COURT OF APPEAL FOR ONTARIO

CITATION: Krieser v. Garber, 2020 ONCA 699

DATE: 20201105

DOCKET: C66850 & C66910

Doherty, Hoy and Jamal JJ.A.

BETWEEN

Shari Krieser

Plaintiff (Respondent)

and

Anna Garber, Michelle Garber, Susin Garber,

Mike Nealon and Nealon Wood Products Ltd.

Defendants (Appellants)

and

George Krieser

Third Party

Peter W. Kryworuk and Jacob R.W. Damstra, for the appellants Mike Nealon and Nealon Wood Products Ltd.

A. Irvin Schein and Whitney E. Abrams, for the appellants Anna Garber, Michelle Garber and Susin Garber

Kenneth Prehogan and Lia Boritz, for the respondent

Heard: in writing

On appeal from the judgment of Justice Edward M. Morgan of the Superior Court of Justice, dated March 29, 2019, with reasons reported at 2019 ONSC 1974.

Hoy J.A.:

I. OVERVIEW

[1] This appeal arises out of the construction of a dock at a waterfront property on Lake Simcoe.

[2] Anna Garber, Michelle Garber and Susin Garber (collectively, “Garber”) hired Mike Nealon and Nealon Wood Products Ltd. (collectively, “Nealon”) to design and build a dock at their property. In August 2011, Nealon, on behalf of Garber, applied for the necessary permit from what is now Ontario’s Ministry of Natural Resources and Forestry (“the MNRF”).

[3] On September 30, 2011, the MNRF issued the necessary permit (“the Permit”) and, in the spring of 2012, Nealon commenced construction of the new dock. But he did not situate the Garber’s dock in conformity with the Permit and it curtailed Shari and George Krieser (collectively, “Krieser”) in the use of their neighbouring waterfront and boat. In 2014, Shari Krieser commenced proceedings against Nealon and Garber. A trial was held in late 2018, and the trial judge ruled that the Garber dock, as constructed, constitutes a nuisance.

[4] Among other things, he ordered that Garber and Nealon, jointly and severally, at their expense, remove the dock from its present location. He ordered that Nealon and Garber pay Shari Krieser, the owner of the Krieser property, punitive damages in the amount of $100,000. He also awarded substantial indemnity costs of $518,000, jointly and severally, against Garber and Nealon, and a further $80,000 in cost solely against Garber.

[5] Garber and Nealon (whom I will sometimes call the “appellants”) argue that the trial judge’s finding that the dock constitutes a nuisance, his grant of a mandatory injunction, and his award of punitive damages are all tainted by reviewable error. They seek leave to appeal the costs awarded. Nealon and Shari Krieser also seek leave to adduce fresh evidence on appeal.

[6] On consent, the appeal proceeded in writing.

[7] I would deny the motions to adduce fresh evidence on appeal. I would not disturb the trial judge’s finding of nuisance, nor would I disturb the grant of the injunction. But I would set aside his order of punitive damages against Nealon, grant Nealon leave to appeal the costs award against Nealon, and substitute an order requiring Nealon to pay costs in the amount of $108,000, all inclusive.

[8] Below, I first explain the nature of the interference with Krieser’s use and enjoyment of their property. Then, I address the arguments raised with respect to the trial judge’s finding of nuisance. Next, I turn to the issues the appellants raise in relation to the mandatory injunction and, in that part of this judgment, address the parties’ motions for leave to adduce fresh evidence. I then turn to the arguments they raise in relation to the punitive damages. Finally, I address the trial judge’s costs award.

II. THE INTERFERENCE WITH THE KRIESER PROPERTY

[9] Shari Krieser’s lakefront property is immediately to the west of the Garber property. The Krieser property includes a small wooden dock on the eastern side and, just to the east of the dock, but still on the Krieser property, a marine rail system.

[10] The Krieser family owns a 33-foot boat, which they previously parked on the marine rails. To land the boat on the marine rails, George Krieser, would typically start his approach some distance north of the shore. He would then head due south onto the rails.

[11] Under the Permit, the Garber dock was to have been built well within the Garber’s property. The plans included in the Permit application placed the dock at least 20 feet from, and parallel to, the projection of the property line between the Garber and Krieser properties. The Permit application included Krieser’s consent to the installation of the Garber dock, as depicted in the application.

[12] However, the Garber dock was not built in the manner described in the application. As built, it angles to west, towards the projected property line between the two properties. Consequently, it comes within three feet of the projected property line. Further, a shield of large, submerged boulders extends five feet across the projected property line. These boulders, which surround the Garber dock to protect it from winter ice, are directly north of Krieser’s marine rail system.

[13] The Kriesers have been unable to use their boat as before. George Krieser is the boat’s owner and primary operator. He has been a recreational boater for most of his life. Because of the submerged boulders, George Krieser could no longer head directly southbound into his docking station, as he used to. George Krieser tried to dock the boat several times in 2012 but concluded that it was too dangerous. He was not comfortable approaching from the west and steering around and through the various underwater hazards. The Kriesers now dock their boat at a local marina.

[14] The Kriesers complained of the erroneously constructed dock to the MNRF. In September 2012, the MNRF inspected Garber’s newly built dock. The MNRF commenced proceedings and, on April 4, 2014, Mike Nealon pleaded guilty to the provincial offence of engaging in construction contrary to a work permit granted under the Public Lands Act, R.S.O. 1990, c. P.43. The agreed statement of facts stated that the erroneous construction of the dock was inadvertent. Mike Nealon was fined $4500 but no order was made requiring removal of the dock.

[15] Shortly thereafter, on April 14, 2014, Shari Krieser commenced an action against Garber and Nealon asserting that the dock constituted a nuisance; seeking a mandatory order requiring Garber and Nealon to dismantle and remove the Garber dock, at their expense; and claiming punitive damages. Nealon brought a third-party claim against George Krieser, as the owner and primary operator of the Krieser boat, pleading that his negligence contributed to any nuisance suffered by the Kriesers.

[16] Prior to trial, the parties made several offers to settle. These offers played a significant role in the trial judge’s reasons and, as I will discuss below, are relevant to various aspects of the issues on appeal. Most notably, in March 2015, Krieser made a with-prejudice offer to Garber to pay the entire cost of removing and rebuilding the Garber dock in the location depicted on the Permit; Krieser would have assumed responsibility for obtaining any necessary approval from the MNRF. Graber rejected this offer.

III. NUISANCE

The trial judge’s reasons

[17] The trial judge concluded that the dock constituted a nuisance.

[18] In his reasons, he began by articulating the test for nuisance. He explained that nuisance is the interference with the use or enjoyment of land and that, in nuisance, the focus is on the harm suffered rather than fault or the nature of the conduct giving rise to the harm: St. Lawrence Cement Inc. v. Barrette, 2008 SCC 64, [2008] 3 S.C.R. 392, at para. 77.

[19] To establish a claim in private nuisance, the interference with the owner’s use or enjoyment of the land must be both substantial and unreasonable: Antrim Truck Centre Ltd. v. Ontario (Ministry of Transportation), 2013 SCC 13, [2013] 1 S.C.R. 594, at para. 19.

[20] The trial judge noted that the phrase ‘substantial’ has been interpreted in the negative to mean something other than minimal such that “compensation will not be awarded for trivial annoyances,” quoting St. Lawrence Cement, at para. 77. He observed that “this test applies whether the nuisance is physical injury to land or an interference with the amenities of the land,” citing Antrim, at para. 23.

[21] As for the reasonableness criterion, the trial judge noted that “the courts assess, in broad terms, whether the interference is unreasonable by balancing the gravity of the harm against the utility of the defendant’s conduct in all of the circumstances”: Antrim, at para. 26. The trial judge also noted that “the severity of the interference and the character of the neighbourhood are important factors in assessing the gravity of the harm,” citing Tock v. St. John’s Metropolitan Area Board, [1987] 2 S.C.R. 1181, at p. 1191.

[22] Citing Antrim, at para. 38, the trial judge observed that while the acts of a public authority will generally be of significant utility, “acts that interfere with one person’s property for the private good of another person’s property will have a more difficult time establishing their ‘utility’ as understood in the law of nuisance.”

[23] The trial judge had no difficulty in finding that the interference with the Krieser property was substantial.

[24] He found that, as constructed, the Garber dock “impede[s] access to the Krieser property, and consequentially deprives Krieser of an important amenity going to his and his family’s use and enjoyment of the property.” The dock sits squarely in front of the Krieser waterfront and amounts to a physical invasion of the Krieser’s property. The trial judge rejected the appellants’ argument that George Krieser’s aversion to docking his boat at the Krieser waterfront was that of an unduly sensitive property owner. He found that “the risk of navigating around the Garber dock and boulders in the unpredictable waters of Lake Simcoe is a serious one.” He accepted expert evidence that the approach was “unduly risky and beyond the expected capabilities of a weekend cottager/boater” such as George Krieser.

[25] The trial judge also found that the actions of the appellants in building the dock were unreasonable. “After all, Nealon, the actual builder of the dock, was convicted of a criminal offence for ignoring the approved plans and building the dock in the wrong place.”

[26] He concluded:

The Garber dock is directly in front of the boat rails on the Krieser property’s lakefront, and impedes access to those rails and to the Krieser property. The Kriesers, as recreational boaters, can no longer dock their vessel at their own property. There is no sense in which this misplacement of the Garber dock can be said to be reasonable. I find that it is not reasonable and constitutes a nuisance.

The issues raised regarding the trial judge’s finding of nuisance

[27] The appellants concede that the trial judge correctly articulated the test for nuisance. However, they argue that he erred in several ways in applying it:

1. While he directed himself that the focus is on the harm suffered rather than fault or the nature of the conduct giving rise to the harm, he focussed on what he found was the unreasonable conduct of the appellants.

2. In concluding that the interference with the Krieser property was unreasonable, he failed to consider that:

a. the difficulty in docking the Krieser boat only arises on windy or stormy days;

b. the interference was created by the shield of boulders, and not the dock itself; and

c. the character of the neighbourhood on the waterfront of Lake Simcoe and, in particular, that a user of the lake should be expected to navigate around neighbouring docks or other structures built in the lake.

3. In concluding that the interference was unreasonable, he failed to balance the fact the dock would have been unusable if it had been built at the location designated by the Permit. On Nealon and Garber’s evidence, the water may have been too shallow to allow for the parking of the Garber boat in the slip between the two arms of the dock, or on the eastern side of the dock. In August, after the water levels in Lake Simcoe fall, there would have been insufficient depth required to park a boat in any area of the dock.

4. He erroneously concluded that this is a case of physical invasion. The Garber dock was built on Crown land, not the Kriesers’ land, and this is purely a case of loss of amenity. As a result, he short-circuited the reasonableness analysis.

Analysis

[28] I am not persuaded that there is any basis to interfere with the trial judge’s conclusion that the construction of the Garber dock resulted in a substantial and unreasonable interference with Shari Krieser’s use and enjoyment of her property. Indeed, I agree with his conclusion.

(1) The trial judge did not improperly focus on the appellants’ unreasonable conduct

[29] Turning to the appellants’ first argument, in nuisance, unlike in negligence, the focus is generally on the harm suffered rather than fault or the nature of the conduct giving rise to the harm. At paras. 28-29 of Antrim, Cromwell J. wrote this:

Generally, the focus in nuisance is on whether the interference suffered by the claimant is unreasonable, not on whether the nature of the defendant’s conduct is unreasonable.

The nature of the defendant’s conduct is not, however, an irrelevant consideration. Where the conduct is either malicious or careless, that will be a significant factor in the reasonableness analysis. [Emphasis in original.]

[30] The trial judge was entitled to consider the appellants’ conduct in his reasonableness analysis. It was not the only factor the trial judge considered. The trial judge focussed on the fact that Krieser’s use of their boat was impeded by the Garber dock and the boulders which were installed as part of the dock are directly in front of Krieser’s marine rails.

(2) The trial judge did not fail to consider relevant factors

[31] I reject the appellants’ argument that the trial judge erred by failing to consider relevant factors.

[32] The trial judge considered the weather conditions on Lake Simcoe. He found that Lake Simcoe weather conditions are volatile and unpredictable. This finding is amply supported by the evidence. The trial judge noted the evidence of David Fingold, the Garber’s neighbour to the east, that the lake is windy and can change in a matter of moments. Mr. Fingold testified that he often goes out in nice weather and, by the time he returns to his dock, finds conditions to be much rougher.

[33] As discussed, in assessing whether a private nuisance has been established, the focus is on the harm suffered by the plaintiff. The harm, in this case, is the interference with Krieser’s ability to use their boat. Whether that harm is caused by the shield of boulders installed in conjunction with, and arguably part of, the dock, or another part of the dock, does not impact the assessment of the harm suffered and the reasonableness of the interference.

[34] In his review of the legal test for nuisance, the trial judge noted that the character of the neighbourhood is an important factor in assessing the gravity of the harm and he was alive to the fact that the Krieser property fronted on Lake Simcoe, where boating was common. The appellants’ argument that the trial judge did not consider the lakefront character of the neighbourhood is an attempt to revisit the argument that the trial judge squarely rejected at trial, namely that it was possible to dock the Krieser boat with the boulders in place, George Krieser was an unusually sensitive boater, and the interference was therefore not a nuisance.

[35] Referring to a colour-coded chart showing the water depths in the approach to the Krieser dock, the trial judge wrote as follows:

As Nealon explains it, Krieser could approach from the west or northwest rather from the north, veer away from or weave between the red coloured bands which are too shallow for his boat to navigate, cross the narrowest part of the orange band which is navigable but precarious, and turn his 33-foot boat to the south in time to avoid the boulders surrounding the Garber dock and line up evenly with the marine rails on the Krieser waterfront…

The feat of navigation proposed by Nealon might or might not be possible to accomplish; what is certain is that it is not easy.

[36] Further, George Krieser’s method of docking his boat was used by others in the neighbourhood. The trial judge accepted the evidence of Mr. Fingold, who “indicated that the safest way he has found to enter his own dock is to start his approach from some distance north of the lakeshore and head directly southbound into his docking station without making any unnecessary turns.”

(3) The trial judge did not err in his reasonableness analysis by failing to balance the greater benefit of the dock to Garber as built

[37] I reject the appellants’ argument that the trial judge erred in his reasonableness analysis by failing to balance the harm to Krieser against the increased utility of the Garber dock to Garber as built.

[38] Antrim, at para. 2, explains that “the reasonableness of the interference must be determined by balancing the competing interests”. As to how that balancing exercise should be carried out, Cromwell J. wrote, at para 25, that “…the reasonableness of the interference must be assessed in light of all of the relevant circumstances.”

[39] The court is neither bound nor limited by any specific list of factors when considering the reasonableness of an interference, but “should consider the substance of the balancing exercise in light of the factors relevant in the particular case”: Antrim, at para 26. The court will sometimes readily conclude that an interference is unreasonable without having to engage in a lengthy balancing exercise: Antrim, at para. 50.

[40] It is hardly surprising that the trial judge did not refer to the benefits accruing to the Garbers. The appellants did not argue at trial that their interference with the Krieser property was reasonable because the Garbers needed to locate their dock where they did to use their boat in August. The appellants’ position, at trial, was that they intended to build the dock in accordance with the Permit and it was built where it was due to an error by Nealon. In other words, any additional benefit was not something they had intended. In the circumstances, I see no error in the trial judge’s conclusion that “there is little, if anything” by way of utility to balance against the inference with Krieser’s property.

[41] Moreover, the trial judge engaged in the essence of the balancing question. He considered whether the interference was one that would not be tolerated by the ordinary occupier. He easily concluded that it would not.

[42] I agree.

[43] As noted above, reasonableness of the interference is to be considered “in light of all of the relevant circumstances”: Antrim, at para. 25. Here, it was highly relevant that the construction of the Garber dock was done contrary to the Permit to which Krieser consented. It was constructed exclusively for Garber’s benefit. And, as constructed, it significantly interferes with Krieser’s enjoyment of their waterfront home. In the circumstances, there is no reason why Krieser should bear the “cost” of this dock for Garber’s benefit.

(4) The trial judge did not otherwise ‘short circuit’ the reasonableness analysis

[44] Finally, whether the interference in this case is characterized as the loss of amenity or physical interference is of no moment. In Antrim, at paras. 49-51, faced with conflicting case law, Cromwell J. addressed whether the reasonableness inquiry must be conducted where the interference is “material or physical,” or only with respect to other types of interference, such as loss of amenity. He concluded that reasonableness is to be assessed in all cases where private nuisance is alleged, regardless of the type of harm involved. He recognized that it will not always be easy to distinguish between damage that is “material or physical” and loss of amenity, particularly where the nuisance is interference with access to land.

[45] Here, contrary to Nealon’s assertion, the trial judge did not short-circuit the reasonableness inquiry on the basis that the interference was physical. The trial judge clearly understood the nature of the interference and he assessed the reasonableness of that interference in light of the relevant circumstances.

IV. THE INJUNCTION

The issues

[46] The appellants acknowledge that the grant of an injunction is a discretionary decision. The court will only interfere with the exercise of discretion if it was based on an error of law (determined on a correctness standard), a palpable and overriding error of fact, the consideration of irrelevant factors or the omission of factors that ought to have been considered, or if the decision was unreasonable in the sense that it is not compatible with the judicial exercise of discretion: Aventis Pharma S.A. v. Novopharm Ltd., 2005 FCA 390, 44 C.P.R. (4th) 326, at para. 4; Bellini Custom Cabinets v. Delight Textiles Limited, 2007 ONCA 413, 225 O.A.C. 375, at para. 44.

[47] The appellants argue that the trial judge omitted to consider several factors that ought to have been considered:

1. He did not consider whether the injunction he granted was capable of enforcement by the court. In particular, he failed to consider that a government permit was required to remove the dock.

2. He did not consider the principles of proportionality and fairness and whether the nuisance could be abated by a narrower and less burdensome order than removal of the dock. In particular, he did not consider whether the appellants’ offer of November 1, 2018, to move the boulders and shave the “bulb” off the western arm of the dock, would secure Krieser’s right to comfortably access their boat.

3. He failed to consider the public policy impact of ordering removal of the dock. In particular, he failed to consider how the removal of the steel piles in the lakebed could have a negative impact on fish habitats.

[48] Nealon seeks to adduce what they characterize as “new” evidence that did not exist at the time of trial and which is necessary to deal fairly with the issues the appellants raise with respect to the injunction. Krieser opposes the admission of the proposed fresh evidence and, if it is admitted, seeks to adduce evidence in response.

[49] Before turning to the issues raised with respect to the injunction granted, I will first address the motions to admit fresh evidence.

The proposed fresh evidence

The nature of the proposed fresh evidence and the parties’ positions

[50] The trial judge’s reasons were released on March 29, 2019. To date, the dock has not been removed. Nealon’s proposed fresh evidence addresses steps Nealon has taken to comply with, and whether it is possible to comply with, the injunction.

[51] Section 134(4) of the Courts of Justice Act, R.S.O. 1990, c. C.43 gives this court discretion to receive further evidence on appeal “in a proper case”. Normally, the court will exercise its discretion to receive further evidence on appeal when (1) the tendered evidence is credible; (2) it could not have been obtained by the exercise of reasonable diligence prior to trial; and (3) the evidence, if admitted, will likely be conclusive of an issue in the appeal: Sengmueller v. Sengmueller (1994), 1994 8711 (ON CA), 111 D.L.R. (4th) 19 (Ont. C.A.), at p. 23.

[52] Nealon submits that the proposed evidence is not “fresh evidence” in the classic sense, because it did not exist at the time of trial; rather, it is “new” evidence of subsequent developments that would not have been generated but for the mandatory injunction ordered by the trial judge. Thus, the second normal requirement for the admission of fresh evidence—that the evidence could not have been obtained by the exercise of reasonable diligence prior to trial—is inapplicable.

[53] In such as case, the evidence will be admitted where (1) it is required to deal fairly with issues on appeal and (2) declining to admit the evidence could lead to a substantial injustice: Sengmueller, at p. 23. Nealon argues that the new evidence shows that what the trial judge assumed about future events—namely that a permit would be obtained—is incorrect and is required to deal fairly with issues on appeal. Further, Nealon argues that trial judge’s assumption underpinned the judge’s orders granting the mandatory injunction, punitive damages, and costs. Accordingly, Nealon submits, this is a proper case to admit the proposed further evidence.

[54] Nealon’s proposed evidence consists of the affidavit of Mike Nealon, sworn January 31, 2020, and the affidavit of David Thompson, trial counsel for Nealon, sworn March 12, 2020.

[55] The gist of Mike Nealon’s evidence is that he has been unable to secure a permit from the MNRF permitting him to remove the dock, but has obtained permits to move the boulders and shave the “bulb” off the western arm of the dock, thereby reducing its size. He also provides evidence regarding the trial judge’s ruling on a contempt motion alleging non-compliance with the judgment, brought by Krieser and heard on September 27, 2019.

[56] Thompson deposes that he has provided copies of the work permits submitted to Krieser and that counsel for Krieser has advised that they do not consider the work described in the permit granted as satisfying the judgment of the trial judge.

[57] Krieser argues that Nealon’s proposed evidence fails to meet the test for the admission of fresh evidence on appeal. Mike Nealon’s affidavit evidence is not credible because it is the evidence of a party with a direct interest in obtaining an order on appeal that he not be required to remove the dock, not an expert. Krieser rejects Nealon’s characterization of the further evidence as “new” evidence. The injunction to remove the dock was always a live issue and Nealon, who testified that the he could probably get a permit to remove the dock, could have obtained this evidence at any time in the six years prior to trial. Had Nealon done so, Krieser would have had an opportunity to respond. Moreover, the proposed evidence is of limited probative value because it does not demonstrate that it would be impossible to remove the dock and piles using different methods or with a more detailed work permit application.

[58] In the alternative, Krieser argues that if Nealon is permitted to adduce this proposed evidence on appeal, as a matter of fairness, they should be permitted to respond with the affidavit of Milo Sturm, sworn September 12, 2019. Mr. Sturm, who was called by Krieser as an expert at trial, appends his expert report of September 2019 (“the Sturm report”), which Krieser had filed in support of their contempt motion.

[59] In his report, Mr. Sturm indicates that there are alternative, less obtrusive, methods for removing the dock than those proposed by Nealon. These methods could be submitted to the MNRF. Further, Nealon did not provide the level of detail typically required by the MNRF and did not sufficiently describe restoration methods. The essence of his report is that if the work is carried out properly and the permit applications are supported with appropriate documentation, including an aquatic habitat assessment and details of how the lakebed is to be restored, the MNRF should be able to consider and approve the removal options. Krieser argues that Mr. Sturm’s evidence demonstrates that it is not impossible to comply with the trial judge’s order and, accordingly, that Nealon’s proposed evidence has limited probative value.

[60] In response, Nealon argues that Krieser misstates their position and the Sturm report should not be admitted. Nealon clarifies that they do not argue that it is impossible to obtain a work permit to remove the dock. Rather, Nealon argues that the trial judge erred in granting an injunction which may not be workable or possible, depending on the position of the MNRF. The Sturm report does not respond to this argument.

[61] Further, Nealon argues that the trial judge had the Sturm report before him on the contempt motion and could have, but did not, direct that Nealon apply for a permit in accordance with Mr. Sturm’s proposal. Nealon says that Krieser inappropriately implies that the trial judge should have done so, and that it is not in the interests of justice to admit the Sturm report.

Analysis regarding admission of the proposed further evidence

[62] I am not persuaded that this is a proper case for this court to receive further evidence on appeal.

[63] Nealon testified at trial about the need for a permit, his close relationship with the MNRF, his successful track-record in obtaining permits and that he could probably obtain a permit to remove the dock.

[64] As McKinlay J.A. noted in Sengmueller, admitting evidence on appeal which did not exist at trial could not possibly have affected the result at trial. It results in their being no finality to the trial process. Such evidence should be admitted only “where it is necessary to deal fairly with the issues on appeal, and where to decline to admit the evidence would lead to a substantial injustice in result”: Sengmueller, at p. 23.

[65] Nealon argues that declining to admit the proposed fresh evidence would lead to the substantial injustice of, among other things, the appellants being required to comply with a mandatory injunction that is neither workable nor possible. I do not accept this submission.

[66] Assuming that it is indeed properly characterized as “new” evidence, the proposed fresh evidence is not necessary to deal fairly with the issues on appeal. Although the trial judge’s order did not explicitly contemplate the difficulties Nealon and Garber may face in obtaining the necessary permits to remove the dock, the order as it stands is not unworkable. In my view, the issues can be fairly addressed on the evidence adduced before the trial judge and, below, I do so.

[67] When disputes based on post-judgment events develop over the meaning of or compliance with a mandatory order and the trial judgment is also under appeal, the trial court, and not the appeal court, will in most cases be the appropriate forum to resolve these disputes.

[68] The court’s enforcement of its order is ultimately carried out through the contempt power. Exercise of this power is discretionary. So long as an alleged contemnor acts in good faith, taking reasonable steps to comply with the relevant order, the court may refuse to make a finding of contempt: Carey v. Laiken, 2015 SCC 17, [2015] 2 S.C.R. 79, at para. 37.

[69] As discussed above, Krieser has already brought a contempt motion in relation to the mandatory injunction. On September 27, 2019, the trial judge ruled on this motion: see Keiser v. Garber, 2019 ONSC 5617 (“the Contempt Reasons”).

[70] It is clear from the Contempt Reasons—which this court may consider, as they are neither fresh nor new evidence—that the appellants are not required to do the impossible: see Korea Data Systems (USA), Inc. v. Aamazing Technologies Inc., 2015 ONCA 465, 126 O.R. (3d) 81, at para. 39. In his contempt reasons, the trial judge clarified his earlier injunction, at para. 10, noting that “[t]he key to fulfilling what I ordered in my judgment is to remove the nuisance, however that might appropriately be accomplished” (emphasis added). The trial judge ordered that Nealon and Garber were to continue to use best efforts to obtain a work permit and to remedy the nuisance.

[71] If necessary, the trial judge will determine whether the appellants have used their best efforts to do so and have thereby complied with the injunction, presumably in the context of a further contempt motion. The trial judge can then consider whether “best efforts” includes following the suggestions of Mr. Sturm in his report, provided to the appellants in September 2019.

Analysis of the issues raised with respect to the injunction

[72] I accordingly consider the issues raised with respect to the injunction granted by the trial judge without regard to the proposed fresh evidence.

[73] Injunctive relief is the “ordinary remedy” for a nuisance: see Robert J. Sharpe, Injunctions and Specific Performance, loose-leaf (2019-Rel. 28), (Toronto: Thomson Reuters Canada Ltd., 2019), para. 4.60. Typically, damages are awarded in lieu of an injunction only where the injury to the plaintiff’s legal rights (1) is small, (2) is capable of being estimated in money, and (3) can adequately be compensated by a small money payment; and where it would be oppressive to the defendant to grant an injunction: Shelfer v. City of London Electric Lighting Co., [1895] 1 Ch. 287 (C.A.).

[74] However, mandatory injunctions—which require the defendant not merely to cease some act but take positive action—raise special concerns. Requiring the defendant to take positive acts, as Sharpe explains, (1) changes the balance of burden and benefits as between the parties and (2) raises issues concerning the court’s reluctance to become involved in ongoing supervision of complex obligations: see Injunctions and Specific Performance, paras. 1.500-1.520.

[75] The trial judge acknowledged that mandatory injunctions are to be used sparingly. He considered the test set out in Shelfer and noted that the defendant bears the burden of establishing the conditions to award monetary compensation instead of an injunction. He observed that the court should not adopt a position that effectively permits the defendant to purchase a license to interfere with the plaintiff’s property rights. Citing Carley v. Willow Park Gold Course Ltd., 2002 ABQB 813, 325 A.R. 27, he remarked that courts have found it appropriate to issue an injunction or affirmative order where “a defendant has acted in reckless disregard of the plaintiff’s rights or has through his or her conduct indicated an unwillingness to abate the nuisance”. He noted that there was no evidence that Garber or Nealon did not have the money required to remove the dock and added:

Indeed, it was Nealon’s evidence that although it would be a significant amount of work, he could remove the dock and rebuild it in its properly authorized place. He testified that it would entail removing the protective boulders around the end of the dock, digging out the poles on which the dock is anchored, filling the holes this process would leave in the bed of the lake, and reconstructing the dock where it was supposed to be—i.e. to the west of its present location. He indicated that it was only a matter of money and he would have done so had Garber given approval for the work.

[76] The trial judge concluded that, under the circumstances, injunctive relief was appropriate.

[77] For ease of reference, the appellants argue that the trial judge made the following errors, all of which relate to factors that they say ought to have been considered by the trial judge in granting the mandatory injunction:

1. He did not consider whether the injunction he granted was capable of enforcement by the court. In particular, he failed to consider that a government permit was required to remove the dock.

2. He did not consider the principles of proportionality and fairness and whether the nuisance could be abated by a narrower and less burdensome order than removal of the dock. In particular, he did not consider whether the appellants’ offer of November 1, 2018 to move the boulders and shave the “bulb” off the western arm of the dock would secure the Krieser’s right to comfortably access their boat.

3. He failed to consider the public policy impact of ordering removal of the dock. In particular, he failed to consider how the removal of the steel piles could have a negative impact on fish habitats.

[78] Having regard to the evidence at trial, there is no reason to interfere with the trial judge’s exercise of his discretion in granting the injunction on the basis that he failed to consider these factors.

[79] The fact that the trial judge did not specifically refer to the need for a permit in his reasons is not surprising, given the evidence at trial. Nealon testified about the need for a permit; his close relationship with the MNRF; his familiarity with their rules; his successful track-record in obtaining permits; his experience in removing piles and remediating the lakebed; and that, notwithstanding the fish habitat, he would probably be able to get a permit. George Krieser testified that Nealon had told him “he can just walk in there [i.e. the MNRF] and get what he wants.” The evidence at trial, including Nealon’s own evidence, left the impression that, as the trial judge wrote, “removing the dock was only a matter of money” and money was not an issue.

[80] As to whether the nuisance could be abated by a narrower and less burdensome order than requiring the removal of the entire dock, George Krieser’s evidence at trial was that the appellants’ offer first made on June 8, 2018 and clarified on November 1, 2018, to move the boulders and shave the “bulb” off the western arm of the dock, did not give him enough room to safely dock his boat. The trial judge accepted that George Krieser was not “an unduly sensitive Plaintiff”. The trial judge’s order requiring the removal of the entire dock was grounded in the evidence.

[81] The appellants argue that the trial judge’s order requiring the removal of the dock was unduly burdensome as he failed to consider that, if the Garber dock were reconstructed in accordance with the Permit, the water would be too shallow for Garber to dock his boat. The only evidence at trial on this issue was Nealon’s. He testified that if the dock were moved, “we’re into shallower water. – I’m not sure [Garber] can get his boat in there.” But Nealon also testified that he visited the site before applying for and obtaining the Permit. It cannot be said that it is unduly burdensome to require removal of the dock. Again, in the context of the evidence at trial, the trial judge did not err by failing to specifically consider the non-financial burden to Garber of relocating the dock. The fairness of the burden imposed by the mandatory injunction must be considered in light of all the trial judge’s factual findings, including those findings about Garber’s and Nealon’s conduct which he made in the portion of his reasons addressing punitive damages and to which I turn in the next part of these reasons.

[82] Finally, as for fish habitat, the only evidence at trial discussing the effect of the dock on fish habitat was Nealon’s. He testified that this is prime bass and perch habitat, that a fish biologist would have to approve what he proposed to do to the lakebed, and that he was very familiar with what the MNRF was looking for with respect to fish habitat. There was no expert evidence on this issue, and no evidence that the dock could not be removed without harming the lake’s fauna. Indeed, Nealon testified about how he would remove the dock without damaging fish habitat. In the context of the record at trial, the trial judge did not err in not specifically considering the impact on fish habitat of removing the dock.

V. PUNITIVE DAMAGES

The trial judge’s reasons

[83] The trial judge began by considering the jurisprudence, including Whiten v. Pilot Insurance Co., 2002 SCC 18, [2002] 1 S.C.R. 595, regarding when an award of punitive damages is appropriate and directed himself that the overriding rule governing quantum is proportionality.

[84] Citing Weenen v. Biadi, 2017 ONCA 533, 84 R.P.R. (5th) 200, at para. 10, he wrote that, “the protracted nature of the nuisance, and the failure to do anything to abate it once discovered, must therefore be factored into the punitive damages analysis.”

[85] The trial judge then outlined the facts that lead him to conclude that punitive damages were required in this case.

[86] The trial judge accepted George Krieser’s evidence that, around the end of April or the beginning of May 2012, he saw the partially constructed dock was too far to the west and spoke to Nealon about it.

[87] Nealon did not stop building the dock.

[88] On June 19, 2012, Krieser’s lawyer wrote to Garber’s lawyer complaining about the location of the dock, stating that it did not appear to be consistent with the Permit. Garber’s lawyer wrote back, on June 27, 2012, taking the position that the dock complied with the Permit. (These letters, the trial judge noted, were inconsistent with Nealon’s position at trial that he discovered the “mistake” mid-construction and told Krieser about it.)

[89] Garber continued to pay Nealon for the dock after receiving the letter from Krieser’s lawyer. The trial judge observed that Garber failed to produce any correspondence to Nealon indicating that the dock is incorrectly built.

[90] If the dock had been built in compliance with the Permit, there would have been what Nealon called a “dogleg” from the stone path to the dock, which Nealon indicated would have been aesthetically displeasing. But, as constructed by Nealon, the dock “lined up” with a stone path leading from the Garber house to the waterfront. This path was constructed after Nealon had secured the Permit. The misplaced dock fit perfectly with the landscaping. It also provided Garber with a far roomier waterfront than had they located it in accordance with the Permit.

[91] The trial judge concluded that “[n]one of this is truly explicable without some type of background agreement or tacit understanding between Nealon and Garber.”

[92] The trial judge also found Nealon’s testimony about how he came to make his mistake “inexplicable”. Nealon was “unquestionably experienced”; his explanation at trial “was difficult to follow” and he seemed to be changing it as he went along. The trial judge noted that Nealon, despite his extensive experience, had no history of mistakes such as the one at issue here. He found that it was very unlikely that Nealon would make such a patent error on this dock.

[93] Most significantly, neither Garber nor Nealon did anything to remedy the problem when they were alerted to it—and not because of the cost of doing so. (It cost $150,000 to build the dock the first time around but that amount included Nealon’s profit.) Garber rejected Krieser’s March 12, 2015 with prejudice offer to pay for all the costs of moving the dock and protective boulders (“the Krieser Offer”). While the offer was not made to Nealon, he was aware of it.

[94] The trial judge concluded:

It is clear to me that the protracted nature of the interference with Krieser’s use and enjoyment of property has everything to do with Garber’s and Nealon’s intentional conduct. It is hard to imagine a clearer case in need of a deterrent type of remedy. Krieser, as plaintiff, has offered to pay the full cost of remedying the interference with his property rights; Garber and Nealon, as defendants, are not interested in a remedy, even one fully funded by Krieser.

The harm inflicted by Garber and Nealon was aimed directly at Krieser. It aimed to expand the Garber waterfront and improve the aesthetics of the Garber waterfront, all at the expense of Krieser’s use and enjoyment of their property. The case calls for a punitive damages award proportionate to the value of the dock.

[95] The trial judge ordered Nealon and Garber to pay Shari Krieser punitive damages in the amount of $100,000.

The appellants’ arguments

[96] Nealon raises two arguments. First, he argues that the trial judge erred by treating Garber and Nealon “as one,” without assessing whether punitive damages were required against them separately, and that punitive damages were not required against Nealon. In the alternative, Nealon argues that the $100,000 awarded in punitive damages was arrived at without the requisite consideration of whether it was the lowest award to rationally serve the purpose of punishing the appellants and deterring their conduct. Rather, the trial judge arbitrarily selected $100,000 because it was “proportionate to the cost of the dock”.

[97] Garber makes three main arguments.

[98] First, Garber argues that the trial judge’s finding that there was a “background agreement or tacit understanding” between Nealon and Garber about the location where the dock would be built is a palpable and overriding error. It was not supported by the evidence at trial.

[99] Second, Garber argues that the trial judge erred in refusing to permit Garber to adduce what they characterize as character evidence about the Kriesers. They say, without that evidence, the trial judge was unable to appreciate the real reason why Garber would not accept the Krieser Offer.

[100] Third, Garber adopts Nealon’s alternative argument.

Analysis

[101] An appellate court has greater scope and discretion when reviewing an award of punitive damages than when reviewing an award of compensatory damages.

[102] Punitive damages are reserved for exceptional cases, to punish, deter, and denounce “malicious, oppressive and high-handed” misconduct that “offends the court’s sense of decency”: Whiten, at para. 36; Hill v. Church of Scientology of Toronto, 1995 59 (SCC), [1995] 2 S.C.R. 1130, at para. 196.

[103] The questions for this court are was the misconduct of the defendant so outrageous that punitive damages were rationally required to further one or other of the underlying purposes of punitive damages and was the quantum ordered, and no less, rationally required to do so?: Hill, at para. 197; Whiten, at paras. 71, 74, 101 and 107; Pate Estate v. Galway-Cavendish and Harvey (Township), 2013 ONCA 669, 117 O.R. (3d) 481, at paras. 201-202.

[104] Where there are multiple defendants, any award of punitive damages must be justified with respect to the acts of each defendant. As Cory J. explained in Hill, at para. 195, “there cannot be joint and several responsibility for either aggravated or punitive damages since they arise from the misconduct of the particular defendant against whom they are awarded.”

Were punitive damages against Nealon rationally required?

[105] I agree with the appellants that the trial judge erred in treating Garber and Nealon “as one,” without assessing whether punitive damages were required against them separately. As Hill instructs, punitive damages must arise from the particular conduct of the defendant against whom they are awarded.

[106] In my view, the misconduct of Nealon was not so outrageous that punitive damages were rationally required to punish, deter or denounce it.

[107] The “protracted nature of the interference” and the failure to accept the Krieser Offer were significant—indeed, in my view, the most significant—factors in the trial judge’s decision to order punitive damages against Garber and Nealon.

[108] However, the trial judge failed to consider that Nealon’s position was fundamentally different from Garber’s. Nealon was a contractor, not the owner. Once the dock was installed, he could not move it without Garber’s approval. His evidence was that he would have done so, had Garber approved it. Indeed, during a July 2012 telephone conversation, Nealon told George Krieser, “I guarantee you they’ll never move it.” Nor could Nealon accept or reject—or, presumably, cause Garber to accept or reject—the Krieser Offer.

[109] The trial judge found that Nealon was aware of the Krieser Offer. But being aware of an offer is different from being able to accept or reject it. Indeed, why would Nealon not have wanted Garber to accept the Krieser Offer? By the time of the Krieser Offer there was no question that the dock did not conform to the Permit: Mike Nealon pleaded guilty to the provincial offence of engaging in construction contrary to a work permit on April 4, 2014. Krieser offered to fix Nealon’s “mistake,” at no cost to Nealon. On the other hand, Garber had a clear reason to refuse the Krieser Offer: acceptance would have left Garber with a less attractive and less spacious waterfront, and, according to Nealon, shallower water at their dock. I do not think that Nealon can be held responsible for the protracted nature of the interference.

[110] I appreciate that, on the trial judge’s findings, Nealon’s conduct is not otherwise without fault. He continued to build the dock after George Krieser told him it was too far to the west. Contrary to the agreed statement of facts at Nealon’s guilty plea to the provincial offence of engaging in construction contrary to a work permit, the trial judge in effect found that Nealon’s noncompliance with the Permit was intentional, and not a mistake. As Krieser urged at trial, the trial judge also found that there was “some type of background agreement or tacit understanding between Nealon and Garber” about the location of the dock.

[111] While I agree with the trial judge that Nealon’s explanation of how he made what he testified was a mistake was “difficult to follow and he seemed to be changing it as he went along”, in my view, the inference regarding the initial intentional nature of Nealon’s noncompliance with the Permit is not strong. The fact that Nealon is experienced and has no history of making mistakes does not reasonably support an inference that he did not make a mistake. Experienced people make mistakes. There was no evidence of any “upside” to Nealon for not complying with the Permit. Nealon testified that he changed the angle of the dock to avoid creating a “dogleg” because, as a result of his measuring mistake, he thought he could do so and comply with the Permit.

[112] However, assuming Nealon’s initial noncompliance with the Permit was intentional, I am not persuaded that his conduct was so outrageous that punitive damages are rationally required to punish, deter, and denounce it.

[113] As I have said, in my view, the “protracted nature of the interference” and the failure to accept the Krieser Offer were the most significant factors in the trial judge’s decision to order punitive damages against Garber and Nealon and those factors properly relate only to Garber.

[114] It must be recalled that the trial judge ordered Nealon to relocate the dock at his expense.[^1] Further, the trial judge did not find that the intent of Nealon’s noncompliance was to interfere with Krieser’s enjoyment of their property. The essence of Nealon’s misconduct was constructing the dock contrary to the Permit. Nealon—not Garber—was fined for engaging in construction contrary to the provincial offence of engaging in construction contrary to a work permit. The fact that “punishment has actually been imposed by a criminal court for an offence arising out of substantially the same facts ... [is] a factor of potentially great importance” in considering whether punitive damages are warranted: Whiten, at para. 69. The trial judge did not advert to this factor. While the agreed statement of facts at the criminal trial was that the noncompliance arose out of a mistake, not that it was intentional, in my view it is nonetheless a factor that weighs against the need for punitive damages against Nealon.

[115] Given my conclusion that punitive damages against Nealon were not warranted, in my analysis of the punitive damages awarded against Garber I will address Nealon’s alternative argument that the trial judge failed to consider whether the $100,000 he awarded was the lowest award to rationally serve the purpose of punishing, denouncing and deterring the appellants’ conduct.

Punitive damages against Garber

[116] I would not interfere with the trial judge’s award of punitive damages in the amount of $100,000 against Garber.

[117] I reject Garber’s argument the trial judge erred by ignoring an indemnity agreement, dated November 28, 2013, and a tolling agreement, dated June 11, 2014, when awarding punitive damages. They argue that these agreements, discussed below, are inconsistent with any notion of a background agreement or tacit understanding between Nealon and Garber. They are also said to show that the trial judge’s finding, at para. 68 of his reasons, that “Garber has never produced a single letter from a lawyer or personally to Nealon indicating that the dock is incorrectly built”, which underpins his conclusion that there was “some type of background agreement or tacit understanding between Nealon and Garber”, is clearly wrong.

[118] In broad terms, Nealon agreed to indemnify Garber against any action arising out of any errors or other acts done by Nealon “in the performance of marine contracting services or the exercise or intended exercise of any duty, act or deed by Nealon for or on behalf of Garber” at the Garber property. In the tolling agreement, Garber and Nealon agreed to toll the limitation periods in respect of any crossclaims or claims which either may have against the other.

[119] These agreements were first drawn to the trial judge’s attention at the opening of closing argument, and after the close of evidence at trial. They were simply marked as exhibits at trial. There was no opportunity to conduct discoveries or question any witnesses at trial on those agreements. In these circumstances, the trial judge cannot be found to have erred in not having considered them.

[120] However, even if the finding that there was a “background agreement or tacit understanding” between Nealon and Garber was a reviewable error, I would not interfere with the trial judge’s award of punitive damages against Garber. As I have said, the “protracted nature of the interference” and Garber’s failure to accept Krieser Offer were, in my view, the most significant factors in the trial judge’s decision to order punitive damages against Garber. I agree with the trial judge that punitive damages are required to punish and denounce Garber’s conduct and deter similar conduct.

[121] I also reject Garber’s argument that this court should interfere with the trial judge’s refusal to permit Garber to adduce what they characterize as character evidence about Krieser on the basis that it was not relevant: Krieser v. Garber, 2018 ONSC 7123 (“the Character Evidence Reasons”). On appeal, this court will not lightly interfere with the discretionary decision by a trial judge to exclude potentially irrelevant evidence: see R. v. Schavinsky (2000), 2000 16877 (ON CA), 148 C.C.C. (3d) 400 (Ont. C.A.), at para. 48.

[122] Garber argues that the evidence ought to have been admitted as it was relevant to two similar, but conceptually distinct, arguments. First, they claim that the excluded evidence shows Krieser provoked Garber, which they say explains their refusal of the Krieser Offer and, thus, may have affected the award of punitive damages. Second, they claim that the evidence may have established that Krieser had unclean hands and, thus, that they may have been barred from equitable relief of an injunction.

[123] The trial judge correctly noted that the plaintiff’s conduct in provoking the actionable conduct by the defendant may be relevant to the assessment of punitive damages: Character Evidence Reasons, at paras. 4-5. The trial judge nonetheless refused to admit the evidence. He found that there was no causal connection between Krieser’s alleged bad conduct and the building of the dock, as Garber and Nealon did not argue that but for Krieser’s playing of loud music and causing smoke to drift over the Garber property, they would have moved their new dock. The trial judge noted that would have been “an admission of liability then an attempt to minimize the consequences”: Character Evidence Reasons, at para. 8. He concluded, at para. 9:

Without the requisite causal connection, the attempt to put the [Krieser’s] conduct in issue is just bad character evidence and is extraneous to the issue at hand. As evidence that is unconnected to the claim against [Garber and Nealon], and that in any case relates to a form of defence that has not been pleaded by [Garber and Nealon], I will not allow it.

[124] The trial judge relied on BMO Nesbitt Burns Inc. v. Wellington West Capital Inc. (2005), 2005 30303 (ON CA), 77 O.R. (3d) 161 (C.A.) for the principle that a causal connection is necessary to establish the relevance of bad conduct to the availability of punitive damages. The holding in BMO Nesbitt Burns is somewhat more nuanced than that. But I see no error in the trial judge’s conclusion that the evidence should not be admitted, given the basis on which the case was argued at trial.

[125] In BMO Nesbitt Burns, which was an appeal from a pleadings motion, this court considered whether the defendant should be allowed to plead and prove bad conduct by the defendant both (1) to establish the unclean hands of the plaintiff and (2) as a factor relevant to the availability of claimed punitive damages. With regard to the evidence’s relevance to the issue of punitive damages, writing for the court, Laskin J.A. noted, at para. 32, that “the typical case where the plaintiff’s conduct is relevant to a punitive damages claim is where the conduct led to or caused the misconduct of the defendant—in other words, where there is a causal connection between the plaintiff’s conduct and the defendant’s conduct.”

[126] While the defendants in BMO Nesbitt Burns did not allege that the plaintiff’s conduct caused the wrongdoing on which the plaintiff relied, and the case was therefore not the “typical case” warranting the admission of bad conduct evidence, Laskin J.A. concluded, at para. 33, that “the defendants should be able to argue that the conduct of which Nesbitt Burns now complains does not attract the kind of outrage associated with punitive damages because it is widely accepted in the industry and indeed has been employed by the plaintiff in its own recruitment of investment advisors.” It was not plain and obvious that such an argument could not succeed.

[127] As the trial judge observed, neither Garber nor Nealon argued that Krieser’s conduct led to or caused them to build the dock where they did, or that they would have remedied the nuisance, but for this conduct. They thus failed to advance the casual connection typically required. Further, the evidence in question was not akin to what this court permitted the defendants in BMO Nesbitt Burns to plead. Garber did not seek to adduce evidence that Krieser had themselves constructed a dock which interfered with a neighbour’s enjoyment of her property and failed to remedy the interference, or that such interference is widely accepted in the Lake Simcoe community. There is no basis to interfere with the trial judge’s exclusion of this evidence on the basis that it was not relevant to the availability of punitive damages.

[128] I reject Garber’s argument that the evidence ought to have been admitted to establish Krieser’s unclean hands. Garber did not plead the defence of unclean hands and, in the Character Evidence Reasons, the trial judge did not specifically address the evidence’s potential relevance to that doctrine. There is nothing before this court that indicates that trial counsel argued that the evidence was relevant to Krieser’s entitlement to an injunction. The trial judge committed no error in failing to anticipate a defence apparently raised for the first time on appeal. Moreover, to rely on the clean hands doctrine, there must be a direct connection between the plaintiff’s conduct and the equitable relief sought: BMO Nesbitt Burns, at paras. 26-29. Krieser’s alleged misconduct played no role in the mislocation of the Garber dock nor does it directly relate to the continuance of the nuisance. As the trial judge noted, Garber and Nealon did not argue that, but for Krieser’s alleged misconduct, they would have moved the dock.

[129] Finally, I also reject the argument that the trial judge arbitrarily awarded $100,000 in punitive damages because it was “proportionate to the cost of the dock” and failed to consider whether the $100,000 awarded was the lowest award to rationally serve the purpose of punishing, deterring and denouncing Garber’s conduct.

[130] As the trial judge noted, the governing rule for quantum is proportionality: Whiten, at para. 74. From the whole of his reasons, it is apparent that the trial judge engaged in his careful consideration of proportionality to determine the lowest award to rationally serve the objectives of punitive damages.

VI. COSTS

[131] As noted above, the trial judge awarded substantial indemnity costs of $518,000 against Garber and Nealon, jointly and severally; he awarded a further $80,000 against Garber for costs thrown away due to the adjournment requested by Garber: see Keiser v. Garber, 2019 ONSC 3241 (“the Costs Endorsement”).

[132] Nealon seeks leave to appeal the costs award, arguing that there was no basis for an award of substantial indemnity costs against him and that the costs award against him is grossly disproportionate. Nealon requests that any costs awarded against him be reduced to $108,000, roughly equivalent to the partial indemnity costs that Nealon incurred, and what Nealon says would have been within his reasonable expectations.

[133] Garber also seeks leave to appeal the costs award, arguing that the award of substantial indemnity costs should be set aside because it flowed in large measure from Garber’s non-acceptance of the Krieser Offer and the fresh evidence shows that offer is now “completely irrelevant”.

[134] The test for leave to appeal costs is stringent. There must be “strong grounds upon which the appellate court could find that the judge erred in exercising his discretion”: Alguire v. The Manufacturers Life Insurance Company (Manulife Financial), 2018 ONCA 202, 140 O.R. (3d) 1, at para. 36; Walsh Energy Inc. v. Better Business Bureau of Ottawa-Hull Incorporated, 2018 ONCA 383, 424 D.L.R. (4th) 514, at para. 40. However, where there is “no basis for an award of substantial indemnity costs of the trial”, this court will “grant leave to appeal costs and reduce the amount awarded to reflect partial indemnity costs”: TWI Foods Inc. v. Just Energy Corp., 2012 ONCA 150, at para. 7.

[135] I am satisfied that there was no basis for an award of substantial indemnity costs against Nealon. I would grant leave to Nealon to appeal the costs award and reduce the award against him to $108,000. I would not grant leave to Garber to appeal the costs award. Garber’s argument depends on the admission of the proposed fresh evidence which I would not admit.

[136] At paras. 11 and 12 of the Costs Endorsement, the trial judge explained why he ordered costs on a substantial indemnity scale:

Defendants both took untenable positions and fought the Plaintiff’s claim tooth and nail even where what the Plaintiff claimed was self-evident. The Garber Defendants continued fighting even in the face of the most generous offer to settle I have ever seen.

The Nealon Defendants were likewise unreasonable. Mr. Nealon could not properly explain how he had made such an error as to build the Garber dock in the wrong place, and spoke as if he did not realize that the place where he did built it worked out perfectly for the Garber walkway and landscaping. The Nealon Defendants spent several years arguing that their actions were legal and reasonable when it was clear as day that they had built a dock in the wrong place (i.e. not in accordance with the building permit) and they had pled guilty to a criminal offence for those very actions. Indeed, the Nealon Defendants continue to do this in their written costs submissions, arguing that the fact that they were punished in criminal court with a fine rather than with a mandatory court order to remove the offending dock somehow authorized the existence of the wrongfully built structure for which the criminal fine was imposed. Their position suggests that they were and are determined to fight for the sake of fighting.

[137] Substantial indemnity costs, because of a losing party’s behaviour, should be “rare and exceptional” absent applicable settlement offers: Whitfield v. Whitfield, 2016 ONCA 720, 133 O.R. (3d) 753, at para. 23. They should only be ordered “where there has been reprehensible, scandalous, or outrageous conduct on the part of one of the parties” in the circumstances giving rise to the cause of action or in the proceedings: Young v. Young, 1993 34 (SCC), [1993] 4 S.C.R. 3, at p. 134. The fact that a defence has little merit or is ultimately unsuccessful is no basis for awarding substantial indemnity costs: Mortimer v. Cameron (1994), 1994 10998 (ON CA), 17 O.R. (3d) 1 (C.A.), at p. 23. Nor does pleading guilty in criminal or regulatory proceedings alone merit elevated costs: Foulis v. Robinson (1978), 1978 1307 (ON CA), 21 O.R. (2d) 769 (C.A.) at p. 776.

[138] In his costs endorsement, unlike in his analysis of the punitive damages issue, the trial judge links non-acceptance of the Krieser Offer only to Garber. The conduct of Nealon that the trial judge describes does not amount to reprehensible, scandalous, or outrageous conduct. The fact that Nealon did not build the dock in accordance with the Permit and pleaded guilty to a criminal offence for that conduct does not mean that the dock constituted, or that Nealon intended to create, a nuisance. Nealon was entitled to defend the Krieser’s nuisance claim. His lack of success at trial does not make his conduct reprehensible, scandalous or outrageous.

[139] Moreover, as I have said, Nealon’s position was different from Garber’s. The Krieser Offer was not made to Nealon and he could not accept it. Nor could he re-locate the dock without Garber’s approval. It is unclear to me how Nealon could have brought the action to an end prior to trial without Garber’s agreement. To the extent the termination of the litigation was within his control, Nealon demonstrated that he was prepared to support an offer acceptable to Garber: He joined with Garber in making the January 11, 2018 settlement offer to Krieser, which contemplated payment of $150,000 in damages, payment of costs and disbursements. He also joined in a related offer, made June 8, 2018, which contemplated partial alterations to the dock.

VII. CONCLUSION

[140] I would dismiss the motion and cross-motion to adduce fresh evidence on appeal. I would allow the appeal to the extent of setting aside the order requiring Nealon to pay punitive damages. I would deny Garber leave to appeal the costs order, but grant Nealon leave to appeal the costs order, grant Nealon’s appeal of the cost order, and reduce the costs ordered against Nealon to $108,000 to reflect partial indemnity costs. As such, Nealon would be jointly and severally liable for $108,000 of the costs awarded against Garber.

[141] I would order that if the parties are unable to agree on the costs of the appeal: Nealon will provide costs submissions in writing within 14 days of the release of this judgment; Garber will provide their submissions within 14 days of receiving Nealon’s cost submissions; and Krieser will provide their costs submissions within 14 days of receiving Garber’s cost submissions. Cost submissions shall not exceed five pages.

Released: “DD” NOV 05 2020

“Alexandra Hoy J.A.”

“I agree. Doherty J.A.”

“I agree. M. Jamal J.A.”

[^1]: Nealon did not argue that the trial judge erred in ordering injunctive relief against him because he was not the owner of the property.