Executive Summary: Key Legal and Evidentiary Issues

• Enforcement of a promissory note with a very high interest formula as a breach of contract claim.
• Assessment of whether additional relief for fraudulent misrepresentation should be granted, which the court ultimately rejected.
• Consideration of an anticipatory declaration under s. 178(e) of the Bankruptcy and Insolvency Act regarding non-dischargeability of the debt, which was declined.
• Determination that the plaintiff’s monetary recovery exceeded his formal offer to settle, affecting the approach to costs.
• Application of the Courts of Justice Act and Rule 57.01 factors to decide a fair and reasonable costs award.
• Evaluation of whether divided success on some legal issues justified each party bearing their own costs, which the court rejected in favour of a fixed costs award to the plaintiff.

Background and facts of the dispute
The case arises from a financial arrangement documented in a promissory note between the plaintiff, Paul Phuong Do, and the defendant, John Timothy Sinclair (also referred to as Sinclair). Do advanced funds to Sinclair under a promissory note that contained a formula for interest which resulted in very high interest accrual over time. As time passed, Sinclair did not repay the amounts owing in accordance with the note. The debt grew substantially because of the operation of the agreed interest formula. Ultimately, Do commenced an action against Sinclair in the Ontario Superior Court of Justice, asserting that Sinclair had breached the contract embodied in the promissory note by failing to pay the principal and the rapidly compounding interest. The case proceeded by way of a summary judgment motion rather than a full trial, meaning the court determined the claim on the written record and evidence placed before it, without hearing viva voce testimony.

Claims advanced and legal issues raised
Do’s primary claim was for breach of contract, seeking to enforce the promissory note and recover all principal and interest owing under its terms. In addition to the contractual claim, Do advanced an allegation of fraudulent misrepresentation, asserting that Sinclair’s conduct or representations warranted a finding of fraud and additional relief. Do also asked the court to grant an anticipatory declaration under s. 178(e) of the Bankruptcy and Insolvency Act, stating in effect that the debt would not be dischargeable in any future bankruptcy because it arose from fraud or similar misconduct. The court therefore had to consider not only whether the debt under the promissory note was owing, but also whether the higher threshold for fraud and for a bankruptcy-related non-dischargeability declaration had been met.

Promissory note and interest terms
The central instrument was the promissory note, which contained a formula that caused interest to accrue at a very high rate as time went on. Although the reasons in the costs decision refer to this generally, the specific text of the interest clauses and any detailed breakdown of the formula are not reproduced in the extracted decision. What is clear is that the court accepted the contractual calculation of principal and interest, and on the summary judgment motion it awarded Do the full damages he requested under the note. The court quantified Sinclair’s liability at $3,627,988.75 in principal and interest owing up to December 31, 2024, and recognized a per diem interest amount of $1,884.87 from January 1, 2025 to the date of judgment, which came to a further $804,839.49. The decision therefore reflects judicial enforcement of the agreed high-interest formula rather than any rewriting of the bargain between the parties.

Summary judgment decision on liability and damages
On March 3, 2026, the court (Mathen J.) granted summary judgment in favour of Do. The judge found that Sinclair was liable to Do under the promissory note and that the damages claimed for principal and accrued interest were proven and recoverable. The court awarded Do the full amount he requested on the contract claim, resulting in the large monetary judgment described above. However, the court did not accept all aspects of Do’s legal theory. The claim for fraudulent misrepresentation was rejected, meaning the court did not find that Sinclair’s conduct met the evidentiary standard for fraud. The court also declined to issue the anticipatory declaration under s. 178(e) of the Bankruptcy and Insolvency Act, so there was no ruling that the debt would automatically survive any future bankruptcy proceeding by Sinclair. Nonetheless, on the critical issue of liability under the promissory note and the quantum of damages, Do was fully successful.

Offer to settle and its impact on costs
An important feature of the case was Do’s formal offer to settle, made on February 18, 2025. Under that offer, Do proposed to settle the action for $752,416 in principal and interest, plus $50,000 in costs, for a total compromise amount of $802,416. This offer did not seek any relief related to fraudulent misrepresentation or a Bankruptcy and Insolvency Act declaration. The eventual judgment far exceeded that offer: the court fixed Sinclair’s liability at $3,627,988.75 for principal and interest up to December 31, 2024, plus a further $804,839.49 in per diem interest to the judgment date. The contrast between the modest settlement offer and the significantly larger judgment highlighted the commercial risk Sinclair took by not accepting the offer and informed the court’s view that Do had achieved substantial, not marginal, success in the litigation.

Costs positions of the parties after judgment
Following the summary judgment decision on March 3, 2026, the court invited the parties to attempt to agree on costs. They were unable to do so, and each filed written costs submissions. Do sought a total of $58,499.81 in legal costs, plus disbursements of $5,259.47. He proposed that costs be awarded on a partial indemnity basis from the start of the claim until February 18, 2025, totalling $22,168.93, and on a substantial indemnity basis thereafter, totalling $31,071.41. In contrast, Sinclair argued that success was divided because Do had not succeeded on the fraudulent misrepresentation claim or the Bankruptcy and Insolvency Act declaration. On that basis, Sinclair asked the court to order that each party bear its own costs. The costs decision therefore turned on whether Do should be treated as the successful party overall, despite having some claims dismissed, and on what level of indemnity would be fair and reasonable.

Court’s analysis on success and costs
In the costs reasons, the court applied s. 131(1) of the Courts of Justice Act and Rule 57.01 of the Rules of Civil Procedure, emphasizing that costs are presumptively awarded to the successful party and must be fair and reasonable for the unsuccessful party to pay in the circumstances. The judge accepted that success was not purely one-sided; Do failed on some legal issues, particularly fraudulent misrepresentation and the Bankruptcy and Insolvency Act relief. However, the court concluded that this did not convert the case into one of genuinely divided success warranting no costs order. Do “prevailed on the motion” in a meaningful sense because he obtained summary judgment for a very large sum of money—far more than his own offer to settle—and his main contractual objective was achieved. At the same time, the court rejected Do’s request for substantial indemnity costs, holding that such an elevated level of indemnity was not required to recognize his success and would not be fair to Sinclair.

Fixing a fair and reasonable costs award
The judge examined Do’s Bill of Costs and found both the work performed and the hourly rates to be reasonable in the circumstances of the litigation. Nonetheless, rather than grant the full amount sought or adopt Sinclair’s position of no costs, the court selected a fixed quantum that it considered proportionate. The court fixed costs at $40,000, including fees (and implicitly reflecting the court’s view of a fair contribution to Do’s legal expenses), noting that this figure fell within the reasonable contemplation of the defendant. This sum was ordered payable by Sinclair to Do as an additional financial consequence of the unsuccessful defence of the action and the decision to proceed rather than accept the earlier, much lower settlement offer.

Overall outcome and total monetary consequence
Taken together, the earlier summary judgment decision and the later costs decision produce a clear overall outcome. Do is the successful party on the core contractual dispute, having enforced the promissory note and secured judgment for the entire debt claimed. The court quantified Sinclair’s liability at $3,627,988.75 in principal and interest up to December 31, 2024, plus a further $804,839.49 in per diem interest from January 1, 2025 to the date of judgment, and then ordered Sinclair to pay an additional $40,000 in costs. In total, the monetary consequence in favour of Do, based on the figures in the decisions, is approximately $4,472,828.24.