Court File and Parties

Court File No.: CV-14-10585-00CL Date: 20160509 Superior Court of Justice - Ontario

Re: Stanbarr Services Limited, Janodee Investments Ltd., Meadowshire Investments Ltd., Regard Investments Ltd., 1563503 Ontario Limited, Beaver Pond Investments Ltd., The Canada Trust Company, Rita Rosenberg and 527540 Ontario Limited, Applicants

And: Metropolis Properties Inc., Ginkgo Mortgage Investment Corporation, Canada Investment Corporation, 2413913 Ontario Limited, 2421955 Ontario Inc. and Sai Mohammed, Respondents

Before: Justice Matheson

Counsel: Stephen Schwartz and Doug Bourassa, for the Applicants Richard Quance for the Respondent Canada Investment Corporation Mark Veneziano and Jaclyn Greenberg for the Respondent 2413913 Ontario Limited Philip Polster for the Respondent Ginkgo Mortgage Investment Corporation Salma Sheikh for the Respondents 2421955 Ontario Inc. and Sai Mohammed No one appearing for Metropolis Properties Inc.

Heard: In writing.

Costs Endorsement

[1] This costs endorsement arises from a hybrid trial of certain issues, as directed by the order of Penny J. dated October 3, 2014. The decisions arising from the trial are found at 2015 ONSC 5249 and 2016 ONSC 1258. The factual background to this case is extensively set out in the above decisions and will not be repeated here.

[2] The applicants were successful in their claims against all but one of the respondents that participated in the hybrid trial. They were unsuccessful as against the respondent Ginkgo.

General principles

[3] The general principles applicable to the order of party and party costs are well settled. Costs are discretionary. Rule 57.01 of the Rules of Civil Procedure sets out factors I may consider in exercising my discretion, in addition to the result of the proceeding and any written offers to settle. Overall, the objective is to fix an amount that is fair and reasonable, having regard for, among other things, the expectations of the parties concerning the quantum of costs: Boucher v. Public Accountants Council for the Province of Ontario, [2004] O.J. No. 2634, 71 O.R. (3d) 291 (C.A.) at paras. 26, 38.

[4] Certain general principles have now been expressly articulated in subparagraphs (0.a) and (0.b) of Rule 57.01, specifically the principle of indemnity and the affirmative obligation to consider the amount of costs than an unsuccessful party could reasonably expect to pay in relation to the step in the proceeding for which costs are being fixed.

Costs against unsuccessful respondents

[5] The applicants seek substantial indemnity costs against the respondents CIC and 2413913, and partial indemnity costs against the respondents 2421955 and Sai Mohammed. The total costs claim on a substantial indemnity basis is about $200,000, and on a partial indemnity basis is about $143,000.

[6] I am not persuaded that there should be an order for substantial indemnity costs against either CIC or 2413913. Although there remain open allegations of fraud against CIC, they were neither determined nor abandoned as part of the hybrid trial. A substantial part of the allegations regarding the amounts in the Notice of Sale also remains to be determined. As for 2413913, the reasons put forward relate to the receivership itself and not the hybrid trial.

[7] CIC seeks to resist costs altogether due to the unproved allegations of fraud. This overlooks the bifurcated nature of this proceeding. Those allegations did not form part of the hybrid trial, but they may yet be pursued. CIC may seek costs in that regard at a later stage.

[8] As the successful party, the applicants shall have partial indemnity costs against CIC, 2413913, 2421955 and Mr. Mohammed.

[9] I accept the applicants’ submissions that the matters at issue were important, the quantum significant and the proceeding complex. Without limiting the other issues raised regarding these costs, all of which I have considered, the two main remaining issues are quantum, and whether or not all the unsuccessful respondents should be jointly and severally liable for the total amount of costs awarded.

[10] Beginning with quantum, the respondents have raised a number of issues and generally submit that an award of around $70,000 would be appropriate. I have taken all relevant factors into account for a partial indemnity costs claim, such as insufficient delegation, some duplication and some excess disbursements, among other things. I have also taken into account the bills of costs tendered by other parties, showing their lower amounts. However, it is more time-consuming for the applicants to make out their case than for an individual respondent, at least in the circumstances of this case. Having regard for all factors, I exercise my discretion to fix the applicants’ costs at $120,000, all inclusive.

[11] There remains the issue of whether these costs should be payable jointly and severally. It is open to me to make several costs orders: Society of Lloyd’s v. Saunders, [2001] O.J. No. 5144 (C.A.). In this case, it would be profoundly unfair for any one of 2413913, 2421955 or Sai Mohammed to be called upon to pay all of the above costs. CIC was responsible for the invalid power of sale proceedings. The other three unsuccessful respondents were independent of CIC. They were related to each other through Mr. Mohammed, and ultimately in a similar situation with regard to notice as a result. The time spent on trial evidence and argument was mainly in regard to the power of sale proceedings undertaken by CIC. 2413913, 2421955 and Sai Mohammed were secondary from that standpoint. I conclude that fairness requires a several order to some extent. I therefore order that $80,000 of the costs be paid by CIC and $40,000 jointly and severally by the other three unsuccessful respondents.

Costs claim of Ginkgo

[12] In regard to Ginkgo, the applicants ask to be relieved from paying costs because they too were victims of the invalid power of sale. Alternatively, the applicants’ request a Sanderson order under which any costs payable to Ginkgo would be paid directly by the unsuccessful respondents.

[13] Ginkgo successfully defended the claim against it. It seeks costs of about $72,000 on a full indemnity basis or, alternatively, about $48,000 on a partial indemnity basis. I am not persuaded either that Ginkgo ought to receive more than partial indemnity costs or that it should be denied costs altogether because the applicants were also innocent of the invalidity of the power of sale. As for the quantum, with some modest adjustments, it is reasonable. Bearing in mind all factors, I fix its costs at $45,000, all inclusive.

[14] Ordinarily, these costs would be paid by the applicants. However, here the applicants request a Sanderson order, requiring that these costs be paid by the unsuccessful respondents.

[15] As set out in Moore v. Wienecke, 2008 ONCA 162, at para. 41, the test for determining whether or not a Sanderson order is appropriate has two steps. The court must first determine whether it was reasonable to join the several defendants together in one action. If the answer is yes, the court must use its discretion to determine whether a Sanderson order would be just and fair in the circumstances.

[16] With respect to the first step, it was reasonable to join all the respondents. The applicants included all the parties who purported to take an interest in the property at issue as a result of the impugned power of sale, including Ginkgo.

[17] Moving to the second step, a number of factors have been found relevant to the question of whether a court should exercise its discretion to grant a Sanderson order. Those factors are as follows: (1) whether the defendants tried to shift responsibility onto each other at trial, as opposed to concentrating on meeting the plaintiff’s case; (2) whether the unsuccessful defendant caused the successful defendant to be added as a party; (3) whether the two causes of action were independent of each other; and, (4) whether there is a question about the plaintiff’s ability to pay: Moore, at paras. 46-50. These factors need not be applied mechanically in every case: Moore, at para. 45.

[18] In this case, most of these factors do not work in favour of a Sanderson order. There is no issue raised about the applicants’ ability to pay. The respondents did not try to shift responsibility onto each other. They focused on defending the applicants’ claim. Further, they did not cause Ginkgo to be added. However, Ginkgo was included as part of a single challenge to the exercise of a power of sale. These were not independent claims.

[19] Considering all factors, and the overall fairness of the situation, I am not prepared to exercise my discretion to grant a Sanderson order. In the ordinary course, the applicants shall bear the cost of their unsuccessful claim against Ginkgo.

Orders

[20] I therefore order as follows:

(i) the respondent CIC shall pay the applicants $80,000 in regard to costs;

(ii) the respondents 2413913, 2421955 and Sai Mohammed shall be jointly and severally liable to pay the applicants $40,000 in regard to costs; and,

(iii) the applicants shall pay Ginkgo $45,000 in regard to costs.

Justice W. Matheson Date: May, 9 2016