ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: 5007/10
DATE: 2013/03/28

B E T W E E N:

DOUGLAS FREDERICK HARVEY

Self-representing

Plaintiff

• and -

ELGIN CONDOMINIUM CORPORATION No. 3

Robert W. Dowhan and Michelle L. Kelly, for the Defendant

Defendant

HEARD: In writing

LEACH J.

1On March 4, 2013, I released my judgment in this matter, following a three day trial the week before.

2For reasons set out in my judgment, I dismissed the Plaintiff’s claim in its entirety.

3Because my decision was reserved, the parties had no opportunity to make submissions regarding costs. My judgment reasons therefore invited written cost submissions.

4Those now have been delivered by both parties. In particular, I have received the following: written cost submissions from the Defendant dated March 14, 2013; responding written cost submissions from the Plaintiff dated March 22, 2013; and reply cost submissions from the Defendant dated March 26, 2013.

Overview of Positions

5In broad terms, the Defendant seeks recovery of its costs of the action and of several motions on a full indemnity basis, fixed at $61,817.21, (inclusive of fees, taxes and disbursements, and the costs associated with pursuing costs). Amongst other points, it generally emphasizes the following:

a. It was entirely successful at trial.

b. The costs it incurred were reasonable, having regard to the varied allegations advanced by the Plaintiff, and the corresponding manner in which it was forced to prepare for trial. Moreover, its costs throughout were augmented by numerous steps taken or not taken by the Plaintiff, (in relation to pleadings, motions, documents and conduct at trial), which are alleged to have been unnecessary or improper, and to have prolonged the proceeding.

c. Numerous authorities indicate that the nature of condominium corporations such as the Defendant, and disputes such as the one before me, usually warrant cost awards on a substantial or full indemnity basis. In particular, given the non-profit nature of such corporations, and the reality that all litigation costs effectively must be passed on directly to all unit owners, courts generally regard it as neither fair nor equitable that other blameless unit holders be obliged to subsidize the costs necessitated by the unwarranted conduct of one unit owner.

d. Costs on an enhanced scale are further justified in this case by the Plaintiff’s unsubstantiated allegations of deliberate impropriety by the Defendant and its officers, (including express claims of wilful deceit and concealment, bad faith, and lying under oath).

e. The plaintiff insisted on pressing the litigation through to trial, even when he knew or ought to have known, long ago, (e.g., by consulting his own legal counsel, and/or through the Defendant’s early provision of authorities and the opinion of the pre-trial judge), that his claim lacked merit and was bound to be unsuccessful. Allegations of impropriety by the Defendant continue to be advanced after judgment, (albeit through the Plaintiff’s spouse).

6For his part, the Plaintiff responds with submissions that generally include or emphasize the following:

a. He maintains that advancement and pursuit of the claim was reasonable, as it was the “only way to get [the Defendant] to listen to his concerns and resolve the issues”. He relies on his “firm belief that he had a legitimate cause of action”, and the Defendant’s alleged practice to date of not passing on the costs of previous litigation to unit owners, as reasons why costs should not be awarded on a full indemnity scale.

b. He maintains that his allegations of Defendant impropriety were justified, (e.g., noting suggested delays by the Defendant in the production of documentation, and questioning the accuracy of certain affidavit evidence).

c. He faults the Defendant for its unwillingness to discuss settlement at an earlier date. In particular, he notes the Defendants’ failure to accept the Plaintiff’s offer, extended immediately after the pre-trial but also withdrawn shortly thereafter), proposing global resolution of the dispute by the Plaintiff’s payment of an earlier $1,000.00 cost award, (made in relation to an interlocutory motion).

d. He submits that the Defendant is improperly claiming additional motion costs that were not awarded.

e. He generally questions the accuracy of the addition/mathematics set forth in the Defendant’s bill of costs but, (apart from the submission regarding motion costs), otherwise makes no submissions as to quantum.

7In reply, the Defendant clarifies and confirms that it is not seeking additional costs in relation to motions in respect of which costs already have been awarded, but only costs in relation to motions in respect of which costs expressly were reserved to the discretion of the trial judge.

8As for the Plaintiff’s offer to settle, the Defendant notes that its ability to respond to any offer is constrained by the nature of its corporate structure and corresponding inherent delay in obtaining instructions. In any event, the Plaintiff’s offer was completely unacceptable, as it completely ignored the substantial costs (approximately $40,000.00) incurred by the Defendant prior to the offer being extended. The offer also fails to satisfy the requirements of Rule 49.10.

General Jurisdiction and Principles

9Pursuant to section 131 of the Courts of Justice Act, R.S.O. 1990, c.C.43, as amended, and subject to the provisions of an Act or rules of court, “the costs of and incidental to a proceeding or a step in a proceeding are in the discretion of the court, and the court may determine by whom and to what extent the costs shall be paid”.

10This is supplemented by the provisions of Rule 57.01(1), which lists a broad range of factors the court may consider when exercising its discretion to award costs pursuant to section 131.

11The overall goal generally is to award costs, (usually fixed), in an amount that is “fair and reasonable for the unsuccessful party to pay in a particular proceeding”; Boucher v. Public Accountants Council for the Province of Ontario, 2004 14579 (ON CA), [2004] O.J. No. 2634 (C.A.), at paragraph 26.

Entitlement and Scale of Indemnification

12As noted above, I dismissed the Plaintiff’s claim in its entirety, which conversely means that the Defendant was entirely successful at trial. Given that success, and the principle of indemnity, the Defendant accordingly should receive a measure of reimbursement for the costs it necessarily has incurred.¹

13In that regard, the normal rule of costs following the event cannot be displaced simply because Mr Harvey had a “firm belief that he had a legitimate cause of action”. That belief apparently was based on advice from a non-lawyer friend that no doubt was well-intentioned, but also entirely erroneous.

14In the result, this case provides a sad example of how a failure to obtain even a modest amount of timely and professional legal advice can lead to ill-advised and unnecessary litigation, with corresponding exposure to significant adverse cost awards.

15Costs should follow the result, and the Defendant accordingly should be awarded its costs of the action, (including trial)².

16As to the appropriate scale of indemnification to be awarded here, I am mindful of the approach adopted in numerous authorities³, and requested by the Defendant in this case, whereby costs of condominium-related litigation often are awarded on a full indemnity basis. Such awards are meant to shift the financial burden of such litigation from blameless/innocent unit owners, (who otherwise effectively share in all expenses of the condominium corporation), to the unit owner or owners whose conduct necessitated the litigation, usually despite repeated warnings.

17However, one must not lose sight of the specific legislative underpinnings of that unusual “full indemnity” approach to cost quantification, which obviously is a departure from the norm.

18In particular, that different approach is grounded in section 134 of the Condominium Act, 1998, S.O. 1998, c.19, which reads in part as follows:

Compliance order

s.134. (1) Subject to subsection (2), an owner, an occupier of a proposed unit, a corporation, a declarant, a lessor of a leasehold condominium corporation or a mortgagee of a unit may make an application to the Superior Court of Justice for an order enforcing compliance with any provision of this Act, the declaration, the by-laws, the rules or an agreement between two or more corporations for the mutual use, provision or maintenance or the cost-sharing of facilities or services of any of the parties to the agreement. ...

Contents of order

(3) On an application, the court may, subject to subsection (4),

(a) grant the order applied for;

(b) require the persons named in the order to pay,

(i) the damages incurred by the applicant as a result of the acts of non-compliance, and

(ii) the costs incurred by the applicant in obtaining the order; or

(c) grant such other relief as is fair and equitable in the circumstances. ...

Addition to common expenses

(5) If a corporation obtains an award of damages or costs in an order made against an owner or occupier of a unit, the damages or costs, together with any additional costs to the corporation in obtaining the order, shall be added to the common expenses for the unit and the corporation may specify a time for payment by the owner of the unit.

[Emphasis added.]

19The Court of Appeal addressed the legislative history and interpretation of these provisions, and the enhanced cost recovery provisions of s.134(5) in particular, in Metropolitan Toronto Condominium Corp. No. 1385 v. Skyline Executive Properties Inc., 2005 13778 (ON CA), [2005] O.J. No. 1604 (C.A.), at paragraphs 35-45, which read in part as follows:

Section 134(5), the section in issue here, applies only to condominium corporations and only where the condominium corporation has obtained an award of damages under s.134(3). ...

Section 134(5) had no equivalent in the predecessor legislation. Section 49 of that legislation, The Condominium Act, R.S.O. 1990, c.C26, did provide for compliance orders but did not specifically address the payment of costs incurred by condominium corporations in obtaining and enforcing compliance orders.

The affidavit material filed by MTCC and Skyline reveals that, during the consultative process leading up to the enactment of the present legislation in December 1998, various groups addressed what they saw as the need to provide for the recovery by condominium corporations of any costs associated with the obtaining and enforcing of compliance orders against unit owners. These groups submitted that since condominium corporations were duty-bound to enforce compliance with their declarations and rules for the benefit of all unit owners, they should not bear any of the costs associated with obtaining and enforcing court orders requiring such compliance. These groups argued that the offending unit owners should have to compensate the condominium corporation for all costs incurred in obtaining and enforcing compliance orders against those unit owners.

Section 134(5) went some way towards addressing the concerns expressed in these submissions. The section declares that the corporation may recover both “an award of costs” and “any additional actual costs”. Clearly, the language of s.134(5) contemplates recovery by the condominium corporation of costs beyond those that are addressed in a court order so long as those costs were actually incurred by the condominium corporation and were incurred in obtaining the compliance order. ,,,

My review of the terms of s.134(5) leads me to agree with counsel for MTCC’s submission that the section was intended to shift the financial burden of obtaining compliance orders from the condominium corporation and, ultimately, the innocent unit owners, to the unit owners whose conduct necessitated the obtaining of the order. ...

Recognition of the remedial purpose behind s.134(5) does not, however, answer all questions of statutory interpretation. The legislature chose to implement its purpose using certain words. Those words described the scope of the claim that can properly be made by MTCC. ...

In determining how to read the phrases “award of costs” and “additional actual costs” in s.134(5), it is appropriate to consider how those words would be read by those familiar with those terms. As all lawyers know, a costs award in favour of a party, even when made on a substantial indemnity scale, will not necessarily reflect the actual amount of fees properly billed to that party by his or her own lawyer. Usually, there will be significant difference between the amount of a costs award made to a party and the actual legal costs incurred by that party. ...

Reading the words of s.134(5) as informed by the well-recognized distinction between costs that are awarded between parties and costs that are payable as between a party and its own lawyer makes the meaning clear to me. “Additional actual costs” will refer to those legal costs properly owed by MTCC to its lawyers above and beyond the amounts awarded for costs by the court or in a court ordered assessment. Those “additional legal costs” are properly added to the common expenses of units pursuant to s.134(5) so long as they were incurred “in obtaining the order”. ...

That read effectively shifts the financial burden associated with obtaining a compliance order from the “innocent” condominium corporation and unit owners to the guilty” unit owner who necessitated the obtaining of the compliance order.

[Emphasis added.]

20I have quoted the legislative provisions and Court of Appeal’s remarks at length because, in my opinion, they make clear certain important considerations and limitations not always highlighted in later decisions awarding condominium corporations costs on a full indemnity basis.

21In particular:

a. Prior to passage of the remedial legislation, condominium litigation enjoyed no special cost treatment. The enhanced ability of condominium corporations to expect full recovery of all costs incurred, beyond the level of partial or even substantial indemnity cost awards, really depends on that legislation. (While the general cost jurisdiction extended by section 131 of the Courts of Justice Act gives the court broad discretion to award whatever costs it deems appropriate, awards of costs on a full indemnity basis are exceedingly rare, and in my opinion have been made regularly in condominium litigation only through the effective application of s.134 of the Condominium Act, supra.)

b. The scope of that enhanced ability and expectation therefore is delineated by the precise wording of the legislation.

c. That wording, and the authoritative interpretation of the Court of Appeal, emphasize that the enhanced ability and expectation are limited to situations where the condominium corporation has sought and obtained a compliance order pursuant to section 134 of the Condominium Act, supra.

22In short, as a matter of statutory interpretation, a condominium corporation is not automatically entitled to full indemnity costs in relation to all types of litigation, or even in relation to all types of litigation between the condominium corporation and unit owners.

23That important distinction and limitation was demonstrated, in practice, by the Court of Appeal’s more recent decision in Toronto Standard Condominium Corp. v. Baghai Development Ltd., [2012] O.J. No. 2746 (C.A.).

24In that case, there had been two applications before the court at first instance. In particular:

a. the condominium corporation brought an application against one of its unit owners for a compliance order; i.e., an order directing the unit owner to comply with the declaration and rules of the condominium corporation, (prohibiting the display of wares on the sidewalk); and

b. the unit owner brought an oppression application, (seeking an order requiring the condominium corporation to enter into an agreement that would permit it to display the merchandise in front of the store).

The court at first instance granted the application for the compliance order, and dismissed the unit owner’s oppression application.

25In a subsequent ruling awarding costs to the condominium corporation, the court at first instance drew a distinction between the costs incurred by the corporation in seeking the compliance order, and the costs it incurred in successfully defending the oppression application. Specifically, the court refused to award the latter costs at full indemnity rates on the basis it was a separate application from the application for a compliance order, and its dismissal did not attract an order for “additional actual costs” under section 134 of the Condominium Act, supra.

26The Court of Appeal upheld the distinction made by the applications judge. In that regard, the issue and the Court of Appeal’s operative ruling are set forth in paragraphs 33-34 and 59-60 of the panel’s decision, which read as follows:

Justice Doherty also drew a distinction between obtaining an order and enforcing an order, and concluded that only costs related to obtaining an order can be added to the losing party’s common expenses pursuant to s.134(5).

Applying these principles to the case before her, the application judge held that TSCC’s “additional actual costs” excluded any amount spent defending Baghai’s oppression application, because those costs did not relate to obtaining the compliance order. ...

Did the application judge err by failing to award full indemnity costs in respect of the oppression application?

TSCC submits that the oppression application was no more than a defence to the compliance application, and its costs beyond partial indemnity rates in responding to the oppression application should therefore be characterized as “additional actual costs” to which full indemnity rates apply.

I agree with the application judge’s analysis on this point. While there is obviously some overlap in respect of the two applications, the oppression application was a separate and independent application that stood on its own pursuant to s.135 of the Act. The dismissal of the oppression application does not attract an order for “additional actual costs” under s.134(5) of the Act.

[Original emphasis.]

27In my view, the above considerations have obvious application to the case before me, and dictate rejection of the Defendant’s request that costs be awarded on a full indemnity basis. In particular:

a. The litigation before me did not involve the Defendant’s request for a compliance order against a unit owner, or the grant of any such order. (Prior to commencement of the litigation, Mr Harvey had complied, albeit belatedly and under protest, with his obligations as a unit owner.)

b. As explained in my substantive reasons, the litigation commenced by Mr Harvey, in respect of which the successful Defendant now seeks an award of costs, essentially was an oppression application pursuant to s.135 of the Condominium Act, supra.

c. The circumstances accordingly do not fall within the provisions of section 134 of the Condominium Act, supra, and the Defendant is not entitled to the costs of its successful defence of the litigation on a full indemnity basis. (If the condominium corporation in the Baghai Development case was not entitled to full indemnity costs in relation to its successful defence of an application brought simultaneously with an application for a compliance order, the request for full indemnity costs must fail a fortiori where the oppression application stands alone.)

28In this particular case of condominium litigation, there accordingly seems to be no special legislation displacing the “normal” approach to cost awards usually adopted pursuant to s.131 of the Courts of Justice Act, supra,

29In my view, for the above reasons, the question of appropriate scale therefore becomes one of deciding whether the Defendant should recover its costs on a partial indemnity or substantial indemnity basis, having regard to the considerations generally applied to all types of litigation.

30Although the court has a broad discretion in relation to costs, confirmed by s.131 of the Courts of Justice Act, supra, our appellate courts repeatedly have emphasized that awards of costs on a partial indemnity basis generally strike the proper balance as to the burden of costs that should be borne by the “winner”, and that substantial indemnity cost awards should be reserved for “rare and most exceptional” cases. See, for example, Foulis v. Robinson (1987), 21 O.R. (2d) 179 (C.A.), and Isaacs v. MHG International Ltd., (1984), 1984 1862 (ON CA), 45 O.R. (2d) 693 (C.A.).

31The sort of conduct meriting elevated cost awards has been described in various ways.

32In Young v. Young, 1993 34 (SCC), [1993] 4 S.C.R. 3, at p.134, McLachlin J. indicated that elevated cost awards are warranted “only where there has been reprehensible, scandalous or outrageous conduct on the part of one of the parties”.

33In Mortimer v. Cameron (1994), 1994 10998 (ON CA), 17 O.R. (3d) 1 (C.A.), and McBride Metal Fabricating Corp. v. H&W Sales Co. (2002), 2002 41899 (ON CA), 59 O.R. (3d) 97, whose principles were echoed and emphasized again by the Court of Appeal in Davies v. Clarington, 2009 ONCA 722, [2009] O.J. No. 4236 (C.A.), conduct warranting elevated cost awards was described as “reprehensible”, “egregious”, or “acts that clearly indicated an abuse of process”, justifying enhanced costs as a form of chastisement.

34In its written cost submissions, the Defendant identified numerous aspects of Mr Harvey self-representation that were problematic and far from ideal, including the following:

a. commencement of the litigation by way of action rather than application;

b. raising of irrelevant issues;

c. attempts to tender documents and communications that were irrelevant, previously undisclosed, exchanged on a without prejudice basis, and/or known to be the subject of an intended objection; and

d. cross-examination of witnesses with repetitive, unanswerable or irrelevant questions.

35I agree with the Defendant that such conduct prolonged the litigation, and involved steps that were unnecessary or improper, thereby favouring a greater cost award pursuant to Rules 57.01(1)(e) and 57.01(1)(f). However, such conduct falls short of being characterized as “reprehensible, scandalous or outrageous”, in the sense required for a general award of costs on a substantial indemnity basis.

36In my opinion, however, the litigation advanced by Mr Harvey did cross that line by virtue of his pervasive allegations, advanced in his pleading and at trial, that the Defendant and its directors had engaged and were engaged in various acts of deliberate and wilful deceit, concealment, lying under oath, and actions taken to further collateral personal objectives. None of this was substantiated at trial.

37Appellate authority has confirmed on numerous occasions that unproven allegations of dishonesty, as well as of fraud, are capable of attracting substantial indemnity costs. See, for example, Hamilton v. Open Window Bakery, 2004 SCC 9, [2004] 1 S.C.R. 303, at paragraph 26, and McNaughton Automotive Limited v. Co-operators General Insurance Company (2008), 2008 ONCA 597, 95 O.R. (3d) 365 (C.A.), at paragraph 45.

38In my opinion, costs of the action (including trial) therefore should be awarded, in this case, on a substantial indemnity basis.

Costs of Motions, and Quantification of Costs

39In its written cost submissions, the Defendant repeatedly makes reference to various motions that were brought, and apparently decided or otherwise resolved, in advance of trial. As noted above, the Plaintiff also makes reference to the motion proceedings and resulting orders in his response.

40My involvement in this matter was restricted to my role as the trial judge.

41I accordingly have no knowledge whatsoever of such motions, the manner in which they were argued or the manner of their disposition, (or any documentation in that regard), apart from the information set forth in the parties’ written cost submissions.

42The Defendant indicates there were at least two motions for summary judgment: one brought by the Plaintiff on a limitation period issue and one brought by an original co-defendant for dismissal of the action against it. According to the Defendant, the former was dismissed, (with costs of $1,000.00 awarded to the Defendant), while the latter was successful, (with costs expressly “reserved for the trial judge”).

43The Defendant indicates that there also were two cross-motions: one by the Defendant to strike certain paragraphs of the statement of claim, and one brought by the plaintiff for production of documents in response to the original co-defendant’s motion for summary judgment. According to the Defendant, the former was dismissed without costs, while the latter was resolved by way of a consent order. (There is no indication in the Defendant’s material as to whether there was any cost disposition in relation to that consent order.)

44To the extent that questions of entitlement and scale of costs of the various motions were not finally decided, and the Plaintiff takes issue with the Defendant’s ability to advance all or some of its requests for costs of those motions, I inherently am in a poor and ill-informed position to address such issues.

45Unfortunately, this has added implications for the quantification of costs in relation to the matters that were before me, (i.e., costs of the action and trial), as I effectively am left without any meaningful ability to differentiate, isolate, total and quantify the particular items of the Bill of Costs that are attributable to the various motions, and to the action generally.

46Attempting that exercise, in such circumstances, carries the inherent risk of doing an injustice to one or both parties, particularly when questions of entitlement may be in issue, and when the scale resulting from one characterization, (i.e., costs of the action and trial awarded on a substantial indemnity basis), may be higher than the scale resulting from another, (i.e., costs of a motion, in respect of which no evidence has been tendered to suggest an award of costs on anything other than a partial indemnity basis).

47In short, I have no familiarity at all with various aspects of the proceeding in respect of which I now am being asked to award and fix costs, which effectively defeats the rationale and premise underlying the preferred approach to cost determinations generally mandated by Rule 57.01(3). See Celanese Canada Inc. v. Murray Demolition Corp., [2003] O.J. No. 4212 (S.C.J.), at paragraph 3.

48Matters are further complicated by the fact that the Defendant, apparently confident of its ability to recover costs on a full indemnity basis, has provided me with cost requests exclusively on that premise.

49In the circumstances, although I generally am loathe to commit these particular parties to further proceedings, I think this is an exceptional case where quantification of the Defendant’s cost entitlement should be referred for assessment under Rule 58, pursuant to Rule 57.01(3.1), if the parties are unable to agree on costs with the benefit of these reasons.

50In an effort to minimize the further cost disagreements between the parties, and to assist and direct the assessment officer, I make the following observations, rulings and directions:

a. As noted above, the Defendant shall have its costs of the action and of the trial, awarded on a substantial indemnity basis.

b. In relation to pre-trial motions:

i. Where they have resulted in an order making no express provision for costs or relating to costs, no costs shall be awarded or assessed for steps taken in relation to such motions. See: Orkin, The Law of Costs, (Second Edition), at paragraph 402; Delrina Corp. v. Triolet Systems Inc. (2002), 2002 45083 (ON CA), 165 O.A.C. 160 (C.A.); and Radvar v. Canada (Attorney General) (2006), 145 A.C.W.S. (3d) 208 (Ont.S.C.J.).

ii. Where they have resulted in an order awarding and quantifying costs of the motion, no further costs for steps taken in relation to such motions shall be awarded or assessed. The court has no jurisdiction to award costs for a prior contested event for which costs were decided. See: Orkin, The Law of Costs, (Second Edition), at paragraph 402; Kordic v. Bernachi (2007), 161 A.C.W.S. (3d) 692 (Ont.S.C.J.), at paragraph 5; and Hollinger Inc. v. Ravelston Corp. (2008), 54 C.P.C. (6th) 211 (Ont.C.A.).

iii. Where they have resulted in an order reserving costs of the motion to the trial judge, costs of such motions shall be awarded to the Defendant on a partial indemnity basis, and assessed accordingly. (In a broad sense, the Defendant would not have been obliged to incur costs in relation to such motions if the Plaintiff had not advanced a proceeding which was found, at trial, to have been without merit. However, without any evidence to suggest any conduct in relation to the motion or motions warranting an award of costs on a substantial indemnity basis, I decline to award costs of such motions – separate steps within the action – on anything other than a partial indemnity basis.)

iv. The Offer to Settle served by the Plaintiff does not comply with the requirements of Rule 49.10, and should have no bearing on the quantification of costs. Nor should the Defendant be faulted in any event for failure to accept a proposed resolution that would have entailed almost complete abandonment of any further claim for indemnification in relation to the substantial legal expense it already had incurred.

Footnotes

1. 1See Rules 57.01(1)(o.a) and 57.01(1)(b), dealing respectively with the principle of indemnity and apportionment of liability.
2. 2As for costs of the motions claimed by the Defendant, these are addressed below.
3. 3See, for example: Metropolitan Toronto Condominium Corp. No. 985 v. Vanduzer, 2010 ONSC 900, [2010] O.J. No. 571 (S.C.J.), at paragraph 35; Chan v. Toronto Standard Condominium Corp. No. 1834, 2011 ONSC 108, [2011] O.J. No. 90 (S.C.J.), at paragraphs 36-37; Metropolitan Toronto Condominium Corp. No. 1179 v. Chow, 2012 ONSC 3681, [2012] O.J. No. 286 (S.C.J.) at paragraph 2.