COURT OF APPEAL FOR ONTARIO

CITATION: Orr v. Metropolitan Toronto Condominium Corporation No. 1056, 2015 ONCA 407

DATE: 20150608

DOCKET: C54309, C54310, C54311, C54315 & C54320

Feldman, Tulloch and Lauwers JJ.A.

BETWEEN

C54309

Kelly-Jean Marie Orr also known as Kelly-Jean Rainville

Plaintiff (Appellant)

and

Metropolitan Toronto Condominium Corporation No. 1056, Gowling, Strathy & Henderson, Brookfield LePage Residential Management Services a division of Brookfield Management Services Ltd., Patrick Post, Pamela Cawthorn, Bruce Ward, Larry Boland, Francine Metzger, Michael Kosich and Richard Dorman

Defendants (Respondents)

and

Richard Weldon

Third Party (Respondent)

C54310

Kelly-Jean Marie Orr

Applicant (Appellant)

and

Metropolitan Toronto Condominium Corporation No. 1056

Respondent (Respondent)

C54311

Metropolitan Toronto Condominium Corporation No. 1056

Plaintiff (Respondent)

and

Kelly-Jean Marie Orr

Defendant (Appellant)

C54315

Kelly-Jean Marie Orr also known as Kelly-Jean Rainville

Plaintiff (Respondent)

and

Metropolitan Toronto Condominium Corporation No. 1056, Gowling, Strathy & Henderson, Brookfield LePage Residential Management Services a division of Brookfield Management Services Ltd., Patrick Post, Pamela Cawthorn, Bruce Ward, Larry Boland, Francine Metzger, Michael Kosich and Richard Dorman

Defendants (Appellant/Respondents)

and

Richard Weldon

Third Party (Respondent)

C54320

Kelly-Jean Marie Orr also known as Kelly-Jean Rainville

Plaintiff (Respondent)

and

Metropolitan Toronto Condominium Corporation No. 1056, Gowling, Strathy & Henderson, Brookfield LePage Residential Management Services a division of Brookfield Management Services Ltd., Patrick Post, Pamela Cawthorn, Bruce Ward, Larry Boland, Francine Metzger, Michael Kosich and Richard Dorman

Defendants (Respondent)

and

Richard Weldon

Third Party (Appellant)

Geoffrey D.E. Adair, Q.C., for Kelly-Jean Marie Orr, also known as Kelly-Jean Rainville

Barry A. Percival, Q.C. and Theodore B. Rotenberg, for Metropolitan Toronto Condominium Corporation No. 1056, Bruce Ward, Larry Boland and Richard Dorman

Robert J. Clayton, for Brookfield LePage Residential Management Services, a division of Brookfield Management Services Ltd., Patrick Post and Pamela Cawthorn

David Gadsden, J. Brian Casey and Matt Saunders, for Gowling, Strathy & Henderson

Thomas W. Arndt, for Richard Weldon

By way of written submissions

Supplement reasons to reasons dated December 2, 2014. On appeal from the judgment of Justice Darla A. Wilson of the Superior Court of Justice, dated August 18, 2011, with reasons reported at 2011 ONSC 4876.

Lauwers J.A.:

[1] These reasons address two sets of issues arising from the appeal decision of this court which was released on December 2, 2014, and is reported at 2014 ONCA 855. The first concerns the implementation of the decision. The second concerns costs, on which the parties were unable to agree. Each is addressed in turn.

A. Implementation Issues

[2] The panel agreed to accept further submissions on the following implementation and related issues outlined in a letter from counsel for the appellant to the court’s Senior Legal Officer:

1. Valuation of the difference between a two-storey and a three - storey townhouse unit: There is no process in place for determining the value as at December 2, 2014, as ordered by the Court;

2. Entitlement to prejudgment/postjudgment interest on the third floor valuation: The parties are at issue over whether the valuation amount when ultimately determined is to bear prejudgment interest or not.

3. Commencement date from which both prejudgment and post judgment interest on the other damages awarded are to run: The parties are in agreement that the respective rates are 3.4 per cent and 3 per cent but are at issue over when entitlement to prejudgment and postjudgment interest commence.

4. Plaintiff’s entitlement to compensation during period of restoration from three-storey unit to two-storey unit.

5. Changes, if any, required to be made to the orders by Wilson J. referring certain matters to the Master to conduct references.

6. Changes to the judgment against Weldon.

[3] I address each issue in turn.

1. The process for the determination of the difference in value between a two-storey and three-storey townhouse unit.

[4] Paragraph 140 of the reasons of this court provides:

I would set damages for negligence and negligent misstatement, for which Gowlings and MTCC 1056 are jointly and severally liable, as the difference between the value of townhouse 113 as a two-storey unit and a three-storey unit with the valuation date set as the date this decision is released.

[5] The parties have requested that the value of the townhouse should be determined by way of the trial of an issue before the trial judge under s. 134(4)(c) of the Courts of Justice Act, R.S.O. 1990, c. C.43. I agree with this proposal, and would so order.

[6] In relation to the damages award, Gowlings has requested the court to re-allocate fault, arguing that it should be apportioned 25 per cent to Gowlings and 75 per cent to MTCC 1056, given “Gowlings’ narrow involvement in litigation” and “MTCC 1056’s combative interactions and acrimonious relationship with the Plaintiff [appellant] that unnecessarily lengthened and complicated the litigation.” This is effectively a request to re-open an issue that has been determined, as set out in para. 140 of the appeal reasons. I would decline to do so. Gowlings and MTCC 1056 remain jointly and severally liable for the damages awarded for negligence and negligent misstatement.

2. Interest on the damages award from the townhouse valuation

[7] The appellant argues that, in addition to postjudgment interest, she is entitled to prejudgment interest on the valuation amount, from January 16, 1998 to August 18, 2011, less a one-year period between October 1998 and October 1999, relying on the Courts of Justice Act, s. 128(1).

[8] The respondents, Gowlings and MTCC 1056, agree that the appellant is entitled to postjudgment interest, but argue that she is not entitled to prejudgment interest. The court’s reasons provide that the loss respecting the value of the townhouse unit only crystalized on December 2, 2014, unlike the other damages that were incurred in 1998. Gowlings and MTCC 1056 argue that by moving the valuation date from the date of closing in 1998 to the date of the decision in 2014, the court fully valued the loss of the appellant’s opportunity to resell the townhouse as three-storey unit. They submit that both ascribing present-day value and also awarding interest for the past 17 years would over-compensate the appellant.

[9] I agree with the respondents. In accordance with para. 148 of the appeal reasons, postjudgment interest is to be calculated in the manner set by the trial judge. No prejudgment interest will be payable on the damages relating to the valuation of the unit.

3. The date from which both prejudgment and postjudgment interest on the other damage awards are to run

[10] As noted in para. 148, the general principle in this court’s reasons is that interest is payable on the awards, calculated in the manner set by the trial judge. With respect to the legal fees, as the trial judge ordered, at para. 314, interest is to be paid from March 2001.

Prejudgment interest

[11] With respect to the award for common element repairs, the trial judge ordered, at para. 369, that prejudgment interest would start in October 2006.

[12] With respect to the end date, s. 128(1) of the Courts of Justice Act stipulates that prejudgment interest is calculated from the date the cause of action arose to the “date of the order”, defined in s. 127(1) as “the date the date the order is made, even if the order is not entered or enforceable on that date, or the order is varied on appeal”. Accordingly, prejudgment interest on the damages awarded for common element repairs ends on August 18, 2011 – the date of the trial judge’s order awarding such damages, together with prejudgment interest.

[13] The appellant seeks interest on the close-up costs. The respondents, Gowlings and MTCC 1056, argue that close-up costs were not awarded by this court and do not attract postjudgment interest.

[14] At para. 147 of the appeal reasons, it was ordered that “[t]he trial judge’s damage awards that are not consistent with these reasons would be set aside.” The question about whether close-up costs were to be incurred was left to MTCC 1056 to decide, as noted at para. 120, simply because one option for MTCC 1056 was to the third floor intact, thereby obviating close-up costs. This court found, at para. 117, that the appellant had no obligation to close up the third floor, and did not award close-up costs to the appellant, so there is no award of close-up costs to her that would attract interest.

Postjudgment interest

[15] Postjudgment interest commences on August 19, 2011, as agreed by the parties.

4. Is the appellant entitled to compensation while the townhouse is restored from a three-storey unit to a two-storey unit?

[16] Based on the reasons given under the previous issue, the appellant is not entitled to compensation for the expenses associated with any close-up.

5. What changes, if any, are required relating to the orders by the trial judge referring certain matters to the Master to conduct references?

[17] Paragraph 147 of the appeal reasons set aside the trial judge’s damage awards that were not consistent with this court’s reasons.

[18] The trial judge ordered two references, at para. 421 (d),

*the close up costs of the third floor, in a sum to be determined by the Master; and

*the decorating/renovation costs to the third floor, in a sum to be determined by the Master pursuant to Rule 54.02(1)

[19] These references are no longer necessary. The close up costs of the third floor are MTCC 1056’s responsibility to incur or to avoid. The appellant was awarded the difference in the value between a two-storey and a three-storey unit. The fact that she spent money converting a two-storey unit into a three-storey unit will only be compensated, if at all, in the notional sale price of the townhouse as a three-storey unit; that is the fair measure of her damages. She is not entitled to separate compensation for expenditures on the decorating and renovation of the third floor; these were a matter of personal taste which the market may not value in the sale price of the unit. Therefore, no references are necessary.

6. Changes to the Judgment against Weldon

[20] The trial judge fixed the amount of damages to be paid to the plaintiff by MTCC 1056 at half of the cost of repairs to the common elements, or $20,840.50. This court, at para. 142, found that MTCC 1056 should compensate the appellant for all of the common element repair costs in the full amount of $41,681.00.

[21] MTCC 1056 urges this court to increase the amount that Weldon is to pay to indemnify MTCC 1056 for the entire cost of the common element repairs awarded on appeal, or $48,650.44, under the court’s jurisdiction in s. 134(5) of the Courts of Justice Act.

[22] Weldon argues that his liability should not be increased because MTCC 1056’s notice of cross-appeal did not seek to vary the judgment on the third party action if the appeal succeeded. Accordingly, Weldon had no opportunity to participate in the argument on that issue.

[23] MTCC 1056 was clearly exposed to an additional award of damages to the appellant on this head, and failed to seek indemnity in its notice of cross-appeal. I would not make a change in the judgment against Weldon.

[24] Finally, MTCC 1056 points out that the start date for postjudgment interest for costs should be changed from August 19, 2012 to August 19, 2011, being the day after the release of the reasons in the main action. I would make this change.

B. Costs Issues

1. Costs of the Appeal

The Appellant’s Appeal Costs

[25] The parties have agreed that the appellant should be awarded the costs of the appeal in the amount of $75,000 (inclusive of taxes) plus $13,341.63 in disbursements. The total is $88,341.63. While the parties have agreed on quantum, they have not agreed on who should pay.

[26] Gowlings argues that, based on the time allocated to the various issues on appeal, MTCC 1056 should pay 75 per cent of the appellant’s costs and Gowlings should pay the remaining 25 per cent. MTCC 1056 argues that the liability for the appellant’s costs should be divided equally between it and Gowlings, and adds that Brookfield should then be required to indemnify MTCC 1056 for its portion under the provision in the Management Agreement referred to in this court’s decision at para. 45.

[27] Considering the issues at trial and on appeal, not from the viewpoint of time spent, but in terms of the monetary recovery of the affected parties on appeal, I would divide the appellant’s appeal costs equally between Gowlings and MTCC 1056 in the amount of $44,170.81 each.

[28] MTCC 1056’s claim that Brookfield must indemnify it for its cost liability to the appellant is a contractual claim based on the Management Agreement. The trial judge did not decide this issue since she found that neither MTCC 1056 nor Brookfield were negligent in preparing the estoppel certificate. On appeal, MTCC 1056 was found liable for negligent misrepresentation, but was entitled to indemnification by Brookfield for the resulting damages owed to the appellant. Whether Brookfield’s indemnification obligation extends to costs is now a live issue. In my view, this matter should be remitted to the trial judge to be determined as a trial of an issue under s. 134(4)(c) of the Courts of Justice Act. This will permit the parties to make full submissions on the scope of Brookfield’s liability for costs under the Management Agreement.

Brookfield’s Appeal Costs against the Appellant

[29] This court concluded that Brookfield was not liable for negligent misrepresentation. Accordingly, Brookfield claims it is entitled to its appeal costs from the appellant in the amount of $45,302.49 (inclusive of taxes). No party contests the quantum of Brookfield’s costs claim.

[30] The appellant brought the negligent misrepresentation claim against Brookfield. The usual result would be for the appellant to pay Brookfield’s costs. As the trial judge noted, a Sanderson order may be appropriate where it was reasonable for a plaintiff to bring an action against several defendants. If the plaintiff is successful against one or some of the defendants but unsuccessful against others, the resulting cost order against the plaintiff may lead to unjust results. She issued a modified Sanderson order requiring that the appellant pay 75 percent of Brookfield’s costs and that Gowlings pay the remaining 25 percent on the ground that the appellant’s claim against Brookfield should have been resolved prior to trial.

[31] I agree with the trial judge that a modified Sanderson order should be issued to mitigate the unfairness that would result from ordering the appellant to pay the entirety of Brookfield’s costs. While I agree with the trial judge that there was no rationale for the appellant to persist with some of her arguments against Brookfield and its employees, this does not apply to the negligent misrepresentation claim. There is force to the appellant’s submission that the result is a Pyrrhic victory for Brookfield. It was reasonable for the appellant to advance this argument against both Brookfield and MTCC 1056. As a result, I would modify the Sanderson order to provide that the appellant is responsible for 50 percent of Brookfield’s appeal costs, in the amount of $22,651.25.

[32] In light of the outcome on appeal, a further modification to the Sanderson order is necessary. While MTCC 1056 was successful in defending against the appellant’s misrepresentation claim at trial, it was unsuccessful on appeal. As a result, it is no longer a successful defendant and should not be sheltered from liability under the Sanderson order. I would therefore divide the balance of Brookfield’s costs equally between Gowlings and MTCC 1056, in the amount of $11,325.62 each. Whether MTCC 1056’s liability for this amount falls within the scope of any indemnity under the Management Agreement will be determined by the trial judge after the trial of the issue discussed in the preceding section.

MTCC 1056’s Appeal Costs against Brookfield and Gowlings

[33] MTCC 1056 claims $117,312 in total, divided equally between the appellant’s appeal and the Gowlings appeal. As between MTCC 1056’s insured interests and its uninsured interests, MTCC 1056 argues the ratio should be about two-thirds (2/3) for its insured interests and one-third (1/3) for its uninsured interests. This allocation is consistent with the decision of the trial judge that it was appropriate for both of MTCC 1056’s interests to be separately represented. Accordingly, MTCC 1056 seeks $39,990.60 for its insured interests and $18,664.78 for its uninsured interests in respect of each of the appeals. It asserts that Brookfield should pay MTCC 1056’s costs for the appellant’s appeal based on the Management Agreement and Gowlings should pay MTCC 1056’s costs for the Gowlings appeal.

[34] Gowlings argues that the quantum of MTCC 1056’s costs claim for the appeal is excessive and beyond Gowlings’ reasonable expectations, taking into account the principles in Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 CanLII 14579 (ON CA), 71 O.R. (3d) 291 (C.A.).

[35] I agree that the amount claimed by MTCC 1056 is excessive, particularly having regard to the amount claimed by the appellant to which the parties have agreed ($75,000 inclusive of taxes). I would therefore set total appeal fees for MTCC 1056 at $80,000 (inclusive of taxes). MTCC 1056’s insured interests are also entitled to their claimed disbursements in the amount of $4,981.20. This amount, totalling $84,981.20, should be divided equally between the appellant’s appeal and the Gowlings appeal, consistent with MTCC 1056’s allocation.

[36] MTCC 1056 claims it is entitled to recover its costs for the appellant’s appeal from Brookfield under the Management Agreement.

[37] Brookfield notes that although MTCC 1056 was successful in obtaining indemnification from Brookfield for its damages for negligent misrepresentation, this court determined that the appropriate measure of damages was the loss of the value of the third floor. Brookfield argues that its proportional liability for costs should be measured solely against this amount as a proportion of the total damages awarded to the appellant. It should not be required to pay MTCC 1056’s costs related to issues such as the common element repairs, which were solely MTCC 1056’s responsibility and had nothing to do with the estoppel certificate or the negligent misrepresentation claim.

[38] As noted above, the difference in value between the townhouse as a two-storey unit and as a three-storey unit will be determined by the trial judge after a trial of an issue (in the absence of any more cost effective consensual mechanism that the parties may agree on). Even if Brookfield’s argument were accepted, it would be impossible to quantify Brookfield’s liability for MTCC 1056’s costs until the damage award for negligent misrepresentation is determined, along with the proper application of the Management Agreement. As a result, Brookfield’s liability for MTCC 1056’s costs on the appellant’s appeal should also be remitted to the trial judge.

[39] Gowlings argues that it should only be required to pay the costs of MTCC 1056’s uninsured interests on the basis that only the uninsured interests were involved in the Gowlings appeal. In my view, the appeal argument did not divide out between MTCC 1056’s various interests as cleanly as Gowlings suggests.

[40] It was reasonable for both MTCC 1056’s insured and uninsured interests to participate in the Gowlings appeal because there would have been consequences for both interests had Gowlings been successful. In the circumstances, Gowlings is liable for the full amount ($42,490.60), to be allocated between MTCC 1056’s insured and the uninsured interests in the ratios of two-thirds ($28,327.07) and one-third ($14,163.53), respectively.

2. Costs of the Trial

The Appellant’s Trial Costs

[41] The appellant seeks to recover her trial costs in the amount of $300,000. The other parties do not challenge the quantum but disagree about who should pay.

[42] Gowlings argues that it should only be liable for 25 per cent of the appellant’s costs due to its “limited” involvement in the trial. MTCC 1056 argues that it is not liable for any of the appellant’s trial costs due to its pre-trial offers to contribute. Variations on both of these arguments were rejected by the trial judge, and I see no reason to depart from her conclusions on these points.

[43] In my view, liability for the appellant’s trial costs should be allocated in the same manner as her appeal costs. MTCC 1056 and Gowlings are each liable for 50 per cent, which translates to $150,000 each. For the reasons noted above with respect to the appellant’s appeal costs, whether Brookfield must indemnify MTCC 1056 for any portion of MTCC 1056’s cost obligation to the appellant will be determined by the trial judge following the trial of the issue.

MTCC 1056’s Trial Costs against Brookfield and Gowlings

[44] MTCC 1056 claims its trial costs in the amount of $500,000. The trial judge issued a Sanderson order requiring that Gowlings pay MTCC 1056’s costs. Given the outcome on appeal, MTCC 1056 is no longer a successful defendant and the Sanderson order must be set aside. There is no basis to hold Gowlings liable for any portion of MTCC 1056’s trial costs.

[45] MTCC 1056 sought leave to appeal the trial judge’s refusal to award MTCC 1056 its costs on a substantial indemnity basis. No error in principle has been identified and I would not grant MTCC 1056’s request for leave.

[46] MTCC 1056 argues that due to its success on its cross-claim against Brookfield, Brookfield would normally be responsible for MTCC 1056’s trial costs. However, MTCC 1056 argues that this liability is displaced by Brookfield and MTCC 1056’s offers to contribute. MTCC 1056 argues that as a result of these offers, Gowlings should pay MTCC 1056’s trial costs. As noted above, a similar argument regarding the effect of offers to contribute was rejected by the trial judge, and I see no basis to depart from her conclusion on this point.

[47] As for whether Brookfield is responsible for any portion of MTCC 1056’s trial costs based on the Management Agreement, this will be determined by the trial judge for the reasons set out above with respect to MTCC 1056’s appeal costs.

Brookfield’s Trial Costs against the Appellant and Gowlings

[48] Brookfield argues that the trial judge’s order that Gowlings pay 75 per cent of its costs and the appellant pay the remaining 25 per cent, for a total of $200,000, should be upheld.

[49] In light of the outcome on appeal, I would modify the Sanderson order to allocate Brookfield’s costs in the same manner set out above with respect to Brookfield’s appeal costs. As a result, liability breaks down as follows: 50 per cent to be paid by the appellant ($100,000); 25 per cent to be paid by Gowlings ($50,000); and 25 per cent to be paid by MTCC 1056 ($50,000). Whether MTCC 1056 can recover this portion of its liability from Brookfield under the Management Agreement will be determined by the trial judge after the trial of the issue discussed above.

3. Summary of Cost Obligations

Appeal Costs

[50] In summary:

The appeal costs shall be paid as follows:

• $44,170.81 to the appellant by MTCC 1056 (para. 27);

• $44,170.81 to the appellant by Gowlings (para. 27);

• $42,490.60 to MTCC 1056 by Gowlings (para. 40);

• $22,651.25 to Brookfield by the appellant (para. 31);

• $11,325.62 to Brookfield by MTCC 1056 (para. 32); and

• $11,325.62 to Brookfield by Gowlings (para. 32).

The trial cost awards shall be paid as follows:

• $150,000 to the appellant by MTCC 1056 (para. 43);

• $150,000 to the appellant by Gowlings (para. 43);

• $100,000 to Brookfield by the appellant (para. 49);

• $50,000 to Brookfield by MTCC 1056 (para. 49); and

• $50,000 to Brookfield by Gowlings (para. 49).

[51] I attach a schedule summarizing the costs awards.

Released: June 8, 2015 “KF”

“P. Lauwers J.A.”

“I agree K. Feldman J.A.”

“I agree M. Tulloch J.A.”

Schedule – Summary of Cost Awards*

PARTY

TRIAL COST ENTITLEMENT

TRIAL COST OBLIGATIONS

APPEAL COST ENTITLEMENT

APPEAL COST OBLIGATIONS

TOTAL ENTITLEMENT

TOTAL OBLIGATION

TOTAL

Appellant

• $150,000 from Gowlings (para. 43)

• $150,000 from MTCC 1056 (para. 43)

Total = $300,000

• $100,000 to Brookfield (para. 49)

Total = $100,000

• $44,170.81 from Gowlings (para. 27)

• $44,170.81 from MTCC 1056 (para. 27)

Total = $88,341.63

• $22,651.25 to Brookfield (para. 31)

Total = $22,651.25

$388,341.63

$122,651.25

Recovers $265,690.38

MTCC 1056

Total = $0

• $150,000 to the appellant (para. 43)

• $50,000 to Brookfield (para. 49)

Total = $200,000

• $42,490.60 from Gowlings (para. 40)

Total = $42,490.60

• $44,170.81 to the appellant (para. 27)

• $11,325.62 to Brookfield (para. 32)

Total = $55,496.43

$42,490.60

$255,496.43

Owes $213,005.83

Gowlings

Total = $0

• $150,000 to the appellant (para. 43)

• $50,000 to Brookfield (para. 49)

Total = $200,000

Total = $0

• $44,170.81 to the appellant (para. 27)

• $42,490.60 to MTCC 1056 (para. 40)

• $11,325.62 to Brookfield (para. 32)

Total = $97,987.03

$0

$297,987.03

Owes $297,987.03

Brookfield

• $100,000 from the appellant (para. 49)

• $50,000 from Gowlings (para. 49)

• $50,000 from MTCC 1056 (para. 49)

Total = $200,000

Total = $0

• $22,651.25 from the appellant (para. 31)

• $11,325.62 from Gowlings (para. 32)

• $11,325.62 from MTCC 1056 (para. 32)

Total = $45,302.49

Total = $0

$245,302.49

$0

Recovers $245,302.49

*As between Brookfield and MTCC 1056, these awards are subject to the decision of the trial judge regarding the scope of Brookfield’s obligations under the Management Agreement.