Executive Summary: Key Legal and Evidentiary Issues

• Discretionary costs jurisdiction under s. 131 Courts of Justice Act and rule 57.01, including when substantial indemnity costs are appropriate.
• Serious fraud and dishonesty allegations made by the plaintiff, then left unresolved when he failed to bring the action to trial.
• Evidentiary concerns about the plaintiff omitting relevant documents from his affidavit of documents and giving inconsistent evidence about his legal costs.
• Prolonged delay, repeated extensions to set the matter down for trial, and abandonment of the action leading to its administrative dismissal.
• Application of case law on when elevated (substantial indemnity / solicitor-client type) costs are justified as a sanction for “reprehensible” litigation conduct.
• Allocation and quantum of costs for both the underlying action and the subsequent costs motion, distinguishing substantial and partial indemnity scales.

Background and parties

This case arises from a long-running civil and commercial dispute in the Ontario Superior Court of Justice. Imad Al-Shawi was the plaintiff and defendant by counterclaim. The opposing side consisted of three defendants, who were also plaintiffs by counterclaim: Hassen Al-Hakim (also known as Hassen El-Hakim), Hazem Taiey (also known as Hazem El-Taiey), and the corporate party 1635003 Ontario Limited operating as Vida La Pita. The litigation began in February 2017 and related to a business dispute in which the plaintiff sought very substantial damages exceeding $3.7 million. Over time, a counterclaim was also advanced by the corporate defendant for $100,000. Ultimately, however, the merits of the underlying claims were never adjudicated at trial. Instead, the action was administratively dismissed on November 6, 2025 after years of inactivity. The decision at issue is an endorsement dated February 17, 2026, focused solely on the question of costs in light of the history of the litigation and the conduct of the parties.

Claims and allegations

From the outset, the plaintiff pursued aggressive allegations of misconduct against the defendants. In his Statement of Claim, he pleaded that the defendants had made fraudulent representations and acted fraudulently and in bad faith, particularly at paragraphs 26 and 28. These allegations were not limited to the pleadings: they were repeated in an affidavit filed by the plaintiff in support of a motion, and in oral submissions where Mr. Al-Shawi asserted that the defendants forged documents and were dishonest. The corporate defendant, for its part, counterclaimed for $100,000, although the defendants later acknowledged that they were not seeking their costs of that counterclaim. The core of the plaintiff’s case was therefore framed as a serious fraud-based commercial claim. The defendants rejected these accusations and, when the action did not proceed to trial, they were left with serious fraud allegations still on the public record but never tested in court. This context of unproven but grave accusations later became central to the court’s assessment of the appropriate scale of costs.

Procedural history and delay

Procedurally, the matter unfolded over several years with considerable activity but no progression to trial. There were two rounds of discoveries and document exchanges. At the plaintiff’s examination for discovery, he admitted that he had omitted relevant documents from his affidavit of documents, raising concerns about his fulfilment of disclosure obligations. Both sides attended examinations for discovery in July 2018, with further discoveries of the defendants in December 2021, contradicting the plaintiff’s later assertion that the defendants had avoided discovery for four years. The plaintiff brought various motions, some of which were partially resolved on consent, but he never returned to address the issue of costs on those motions. He also brought motions to extend the time to set the action down for trial but, despite obtaining extensions, he never actually set the matter down. Over roughly seven years, the case advanced in fits and starts until, after further inactivity, the action was administratively dismissed on November 6, 2025.

Plaintiff’s explanation and cost-related evidence

When the defendants moved for costs following the administrative dismissal, Mr. Al-Shawi filed a brief four-paragraph responding affidavit. In it, he alleged that the defendants had delayed the action for many years, that he had been hospitalized in October 2024, and that he had made an offer to settle by dismissing the action without costs, which the defendants did not accept. He then delivered a notice of intention to act in person and took no further steps. In submissions, the plaintiff contended that he could not continue the case because of defence delays, the time and money required to progress the litigation, and his health issues, which he claimed were caused by the stress of the proceedings. He said he had discussed abandoning the fraud allegations with his former lawyer and eventually ran out of funds to litigate. However, the defendants relied on invoices the plaintiff had himself provided, showing that he had incurred $55,367.64 in legal costs. In an earlier offer dated September 11, 2024, the plaintiff had claimed $145,000 in costs, and in oral submissions he stated his costs were about $120,000. These different figures led the court to observe that his submissions about the costs he incurred conflicted with his own sworn evidence and prior offers, undermining his credibility on that point.

Legal framework for costs and elevated scales

The judge began by reviewing the general principles that govern costs in Ontario civil proceedings. Under section 131 of the Courts of Justice Act, and subject to any statute or rules, costs are in the discretion of the court. In exercising that discretion, the court must consider the result in the proceeding, any relevant offers to settle, and the non-exhaustive list of factors in rule 57.01 of the Rules of Civil Procedure. Key authorities such as Zesta Engineering Ltd. v. Cloutier and Davies v. Clarington (Municipality) emphasize that costs awards should reflect what is fair and reasonable, rather than a mechanical reimbursement of actual legal fees, and that a judge must “step back” and assess whether the overall result is just in the circumstances. The endorsement then canvasses case law on when a higher scale of costs (substantial indemnity or solicitor-client-type costs) may be appropriate. Absent an operative rule 49 offer, such elevated costs are generally reserved for rare and exceptional cases, typically involving reprehensible, scandalous, or outrageous conduct by a party. The court cited leading decisions such as Young v. Young, Mortimer v. Cameron, McBride Metal Fabricating Corp. v. H. & W. Sales Co., Hunt v. TD Securities Inc., Hamilton v. Open Window Bakery Ltd., and Manning v. Epp. These cases establish that unproven allegations of fraud, dishonesty, breach of trust, conspiracy, and similar conduct—especially when inadequately pleaded or abandoned—can attract substantial indemnity or solicitor-client costs as a form of chastisement. The underlying rationale is that such accusations attack a person’s integrity and can cause serious reputational harm, and so costs may be used to punish and deter unwarranted or reckless allegations without discouraging the proper pursuit of serious impropriety in appropriate cases.

Application of principles to the plaintiff’s conduct

Applying these principles, the court focused squarely on how the plaintiff had conducted the litigation. He had alleged fraud and dishonesty in his pleadings, affidavits, and submissions, yet he did not take the case to trial. Instead, he repeatedly sought extensions of time to set the action down but never did so, and ultimately allowed the action to become dormant and be administratively dismissed. Throughout this period, the defendants had to live with untested allegations of fraud and forgery hanging over their reputations. The judge rejected the plaintiff’s explanations that the defendants had avoided discovery for four years, finding that the documentary record of discoveries contradicted this claim. The court also viewed negatively the plaintiff’s admission that he had omitted relevant documents from his affidavit of documents and the fact that he initiated motions but did not bring them to a proper conclusion. His varying and inconsistent figures for his own legal costs—documents showing approximately $55,000, an offer seeking $145,000, and oral submissions claiming about $120,000—reinforced the impression that his evidence and submissions on costs lacked reliability. The judge concluded that this overall pattern of conduct, particularly making serious fraud allegations and then abandoning the case after years of delay, amounted to behaviour warranting sanction and chastisement. This, in the court’s view, justified an award of costs on a substantial indemnity basis for the action.

Outcome and costs awarded

In the result, the court determined that the defendants were clearly entitled to their costs of the action following its administrative dismissal. Having considered the costs claimed and incurred by both sides, the applicable legal principles, the rule 57.01 factors (including the importance of the issues, the very large amount claimed by the plaintiff, the defendants’ $100,000 counterclaim, and the steps taken in the proceeding), as well as what the plaintiff could reasonably have expected to pay and what would be fair and reasonable overall, the judge fixed the costs of the action at $38,535 on a substantial indemnity basis, payable by the plaintiff to the defendants. In addition, the defendants sought costs of the costs motion itself in the amount of $4,209 on a partial indemnity basis, pointing out that two appearances were required and that the entire file had to be reviewed to prepare the motion materials. The plaintiff argued that each party should bear its own costs for the motion, again relying on his general fairness arguments and his view of how the litigation had unfolded. The court rejected this submission, holding that the defendants, having been successful on the motion, were entitled to their costs. Those costs were fixed at $3,750 all-inclusive on a partial indemnity basis. Taken together, the endorsement ordered that the plaintiff pay the defendants a total of $42,285 in costs ($38,535 for the action plus $3,750 for the motion), thereby confirming the defendants as the successful parties in this costs phase of the litigation and providing them with a significant monetary recovery on account of the plaintiff’s conduct and the manner in which the proceedings were pursued and ultimately abandoned.