CITATION: TD Bank v. Yousefie, 2016 ONSC 6957
COURT FILE NO.: 3739/12
DATE: 2016 11 10
SUPERIOR COURT OF JUSTICE – ONTARIO
RE: THE TORONTO-DOMINION BANK, Plaintiff
AND:
DANKO YOUSEFIE, Defendant
BEFORE: Trimble J.
COUNSEL: Jeffrey Kukla for the Plaintiff: Toronto Dominion Bank Jame Pedro for the Applicant: SBMB Law Ralph Swaine for the Creditor: 2233586 Ontario Inc. Zoe Thoms for the Creditor: Maxims Holdings Inc. David Dolson for the Creditor: Ronstar Homes No one appearing for the Defendant
HEARD: In Writing
COSTS ENDORSEMENT AND CORRECTING ENDORSEMENT
Trimble J.
A) INTRODUCTION
[1] On 15 September, 2016, I heard a motion brought by TD to interplead the net proceeds from its power of sale of Yousefie’s property, which TD conducted under its first mortgage. The surplus is $539,513.78.
[2] I was also asked to determine priority of interest in those funds. The Yousefie property was subject to TD’s first mortgage, then three other mortgages (Ronstar Homes, Maxims Holdings and 2233586 Ontario Inc.) and then TD’s equitable mortgage. The priority issue arises because SBMB Law, an unsecured execution creditor, said that since it paid TD $473,506.16, it was subrogated to TD’s first mortgage, including its priority in claim to the net proceeds of sale. SBMB, as an execution creditor, would normally have priority behind all registered and equitable mortgages. It is important to note that the $473,506.16 was insurance proceeds, paid by Yousefie’s insurer because of property damage to the mortgaged premises which occurred before TD’s sale of the property. The policy had a mortgage endorsement which required that the funds be paid to the Yousefies and TD as joint payees. On the third re-issuance of the cheque, SBMB omitted to put TD as a payee along with Yousefie.
[3] By Endorsement dated 22 September, 2016, I allowed the interpleader, but dismissed SBMB Law’s motion.
B) CORRECTION TO MY 22 SEPTEMBER, 2016 ENDORSEMENT.
[4] As a preliminary matter, Ronstar Homes Ltd. has asked that I amend paragraph 1 and 40 of my 22 September, 2016 endorsement. I said that TD sought an order that its equitable mortgage took priority over the other three mortgages, and that I granted this relief. Ronstar seeks a correction. Ronstar advised that it was understood by all that TD’s equitable mortgage stood behind the other three mortgagees’ interests.
[5] I have reviewed the file. In argument, all mortgagees agreed that the priority of entitlement to the surplus (TD’s first mortgage having been satisfied) is Ronstar, Maxims, 2233586, then TD’s equitable mortgage. In oral submissions, SBMB agreed with this, but said that it stood in the shoes of TD’s first mortgage and its priority.
[6] Therefore, the sentence in paragraph 1 of by 22 September 2016 endorsement that reads “It [TD] also seeks a declaration that its equitable mortgage takes priority over the other three registered Mortgages and the claim by SBMB Law (the firm).” should be deleted. Further, paragraph 40 should be amended by deleting the words beginning in the second line “TD’s equitable mortgage, followed by”.
[7] Normally, I would have invited submissions by all the parties on this issue. Having reviewed the file and my notes, I see that the error is mine. No further submissions were required on this point.
C) COSTS.
a) The Positions of the Parties:
[8] TD says that it should receive its costs on a substantial indemnity basis, of $10,145.87, $5,355.75 from SBMB Law, and $4,790.12 from the proceeds from sale. TD says that its costs, and the costs of all other mortgagees, incurred because of SBMB’s position on priority, should be assessed against SBMB. SBMB made much of the motion and attendance necessary because of its unsuccessful position on priority. To order the costs of the successful mortgagees paid out of the proceeds would reduce the amount all mortgagees would be entitled to recover from the proceeds. With respect to the costs from the proceeds, that part of the motion was necessary because 2233 never responded to TD’s efforts to determine 2233’s entitlement.
[9] Ronstar seeks substantial indemnity costs of $4,449.38, payable from the proceeds of sale, but says that the payment be taken from any entitlement that SBMB has to the proceeds.
[10] Maxims seeks partial indemnity costs of $5,000.88, against SBMB.
[11] 2233 seeks costs of $3,364.00, against SBMB. It appears that these costs are claimed on a partial indemnity basis.
[12] SBMB says that the costs claimed are too high. It also says that the costs orders should be against Mr. Yousefie, or funded from the proceeds of sale. It is unfair, SBMB says, to saddle SBMB with costs when Mr. Yousefie stole the $473,506.16 from SBMB, which ought to have gone to TD. It is inequitable since SBMB already has an uncollectible judgment against Yousefie for the $473,506.16. Finally, SBMB says that this motion was necessary since a) TD claimed priority of its equitable mortgage above that of the others, and b) 2233 never responded to TD’s request for status of 2233’s interest.
b) Disposition:
[13] TD shall be entitled to claim from the proceeds as part of its first mortgage, $4,790.12 as costs of enforcing its first mortgage.
[14] SBMB shall pay the following in costs to the following parties, by 4 p.m., 30 November, 2016:
TD $3,250 for fees and $250 for disbursements, both inclusive of HST
Ronstar $2,750 for fees and $197.95 for disbursements, both inclusive of HST.
Maxims $3,000 for fees and $170.92 for disbursements, both inclusive of HST
2233586 Ont. Inc. $2,750 for fees and $144.50 for disbursements, both inclusive of HST
c) The Law:
[15] In assessing costs, I must consider the cases that have outlined broad principles with respect to costs under s. 131 of the Courts of Justice Act, and Rule 57.01. Section 131 says that costs are discretionary. Rule 57.011) says:
57.01 (1) In exercising its discretion under section 131 of the Courts of Justice Act to award costs, the court may consider, in addition to the result in the proceeding and any offer to settle or to contribute made in writing,
(0.a) the principle of indemnity, including, where applicable, the experience of the lawyer for the party entitled to the costs as well as the rates charged and the hours spent by that lawyer;
(0.b) the amount of costs that an unsuccessful party could reasonably expect to pay in relation to the step in the proceeding for which costs are being fixed;
(a) the amount claimed and the amount recovered in the proceeding;
(b) the apportionment of liability;
(c) the complexity of the proceeding;
(d) the importance of the issues;
(e) the conduct of any party that tended to shorten or to lengthen unnecessarily the duration of the proceeding;
(f) whether any step in the proceeding was,
(i) improper, vexatious or unnecessary, or
(ii) taken through negligence, mistake or excessive caution;
(g) a party’s denial of or refusal to admit anything that should have been admitted;
(h) whether it is appropriate to award any costs or more than one set of costs where a party,
(i) commenced separate proceedings for claims that should have been made in one proceeding, or
(ii) in defending a proceeding separated unnecessarily from another party in the same interest or defended by a different lawyer; and
(iii) any other matter relevant to the question of costs. R.R.O. 1990, Reg. 194, r. 57.01 (1); O. Reg. 627/98, s. 6; O. Reg. 42/05, s. 4 (1); O. Reg. 575/07, s. 1.
[16] Costs awards have a number of purposes, four of which are to indemnify (partly) successful litigants, encourage settlement, correct behaviour of the parties and discourage frivolous or ill-founded litigation (see 394 Lakeshore Oakville Holdings Inc. v. Misek, 2010 ONSC 7238, at para. 10). Generally costs should follow the event (see Bell v. Olympia & York (1994), 1994 CanLII 239 (ON CA), 17 O.R. (3d) 135 (C.A.)) and be proportional to the issues in the action and the outcome, and be reasonable for the losing part to pay, all circumstances considered (see Boucher v. Public Accountants, (2004) 2004 CanLII 14579 (ON CA), 71 O.R. (3d) 291 (C.A.) and Moon v. Sher et al., 2004 CanLII 39005 (ON CA), [2004] OJ No 4651 (C.A.). Conduct of the parties is also relevant, where it deserves sanction (see Davies v. Clarington (2009), 2009 ONCA 722, 100 O.R. (3d) 66 (C.A.).
d) Analysis:
a. What costs are recoverable in this Motion?
[17] TD and SBMB say that some of TD’s costs were incurred regardless of SBMB’s position on the motion. Such costs are recoverable under the individual mortgages, and payable out of the proceeds. These costs should not be visited upon SBMB.
[18] Under each of the mortgagees’ mortgages, the costs of enforcement, including the full legal costs, are to be paid by the mortgagee, added to the amount owing under the mortgage, and paid from the proceeds in the mortgagee’s priority with other mortgagors. This is a contractual right arising from the mortgage. Because of those agreements, to the extent to which any mortgagee incurred legal expenses unrelated to the claim by SBMB, those costs should be assessed on a substantial indemnity basis, added to the amount owing under that mortgage, and be paid from the proceeds of the sale to each mortgagee according to its priority in interest.
[19] Where a mortgagee incurred costs because of SBMB’s priority claim, claims for those costs are between parties in the litigation, and should be awarded based on the normal rules applicable to costs. The mortgagees’ contractual rights vis a vis the mortgagor do not bind third parties, and in any event do not limit the Court’s discretion under s. 131 of the Courts of Justice Act.
b. Who should pay the litigation related costs?
[20] Costs in litigation normally follow the event. SBMB was wholly unsuccessful.
[21] SBMB says that notwithstanding that it is the unsuccessful litigant, Yousefie should pay the litigation related costs since he “stole” the $473,506.16 from SBMB. In any event, since SBMB is the victim of a Yousefie’s “theft”, it would be unfair to saddle SBMB with more unrecoverable expense.
[22] I disagree. SBMB is not the innocent victim of a theft. It re-issued the cheque (the third issuance) without naming TD as a payee. It knew that TD was a payee pursuant to a mortgage endorsement to the property insurer’s policy of insurance. Through its own mistake, SBMB allowed Yousefie to “steal” the $473,506.16. To make the costs payable from the proceeds is unfair to the mortgagees. They bargained for certain priority. As mortgagees, they must have understood that in a normal enforcement proceeding the enforcing mortgagee can recover its whole costs in enforcement. It is unreasonable to impose on the mortgagees the costs imposed by a third party’s claim to priority. Further, ordering that the mortgagee’s costs should come from the proceeds might imperil the amount available to the mortgagees, depending on the amounts owing under each mortgage and the costs payable.
[23] To the extent that the successful litigants incurred costs because of SBMB’s position that it was subrogated to the interests and mortgage priority of TD’s first mortgage, those costs should be paid by SBMB. As a matter of mechanics, to the extent that any sale proceeds are available to satisfy SBMB as an unsecured execution creditor, those proceeds can be applied to the costs awards of the four mortgagees, pro rata. The balance, SBMB shall pay directly. SBMB can recover the costs it is required to pay from Yousefie.
c. What is the scale of costs?
[24] There are no offers or circumstances that support costs on anything other than a partial indemnity scale.
d. What are the Costs to be paid?
[25] In this case, TD says that because 2233 did not provide it with a statement of 2233’s mortgage interest, an attendance at the motion to interplead was necessary. Had 2233 provided its payout information, the motion likely would have gone on consent. SBMB supports this proposition. TD sets those costs at $4,790.12, calculated on a full recovery basis.
TD
[26] No one took issue with this aspect of TD’s claim for costs. SBMB appears to have taken issue with the total since $3,247.00 in fees was incurred before SBMB advanced its claim for subrogation in is response to TD’s interpleader motion.
[27] SBMB says that TD’s litigation costs claim is excessive. It is over lawyered. It is on a substantial indemnity basis. Mileage is not a proper disbursement.
[28] I agree that mileage is not a proper disbursement.
[29] According to TD’s Bill of Costs, the claim for two attendances is not 10.7 hours, as SBMB says. TD claims 5.5 hours to prepare for and attend at Court on August 11. There is no attendance claimed for the appearance before me. Therefore, I allow the 5.5 hours preparation and attendance as if it were for the motion before me.
[30] In terms of the time, TD did most of the work on the motion, as is reflected in the materials submitted, and the submissions made. The other mortgagees adopted TD’s position, making only such specific submissions as were required for their interests.
[31] Adjusting for these matters and partial indemnity costs, SBMB will pay TD fees of $3,250 for fees and $250 for disbursements, both inclusive of HST.
Ronstar
[32] No one took issue with Ronstar’s Bill of Costs. Adjusting it to partial indemnity, SBMB shall pay to Ronstar $2,750.00 for fees and $197.95 for disbursements, both inclusive of HST.
Maxims
[33] Maxims seeks partial indemnity costs of $5.000.88. SBMB says that these costs are excessive. The partial indemnity hourly rate for Ms. Thoms at $237 is too high for a 7 year lawyer, especially when compared to the client rates of senior lawyers on this file. Three lawyers spending 13.7 hours on preparing for the motion is excessive. I agree. A more reasonable, proportional fee, based on the foregoing and the Bill of Costs is $3,000.00 for fees. Therefore, SBMB shall pay to Maxims $3,000 for fees and $170.92 for disbursements, both inclusive of HST.
2233586 Ontario Inc.
[34] 2233 seeks costs of $3,364,00. No one took issue with 2233’s claim for costs. The fees incurred are $3,700.00 (before HST), but were reduced to $2,850 for the Bill of Costs, presumably to reflect partial indemnity rates.
[35] 2233’s Bill of Costs is skimpy, providing no detail about the activities undertaking other than “Draft Motion Record”, “Review material form (sic) other parties”, “Attendance at Motion ½ day”. Based on the foregoing a reasonable, proportional fee is $2,750.00 for fees. SBMB shall pay 2233 $2,750 for fees and $144.50 for disbursements, both inclusive of HST.
[36] SBMB shall pay these costs by 4 p.m., November 30, 2016.
Trimble J.
Released: November 10, 2016
CITATION: TD Bank v. Yousefie, 2016 ONSC 6957
COURT FILE NO.: 3739/12
DATE: 2016 11 10
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
The Toronto-Dominion Bank
Plaintiff
– and –
Danki Yousefie
Defendant
COSTS Endorsement AND CORRECTING ENDORSEMENT
Trimble J.
Released: November 10, 2016