Court of Appeal for Ontario

Date: 2022-03-09 Docket: C69185

Judges: Rouleau, van Rensburg and Roberts JJ.A.

Between:

2651171 Ontario Inc. Plaintiff (Appellant)

and

Patrick Brey and Grapevine Realty Inc. Defendants (Respondents)

Counsel: J.F. Lalonde and Lauren Benoit, for the appellant Miriam Vale Peters and Matthew Miklaucic, for the respondent, Patrick Brey Michael Swindley, for the respondent, Grapevine Realty Inc.

Heard: January 7, 2022 by video conference

On appeal from the judgment of Justice Sally A. Gomery of the Superior Court of Justice dated March 1, 2021, with reasons reported at 2021 ONSC 1492.

Costs Endorsement

[1] On February 17, 2022, this court allowed the appellant’s appeal, set aside the motion judge’s judgment, allowed the appellant’s claim for damages arising out of its failed real estate purchase in the amount of $4,632.10, and ordered the return of its $25,000 deposit held by the listing agent, the respondent, Grapevine Realty Inc. Grapevine took no position on the appeal and accordingly makes no claim for costs.

[2] The appellant was also awarded its costs of the appeal in the all-inclusive amount of $15,000 and its costs of the motions for summary judgment and the action in an amount to be determined and subject to any offers to settle. The parties were unable to agree on the latter amount and have provided written submissions that we have reviewed.

[3] The appellant requests costs of the motions for summary judgment and the action on a substantial indemnity scale in the amount of $40,572.04. It bases its entitlement to an elevated scale of costs on its offer to settle dated October 17, 2019, made under r. 49.10(1) of the Rules of Civil Procedure [1], which it served with its statement of claim. The appellant offered to settle the action in exchange for the return of the appellant’s $25,000 deposit plus costs. The offer provided that if it were accepted on or before November 1, 2019, the respondent, Patrick Brey, would pay the appellant its partial indemnity costs; if accepted thereafter, the respondent Brey would pay the appellant its costs on a partial indemnity basis up to the date of service, and its costs on a substantial indemnity basis following that date and up to the date of the acceptance of the offer. The offer remained open until one minute after the commencement of the trial.

[4] The respondent Brey raises a number of objections to the appellant’s costs submissions and argues that the costs should be reduced. First, he submits that the docketed fees of appellant’s counsel between January 22 and 29, 2021, related to the leave motion that was settled by the parties on a no costs basis on January 29, 2021, must be deducted from the appellant’s claimed amount. Second, he says that the amount claimed by the appellant is “grossly disproportionate” to the result ultimately achieved by the appellant on appeal. Finally, the appellant’s unproven suggestions of fraud that it made in its reply factum and its oral submissions on the motions against the respondent Brey should be taken into account. The respondent Brey raises no objection to the appellant’s claimed disbursements.

[5] We shall consider these submissions in turn.

[6] First, there is no question that the appellant’s offer was made more than seven days before the hearing of the motions, not accepted by the respondent Brey, had not expired, and the result obtained by the appellant as a result of this appeal is more favourable than its offer to settle. As a result, the appellant is prima facie entitled to its costs on a partial indemnity basis to the date the offer was served and substantial indemnity costs from that date, “unless the court orders otherwise”: r. 49.10(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.

[7] While a court retains the discretion to “order otherwise” under r. 49.10(1), this discretion has been very narrowly construed. As this court cautioned in Niagara Structural Steel (St. Catharines) Ltd. v. W.D. Laflamme Ltd. (1987), 58 O.R. (2d) 773 (C.A.), at para. 12, “resort should only be had to the exception where, after giving proper weight to the policy of the general rule, and the importance of reasonable predictability and the even application of the rule, the interests of justice require a departure.” We do not see any circumstances here that would justify a departure from the general cost consequences stipulated under r. 49.10(1). Accordingly, the appellant is entitled to costs on a substantial indemnity basis.

[8] With respect to the quantum of the appellant’s costs, we are not persuaded that the appellant has claimed any costs related to the settled leave motion. It is not clear from the dockets what time was expended on just the settled leave motion between January 22 and 29, 2021. We are therefore unable to conclude that the appellant’s claimed costs include any amounts related to the settled leave motion and decline to make any deduction.

[9] Further, we do not accept the respondent Brey’s submission that the amount of costs claimed by the appellant is grossly disproportionate. The overarching consideration is whether the costs claimed are reasonable, fair, and proportionate in all the circumstances of the case, having regard to the factors set out in r. 57.01 and the reasonable expectations of the losing party: Boucher v. Public Accountants Council for the Province of Ontario (2004), 71 O.R. (3d) 291 (C.A.). The result achieved in the action is only one of the factors to be considered.

[10] In our view, the appellant’s costs are reasonable, fair, and proportionate. They were incurred in relation to the appellant’s claim, the respondent Brey’s counterclaim and the two motions for judgment, which included cross-examination on affidavits. As the respondent Brey acknowledged in his written cost submissions before the motion judge, this was “a “moderately complex proceeding” and “not a routine breach of contract”. The appellant’s claimed costs are comparable with (indeed less than) the respondent Brey’s costs and the $50,000 in costs that the motion judge awarded, and thus within his reasonable contemplation if he lost the appeal and had to pay the appellant’s costs of the motions and the action.

[11] Finally, we address the respondent Brey’s submission that the appellant’s costs should be reduced because of the appellant’s alternative submission on the motions that the respondent Brey fraudulently misrepresented that the property could be used as a fourplex. We agree there should be a reduction.

[12] Regardless at what stage in the proceedings they are raised, unfounded allegations of fraud may attract serious cost consequences as a form of chastisement and a mark of the court’s disapproval because of their extraordinarily serious nature that go directly to the heart of a person’s very integrity: Bargman v. Rooney (1998), 30 C.P.C. (4th) 259 (Ont. Gen. Div.), at paras. 18-19.

[13] In the present case, the appellant did not plead fraudulent misrepresentation. Rather, the issue of fraudulent misrepresentation was raised as an alternative argument to its main contention of negligent misrepresentation. The motion judge declined to determine this issue because it was not advanced in its statement of claim. She also stated that had the claim been properly advanced, she would have dismissed it “in the absence of any credible evidence that [the respondent] Brey intentionally misled [the appellant] and other potential purchasers about the lawful use of the Property or potential exposure as a result of the renovation of the Property forty-five years earlier.”

[14] The appellant’s allegations of fraudulent misrepresentation occupied a small part of the proceedings and did not form the basis for the motion judge’s decision. Nevertheless, based on the motion judge’s reasons, they appear to have been proffered “without regard for the rule that fraud must be strictly pleaded and strictly proved”: Toronto Dominion Bank v. Leigh Instruments Ltd. (Trustee of), [1998] O.J. No. 4221 (Gen. Div.), at para. 17. Moreover, while not all unsuccessful allegations of fraud and dishonesty lead inexorably to cost consequences, where, as here, a party makes such allegations unsuccessfully “with access to information sufficient to conclude that the other party was merely negligent and neither dishonest nor fraudulent”, costs sanctions may be appropriate: Hamilton v. Open Window Bakery Ltd., 2004 SCC 9, [2004] 1 S.C.R. 303, at para. 26.

[15] As a result, we are of the view that a reduction of the appellant’s costs is appropriate as a reminder that “allegations of fraud and dishonesty are simply not to be made unless there is every reasonable likelihood that they can be proved”: Bargman, at para. 19.

[16] Accordingly, we order that the respondent Brey shall pay to the appellant its costs of the motions and the action in the amount of $35,000, inclusive of disbursements and all applicable taxes.

“Paul Rouleau J.A.” “K. van Rensburg J.A.” “L.B. Roberts J.A.”

[1] As provided for under r. 49.02(2), r. 49.10(1) also applies to motions, with necessary modifications.