SUPERIOR COURT OF JUSTICE – ONTARIO

COMMERCIAL LIST

COURT FILE NO.: CV15-10843-00CL
DATE: 20151106

IN THE MATTER OF THE CONSTRUCTION LIEN ACT, R.S.O. 1990, c. C.30, AS AMENDED

AND IN THE MATTER OF AN APPLICATION MADE BY 144 PARK LTD. FOR THE APPOINTMENT OF A TRUSTEE UNDER SECTION 68(1) OF THE CONSTRUCTION LIEN ACT, R.S.O. 1990, c. C.30, AS AMENDED

BEFORE: Newbould J.

COUNSEL:
Harvey Chaiton and Sam Rappos, for Collins Barrow Toronto Limited, the Trustee

Matthew B. Lerner, for William Seegmiller

Irwin A. Duncan and David M. Steele, for Richard Magnussen, Marilyn Magnussen, Joseph Siefried, Susan Siefried, AJ Mueller, Kerry Mueller, Ryan Cyrankiewicz and Laurie Cyrankiewicz

Eric Sherkin, for MarshallZehr Group

Asim Iqbal, for Laurentian Bank of Canada

Oliver Romaniuk, self-represented

ENDORSEMENT

[1] On November 2, 2015 I dismissed a motion by the Trustee for advice and directions and in particular for an order permitting the Trustee to terminate agreements of purchase and sale that provided for two parking units to be transferred along with the condominium units. I have now received cost proposals.

[2] The Trustee submits that it would be inappropriate to award costs against the Trustee in favour of the purchasers given that the Trustee was required to apply to the Court because of the conflicting positions put forward by the mortgagees and the Purchasers. As put by counsel for the Trustee, there was an irreconcilable dispute amongst the stakeholders of the 144 project, being Laurentian Bank and MarshallZehr Group as mortgagees and certain purchasers who purchased two parking units for their condominium units.

[3] The Trustee did not act in a neutral manner and let the two sides to the dispute argue it out, but rather proposed that if the purchasers did not give up one parking unit, the Trustee would terminate their agreement of purchase and sale. The effect of terminating the agreements would be to the benefit of the mortgagees, two of whom are Laurentian Bank, the ranking first mortgagee and MarshallZehr Group, the ranking third mortgagee.

[4] The purchasers say that the Trustee should be responsible for their costs but, if not, the Laurentian Bank and the MarshallZehr Group should be responsible as they participated in the motion and supported the position of the Trustee that the Trustee should be able to terminate the sale agreements if the purchasers did not give up one of their units.

[5] Laurentian Bank and the MarshallZehr Group contend that they should have no liability for costs as they say they were not parties to the motion and the Trustee was not acting as their “straw man” on the motion. This position is taken because of case law that says a person who is not a party to an action should not ordinarily pay costs of the action. A British Columbia decision is quoted for the proposition that there must be fraud, abuse of process, gross misconduct or where the real litigant stays out of it and has the proceeding brought by a “straw man”. See International Hi-Tech Industries Inc. v. FANUC Robotics Canada Ltd., 2007 BCSC 1724.

[6] In Ontario, several cases have laid down the basic proposition that a non-party should not be ordered to pay costs without exceptional circumstances. In Elliott v. Toronto (City), (1999), 1999 1073 (ON CA), 43 O.R. (3d) 392 (C.A.) Morden J.A. stated:

It is clear that, subject to certain exceptions which are not applicable to this case, a court does not have jurisdiction under s. 131(1) of the Courts of Justice Act to make a costs order against a non-party in a proceeding; see Rockwell Developments Ltd. v. Newtonbrook Plaza Ltd., 1972 531 (ON CA), [1972] 3 O.R. 199 (C.A.).

[7] In Rockwell, Arnup J.A. dealt with the issue at length. He quoted with approval English cases, including the following:

Mr. Rolls relies upon s. 82 as the authority for such power, and in particular upon the words "has full power to determine by whom . . . the costs shall be paid". Notwithstanding that those words have been in the English Judicature Act since at least 1890, no case was cited to us (and after diligent search, I have found none) in which it has been held that those words empower a Court to make an order for costs against a stranger to the proceedings. As long ago as 1838 it was said by Lord Abinger, C.B. in Hayward v. Giffard and Grove (1838), 4 M. &. W. 194 at p. 197, 150 E.R. 1399:

Those [the ejectment cases] are the excepted cases, but the general rule is, that courts of justice have no power except over parties to the record.

This is the common law rule. The discretion in equity was broader, but even its broader powers have never been exercised against a "stranger" to the proceedings.

[8] For the most part, these principles have been developed in litigation between parties in which it is not difficult to discern who is and is not a party. Insolvency litigation is not quite like that. In a typical receivership or CCAA proceeding, motions are brought by a party who serves the material on persons who are on the service list, being parties who were originally served with the materials at the outset or who became involved in the proceeding later on. It is only the parties on the service list who are interested in the particular motion being brought who respond to the motion, either to support or oppose it.

[9] This case is no different. The Trustee, acting under its appointment as a receiver and manager, served its motion on the service list, which was lengthy. Included in the service list were the solicitors for Laurentian Bank and the MarshallZehr Group as well as for the purchasers.

[10] It cannot be said that the mortgagees were not a party to the motion or that they were strangers to the proceedings. It was their position that caused the Trustee to bring its motion. They attended the hearing of the motion and argued in support of the Trustee in seeking to have the Trustee given the power to terminate the purchase agreements for purchasers not willing to give up a parking unit. The fact that they chose to rely on the material filed by the Trustee makes them no less a party. The position of the Trustee was in their interest as any greater funds obtained from the termination of the sale agreements or from the sale of the unsold units will be to their advantage. The lien claimants will be paid in full what their liens entitle them to and the surplus will be for the benefit of the mortgagees. In the circumstances, Laurentian Bank and the MarshallZehr Group should bear the costs of the purchasers.

[11] But for that I would order the Trustee to pay the costs of the purchasers. A trustee or a receiver has no immunity from costs simply be reason of being appointed by a court. The general rule is that a receiver or trustee litigates at its peril if there is no source of indemnity available to it, with the two standard sources of indemnity residing in the assets of the estate or a contract of indemnity from one or more creditors. The discipline imposed by a "loser pays" costs rule applies equally to decisions to commence proceedings by a receiver or trustee. However receiver and trustees are entitled to indemnity out of the bankrupt estate provided there was no misconduct on their behalf. See Haunert-Faga v. Faga (2013), 2013 ONSC 1581, 100 C.B.R. (5th) 52 per Brown J. (as he then was) and the authorities cited therein. In this case there was certainly no misconduct on the part of the Trustee that would disentitle the Trustee from being indemnified by the assets which it is administering.

[12] Neither the Trustee nor the mortgagees have raised any issue with the quantum of costs claimed by the purchasers. Nevertheless I must consider the reasonableness of the costs claimed.

[13] Mr. Seegmiller claims costs of $18,649 inclusive of disbursements and HST. The disbursements include a disbursement of $6,000 for an expert report obtained for the purposes of the motion. The fees claimed are $9,025 plus HST. Most of the work was done by junior lawyers. The rates claimed are lower than they might be, being far less than 60% of the actual rates charged. The hours appear reasonable. This was a very important matter for Mr. Seegmiller. Taking into account the factors in rule 57.01 including what the mortgagees might reasonably expect to pay, I assess the costs of Mr. Seegmiller at $18,650 inclusive of disbursements and HST.

[14] Richard Magnussen, Marilyn Magnussen, Joseph Siefried, Susan Siefried, AJ Mueller, Kerry Mueller, Ryan Cyrankiewicz and Laurie Cyrankiewicz claims costs of $37,187.88 inclusive of disbursements and HST. This includes fees of $29,835. One reason for the much higher claim for fees than claimed by Mr. Seegmiller is that a number of affidavits had to be prepared, one for each of unit purchasers represented by Mr. Duncan. The hourly rates charged are modest compared to Toronto firms and I assume reflect Waterloo standards. More work was done by Mr. Duncan, a 1972 call, than by Mr. Steele, a 1991 call, but the hourly rates being claimed for each of them are not a great deal different. Like Mr. Seegmiller, this was a very important matter for these purchasers. Taking into account the factors in rule 57.01 including what the mortgagees might reasonably expect to pay, I assess the costs of these purchasers at $37,000 inclusive of disbursements and HST.

[15] Mr. Romaniuk was self-represented. He claims costs of $15,134.54, consisting of fees of $1,000, “self-represented litigant’s cost-of-time” of $13,282.50, disbursements of $722.04 plus applicable HST. He indicates that he has spent 230 hours and claims a “salaried rate of $57.75 used here as a proxy”. He is a professional engineer. It is quite evident from the material that he filed and from his submissions made in court that he has spent considerable time on this case which, like the other purchasers, is very important to him.

[16] However, the law constrains what may be awarded to a self-represented litigant and limits an award to proven foregone income by reason of the time spent. In Fong v. Chan (1999), 1999 2052 (ON CA), 46 O.R. (3d) 330 (C.A.) Sharpe J.A. stated:

I would also add that self-represented litigants, be they legally trained or not, are not entitled to costs calculated on the same basis as those of the litigant who retains counsel. As the Chorley case, 13 Q.B.D. 872, recognized, all litigants suffer a loss of time through their involvement in the legal process. The self-represented litigant should not recover costs for the time and effort that any litigant would have to devote to the case. Costs should only be awarded to those lay litigants who can demonstrate that they devoted time and effort to do the work ordinarily done by a lawyer retained to conduct the litigation, and that as a result, they incurred an opportunity cost by foregoing remunerative activity...

[17] See also Mustang Investigations v. Ironside (2010), 2010 ONSC 3444, 103 O.R. (3d) 633 (Div. Ct.).

[18] In this case, while I have great sympathy for Mr. Romaniuk and the time he has spent, I cannot award him costs for that time as he has not demonstrated that he has foregone remunerative activity because of that time spent.

[19] In the circumstances all I can award Mr. Romaniuk, and do, is his disbursements of $722.04 which includes HST.

[20] Laurentian Bank and the MarshallZehr Group are jointly and severally liable for the costs awarded in these reasons, to be paid within 30 days.

Newbould J.

Date: November 6, 2015