Hurontario Property Development Corporation et al. v. Pinewood Business Interiors Inc. et al.

[Indexed as: Hurontario Property Development Corp. v. Pinewood Business Interiors Inc.]

108 O.R. (3d) 359

2011 ONSC 5476

Ontario Superior Court of Justice,

Divisional Court,

Chapnik, Hoy and Hourigan JJ.

September 30, 2011

Corporations -- Oppression -- Costs -- Substantial indemnity -- Defendant extracting all of equity in joint venture properties and transferring it to companies which he controlled -- Trial judge finding defendants' conduct to be oppressive to other joint venturers and that plaintiffs were entitled to accounting -- Trial judge not erring in awarding plaintiffs costs on substantial indemnity basis -- Defendants' conduct reprehensible, scandalous and outrageous.

Corporations -- Oppression -- Remedies -- Accounting -- Defendant extracting all of equity in joint venture properties and transferring it to companies which he controlled -- Trial judge finding defendants' conduct to be oppressive to other joint venturers and that plaintiffs were entitled to accounting -- Defendants' appeal dismissed -- Trial judge not erring in his accounting.

W and V, through their companies, entered into a joint venture agreement (the "JVA") for the development of properties owned by W's companies. The JVA contemplated an equal split of any proceeds. Without W's knowledge, and in clear breach of a trust agreement which formed part of the JVA, V caused mortgages to be placed on the properties. Net proceeds from the mortgages were transferred to companies owned by V. The properties were sold to the Ministry of Transportation for $3 million. Virtually all of the net proceeds were transferred to companies owned by V. W and his companies sued V and his company, alleging oppressive conduct on their part. The trial judge found that the conduct of the defendants in extracting all of the equity in the joint venture properties and transferring it to companies controlled by V to be oppressive. He found that the plaintiffs were entitled to an accounting. Based on the accounting that he conducted, he ordered the defendants to pay the plaintiffs $770,192.20. He ordered the defendants to pay costs on a substantial indemnity basis throughout the proceeding. The defendants appealed. The plaintiffs cross-appealed, arguing that the trial judge erred in his calculation of their capital allocation.

Held, the appeal should be dismissed; the cross-appeal should be allowed.

There was no basis to interfere with the trial judge's valuation of the properties. The trial judge did not err in refusing to credit the defendants with development costs alleged to have been incurred between July 31, 2004 and October 12, 2005. While the court, in fashioning a remedy in oppression proceedings, cannot go beyond a restorative order to punish a party for its wrongful conduct, there was nothing punitive about the order regarding development costs. The onus was on the defendants to establish that a deduction should be made for development costs. Despite a court order, they failed to produce supporting documentation. The trial judge drew an adverse inference from that failure. There was no requirement that the trial judge direct a reference if he was not satisfied with the production made by the defendants. Nothing in the manner in which they had defended the proceeding suggested that the defendants would have [page360] complied with their production obligations on a reference. The trial judge did not err in allocating profits from the joint venture on an equal basis as provided for in the JVA.

The trial judge did not err in awarding the plaintiffs substantial indemnity costs throughout the proceeding. The defendants' conduct was reprehensible, scandalous and outrageous. To deny substantial indemnity costs in this case of serious corporate malfeasance would be to set the bar for such costs impossibly high.

In determining the amount to which the plaintiffs were entitled, the trial judge erred in deducting 50 per cent of the increase in the principal amount of a mortgage which was made with the plaintiffs' knowledge and 50 per cent of the costs incurred in doing so. It was implicit in the trial judge's deduction of development costs as a separate item that such costs were not paid for out of mortgage proceeds and that the defendants received the benefit of the mortgage payments. The additional deductions made by the trial judge resulted in the defendants receiving double credit for development costs.

APPEAL AND CROSS-APPEAL from a judgment in action for an oppression remedy.

Cases referred to Hurontario Property Development Corp. v. Pinewood Business Interiors Inc. (2010), 100 O.R. (3d) 261, [2010] O.J. No. 63, 2010 ONSC 260, 67 B.L.R. (4th) 79; Naneff v. Con-Crete Holdings Ltd. (1995), 1995 959 (ON CA), 23 O.R. (3d) 481, [1995] O.J. No. 1377, 85 O.A.C. 29, 23 B.L.R. (2d) 286, 55 A.C.W.S. (3d) 86 (C.A.); Stabile v. Milani Estate, [2004] O.J. No. 2804, 46 B.L.R. (3d) 294, 2004 867, 132 A.C.W.S. (3d) 477 (C.A.)

Statutes referred to Business Corporations Act, R.S.O. 1990, c. B.16, s. 248 [as am.]

Rules and regulations referred to Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rule 61.08

Simon Schneiderman, for plaintiffs (respondents). Kenneth Hood, for defendants (appellants).

BY THE COURT: --

Overview

[1] This is an appeal by the defendants of the trial decision of Justice Marrocco dated January 11, 2010 [(2010), 2010 ONSC 260, 100 O.R. (3d) 261, [2010] O.J. No. 63 (S.C.J.)] and his costs endorsement dated February 18, 2010.

[2] The litigants are parties to a joint venture regarding certain properties in the City of Mississauga. The trial judge found that the respondents had been oppressed within the meaning of s. 248 of the Ontario Business Corporations Act, R.S.O. 1990, c. B.16 and found that they were entitled to an accounting. He [page361] held, based on the accounting that he conducted at trial, that the appellants Pinewood Business Interiors ("Pinewood") and its principal John Vandyk owed the respondents the total sum of $770,192.20, inclusive of interest, and granted judgment accordingly.

[3] In his costs endorsement, the trial judge ordered Pinewood and Mr. Vandyk to pay costs on a substantial indemnity basis throughout the proceeding to the respondents in the amount of $177,524.31.

[4] Pinewood and Mr. Vandyk appealed, challenging virtually every aspect of the trial judge's decision, including his finding of oppression. At the hearing of the appeal, the issues were narrowed considerably. The appellants abandoned most of their grounds of appeal and focused on two issues, namely, the remedy ordered and the costs awarded.

[5] The respondents cross-appealed, arguing that the trial judge erred in his calculation of their capital allocation.

[6] For the reasons that follow, the appeal is dismissed and the cross-appeal is allowed. In summary, the arguments raised by the appellants were all carefully considered and rejected in the trial judge's reasons, save for two issues which were not raised at either the trial or in their notice of appeal and were accordingly not properly before this court. On the cross- appeal, the trial judge's reduction in the capital allocation to the respondents was not warranted in the circumstances.

Background Facts

[7] Alexander Wandich owned properties located on Hurontario Street in Mississauga, Ontario through companies he controlled, Hurontario Property Development Corporation ("Hurontario Property") and 1163252 Ontario Inc. ("1163252"). The mortgage on the properties went into default in September of 1998. The mortgagee issued a Notice of Sale and eventually executed an agreement to sell the properties for $900,000.

[8] Mr. Vandyk, a real estate developer, approached Mr. Wandich about the possibility of entering into a joint venture to develop and sell the properties, and Mr. Wandich agreed. Mr. Vandyk made an offer of $1.2 million for the properties, and Mr. Wandich used this offer to convince the mortgagee to stop its sale proceedings and permit Hurontario Property and 1163252 to bring the mortgage back into good standing.

[9] Mr. Vandyk entered into a Memorandum of Understanding (the "MOU") with Hurontario Property and 1163252 on October 3, 2000. The MOU contemplated that the parties would build 21 residential units on the properties. Pursuant to the MOU, the [page362] title to the properties was transferred to 1400545 Ontario Ltd., which was to hold the properties as bare trustee. Messrs. Vandyk and Wandich were each to have a 50 per cent ownership interest in the properties and split the profits from the venture equally. The MOU further provided that Mr. Vandyk was primarily responsible for the management of the joint venture.

[10] Mr. Vandyk was to obtain his 50 per cent interest by assuming 50 per cent of the liabilities relating to the properties, paying the mortgage interest arrears and paying $104,744.73 to Hurontario Property/116352. Mr. Vandyk also paid $82,929.88 for legal fees related to the previous power of sale proceedings and outstanding realty tax arrears.

[11] A mortgage in favour of Foremost Financial Corp. for $650,000 was registered on the properties in May 2001 and matured June 1, 2002. This mortgage was obtained with the knowledge and consent of Mr. Wandich. It was replaced in August 2003 by another mortgage in favour of the same mortgagee in the amount of $950,000. That mortgage matured on July 1, 2004. Again, Mr. Wandich was aware of and consented to the registration of this mortgage.

[12] In April of 2003, the City of Mississauga placed a holding zone on the properties because the Ministry of Transportation (the "MTO") was interested in acquiring all or part of them for the purposes of highway expansion.

[13] On July 29, 2003, Pinewood, Hurontario Property and 1163152 entered into a Joint Venture Agreement (the "JVA"). Like the MOU, the new JVA contemplated the potential development of the properties and an equal split of any proceeds realized. It also stipulated that the capital contributions of the parties to the joint venture were $221,250 each. The formal parties to the agreement were Pinewood, Hurontario Property and 1163152.

[14] In November of 2004, Mr. Vandyk caused a mortgage to be placed on the properties in the amount of $1,150,000. This action was taken without the knowledge of Mr. Wandich and was a clear breach of the Trust Agreement which formed a part of the JVA. Net proceeds of $57,450.69 from the mortgage were transferred to companies owned by Mr. Vandyk.

[15] In March of 2005, Mr. Vandyk placed another mortgage on the properties, this time in the amount of $1.9 million. Mr. Vandyk directed the net proceeds of $742,000 from this mortgage to be deposited in the bank account of a company owned by him.

[16] In October of 2005, the properties were sold to the MTO for $3 million. Net proceeds of $1,099,584.20 were received from [page363] the sale and the same day virtually all of the proceeds were transferred to companies controlled by Mr. Vandyk.

Decision of Justice Marrocco

[17] The respondents sued Pinewood and Mr. Vandyk, alleging, among other things, oppressive conduct on their part.

[18] As noted above, the trial judge found in favour of the respondents and granted judgment in the amount of $770,192.20. In comprehensive reasons for judgment, the trial judge found that the conduct of the appellants in extracting all of the equity in the joint venture properties and transferring it to companies controlled by Mr. Vandyk was oppressive to the respondents.

[19] At para. 124 of his reasons, the trial judge found that the accounting was as follows: (i) The sale price of the property, by agreement of the parties, is $3,078,821; (ii) The value of the land at the inception of the joint venture is $1,102,500; (iii) Development costs are $694,430; (iv) The management fee to be credited to Mr. VanDyk is $123,153; (v) The net profit is $1,158,738, 50% of which, or $579,369, is allocated to the plaintiffs; (vi) The capital allocated at the inception of the joint venture to the plaintiffs has to be adjusted to allow for the $290,000 mortgage increase from $660,000- $950,000. In addition, the costs of renewing that mortgage ($16,768.20) also must be allowed for. At the inception of the joint venture, the capital allocated to the plaintiffs was $221,250. Accordingly, the capital allocated to the plaintiffs at the inception of the joint venture, $221,250, will be reduced by 50% of $306,768 (i.e. $290,000 plus $16,768.20) or $153,384. Accordingly, the plaintiffs' capital allocation as adjusted will be $67,866. In addition, according to the 2004 financial statements, there were draws from the plaintiffs' capital account in the amount of $43,257. These draws must also be deducted from the plaintiffs' capital allocation, leaving an allocation of $24,609; (vii) Finally, it was agreed that Mr. VanDyk failed to pay Mr. Wandich $31,250, which he had promised to pay when the Memorandum of Understanding was signed. This is, in effect, a capital account over-payment by the plaintiffs I have also decided that interest will accrue from October 12, 2005 and not October, 2000 when the Memorandum of Understanding was signed; and, (viii) Accordingly, the plaintiffs are owed $579,369, plus $24,609 return of their capital, plus $31,250 on account of Mr. VanDyk's initial failure to honour the Memorandum of Understanding. The total owing to the plaintiffs is $635,228. [page364]

Standard of Review

[20] The standard of review of a trial judge on a question of fact or mixed fact and law is palpable or overriding error (i.e., where no reasonable court could have reached such conclusions because they are based on a plainly erroneous factual conclusion). The standard of review on a question of law is one of correctness (see Stabile v. Milani Estate, [2004] O.J. No. 2804, 2004 867 (C.A.)).

[21] An appeal court will only interfere with a trial judge's decision in an oppression remedy proceeding where the appellant has established that there was an error in principle or the remedy in all of the circumstances was unjust (see Naneff v. Con-Crete Holdings Ltd. (1995), 1995 959 (ON CA), 23 O.R. (3d) 481, [1995] O.J. No. 1377 (C.A.)).

Issues on the Appeal

[22] The appellants take issue with six components of the trial judge's accounting: (i) the value of the properties at the time of joint venture; (ii) the development costs incurred; (iii) the percentage profit allocation; (iv) the capital allocation to the plaintiffs; (v) the failure to include a marketing fee payable to Mr. Vandyk; and (vi) the failure to include a payment owing to Mr. Vandyk pursuant to the MOU. As noted above, the appellants also challenge the trial judge's decision to award costs on a substantial indemnity scale throughout the proceeding. These issues are dealt with in turn below. [See Note 1 below]

(i) The value of the properties

[23] The appellants submit that the trial judge erred in concluding that the value of the properties arrived at by Mr. Vandyk and Mr. Wandich for purposes of their joint venture in October of 2000, being $1,102,500, accurately reflected their value. They argue that the correct value was $900,000, which was the price at which the mortgagee had been prepared to sell the properties when it exercised its power of sale.

[24] The value of $1,102,500 is amply supported by the evidence, including the JVA, which valued the properties at that figure. While it is true that the JVA contemplated the development [page365] of 21 units, it is evident, as will be discussed below, that both parties contemplated the potential expropriation of all or part of the properties.

[25] In addition, the appellants filed corporate tax returns after the lands were sold using $1,102,500 as the cost base.

[26] There is no basis to interfere with the valuation of the properties as determined by the trial judge. This was the value that the parties agreed to and to ascribe a value based on the price obtained in a power of sale proceeding ultimately abandoned would be entirely arbitrary.

(ii) Development costs

[27] The trial judge credited the appellants with contributing $694,430 toward development costs and refused to award any amount for costs alleged to have been incurred between July 31, 2004 and October 12, 2005.

[28] In so doing, he found that the financial information utilized by the joint venture's accountant in preparing the 2004 unaudited financial statements was reliable as it was provided by the then chief financial officer for the Vandyk group of companies, Ralph Peters, whom the trial judge found to be a credible witness. For the purposes of the accounting, the trial judge accepted that the development costs of $694,430 set out in the 2004 unaudited financial statements were an accurate reflection of the development costs of the joint venture to that date.

[29] The trial judge further found that the evidence of Richard Ma, who assumed the position of chief financial officer of the Vandyk group of companies following Mr. Peters' departure, was wholly unreliable and that an adverse inference should be drawn from the failure of Mr. Ma to produce supporting invoices for expenses in the general ledger of the joint venture. He found that the joint venture's general ledger and unaudited financial statements prepared during Mr. Ma's tenure were unreliable and that, consequently, no amount for development costs allegedly incurred after July 31, 2004 should be allowed for the purposes of the accounting.

[30] The appellants submit that they should be credited for development costs in the total amount of $906,902, being the amount of costs claimed in their negotiations with the MTO. They also argue that the trial judge in refusing to credit them for expenses incurred after July 31, 2004 went beyond his authority to make an order to "rectify the matters complained of" as contemplated by the OBCA and made an order which was punitive in nature to mark the court's disapproval of the appellants' wrongful conduct. [page366]

[31] It is common ground between the parties and a well- established legal principle that a court in fashioning an appropriate remedy in an oppression proceeding must strive to correct the impact of the wrongful conduct and restore the parties' economic relationship in a manner which is consistent with their reasonable expectations. The court cannot go beyond a restorative order to punish a party for its wrongful conduct (see Naneff, at paras. 30-35).

[32] The question for determination is whether the trial judge made an order which was punitive in nature. In our view, there is nothing punitive about the order regarding development costs and there is no basis to interfere with that order.

[33] The onus was on the appellants to establish that a deduction should be made for the development costs. Despite a court order, they failed to produce supporting documentation. The trial judge drew an adverse inference from the failure to produce the documents and also concluded, as he was entitled to do, that Mr. Ma was not a believable witness and attached no weight to his evidence.

[34] We can see no error in the conclusion that he reached. The trial judge was faced with the unenviable task of conducting an accounting with a dearth of information. He did not have a sufficient evidentiary basis to quantify what costs were incurred post July 31, 2004 because the appellants defied a court order to produce the supporting documentation. In short, the appellants are the authors of their own misfortune.

[35] We expressly reject the argument advanced by the appellants that if the trial judge was not satisfied with the lack of production made by them he should have directed a reference. Such an argument presumes that the appellants would on a reference comply with their production obligations. There is nothing in the manner in which they defended the proceeding which would suggest that the appellants could be relied upon to make proper production.

[36] In any event, the manner in which the trial judge conducted the accounting effectively recognized development costs of more than $694,430. It was unclear what portion of the increase in the mortgage in August of 2003 was used to fund development expenses in relation to the joint venture, and therefore what portion of the mortgage debt was properly deductible in calculating the cash surplus to be apportioned between the appellants and the respondents in accordance with the JVA.

[37] In calculating the cash surplus, the trial judge, in para. 124(ii) of his reasons, deducted the value of the land at the start of the joint venture (calculated on an unencumbered basis), [page367] as opposed to the amount of the mortgage outstanding at the time of sale. While neither the appellants nor the respondents appeared to understand why this approach was taken by the trial judge, they do not object to his having done so, although, as noted above, the appellants have objected to the value of the land determined by the trial judge for the purpose of that calculation.

[38] To the extent that the trial judge deducted development costs, he effectively assumed that mortgage proceeds were not used to fund them. (To the extent that mortgage proceeds were used to fund development expenses, development expenses need not have been separately accounted for. They were paid. Deducting them again would amount to accounting for them twice.) While not argued, in deducting more than the mortgage outstanding at the start of the joint venture, the trial judge effectively allowed the appellants development costs in excess of $694,430.

(iii) Percentage profit allocation

[39] The trial judge allocated profits from the joint venture on an equal basis as was provided for in the JVA. The appellants submit that he erred in allocating profits in this manner and that the proper allocation should have been 84 per cent to the appellants and 16 per cent to the respondents based upon the appellants' calculation of the parties' relative contributions to the venture.

[40] At the heart of this submission is the appellants' contention that the expropriation of the properties frustrated the JVA such that the allocation provided for therein was no longer appropriate. They argue that the JVA contemplated the development of 21 units and did not contemplate an expropriation.

[41] The argument that the JVA was frustrated by the expropriation was expressly rejected by the trial judge [at paras. 98-102]:

It was suggested by the defence that the sale to the MTO was not within the contemplation of the parties and that the interference by the MTO effectively frustrated the joint venture agreement.

I am satisfied that the possible expropriation of the property was within the contemplation of the parties. First, Glen Schnarr and Associates Inc., in a letter dated, September 20, 2004, indicated that the MTO had been interested in any development proposal dealing with the joint venture properties from 1992 onwards. Mr. William Oughtred testified that Mr. Schnarr's statement accorded with his (Mr. Oughtred's) memory of the matter. Mr. Oughtred was working as a planner in Mississauga in 1992. [page368]

Mr. VanDyk was familiar with the property, not only because he was a successful developer in Mississauga, but also because he was developing property on Hurontario Street a short distance from the joint venture property. It is absurd to suggest that he did not know that the MTO was concerned about the Hurontario Street-QEW interchange and, therefore, interested in any development proposal concerning the joint venture property.

Finally, Article 39.01 of the joint venture agreement specifically provides that "any proceeds received with respect to the development of the real property (including but not limited to all mortgage advances, expropriation proceeds, sale proceeds, etc.) shall be deposited into the VanDyk-Mary Fix Creek Developments Limited bank account." (Emphasis added)

I am satisfied that the possibility that the property might be expropriated or sold to the MTO was within the contemplation of Mr. VanDyk and Mr. Wandich and, therefore, within the contemplation of the plaintiffs and defendants when they signed the joint venture agreement.

[42] It is evident that the trial judge had ample grounds for reaching the conclusion that the JVA was not frustrated. There is no basis to interfere with the trial judge's conclusion that the JVA was not frustrated by the expropriation. Accordingly, there is no ground to rewrite the profit allocation provided for in the JVA and the parties should be bound by their contract.

(iv) Capital allocation

[43] The appellants argue in their factum that the trial judge's calculation of the respondent's capital allocation was incorrect and that the correct finding was a capital allocation to the respondents of -$73,957 and not +$24,609 as found by the trial judge.

[44] This argument was not pursued in oral submissions. In any event, it is inappropriate to alter the capital allocation as the JVA fixed those amounts at $221,250 each and there is no provision in the JVA for any modification of those amounts.

(v) Marketing fee

[45] The appellants submit that the trial judge erred in failing to award them a 4 per cent marketing fee provided for in the JVA.

[46] It is hardly surprising that no credit was given for the marketing fee given that the appellants did not raise this issue in their pleadings or at trial. Moreover, the appellants did not identify the marketing fee as a ground of appeal in their lengthy Notice of Appeal. [page369]

[47] Pursuant to rule 61.08, Rules of Civil Procedure, R.R.O. 1990, Reg. 194, no grounds other than those raised in a Notice of Appeal may be relied upon at the hearing of appeal except with leave of the court.

[48] No motion for leave was brought by the appellants. This issue was not properly before this court and, therefore, we decline to make any adjustment for the marketing fee.

(vi) MOU payment

[49] The appellants seek a credit in the amount of $82,920, which they say they were entitled to receive pursuant to terms of the MOU.

[50] Similar to the issue of the marketing fee, the claim to these funds was not included in the appellants' pleadings, was not raised at trial and was not included in the Notice of Appeal. Therefore, the issue was not properly before this court on the appeal.

[51] In any event, it is clear that the MOU was superseded by the JVA and that this sum was included in the appellants' capital allocation in the JVA. In other words, the appellants have already received full credit for this amount. Consequently, there is no basis to interfere with the trial judge's accounting on this issue.

(vii) Costs of the trial

[52] The appellants submit that the trial judge erred in awarding costs to the respondents on a substantial indemnity basis throughout the proceeding.

[53] They concede that such an award was appropriate for the period after October 7, 2009, when the respondents served an offer to settle which was significantly less than the judgment at trial. However, they argue that the trial judge erred in awarding substantial indemnity costs throughout the proceeding simply on the basis that there had been a finding of oppression. The appellants submit that costs on a higher scale are only awarded in an oppression case where the conduct of the defendants is reprehensible, scandalous or outrageous.

[54] This argument is without merit. It is clear upon a reading of the trial judge's costs endorsement that he was well aware of the applicable legal principles. Indeed, he cites the relevant paragraphs of Naneff, wherein the Court of Appeal held that costs on a higher scale were warranted given the manner in which the defendants conducted the trial and not simply on the basis of a finding of oppression. [page370]

[55] In his costs endorsement, the trial judge went on to reference the appellants' conduct, including their refusal to produce documents despite a court order and the fact that they "simply kept and failed to account for the proceeds from the joint venture".

[56] There is no error in the decision of the trial judge to award costs on a substantial indemnity basis throughout the proceeding. The appellants' conduct was reprehensible, scandalous and outrageous.

[57] To say that this was joint venture that went bad is to grossly understate the nature and extent of the dishonest conduct perpetrated by Pinewood and Mr. Vandyk. This was not merely a case of oppressive conduct, it was a concerted act of what the trial judge quite properly found to be corporate "looting". This was a case where the entirety of the profits from the joint venture were defalcated by the appellants. To deny substantial indemnity costs in this case of serious corporate malfeasance would be to set the bar for such costs awards impossibly high.

The Counterclaim

[58] The respondents cross-appeal the deduction by the trial judge, in para. 124(vi) of his reasons, of 50 per cent of the $290,000 increase in the principal amount of the mortgage made with the respondents' knowledge and 50 per cent of the $16,768.20 of costs incurred in doing so, in determining the amount to which the respondents were entitled.

[59] We accept the respondents' submission that the trial judge erred in doing so. In our view, implicit in the trial judge's deduction of development costs as a separate item is that such costs were not paid for out of mortgage proceeds, and that the appellants received the benefit of the mortgage payments. The additional deductions made by the trial judge result in the appellants receiving double credit for development costs. Whether or not the respondents approved of the increase in the principal amount of the mortgage is a "red herring"; what is relevant is the use of those funds. Accordingly, the cross-appeal is allowed and the deduction in the respondents' capital allocation in the sum of $153,384 is deleted from the calculation.

Costs of the Appeal

[60] The respondents as the successful parties are entitled to their costs of the appeal and the cross-appeal. They have submitted two bills of costs, one is on a substantial indemnity basis [page371] and in the amount of $34,577.88 and the other is on a partial indemnity basis and in the amount of $28,414.03.

[61] The appellants did not submit a bill of costs but did not take issue with amounts claimed. However, Mr. Hood argued that if his clients were unsuccessful on the appeal an award of costs on the higher scale would not be appropriate.

[62] It is tempting to view this appeal as another step in the long campaign waged by the appellants to thwart the rights of the respondents to participate in the profits of the joint venture and thus to award costs on a substantial indemnity basis. However, it is clear that Mr. Hood, who was not counsel at trial, took steps to narrow the issues on the appeal and focused his submissions accordingly. We conclude that there is nothing in the manner in which the appellants pursued the appeal which would justify an award of costs on a substantial indemnity basis.

[63] We award costs to the respondents on a partial indemnity basis in the total amount of $28,414.03, inclusive of disbursements and all applicable taxes.

Disposition

[64] The appeal is dismissed and the cross-appeal is allowed. The appellants Pinewood and Mr. Vandyk shall pay costs to the respondents in the amount of $28,414.03.

Appeal dismissed; cross-appeal allowed.

Notes

Note 1: In their factum, the appellants raised the issue of interest on development costs paid. However, this issue was neither raised as a ground of appeal in the Notice of Appeal nor argued before us, so we decline to address the issue.