2017 ONSC 3794, 2017 ONSC 3794

CITATION : Millerson Group Inc. v.

Huntington Properties Ottawa Inc., 2017 ONSC 3794 COURT FILE NO.: 12-54869 DATE: 2017/06/19 SUPERIOR COURT OF JUSTICE - ONTARIO RE: MILLERSON GROUP INC. and THE SINHA FAMILY TRUST, Plaintiffs AND HUNTINGTON PROPERTIES OTTAWA INC. and ORVILLE STATION LTD., Defendants AND HUNTINGTON PROPERTIES OTTAWA INC., Plaintiff AND DHARMA INC, carrying on business as DHARMA DEVELOPMENTS, AKASHA SINHA, MILLERSON GROUP INC. and THE SINHA FAMILY TRUST, Defendants BEFORE: Madam Justice Liza Sheard COUNSEL: Roberto Aburto and (Jason Mercier-articling student), Millerson Group Inc., The Sinha Family Trust, et al Paul A.

Webber, Q.C. and Kate Laframboise, Huntington Properties Ottawa Inc. and Orville Station Ltd. HEARD: By Way of Written Submissions COSTS DECISION SHEARD J. [ 1 ] These actions were heard together at Ottawa. The trial took place over eight days from March 14 to March 24, 2016.

The action brought by Huntington Properties Ottawa Inc. (“HPOI”) and Orville Station Ltd. (“OSL”) was dismissed on October 7, 2016 for Reasons for Judgment released on that date. [ 2 ] At the opening of trial the parties also consented to an order for directions whereby HPOI and OSL would be treated as the plaintiffs and Millerson Group Inc. (“MGI”), The Sinha Family Trust (“SFT”), Dharma Inc., carrying on business as Dharma Investments (“DD”), and Akash Sinha (“Sinha”) would be considered the defendants.

The parties are similarly referred to in this cost decision. [ 3 ] The plaintiffs sought a declaration that the Promissory Note dated May 1, 2012 and executed by the plaintiffs in favour of MGI and SFT (the “Note”) was null and void and for damages. On consent, at the opening of trial, the plaintiffs’ damage claim was increased to $1,375,886.00. [ 4 ] The parties could not agree on costs, and were allowed to file written costs submissions. This cost decision follows the parties’ written costs submissions.

Positions of the Parties [ 5 ] The defendants seek full indemnity (100%) costs of $239,749.76 inclusive of disbursements and taxes and, in the alternative, $194,397.29 on a substantial indemnity (80%) basis. Those amounts exclude services rendered in relation to the defendants’ motion for

summary judgment, in which costs have already been determined. [ 6 ] The defendants seek full indemnity costs on the following grounds:

a) that the plaintiffs acted in “an egregious manner” by unsuccessfully alleging fraud and asserting a claim that was barred by a full and final release;

b) that the Note states that the plaintiffs “shall pay all costs of collection, including without limitation, legal fees, disbursements and costs on a solicitor-client basis, incurred by MGI and SFT”;

c) that the defendants obtained a trial judgment against the plaintiffs that exceeded their settlement offers and pursuant to Rule 49.10of the Rules of Civil Procedure, they are entitled to partial indemnity costs from the date the offer was served; and

d) that the plaintiffs’ conduct unnecessarily lengthened the proceeding. The Plaintiffs’ Position [7] The plaintiffs assert that: (

a) any cost award should be on a partial indemnity basis or, alternativielt, on a substantial indemnity basis only from April 15, 2015; (

b) any cost award should exclude the period between the original trial date, which was postponed dues to “scheduling difficulties” andthe date on which the trial was heard; (

c) the costs award should be minimal given the principle of proportionality and the reasonable expectation of the paying party; (

d) that this is not an appropriate case in which to award full indemnity costs; and (

e) the defendants’ bills of costs is excessive, unfair and unreasonable. The Defendants’ Position Conduct of the Plaintiffs: (

i) Allegations of Fraud [8] Briefly, that facts are as follows: The parties were engaged in the development of a residential and commercial property. Thedevelopment of the property did not proceed as quickly as hoped and costs escalated beyond expectations. After months of negotiations,on April 30, 2012, HG and MI entered into a settlement agreement pursuant to which HG was to buy out the interests of MGI and SFTfor $512,500 (the “Settlement Agreement”). Payment was to be made in instalments.

The plaintiffs executed the Note, which set out thepayment obligations and terms. [9] As per the Settlement Agreement, the plaintiffs executed the Note and a full and final release in favour of MI and DD (the“Release”). [10] Only one payment was made pursuant to the Note. The plaintiffs defaulted on the second payment, due on June 1, 2012. MGIand SFT sued for

summary judgment on the Note. In response to that motion, HPOI and others, not parties to these actions, asserted thatthe Settlement Agreement had been based on fraudulent or negligent misrepresentations. The

summary judgment motion was stayed, inorder to allow HPOI and others to pursue and issue a claim based on the alleged fraudulent or negligent misrepresentations. [11] The plaintiffs failed to prove misrepresentation and to show that they suffered damages as a result of any allegedmisrepresentation or at all (Reasons for Judgment, para. 11).

The plaintiffs’ action against the defendants was dismissed and judgmentwas granted to MGI and SFT on the Note in the amount agreed to by the parties. [12] The Reasons for Judgment detail the negotiations that led to the execution of the Settlement Agreement, the Release and theNote. At paragraph 77 of the Reasons: By the time the Settlement Agreement was signed, the Plaintiffs and their experts had reviewed the budgets, examined the records, metwith Modulevsky and with representatives of the City, and obtained legal and accounting advice.

In other words, they had done their duediligence and entered into the settlement agreement with their eyes open. [13] The defendants allege that the plaintiffs advanced false claims of fraud.

They rely, in part, on the conclusions set out atparagraphs 91 and 132 of the Reasons for Judgment in which the Court found that the plaintiffs had failed to establish fraudulent ornegligent misrepresentation and that the plaintiffs were trying to justify non-payment under the Note by making allegations than theyknew or ought to have known were false or inaccurate. [14] In their costs submissions, the defendants refer to 131843 Canada Inc. v. Double “R” (Toronto) Ltd., et al (1992 CarswellOnt437, Gen.

Div.) in which Blair, J. (as he then was) found that allegations of fraud made falsely and for the purpose of misleading, orallegations that go “to the heart of a person’s integrity” or of “improper conduct” that is “seriously prejudicial to the character orreputation of a party”, are “analogous to allegations of fraud”, deserving of costs on a solicitor and client scale. [15] It is a principle found throughout our jurisprudence that unsupported and unproven allegations of fraud and dishonesty are asufficient basis to award solicitor and client costs. (See Royal Bank of Canada v.

Boussoulas, 2010 ONSC 5744 , citing Blair, J. in Bargman v. Rooney (1998), 8 C.B.R. (4th) 190 (Ont. Gen. Div.)) [16] The plaintiffs made allegations against AS that went to the heart of AS’s integrity and to his professional skills. The plaintiffsfailed to prove those allegations. Moreover, given the other parties to the litigation, suing AS personally was neither necessary norjustified and could be fairly viewed as egregious conduct by the plaintiffs. (ii) Solicitor and Client Costs payable as per the Note

[17] The defendants submit that, by its terms, the Note entitles them to their solicitor-client costs of enforcing the Note. The Courtnotes that while the defendants include Sinha and DD, who are not parties to the Note, Sinha is the trustee of SFT and DD is Sinha’scorporation. The defendants were represented collectively by one law firm and for the purposes of this cost decision, they are treated asone entity. However, nothing in this cost decision is intended to determine how costs are to be allocated as among the defendants.

Ifthat is or becomes an issue, the defendants will be required to make further submissions. [18] The core of the plaintiffs’ evidence was given by William Alan Whitten, (identified as “Whitten” in the Reasons forJudgment), who is the President of HPOI and Vice-President of OSL. It made sense for Whitten to be the principal witness for theplaintiffs as he negotiated and signed the Settlement Agreement and Release on behalf of the plaintiffs and signed the Note in hiscapacity as President and Vice-President of HPOI and OSL, respectively.

It is therefore reasonable and fair to conclude that Whitten wasthe operating mind and instructing party with respect to the plaintiffs’ claim. Whitten and the plaintiffs were fully aware of the terms ofthe Note. [19] In all the circumstances, there is no basis to the plaintiffs of the costs provisions contained in the Note. (iii) Solicitor and Client Costs payable as Action was Barred by Release The Release [20] The plaintiffs, and others, signed the Release in favour of MGI, SFT and DD dated April 30, 2012. In his Reasons forDecision dated January 24, 2013 in which he stayed the defendants’ motion for

summary judgment, Annis, J. noted that the Releasewould appear “to bar a cause of action in innocent misrepresentation, but not necessarily one in fraudulent misrepresentation.” (at para20). This statement identified the onus on the plaintiffs to overcome the Release. It should have been clear to the plaintiffs that unlessthey proved “fraud, mistake of fact or unconscionability” the Release would act as a bar to their claim. [21] The Release does not state what cost consequences will occur if an action is brought in respect of the subject matter of theRelease.

On that issue, the defendants rely upon the decision of Southlake Regional Health Centre v. Beswick Group Properties Inc.,2014 ONSC 2326 in which case the Court awarded solicitor and client costs against a plaintiff who sought to re-litigate claims it hadreleased.

The Court followed the Ontario jurisprudence that solicitor and client costs should be awarded “as a mechanism for ensuringthat re-litigation of previously settled claims is discouraged.” [22] Given the trial findings here, the same reasoning applies. (iv) Rule 49 Offers to Settle [23] The defendants also ground their claim for costs on a full indemnity or, at the least, substantial indemnity, scale on the basisthat they made two r. 49 offers to settle for amounts lower the defendants were awarded at trial: (

a) November 8, 2012: the defendants made an offer to settle for all-inclusive payment by the plaintiffs to the defendants of $325,000,payable within 30 days from the date of acceptance. This offer was open for acceptance until November 15, 2012. After that date, theplaintiffs were also to pay the defendants’ full indemnity costs incurred after November 15, 2012; (

b) April 17, 2015: the defendants offered to settle both actions by payment by HPOI and OSL of $350,000 to MGI and SFT within 30days after acceptance of the offer; upon receipt of payment, both actions would be dismissed on a without costs basis. That offer wasopen for acceptance up to one minute after the commencement of trial. [24] In their costs submissions, the plaintiffs acknowledge receipt of both offers. They discount the November 8, 2012 offer on thebasis that it was made prior to the defendants’

summary judgment motion and was taken into account in the costs award to thedefendants. [25] With respect to the April 17, 2015 offer, the plaintiffs submit: …the plaintiffs acknowledge the possibility of the court awarding costs from this date forward to the plaintiffs on a substantialindemnity basis. However, as noted in the defendant’s cost submissions, this matter was originally scheduled for trial to take place in2015, but was postponed on the eve of trial due to scheduling difficulties.

It would be unfair and unreasonable for our client to pay costsfor the period between the original trial date and the subsequent date of the trial. (Plaintiffs’ Cost Submissions, at para 9) [26] Based on the submissions from both parties, it is clear that the defendants’ Offers to Settle were lower and more favourable tothe plaintiffs than the results achieved by the defendants at trial. Therefore, rule 49.10 has application here. Analysis [27] The award of costs is governed by s. 131 of the Courts of Justice Act, R.S.O. 1990, c.

C.43 (the “CJA”) and by rr. 49 and57.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. Rule 57.01 expands the judicial discretion regarding costs award found ins. 131 of the CJA. [28] In Fong et al v. Chan et al, (1999), (ON CA), 46 O.R. (3d) 330, the Ontario Court of Appeal set out threefundamental purposes of modern cost rules:

(

i) to indemnify successful litigants for the cost of litigation; (ii) to encourage settlements; and (iii) to discourage and sanction inappropriate behaviour by litigants. [29] Rule 57.01 contains a non-exhaustive list of factors to be applied by the Court in fixing costs and confirms the authority of theCourt under s.131 of the CJA to award all or part of the costs on a substantial indemnity basis and in an amount that represents fullindemnity. [30] The implications of r. 49 was clearly stated by the Ontario court of Appeal in Davies v.

The Corporation of the Municipality ofClarington et al., 2009 ONCA 722 (at para 16): Rule 49 deals with a specific aspect of costs: it is a self-contained scheme that addresses the manner in which offers to settle are broughtinto play. Its objective is to promote an offer of compromise and visit a cost consequence upon an offeree who rejects an offer that turnsout to be as favourable as or more favourable than the judgment awarded to a plaintiff at trial. [31] In this case, the provisions of r. 49.10(2) apply:

(2) Where an offer to settle, (

a) is made by a defendant at least seven days before the commencement of the hearing; (

b) is not withdrawn and does not expire before the commencement of the hearing; and (

c) is not accepted by the plaintiff, and the plaintiff obtains a judgment as favourable as or less favourable than the terms of the offer to settle, the plaintiff is entitled topartial indemnity costs to the date the offer was served and the defendant is entitled to partial indemnity costs from that date, unless thecourt orders otherwise. [32] As the plaintiffs were entirely unsuccessful, they are not entitled to costs. Applying the balance of the rule, the defendants areentitled to no less than their partial indemnity costs from at least April 17, 2015, forward, unless the Court orders otherwise.

Given thefacts in this case, the Court must consider whether an elevated scale of costs is appropriate. Costs as per the Terms of the Note [33] The facts in the 2014 decision of Buik Estate v. Canasia Power Corp., 2014 ONSC 4042 CanLII; affd 2015 ONCA 352, havemany similarities to the case here. In Buik, the successful plaintiff sought and was awarded costs on a full indemnity scale as per theterms of the provisions of the promissory note under which the plaintiff successfully sued.

The higher scale of costs was also justified byreason of the conduct of the defendant, which included that the defendant failed to accept the plaintiff’s r. 49 offer to settle.Notwithstanding the finding that full indemnity costs should be awarded, the Court in Buik went on to apply the r. 57.01 factors whendetermining the fair and reasonable amount of costs to be fixed. Determination of Amount [34] Similarly here, even if the Court finds that costs should be awarded on an elevated scale, the amount awarded must be fair,reasonable, and proportionate.

As in Buik, the Court must consider the factors set out in rule 57.01. (

a) the principle of indemnity, including, where applicable, the experience of the lawyer for the party entitled to the costs as well as therates charged in the hours spent by that lawyer; (

b) the amount of cost that an unsuccessful party could reasonably expect to pay; (

c) the amount claimed and the amount recovered in the proceeding; and (

d) the complexity of the proceeding. Experience of the Lawyers, Hourly Rates and Time Spent [35] In their original cost submissions, neither party submitted proper Bill of Costs or a Costs Outline. The defendants provided achart that listed names, hours spent, hourly rates (averaged over the course of the litigation) and years of experience, without anydescription of the services rendered, by whom, and when. The Court asked the defendants to provide a more complete Bill of Costs,together with time dockets.

Again, the defendants’ counsel submitted a chart listing time spent, each lawyer’s years of experience andthe hourly rates charged, without breaking out the time spent on each step of the litigation. While the defendants’ counsel did provide aprintout of the docket entries, it was chronological and did not to break out the time under various headings such as pleadings, discovery,trial preparation, etc.

That analysis, if undertaken at all, would have been left to the Court. [36] Again at the request of the Court, the plaintiffs’ counsel provided a settlement statement, which the Court understands tocontain a complete record of time and disbursements, from August 7, 2012 to October 13, 2016 generated by their timekeeping software.Without more analysis from both sides, it is difficult to accurately compare the time spent by counsel for each side on similar tasks. Thatcomparison can assist in determining the reasonable expectations of the losing party with respect to the payment of costs to thesuccessful party.

[ 37 ] According to the defendants’ “bill of costs”, trial counsel, Robert Aburto was a five year lawyer. His average hourly rate was $320.00 per hour. By contrast, counsel for the plaintiffs, Paul A. Webber, Q.C., charged out his time at $375.00 per hour throughout. Although the plaintiffs did not provide Mr. Webber’s year of call, the Court notes that he is a Q. C. and a senior solicitor. The defendants’ bill of costs includes time recorded by Darryl R. J. Daly at $330.00 per hour. He is described as a lawyer with six years’ experience.

Alannah Lawson recorded 296.7 hours on the file, the most time recorded by any of the defendant’s lawyers. Like Mr. Aburto, Ms. Lawson is also shown as a five-year lawyer. However, Ms. Lawson’s time was charged out at the lower average hourly rate of $199.76. There is no explanation offered for the higher hourly rate charged by Mr. Aburto. I conclude that in this case, the appropriate hourly rate to be fixed for a five-year lawyer with the defendants’ counsel, is $199.76 per hour. That is the hourly rate that will be allowed to Mr.

Aburto. [ 38 ] Without having reviewed each and every entry in the dockets provided, a sampling of those entries shows that much of the 296.7 hours docketed by Ms. Lawson was spent reviewing and preparation of affidavits of documents and attending on examinations for discoveries as a junior lawyer to Lynn D. Watt, who the defendants identified as having twenty-two years of experience. Ms. Watt’s hourly rate averages at $428.07. The defendants also include time spent by Jason Mercier, a law student, in their bill of costs. Based on the docket entries, Mr. Mercier recorded 189 hours on and after January 6, 2016.

Much of his time was spent in meetings with other counsel reviewing the documents, preparing books of authorities, etc. Taken as a whole, the time appears excessive and in part, appears to be clerical. Accordingly, in this case, it is fair and reasonable to reduce his by 50 %. [ 39 ] Based on the above, the reductions in fees are as follows:

a) Robert Aburto reduced by $22,521.00 to $37,415.00;

b) Alannah Lawson reduced by $23,707.00 to $ 35,561.00; and

c) Jason Mercier reduced by $13,675.00 to $13,675.00. for a total fee reduction of $59,903. Accordingly, the Court determines that the defendants’ full indemnity fees (before taxes and disbursements) would be $141,293.88 ($201,196.88 less $59,903.00). Amount of Costs Unsuccessful Party Could Reasonably Expect to Pay [ 40 ] The plaintiffs’ settlement statement shows total fees of $126,815.00. That amount included a “courtesy discount” of $10,800.00. It is unclear why the discount was allowed. For the purposes these reasons, that discount will be added back, to arrive at total docketed fees of $137,615.00.

Although that time is less than the time spent by the defendants’ counsel, the Court takes into account that they represented five parties. While their interests were not in conflict, their issues and the claims against them were different. In all of the circumstances, it is not unreasonable for the defendants’ legal fees to exceed the plaintiffs’. [ 41 ] As for the plaintiffs’ reasonable expectations, the Court notes that the plaintiffs were represented by senior counsel throughout.

It is reasonable to conclude that the plaintiffs knew or ought to have known that they would be exposed to a higher level of costs if they alleged fraudulent misrepresentation and were unsuccessful in establishing fraud. Further, the plaintiffs knew or ought to have known that the Note entitled the defendants to their solicitor and client costs of enforcing the Note. [ 42 ] The Court also takes into account that the defendants sought to enforce the Note by way of a motion for

summary judgment. That motion did not proceed on January 24, 2013 because of the allegations of fraud made by the plaintiffs. The motion for

summary judgment was an inexpensive and appropriate way for the defendants to enforce the Note. Because of the unsubstantiated and unproven accusations of fraudulent and negligent misrepresentation made by the plaintiffs, the defendants were put to the much higher cost of examinations for discovery and a trial. I conclude, therefore, that the plaintiffs knew that, by forcing a trial, they would be exposed to significant legal fees. The Amount Claimed and the Amount Recovered [ 43 ] The amount claimed by the plaintiffs was $1,375,886.00.

The plaintiffs recovered nothing. [ 44 ] The amount claimed by the defendants and as agreed to by the parties was $396,666.00 interest of $62,661.00 plus interest from March 15, 2016 at the rate of $54.34 per day. From March 15, 2016 to the date of judgment, October 7, 2016, interest would be $10,976.68 ($54.34 x 202 days) for a total owing as at October 7, 2016 of $470,303.68.

Judgment was granted to the defendants in accordance with that agreement. [ 45 ] Added together, as at the date of judgment the total amount at stake for the defendants was approximately $1,846,189, excluding interest claimed by the plaintiffs. [ 46 ] Costs usually follow the event: the defendants were successful in enforcing the Note and in defending the plaintiffs’ claim and are entitled are entitled to their costs. The Complexity of the Proceeding [ 47 ] The proceeding was reasonably complex and involved volumes of documents and emails and spreadsheets, many of which

required a person with special expertise to understand. The Importance of the Issues [ 48 ] Clearly, these actions were important to all the parties. The actions taken by the plaintiffs to resist payment of the Note leads to a conclusion that the payment of the Note was of great significance to the plaintiffs. Perhaps, these actions were even greater importance to the defendants against whom allegations of misrepresentation, fraudulent and negligent were made. Moreover, in the case of Sinha, his personal and professional reputations were at stake.

Improper or Unnecessary: The Scale of Costs [ 49 ] The plaintiffs knew that the only way to stop the enforcement of the Note and to defeat the motion for

summary judgment was to allege and prove fraud and misrepresentations. Given the utter absence of such evidence at trial, and as noted in the Reasons for Judgment, this action was brought to justify non-payment under the Note. As a result, it would be reasonable to view the plaintiffs’ entire action as improper and unnecessary.

Disposition [ 50 ] For all the above reasons, I conclude that the defendants are entitled to their costs on full indemnity scale and fixed at $172,059.37, calculated as follows: [1] Fees: $141,293.88 [2] HST on fees: $ 18,368.20 [3] Disbursements and HST: $ 11,735.29 [4] Non-taxable disbursements: $ 662.00 Total: $172,059.37 L. Sheard J. Released: June 19, 2017 CITATION : Millerson Group Inc. v. Huntington Properties Ottawa Inc., 2017 ONSC 3794 COURT FILE NO.: 12-54869 DATE : 2017/06/19

ONTARIO SUPERIOR COURT OF JUSTICE RE: Millerson Group Inc. And The Sinha Family Trust, Plaintiffs And Huntington Properties Ottawa Inc. And Orville Station Ltd., Defendants And Huntington Properties Ottawa Inc., Plaintiff And Dharma Inc., Carrying On Business As Dharma Developments, Akasha Sinha, Millerson Group Inc. and The Sinha Family Trust, Defendants BEFORE: Madam Justice L. Sheard COUNSEL: Roberto Aburto and (Jason Mercier- articling student), Millerson Group Inc., The Sinha Family Trust, et al Paul A. Webber, Q.C. and Kate Laframboise, Huntington Properties Ottawa Inc. and Orville Station Ltd. HEARD: By Written Submissions COSTs DECISION Sheard J. Released: June 19, 2017