COURT FILE NO.: CV-13-0742

DATE: 20140304

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: CAISSE DESJARDINS DES BOIS-FRANCS, Plaintiffs

AND:

RIVER ROCK FINANCIAL CANADA CORP., RIVER ROCK DISTRIBUTION CORP., RIVER ROCK INTERNATIONAL LIMITED, 2126628 ONTARIO LIMITED, HUBERT BELANGER and JACLYN NICOLE BELANGER, Defendants

BEFORE: THE HONOURABLE MR. JUSTICE J.R. McCARTHY

COUNSEL:
M. Abramowitz, S. Wolpert, for the Plaintiffs

D. Magisano, E. Eski, for the Respondents

B. Frydenberg, for Scotia Mortgage Corp.

D. Crabbe, for 2nd Mortgage Respondents (Falconi et al)

HEARD: By Written Submissions Only

COSTS ENDORSEMENT

Entitlement to Costs

[1] The Applicant was substantially successful in obtaining the relief sought. To the extent that the Respondent Debtors (River Rock Financial, River Rock Distribution, River Rock International, 2126628 Ontario Limited, Hubert Belanger and Jaclyn Belanger) prevailed on any aspect of the proceeding, such success was modest and cosmetic. The Applicant is presumptively entitled to costs of the Application against the unsuccessful Respondents.

Scale of Costs

[2] It is clear that the Security Agreement set out that the Debtor/Respondent would pay all costs, charges, expenses and legal fees and disbursements on a solicitor and his own client basis incurred by the Applicant in enforcing its security. There is no suggestion that the clause in question [6.1(g)] was vague or somehow severable from the agreement. The term “solicitor and own client costs” is synonymous with substantial indemnity costs. The motion was brought under the Security Agreement. I find that the Respondents must have clearly contemplated that they would be responsible for the Applicant’s entire legal costs in the event of an action or proceeding being brought for enforcement of the security under that agreement.

[3] The court maintains discretion to award costs of a proceeding before it. The factors to be considered when exercising that discretion under Rule 57.01 include any other matter relevant to the question of costs. In my view, pre-determining the scale upon which costs would be awarded in a contemplated proceeding is a reasonable and commercially practical way of conducting business. That contractual agreement should be afforded deference by the court and must be considered relevant to the question of costs.

[4] There is no factor weighing against an award of costs on a substantial indemnity basis. The proceeding was complex: it involved commercial and insolvency matters involving issues of security and enforcement. The issues were of great importance: there were large sums of money owing to the Applicant. There were competing interests in respect of the collateral given in return for the demand loan. The Applicant was generally successful, obtaining most of the relief that he was seeking. The Applicant did nothing to lengthen the proceeding unnecessarily. The Respondent sought adjournments on terms and was granted the right to cross-examine the moving party on its affidavits. I agree that there was nothing derived from that cross-examination that provided the court anything of significance in determining the issues before it. I find that costs should be allowed against the Respondent corporate debtors and the Respondent Hubert Belanger on a substantial indemnity basis.

Jaclyn Nicole Belanger

[5] I am not persuaded that the Respondent Jaclyn Nicole Belanger should bear the obligation to pay costs on a substantial indemnity basis alongside her spouse and the Respondent companies. She was not a party to the Security Agreement. There is an insufficiency of factors that would weigh in favour of awarding costs against her on that scale. However, she was a Respondent who opposed the relief sought. She provided consent to a collateral mortgage on the property located at 980 Shoreview Drive, Innisfil, Ontario, and therefore had an interest in the outcome of any realization of security for the debt. I exercise my discretion to allow costs against the Respondent Jaclyn Nicole Belanger on a partial indemnity basis only.

Entitlement to Costs against the Mortgagees

[6] I exercise my discretion to order that both the Applicant and the Respondent mortgagees, Scotia Mortgage Corporation and Falconi et al, should bear their own costs as it pertains to the issues between them. Although the Applicant was successful in obtaining the relief sought against the Respondent Debtors, the broader version of the receivership order sought was challenged successfully by the Respondent mortgagees. The result was a court order that paid heed to the integrity of the mortgagees’ security interest in the land by limiting the receiver to a charge on the land only to the extent that fees and disbursements and interest relate exclusively to the land.

Quantum of Costs

[7] The Applicant seeks costs in the amount of $103,310.00 plus HST for fees together with disbursements of $1,395.78. This was an application only. There was a limited evidentiary record. No viva voce evidence was called. The matter consumed parts of three separate days in court. There was one day of cross-examinations on affidavits. Lead counsel for the Applicant was assisted by junior counsel. The issues were complex and the issues were important. I have no doubt that a considerable amount of time was spent preparing the materials and the argument.

[8] Nevertheless, the quantum for costs claimed seems excessive in light of the nature of the application, which was, after all, confined to only a few documents and a handful of issues. A measure of proportionality is in order, not just in light of the nature of the application but also given the relatively straightforward nature of the relief sought. Counsel for the Applicant candidly admitted that what he was seeking was relatively standard fare from a commercial law perspective. The draft order presented to the court, while tailored to the facts of the case, was largely made up of standard clauses and terminology. The pith of the matter was the larger relief sought: the appointment of a receiver. Much fell in to place vis-à-vis the Respondent debtors once that relief was assured. I recall that the wrangling between the Applicant and the mortgagees in respect of the scope of the receiver’s mandate took up a large portion of the third day of the hearing. The Respondent Debtors were not interested in the outcome of the debate on the priority of charges. It follows that they should not be saddled with all of the costs related to the court’s disposition on that issue. I have already determined that, as it pertains to the issues between the Applicant and the Respondent mortgagees, the parties should bear their own costs.

Disbursements

[9] There was no suggestion that any of the claimed disbursements totalling $1,550.87 are improper or excessive. I would allow them in their entirety as against the Respondent Debtors.

Disposition

[10] In light of the foregoing considerations and my findings in respect of scale of costs, I exercise my discretion to award costs to the Applicant as follows:

(a) As against the Respondent Debtors, save and except for the Respondent Jaclyn Nicole Belanger, and on a substantial indemnity basis, the amount of $52,500.00 inclusive of fees, disbursements and HST. These costs are ordered payable on a joint and several basis;

(b) As against the Respondent Jaclyn Nicole Belanger only, costs on a partial indemnity basis in the amount of $7,500 inclusive of fees, disbursements and HST;

There shall be no costs payable by the Respondent mortgagees.

[11] These costs are fixed and payable forthwith.

J.R. McCARTHY J.

Date: March 4, 2014