COURT FILE NO.: CV-11-435021 DATE: 20170705 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: FAIGIE ABRAHAMOVITZ and FRANCES SPIRO, Plaintiffs AND: MARK BERENS, MEGAPRO PROPERTY MANAGEMENT LTD., 3030 DANFORTH LTDS., T.W.M. CONSOLIDATED HOLDINGS INC. and LOIS KALCHMAN, Defendants

BEFORE: R.F. Goldstein J.

COUNSEL: David P. Jacobs, for the Plaintiff Sharon Sam, for the Defendants Samual Marr, for the Estate of Gabriel Zimmerman

HEARD: In Writing

COSTS ENDORSEMENT

BACKGROUND

[1] The Plaintiffs Ambrahamovitz and Spiro co-own a holding company that in turn owns an income property on Danforth Avenue in Toronto. They have brought an action against the Defendant property managers. The Defendants sought to add the Estate of Gabriel Zimmerman as a party. Gabriel Zimmerman was the original property manager. The Estate participated in the motion. On January 11, 2017 I dismissed the motion.

[2] The Plaintiffs have submitted a costs outline seeking substantial indemnity costs of $49,423.38 in fees, disbursements, and HST. The Plaintiffs offered to settle the motion on the following terms:

• The Defendants withdraw the motion.
• The Defendants pay the partial indemnity cost of the motion only up to the acceptance of the offer to settle.
• The offer to remain open until the commencement of the motion on July 7, 2016 (in the event the motion was not actually heard until August 26, 2016).

[3] The Plaintiff submits that it is entitled to partial indemnity costs because the Defendants rejected the offer to settle. The motion was an important one, as it has a significant impact on the viability of the main action. As well, the motion had to be delayed because the actions of the Estate and the Defendants forced extra, unnecessary appearances. These actions had the effect of driving up costs. The Estate sought to intervene late in the proceedings. Further, the issues were reasonably complex. The Court was required to resolve rather complex limitation and interpleader issues. Given the importance of the motion in terms of resolving the proceeding, the costs are reasonable.

ANALYSIS

The Court has considerable discretion in setting costs: Courts of Justice Act, s. 131(1). A Court fixing costs should set an amount that is fair and reasonable in the circumstances: Boucher v. Public Accountants Council for Ontario, 71 O.R. (3d) 291, [2004] O.J. No. 2643 (C.A.).

I see no reason in this case to depart from the usual rule that costs are awarded to the successful party: Schreiber v. Mulroney, [2007] O.J. No. 3191 (Sup.Ct.).

Rule 57.01(1) of the Rules of Civil Procedure sets out the factors that a court may take into consideration when awarding costs:

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

(i) any other matter relevant to the question of costs.

[4] The following issues are raised by the parties:

• Should substantial indemnity costs be awarded?
• Should costs be awarded against the Estate?
• What is the appropriate quantum?
• Should the Defendants be permitted to pay costs from the funds at issue?

(a) Should substantial indemnity costs be awarded?

[5] The Defendants argue that substantial indemnity costs should not be awarded. They point to an email where the Defendants took the position that the Plaintiffs should settle with the Estate. The failure of the Plaintiffs to do so drove the motion. The Defendants also take the position that by winning the motion – effectively disposing of the action – the Plaintiffs have saved themselves the costs of discoveries and other pre-trial procedures.

[6] I disagree. The position of the Defendants is rather odd. The motion was driven by the desire of the Estate to assert a claim and the refusal of the Defendants to pay money actually owed to the Plaintiffs pending that claim. Moreover, it is unusual to submit that the Plaintiffs do not deserve to recover their costs because they have saved money by winning a motion brought by the Defendants. No authority was cited for that proposition, likely because the authorities all go in the other direction. In any event, that submission has no bearing on whether the costs should be on a partial or substantial indemnity basis.

[7] In my view, substantial indemnity costs are appropriate. The Estate was very clearly out of time. The motion can be seen as a delaying tactic. The offer to settle was reasonable.

(b) Should costs be awarded against the Estate?

[8] The Estate argues that as a non-party no costs should be awarded against it. The Defendants sought to bring the Estate into the proceedings. The usual rule is that non-parties should not pay costs absent exceptional circumstances.

[9] This argument is shortly and easily dealt with. That principle does not apply. The Estate was not responding to some motion where it was a disinterested but involved party – for example, a third party responding to a request for documentary discovery: see, for example, Oticon Inc. v. Gennum Corp., 2010 ONSC 1638, [2010] O.J. No. 1082 (Sup.Ct.) per Brown J. (as he then was). The Estate’s claims drove the litigation. It sought to become a party. There is no basis for characterizing the Estate as some kind of innocent who happened to get in the way of someone else’s litigation.

(c) What is the appropriate quantum?

[10] The Defendants argue that partial indemnity costs of $8,227.97 should be paid to the Plaintiffs. That is the amount that the Defendants set out in their costs outline. The Estate argues that partial indemnity costs of $9,581.81 should be awarded, inclusive of disbursements and HST.

[11] In my view, the amounts set out by the Defendants and the Estate are low compared to other costs outlines in motions of similar length and complexity. Reasonable costs estimates are to be encouraged and certainly this Court sees plenty of unreasonable costs estimates. I infer, however, that the Defendants and the Estate “low-balled” the amounts for the purposes of the motion.

[12] The partial indemnity fees set out by the Plaintiffs are, on the other hand, somewhat high. The amount at issue in this litigation is $67,000.00 as of March 2016 with further amounts of $13,400 added each year. Prior to the offer to settle, the Plaintiff had incurred $5,345.00 in partial indemnity costs and $8017.50 in substantial indemnity costs. After the offer to settle was rejected, the Plaintiffs incurred $25,595.00 in partial indemnity costs and $38,392.50 in substantial indemnity costs.

[13] In applying the factors under Rule 57, I find that Defendants and the Estate should have known that they would likely lose, and could reasonably expect to have to pay costs – including substantial indemnity costs – when that occurred. I find that the Defendants prolonged the proceeding, but by the same token I find that the complexity level was not that great. Overall, I find that $45,000.00, inclusive of disbursements and HST, is an appropriate level of costs. That amount represents substantial indemnity costs with a small discount for the Plaintiff’s costs being higher than could reasonably be expected.

(d) Should the Defendants be permitted to pay costs from the funds at issue?

[14] The Defendants argue that their costs should be paid out of the $67,000 that is in dispute. The Defendants argue that they took a neutral position, meaning that they did not lose.

[15] I do not agree that costs should be paid from the $67,000.00 that was held back. In effect, that would be penalizing the Plaintiffs for winning the motion. They would be paid their costs out of monies that they are already owed. That makes no sense. Furthermore, it would be rewarding obstreperous behaviour by the Defendants. The Plaintiffs alleged that Mr. Berens used the Estate as a stalking horse. There was some evidence to support that notion. I do not need to decide the point, however. It is enough simply to dismiss this argument as without foundation.

DISPOSITION:

[16] Joint and several costs in the amount of $45,000.00 are ordered against the Defendants and the Estate. The Estate’s liability is limited to the amount of $36,982.50. As I see it, that represents the costs of the motion on a substantial indemnity basis after the offer to settle. The Estate is not responsible for costs incurred prior to the motion.

R.F. Goldstein J.

Date: July 5, 2017