Court File and Parties

Citation: Metropolitan Toronto Condominium Corporation 1067 v. 1388020 Ontario Corp., 2017 ONSC 4793

Court File No.: CV-16-557120

Date: 2017-08-14

Superior Court of Justice - Ontario

Re: Metropolitan Toronto Condominium Corporation 1067, Plaintiff And: 1388020 Ontario Corp., Defendant

Before: J. Ferguson, J.

Counsel: Bernard B. Gasee, for the Plaintiff Filip Boskovic and Jonathan Kulathungam, for the Defendant

Heard: August 8, 2017

Endorsement

[1] This motion for summary judgment is brought by the plaintiff against the defendant.

[2] The defendant owns and occupies 8 condominium units and 3 VIP parking spaces in a condominium located at 4002 Sheppard Avenue East, Units 300, 304, 307, 309, 310, 311, 314 and 328 in Toronto, Ontario ("the condominiums").

[3] This matter stems from an outstanding balance owed by the defendant for unpaid condominium common elements maintenance fees ("maintenance fees"), interest and additional claimed expenses for such things as bank runs and fees for reviewing records ("claimed expenses").

[4] The parties arrived at partial minutes of settlement, which minutes of settlement are attached as Appendix "A" to this endorsement.

[5] The issues are as follows:

i. Interest on the unpaid condominium fees; ii. Additional claimed expenses; and iii. Costs.

[6] The parties will advise as to any remaining issue with respect to parking and storage.

[7] Section 7 of By-law No. 1 provides specifically for two charges to be levied:

(a) Interest at the rate of 30% per annum, compounded monthly:

"Arrears of payments required to be made under the provision of this Article XI shall bear interest at the rate of thirty (30%) percent above the prime rate charged by the Toronto Dominion Bank to its best risk commercial accounts per annum and shall be compounded monthly until paid and shall be deemed to constitute a reasonable charge incurred by the Corporation in collecting the unpaid amounts within the meaning of the Act."

(b) In addition to any other remedies, the Board may bring legal action on behalf of the Corporation to enforce collection thereof and "they shall be added to any amounts found due, all cost of such action, including cost as between a solicitor and his own client". In other words, costs of the litigation ("Litigation Costs").

[8] The Condominium Act Section 85(1) states as follows:

Lien upon default

85 (1) If an owner defaults in the obligation to contribute to the common expenses, the corporation has a lien against the owner's unit and its appurtenant common interest for the unpaid amount together with all interest owing and all reasonable legal costs and reasonable expenses incurred by the corporation in connection with the collection or attempted collection of the unpaid amount. 1998, c. 19, s. 85 (1).

[9] In June of 2016 the plaintiff registered such a lien against the condominium.

Interest

[10] The plaintiff's position is that Section 7 of the By-law number 1(a) governs interest at the rate of thirty percent per annum above the prime rate, compounded.

[11] Counsel for the plaintiff correctly points out that the interest rate is a contractual matter between the parties and that I should not lightly interfere with holding the parties to the contract they entered into. (unless there are clear, cogent reasons to interfere)

[12] Plaintiff's counsel agrees that the interest rate is discretionary but submits that the following supports against a reduction of the interest rate:

i. The plaintiffs are innocent parties. They have not been paid for the maintenance fees; ii. The defendant does not operate with clean hands. It has continued to operate a business in 8 units (some sort of medical clinic business); iii. Although the defendant has provided $112,000.00 to their lawyer to be held in trust it is not the same as the defendant agreeing to pay this amount (or paying the amount) to the plaintiff. There is no reason why those funds have not been paid to the plaintiff; iv. The defendant was responsible for its own bookkeeping. If it did not agree with the plaintiff's statements it should have provided proof, (I do not agree with this submission); v. The fact that the defendant's shareholders are involved in a shareholder dispute does not impact its obligation to pay the maintenance fees.

[13] The defendant submits that when a high interest rate is an issue, it is imperative that the plaintiff establish and provide precise record keeping, to avoid substantial unjust enrichment by way of inappropriate interest charges. Its position is that the plaintiff has not provided precise, consistent statements. I find that the plaintiff has done its best in providing records and statements.

[14] The defendant points to various inconsistencies between the statements of account. As a result of the plaintiff not actually knowing how much it was owed and what precise collection efforts were taken it has created false statements. (I do not accept that the plaintiff has deliberately created false statements)

[15] The defendant's position is that I should exercise discretion and provide relief against the 33% interest rate. He made the following further submissions:

i. The defendant has agreed to an amount of approximately $114,000.00 for maintenance fees which is essentially the same amount that was paid to the defendant's lawyers in trust. As a result interest at 33%, at the very least, should not run after October 2016. (In order to accept this submission the defendant should have paid these funds to the plaintiff as a payment on account) ii. The plaintiff's own statements were inconsistent and therefore should not give rise to the contractual high interest rate.

[16] Based on the evidence and on the submissions, there is absolutely no reason to not enforce the contractual arrangement made between the parties with respect to interest. Interest is to be paid as per the condominium by-law.

[17] On consent, I am making an order that the $112,000.00 being held in trust (plus any accrued interest) be paid to "Bernard Gasee in trust".

Claimed Expenses

[18] The plaintiff submits that it is entitled to all of the additional claimed expenses in collecting the unpaid maintenance fees.

[19] With respect to the issue of these additional claimed expenses, I accept the defendant's position that there is no provision under any of the existing by-laws which permits the plaintiff to claim any such further expenses.

[20] I find that any additional claimed expenses spent in recovering arrears, are included in the high interest rate charged of 33%.

[21] The plaintiff is not entitled to recover these additional claimed expenses.

Costs

[22] In Chandra v. CBC, 2015 ONSC 6519 ("Chandra"), the court set out the following principles for dealing with costs at paras. 15-17:

15. The general principles to be applied in fixing costs are conveniently articulated in Agius v. Home Depot Holdings Inc., 2011 ONSC 5272, at paras. 10-12, as follows:

Cumming J. in DUCA Financial Services Credit Union Ltd. v. Bozzo, 2010 ONSC 4601 at para. 5, described the "normative approach" to an application for costs:

Costs are in the discretion of the Court: s. 131, Courts of Justice Act, R.S.O. 1990, c. C.43 and Rule 57.01 of the Rules of Civil Procedure. In Ontario, the normative approach is first, that costs follow the event, premised upon a two-way, or loser pay, costs approach; second, that costs are awarded on a partial indemnity basis; and third, that costs are payable forthwith, i.e. within 30 days. Discretion can, of course, be exercised in exceptional circumstances to depart from any one or more of these norms.

Fixing of costs is not merely a mechanical exercise in reviewing the receiving party's Cost Outline. In Andersen v. St. Jude Medical Inc. (2006), 2006 85158 (ON SCDC), 264 D.L.R. (4th) 557, the Divisional Court set out several principles to be considered in making an award of costs:

1. The discretion of the court must be exercised in light of the specific facts and circumstances of the case in relation to the factors set out in rule 57.01(1): Boucher [Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291], Moon [Moon v. Sher (2004), 2004 39005 (ON CA), 246 D.L.R. (4th) 440], and Coldmatic Refrigeration of Canada Ltd. v. Leveltek Processing LLC (2005), 2005 1042 (ON CA), 75 O.R. (3d) 638 (C.A.).

2. A consideration of experience, rates charged and hours spent is appropriate, but is subject to the overriding principle of reasonableness as applied to the factual matrix of the particular case: Boucher. The quantum should reflect an amount the court considers to be fair and reasonable rather than any exact measure of the actual costs to the successful litigant: Zesta Engineering Ltd. v. Cloutier (2002), 119 A.C.W.S. (3d) 341 (Ont. C.A.), at para. 4.

3. The reasonable expectation of the unsuccessful party is one of the factors to be considered in determining an amount that is fair and reasonable: rule 57.01(1)(0.b).

4. The court should seek to avoid inconsistency with comparable awards in other cases. "Like cases, [if they can be found], should conclude with like substantive results": Murano v. Bank of Montreal (1998), 1998 5633 (ON CA), 41 O.R. (3d) 222 (C.A.), at p. 249.

5. The court should seek to balance the indemnity principle with the fundamental objective of access to justice: Boucher.

The Court of Appeal has identified the overriding principle to be that the amount of costs awarded be reasonable in the circumstances. In Davies v. Clarington (Municipality) (2009), 2009 ONCA 722, 100 O.R. (3d) 66 Epstein J.A. stated at paras. 51-52:

As can be seen, the overriding principle is reasonableness. If the judge fails to consider the reasonableness of the costs award, then the result can be contrary to the fundamental objective of access to justice. Rather than engage in a purely mathematical exercise, the judge awarding costs should reflect on what the court views as a reasonable amount that should be paid by the unsuccessful party rather than any exact measure of the actual costs of the successful litigant. In Boucher, this court emphasized the importance of fixing costs in an amount that is fair and reasonable for the unsuccessful party to pay in the particular proceeding at para. 37, where Armstrong J.A. said "[t]he failure to refer, in assessing costs, to the overriding principle of reasonableness, can produce a result that is contrary to the fundamental objective of access to justice."

16. As Mark Orkin in The Law of Costs, 2nd ed., loose-leaf (Aurora, Ont.: Canada Law Book, 2010) reminds us (at para. 201) awarding costs is an exercise in balancing two principles:

...One, that a successful party to litigation who is free of blame should not be required to bear the costs of either prosecuting or defending the action, and two, that citizens will be unduly hesitant to assert or defend their rights in court if an unsuccessful party is required to bear all of the costs of a successful one.

17. The principle of indemnification is no longer the only purpose of costs awards. There is recognition that modern costs awards may encourage settlement, prevent (or at least discourage) frivolous or vexatious litigation, or sanction behaviour that increases the expense of litigation.

[23] In fixing costs, the trial judge is not engaged in simply a mechanical exercise. She is not conducting an assessment and applying a tariff, but rather making a judicial determination using her best judgment, with some regard paid to what might occur on an assessment. She is not to scrutinize docket entries, but to consider the nature and factual and legal complexity of the case and the preparation for efficient use of court time. The goal is to reach a fair and reasonable costs award.

Boucher v. Public Accountants Counsel (Ontario), 2004 14579 (ON CA), 71 O.R. (3d) 291 (C.A.)

Eagleson v. Dowbiggan (1996), 4 C.P.C. (4th) 55 (Ont. Gen. Div.)

De Bonth v. Revenue Properties Co. (1996), 46 C.P.C. (3d) 93 (Ont. Gen. Div.)

[24] The Rule 57.01 factors applicable in this case are the principle of indemnity; the amount of costs that an unsuccessful party could reasonably expect to pay; the amount claimed; the complexity of the proceedings; and the importance of the issues. Costs should also be proportionate.

[25] The endorsement of Quigley, J., York Condominium Corporation No. 345 v. Qi, 2013 ONSC 4592, is of assistance in this case. He states the following at paragraph 9:

(9) Justice Lane made those observations in the context of s. 134(5) of the Condominium Act but as counsel for the defendants argued in her written submissions, I can see no reason that those principles would not be equally applicable here and require that legal costs in respect of the collection of common elements and similar expenses under s. 85(1) of the Act would not also be required to be demonstrably reasonable and evidence-based: see Mancuso v. York Condominium Corporation No. 216, 2008 31418 (ON SC); Metropolitan Toronto Condominium Corp. No. 1385 v. Skyline Executive Properties Inc., 2005 13778 (ON CA) at paras. 32-33, 45; Toronto Standard Condominium Corporation No. 1633 v. Baghai Development Limited, 2012 ONCA 417 at para 84; Durham Standard Condominium Corporation No. 187 v. Morton, 2012 ONSC 5132 at para. 19. The court observed in TSCC No. 1633 v. Baghai that section 134(5) does not give counsel license to spend the client's money with impunity. I agree with counsel for the defendants that no such authority is provided in s. 85(1) either.

[26] Those points have particular significance in this case. Costs must demonstrably reasonable. Further Sections 134(5) and 85(1) do not give counsel the licence to spend the client's money with impunity. (This includes monies spent as legal fees)

[27] Although it is not my role to perform an item-by-item analysis of the bill of costs, the plaintiff has provided a bill of costs broken down into categories. Certain categories are clearly not part of this straightforward action to recover unpaid condominium maintenance fees. This would include the categories of notice of sale and legal research; the motion to intervene; the attendance at commercial court.

[28] Under all the circumstances and in applying the legal principles regarding costs, costs are set in the amount of $30,000.00 inclusive of fees, HST and disbursements.

J. Ferguson, J.

Date: August 14, 2017