Court File and Parties
COURT FILE NO.: CV-16-161709 MOTION HEARD: March 21, 2017
SUPERIOR COURT OF JUSTICE – ONTARIO
Re: MORGIS PROPERTIES LIMITED, Plaintiff v. HARBOUREDGE MORTGAGE INVESTMENT CORPORATION, Defendant
BEFORE: Master Lou Ann M. Pope
APPEARANCES: Christopher Morgis, with leave of the court to represent the plaintiff by order dated October 5, 2016 Fax: 905-738-1168 Email: cmorgis@morgis.ca
Victor L. Vandergust, Professional Corporation for defendant Fax: 705-445-4160 Email: vic@vandergustlaw.com
Reasons for Endorsement
[1] This action involves a mortgage dated January 25, 2013 made between the plaintiff and the defendant.
[2] The parties each brought motions as follows:
(a) plaintiff’s motion for a certificate of pending litigation (“CPL”); (b) defendant’s motion: (i) to discharge the CPL granted by Order dated October 5, 2016; (ii) for an order that the plaintiff post security for costs; (iii) for an order to stay this action until the plaintiff pays any security for costs order; (iv) to transfer this action to Barrie, County of Simcoe and direct that it be heard by Justice DiTomaso at Barrie, Ontario.
[3] The plaintiff’s motion for a CPL and the defendant’s motion to discharge the CPL were disposed of for reasons set out in my Reasons For Endorsement dated March 30, 2017. The plaintiff’s motion was dismissed and the defendant’s motion was granted discharging the CPL.
[4] Therefore, these Reasons address the defendant’s motion for security for costs, transfer of the action, and stay of action.
Background
[5] The plaintiff was the registered owner of two apartment buildings in Toronto. The plaintiff gave a second mortgage to the defendant in the principal amount of $10,155,000, registered on title to the two properties on January 25, 2013. No payments were made; therefore, the mortgages went into default.
[6] Similarly, the plaintiff defaulted on the first mortgage to First National who took court proceedings and obtained possession. In order to protect its position, the defendant took steps to reinstate the first mortgage and keep it in good standing which it did through the foreclosure process on its second mortgage.
[7] The defendant commenced an action for foreclosure on the second mortgage in May 2014, at which time the mortgage was in arrears over fifteen months.
[8] On June 10, 2015, the parties signed minutes of settlement which provided that the plaintiff had until August 14, 2015 to pay the agreed sum of $16,500,000 to the defendant, failing which the defendant was free to register the final order of foreclosure (“FOF”). The minutes of settlement were filed with the court on June 10, 2015 when, on consent, Justice DiTomasi granted the FOF. Having failed to pay the agreed upon sum, the defendant registered the FOF on August 21, 2015.
[9] The plaintiff commenced this action by statement of claim on October 4, 2016. The following day, Christopher Morgis (“Morgis”), president of the plaintiff, attended before me as duty master at regular motions court requesting a CPL on an urgent basis. The motion was brought on an ex parte basis.
[10] Pursuant to my endorsement dated October 5, 2016, I granted leave to Christopher Morgis to represent the plaintiff pursuant to rule 15.01(2) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (“the Rules”). In addition, I further ordered that the plaintiff was entitled to CPLs over the two properties owned by the defendant at the time on an interim basis until the plaintiff could serve the defendant with the statement of claim, motion materials, CPL order and my endorsement and to allow the defendant time to respond to the motion.
[11] The subject properties were sold by the defendant to non-parties on October 5, 2016, the same day that the plaintiff obtained the CPL order.
[12] The defendant delivered a notice of intent to defend on November 4, 2016 and a statement of defence on November 7, 2016.
[13] The CPL was discharged by my order dated March 30, 2017.
[14] It is undisputed that the defendant is no longer the owner of the subject properties having transferred title on October 5, 2016.
Defendant’s Motion for Security For Costs
[15] The defendant relies on Rule 56.01(1)(d) for its motion seeking an order requiring the plaintiff to pay security for costs.
[16] The defendant submits that it is entitled to a security for costs order as the plaintiff is a corporation and there is good reason to believe that the plaintiff has insufficient assets in Ontario to pay the defendant’s costs.
[17] The defendant relies on the evidence that the plaintiff failed to maintain its mortgages on the subject properties and lost its two apartment properties by foreclosures which were its principal assets when the defendant financed the mortgage. Secondly, the defendant filed evidence of numerous executions filed against the plaintiff and Morgis.
[18] In particular, the defendant filed five certificates of writs of execution obtained on November 21, 2016 against the plaintiff and Morgis which total over $500,000. In addition, the defendant filed three certificates of writs of execution filed against Morgis personally which total some $142,000 plus interest and costs.
[19] The only evidence filed by the plaintiff in response to this motion for security for costs is one paragraph contained in Morgis’ affidavit sworn January 31, 2017 in which he states with respect to the executions that he has “either settled, paid or have obtained orders to have the executions lifted at the sheriff’s office”. However, Morgis did not provide any documentary evidence to support his statement that, essentially, all of the five executions no longer exist. I find Morgis’ statement to be unbelievable given that the certificates of writs of execution were obtained on November 21, 2016 and Morgis’ sworn evidence was made on January 31, 2017 which means that if Morgis’ evidence were to be believed, he would had to have arranged to pay off all the executions of over $642,000 in just over two months. As Morgis did not file any documentary evidence of having paid the executions, I do not accept his evidence as being forthright.
Law
[20] Rule 56.01(1)(d) provides as follows:
56.01(1) The court, on motion by the defendant or respondent in a proceeding, may make such order for security for costs as is just where it appears that,
(d) the plaintiff or applicant is a corporation or a nominal plaintiff or applicant, and there is good reason to believe that the plaintiff or applicant has insufficient assets in Ontario to pay the costs of the defendant or respondent;
[21] The decision to order security for costs is discretionary and the court considering the motion is afforded broad latitude to make an order that is just in the circumstances. (Morton v. Canada (Attorney General), 75 O.R. (3d) 63 (S.C.J.) at para. 38)
[22] The courts have established a two-step inquiry when considering whether to order security for costs.
[23] Initially, the onus is on the defendant to demonstrate that the plaintiff falls into one of the subrules of 56.01(1). The onus is not a heavy one. For example, the defendant need only demonstrate that “it appears” that the plaintiff is a corporation and there is “good reason to believe” that the plaintiff has insufficient assets in Ontario to pay the costs of the defendant. Only if the defendant succeeds with the first stage does the inquiry move to the second stage.
[24] At the first stage, the defendant, in satisfying its onus that there is a good reason to believe the corporate plaintiff has insufficient assets to satisfy a cost award, must provide enough information about the corporation that goes beyond mere conjecture, hunch or speculation. There must be some evidence placed before the court from which the court can accept that the concern is genuine and that it is based on proven facts regarding the corporation’s current financial circumstances. (Cigar500.com Inc. v. Ashton Distributors Inc. et al., paras. 23-24)
[25] The authorities are clear that the second step onus on the plaintiff is not even reached until the defendant satisfies its initial burden. Once the defendant has done so, the onus shifts to the plaintiff.
[26] At the second stage the plaintiff can either demonstrate that it has sufficient assets in Ontario to pay a costs order or that it is impecunious and then ask the court to make such order as is just in the circumstances.
[27] At the second stage, the merits of the case remain a relevant factor. If it is found that the plaintiff has insufficient assets in Ontario, the court may exercise discretion as to whether an order for security for costs would be “just” in all of the circumstances. An inquiry into all factors must be taken including the merits of the case, balancing the interests of the parties, review of the financial circumstances of the plaintiff and the effect of an order.
[28] Where the plaintiff is a corporation, the plaintiff must adduce substantial evidence about the ability of its shareholders or others with an interest in the litigation to post security.
Analysis
[29] There are numerous outstanding writs of executions filed against the plaintiff which total over $500,000 and by the time of the hearing of this motion on March 21, 2017, there was no credible evidence that any or all of the debts had been paid. It was open to the plaintiff to file such evidence; however, it failed to do so. For reasons set out above, Morgis’ evidence is not credible.
[30] Further, it is accepted that the plaintiff lost a valuable asset in the foreclosure proceeding due to its failure to pay the mortgage.
[31] Therefore, I am satisfied on the evidence filed herein that it appears that the plaintiff is a corporation and there is good reason to believe that the plaintiff has insufficient assets in Ontario to pay the defendant’s costs.
[32] As the defendant has met the first stage of the test, the onus shifts to the plaintiff to satisfy the second stage. As set out above, the plaintiff can either demonstrate that it has sufficient assets in Ontario to pay a costs order or that it is impecunious and then ask the court to make such order as is just in the circumstances.
[33] The plaintiff did not take either position on the second part of the test. The plaintiff’s only evidence is a single statement that Morgis has settled, paid or obtained orders to have the executions lifted at the sheriff’s office. Further, Morgis, as a shareholder of the plaintiff, failed to adduce any evidence of his ability to post security.
[34] As such, on the plaintiff’s evidence, I find that the plaintiff has failed to demonstrate that it either has sufficient assets in Ontario to pay a costs order or that it is impecunious.
[35] However, the defendant submits that the plaintiff is impecunious. In support of that submission, the defendant relies on the fact that the plaintiff lost its two apartment properties by foreclosures which were its principal assets when the defendant financed the mortgage. The defendant relies further on the multiple executions filed against the plaintiff and Morgis.
[36] The difficulty with which I am now faced is what positions to prefer considering that the onus is on the plaintiff to satisfy the second part of the test which I have ruled the plaintiff failed to do. It is unknown whether the plaintiff has any assets with which to satisfy a costs order. Furthermore, it is noted that all of the writs of executions were issued between 2013 and 2016 which are relatively recent. Moreover, Morgis, who may be the sole shareholder of the plaintiff, has not disclosed his financial status in order to determine whether he has the ability to post security.
[37] On the second part of the test, the court is required to consider the merits of this action, which I will now do.
[38] The defendant submits that this action has no merit given that the plaintiff’s allegation that there was an extension period for redemption of the mortgage is inaccurate and completely contrary to the terms of the minutes of settlement filed with the court when the parties consented to the defendant obtaining the FOF.
[39] In this action, the plaintiff seeks damages in the amount of $17,500,000 due to (1) the defendant’s failure to comply with the requirements of a “settlement agreement” entered into in July 2015, (2) the defendant’s failure to produce necessary materials, (3) the defendant’s failure to remove registered executions to allow the new mortgages that the plaintiff had arranged to be registered, and (4) the defendant’s inappropriate management of the properties which caused the plaintiff permanent financial harm.
[40] It is alleged in the statement of claim that the parties entered into a settlement agreement in July 2015 and in furtherance of the terms of the agreement, the plaintiff arranged with MCAP Financial to pay the “required amount to repay” the defendant. Further, it is alleged that the plaintiff paid MCAP over $110,000 in commitment fees but due to the defendant’s failure to cooperate, the mortgage could not be completed “as was agreed to”. It is alleged further that the plaintiff was “frustrated by the defendant when it continually failed to cooperate with the requirements” of the settlement agreement. The plaintiff pleads further that despite the defendant’s repeated assurances that it would cooperate, the defendant failed to provide the “necessary materials” and failed to “remove certain registered executions for the new Mortgages.” It is also pled that the defendants did not act in good faith. Lastly, the plaintiff alleged that the defendant inappropriately managed the properties which caused “the defendants permanent financial harm”. Presumably, this reference to “defendants” was made in error and was intended to be the “plaintiff” that allegedly suffered financial harm.
[41] However, Morgis’ evidence contradicts some of the allegations in the statement of claim. In particular, Morgis states in his affidavit sworn on January 31, 2017, at paragraphs 8 and 9, that after MCAP requested up-to-date financial information for the two properties, the defendant sent the documentation to MCAP that it required.
[42] Morgis also states that he paid MCAP a commitment fee of $100,000 in the summer of 2015, which is consistent with the timeline set out in the minutes of settlement that require the plaintiff to pay the defendant $16,500,000 by August 14, 2015. However, his evidence becomes confusing when he goes on to state that on February 9, 2016 a new commitment was issued by MCAP. This new commitment is dated almost one and a half years after the August 14, 2015 deadline set out in the minutes of settlement.
[43] With respect to the allegation in the statement of claim that the defendant mismanaged the properties after it obtained possession, it is Morgis’ affidavit evidence that the defendant was in possession of the properties in 2014 and 2015. He alleges that the defendant breached its duty of care to manage the properties in a prudent fashion. Morgis’ evidence is that during that time that the defendant spent all of the rental income on demolition and reconstruction of approximately 56 rental units which ultimately created a deficiency every month. The deficiency was added to the mortgage balance. He alleges further that the original mortgage was $10,155,000 in 2013 and by 2016 the mortgage balance was in excess of $17,000,000. Essentially, it is alleged that the deficit was being back charged to the plaintiff at an interest rate of 11.75 per cent. In addition, it is Morgis’ evidence that spending millions of dollars on capital expenditures and not paying the first and second mortgages was improper and perhaps negligent by a mortgagee in possession. Morgis relies on engineering and environmental reports obtained prior to registration of the subject mortgage to the defendant in 2013 which allegedly state that no immediate capital expenditures were required for the properties for at least three to five years from the date of the reports.
[44] The statement of defence was not filed for this motion; therefore, I am unable to consider properly the merits of the action in regard to the defence against the plaintiff’s allegation of mismanagement of the property. Further, the only evidence filed by the defendant in response to Morgis’ affidavit evidence regarding that issue, is contained in Mr. Dunn’s affidavit sworn October 24, 2016, at paragraph 11, where he states merely that the defendant managed the properties, performed repairs and maintained the first mortgage until it the properties were sold on October 5, 2016.
[45] As an aside, it is my view that the statements of material facts and the allegations in the statement of claim are vague and lack the required particulars. There are far more material facts contained in Morgis’ affidavit evidence than in the statement of claim.
[46] In any event, on this motion the plaintiff has adduced no evidence to support some of the facts and allegations made in the statement of claim. For example, the plaintiff adduced no evidence of any such “requirements” of the defendant as contained in the settlement agreement. In fact, the plaintiff did not file the settlement agreement referred to in the statement of claim which, allegedly, the parties entered into in July 2015. If the plaintiff is referring to the minutes of settlement signed by the parties in June 2015, firstly, it was the defendant that filed the minutes of settlement and, secondly, the minutes contain no requirements whatsoever that the defendant perform any step other than to discharge the mortgages and the executions if the plaintiff paid the sum of $16,500,000 to the defendant. If the plaintiff is relying on the defendant’s alleged failure to provide information or documents in order to complete the refinancing with MCAP, it has failed to plead that material fact in the statement or claim. Nor did the plaintiff set out in Morgis’ evidence the particulars of what documents the plaintiff or MCAP required from the defendant to complete the refinancing and particulars of how the defendant failed to cooperate such that the defendant’s lack of cooperation frustrated the plaintiff’s ability to complete the refinancing.
Conclusion – Security for Costs
[47] It is difficult to assess the merits of this action as it is only at the pleadings stage and only the statement of claim was filed with the motion material. However, I find that this action is not wholly without merit given Morgis’ affidavit evidence with respect to the allegation that the defendant mismanaged the properties. I would not have come to that conclusion on a review of the statement of claim alone because, as stated above, the statement of claim lacks a great deal of particularity regarding the material facts and the allegations.
[48] Further, the plaintiff has made it impossible for the court to review its financial circumstances having chosen not to file such evidence. For the same reason, it is also impossible to assess how a security for costs order will affect the plaintiff.
[49] However, based on Morgis’ evidence that he has “either settled, paid or have obtained orders” to have the executions lifted at the Sheriff’s office, I have come to the conclusion that Morgis, as an officer and director of the plaintiff and likely its only shareholder, has the financial ability to pay a security for costs order if he was able to pay all of the executions that totalled over $600,000.
[50] Having found that the plaintiff has the ability to pay a security for costs order, and further found that the plaintiff failed to satisfy its onus at the second stage of the test due to its failure to file any evidence regarding its assets or impecuniosity, I find that it is just in the circumstances to grant the defendant’s motion and order that the plaintiff pay security for costs.
[51] I must now determine the amount of the security to be paid.
[52] Rule 56.04 provides the court with wide discretion in determining the amount and form of security and the time for paying:
56.04 The amount and form of security and the time for paying into court or otherwise giving the required security shall be determined by the court.
[53] Where an action is at an early stage, a court may make a pay-as-you-go order. Quinn J. in Morton held that:
Despite the generous discretion available, where the need for security for costs is made out, the court, absent exceptional circumstances, should order security in the amount of the actual anticipated costs and not become weak-kneed at that prospect. This is not to say, however, that the full anticipated costs of the entire action must be ordered. Where an action is in its procedural infancy, with examinations for discovery yet to be scheduled, a pay-as-you-go order is usually the most appropriate one and I find that to be so here.
[54] The defendant seeks security for costs in the amount of $60,000 which is broken down as follows:
(a) approximately $5,000 to respond to this motion; (b) $5,000 for the defendant’s cross-motion including travel and accommodation expenses from Collingwood where defence counsel is located to Toronto; (c) $7,500 for future costs for producing an affidavit of documents and conducting examinations for discovery; (d) $6,000 for future costs of drafting and filing settlement conference brief and attending the settlement conference in Toronto; (e) $60,000 for future costs of preparation and attendance at a one-week trial including travel and accommodation expenses for defence counsel and witnesses.
[55] The defendant’s estimated costs set out above are actual costs. If the defendant is successful at trial and the action is dismissed, the defendant will likely not be entitled to its actual costs, but rather costs based on a partial indemnity basis.
[56] The request for security for costs in the amount of $60,000 includes the costs of this motion of approximately $10,000. I will address the costs of this motion later in these reasons.
[57] Therefore, deducting the amount of costs sought on this motion, the defendant is seeking $50,000 for the balance of the steps in this action which are full indemnity costs. It is now well accepted that cost rates set out in the Information for the Profession set out in the preamble of rule 57 are out of date and that amounts calculated at 55 percent to 60 percent of a reasonable actual rate more appropriately reflect partial indemnity. (Inter-Leasing, Inc. v. Ontario (Revenue), 2014 ONCA 683, at para. 5)
[58] Therefore, applying that principle to determine the amount of partial indemnity costs that the defendant might be entitled to should the plaintiff not succeed at trial, the partial indemnity costs based on actual costs of $50,000 would range between $27,500 and $33,000.
[59] In my view, this is an appropriate case for a pay-as-you-go order. Therefore, the plaintiff shall pay into court to the credit of this action the amount of $30,000, as follows:
(a) $10,000 by September 15, 2017. This represents the defendant’s costs on a partial indemnity scale up to and including examinations for discovery of both parties, but not including the costs of any motions; (b) $10,000 within 30 days of completion of mediation; and (c) $10,000 within 30 days of completion of the pre-trial conference.
Transfer of Action
[60] The defendant seeks an order transferring this action to Barrie, Ontario, in the County of Simcoe pursuant to rule 13.1.02.
[61] I draw defence counsel’s attention to the Consolidated Provincial Practice Direction, Part III, B., which deals with motions to transfer a civil proceeding in the Central East, Central West, Central South and Toronto Regions under rule 13.1.02. Part III, section B, provides that a motion to transfer a proceeding should be brought at the court location to which the moving party seeks to have the proceeding transferred. That section also contains particulars of the requisite material to be filed. The Regional Senior Judge, or his or her designate will hear all motions to transfer.
[62] Therefore, the defendant’s motion for an order transferring this action to Barrie, Ontario, in the County of Simcoe is dismissed without prejudice to the defendant’s right to bring this motion at a later date in accordance with the aforesaid Consolidated Provincial Practice Direction.
Stay of Action
[63] The defendant seeks an order that this action be stayed pending payment of any costs order.
[64] Rule 56.05 provides that a plaintiff against whom an order for security for costs has been made may not, until the security has been given, take any step in the proceeding except an appeal from the order, unless the court orders otherwise.
[65] The defendant has not relied on any rule in support of its request for a stay of the action. In my view, given the provisions of rule 56.05, the plaintiff cannot take any step in this action until payment of the costs order at each step as set out above. Therefore, the relief for a stay of action is dismissed.
Costs of Motion
[66] For the reasons set out in my Reasons for Endorsement dated March 30, 2017, I dismissed the plaintiff’s motion for a CPL and granted the defendant’s motion discharging the CPL granted on October 5, 2016. At paragraph 40 of my Reasons, I deferred consideration of the costs of this motion until after I rendered my decision on the defendant’s motions for security for costs and to transfer the action to Barrie.
Law regarding Costs
[67] The law with respect to costs generally and substantial indemnity costs is as stated by the Court of Appeal in Clarington (Municipality) v. Blue Circle Canada Inc., 2009 ONCA 722, which is set out below.
[68] An award of costs is governed by s.131 of the Courts of Justice Act, R.S.O. 1990, c. C.43, and by Rules 49 and 57.01. The general source of judicial discretion to award costs is found in s. 131 of the Courts of Justice Act as expanded by rule 57.01.
Section 131(1) states:
Subject to the provisions of an Act or rules of court, the costs of and incidental to a proceeding or a step in a proceeding are in the discretion of the court, and the court may determine by whom and to what extent the costs shall be paid.
[69] Rule 57.01(1) sets out the factors that a court may consider in exercising its discretion under section 131 of the Courts of Justice Act to award costs in addition to the result of the proceeding and any offer to settle or to contribute made in writing.
[70] Rule 57.01(4) allows for elevated levels of costs, as follows:
Nothing in this rule or rules 57.02 to 57.07 affects the authority of the court under section 131 of the Courts of Justice Act,
(a) To award or refuse costs in respect of a particular issue or part of a proceeding; (b) To award a percentage of assessed costs or award assessed costs up to or from a particular stage of a proceeding; (c) To award all or part of the costs on a substantial indemnity basis; (d) To award costs in an amount that represents full indemnity; or (e) To award costs to a party acting in person.
[71] Substantial indemnity costs is defined in rule 1.03 as “costs awarded in an amount that is 1.5 times what would otherwise be awarded in accordance with Part I of Tariff A”. The Court of Appeal stated that this part of Tariff A was once the prescribed grid for “partial indemnity costs”, but is no longer in effect. “Full indemnity costs” is not a defined term but is generally considered to be a complete reimbursement of all amounts a client has had to pay to his or her lawyer in relation to the litigation.
[72] Rule 49 deals with a specific aspect of costs which is not applicable to the facts herein.
[73] Thus, the court held that elevated costs are warranted in only two circumstances. The first involves the operation of an offer to settle under rule 49.10 where substantial indemnity costs are explicitly authorized. The second involves sanction-worthy behaviour by the losing party.
[74] With respect to sanction-worthy behaviour, in Conroy v. The College of Physicians and Surgeons of Ontario, 2011 ONSC 1664, at para. 8, the court held that a party may be entitled to substantial indemnify costs where a party makes an unproven allegation of fraud, bad faith or misconduct against another party or conducts itself improperly during the course of the litigation.
[75] In 2014 the Court of Appeal in Inter-Leasing, Inc. v. Ontario (Revenue), 2014 ONCA 683, at paragraph 5, held that the cost rates set out in the Information for the Profession set out in the preamble to rule 57 are now out of date, and that “amounts calculated at 55%-60% of a reasonable actual rate might more appropriately reflect partial indemnity”.
Analysis
[76] The defendant seeks substantial indemnity costs on the basis that the plaintiff ought to have served the defendant with its motion seeking a CPL. The defendant filed a costs outline in which it seeks $27,010.98 for substantial indemnity costs, including fees of $20,975.25, taxes of $2,726.78, and disbursements of $3,308.95.
[77] The plaintiff submits that the amount sought by the defendant is excessive for one court attendance.
[78] As noted at paragraph 9 of my Reasons for Endorsement dated March 30, 2017, the plaintiff filed an undertaking at the hearing of the ex-parte motion which reflects the language of section 103(4) of the Courts of Justice Act, as follows:
103(4) Liability where no reasonable claim – A party who registers a certificate under subsection (2) without a reasonable claim to an interest in the land is liable for any damages sustained by any person as a result of its registration.
[79] Therefore, based on the plaintiff’s undertaking, the plaintiff was well aware that it would be liable for any damages sustained by the defendant if it registered a CPL without a reasonable claim to an interest in the land.
[80] I found at paragraph 34 of my Reasons dated March 30, 2017 that there was not a triable issue regarding the plaintiff’s interest in the subject properties given the existence of the foreclosure order and the minutes of settlement. In addition, I made the following findings:
(a) the plaintiff failed in its obligation to present the facts accurately and it misled the court regarding the terms of the minutes of settlement (para. 36); (b) the plaintiff failed to prosecute this proceeding with reasonable diligence in failing to serve the CPL order forthwith, failing to confirm the motion on October 25, 2016 and the subsequent return date, and failing to schedule the motion on a date when I was scheduled to hear this motion given my order that I was seized with the matter (para. 37); (c) the plaintiff failed to comply with my production orders made on October 5, 2016 (para. 38); (d) the plaintiff failed to give the defendant requisite notice of the motion by serving it on October 20, 2016 for the return date of October 25, 2016 (para. 14); (e) the plaintiff served the CPL order and motion materials by fax which is not a permissible method of service on a party who is unrepresented under the Rules (para. 13); (f) the plaintiff had not served the new owners of the properties with the CPL order and the motion materials as required by rule 37.07(1) (para. 30);
[81] For the above reasons, I find that the defendant is entitled to substantial indemnity costs for its motion to discharge the CPL on the basis that the plaintiff conducted itself improperly by obtaining a CPL order when it did not have a reasonable claim to an interest in the subject properties.
[82] In addition, the defendant was successful on the motion for security for costs; therefore, it is entitled to costs on a partial indemnity basis. The defendant was not successful on the motion to transfer the action and stay the action; however, those were minor issues on this motion. I will take this into consideration when fixing costs.
[83] I must now determine the amount of substantial indemnity costs the defendant is entitled to for the motion to discharge the CPL, and the amount of partial indemnity costs the defendant is entitled to for the security for costs motion.
[84] In reviewing the defendant’s costs outline, I raise two points.
[85] Firstly, it fails to set out the amount of time spent on each step as required by the Rules. It provides merely that the defendant claims for 26.95 hours spent by Mr. Vandergust and 35.85 hours spent by his clerk for the October 24, 2016 motion, the December 6, 2016 return date of motion, February 6, 2017 motion and the March 23, 2017 motion. Nor did defence counsel make submissions on an amount of substantial indemnity costs for the motion to discharge the CPL alone. Therefore, I am unable to determine the amount of time spent on the motion to discharge the CPL alone. Having said that, I am cognizant that the defendant’s motion material included all the relief sought such that it would be difficult to separate out the time spent on each motion.
[86] Secondly, the costs outline is confusing because it fails to set out a column for the substantial indemnity rates and, in the column entitled “Actual Rate”, it also states “substantial indemnity”. Therefore, it is unclear whether $395 is Mr. Vandergust’s hourly actual or substantial indemnity rate. I will accept that it is his actual hourly rate in fixing costs. In addition, I find that Mr. Vandergust’s partial indemnity rate is 60 per cent of his actual rate or $256.75. Further, in my view, a claim of $200 per hour for a clerk is excessive considering that the allowable partial indemnity rate for a law clerk is $80 per hour as set out in the Information for the Profession in the preamble of rule 57. I will allow an hourly rate for the clerk of $80 an hour.
[87] The defendant’s costs outline includes time spent for four motion dates; namely, October 25, 2016, December 5, 2016, February 6, 2017 and March 21, 2017. Two of the four hearing dates did not require court attendances. The defendant filed a motion record and responding motion record which are identical, a supplementary motion record, factum and brief of authorities. The plaintiff filed the affidavit of Morgis in response to the defendant’s motion, a supplementary affidavit of Morgis, and a factum.
[88] I have allocated one half of defence counsel’s time for the motion to discharge the CPL and the other half to the motions for security for costs, transfer of action and stay of action. In my view, the motion to discharge the CPL was of utmost importance to the defendant in these circumstances where they had sold the property to arms-length purchasers on the same day that the plaintiff obtained the ex-parte CPL order. I have used a partial indemnity hourly rate of $237 and a substantial indemnity hourly rate of $350 for Mr. Vandergust’s time. For the clerk, I have used a partial indemnity hourly rate of $80 and a substantial indemnity hourly rate of $100.
[89] Therefore, I fix the defendant’s substantial indemnity costs of opposing the plaintiff’s motion for a CPL and its motion to discharge the CPL at $13,200 inclusive of fees, taxes and all disbursements.
[90] I fix the defendant’s partial indemnity costs of the motion for security for costs at $5,000 inclusive of fees and taxes. I included the disbursements in the costs order of $13,200. This cost order was reduced to take into consideration that the defendant was not successful on the motion to transfer the action and to stay the action.
Conclusion
[91] The following orders shall be issued:
(a) the plaintiff shall pay into court security for costs of this action in accordance with the terms set out in paragraph 59 herein; (b) the defendant’s motion is dismissed with respect to the relief sought to transfer this action to Barrie, Ontario, County of Simcoe, and that the action be stayed pending payment of the security for costs order; (c) the plaintiff shall pay to the defendant costs of this motion fixed in the amount of $18,200, payable within 30 days.