Executive Summary: Key Legal and Evidentiary Issues

• Disputed existence and enforceability of an alleged written settlement agreement governing the parties’ rights in the Wright’s Variety business and related property.
• Conflicting evidence about the Applicants’ financial contributions and the parties’ subsequent conduct, suggesting “some kind of arrangement” but not a clearly provable contract on the motion record.
• Appropriateness of interlocutory injunctive relief to prevent the Respondents from interfering with the Applicants’ operation of the corporation’s business, and whether the evidence justified such extraordinary relief.
• Application of Rule 57.01 and modern costs principles, including proportionality, indemnity, and reasonable expectations, in fixing costs of an interlocutory motion.
• Assessment of whether the Applicants’ conduct was sufficiently improper to justify substantial indemnity costs, in light of allegations of “egregious and abusive” conduct and alleged use of falsified or inconsistent evidence.
• Reasonableness of the Respondents’ claimed hours and disbursements as against the nature of the motion, the Applicants’ own costs, and the principle that losing parties should not pay for excessive or clerical work.

Background and parties

This case arises out of a commercial dispute between two individuals and a closely held corporation operating a convenience store business known as Wright’s Variety. The Applicants, John Ho Son (also known as John Son) and Byung Hwa Son (also known as Susan Son), claimed to have invested funds in the business and asserted rights in relation to the corporation, 2691765 Ontario Inc. o/a Wright’s Variety, and its underlying property. The Respondents are Keun Ik Hwang (also known as Ken Hwang) and the corporate entity, 2691765 Ontario Inc. The dispute was brought before the Ontario Superior Court of Justice by way of application, and the reasons provided by MacNeil J. address a subsequent contested motion regarding enforcement of an alleged settlement and a request for injunctive relief, followed by a separate decision on costs.

Alleged settlement and underlying dispute

The Applicants brought a motion seeking an order to enforce a written settlement agreement that they said had been concluded between the parties in relation to the application. The alleged settlement was embodied in signed minutes of settlement, which the Applicants relied on as proof that a binding agreement existed to resolve the underlying ownership and contribution issues in the Wright’s Variety business. The Respondents resisted enforcement, disputing that a valid, enforceable settlement agreement had been formed. They also challenged the Applicants’ version of events regarding financial contributions, documentation and the overall narrative of how the business relationship had evolved. The motion record revealed that the parties’ relationship had become highly contentious. Although the court was not satisfied that the Applicants had proven an enforceable settlement agreement, it did accept that the parties’ conduct after the alleged settlement tended to indicate that “some kind of arrangement” had been reached between them. However, the evidence as a whole was characterized by serious factual disputes that could not be reliably resolved on motion materials alone and required a full trial with viva voce evidence and cross-examination.

Interlocutory injunction request

As an alternative to enforcing the alleged settlement, the Applicants asked the court for an interlocutory injunction restraining the Respondents from interfering with their operation of the corporation’s business. This injunctive relief, if granted, would have significantly affected the legal and practical control of the subject property and business. The Respondents opposed the injunction, highlighting the extraordinary nature of the relief sought and arguing that the Applicants’ evidentiary foundation was insufficient. The motion judge ultimately dismissed the injunction request on the record before the court. The dismissal was without prejudice, however, leaving open the possibility that the Applicants could revisit injunctive relief if new evidence emerged, particularly regarding any potential sale of the subject property.

Nature of the motion and need for a trial

In disposing of the motion, the court emphasized that the evidentiary disputes were too extensive and too serious to be determined in an interlocutory setting. The case, in the court’s view, was not well suited to proceed as an application, given the need for a fulsome record and live testimony. The motion judge concluded that a proper resolution of the parties’ competing accounts and documents could only be achieved at a trial, where viva voce evidence and cross-examination would allow the court to make dispositive credibility findings and determine the true nature of any agreement and contributions. Unlike some cases where motion outcomes give a clear indication of who is likely to prevail at trial, the court here found no such strong predictive sense and declined to treat the motion as producing “no real winners or losers” for purposes of costs.

Positions on costs and level of indemnity

After dismissing the motion, the parties were unable to agree on costs. The Respondents, as the successful parties on the motion, sought costs on a substantial indemnity basis of approximately $62,077.09 (including HST and disbursements), or, in the alternative, partial indemnity costs of approximately $47,780.90. They argued that elevated costs were justified by what they described as “egregious and abusive” conduct by the Applicants, alleging that the Applicants’ case relied on fraudulent misrepresentations, fraudulent documents and inconsistent evidence that complicated and lengthened the proceedings. They also pointed to the volume of the Applicants’ materials, including extensive affidavits, cross-examinations and translation issues that had to be addressed on an urgent basis, and emphasized the importance of the issues to them, as the relief sought would have permanently altered the legal status of the subject property. The Applicants took the position that costs should be in the cause and ultimately fixed by the trial judge, or, alternatively, that any costs should be fixed on a partial indemnity basis and capped at $20,000. They argued that the motion was interlocutory, dismissed without prejudice, and that the overall merits of the dispute remained to be determined at trial. They also disputed the Respondents’ characterization of the court’s earlier reasons, noting that the judge had not actually found their conduct to be “egregious and abusive,” nor that their case was based on fraudulent evidence. The Applicants further contended that their motion had been reasonably brought in light of the signed minutes of settlement and evidence of their investment in the business, and they argued that the Respondents’ hours were excessive and included clerical tasks that should not be recoverable as costs.

Application of modern costs principles

In fixing costs, the court reviewed the general framework under the Courts of Justice Act, Rule 57.01, the Tariff and related case law. Key considerations included the result on the motion, the importance and complexity of the issues, any offers to settle, the principle of indemnity, the parties’ reasonable expectations and the proportionality mandate in Rule 1.04(1.1). The court stressed that modern costs rules serve several purposes: partial indemnification of successful litigants, facilitating access to justice, discouraging frivolous proceedings, sanctioning improper conduct and encouraging settlement. Against that backdrop, the motion judge rejected the Respondents’ request for substantial indemnity costs. The references in the earlier decision to “egregious and abusive” conduct and to “fraudulent” misrepresentations and documents were clarified as merely recounting submissions made by counsel, not findings of the court. The judge held that the Applicants’ conduct had not been “reprehensible, scandalous or outrageous” in the sense required to justify substantial indemnity. Costs were therefore to be assessed on a partial indemnity basis. The judge accepted that the Respondents’ hourly rates, while high, were comparable to those charged by other Toronto counsel, including counsel for the Applicants, and thus were generally fair. However, the number of hours claimed was viewed as excessive for an interlocutory motion where the Applicants were the moving parties. The court also agreed that some of the work claimed appeared to be clerical in nature and should not be passed on to the losing party.

Outcome and costs award

Taking into account the Applicants’ own full litigation costs (roughly $54,392.25 plus disbursements of $3,745.08), the complexity and importance of the issues, the volume of materials and the interlocutory character of the motion, the court concluded that it was not unreasonable for the Applicants to have brought the motion and that they could reasonably have expected to pay costs if unsuccessful. The Applicants’ settlement offer was treated as relating to the application as a whole rather than the motion itself and was therefore not a significant factor in fixing motion costs. Balancing all of these considerations, the court ordered that the Respondents, as the successful parties on the motion, receive costs fixed on a partial indemnity basis in the amount of $30,000, inclusive of HST and disbursements, payable by the Applicants within 30 days of the release of the reasons. This award represents the total quantified monetary outcome in the decision; there was no separate determination of damages or other monetary relief at this stage, only a costs order in favour of the Respondents in the amount of $30,000.