Fimax Investments v. Grossman, 2015 ONSC 2048

CITATION: Fimax Investments v. Grossman, 2015 ONSC 2048

COURT FILE NO.: CV-12-460657

DATE: 20150330

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

FIMAX INVESTMENTS GROUP LTD.

Plaintiff

and

JANINE GROSSMAN

Defendant

BEFORE: F.L. Myers J.

COUNSEL: Arie Gaertner the plaintiff

Ian N. Roher for the defendant

READ: March 30, 2015

COSTS ENDORSEMENT

[1] The defendant moved for summary judgment. She sought to avoid liability on a guarantee. There was no doubt that the underlying debt remains outstanding. The validity of the guarantee was not contested at this stage. The defendant based her defence on an argument predicated on the plaintiff not having incurred any damages. The plaintiff lent money to the debtor. The defendant guaranteed repayment of the loan. The plaintiff was a flow-through vehicle which effectively borrowed money from investors to lend to the debtor. The investors who had lent their money to the plaintiff have let their rights to sue the plaintiff to recover their loans lapse under the Limitations Act, 2002. Therefore, the defendant argued that since the plaintiff was always a flow-through vehicle, it suffered no loss and would, in fact, gain a windfall if the defendant pays it.

[2] The defendant’s argument did not survive a moment’s consideration. Could a borrower refuse to re-pay a bank on the basis that the bank’s shares had gone up in value so that the bank’s shareholders had made money and would not lose if the borrower defaults? What if a bank actually borrowed funds to make its loan to the debtor or if it led a consortium as agent? Can a syndicate agent who obtains only fees not enforce the syndicate loan? To ask the question is to reject it. How the lender obtains its funds is wholly irrelevant to the borrower’s obligation to pay its debt and the guarantor’s liability to pay in accordance with the terms of the guarantee. The only windfall at play was the defendant’s effort to obtain one.

[3] I dismissed the motion. Counsel jointly requested that I not seize myself under Hryniak v. Mauldin, 2014 SCC 7 as they have the action under control procedurally.

[4] The plaintiff seeks its costs. It also delivered an offer to settle a few weeks before the hearing of the motion. By winning the motion, the plaintiff beat its offer. It seeks costs on a substantial indemnity basis from the date of its offer. Moreover, it seeks costs of the motion on a substantial indemnity basis throughout under Rule 20.06 on the basis that the motion was not reasonably brought.

[5] The defendant says that the issue was novel so that there should be no costs. She continues to argue that the plaintiff’s claim was not liquidated because the debtor’s promissory note includes an obligation to pay costs. While older case law suggests that the inclusion of an unliquidated costs provision in a promissory note may prevent the note from qualifying as a Bill of Exchange, that does not alter the underlying basis for the claim to repayment of the debtor’s’ loan. The claim sounded in debt whether under the statute or at common law. The claim on the debt itself was liquidated and specific. The notion that when a debtor agrees to take on additional liability for the lender’s costs this somehow allows the debtor to escape its liability on the principal debt based on how the lender obtained its funding was not novel. It was just wrong. No law supported the outcome claimed. In my view, the defendant acted unreasonably in bringing the motion as discussed in rule 20.06.

[6] There is approximately $3 million in issue in the proceeding. The defendant was willing to invest in a motion for summary judgment to try to avoid that liability. The motion was not arguable. By bringing it, the defendant made the plaintiff pay to respond to it. The defendant challenges the quantum of the fees claimed by the plaintiff. I have reviewed the plaintiff’s Costs Outline. The rates charged by the plaintiff’s counsel are very reasonable. The hours are claimed to be high especially for experienced counsel. I am hesitant to criticize counsel who prepare for a hearing and are successful. Courts frequently lament the lack of preparation by counsel. Moreover, every litigation skills course emphasizes that the single-most important element of presenting a case in court is preparation. In my view, absent very obvious abuse or unreasonableness, I am disinclined to measure too closely the time of counsel whose preparation led to success.

[7] The fixing of costs is a discretionary decision under s.131 of the Courts of Justice Act. That discretion is generally to be exercised in accordance with the factors listed in Rule 57.01 of the Rules of Civil Procedure. These include the principle of indemnity for the successful party (57.01(1)(0.a)), the expectations of the unsuccessful party (57.01(1)(0.b)), the amount claimed and recovered (57.01(1)(a)), and the complexity of the issues (57.01(1)(c)). Overall, the court is required to consider what is “fair and reasonable” in fixing costs, and is to do so with a view to balancing compensation of the successful party with the goal of fostering access to justice: Boucher v Public Accountants Council (Ontario), 2004 CanLII 14579 (ON CA), (2004), 71 O.R. (3d) 291, at paras 26, 37.

[8] The plaintiff claims costs of $22,217.50 before HST on a partial indemnity basis. Converting to substantial indemnity by multiplying by 1.5 under rule 1.03 yields costs on a substantial indemnity basis of $33,326.25. Adding HST at 13% yields costs on a substantial indemnity basis including disbursements and HST of $37,658.66. I am satisfied that costs in this amount is fair and reasonable and ought to have been within the defendant’s reasonable contemplation in light, in particular, of the plaintiff’s unaccepted offer to settle.

________________________________ F.L. Myers J.

Date: March 30, 2015