Court of Appeal for Ontario
Date: March 16, 2017 Docket: C61890
Justices: Gillese, Benotto and Roberts JJ.A.
Between
Emil Mihaylov and Sofia Mihaylov Applicants (Appellants)
and
1165996 Ontario Inc. and Donald Abel Respondents (Respondents)
Counsel
Stephen R. Jackson, for the appellants
Ryan O'Neill, for the respondents
Heard
November 25, 2016
Decision
Reasons concerning costs, supplementary to the judgment in Mihaylov v. 1165996 Ontario Inc., 2017 ONCA 116, released on February 13, 2017.
Gillese J.A.:
Introduction
[1] By reasons dated February 13, 2017 (the "Decision"), this court allowed the appeal, in part, in this matter. The Decision affirmed the validity of the easement granted in the 1979 Agreement that is registered against the parties' respective properties. However, in all other regards, the appellants were successful. Costs of the appeal were ordered in favour of the appellants in the amount of $3,000, all inclusive.
[2] At para. 131 of the Decision, the court indicated that if the parties were unable to resolve the matter of costs of the Application and Counter-Application below (the "Proceedings Below"), they could make written submissions on that matter. The parties have been unable to resolve that matter and the court has now received and reviewed their costs submissions in relation to it.
The Parties' Positions on Costs of the Proceedings Below
[3] The appellants seek costs of the Proceedings Below on a substantial indemnity basis in the amount of $14,440. They say that, bearing in mind the result on appeal, they were substantially successful in the Proceedings Below because their position on the scope of the easement and the rights that flow therefrom was upheld. The appellants then point to the general principle this court follows when an appeal is allowed: the order for costs below is set aside and costs are awarded to the successful party: Hunt v. TD Securities Inc., 43 C.P.C. (5th) 211 (Ont. C.A.), at para. 2.
[4] The appellants acknowledge that the costs of the Proceedings Below would normally be on a partial indemnity basis which, in this case, would be just over $12,000. However, they ask this court to express its disapproval of the respondents' actions by making the costs award on a substantial indemnity basis. In support of this argument, the appellants have attached to their costs submissions copies of correspondence between counsel since the Decision was released. They say that this correspondence shows that there never was a leak in the pipeline so the respondents never had an immediate need to repair it and, in turn, that means that the Proceedings Below were unnecessary.
[5] The respondents submit that the parties should bear their own costs of the Proceedings Below. They dispute the suggestion that there was no leak in the pipeline. They say that success below was divided, noting that their contention that a valid easement had been created and continued to exist was upheld on appeal. Consequently, their right to draw water from Sturgeon Lake by means of the pipeline that runs below the appellants' land was affirmed.
[6] The respondents acknowledge that the appeal resulted in them losing on the issue of the scope of the easement, including their right to enter on the appellants' land to effect repairs without the appellants' prior permission and to lay a new pipeline. They also acknowledge that when an appeal is allowed, the general principle is that the order for costs below is set aside and costs are awarded to the successful party on a partial indemnity basis. However, they point to the court's discretion to depart from this approach "in unusual circumstances": Kopij v. Metropolitan Toronto (Municipality), 1999, 85 A.C.W.S. (3d) 763 (Ont. C.A.), at para. 2. They say that the facts of this case are unusual circumstances warranting a departure from the usual approach.
Analysis
[7] I do not view this matter as amounting to "unusual circumstances" such that the court should exercise its discretion and depart from its usual approach when deciding on costs of the Proceedings Below. This was a civil dispute which required the court to rule on legal questions so that the parties could clearly know what their respective rights and obligations were and, with that clarity, govern themselves accordingly.
[8] However, it is important to note that the appeal in this matter was allowed only in part. Accordingly, while the order for costs below must be set aside, it does not automatically follow that the appellants are entitled to their full costs of the Proceedings Below. The quantum of costs must reflect the fact that there was divided success in those proceedings. In my view, the appellants enjoyed greater success. While the respondents succeeded on the question of whether a valid easement had been created and continued to attach to each of the parties' lands, the appellants succeeded on the issues that drove the Proceedings Below – namely, whether the respondents could enter onto the appellants' lands without their prior permission to repair the pipeline and whether the respondents had the right to replace the existing pipeline.
[9] As for the scale of costs, I am not satisfied that the court should depart from the general principle that costs are to be awarded on a partial indemnity basis. The finding of reprehensible behaviour warranting the sanction of costs on a substantial indemnity basis is not to be made lightly. The suggestion made about the respondents' conduct is based on correspondence that arose after the conclusion of these proceedings and which has not been tested in the crucible of litigation. The meaning to be taken from that correspondence is disputed. To resolve that dispute would require the court to make credibility findings. Those types of findings cannot be made on the basis of the record before the court.
Disposition
[10] For these reasons, I would order costs of the Proceedings Below in favour of the appellants fixed at $8,000, all inclusive.
Released: March 16, 2017
"Eileen E. Gillese J.A."
"I agree. M.L. Benotto J.A."
"I agree. L.B. Roberts J.A."
