ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: 11-CV-436620
DATE: August 7, 2012
BETWEEN:
Deutsche Bank AG, Canada Branch
Plaintiff
- and -
Lewis O’Keefe
Defendant
COUNSEL:
• Eric Mayzel for the Plaintiff
• Kevin Sherkin for the Defendant,
HEARING DATE: In writing
Perell, J.
REASONS FOR DECISION-COSTS
A. INTRODUCTION
[ 1 ] In matters of costs, a self-represented litigant is sometimes his own worst enemy.
[ 2 ] In this matter, the plaintiff Deutsche Bank AG, Canada Branch brought a straightforward debt enforcement action against the defendant Lewis O’Keefe. Mr. O’Keefe defended, and after the action was transferred to Toronto, the Bank successfully moved for summary judgment. See Deutsche Bank AG, Canada Branch v. O’Keefe , 2012 ONSC 3910 .
[ 3 ] Apart from determining the precise amount of the debt, there were no genuine issues for trial. There was no doubt that Mr. O’Keefe borrowed $250,173 and had agreed to repay it with interest at the rate of 6.45 per cent per annum. There was no genuine issue for trial that the mortgage went into default and the mortgage has remained in default since the summer of 2010. Mr. O’Keefe’s defences to the summary judgment motion were untenable and most of them had not even been pleaded.
[ 4 ] I was satisfied that Deutsche Bank was owed the outstanding principal and interest for the loan. However, I was not satisfied that it had correctly calculated the amount of the principal and interest, and I noted in my Reasons for Decision that Mr. O’Keefe may be able to challenge the amounts claimed for a prepayment penalty, other expenses, and legal fees. I granted the Bank’s motion for summary judgment for possession of the mortgaged property and pursuant to rule 20.04 (3), I ordered a reference to determine the amount of the debt.
[ 5 ] I invited the parties to make costs submissions, if they could not agree about the matter of costs. I have now received submissions from the Bank and from the now represented Mr. O’Keefe. The Bank claims substantial indemnity costs of $78,566.52, all inclusive. The breakdown is $65,231.50 for counsel fees, $4,854.92 for disbursements, and $8,480.10 for HST on the legal fees. The claim on a partial indemnity basis is $43,453.00, all inclusive. In the normal course, these would be extraordinary high costs for a debt enforcement action.
[ 6 ] For the reasons that follow, I award $38,000, all inclusive, which I regard as the fair and reasonable award of costs.
[ 7 ] In claiming costs on a substantial indemnity basis, the Bank relies, in part, on the provision in the standard charge terms of the mortgage signed by Mr. O’Keefe under which he agreed to pay costs on a full indemnity scale. The Bank also relies on the circumstance that Mr. O’Keefe defended an indefensible claim with volumes of affidavit evidence that made spurious allegations of misconduct by bank officials, employees, and lawyers.
[ 8 ] As a general proposition, the court will respect a contractual entitlement to costs, but the agreement does not exclude the court's discretion, and where there is good reason for doing so, such as inequitable conduct or special circumstances that would make the imposition of costs pursuant to the agreement unfair or unduly onerous, the court may refuse to enforce the contract and reduce the quantum of costs: Bossé v. Mastercraft Group Inc . 1995 931 (ON CA) , [1995] O.J. No. 884 At para. 65 (C.A.), leave to appeal to the S.C.C. refused, [1995] S.C.C.A. No. 205; Morguard Corp. v. Innvest Properties Ottawa GP Ltd. , 2012 ONSC 1769 ; Toronto Common Element Condominium Corp. No. 1508 v. Stasyna , 2012 ONSC 1504 .
[ 9 ] Subject to the costs consequences provisions of the offer to settle rule, only in exceptional cases are costs awarded on a substantial indemnity scale or on a full indemnity scale; Foulis v. Robinson (1978), 21 O.R. (2d) 769 (C.A.); United States of America v. Yemec (2007), 85 O.R. (3d) 751 (Ont. Div. Ct.); Davies v. Clarington (Municipality) (2009), 100 O.R. (3d) 66 (C.A.); Toronto Star Newspapers Ltd. v. Fraleigh , 2011 ONCA 288 (C.A.).
[ 10 ] Costs on a substantial indemnity scale or full indemnity scale are reserved for rare and exceptional cases, where the conduct of the party against whom costs is ordered is reprehensible or where there are other special circumstances that justify costs on the higher scale: McBride Metal Fabricating Corp. v. H & W Sales Co. , (2002), 59 O.R. (3d) 97 at para. 38 (C.A.) ; 1483677 Ontario Ltd. v. Crain , 2010 ONSC 1353 , [2010] O.J. No. 886 (S.C.J.) ; Davies v. Clarington (Municipality) , supra.
[ 11 ] In the case at bar, the Bank has a reasonably strong argument that it is entitled to costs on a substantial or full indemnity scale, but there is something to Mr. O’Keefe’s counsel’s argument that the Bank overreacted when it engaged disproportionate legal resources to refute Mr. O’Keefe’s manifestly weak defence. The allocation of resources was particularly unnecessary given that the Bank’s lawyers were confronting a litigant who was ignorant of the law and self-misguided about the merits of his defence and his allegations. There is also something to the argument that the amount of work committed to refuting Mr. O’Keefe’s defences was excessive and overkill. And, I think it was a provocation and unfair for the Bank to commence proceedings in Milton when the subject property and Mr. O’Keefe are in Toronto and the Bank knew he was going to defend the action.
[ 12 ] The preparation for and argument of the summary judgment motion is illustrative. David Ward, a lawyer of 20 years’ experience, docketed 17.1 hours ($8,977.50) and David Eveline (call 2004) docketed 1.5 hours ($506.25), but neither argued the motion, which was argued by Mr. Mayzel, a recent call, but clearly a competent lawyer, who docketed 122.4 hours ($41,310.00) for preparation and argument. There is also 6.3 hours of student time ($567.00) for the summary judgment motion. Thus, on a substantial indemnity scale, the Bank claims $51,360.00 for the preparation and argument of a summary judgment motion.
[ 13 ] If a costs award on a substantial or full indemnity basis is meant to punish, to a large extent, Mr. O’Keefe already punished himself by running up unnecessary legal costs, and to award costs on a substantial indemnity scale is to rub salt in a self-inflicted punishment. It is unfortunate that Mr. O’Keefe did not obtain legal counsel earlier because counsel would have likely advised him (as his current counsel has advised him) to simply challenge the quantum of the debt and redeem the mortgage and sever relations with the lender.
[ 14 ] Pausing here, I note that Mr. O’Keefe’s counsel submitted that the costs should be reduced because the Bank has denied Mr. O’Keefe the right to redeem by bringing an action for payment of the mortgage debt and for possession of the mortgaged property. The error in this submission, however, is that although the Bank undoubtedly is seeking possession in order to sell the home, it must still bring mortgage power of sale proceedings in order to convey good title and Mr. O’Keefe will, therefore, have an opportunity to redeem the mortgage and regain possession of the property if he pays the mortgage debt.
[ 15 ] In any event, whatever the scale of costs, the quantum must be reasonable and fair in the circumstances. Having reviewed the Bill of Costs, my opinion is that while the services may have been valuable or worthwhile for the Bank, it is not reasonable or fair to have Mr. O’Keefe pay approximately $80,000 as the losing party in what remained a straightforward enforcement claim given the manifest weaknesses of his defence. A costs award of $38,000, all inclusive, is sufficiently punitive to serve the purposes of a costs award in the circumstances of this case.
[ 16 ] Order accordingly.
Perell, J.
Released: August 7, 2012
COURT FILE NO.: 11-CV-436620
DATE: August 7, 2012
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Deutsche Bank AG, Canada Branch
Plaintiff
‑ and ‑
Lewis O’Keefe
Defendants
REASONS FOR DECISION-COSTS
Perell, J.
Released: August 7, 2012.