SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: CV-14-00501047-0000
DATE: 20151021

RE: XPERT CREDIT CONTROL SOLUTIONS INC., Plaintiff

AND:

VICTOR BORGES and ANNA BORGES, Defendants

BEFORE: Mr. Justice M. D. Faieta

COUNSEL:
Glenn E. Cohen, for the Plaintiff

Shaneka Taylor and Rolf M. Piehler, for Anna Borges

HEARD: October 19, 2015

COSTS ENDORSEMENT

[1] The plaintiff commenced this action on March 28, 2014 claiming $182,205.20 plus costs and interest.

[2] The plaintiff and the defendant Anna Borges (Ms. Borges) have settled this action on the following basis: 1) the action against the defendant Victor Borges, and his Counterclaim, be dismissed; 2) Ms. Borges will pay to the plaintiff the sum of $202,930.90 for principal, fees and interest to October 20, 2015, that is owed under a mortgage held by the plaintiff on her property, plus costs of this action and post-judgment interest from October 21, 2015; 3) the plaintiff is granted vacant possession of the property and leave after November 3, 2015, to issue a Writ of Possession.

[3] The plaintiff seeks costs of this action in the amount of $65,831.32 on a solicitor and client basis comprised of fees and disbursements charged by Mr. Cohen except for $11,132.29, in respect of an account for legal services dated September 18, 2015, from Terry Walman, amongst other things related to issuing and serving a Statement of Claim, preparing and serving a Notice of Sale, to noting the defendants in default and to preparing and obtaining default judgment.

[4] The plaintiff submits that the mortgage obliges the defendant Anna Borges to pay its costs of this action on a solicitor and client basis. The mortgage contains the standard charge terms (Dye & Durham #200033). Paragraph 8 includes the following provision: “…all costs, charges, legal fees (as between solicitor and client) and expenses which may be incurred…in any other proceedings taken in connection with or to realize upon the security given in the Charge (including legal fees and real estate commissions and other costs incurred in leasing or selling in taking, recovering and keeping possession of the land or in exercising the power of entering, lease and sale contained in the Charge) shall be, with interest at the rate provided for in the Charge, a charge upon the land in favour of the Chargee…”

[5] In my view, this provision of the mortgage is a factor to be considered by this Court in awarding costs. However, this provision does not give the plaintiff carte blanche. Section 131 of the Courts of Justice Act and Rule 57.01 of the Rules of Civil Procedure remain paramount. In Bossé v. Mastercraft Group Inc. 1995 931 (ON CA), [1995] O.J. No. 884, at para. 65, the Court stated that,

As a general proposition, where there is a contractual right to costs the court will exercise its discretion so as to reflect that right. However, the agreement of the parties cannot exclude the Court’s discretion; it is open to the Court to exercise its discretion contrary to the agreement. The Court may refuse to enforce the contractual right where there is good reason for so doing...where, for instance, the successful mortgagee has engaged in inequitable conduct or where the case presents special circumstances which renders the imposition of solicitors and client costs unfair or unduly onerous in the particular circumstances.

[Emphasis added]

[6] Ms. Borges does not take issue with the hourly rate of $450 billed by Mr. Cohen nor with the rates charged for the junior lawyers who worked on this matter.

[7] However, Ms. Borges submits that there is good reason to reduce the costs claimed for the following reasons.

Account of Terry Walman

[8] Mr. Walman’s account, dated September 18, 2015, is in the amount of $11,132.29, including disbursements of $1,329.54. Ms. Borges submits that all of Mr. Walman’s costs associated with the Notice of Sale, issued April 1, 2014, in the amount of $182,205.50 plus costs of $2,500.00 should be denied because the mortgage was in good standing at the time that it was issue. She alleges that a payment of $7,500.00 on March 4, 2014, brought the mortgage in good standing. There is no evidence that this payment brought the mortgage in good standing. Mr. Cohen advises that the payment of $7,500.00 was not credited to the mortgage when this action was settled. This statement was not contested. Accordingly, these charges will not be denied in principle.

[9] Ms. Borges also submits Mr. Walman’s fees should be reduced because the mortgage discharge statement provided by the plaintiff by letter dated May 12, 2014, and by Mr. Walman on June 3, 2014, in the amount of $514,886.93, included a debt of $315,000.00 that was not secured by this mortgage.

[10] I note that the action was commenced on March 28, 2014, and that default judgment was issued on May 15, 2014, which is a few days after the first mortgage discharge statement was provided by the plaintiff. The Mortgages Act, R.S.O. 1990, c. M.40, states:

(2) The mortgagor may, by a notice in writing, require the mortgagee to furnish the mortgagor with a statement in writing,

(a) of the amount of the principal or interest with respect to which the mortgagor is in default; or

(b) of the nature of the default or the non-observance of the covenant, and of the amount of any expenses necessarily incurred by the mortgagee.

(3) The mortgagee shall answer a notice given under subsection (2) within fifteen days after receiving it, and, if without reasonable excuse the mortgagee fails so to do or if the answer is incomplete or incorrect, any rights that the mortgagee may have to enforce the mortgage shall be suspended until the mortgagee has complied with subsection (2). [Emphasis added]

[11] Ms. Borges states that she had arranged alternate mortgage financing that would have paid the mortgage arrears and that her ability to do so was frustrated by this inaccurate discharge statement. There is no serious dispute that the discharge statement did not comply with s. 22(2) of the Mortgages Act. The settlement of this action for slightly more than $200,000.00 supports this conclusion.

[12] A further discharge statement was provided by the plaintiff by letter dated September 18, 2015, which showed that the amount owed was $207,703.65 plus costs of slightly more than $50,000.00. There is no evidence before me which shows that a discharge statement was provided prior to September 18, 2015, which did not include the unsecured debt of $315,000.00.

[13] Finally, Mr. Walman’s account is solely comprised of block billing. His hourly rate and time spent is not shown. Mr. Cohen suggested that his hourly rate was likely $375-$400. While the plaintiff may be content with block billing for routine matters, in my view more transparency is required to justify an order for the payment of costs as presented.

Interlocutory Motions

[14] The plaintiff claims $24,714.00 plus HST of $3,212.82 for attending to the motion to set aside the default judgment including two affidavits, reviewing four affidavits, attending Court on July 23, 2014, preparation for and attendance for five cross-examinations, negotiating and drafting a Consent and Order, enforcement of a costs Order and other matters.

[15] The Consent dated October, 2014 states that “…costs incurred to date by the parties with respect to the motion to set aside the default Judgment will be reserved to be dealt with by the Judge the Summary Judgment Motion. A summary judgment motion was not held. Accordingly, this matter is left for me to determine.”

[16] Ms. Borges submits that the Bill of Costs should be reduced to remove costs associated with the motion for default judgment and the motion to set aside the default judgment and the writ of possession. Her submission is that any costs would have been dealt with by motions judge and should not be allowed. The plaintiff granted its consent to set aside the default judgment after the exchange of many affidavits and extensive cross-examination. In my view, there is little doubt that had the motion to set aside the default judgment would have been granted. Amongst other things, Ms. Borges’s asserted an arguable defence in that she alleged in her Statement of Defence and Counterclaim that the damages claimed were not recoverable in law. According to Mr. Cohen, the law at the time was uncertain as a result of conflicting case law regarding whether administration and NSF fees were recoverable. The law was subsequently clarified in Ms. Borges’ favour and Mr. Cohen advised that the settlement reflects the current state of the law.

Administrative and Other Matters

[17] Ms. Borges submits that work performed by Mr. Cohen should have been performed by junior counsel given that this should have been a relatively routine mortgage enforcement action. Mr. Cohen explained that his client wanted his experience and services in this action rather than those of a more junior counsel. That explanation does not answer why more junior counsel could not have taken the lead on this action, with Mr. Cohen providing support, given the routine nature of this mortgage enforcement action.

[18] Counsel for Ms. Borges in this matter provided an outline of her firm’s bill to Ms. Borges for defending the second and third mortgage actions. The total amount billed to Ms. Borges for defending this action is approximately $14,300.00 in fees and disbursements. Ms. Borges submits that this amount reflects a reasonable expectation of what she might have been expected to pay if she was unsuccessful in this action.

Did the Plaintiff’s Conduct Unnecessarily Lengthen or Delay these Proceedings?

[19] Aside from my findings regarding the motion to set aside default judgment, I do not accept the submission that the plaintiff delayed these proceedings. Nor do I accept that the plaintiff was motivated to delay this action in order to collect additional interest. According to Mr. Cohen, the delay in discharging the mortgage caused the plaintiff to forego fees that it would have collected to place a new mortgage using the funds from this redeemed mortgage.

Conclusion

[20] In addition to the principle described above in Bossé, the following principles are also applicable: (1) In Davies v. Clarington (Municipality), 2009 ONCA 722, 100 O.R. (3d) 66 the Court of Appeal stated that the amount of a costs award should reflect what an unsuccessful party could reasonably expect to pay rather than the exact amount of costs actually incurred by the successful party; (2) In Boucher v. Public Accountants Council for the Province of Ontario et al. (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291 the Court of Appeal stated that “…the objective is to fix an amount that is fair and reasonable for the unsuccessful party to pay in the proceeding…”; (3) In Elbakhiet v. Palmer, 2014 ONCA 544, 121 O.R. (3d) 616, the Court of Appeal stated that there is a need for proportionality in awarding costs.

[21] For the reasons described above, in my view there is good reason to refuse to enforce the contractual right to costs found in the mortgage. Applying the principles described above, I hereby order that Ms. Borges pay costs in the amount of $25,000.00, inclusive of taxes and disbursements, to the plaintiff.

Mr. Justice M. D. Faieta

Date: October 21, 2015