CITATION: Carleton Condominium Corporation No. 396 v. Burdet, 2015 ONSC 1361
COURT FILE NO.: 09-45430
DATE: 2015/03/17
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
CARLETON CONDOMINIUM CORPORATION NO. 396
Plaintiff
– and –
CLAUDE-ALAIN BURDET, CLAUDE-ALAIN BURDET IN TRUST, 1457563 ONTARIO CORPORATION, 1457563 ONTARIO CORPORATION IN TRUST, JANET SUE BURDET, NELSON STREET LAW OFFICES, L’ACADEMIE CHRISTIANE SAUVE INC., INTERNATIONAL BEAUTY DEPOT and ENTREPRISE TED RUBAC ENTERPRISES INC.
Defendants
Nancy Houle, for the Plaintiff
Claude-Alain Burdet, for himself and in trust, 1457563 Ontario Corporation, Nelson Street Law Office and Janet Sue Burdet
HEARD: By Written Submissions
AMENDED COST decision
The text of the original decision was corrected on March 17, 2015 and the description
of the correction is appended
KANE J.
[1] Carleton Condominium Corporation 396 (“CCC 396”) seeks an award of costs on a full indemnity scale pursuant to s. 85 Condominium Act, 1998, S.O. 1998, c. 19 (the “Act”) in the amount of $853,480.26 payable within 30 days. The breakdown thereof is $547,362.80 for fees and $306,117.46 for disbursements, inclusive of HST.
[2] In the alternative, CCC 396 seeks an award of costs of this proceeding pursuant to R. 57.03 (1), on a full indemnity scale, in the amount of $642,610.64. That amount consists of $352,133.81 for fees and $290,476.83 for disbursements, inclusive of HST.
[3] CCC 396 submitted this request for costs on January 22, 2015. The defendants have not replied thereto. Their reply was due by February 12, 2015. No extension of time to reply was sought.
BACKGROUND
[4] The following defendants, Claude-Alain Burdet, personally and in trust, 1457563 Ontario Corporation, 1457563 Ontario Corporation in Trust, Janet Sue Burdet and Entreprise Ted Rubac Enterprises Inc. (“E.T.R.E.”) (collectively referred to as the “Majority”) at the relevant times, jointly owned 23 of the 33 condominium units in CCC 396.
[5] The Majority failed to pay their condominium fees and special assessments to CCC 396 for years: Carleton Condominium Corporation No. 396 v. Burdet, 2011 ONSC 5807, para 67. (the “Summary Judgment”) and Carleton Condominium Corporation No. 396 v. Burdet, 2014 ONSC 7411, paras. 199-201, (the “Trial Decision”).
[6] CCC 396 registered liens and issued several Notices of Power of Sale against the units of the Majority. CCC 396 commenced this proceeding (“CCC 396 Action”) in 2009 to enforce the liens and notices of power of sale and for judgment for the arrears owing. The Majority defended the claim presented and counterclaimed for various heads of relief.
[7] CCC 396 obtained partial summary judgment against the Majority on September 11, 2011, collectively totalling $109,440.92 (the “Summary Judgment”). The court ordered a trial of specified issues as to the remaining indebtedness claimed by CCC 396.
[8] The Majority’s appeal of the Summary Judgment was unsuccessful.
[9] The defendants transferred title to all of their 23 units to E.T.R.E. on June 15, 2012, three days before the start of the trial, except for unit 4, level A which remained in the name of C.-A. Burdet.
[10] At trial, the court determined:
(a) The liens registered against 21 Majority units were valid;
(b) The Notices of Power of Sale of three of the five Majority units were valid; and
(c) CCC 396 was granted judgment in the amount of $380,970 (paras. 328, 333 and 362) which, combined with the Summary Judgment, totals $490,410. That represented the Majority’s collective liability up to August 31, 2014.
COST AWARD IN SUMMARY JUDGMENT
[11] On the Summary Judgment motion, CCC 396 was awarded costs on a partial indemnity scale. This cost decision is one of two cost awards in this and a companion action reported in Dewan v. Burdet, 2011 ONSC 7686 (the “Dewan Action”).
[12] The cost award on a partial indemnity scale to CCC 396 on the Summary Judgment motion was in the amount of $20,000. In its decision, the court made the following determinations:
(a) The CCC 396 Action is a compliance proceeding pursuant to s. 134 of the Condominium Act, 1998 S.O.1998, c. 19 (the “Act”) in that CCC 396 is suing to enforce compliance by the Majority to pay their statutory obligated common expenses, as required under s. 84(1) of the Act (paras. 49 and 72 (g);
(b) The Majority’s refusal notwithstanding the clear s. 84 obligation to pay condominium fees and their acknowledgment of non-payment for some two years, warranted an award of costs on a substantial indemnity scale (paras. 53-55);
(c) The costs claimed included steps in this proceeding outside of the summary judgment motion which were not relevant in determining costs of the Summary Judgment motion (para. 74 (d) and (e));
(d) CCC 396 was partially successful on the motion as to the total amount claimed. A trial was required as to the remaining arrears claimed;
(e) For the reasons stated, the court reduced some of the cost claimed (paras.72, (a), (c) and (f)); and
(f) Costs were awarded pursuant to R. 57 on a partial indemnity scale and fixed at $20,000 (para. 81).
[13] Relevant to the costs now claimed is the concluding paragraph of that cost decisions which states:
- This award is without prejudice to what legal expenses are recoverable from unit owners. Section 134 indicates that this cost award and any added cost to CCC 396 in obtaining the summary judgment may be added to the common expenses of the units. CCC 396 is required under s. 134(5) to limit those added costs to only those incurred to obtain this summary judgment, as opposes to the costs already incurred which relate to determination of the remaining issues in this action.
[14] The court thereby indicated that that the legal costs incurred on the Summary Judgment motion by CCC 396 beyond the cost award of $20,000, remained an obligation of unit owners and recoverable under s. 134.
[15] The $20,000 costs awarded was made pursuant to R. 57 and not pursuant to s. 134 of the Act.
LEGAL COSTS IN CONDOMINIUM PROCEEDINGS
[16] Section 131 (1) of the Courts of Justice Act, R.S.O. 1990, c. C.43 (the “CJA”) states:
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. (Emphasis added)
[17] The Act contains specific provisions as to what levels of legal costs are recoverable by a condominium corporation and others. Cost entitlement under the Act is not limited to the cost provisions under s. 31 of the CJA and R.57.
[18] Sections 85(1) and 85(3) (c) of the Act create a lien for unpaid condominium expenses and “all reasonable legal costs and reasonable expenses incurred in connection with the collection or attempted collection of the unpaid amount”.
[19] The priority of a s. 85 lien ranks ahead of prior registered and unregistered encumbrances pursuant to s. 86(6) (b). That priority includes “all reasonable legal costs and reasonable expenses incurred by the corporation in connection with the collection or attempted collection of the arrears.”
[20] The terms of a mortgage registered against a condominium unit, pursuant to ss. 88(1) (b) and (c), are deemed to provide that default in payment of s. 84 common expenses constitutes default under the mortgage. A mortgagee is given the right to pay those common expense arrears and “all reasonable legal costs and reasonable expenses that the corporation incurs in connection with the collection or attempted collection of the common expense arrears, including the costs of preparing and registering a certificate of lien ...”
[21] Pursuant to s. 88(1) (d) and (e), the total of the common expense arrears and legal costs paid by the mortgagee, plus “all reasonable costs, charges and expenses incurred in respect of the payments, are to be added to the debt secured by the mortgage …”, and if not paid by the unit owner following demand, “the mortgage immediately becomes due and payable; at the option of the mortgagee.”
[22] Compliance orders under s. 134 may be sought by many, including unit owners, a condominium corporation, a declarant or a unit mortgagee.
[23] The compliance provisions in ss. 134(3) (b) (i) permit the court to grant:
(a) The compliance order requested;
(b) The “damages incurred by the applicant as a result of the acts of non-compliance”; and
(c) The “costs incurred by the applicant in obtaining the order”…
[24] The above combined liabilities under s. 134(3), include “any additional actual costs to the corporation in obtaining the order” and are added to the common expenses of the unit and are payable by the owner of that unit under s. 134(5).
[25] The distinction between cost entitlement in a proceeding involving these specific sections of the Act, versus costs awarded under s. 131 of the CJA and the Rules of Civil Procedure is determined in Metropolitan Toronto Condominium Corp. No. 1385 v. Skyline Executive Properties Inc., 2005 CarswellOnt 1576, paras. 36-54 (C.A.). That court determined that a condominium corporation is entitled in proceedings to enforce compliance to provisions of the Act to legal costs incurred, in addition to a cost award in the proceeding.
[26] The underlying issue in Metropolitan, supra, was the use of a condominium unit contrary to the permitted use under the corporation’s Declaration.
[27] CCC 396 brought the present action for:
(a) An order for immediate possession of the condominium units owned by the Majority pursuant to liens registered by CCC 396 for unpaid condominium expenses,
(b) all reasonable legal costs and expenses in connection with the collection of the unpaid amount pursuant to s. 85 of the Act;
(c) Enforcement of the liens registered as a mortgagee as per s. 85(6) of the Act, for which an order of vacant possession was requested;
(d) An order terminating the leases involving five of the Majority units; and
(e) Judgment at trial for the condominium fees owing by the Majority.
[28] In their statement of Defence, the Majority alleged that:
(a) The liens registered against the units of the Majority and the Notices of Sale under Liens were invalid, had not been authorized and were not properly served;
(b) The liability of the Majority claimed under the liens was denied thereby invalidating the liens and the Notices of Power of Sale;
(c) their payment obligations under s. 84 of the Act and the condominium Declaration had been met and exceeded; and
(d) CCC 396 breached its obligations under the Act which by equitable estoppel prevented enforcement of its liens.
[29] The Majority presented many arguments why they were not obligated to pay the condominium fees assessed against them. This was not a “we paid our condominium fees so no debt is owing” proceeding.
[30] In contesting the validity of the liens against their units, the Majority disputed their s. 84 obligation to pay condominium fees because:
(a) The s. 84 obligation to pay condo fees should be interpreted to be a conditional obligation, subject to matters such as follows;
(i) other unit owners were indebted to CCC 396 which should reduce the Majority’s liability;
(ii) CCC 396 was indebted to third parties, namely E.T.R.E. which debt had been assigned to the Majority and should offset their liabilities if any;
(b) Of misconduct by CCC 396;
(c) The common expenses assessed were invalid; and
(d) The accounting of liabilities to and payments from Majority unit owners was inaccurate;
all of which relieved the Majority of their s. 84 obligation to pay condominium fees.
[31] The Majority therefore:
(a) Challenged the validity and enforceability of CCC 396’s s. 85 liens registered against their units and the Notices of Power of Sale pursuant thereto; and
(b) Disputed any indebtedness to CCC 396 for unpaid common expenses.
[32] The validity and enforceability of the liens registered by CCC 396 required determination whether the Majority were in default of their s. 84 payment obligation.
[33] “Compliance” under s. 134, is not limited to seeking enforcement as to physical conduct. Section 134(1) authorizes the seeking of “an order enforcing compliance with any provision of this Act” (emphasis added). Compliance in this case includes ss. 84 and 85.
[34] The remedy sought by CCC 396 in the statement of claim is for possession of the Majority units in order to enforce the corporation’s liens against such units. The nature of the relief sought and granted in this proceeding constitutes an award enforcing compliance with the s. 84 payment obligation and s. 85 lien enforceability provisions of the Act, as contemplated under s. 134(1).
[35] The reasoning in Metropolitan, supra, is relevant to the issues as to the costs claimed herein.
[36] The court in Metropolitan, supra, paras. 38-39, held that s. 134(5) applies where a condominium corporation obtains an award of damages or costs under that sub-section and entitles that corporation to recover both “an award of costs” and “any additional actual costs”, namely legal costs actually incurred in obtaining the compliance order, in addition to a court award of costs in the proceeding.
[37] The court in Metropolitan held that s. 134, shifts 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: para. 40.
[38] The legislative provisions of ss. 84, 85, 88, and 134 are materially different from the factors to be considered in the awarding of costs in non-condominium civil litigation.
[39] Whether considered:
(a) under ss. 84 and 85 as to the lien amount and “all reasonable legal costs and reasonable expenses” incurred in “connection with the collection or attempted collection of the owing under the corporations liens”, or
(b) under s. 134, as to damages for non-compliance with any provision of the Act and “costs incurred in obtaining the order” which, as against the owner, include “any additional actual costs to the corporation in obtaining the order…”;
the above sections of the Act signal a clear intention and legislative requirement that condominium unit owners who breach statutory obligations under the Act are liable for all reasonable legal costs and expenses, or additional actual costs, incurred by the condominium corporation in addressing that default.
[40] For the above reasons, CCC 396’s entitlement to legal costs in this proceeding is not limited to the several cost awards granted under s. 131 and R. 57, including the Summary Judgment cost award.
SECTION 85(1) COST CLAIM
[41] CCC 396 seeks full indemnity costs herein pursuant to s. 85 (1) of the Act. CCC 396’s entitlement exceeds the s. 131 CJA and R. 57 cost awards granted which have been appropriately deducted from the amounts now claimed.
[42] Entitlement under s. 85(1) creates liability of the owner, including “all reasonable legal costs and reasonable expenses incurred by the corporation in connection with the collection or attempted collection of the unpaid amount” of condominium expenses. Section 85(1) creates this liability and its enforcement by way of lien.
[43] It is inaccurate to suggest an owner has less liability for such legal expenses because s. 85 creation of this liability is within the context of enforceable lien rights as to the amount of such liability.
[44] The thrust of keeping the corporation whole as to reasonable costs incurred and thereby protecting the corporation and non-defaulting unit owners, is the clear intention of the Act based on the above analysis and the decision in Metropolitan, supra, in proceedings to enforce statutory obligations in the Act.
[45] All “reasonable legal costs and expenses” under s. 85 indicate a cost award at the level of full indemnity for all reasonable costs.
[46] Based on the above analysis, the statement in paragraph 72 (g) of the Summary Judgment cost decision as to s. 134 not articulating a substantial versus partial indemnity scale, is inaccurate and irrelevant as to this s. 85(1) claim for costs.
ALTERNATIVE COSTS
[47] The difference between the above s. 85 costs claimed and the alternate costs of the action, are the exclusion in the latter of the following events (“Item”) and amounts from the former listed in T-1 of the plaintiff’s cost submissions, namely:
• Item 5. December 14, 2010 contested adjournment of the Summary Judgment motion - $610.20 for fees;
• Item 6. Cross-examination of L. A. Burdet on the Summary Judgment motion argued on October 26, 2010 - $2,478.09 for fees;
• Item 7. Preparation for the Summary Judgment motion argued October 26, 2010 - $100,500.91 for fees, excluding cost award of $20,000;
• Item 8. Attendance on the Summary Judgment motion - $13,237.95 for fees;
• Item 10. Response to defendants Appeal of Summary Judgment decision, motion to stay and motion - $47,843.92 for fees, excluding cost awarded of $39,500;
• Item 11. Motion by CCC 396 to remove C.-A. Burdet as counsel for the defendants and defendants’ cross-motion to remove plaintiff counsel - $11,729.46 for fees, excluding costs awarded of $12,500; and
• Item 13. Defendants’ motion for leave to appeal dismissal of defendants’ mid-trial Summary Judgment motion - $2,195.15 for fees, excluding costs awarded of $2,500.00.
(collectively referred to as the “Additional Amounts”).
[48] Items 5, 10, 11 and 13 of T-1 of the Additional Amounts, net of the costs awarded, are recoverable as s. 85(1) includes “all” reasonable legal costs and expenses. The steps and work within those Items were appropriate and reasonable. Some were in response to action initiated by the Majority.
[49] The Majority:
(a) vigorously defended this proceeding;
(b) pursued all possible arguments in evidence and in final written submissions;
(c) pursued a number of unsuccessful appeals and motions for leave to appeal; and
(d) presented evidence and argument at trial on issues determined against them in the Summary Judgment thereby extending the length and cost of the trial.
[50] The 23 Majority units defaulted in payment of common expenses for some 29 months knowing the financial impairment that created on CCC 396 and the increased costs to the other 11 unit owners. Specifically, the Majority’s refusal to pay their assessed common expenses over this extended period of time would impair the financial status of this condominium and the services and service providers it normally could provide. Such default would also negatively financially impact the other 11 unit owners in the form of level of common expense contributions over an extended period and the negative financial status of the condominium contained in Status Certificates under s. 76 (1) (h), (i) and (m) of the Act required on a sale or financing.
[51] Adopting the above approaches in this litigation undermines any argument that the costs claimed are excessive. The Majority’s approach to this litigation materially enlarged and extended this proceeding and the cost thereof.
SECTION 85(1) FULL COSTS CLAIMED – TAB 1
[52] Items 1 to 5 are minor in amount and determined reasonable.
[53] Item 2 reflects that two of the five Notices of Power of Sale were determined invalid. The costs claimed thereof are minor.
[54] Item 6 is recoverable as the transcript of the cross-examination was used on obtaining Summary Judgment and at trial.
[55] Items 7 and 8 involve mixed considerations including:
(i) CCC 396’s motion for Summary Judgment was materially successful in that judgment was obtained for $109,440. Indebtedness claimed in 2009 on the issuance of the claim was $109,291.
(ii) The underlying issues and accounting as to the 23 Majority units over the period 2002 to 2011, resulted in the lengthy Summary Judgment motion.
(iii) In its reasons on costs for the Summary Judgment, the court expressed concern as to the number of lawyers docketing time: para. 72(a).
[56] The concern with an unsuccessful summary judgment motion is that it increases the overall cost of the proceeding. The determinations of several issues in this Summary Judgment however, such as:
(a) The Majority’s acknowledgement of their non-payment of common expenses for 28 months;
(b) The Majority were in default for common expenses in an amount exceeding the Summary Judgment of $109,440;
(c) The $296,887 allegedly owed by CCC 396 to E.T.R.E., could not be used by the Majority to offset their liability to CCC 396; and
(d) The Majority’s conditional payment of $104,185 to plaintiff’s counsel was not payment received by CCC 396;
should have resulted in fewer issues and a more focused and shorter trial. That did not happen as the Majority contested each of the above determinations again at trial. The Majority is responsible for the loss of that benefit in rearguing the same issues at trial where they again were unsuccessful. The Summary Judgment was appropriate and did not lead to increased costs.
[57] The concern as to too many lawyers referred to in para. 72(a) of the Summary Judgment cost decision is in relation to Item 7 of T-1. Aside from Item 14, the court does not have that concern in relation to the other Items in T-1 as the number of lawyers involved was fewer and an action like this would normally involve participation of litigation and condominium real estate lawyers.
[58] The number of lawyers on some of the items, other than Item 7, is high, but involves small amounts of time for several of the lawyers suggesting short consultations with more senior lawyers which is appropriate in a case of this complexity.
[59] The quantity of arguments presented by the Majority, the quantum of indebtedness and length of period over which that was claimed and the number of units in issue warranted two counsel for the plaintiff.
[60] As to Item 7, eight lawyers docketed a total of some 250 hours in the preparation of CCC 396’s Summary Judgment motion, for a total fee of $107,103. That exceeds the reasonable requirement of s. 85(1) as against the Majority unit owners and the client.
[61] The docketed time for Item 7 is reduced by $25,000 from $107,103, to $82,103 plus HST, less the $20,000 costs award. The net recoverable including HST for Item 7 is $72,776.
[62] Item 8 is reasonable.
[63] Item 9 includes review of the lengthy Summary Judgment reasons, settling judgment and cost submissions. Junior lawyers were used. Item 9 given the number of tasks involved is reasonable.
[64] Item 10, at almost $48,000 for fees of six lawyers is high. Three of those lawyers however docketed one day or less. The Majority appealed the Summary Judgment and sought an order to stay and quash the proceeding. The combined time of M. Seebaran and C. Rootham is slightly below the time of the most senior lawyer who argued the Summary Judgment motion. As stated, two lawyers on this file is reasonable. For these reasons, the fees in Item 10 are reasonable.
[65] The first lawyer listed in Item 11 is C. Rootham for 4.85 hours at $450 per hour. That reference to that lawyer must be an error and should refer to J. Payne. C. Rootham is shown later in Item 11 at $260 and $270 per hour. The hourly rate of J. Payne in Items 8, 9 and 10 is $450 per hour with no other lawyer at that hourly rate. In terms of hours, M. Seebaran and C. Rootham had carriage of this Item.
[66] Items 11 to 13 are reasonable.
[67] Item 14 is high however the trial lasted ten days divided into two blocks of time in 2012 and then 2014. There were several interim attendances to schedule completion dates for the trial in 2014.
[68] The two lawyers with carriage of the trial combined, docketed 717 hours, which equals to 89, eight hour days. The primary trial lawyer docketed 466 hours over three years under Item 14. That equivalent of 58, eight hour days must be considered in light of the following:
(a) The trial lasted ten days;
(b) The trial days was divided between 2012 and 2014 which increases preparation time;
(c) There were detailed lengthy accounting reports and affidavits prepared by each side. Some of those were created between 2012 and 2014. Some were served immediately before the trial dates in 2012 and 2014;
(d) Both sides elected at the end of trial with written argument; and
(e) The plaintiff used more junior with lower hourly rates.
[69] Added to the above is 56 hours by J. Payne at $450 to $500 per hour. The combined total in Item 14 is too high.
[70] Item 14 fees are reduced by $25,000 to $224,549, plus HST, for a total of $253,740.
[71] The decision at 397 paragraphs, including amended and supplementary reasons is lengthy. Counsel were unable to agree upon the interest calculation, the wording of the judgment and who were the owners of which units. That necessitated further court attendance. Item 15 accordingly is reasonable.
[72] There is no issue generally as to hourly rates given the years of call. Junior lawyers were used thereby reducing costs.
[73] The Court has considered proportionality and whether the fees claimed as adjusted of $491,388, are excessive compared to the total recovery of $490,410, including interest.
[74] The Majority elected to:
(a) Not pay assessed condominium expenses for numerous units over an extended period of time;
(b) Attempted to justify their non-payment on the Summary Judgment and at trial for a multitude of reasons which had no bearing on their s. 84 obligation;
(c) Appealed or sought to appeal all substantive determinations against them;
(d) Ignored determinations made in the Summary Judgment and placed them in issue in the trial; and
(e) Were unsuccessful in their mid-trial summary judgment motion to dismiss this action.
[75] Having adopted the above approach, the Majority cannot successfully argue that the time expended, as adjusted above, is not proportional.
[76] The total of fees, adjusted as per Items 7 and 14, including HST, less the cost awards granted, is reasonable given the multitude of issues presented, the issues re-argued by the Majority at trial, the protracted length of this proceeding and the level of judgment awarded. The total net fees of $491,388 including HST, is reasonable and recoverable pursuant to s. 85.
[77] Although not requested on that basis, the court would reach the same above conclusions on a cost review under ss. 134 of the Act.
ALTERNATE COST CLAIM
[78] In the alternative, CCC 396 claims $642,610.64 for fees on a full indemnity scale for Items 1 to 4, 9, 12, 14 and 15 under T-1, or Items 1 to 7 and Item 11 under T-2. This alternate claim consists of legal fees of $352,133.81, including HST. None of these Items include prior cost awards.
[79] CCC 396 submits it is entitled to recover full indemnity on the basis of:
(a) R. 57.01(4) and s. 131 of the CJA application which recognizes and permits such level of recovery;
(b) Inappropriate conduct in this proceeding by the Majority which courts have held appropriate to discourage and sanction inappropriate behaviour; and
(c) The indemnification principle in condominium litigation, similar to a mortgagee’s contractual right of recovery of all costs in mortgage enforcement proceedings and CCC 396’s Declaration, pursuant to which the corporation and uninvolved unit owners must be protected and indemnified against costs incurred as a result of inappropriate conduct by unit owners which the corporation is obligated to remedy under s. 18(3).
[80] The court does not agree with the submission of CCC 396 that its Declaration supports an award of costs on a full indemnity scale.
[81] The condominium Declaration in Oxford Condominium Corp. No. 16 v. Collins, 2000 CarswellOnt 4060 (S.C.J.) required unit owners to reimburse the corporation for “all legal costs and disbursements (including the Corporation’s legal fees on a solicitor and client basis), incurred in bringing any court proceeding including ...”
[82] The Declaration of CCC 396 is not similarly broad or specific regarding court proceedings. It states that unit owners “shall indemnify and save harmless the Corporation from and against any loss, costs, damage, injury or liability whatsoever which the Corporation may suffer or incur resulting from or caused by an act or omission of such owner… to or with respect to the common elements and/or all other units, except for ...”. (emphasis added)
[83] Vigorous litigation is not inappropriate. Parties should not be penalized in costs for adopting such an approach. At the early stages of a proceeding, counsel does not have the benefit of hindsight in that proceeding.
[84] The Majority knowingly breached their s. 84 obligation for an extended period of time. Those breaches in refusing to pay common expenses for years have financially harmed the corporation and other unit owners. Service providers of CCC 396, including court appointed accountants as will be seen in the disbursements claimed, are owed large amounts which have been outstanding over years.
[85] The Majority, having been unsuccessful in their appeal of the summary judgment, disregarded many of the determinations in that decision and injected the same issues during the trial. L.A. Burdet in the trial testified the Majority unit owners’ accounts had never been in arrears of payment of their common expenses.
[86] The Majority raised inappropriate issues in the trial including:
(i) seeking to set aside the Summary Judgment;
(ii) challenging two special assessments which were obviously necessary including one necessitated because of the financial condition of the condominium due largely because the Majority refused to pay their share of special expenses;
(iii) the Majority’s alleged “ownership” of assets of CCC 396;
(iv) seeking credit for $104,815 that the Majority delayed payment of to CCC 396;
(v) attempting to eliminate or shield their liability by liability owed by other unit owners and liability owed by CCC 396 to E.T.R.E. which the court had previously ordered were issues to be determined in the Dewan Action;
(vi) faulting the court appointed Administrator for failing to collect arrears owned by the other 11 unit owners notwithstanding 2 interim orders prohibiting recovery of those amounts; and
(vii) alleging bias, misconduct, collusion or conspiracy between the court appointed Administrator and the other 11 unit owners.
[87] The above is not “second guessing how a trial should be conducted” as per Foulis v. Robinson (1978), 1978 ONCA 1307 (ON CA), 21 O.R. (2d) 769 (C.A.). It merely recognizes that a party may not litigate issues previously determined by the court.
[88] This adamant approach of the Majority continued after the September 30, 2011 Summary Judgment and their unsuccessful appeal thereof. The position of the Majority at trial remained that they owed no arrears of common expenses to CCC and the Summary Judgment determinations were wrong.
[89] CCC 396 and indirectly the other 11 unit owners should not be financially responsible for the Majority’s efforts to construct fresh arguments for their appeal of the trial decision to the Court of Appeal on issues rejected in the Summary Judgment decision.
[90] The expansive scope and protracted nature of this proceeding was the responsibility of the Majority. There comes a point when such conduct becomes abusive and requires admonition in the form of an elevated cost award. This is such a case.
[91] The normal scale of costs to be awarded is partial indemnity. A higher scale of cost award is appropriate where the conduct of the losing party either before or during the litigation warrants sanction: Davies v. Clarington (Municipality), 2009 ONCA 722, 100 O.R. (3d) 66, paras. 28 and 40; Brown v. Canada (Attorney General), 2015 ONSC 717, 2015 CarswellOnt 1288 (Ont. Div. Ct.)) and Oz Optics Ltd v. Timbercon Inc., 2012 ONCA 735, para. 16.
[92] Unproven allegations of fraud, bad faith, misconduct against another party, wanton, scandalous and vicious charges or improper conduct during the litigation have been considered sufficient reason to award costs on a scale of substantial indemnity: McBride Metal Fabricating Corp. v. H & W Sales Co. (2002), 2002 ONCA 41899 (ON CA), 59 O.R. (3d) 97, para. 38 (C.A.); Murano v. Bank of Montreal (1998), 1998 ONCA 5633 (ON CA), 41 O.R. (3d) 222, para. 82 (C.A.) and Foulis v. Robinson (1978), 1978 ONCA 1307 (ON CA), 21 O.R. (2d) 769 at p. 776 (C.A.).
[93] Where the allegations create no harm, a cost award on a scale of substantial indemnity may be denied: Mark Orkin, The Law of Costs, 2nd ed., (Aurora, Ontario: Canada Law Book, 2009) at para. 2191.
[94] A cost award on the basis of full indemnity is exceptional but is justified where a party has unsuccessfully alleged dishonesty, illegality, and conspiracy or where the allegations or conduct by a party are “reprehensible, scandalous, or outrageous”: 1483677 Ontario Ltd v. Crain, 2010 ONSC 1353, para. 19 and Envoy Relocation Services Inc. v. Canada (Attorney General), 2013 CarswellOnt 5389, para. 114 (OSC).
[95] Residential and commercial condominiums have become more prevalent in our society. Independent of s. 85 of the Act, unit owners and particularly owners of the majority of the units in a condominium must understand that they cannot impair the financial viability and level of services within a corporation, and thereby the interests of other unit owners, by withholding what is often the only source of revenue of that corporation.
[96] Independent of s. 85 of the Act, ss. 84(1) and (3) of the Act are clear. Condominium owners have a legal obligation to pay their share of common expenses and such obligation continues and is not diminished by their claim against the condominium corporation.
[97] It is manifestly unfair that unit owners who pay their condominium fees be indirectly, but eventually directly, obliged to assume part of the litigation costs incurred to force compliance by a defaulting unit owner. Defaulting unit owners create harm to owners who are not parties to the action.
[98] The above are reasons why these costs should be on a scale of full indemnity. The obvious harm caused to third party compliant unit owners by defaulting owners should not be condoned as a cost of condominium ownership. To hold otherwise contradicts the clear intent of the legislation which, independent of security provisions, indicates non-compliant owners must pay all reasonable costs.
[99] Alternatively, costs for the same reasons should be awarded on a substantial indemnity scale. That is particularly so as the Majority essentially at trial ignored the prior determinations against them and reargued the same issues determined against them.
R. 57 FACTORS
[100] The determinations above as to degree of success, hourly rates, quantum of time docketed, proportionality and unnecessary protracting this proceeding are the same in this R. 57 analysis and will not be repeated. The above determinations respond to the requirements of R. 57(1) (o.a), (o.b.) and (a) to (g).
[101] CCC 396 was fully successful, recovered judgment for a considerable amount, had its liens and most of the Notices of Power of Sale validated with the other latter notices easily amendable.
[102] As to the non-profit nature of a condominium corporation and the potential financial harm to it and other unit owners, paras. 37 and 38 of Metropolitan, supra, are relevant. The protection deemed necessary and resulting in the enactment of sections ss. 85 (1) and 134 is, independent of those sections, informative as to what scale of costs is appropriate. If the legislature deemed the problem significant enough to enact amendments to the Act to address the problem, surely this is relevant to the court’s exercise of its “discretionary” power under s. 131 of the CJA.
[103] CCC 396 in this alternative argument is entitled pursuant to s. 131 of the CJA and R. 57 (4) (d) and (c), to legal fees in T-2 on:
(a) Full indemnity scale in the amount of $323,882.78, including HST;
(b) In the further alternative, fees on a substantial indemnity scale in the amount of $288,669.49, including HST; and
(c) In the final alternative, $183,029.34 for fees on a partial indemnity scale.
DISBURSEMENTS
[104] The disbursements claimed are:
(a) $306,117.46 including HST, pursuant to the s. 85 cost claim under T-4; of which $196,071.50 are the fees of the plaintiff’s expert Marcil Lavallee before HST and interest; or
(b) $290,476.83 including HST and the above expert fees of Marcil Lavallee pursuant to T-2. T-2 excludes the disbursements listed under heading 1, Summary Judgment Motion and heading 2, Appeal of Summary Judgment Motion in T-4.
[105] The disbursements beyond the expert’s fees are reasonable and recoverable.
[106] The use by CCC 396 of an accountant as an expert witness was reasonable given the length of the period involved, the number of units in issue and the defendants’ dispute that they were not in arrears. The inclusion of credits claimed by the defendants prior to April, 2002, and their method of accounting reinforced the need of an accounting expert for the plaintiff.
[107] At the request of the court, the accounts of the expert were produced together with the accountants’ calculation of interest charged on their accounts to December 31, 2014, (“M-L Accounting”). Added to that is the latest January 20, 2015 invoice from M-L in the amount of $12,454.30 which must be added to the M-L Accounting total of $259,805.14 resulting in a final total for that expert of $272,259.44, including interest charges and HST.
[108] The review of the M-L invoices indicate that they appear to be reasonable as to the subject and scope of services provided and the amounts charged, which remain unpaid back to March of 2012. The court accepts M-L’s calculation of interest thereon.
[109] With the addition of the M-L January 12, 2015 invoice, the court calculates the disbursement total under part 3 of T-4 to be $283,886, inclusive of HST, rather than $290,476.83 as claimed. This produces a combined total of disbursements in T-4 of $299,526.63 which are recoverable by CCC 396 pursuant to the cost claim under s. 85 of the Act.
[110] In the alternative claim, the disbursements recoverable for costs on a full, substantial or partial indemnity scale under T-2 and for the trial under T-3, with the same reduction in Item 14 and including the M-L January 20, 2015 account and HST, are $283,886.
[111] In conclusion, the total fees and disbursements awarded herein are as follows:
(a) Pursuant to s. 85 - Fees of $491,388 plus disbursements of $299,526.63 for a total of $790,914.63;
(b) Alternatively, Full Indemnity – Fees of $323,882.78 plus disbursements of $283,866 for a total of $607,748.78;
(c) In the further alternative, Substantial indemnity – Fees of $288,669.49 plus disbursements of $283,866 for a total of $572,535.49; and
(d) In the final alternative, Partial indemnity – Fees of $183,029.34 plus disbursements of $283,866 for a total of $466,895.34.
LIABILITY PER OWNER AND UNIT
[112] Sections 85 (3) and 134 (5) of the Act create unit liability for awards including costs.
[113] Having determined the amount of the cost award, it is necessary to determine the liability of each defendant and condominium unit in relation thereto.
[114] Each defendant is indebted to and liable to CCC 396 for only a portion of the total net principal and interest owed by the Majority; namely their unit share of common expenses set in the condominium Declaration, plus costs.
[115] The defendant unit owners, being some but not all of the defendants, are liable for their proportionate share of the costs awarded herein.
[116] Any defendants who have not been owners of units in CCC 396 since 2002, are not liable to CCC 396 for unpaid common expenses. Any such defendant is not liable for costs.
[117] The above raises the same issue referred to in paragraphs 380 to 394 of the trial decision, namely registered unit owners versus the allegations of the defendants not proven during the trial that some of the registered owners hold title in trust for an unidentified entity.
[118] The best evidence introduced at trial as to unit ownership is the registered title ownership or PIN sheets of the subject units, which is:
Unit 4, Level A was and is owned by C.-A. Burdet;
the other 17 Level A units were owned by C.-A. Burdet in trust;
Units 2 and 3, Level 1 were owned by 1457563 Ontario Corporation; and
Unit 9, Level 1 and Units 2 and 3 Level 2 were owned by Janet Sue Burdet.
[119] The evidence at trial further established the transfer of title of 22 of the above Majority 23 units to E.T.R.E. on June 15, 2012, immediately prior to the commencement of trial, not E.T.R.E. in trust.
[120] A central issue in the Dewan Action involves the relationship between E.T.R.E. and the other defendants with that entity being incorporated by and bearing the name of C.-A. Burdet in reverse. The evidence at trial was that Mr. Burdet’s daughter was the Director of that corporation and that Janet Burdet Strauss and L. A. Burdet were employees or agents of E.T.R.E.
[121] E.T.R.E. is a defendant in the Dewan Action and was added as a party in this action in June, 2012 upon CCC 396 learning that 22 of the 23 Majority units had been transferred to E.T.R.E. three days prior to the commencement of the trial.
[122] E.T.R.E.’s title to the 22 units on June 15, 2012 was received with its knowledge of the liability claim of CCC 396 and notice of the registered liens against 21 of the 23 units.
[123] Based on the above factors:
Proportionate liability in accordance with Schedule D of the Declaration is attributed to each Majority unit, regardless of ownership;
Unit ownership is determined by the unit registry under Land Titles and the evidence at trial as above; and
Unit owners prior to the conveyance of 22 of the units to E.T.R.E., remained defendants in the trial, disputed any liability to CCC 396 and participated in all the defences introduced and argued during the trial. They personally remain liable for the full amount of the share of their unit(s) share of the cost award herein.
[124] E.T.R.E. is liable for costs commencing with trial preparation as per T-4 (3) and thereafter pursuant to s. 85 or alternatively, on a full indemnity scale, on a substantial scale or partial indemnity scale if decreased on appeal.
[125] The proportionate liability share of the costs awarded herein per unit and personally against each prior registered defendant owner, subject to E.T.R.E. as below, is set forth in Schedule A.
CONCLUSION
[126] As adjusted above, the combined fees and disbursements totals awarded to the plaintiff are:
(a) Section 85 - fees of $491,388 and disbursements of $299,526.63 for a total of $790,914.63, inclusive of HST and interest, pursuant to T-1 and T-4; and
(b) In the alternative, costs of the proceeding on a full indemnity basis consisting of fees of $323,882.78, including the reduction for Item 14 plus disbursements of $283,886 for a total of $607,748.78, including HST and interest pursuant to T-2 and T-4 (3);
(c) In the further alternative, costs of the proceeding on a substantial indemnity scale consisting of fees of $288,669.49, including the Item 14 reduction plus disbursements of $283,886, for a total of $572,535.49, including HST and interest pursuant to T-2 and T-4 (3); and
(d) In the final alternative, costs of the proceeding on a partial indemnity scale consisting of fees of $183,029.34, including the reduction for Item 14 plus disbursements of $283,886 for a total of $466,895.34, including HST and interest pursuant to T- 2 and T-4 (3).
[127] The liability per unit and against the former registered owner of such units identified above, is set forth in Schedule “A” hereto. The same percentage per unit applies to costs on a full, substantial or partial indemnity scale.
[128] Costs awarded against E.T.R.E. personally, commencing with trial preparation, trial and thereafter, being Items 2 and 3 of T-3 are:
(a) Fees on full indemnity scale as adjusted herein $269,953.24;
(b) Alternatively, fees on substantial indemnity scale $242,957.92;
(c) In the final alternative, fees on partial indemnity scale of $161,971.94;
(d) Plus disbursements in each of (a) to (c) above in the amount of $283,886.
[129] The costs awarded are payable within 30 days from today.
Kane J.
Released: March 17, 2015
APPENDIX 1
March 17, 2015:
Paragraph [10] (a) is amended as follows:
At trial, the court determined:
(a) The liens registered against 21 Majority units were valid;
SCHEDULE “A”
Unit-Level
Proportionate Share Based on Declaration, Schedule D Percentage of Common Expenses
Section 85
$790,914.63
Fees and Disbursements
1 – A
(2.078%)
$16,435.21
2 – A
(2.078%)
$16,435.21
3 – A
(2.078%)
$16,435.21
4 – A
(2.078%)
$16,435.21
5 – A
(2.078%)
$16,435.21
6 – A
(2.078%)
$16,435.21
7 – A
(2.078%)
$16,435.21
8 – A
(2.078%)
$16,435.21
9 – A
(2.078%)
$16,435.21
10 – A
(2.078%)
$16,435.21
11 – A
(2.078%)
$16,435.21
12 – A
(2.078%)
$16,435.21
13 – A
(2.078%)
$16,435.21
14 – A
(2.078%)
$16,435.21
15 – A
(2.078%)
$16,435.21
16 – A
(2.078%)
$16,435.21
17 – A
(2.078%)
$16,435.21
18 – A
(2.078%)
$16,435.21
2 – 1
(14.086%)
$111,408.23
3 – 1
(14.086%)
$111,408.23
9 – 1
(9.306%)
$73,602.51
2 – 2
(12.560%)
$99,338.88
2 – 3
(12.560%)
$99,338.88
CITATION: Carleton Condominium Corporation No. 396 v. Burdet, 2015 ONSC 1361
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
CARLETON CONDOMINIUM CORPORATION NO. 396
Plaintiff
– and –
CLAUDE-ALAIN BURDET, CLAUDE-ALAIN BURDET IN TRUST, 1457563 ONTARIO CORPORATION, 1457563 ONTARIO CORPORATION IN TRUST, JANET SUE BURDET, NELSON STREET LAW OFFICES, L’ACADEMIE CHRISTIANE SAUVE INC., INTERNATIONAL BEAUTY DEPOT and ENTREPRISE TED RUBAC ENTERPRISES INC.
Defendants
AMENDED COST DECISION
Kane J.
Released: March 17, 2015