2010 ONSC 6837, 2010 ONSC 6837

CITATION : Hromek v. Khatra, 2010 ONSC 6837 BARRIE COURT FILE NO.: 08-1421 DATE: 20101210 SUPERIOR COURT OF JUSTICE - ONTARIO RE: JANE HROMEK, Plaintiff AND: DEVINDER KHATRA, RAMINDER KHATRA et al, Defendants CHARLES G. ASHTON, Intervenor BEFORE: M.P. EBERHARD COUNSEL: R. Isles, Counsel for the Plaintiff M. Handler, Counsel for the Defendant D. Dooley, Counsel for the Intervenor HEARD: December 3, 2010 ENDORSEMENT [ 1 ] Having obtained an order setting aside Default Judgment, the Defendant seeks costs calculated at $26,359.96 partial indemnity and $32,290.21 full indemnity.

For some portion of those costs it is submitted that the order should be against Mr. Isles personally. [ 2 ] The Intervenor for Ashton, who was the lawyer who represented the Defendant at the time when Default Judgment was obtained, seeks costs for participation in the contested motion to set aside which gave rise to the need for intervention because of the potential conflict between the interests of Ashton and his former client Khatra. Those costs are calculated as $21,355.78 partial indemnity and $23,261.05 substantial indemnity less 4 hours inadvertently claimed for the August 4 th appearance for which Mr.

Dooley stated at the time he made no costs claim ($1300-$1400 respectively). [ 3 ] The Plaintiff did not present a calculation of costs but I invited him to address me on costs thrown away for the proceedings which resulted in the Default Judgment now set aside along with the costs ordered for the then successful Plaintiff. [ 4 ] Each party reminded the court of the tortured history of the motion to set aside which was brought in tandem with a motion for

Summary Judgment which is on adjournment sine die after the October 19, 2010 order made by me in accordance with the Consent negotiated that day by Handler, Dooley and Isles’ agent Eversley. [ 5 ] Among the terms in that consent was a requirement that proceeds of a sale of property by the Defendant in the sum of $300,000 be held in Handler’s trust account. Today Mr.

Isles argued that such a term constituted substantial advantage to the Plaintiff such that success on the Motion to Set Aside was mixed: the Defendant achieved the setting aside, the Intervenor achieved the setting aside, the Plaintiff achieved a fund to look to in the event of judgment [ 6 ] I am in a position to rule today as to costs. However I perceive a danger in leaving the issue of the fund in trust unaddressed. The Defendant intends to pay it out because the order held it until December 3 rd . The Plaintiff, expecting to argue the motion for

Summary Judgment today, was confident that the fund would be available to pay out upon his anticipated success in attaining judgment. [ 7 ] Which issue is scheduled for argument before me today and the retention of the fund in trust are addressed in the consent order of October 19, 2010: 8. THIS COURT FURTHER ORDERS THAT upon the completion of the sale of property municipally known as 24 Pebblecreek Drive, Brampton, Ontario before December 3, 2010, the sum of $300,000.00 from the proceeds be directed and paid to the Defendant Khatra’s lawyer, Michael A.

Handier Professional Corporation, in trust, where these monies will remain until December 3,2010 or as further directed by this Court pursuant to an Order obtained prior to December 3,2010. 9. THIS COURT FURTHER ORDERS THAT the Plaintiffs motion for

summary judgment is adjourned sine die. 10.THIS COURT FURTHER ORDERS THAT if the parties cannot agree on the costs of these motions then the issue of costs shall be argued before the Honourable Justice Eberhard on December 3,2010 or on such other date as fixed by the Trial Coordinator,

[ 8 ] Mr. Isles served Notice of Return of the

Summary Judgment motion last week on Mr. Handler. Mr Handler argued that this motion, until service of a Statement of Defence after the setting aside of the Default Judgment, was not within the leave provisions of Rule 20. He protests that now that a Statement of Defence has been filed he has additional material to put forward to defend the Motion for

Summary Judgment over and above the material filed in support of the requirement in a Motion to Set Aside to demonstrate a defence on the merits. While that remains to be seen, I did not permit the motion for

Summary Judgment to proceed before me on the basis of the unspecified adjournment in paragraph 9 as against the specific adjournment of the costs issue to this date before me in paragraph 10. I ruled that the costs argument proceed. [ 9 ] Mr. Dooley acknowledged that a lawyer whose conduct gave rise to a Default Judgment that is set aside cannot expect costs upon success in having the judgment set aside. Indeed, before potential conflict between his position and that of his then client Khatra arose, Mr. Ashton moved to set aside the judgment without charge to his client or seeking costs.

However, Mr Dooley asserts that once leave for Intervenor status was sought and especially after review of the transcript of the proceeding before McIsaac J on June 30, 2009, the Plaintiff should not have so vigorously opposed. [1] The materials amply demonstrated that after he had filed a Notice of Intent to Defend, Mr. Ashton only became aware on the morning it was argued that the Motion for Default Judgment had been brought by the Plaintiff without counsel and it was not served on Mr Ashton. There is dispute whether the Defendant herself was served but my decision does not turn on that.

Rather I avert to the requirement of McIsaac J, having noticed the Notice of Intent to Defend, that Mr. Isles, himself new to the file, call Mr. Ashton. Mr. Isles did call but, on the instructions of his client and the court’s observation that service is not necessary as the Defendant was noted in default, Mr. Isles did not convey Mr.

Ashton’s request for an adjournment. [ 10 ] While it cannot be known what McIsaac J. would have ruled had he known of the adjournment request, it is a circumstance that makes the setting aside of the Default Judgment almost inevitable when the motion was made so very soon after the event. [ 11 ] I am satisfied that the Intervenor can seek costs from the unsuccessful opposing party (the Plaintiff) even though that party is caught up in negligence issue between the lawyer and his client, (the Defendant), over which the party has no control or interest [2] .

It is a step in litigation and an unreasonable position can attract cost sanction. Still, I bear it in mind that usually when a Default Judgment is set aside it is the disappointed Plaintiff who can look for costs thrown away. The Intervenor’s claim for costs, based as it is on Mr. Isles continuing into protracted proceedings notwithstanding an inevitable result, causes me to consider just how unreasonable it was for Mr. Isles to defend the motion, and when it became so.

The Intervenor is not involved in the substance of the claim so there is no requirement to attempt to quantify what portion of the protracted proceedings are not wasted because they would have been necessary to the progress of the claim towards proper finalization. [ 12 ] Mr. Isles did not provide me with a Costs Outline. Rather, he argued that there were no wasted steps or time brought about by the Plaintiffs position on the Motion to Set Aside because all the examinations and appearances except the August 4, 2010 appearance on which Mr.

Dooley expressly did not seek costs, all advanced the substantive claim towards finalization which he expects to achieve on his Motion for

Summary Judgment when it is heard. [ 13 ] On behalf of the Defendant Mr. Handler repeats the assertion that Mr. Isles conduct in failing to alert the court of Mr. Ashton’s request for adjournment created a circumstance in which setting aside Default Judgment should not have been opposed and adds that it was sharp practice for which Mr. Isles himself should bear the costs. He points to the adjournment on August 4, 2010, requested by Mr. Isles during argument, to explore whether he too had a potential liability which raised a conflict between his position and that of his client. Mr.

Handler asserts that such an issue was apparent from the materials and should have been acted on before the appearance for argument. He noted the failure of Mr. Isles to attend on October 19, 2010. Happily much was accomplished that day in his absence. [ 14 ] Again, Mr.

Isles asserts it was all to the ultimate claim and no waste or delay arose from his position. [ 15 ] I am unable to segregate the conduct of the lawyer from the conduct or instructions of the client except in 2 circumstances in which I, as motion’s judge, participated: August 4 th was a lost opportunity for the Motion to Set Aside to be finalized because Mr. Isles failed to recognize and consider the patent issue of his own potential conduct; and Mr. Isles misinterpretation of the October 19, 2010 adjournment date is entirely without basis. His unexpected absence was ably covered by Mr.

Eversley as agent with very little apparent instruction from Mr. Isles. Nevertheless, as a participant, I know as a certainty that the inexcusable absence of Mr. Isles required all other participants, including his own client, to proceed in chaotic, unforeseeable circumstances that were hostile to an atmosphere of justice. On that day Mr. Isles failed in his duty to the court, to his client and to parties opposite. While this was somewhat redeemed by Mr. Eversley’s presence, no credit for redemption falls to Mr.

Isles. [ 16 ] The latest argument about whether the fund in trust should be retained augments my impression that Mr. Isles does not pay attention to the court’s endorsements. I took pains to write an endorsement, reflecting the in court discussion on August 4 th, , that would explain that the October date was intended to proceed even if Mr. Dooley could not attend personally because he had completed his argument. Mr. Isles found some uncertainty about the date but did nothing to become certain.

Until I read the transcript, that I have had to order of the October 19, 2010, I have not ruled on whether the order to retain the fund continues beyond December 3, 2010, but there is enough in the phrase “or as further directed by this Court pursuant to an Order obtained prior to December 3, 2010.” to raise an inquiry whether a motion for Mereva type injunction needed to be brought before December 3 rd .

Failure to file any quantification of costs thrown away in obtaining the Default Judgment is a further curiosity. [ 17 ] I find that the Defendant and Intervenor were the successful parties on the Motion to Set Aside. [ 18 ] I find there are no grounds for substantial indemnity costs but there are grounds to assign a proportion of the costs awarded to the successful Defendant to be paid by Mr.

Isles personally. [ 19 ] Weighing the totality of the circumstances, those averted to above and the general principals relating to costs I fix (not assess) costs as follows: Payable to the Intervenor representing Ashton by the Plaintiff: $10,000;

Payable to the Defendant by the Plaintiff: $10,000 (being $15,000 less costs thrown away or otherwise necessary to the continuing claim); Payable to the Defendant by Mr Isles personally: $5,000. [ 20 ] Having made that determination I paused until the transcript of October 19 th proceedings arrived.

I will make it available, as I indicated on December 3 rd it would be, for inspection in the court file but I footnote it below [i] from the point when I was reading aloud into the record the agreement that the three counsel had reached when I stood down so they could have discussion. [ 21 ] Please note that, when I completed reading their agreement, I intervened to point out the practical difficulties they would face in Barrie to get a motion before the court by November 19 th which was then spoken of as the “drop dead” date. It was a date to bring a motion to retain the funds in trust.

While there is uncertainty about how they could get a motion before me or another judge quickly, there can be no doubt that it was understood that the motion was necessary by the “drop dead” date.

Ways of getting it before me during our civil sittings were suggested but the totality of the discussion was based on the premise that the retention of funds would not go on beyond the “drop dead” date and a motion to retain them was required. [ 22 ] Ultimately, December 3 rd 2010 was substituted in the agreement for November 19 th , 2010. [ 23 ] No motion to retain the fund was brought by December 3 rd , 2010. [ 24 ] I am told by the Trial Coordinator that on December 8, 2010, while I was awaiting receipt of the transcript, Ms. Hromek dropped off a motion returnable next Tuesday on the open civil motions list.

That does not meet the agreed time requirement. [ 25 ] I find that the agreed obligation to retain the sum of $300,000 expired on December 3 rd , 2010 and there has been no order obtained prior to December 3 rd to replace or revive that obligation. Eberhard J. Date: December 10,2010 18 I am reluctant to leave this point without expressing a further concern. I am troubled that these default proceedings were taken without any notice or warning to Mr. Meiklejohn. I recognize that there is no obligation under the Rules of Practice to alert opposing Counsel when one is about to note a default or to move for judgment.

But I would have hoped that when it is known that reputable defendants are represented by reputable Counsel who has given notice of intention to defend an action, simple professional courtesy between members of the Bar would have dictated a call to Mr. Meiklejohn before default proceedings were taken against his clients I have no doubt that had such a call been made, the default would have been promptly remedied and the parties would not have been put to the time and expense of this motion. [i] THE COURT: I'm going to read it aloud. MR. EVERSLEY: Okay.

THE COURT: Starting at A, B, C, "That the motion for intervener status on behalf of Charles Ashton is granted on consent. That the noting of pleadings in default of defender Khatra is set aside. That the default judgment granted to the plaintiff against the defendant. Khatra by the Honourable Justice McIsaac on June 30 th is set aside.

That Khatra is granted leave to deliver a Statement of Defence and Counterclaim if so advised, within 20 days of this date, and that any responding pleadings be delivered in accordance with the Rules of Civil Procedure. That all Sherriff's offices where Writs of Seizure and Sale are filed pursuant to the default judgment referred to herein be cancelled and withdrawn forthwith.

That all Notices of Garnishment issued by the plaintiff pursuant to the default judgment referred to herein be set aside forthwith, including Notice of Garnishment issued and served upon garnishee, Bank of Nova Scotia, located at 160 Taunton Road in Whitby. That all monies paid to the plaintiff pursuant to any Notice of Garnishment forthwith be returned to Khatra in care of her lawyer, Handler Professional Corporation.

That upon completion of the sale of Peeble Creek Drive, Brampton, before November 19th, the sum of $300,000.00 be directed and paid to Handler in trust where the monies will remain until November 19th, 2010, or as directed by this court pursuant to an order obtained prior to November 19th." How are you going to get an order from this court before November 19th, 2010? MR. EVERSLEY: Well, this is...this is the question. We're punting it for a month. I'm not familiar with whether it's possible to actually argue the motion. But if not to argue the motion, then perhaps to get a temporary injunction extending the date.

But that... THE COURT: Let me just complete this so I know what... MR. EVERSLEY: Please. THE COURT: "That costs, if not settled, are to be argued before Eberhard, J., on December 3rd or such other date as fixed by the trial coordinator." MR. HANDLER: One change that I think should be made. Under H, where it says 'Her lawyer', I suppose it should be Khatra's lawyer, the defendant Khatra's lawyer, because 'her' is not really defined. I mean, we know what we're talking about, but to be a bit pedantic, I think it should say that. THE COURT: Okay.

What I would probably do is hand that back to you for that change so that I don't end up getting involved in the...so I think the...I'm not quite sure. I guess November 19th is just to give 30 days of time so that things could be sorted out. MR. EVERSLEY: Yes. THE COURT: But there is a practical problem. It would...unless it could be said to be not a long motion, are you anticipating that it would be before me? MR. EVERSLEY: I am. May I say that, Your Honour, the intention is to give Mr. Iles an opportunity to return and to deal with this himself.

Part of the discussion I've had with my friends is I'm not sure what the local...what the local practice is for sort of short, more or less emergency motions, because it may be that a motion would be brought just to extend that date out until...until...pardon me, the date to which my friend would hold the net proceeds of the sale of the home in his trust would be extended out to a date following a date upon

which the motion could be argued. THE COURT: Okay. Hang on. Hang on. MR. EVERSLEY: I don't...I don't know what's realistic about that up here. THE COURT: Right. The sittings start on November 15th? COURT REGISTRAR: Yes. THE COURT: So thereafter, I am here, but I'm here on other duty. No, the week of November 8th, I'm not here. So... MR. EVERSLEY: Would it be possible to set November 15th? Can we book November 15th? THE COURT: No, because our region is devoted to civil trials for three weeks. MR. EVERSLEY: Okay. THE COURT: And so it defeats that initiative if judges decide that they're going to book other things.

Can you phone the trial coordinator and see if I am duty judge at any time between now and November 19th? COURT REGISTRAR: You are not, Your Honour. THE COURT: Okay. Thank you. So all that that means is we are now all certain that if something has to be brought on before the 19th, it would have to be on a Tuesday. It would not be before me and it would be in the context of a long list. If you want to know what they look like, you can go across the hall and see them today. MR. EVERSLEY: Yes. May I ask Your Honour, is it possible to know the date, the next date upon which you would be duty judge?

Is it possible to know that? Then my friends and I will see if we could... THE COURT: Well, let me just...let me just guess. Three weeks of sittings, December 3rd that we've set aside here is the last day of those sittings. So if I'm not a duty judge before the sittings, I'm not a duty judge during the sittings, December 3rd would be the first day upon which it was possible to appear before me. MR. EVERSLEY: Is that December 3rd date still available? THE COURT: It was never available in the sense that it's fixed and everything else would change.

It was available in the sense that it was our best guess when I would be available to hear further argument. MR. DOOLEY: Sometimes we've done motions on an on-call basis during the sittings. THE COURT: Yes.

MR. DOOLEY: And I wonder if that might assist. Your Honour might have an afternoon or something. THE COURT: Yes. That sort of thing is possible. I could direct in this endorsement that if counsel ask for a date and I became available for some reason, it would be a short notice appearance, and I also know that you folks have other things you do. MR. HANDLER: Yeah. I know that. I'm surprised my client's not here. I can't reach my client. I'm, to some extent, going out on a limb here to say that I'm to hold $300,000.00.

But I'm trying to be focused and practical on getting the real estate transaction closed without having to come to court to get a motion, blah, blah, blah. Does 'Blah, blah, blah' get recorded properly? THE COURT: I understand you fully. MR. HANDLER: So I can't have it sort of...I can't go back to my office, reach my client, and say, oh, I'm to be holding $300,000.00 in perpetuity. You know, that's not going to do me and my client's relationship very much good. THE COURT: So you have a drop dead date, though, of November 19th, unless... MR.

HANDLER: Well, I wouldn't say it's a drop dead date, but I have to believe that, practically speaking, you have a greater familiarity with the issues than anyone else at this moment. You're not seized of any kind. I don't even know what kind of motion this would be. Since I'm standing here and I have the floor, from my client's, from my perspective, my submission to you is this was stealing the march, the fact, i.e., the default judgment. It had nothing to do with my client. She did what clients do. They go to lawyers and assume that lawyers will protect them.

It didn't happen here, unfortunately, for whatever reasons, and the only reason that this $300,000.00 is potentially capped of this because the march was stolen. So...but, you know, if Mr. Iles, on behalf of his client, wants to bring a motion saying, you know, we've got to hold this $300,000.00, otherwise who knows what's going to happen, you know, he has the right to go to court and make those submissions and they will be opposed. But that's where I'm coming from. MR.

EVERSLEY: Is it possible to know...I'm at a disadvantage, Your Honour, because I'm completely unfamiliar with how difficult it is to get a motion on here. So I apologize. Is it possible to know whether, for example, the December 3rd date is still available because then I could speak to my friends and see if that can become a drop dead date. Can we make that determination? MR. DOOLEY: The difficulty, I suppose, is, Your Honour, it's the last day of the sittings and you can't commit to anything. You might be involved in a trial. THE COURT: Yeah. MR. DOOLEY: Which is why I suggest that the on-call...Mr.

Iles can bring a motion on a date during the sittings on an on-call basis, to be arranged, and then what the trial coordinator does is she calls counsel and sees if we're all available and down we come. I mean, I wouldn't be participating in that motion. So it really does seem the best solution and since the sittings are starting on the 15th and the drop date dead was the 19th, well, during the three-week sittings really is not much of an extension. So it might be the best solution. THE COURT: That is how it works. MR.

EVERSLEY: To extend...so to extend the drop dead date to December 3rd, but still to have this on-call mechanism mentioned in the endorsement. Is that what's suggested? MR. HANDLER: Well, that's what I'm hearing suggested. Sure. I think the on-call...if you don't see me again because I've been fired, you'll understand why.

THE COURT: I'll hand these back because I'm not participating in your agreement here. MR. HANDLER: Good. THE COURT: I am merely pointing out a practical difficulty with the dates you've chosen and trying to facilitate the best chance of getting back before me, if there's a difficulty that needs to be addressed during that period of time. In my endorsement, I could certainly underscore that counsel wish it to be before me and if there is a time before me during the sittings, that the trial coordinator is directed to try to facilitate counsel attending for that.

The December 3rd date is already marked, so she's already alerted to trying to make me free for that. But I don't know what my assignment will be, whether I'll be in a series of short trials in which you can kind of move around or a longer jury trial that will depend on where the witnesses are and all that sort of thing. So I can't make a firm commitment, but those are the best options, as described by Mr. Dooley. So my other question of you is you've saved the issues of costs.

I have prepared an endorsement that tells the story of what's happened now and I'm wondering whether you want me to issue an endorsement in terms of my characterization of what's happened today or not. MR. HANDLER: No, I definitely will be asking for costs of today and it is part of this. I mean, yes, we got something done, but we're spending more and more time. But we're trying to avoid... THE COURT: Would it be best for me to keep my view of things under my hat until after those... MR.

EVERSLEY: Could I suggest, Your Honour, that, first of all, I can...may I say, it was relatively evident to me the direction the wind was blowing and it might be unfortunate because if your thoughts found their way into an endorsement, those words might take on significance outside of just today. So I think my friends and I are agreed on how to disposition the substantive issues, except for costs. I should say we haven't, in this document, we haven't addressed Mr. Iles' cross motion for

summary judgment, of course. So we were hoping that your endorsement would say that that motion is adjourned sine die on consent, and then that other matters are dispositioned in this fashion. But I myself don't think it's necessary to add any other comment or observation in the endorsement, as long as we're reasonably confident that the issues of costs, if it has to be argued, can come back before you. THE COURT: Well, it can, somehow, sometime. MR. EVERSLEY: Somehow, sometime.

Because if there was a concern that, in the event counsel can't agree on the costs issue and it had to be argued and was to be before a different member of the Bench, other than Your Honour, then perhaps it might be...you're not going to agree, counsel? MR. DOOLEY: No, I'm sorry, I cannot see how costs could be adjudicated by a different judge than heard the motions. MR. EVERSLEY: Yeah. Okay. MR. DOOLEY: So that it has to be Your Honour, I respectfully submit. MR. EVERSLEY: Yeah, but...

THE COURT: I will just regard my endorsement then as notice to myself and so I will have that for my own benefit when submissions are made to me as to all things occurred. So you're going to change some dates on there.

MR. EVERSLEY: Yeah.