costs submissions of no more than two pages were to be emailed to the trial co-ordinator with a copy to the other side as follows:
(a) the Plaintiffs were to provide costs submissions by March 26, 2026;
(b) the Defendant was to provide costs submissions by March 31, 2026.
The Plaintiffs’ List of Expenses
- In accordance with my Endorsement of March 23, 2026, the Plaintiffs provided the following list of expenses together with supporting documentation:
Item
Recipient
Description
Date
Amount
Cad
1
Rahi Legal Resolutions-Ms.
Florin Rahi
Legal fee
March 07,2023
$5,000.00
2
David Gray Law Office-
Hallmark Corporate Center
General
Consultation Service
March 10,2023
$395.50
3
Powell Law Professional Corporation
Strategy Session
April 08,2023
$282.50
4
Powell Law Professional
Corporation
Litigation legal fee
March 29, 2023
$3,390.00
5
Powell Law Professional Litigation legal fee
Corporation
June 06,2024
$1,130.00
6
Civic and Small Claim Filling Fee
Court
03,04,2025
$308.00
2
Andrew George (Krupe
Law)
Consultation
(Second Legal Opinion
March 09,2023
$400.00
The Defendant’s Submissions on the Expenses
- The Defendant provided a two page document titled “Costs Submissions” on March 31, 2026, however, those submissions appeared more like an “appeal” of my decision on the expenses, rather than “costs submissions,” with the Defendant submitting that:
The Defendant, Frank Loreto, respectfully submits that there is no basis for a reimbursement of expenses to the plaintiffs per paragraph 91(b) of the Order. The plaintiffs ought to be entitled to the maximum costs award of $7,500.00 (plus disbursements), being 15% of the $50,000 damages claimed, in accordance with the applicable statutory limits.
Respectfully, there is no basis for an additional head of damages for reimbursement of expenses per paragraph 91(b) of the Order in the Rules of Small Claims Court (the “Rules”) or the CJA. Further, the plaintiffs did not plead such expenses as damages.
The Defendant went on to submit that “the fees claimed by the plaintiffs are neither reasonable nor supported by the documentation provided, which does not establish that the fees claimed as “expenses” in seeking to recover their deposit are in fact connected to those efforts.”
The Defendant expressed his view on the expenses, notwithstanding that the March 23, 2026 Order sought the Defendant’s submissions on costs, not on the expenses. The Defendant made the following submissions with respect to the Plaintiff’s expenses:
(a) The plaintiffs claim the entirety of Felorin Rahi’s legal fees of $5,000 but they did not incur these fees during this litigation. Ms. Rahi’s legal fees pertain not to costs but to her retainer related to the asset purchase transaction, which predate and fall outside of litigation. Further, Mr. Rahi’s invoice refers to services rendered in connection with a mortgage transaction unrelated to the within litigation. It also contains no particulars about the work performed.
(b) The invoices by Powell Litigation dated March 24, 2023 and June 6, 2024 refer to a “strategy session” and “flat fee” without any particulars about the specific work performed, nor any indication it was in relation to the within litigation.
(c) The invoice from David Gray Law Office, dated March 10, 2023, refers to “general dispute related consultation” but does not include any particulars of the legal advice provided, whether it related to the within litigation, or whether it was paid.
(d) Lastly, the plaintiffs’ $400.00 payment to Andrew George (Krupe Law) to obtain a second opinion is wholly unsupported by any documentation. There is only a cut- off screenshot of an e-transfer. There are no particulars of the recipient or date of the e-transfer, the services rendered, or whether the opinion is related to this claim.
The Defendant’s Submissions on Costs
- With respect to costs, the Defendant submitted that:
Under section 29 of the Courts of Justice Act, an award for costs in Small Claims Court shall not exceed 15% of the amount claimed unless the court considers it necessary in the interest of justice to penalize a party for unreasonable behaviour in the proceeding.
Loreto did not engage in any unreasonable behaviour to justify a costs order in excess of 15% of the amount claimed in the action. He did not refuse any reasonable offers to settle, fail to attend court, nor cause any unreasonable delay.
Section 29 of the CJA does not confer a general compensatory or contempt power and does not authorize punitive damages. The costs awarded must logically relate to actual costs incurred as a result of unreasonable behaviour, which was not present in this matter. As such, only a costs order up to the 15 percent maximum of the amount claim is justified.
Any expenses incurred by the plaintiffs in the course of litigation constitute costs and should be considered as such pursuant to section 29 of the CJA.
- The Defendant concluded their submissions by saying that “costs of $3698.00, inclusive of disbursements, should be awarded to the plaintiffs” noting that this figure was made up of only one of the 3 Powell invoices (March 4, 2025 [sic] invoice for $3,390.00) plus disbursements of $308.00. I assume the date was a typographical error and that the Defendant agrees that the costs of the March 29, 2023 Powell invoice for $3,390.00 should be paid by Mr. Loreto.
Analysis of The Expenses/Costs Submitted by the Plaintiffs
- While it is somewhat unusual (some might say improper) for a party to make appeal arguments in a costs submission, because this is Small Claims Court, I am guided by Rule
1.03 which provides that “the primary objective of these rules is to enable the court to secure the just, most expeditious and least expensive determination of every proceeding on its merits in accordance with section 25 of the Courts of Justice Act.”
As such, I am prepared to consider the Defendant’s arguments concerning both the expenses submitted by the Plaintiffs and the costs to be awarded. I will then make a finding as to which of the Plaintiffs’ expenses are appropriate as “expenses” and which are appropriate as “costs”.
The first item is:
1
Rahi Legal Resolutions-Ms.
Florin Rahi
Legal fee
March 07,2023
$5,000.00
- Mr. Loreto argues that:
(a) The Plaintiffs did not incur these fees during this litigation. Ms. Rahi’s legal fees pertain not to costs but to her retainer related to the asset purchase transaction, which predate and fall outside of litigation;
(b) Mr. Rahi’s invoice refers to services rendered in connection with a mortgage
transaction unrelated to the within litigation; and
(c) It contains no particulars about the work performed.
In my March 23, 2026 Written Reasons I found that the Plaintiff, Ms. Harandi had given her evidence in a clear, consistent and forthright manner with documentary support at every turn. I went on to note that I accepted her evidence on all matters.
The same was not true for Mr. Loreto, who I found to have been dishonest in his dealings with the Plaintiffs, Ms. Rahi, and the Court.
I have no hesitation in concluding that the expenses put forward by the Plaintiffs in response to my request, satisfy the criteria of “expenses they incurred in their efforts to recover their
$35,000.00 deposit…including any invoices from their lawyers for time and expenses incurred after February 7, 2023”. These were not fees in relation to the asset purchase transaction. They were expenses incurred to recover their $35,000.00 deposit. Mr. Loreto’s fees for the transaction included an amount paid with the bounced cheque, the $3,000 he took from the Plaintiff’s deposit, and additional fees he said were outstanding. I conclude that the March 7, 2023 invoice covered only the additional amounts charged by Ms. Rahi after February 7, 2023.
With respect to Mr. Loreto’s assertion that Ms. Rahi’s invoice refers to services rendered in connection with a mortgage transaction unrelated to the within litigation, I find this is simply another attempt by Mr. Loreto to mislead the Court. The invoice clearly indicates that it is in respect of her file C22-2013 which is the exact same file number on the emails Ms. Rahi exchanged with Mr. Loreto in relation to this matter. I assume this was a typographical error.
I have no hesitation in concluding that Ms. Rahi’s invoice for $5,000.00 pertains to work she did on this matter after February 7, 2023 in an effort to retrieve the Plaintiffs’ deposit when, unbeknownst to the Plaintiffs or Ms. Rahi, Mr. Loreto had improperly released the Plaintiffs’ deposit to himself and his clients. But for Mr. Loreto’s dishonesty, and improper release of the Plaintiffs’ deposit, the Plaintiffs would not have had to incur this expense.
The second item is:
2
David Gray Law Office-
Hallmark Corporate Center
General
Consultation Service
March 10,2023
$395.50
Mr. Loreto argues that the invoice from David Gray Law Office refers to “general dispute related consultation” but does not include any particulars of the legal advice provided, whether it related to the within litigation, or whether it was paid. Again, based on my assessment of Ms. Harandi’s credibility, I have no hesitation in concluding that the expenses put forward by the Plaintiffs in response to my request, satisfy the criteria of expenses they incurred in their efforts to recover their deposit, together with supporting documentation for time and expenses incurred after February 7, 2023.
I have no hesitation in concluding that Mr. Gray’s invoice for $395.50 pertains to the work he did for the Plaintiffs on March 10, 2023 in relation to this matter, and that but for Mr. Loreto’s dishonesty, and improper release of the Plaintiffs’ deposit, the Plaintiffs would not have had to incur this expense.
The third, fourth, and fifth items are:
3
Powell Law Professional Corporation
Strategy Session
April 08,2023
$282.50
4
Powell Law Professional
Corporation
Litigation legal fee
March 29, 2023
$3,390.00
5
Powell Law Professional Litigation legal fee Corporation
June 06,2024
$1,130.00
Mr. Loreto has already acknowledged that item 4 is properly payable by him to the Plaintiffs as costs. I conclude that Mr. Loreto is to pay $3,390.00 to the Plaintiffs for item 4. Mr. Loreto takes issues with items 3 and 5 on the basis that these invoices from Powell Law refer to a “strategy session” and “flat fee” without any particulars about the specific work performed, nor any indication it was in relation to the within litigation.
Again, based on my assessment of Ms. Harandi’s credibility, I have no hesitation in concluding that the expenses put forward by the Plaintiffs in response to my request, satisfy the criteria of expenses they incurred in their efforts to recover their deposit, together with supporting documentation for time and expenses incurred after February 7, 2023.
I have no hesitation in concluding that Powell Law’s March 24, 2023 invoice for $282.50 and Powell Law’s June 21, 2024 invoice for $1,130.00 pertain to the work he did for the Plaintiffs in connection with this litigation. The dates of the invoices match the dates of the steps taken in the litigation. Mr. Loreto’s implication that these invoices pertain to something other than the within litigation are arguments without any basis.
The final item is:
2
Andrew George (Krupe
Law)
Consultation
(Second Legal Opinion
March 09,2023
$400.00
Mr. Loreto argues that this charge is wholly unsupported by any documentation, that there is only a cut-off screenshot of an e-transfer, and that there are no particulars of the recipient or date of the e-transfer, the services rendered, or whether the opinion is related to this claim.
While the Plaintiffs did not produce an invoice for this item, I do not doubt the Plaintiffs met with Andrew George on or about March 9, 2023 and that he charged them for his services. The March 9, 2023 meeting (after the release of the deposit but before Mr. Loreto came clean) is referenced in one of Mr. Loreto’s own emails to Ms. Rahi (Exhibit 11). As such, I have no hesitation including the $400.00 amount as an expense. But for Mr. Loreto’s dishonesty, and improper release of the deposit, the Plaintiffs would not have had to incur this expense.
Conclusions on the Expenses
- I have concluded, subject to my comments below, that Mr. Loreto is to pay to the Plaintiffs the following amounts as expenses pursuant to paragraph 91(b) of my March 23, 2026 Written Reasons:
1
Rahi Legal Resolutions-Ms.
Florin Rahi
Legal fee
March 07,2023
$5,000.00
2
David Gray Law Office-
Hallmark Corporate Center
General
Consultation Service
March 10,2023
$395.50
2
Andrew George (Krupe
Law)
Consultation
(Second Legal Opinion
March 09,2023
$400.00
- Total Expenses: $5,795.50 plus pre-judgment interest at 4% from March 10, 2023 ($708.83).
Conclusions on the Costs
The Plaintiffs appeared as self-represented litigants for the first day of trial on February 9, 2026 and for the second day of trial on March 16, 2026 during which we sat until 6:35 pm to accommodate Mr. Loreto’s schedule. Pursuant to Rule 19.05, the Plaintiffs, as the successful parties, are each entitled to a maximum of $500.00 for inconvenience and expense. I have no hesitation awarding each of the self-represented Plaintiffs $500.00 for a total of $1,000.00.
While self-represented at trial the Plaintiffs were represented by Powell Law throughout the litigation. They were well prepared for trial, no doubt because of the assistance they received from Powell Law as evidenced by their organized documents, submissions and testimony.
Mr. Loreto has acknowledged that costs of $3698.00, inclusive of disbursements, should be awarded to the plaintiffs noting that this figure was made up of only one of the 3 Powell Law invoices for $3,390.00 plus disbursements of $308.00.
I have already determined that the other two Powell Law invoices - March 24, 2023 invoice for $282.50 and June 21, 2024 invoice for $1,130.00 pertain to the work he did for the Plaintiffs in connection with this litigation. As such, and in accordance with Mr. Loreto’s costs submissions, I am including those invoices in the costs to be awarded to the Plaintiffs.
Those four (4) amounts total $5,802.50.
The disbursements incurred by the Plaintiffs include both the $308.00 to set the matter down
for trial plus the $108.00 to issue their Plaintiffs’ Claim, for total disbursements of $416.00.
Rule 19.06 provides that “if the court is satisfied that a party or a party’s representative has unduly complicated or prolonged an action or has otherwise acted unreasonably, the court may order the party or the party’s representative to pay an amount to another party as a penalty, as provided by section 29 of the Courts of Justice Act.”
As detailed in my Written Reasons dated March 23, 2026:
(a) I found that Mr. Loreto’s submissions on the first day of the trial, insisting that the transaction had closed, were an attempt to mislead the Court;
(b) I found that despite the fact that this action was commenced on April 19, 2023 and Mr. Loreto filed his Defence on May 10, 2023, it wasn’t until 4 pm on Friday March 13, 2026 (almost 3 years later) just before the second day of trial, that the crucial cheque dated February 7, 2023 in the amount of $32,000.00, potentially showing that Mr. Loreto kept a portion of the $35,000.00 deposit for himself, was produced;
(c) I found that in the over 100 pages of documents filed by Mr. Loreto on March 13, 2026, long past the dealine to submit documents, there was only an unsigned version of the Proposed Asset Purchase Agreement and that Mr. Loreto kept this crucial information from the Plaintiffs’ throughout the litigation up until LawPRO took over his defence;
(d) I found that until March of 2026, Mr. Loreto, a lawyer of some 45 years, had been defending himself in this action from May of 2023 and in all that time he failed to disclose:
(i) that he paid himself $3000.00 from the Plaintiffs’ deposit monies;
(ii) that he paid his clients the remaining $32,000.00 even though they had not signed the Proposed Asset Purchase Agreement or most of the other closing documents; and
(iii) that hours after he released the $32,000.00 to his clients, they backed out of the deal.
(e) I found that even after Mr. Loreto had improperly released the Plaintiffs’ deposit, he misled the Plaintiffs and Ms. Rahi by continuing to advise them, as evidenced by the emails he exchanged with Ms. Rahi, that his clients were still willing to proceed with the transaction and that they had signed the necessary closing documents to that effect;
(f) I found that Mr. Loreto even went so far as to tell Ms. Rahi in an email sent at 2:15 pm on February 8, 2023, 14 hours after his clients had backed out of the deal and at a time when, by his own admission, he thought his clients were attempting to scam the Plaintiffs, that “pursuant to the Agreement, $100,000 is now due and payable”;
(g) I found that both the March 20, 2023 email sent by Mr. Loreto to Ms. Rahi and the March 24, 2023 email sent by Mr. Loreto to Ms. Rahi contained false and misleading statements geared toward hiding from the Plaintiffs and Ms. Rahi the true state of affairs both before and after this litigation was commenced;
(h) I found that Mr. Loreto was dishonest in his dealings with the Plaintiffs and Ms. Rahi, and that he continued to make unsupportable assertions throughout this litigation including in his Defence, in his submissions to the Court on day one of the trial, and in his testimony on day two of the trial;
(i) I found that Mr. Loreto’s position in his Defence and at trial that the Plaintiffs received consideration for their $35,000.00 deposit as they could “use” the equipment located in premises the Landlord had yet to assign to the Purchaser, in the face of an unsigned Asset Purchase Agreement was manifestly unsupportable;
(j) I found that Mr. Loreto released the Plaintiffs’ deposit on February 7, 2023 because he wanted to get paid and he decided he could simply use the Plaintiffs’ money to do so rather than chasing after his unreliable clients to pay his invoices and risk receiving another NSF cheque. I find that Mr. Loreto, a lawyer with 45 years of experience, deliberately hid this cheque from the Plaintiffs both at the time and during the litigation because he knew what he did was wrong.
I have no hesitation in finding that some or all of these findings justify a penalty to be paid by Mr. Loreto to the Plaintiffs. While Mr. Loreto asserts in his submissions that he did not engage in any unreasonable behaviour to justify a costs order in excess of 15% of the amount claimed in the action, I disagree.
In making a costs decision, I am bound by the provisions of s. 29 of the CJA, which provides, in part, that an award of costs in Small Claims Court, other than disbursements, shall not exceed 15 per cent of the amount claimed unless the court considers it necessary in the interests of justice to penalize a party for unreasonable behaviour in the proceeding.
By virtue of s. 29, the costs award in this case is not to exceed $7,500.00 (15% of
$50,000.00) plus disbursements unless the court considers it necessary in the interests of justice to penalize Mr. Loreto for unreasonable behaviour in the proceeding.
- I find that Mr. Loreto exhibited unreasonable behaviour for the three years leading up to the trial and during the trial, all of which prolonged this action including but not limited to putting forward false, misleading and nonsensical positions, failing to produce his documents in a timely manner, failing to come prepared for trial on day one, and making lengthy submissions that ignored the fact that the Proposed Asset Purchase Agreement was never signed. Mr. Loreto’s unreasonable behaviour necessitated, among other things, a mid trial adjournment, a second day of trial that lasted until 6:35 pm, and the preparation of further materials to deal with the late amendment request.
Final Amounts to be Paid By Mr. Loreto to the Plaintiffs
- In accordance with my Written Reasons of March 23, 2026 and my findings herein, I order that Mr. Loreto is to pay to the Plaintiffs a total of $53,789.10 broken down as follows:
(a) reimbursement of the Plaintiffs’ $35,000.00 deposit together with pre judgment interest from January 30, 2023 (the day the funds were deposited into Mr. Loreto’s Trust Account) at the pre-judgment interest rate of 4% ($4,368.77) payable within 30 days after the release of my March 23, 2026 Endorsement;
(b) $5,795.50 representing the expenses incurred by the Plaintiffs in their attempts to recover the $35,000.00 deposit, together with pre-judgment interest from March 10, 2023 (the date the expenses were incurred by the Plaintiffs) at the pre-judgment interest rate of 4% ($708.83) payable within 30 days after the release of this Endorsement; and
(c) Costs in the amount of $7,500.00 (made up of $1,000.00 per Rule 19.05, the three (3) Powell Invoices totalling $4,802.50 and a modest penalty of $1,697.50) plus disbursements of $416.00 payable within 30 days after the release of this Endorsement.
- In the event I am wrong about the Plaintiffs’ entitlement to the expenses as part of their Plaintiffs’ Claim, those expenses are to be included as part of the costs penalty, such that the total amount owing by Mr. Loreto to the Plaintiffs remains at $53,789.10.
April 1, 2026 yr. 2026
Date Signature of Judicial Official