Court File and Parties

COURT FILE NO.: 14/46455 DATE: 20200407 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Janet Louise Hilson Plaintiff (Defendant by Counterclaim) – and – Carole Evans Defendant (Plaintiff by Counterclaim)

Counsel: Howard W Reininger, for the Plaintiff (Defendant by Counterclaim) Orie Niedzviecki, for the Defendant (Plaintiff by Counterclaim)

HEARD: In Writing

Reasons for Decision: Judgment Amount and Costs

L. Sheard J.

[1] This action was brought by the plaintiff mortgagee as against the defendant, as guarantor of a mortgage. The face amount of the mortgage was $170,000 (the “Mortgage”). In this action, the plaintiff sought to recover from the defendant the approximate amount of $1,303,519, plus interest. That figure included amounts that the plaintiff claimed were spent by the plaintiff’s corporation respecting the mortgaged property. A central issue at trial was whether the plaintiff could increase the mortgage amount by payments made by the plaintiff’s corporation. The plaintiff’s corporation was neither a mortgagee nor a party to this action.

[2] Reasons for Judgment in this matter were released on February 19, 2020 (the “Judgment”). As set out in the Judgment, I determined that the mortgage amount could not be increased by amounts spent by any party other than the plaintiff/mortgagee. In the Judgment, the parties were invited to make written submissions with respect to the following three issues, should they be unable to reach agreement:

1. Based on the findings in the Judgment, what amounts are owing under the Mortgage?;
2. Should there be any adjustment in the calculation of interest accruing on the plaintiff’s claim from and after December 1, 2018?; and
3. Costs.

[3] The parties did not reach agreement on any of the above issues and these reasons follow my receipt and review of the parties’ submissions.

Issue #1: What amount is owing by the defendant?

[4] In their written submissions, there was consensus that:

(i) the principal amount of the Mortgage is $170,000; (ii) the Mortgage money was advanced on July 23, 2008; (iii) the rate of interest claimed is simple interest, at 12% per annum; (iv) in January 2011, the plaintiff received the first of two payments out of court from surplus funds generated on the sale of the mortgaged property (the “2011 Payment”), which payment should be credited against the amount due under the Mortgage; and (v) on March 23, 2012, the plaintiff received the second payment out of court in the amount of $35,569.30, which payment should also be credited against the Mortgage.

[5] As set out in the Judgment [1], I found as a fact that the plaintiff received the sum of $188,087.27 on January 3, 2011. The defendant uses those findings in her calculations of the amount owing, whereas the plaintiff uses the date of January 31, 2011 as the date on which she received a payment of $187,087.27.

[6] Using my findings in the Judgment as to the amounts to be credited against the Mortgage, and the agreed-upon interest rate, I have done my own calculations as follows:

Mortgage Principal as at July 23, 2008 : $170,000.00

Interest : July 23, 2008 to January 3, 2011 ($170,000 x 12% ÷ 365 x 894 days) $ 49,966.03

Balance: $219,966.03

Payment #1 : January 3, 2011: ($188,087.27)

Balance: $ 31,878.76

Interest : January 3, 3011 to March 23, 2012 ($31,878.76 x 12% ÷ 365 x 445 days) $ 4,663.91

Balance: $ 36,542.67

Payment #2 : March 23, 2012: ($35,569.30)

Balance: March 23, 2012: $ 973.37

Interest on $973.37

Either :

i) From March 23, 2012 to December 1, 2018: $782.11 ($973.37 x 12% ÷ 365 x 2444 days)

OR

ii) From March 23, 2012 to February 19, 2020: $924.52 ($973.37 x 12% ÷ 365 x 2889 days)

[7] As explained below, I conclude that interest should be included to February 19, 2020, the date of the release of the Judgment. Accordingly, I calculate the amount owing under the Mortgage on February 19, 2020 to be $1,897.89 ($973.37 + $924.52).

Issue #2: Should there be a post-trial adjustment in interest?

[8] In her submissions, the plaintiff questions why there should be any issue about the running of interest after December 1, 2018. That is explained in the Judgment and is summarized as follows: The plaintiff sued her former lawyer and her former financial advisor. The plaintiff settled her negligence claim against her former lawyer, from whom she recovered $1.3 million (gross). The plaintiff brought a separate claim respecting another mortgaged property (the “Lightle Action”). In issue in the Lightle Action was whether the defendants should be credited with a portion of the settlement recovered by the plaintiff from her former lawyer. The trial judge allowed a credit. The plaintiff appealed. The credit was an issue under appeal.

[9] Whether the plaintiff should give a credit to the defendant in this action for monies the plaintiff recovered from her former lawyer was also in issue in this action. The plaintiff submitted that the appellate decision in the Lightle Action would govern that issue in this action.

[10] In this action, in answer to undertakings, the plaintiff agreed that a portion of the amounts the plaintiff recovered from her former lawyer should be applied to reduce the amount owing under the Mortgage. At trial, the plaintiff took the position that no credit should be given, unless the appellate court concluded that, in law, the credit should be given.

[11] At the conclusion of this trial, the plaintiff asked that I delay the release of my decision until a decision had been released by the Court of Appeal. A final decision from the Court of Appeal in the Lightle Action was not released until late December 2019, more than one year after the completion of this trial. As a result, the Judgment was not released for close to 14 months after the conclusion of the trial. For that reason, I invited the parties to make submissions on whether there should be an adjustment in the interest accruing under the Mortgage.

[12] The plaintiff submits that there should be no adjustment: she was obliged to bring to the attention of the court that there was a pending decision of the Court of Appeal, whose decision could affect an issue before this court. The plaintiff also asserts that by raising this as an issue, there appears to be “an element of bias against the Plaintiff in this proceeding.” That assertion is without any foundation and ignores the reasons set out in the Judgment and outlined above.

[13] The Court of Appeal in the Lightle Action determined that no credit should be given to the defendant for amounts recovered by the plaintiff in the settlement of her negligence claim against her former lawyer. As the Court of Appeal decision in the Lightle Action was binding on this court, no credit was awarded to the defendant in the Judgment. Had credit been given in the amount proposed by the plaintiff in answer to her undertaking, the plaintiff would have recovered nothing in this action. Such an outcome would have had a significant bearing on costs; an issue important to both parties.

[14] The defendant submits that because it was the plaintiff, and not the defendant, who asked this court to delay its decision until after release of the Court of Appeal decision in the Lightle Action, the plaintiff should suffer the loss of the interest that accrued while waiting for the appellate court’s decision.

[15] In her submissions, the defendant also raised a new issue: she submits that interest on the Mortgage should be suspended for some portion of the two years between March 23, 2012, when the plaintiff received the second distribution payment, and April 1, 2014, the date on which the plaintiff issued her claim. The defendant says that the plaintiff’s delay in bringing this claim should be characterized as a failure to mitigate her loss.

[16] The plaintiff opposes any suspension of the running of interest. Among other things, she asserts that it is not open to the defendant to now argue that the plaintiff failed to mitigate her loss, an issue not raised at trial and on which there was no evidence.

[17] I agree with the plaintiff’s submissions. The defendant did not plead or raise at trial the issue of the plaintiff’s alleged failure to mitigate by not commencing her action until April 2014; accordingly, she should not be permitted to do so now.

[18] It also bears noting that the amounts in dispute are nominal: The daily rate of interest on $973.37 is $0.32 and between March 2012 and April 2014, the period of alleged lack of mitigation, the interest would total less than $234. Similarly, the interest from December 1, 2018 to February 19, 2020 totals $142.41.

Disposition: Interest Chargeable

[19] I have been referred to no law on point and am not aware of any principled basis to suspend the running of interest from and after March 23, 2012. As for interest running after December 1, 2018, the decision from the Court of Appeal was important to both parties and helpful to the court. The evidence before me could easily have supported a finding that the plaintiff had agreed that she should give the defendant credit for a portion of the amount she had recovered from her former lawyer; that decision would also have been in keeping with the decision of the trial judge in the Lightle Action. However, in view of the appellate decision, credit granted in the Judgment could have given rise to a ground of appeal. Such an outcome could have had important consequences to both parties.

[20] I conclude that there should be no suspension of the running of interest on the amount that I found due and owing to the plaintiff, namely $973.37, from and after March 23, 2012. In reaching that conclusion, I consider the small amount involved and that it was reasonable for the plaintiff to ask that I delay the release of my decision until after the release of the Court of Appeal decision.

Disposition: Judgment Amount and Interest

[21] Based on my calculations above, I determine that the plaintiff is entitled to judgment in the amount of $1,897.89 ($973.37 + $924.52).

Issue #3: Costs

[22] The plaintiff seeks her costs fixed in the amount of $140,958.68, if calculated on a substantial indemnity rate ($525 per hour), or $94,853.27, if calculated on a partial indemnity rate ($350 per hour), including disbursements and HST. The plaintiff submits that under the Mortgage, she is entitled to her costs on a substantial indemnity basis.

[23] In her submissions, the plaintiff concedes that r. 57.05(1) of the Rules of Civil Procedure [2] applies. Rule 57.05(1) reads:

If a plaintiff recovers an amount within the monetary jurisdiction of the Small Claims Court, the court may order that the plaintiff shall not recover any costs.

[24] However, the plaintiff submits that the court ought not to exercise its discretion to deprive the plaintiff of her costs in this action because the issues were complex, the question of whether the defendant was entitled to a credit for amounts recovered by the plaintiff in her negligence action against her former lawyer was unsettled until the decision of the Court of Appeal in the Lightle Action was rendered, and because the plaintiff has found no authority to support the proposition that “payments not personally made by a mortgagee cannot be considered as added to the mortgagee’s principal claim notwithstanding the contractual right to do so.”

[25] The plaintiff’s last point, above, is undermined by the allegations she, herself, made in the claim brought against both her former lawyer, Terence S. Reiber, and her former financial advisor, Howard Paul Ivany (“Ivany”) (the “Negligence Claim”). In the Negligence Claim, the plaintiff seeks damages for losses suffered because Ivany caused the plaintiff’s corporation “to advance funds for repairs and maintenance and as the mortgages were held by the Plaintiff, Hilson, personally, Ivany knew and failed to advise those advances could not be added to her mortgage debt since it was not Hilson advancing the funds for repairs and maintenance”. [3]

[26] As noted at paragraph 47 of the Judgment, although the plaintiff alleged in this action that the amount due and owing under the Mortgage should be increased by amounts spent by the plaintiff’s corporation for repairs and maintenance, the plaintiff called no evidence to show that monies spent by her corporation were applied to the Mortgage. Indeed, at paragraph 45(c) of the Negligence Claim, the plaintiff asserts that a large part of the funds advanced by the plaintiff’s corporation “were not for repairs and maintenance… and could not be added to the mortgage debt”.

[27] The plaintiff submits that the facts in this case are analogous to those in Hunt v. TD Securities Inc. (2003), 66 O.R. (3d) 481 (C.A.). In Hunt, the court was called upon to determine whether a fiduciary relationship existed between the individual plaintiffs and the corporate investment advisors. Offers to settle had been exchanged and were relevant to the court’s determination of costs. Although the plaintiffs recovered an amount within the monetary jurisdiction of the Small Claims Court and/or that could have been brought using the simplified procedure, the court rejected the defendant’s contention that the plaintiffs were not entitled to costs. In reaching that conclusion, the court held that the issues were complex and involved unsettled matters of law and that it could not be reasonably known until the conclusion of the trial that the damages would be within the monetary jurisdiction of the Small Claims Court.

[28] The facts here are quite different. It cannot be said here that the plaintiff could not reasonably have known or, at least, anticipated, that it was possible that she would recover damages within the monetary jurisdiction of the Small Claims Court: unless the plaintiff could prove that her corporation did spend monies on the mortgaged property – on which she led no evidence - and having met that evidentiary hurdle, that she could establish that monies spent by someone other than a mortgagee, could be added to the amount due under the Mortgage.

[29] The defendant shares the plaintiff’s view that the issues were complex. The parties’ view about the complexity of this case is somewhat contradicted by the fact that the trial took only three days, involved the testimony of two witnesses, and a modest number of exhibits.

[30] The defendant submits that the plaintiff’s “de minimis” recovery at trial should deprive the plaintiff of her costs under r. 57.05(1) and should also lead to an award of costs to the defendant. The defendant also submits that r.57.01(1)(a) directs the court to consider the amount claimed versus the amount recovered and that in this case, that factor should be the most prominent.

[31] The defendant also asserts that the plaintiff will have obtained a judgment in an amount equal to .14% of the amount of her initial claim. As such, the defendant argues that she should be entitled to “99.9%” of her costs, payable by the plaintiff.

[32] The defendant seeks her costs on a substantial indemnity basis, fixed in excess of $61,000. The defendant justifies that amount by reason of the complexity of the issues, the number of documents, the requirement to respond to a summary judgment motion, the time spent on discoveries, pre-trial, trial and lengthy written submissions that were required at the conclusion of the trial.

[33] The defendant submits that by March 23, 2012, the plaintiff knew that she had been repaid all but approximately $973 owing on the Mortgage, a fact unknown to the defendant until after the proceedings began and there had been examinations and documentary production. Despite knowing how little was owing under the Mortgage, the plaintiff proceeded in this court and claimed $1.3 million.

Analysis

[34] The general principles applicable to party and party costs are well settled. Costs are discretionary. Rule 57.01 of the Rules of Civil Procedure sets out factors that the court may consider in exercising its discretion under section 131 of the Courts of Justice Act:

57.01 (1) In exercising its discretion under section 131 of the Courts of Justice Act to award costs, the court may consider, in addition to the result in the proceeding and any offer to settle or to contribute made in writing,

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

(0.b) the amount of costs that an unsuccessful party could reasonably expect to pay in relation to the step in the proceeding for which costs are being fixed;

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

(b) the apportionment of liability;

(c) the complexity of the proceeding;

(d) the importance of the issues;

(e) the conduct of any party that tended to shorten or to lengthen unnecessarily the duration of the proceeding;

(f) whether any step in the proceeding was,

(i) improper, vexatious or unnecessary, or

(ii) taken through negligence, mistake or excessive caution;

(g) a party’s denial of or refusal to admit anything that should have been admitted;

(h) whether it is appropriate to award any costs or more than one set of costs where a party,

(i) commenced separate proceedings for claims that should have been made in one proceeding, or

(ii) in defending a proceeding separated unnecessarily from another party in the same interest or defended by a different lawyer; and

(i) any other matter relevant to the question of costs.

[35] Overall, the objective is to fix an amount that is fair and reasonable, having regard for, among other things, the expectations of the parties concerning the quantum of costs: Boucher v. Public Accountants Council for the Province of Ontario (2004), 71 O.R. (3d) 291 (C.A.) at paras. 26 and 38.

[36] I begin by considering the factors found at r. 57.01 (0.a) and (0.b). In her Bill of Costs, the plaintiff has included time spent in respect of a motion identified as the motion brought by Mr. Adler [the defendant’s previous counsel] to have “the actions” tried together. The plaintiff provided no particulars of this motion, but I can see from the plaintiff’s Bill of Costs that the plaintiff’s costs of that motion appear to have been fixed by Ramsay J. in the amount of $500, payable forthwith [4]. With nothing more, I conclude from the Bill of Costs that the costs awarded have been paid, and the fees and disbursements set out in the plaintiff’s Bill of Costs should be excluded from any costs awarded here.

[37] I further note that beginning with the entry on February 19, 2015, reference is made to the plaintiff’s intention to proceed with a motion for summary judgment. On and after December 8, 2015, counsel for the plaintiff has recorded time spent on a motion heard by Arrell RSJ, which was related to the summary judgment motion. In her Bill of Costs, the plaintiff records five hours for attending the motion heard by Arrell RSJ. In his endorsement, Arrell RSJ fixed costs of that motion at $1,500, which were left to the discretion of the judge hearing the summary judgment motion.

[38] In her cost submissions, the defendant provided a copy of the endorsement of Goodman J., who heard and dismissed the plaintiff’s motion for summary judgment. He awarded costs “to the defendant in the cause”. My understanding of that endorsement is that, if the defendant is successful at trial, she is entitled to her costs of the summary judgment motion, including the $1,500 awarded by Arrell RSJ. However, in no circumstance is the plaintiff entitled to her costs of that unsuccessful motion. I conclude that the plaintiff is not entitled to claim fees and disbursements listed in the plaintiff’s Bill of Costs that relate to her summary judgment motion.

[39] In determining the reasonable expectations of the parties, I consider the Bill of Cost filed by each party. The difference between the amounts claimed by the parties on a substantial indemnity basis is significant: before disbursements, the plaintiff’s fees and HST total $138,316.24 as compared to the defendant, whose fees and HST total $47,169.60, a difference of $91,146.64. The difference is explained, in part, by the higher hourly rates charged by Mr. Reininger, who was called to the Bar in 1975, and is senior to Mr. Niedzviecki.

[40] I also recognize that the fees shown in the defendant’s Bill of Costs do not include the fees of the defendant’s previous lawyer, Mr. Adler. From the plaintiff’s Bill of Costs it appears that Mr. Niedzviecki’s firm has been involved since March 12, 2015.

[41] The plaintiff submits that r. 76.13 has no application here. Rule 76 applies to actions that were or ought to have been brought under that rule. That rule applies to claims where the total amount is $100,000 [5] or less. Rule 76.13 applies to claims that are mandated to be brought under r. 76.02 that is, when the amount claimed is $100,000 or less. The plaintiff’s claim well exceeded that amount. I agree with the plaintiff that r. 76 has no application here.

[42] It is easy to understand why the defendant has taken the position that she should be awarded her costs based on the plaintiff’s “de minimis” success. However, the defendant did not serve an offer to settle that might have entitled her to some costs and has not referred the court to any rule or case law that might support her claim for costs as the unsuccessful defendant.

[43] I next address whether there are any offers to settle that might apply. The defendant identifies that she served two offers to settle. One was dated May 6, 2014, pursuant to which the defendant agreed to pay the plaintiff $1,000 and, if accepted within 20 days, each party would bear their own costs. If this offer was not accepted until after 20 days, the plaintiff would be required to pay the defendant’s costs on a partial indemnity basis and otherwise, the action would be dismissed without costs. This offer of settlement was open for acceptance until 5 minutes after the start of the trial unless otherwise withdrawn.

[44] On May 22, 2017 the defendant withdrew the May 6, 2014 offer and offered to settle on the basis of mutual releases and the dismissal of the action without costs.

[45] Neither of the defendant’s offers was accepted. Her offer of May 22, 2017 was in effect at the time of trial but does not attract the costs consequences set out in r. 49.10 in that the plaintiff obtained a judgment amount (as determined in these reasons) that is more favourable than the terms of the defendant’s offer.

[46] The plaintiff submits that the court should disregard both offers made by the defendant; the first was withdrawn and the May 22, 2017 offer should not be considered because it offers no money as a compromise and does not refer to the defendant’s counterclaim, which was not withdrawn until the opening of trial. The plaintiff submits that the principles found in OPB Realty Inc. v. Canada International Medical Suppliers Co. Ltd., 2015 ONSC 6, 2015 CarswellOnt 4, at para. 8, apply to the facts here: that the defendant’s May 22, 2017 offer was a pretence and not a genuine offer, made in keeping with the spirit of r. 49.

[47] I do not accept the plaintiff’s submissions that the defendant’s offer was a pretence and did not represent a genuine compromise: prior to trial the defendant was able to estimate that the amount owing under the Mortgage was less than $1,000; the plaintiff had offered to credit the defendant a portion of the amount she had received in the settlement of the Negligence Claim, which would have reduced the amount owing under the Mortgage to $0; and the defendant had a claim to the costs awarded by Goodman J. For those reasons, I find the defendant’s offer to dismiss the claim, without costs, to be a genuine compromise on the part of the defendant.

[48] I conclude that the defendant’s offers to settle do not entitle the defendant to costs.

[49] The defendant submits that r. 76.13(2), (3) and 13 would deny the plaintiff any costs, given that the amount recovered is $100,000 or less. The defendant further submits that pursuant to rule 76.13(6), the court has discretion to order that the plaintiff pay the defendant’s costs where the amount of recovery is under $100,000.

[50] I have also considered whether the facts here would justify an award of costs to the defendant under r. 57.01(2), which permits the court to award costs against the successful party “in a proper case”. I cannot conclude this to be a proper case. I can identify no conduct (or misconduct) on the part of the plaintiff that would warrant making a costs award against the plaintiff.

Disposition: Costs

[51] The plaintiff has obtained a judgment that is at the very low end of the Small Claims Court jurisdiction and, as asserted by the defendant, approximately .14% of the amount claimed.

[52] After reviewing the factors discussed above, I have considered whether this is a case in which I ought to exercise my discretion under r. 57.05 to make an order that the plaintiff not recover any costs. I conclude that this is such a case.

[53] As discussed above, I find that the plaintiff knew or ought to have known that her claim to recover $1.3 million was based on facts she did not try to prove and were premised on a legal footing that the plaintiff, herself, doubted - that payments made by her corporation, who was not a mortgagee, nor a party to the action, could be added to the Mortgage.

[54] As explained above, I also find that there is no legal basis to award costs to the defendant.

[55] The sad reality is that the plaintiff and the defendant have both suffered financially from their investments in the property that was the subject of this action and, to a significant extent, it appears that both parties lost their investments by reason of their misplaced trust in Ivany.

Orders Made:

[56] I make the following orders:

1. The plaintiff shall have judgment against the defendant in the amount of $1,897.89, together with post-judgment interest on that amount, calculated at the simple interest rate of 12 per cent per annum.
2. There shall be no costs awarded to either party.

Sheard J.

Released: April 7, 2020

Footnotes:

[1] At paras. 65-67. [2] R.R.O. 1990, Reg. 194. [3] Trial Exhibit 4, tab B, para. 45 (b), [as amended on November 3, 2015] Amended Statement of Claim, Janet Louise Hilson and 1771085 Ontario Limited v. Howard Paul Ivany and Terence S. Reiber. [4] Plaintiff’s Bill of Costs, entry at November 10, 2014. [5] The limit in effect at the relevant time.