ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: 14-60620
DATE: 2015/08/19

BETWEEN:

MIREILLE BALLINGALL, MARK HAIART, STEPHEN PILON, and DENISE THOMPSON

Applicants

– and –

CARLETON CONDOMINIUM CORPORATION NO. 111 and JOHN MACMILLAN

Respondents

Rodrigue Escayola and Jocelyn Duquette, for the Applicants

Christy J. Allen, for the Respondent, Carleton Condominium Corporation No. 111

Howard Yegendorf, for the Respondent, John MacMillan

HEARD: June 18, 2015 (at Ottawa)

AMENDED SUPPLEMENTARY REASONS RE COSTS

The text of the original decision was corrected on August 19, 2015
and the description of the correction is appended

AITKEN J.

Position of the Parties

[1] The Applicants claim total success on the Application and seek partial indemnity costs until May 27, 2014, the date of their first offer to settle, and substantial indemnity costs thereafter, for a grand total of $76,523 ($65,000 in fees, $2,799 in disbursements, and $8,777 in HST). They seek an order against Carleton Condominium Corporation No. 111 (“CCC 111” or “the Corporation”) and John MacMillan (“MacMillan”) on a joint and several basis, but ask that 60% of costs be assessed against the Corporation and 40% be assessed against MacMillan.

[2] The Corporation and MacMillan take the position that success was divided and there should be no order as to costs.

Should a Costs Award be Made?

[3] The Corporation gave the Applicants little choice but to commence litigation if they wanted the single family residence provision in the Declaration enforced. On March 13, 2014, Stephen Pilon (“Pilon”) wrote to MacMillan asking what the Board of Directors’ position was concerning the single family residence rule and what steps the Board was taking to enforce it. On April 2, 2014, MacMillan, then President of the Board, responded that the status quo, as it existed prior to June 17, 2013, remained in effect in regard to the single family residence rule. The essence of his response was that the Board’s position was that “single family” included any number of unrelated persons, as long as they were living “as a family”, but did not include roomers or boarders. This position was inconsistent with the latest Ontario jurisprudence regarding the meaning of “single family residence”.

[4] It was only after this litigation was commenced that the Board, as then constituted, grappled with the single family residence issue and proposed a new rule to deal with it.

[5] The Applicants took no issue with the wording of the new rule, aside from the grandfathering provisions which, in essence, abrogated enforcement of the new rule for a period of ten years. In my Reasons for Judgment, I found the grandfathering provisions to be unreasonable. Therefore, the Applicants cannot be faulted for refusing to accept a new rule with those grandfathering provisions.

[6] There were six issues that I had to decide in regard to the actions of the Board, and two issues in regard to the actions of MacMillan. In regard to the first six issues relating to the Board, the Applicants were successful on five. To summarize, I found that: (1) owners and occupiers of units at CCC 111 were bound by the Corporation’s Declaration, and the Applicants were entitled to the protection of that Declaration; (2) the Board of Directors had an obligation to enforce the Corporation’s Declaration; (3) the Corporation was not estopped from enforcing its Declaration because it had failed to effectively do so in the past; (4) the Applicants took no issue with the Board passing a new rule 44A, as long as it was consistent with the provisions in the Declaration regarding “single family residence”; and (5) the grandfathering provisions in the proposed rule were unreasonable and not consistent with the Declaration. It was only in regard to the Applicants’ claim for an oppression remedy that the Corporation was successful in that I found that the evidence was inadequate to persuade me that the Board’s passage of rule 44A had been oppressive.

[7] The Corporation’s counsel argued that the Applicants had not been successful on the majority of the claims for relief in the original Notice of Application because I did not make some of the orders that the Applicants originally requested. Those orders were not made, not because the Applicants were not entitled to them, but because they were not necessary once it became clear that the only objection the Applicants had with the proposed rule 44A was with the grandfathering provision. The Applicants were successful in getting what they wanted from the litigation, and it was the Respondent Corporation that had to change its course of action.

[8] In regard to MacMillan, I set out in paragraphs 103 to 116 of my Judgment all of the reasons why I found that MacMillan had breached his obligations as a director under s. 37(1)(a) and (b) of the Condominium Act 1998, S.O. 1998, c. 19 and, more specifically, why I found that he had not acted in good faith and had not exercised the care, diligence, and skill that a reasonably prudent person would have in comparable circumstances. I did not consider it necessary to decide whether MacMillan had acted oppressively once I had made these other findings.

[9] In these circumstances, I see no reason why the Applicants should not be successful in getting a costs award against both the Corporation and MacMillan.

Factors to Consider

[10] The factors to consider in a cost award are set out in r. 57.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.

[11] The Applicants felt that they had no option other than commencing litigation to force the Corporation to do what it was legally obliged to do so as to protect the integrity of CCC 111. The litigation brought no financial gain to the Applicants. On the contrary, in addition to paying their own lawyers’ costs, they are obliged to contribute to the Corporation’s legal expenses through their condominium fees.

[12] The proceeding was reasonably complex, as indicated by the length of the Reasons for Judgment. There were 16 affidavits and 186 exhibits. There were seven issues requiring analysis. The Applicants had to present information about the history of the condominium complex and the actions of the Board over an extensive period of time, and they did so at a time when none of them was on the Board or had easy access to relevant documentation.

[13] The Applicants’ counsel originally set down the Application for a two-hour hearing in October. Clearly, this was not a short motion and should never have been scheduled for a short-motion day. The Applicants will not receive any costs for this appearance.

[14] The documentary evidence which the Applicants had to produce for this litigation was more extensive than was truly necessary as a result of various spurious and irrelevant assertions made by the Respondents in the affidavits they filed in response to the Application. Those spurious assertions were identified in my Reasons for Judgment.

[15] The issue was an important one, not only to the Applicants, but also to the Respondents and to all unit owners and occupiers. The underlying issues involve the peace and sanctity of the condominium community at CCC 111, as well as the financial well-being of all unit owners.

[16] Important considerations are the principle of indemnity and the amount of costs that an unsuccessful party could reasonably expect to pay. In regard to the latter point, counsel for CCC 111 did not file a costs outline prior to the issue of costs being argued. Had she done so, the Court would have had a better idea as to what the unsuccessful party thought the reasonable legal costs of the Applicants might be. I accept the evidence that, ultimately, the Corporation was charged total fees, disbursements, and HST relating to this litigation in the amount of $62,450. That being said, in a letter to owners regarding 2015 condominium fees, the Board advised that unusually large legal fees exceeding $90,000 were incurred in 2014, and it was anticipated that a further $25,000 would be incurred in 2015. This suggests that the Corporation was prepared to pay at least $115,000 to enable itself and MacMillan (whose legal fees the Corporation originally covered) to respond to the Application.

[17] The Bill of Costs prepared by the Applicants’ counsel showed full indemnity costs at $89,815, substantial indemnity costs at $81,147, and partial indemnity costs at $56,204. How reasonable are these figures? I note that the total number of hours worked on the file by lawyers for the Applicants was 259. The total number of hours worked on the file by lawyers for the Corporation was 228. The hourly rates charges by the senior counsel for the Applicants and the senior counsel for the Corporation were basically the same, with the hourly rates charged by junior lawyers for the Applicants being less than that charged for junior lawyers for the Corporation. This comparison helps me to conclude that the hourly rates and the hours charged by the Applicants’ lawyers were not out of line.

[18] A significant factor is that the Applicants made four offers to settle, while the Respondents made none. That being said, on May 22, 2014, the Corporation’s counsel sent a conciliatory letter to the Applicants’ counsel asking if the Applicants would be prepared to meet, mediate and/or exchange comments about the proposed rule 44A that the Board was hoping to pass. The tone of the letter was very positive.

[19] On May 27, 2014, the Applicants offered to accept a resolution whereby the Board would pass a new rule 44, broadening the definition of “single family” along the lines that was eventually done, but with the grandfathering provision applying only to existing tenants. Part of the offer was that the Applicants’ legal fees had to be paid by the Respondents. This offer was not as favourable to the Respondents as my eventual ruling in that I accepted the Respondents’ position that limiting the grandfathering clause to existing tenants would be unreasonably restrictive. But at the very least, it was an attempt to engage in settlement discussions and to focus everyone’s attention on the only contentious issue – the grandfathering clause. This offer was served only on the Corporation. The Corporation’s counsel responded on June 3, 2014, with a conciliatory letter aimed at keeping discussions ongoing while, at the same time, explaining why the Applicants’ offer was not acceptable. That cooperative attitude was also exemplified in a letter dated June 17, 2014 from one of the Corporation’s lawyers to the Applicants’ counsel.

[20] On July 2, 2014, the Applicants expanded their offer to include in the grandfathering provision, for a two-year period, owners who were leasing when the Application was commenced. Again, the Applicants were seeking full indemnification for legal fees. The offer was served only on the Corporation. In early August, the Board of Directors passed rule 44A with the ten-year grandfathering provision. At no time prior to passing this rule did the Board, or the Corporation’s lawyer, engage in meaningful negotiations with the Applicants’ lawyer regarding specific wording for the grandfathering provision.

[21] On August 19, 2014, the Applicants again expanded their offer by extending the grandfathering provision to five years. Full indemnification for legal fees continued to be in the offer. The offer was served on both Respondents.

[22] On September 2, 2014, the Applicants submitted their final offer which was the same as the previous offer, subject to a change in the costs being sought. The Corporation was to pay the Applicants’ costs, as agreed or as assessed. The offer was served on both Respondents. This offer was as favourable to the Respondents as my Judgment. Costs on a partial indemnity basis to September 2, 2014 and on a substantial indemnity basis thereafter would amount to $73,220.

[23] The Corporation asserts that this final offer was not a r. 49 offer because it was incapable of being accepted by the Board on behalf of the Corporation. Ultimately, it was for the unit owners to decide on the acceptability of the proposed rule 44A. What this argument ignores is that, in each of the Applicants’ offers, the Applicants’ counsel specifically acknowledged that the wording of rule 44A would have to be put to a vote by the owners. Any accepted offer was subject to this confirmation. This litigation could have been resolved if the Board of Directors had accepted the Applicants’ last offer and had presented rule 44A with a five-year grandfathering provision to the owners for acceptance. Once my Reasons for Judgment were released, this is precisely what happened, and the Corporation now has a new rule 44A with a five-year grandfathering provision.

[24] MacMillan is in a different position from the Board in regard to the issue of costs. The only issues that applied to him on the Application were the questions of whether he had acted oppressively, whether he had met his obligations as a director of the Corporation, and whether he had acted in good faith. As well, MacMillan was not in a position to accept any offers or carry out their provisions; therefore, the offers have no effect on his liability for costs. On the other hand, although I made no finding as to whether MacMillan had acted oppressively, I did make a finding that he had not acted in good faith as a director and, in fact, much of the dysfunction of the Board of Directors during the years when rule 44 was being considered, and much of the acrimony that festered at CCC 111, can be attributed to MacMillan’s belligerence. Due to my finding that MacMillan had not acted in good faith, the Corporation is under no obligation to pay any of his legal expenses relating to this litigation.

Disposition

[25] Taking all of these factors into account, I make the following order as to costs:

(1) The Applicants are awarded costs against the Respondents on a joint and several basis in the amount of $50,000.

(2) Of this total amount, MacMillan shall be responsible to pay $15,000 and the Corporation shall be responsible to pay $35,000.

[26] This litigation should be a reminder to all concerned that being stubborn and unwilling to compromise when parties have different, but legitimate, interests and concerns is a costly and unwise endeavour. Looking for common ground, and working hard to find solutions, is always the better way. This award also provides a strong message to condominium owners to take an interest in the management of their corporations and to seek leaders who are able to work constructively and effectively with all owners in seeking reasonable resolutions to difficult issues.

Aitken J.

Released: August 19, 2015

APPENDIX

August 19, 2015: The date in the last sentence of paragraph [19] was incorrect and replaced with the correct date of June 17, 2014.

ONTARIO
SUPERIOR COURT OF JUSTICE

BETWEEN:

MIREILLE BALLINGALL, MARK HAIART, STEPHEN PILON, and DENISE THOMPSON

Applicants

– and –

CARLETON CONDOMINIUM CORPORATION NO. 111 and JOHN MACMILLAN

Respondents

AMENDED SUPPLEMENTARY REASONS

RE COSTS

Aitken J.

Released: August 19, 2015