CITATION: McDowell and Aversa v. Fortress Real Capital Inc., 2017 ONSC 5759

COURT FILE NO.: CV-16-558165CP COURT FILE NO.: CV-16-560268CP COURT FILE NO.: CV-16-561293CP COURT FILE NO.: CV-16-565287CP DATE: 20170928

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

ARLENE McDOWELL and SAVERIO AVERSA Plaintiffs

– and –

FORTRESS REAL CAPITAL INC., FORTRESS REAL DEVELOPMENTS INC., JAWAD RATHORE, VINCENZO PETROZZA, CENTRO MORTGAGE INC., ILDINA GALATI, FFM CAPITAL INC., ROSALIA SPADAFORA, KRISH KOCHHAR, TONY MAZZOLI, SAUL PERLOV, DEREK SORRENTI, SORRENTI LAW PROFESSIONAL CORPORATION, OLYMPIA TRUST COMPANY and FINANCIAL SERVICES COMMISSION OF ONTARIO Defendants

Mitchell Wine for the Plaintiffs Ryan Morris and Daniel Styler for the Defendant Olympia Trust Company

Proceeding under the Class Proceedings Act, 1992

AND BETWEEN:

ARLENE McDOWELL Plaintiff

– and –

FORTRESS REAL CAPITAL INC., FORTRESS REAL DEVELOPMENTS INC., JAWAD RATHORE, VINCENZO PETROZZA, EMPIRE PACE (1088 PROGRESS) LTD., BUILDING & DEVELOPMENT MORTGAGES CANADA INC., ILDINA GALATI, DEREK SORRENTI, SORRENTI LAW PROFESSIONAL CORPORATION, OLYMPIA TRUST COMPANY and MICHAEL CANE Defendants

Mitchell Wine for the Plaintiff Ryan Morris and Daniel Styler for the Defendant Olympia Trust Company

Proceeding under the Class Proceedings Act, 1992

AND BETWEEN:

DAVID MARTINO Plaintiff

– and –

FORTRESS REAL CAPITAL INC., FORTRESS REAL DEVELOPMENTS INC., JAWAD RATHORE, VINCENZO PETROZZA, ADI DEVELOPMENTS (LINK) INC., ADI DEVELOPMENTS INC., BUILDING & DEVELOPMENT MORTGAGES CANADA INC., ILDINA GALATI, FFM CAPITAL INC., ROSALIA SPADAFORA, KRISH KOCHHAR, TONY MAZZOLI, SAUL PERLOV, DEREK SORRENTI, SORRENTI LAW PROFESSIONAL CORPORATION, OLYMPIA TRUST COMPANY and HER MAJESTY THE QUEEN IN RIGHT OF ONTARIO Defendants

Mitchell Wine for the Plaintiff Ryan A. Morris and Daniel Styler for the Defendant Olympia Trust Company

Proceeding under the Class Proceedings Act, 1992

AND BETWEEN:

BRYAN MADRYGA and EILEEN WALLACE Plaintiffs

– and –

FORTRESS REAL CAPITAL INC., FORTRESS REAL DEVELOPMENTS INC., FORTRESS KEMPENFELT BAY DEVELOPMENTS INC., JAWAD RATHORE, VINCENZO PETROZZA, HARMONY VILLAGE-LAKE SIMCOE INC., CITY CORE DEVELOPMENTS INC., BUILDING & DEVELOPMENT MORTGAGES CANADA INC., ILDINA GALATI, FMP MORTGAGE INVESTMENTS INC., MICHAEL DARAMOLA, TONINO AMENDOLA, GRAHAM MCWATERS, FDS BROKER SERVICES INC., GLENN MAY-ANDERSON, ZAFAR IQBAL KHAWAJA, DEREK SORRENTI, SORRENTI LAW PROFESSIONAL CORPORATION, OLYMPIA TRUST COMPANY, GRANT EDWARDH APPRAISERS AND CONSULTANTS LTD. and IAN G. MCLEAN Defendants

Mitchell Wine for the Plaintiff Ryan A. Morris and Daniel Styler for the Defendant Olympia Trust Company

Proceeding under the Class Proceedings Act, 1992

HEARD: In writing

REASONS FOR DECISION - COSTS

PERELL, J.

[1] Olympia Trust Company is the defendant in four proposed class actions. It brought a pleadings motion in all four actions. The motions were argued over two days, and Olympia Trust was successful. The Statements of Claim were all struck out with leave to amend. See: McDowell v. Fortress Real Capital Inc., 2017 ONSC 4789; Martino v. Fortress Real Capital Inc., 2017 ONSC 4790; McDowell and Aversa v. Fortress Real Capital Inc., 2017 ONSC 4791; and Madryga v. Fortress Real Capital Inc., 2017 ONSC 4792.

[2] Olympia Trust claims costs for the motions of $61,184.27, inclusive of HST and disbursements, on a substantial indemnity basis, or alternatively, it claims $41,188.92, all inclusive, on a partial indemnity basis.

[3] By way of comparison, it may be noted that: (a) I awarded the Defendants FFM Capital, Rosalia Spadafora, Krish Kochhar, Tony Mazzoli, and Saul Perlov, whose pleading motion was settled save for costs, the sum of $17,500 all inclusive; (b) Adi Developments (Link) Inc. and Adi Development Group Inc. claim approximately $65,000, all inclusive, for the motions and for the dismissal of the action against them; and (c) Empire Pace (1088 Progress) Ltd. claims approximately $60,000, all inclusive, for the motions and for the dismissal of the action against it.

[4] In claiming costs on a substantial indemnity basis, Olympia Trust relies on the following paragraph in the Mortgage Investment Direction and Indemnity Agreement:

In addition to all indemnities and other provisions benefiting Olympia that I have agreed to in the Trust Agreement, I agree to indemnify and save harmless Olympia and their respective officers, directors, and employees from and against all claims, demands, actions, suits, or other proceedings by whomsoever brought, and from all losses, costs, fines, levies, damages, expenses (including any legal fees and disbursements on a solicitor and client basis and any costs incurred in connection with the enforcement of this indemnity), taxes, penalties, and other liabilities whatsoever, directly or indirectly, arising from or in connection with (i) Olympia acting in accordance with the instructions set out herein; (ii) the investment of funds from my Plan in the Mortgage; or (iii) any breach of any representation, warranty or covenant made by me in the Trust Agreement or this Agreement…..

[5] The Plaintiffs in the four proposed class actions submit that the indemnity provision does not apply to the circumstances of the immediate case where they are suing Olympia Trust.

[6] In any event, the Plaintiffs submit that Olympia Trust’s claim for costs is excessive and beyond the reasonable expectations of the unsuccessful parties on what was just a pleadings motion. They submit that the amount of the award would be contrary to the fundamental objective of access to justice. In regard to the allegedly excessive claim for costs, the Plaintiffs make the following points:

a. They are persons of modest means seeking access to justice for a group of investors who all lost money that they could not afford to lose.

b. Had they been the successful party on the pleadings motions, their Bill of Costs would have been for $37,682.73, of which the fee portion was $33,176, HST was $4,335.18, and disbursements $175.55; approximately $42,000, all inclusive. The Bill of Costs was for services associated with eight motions brought by the Defendants in the four proposed class actions. The Plaintiffs submit that it should have been expected that the Defendants’ lawyers respectively would have done less work than would have the Plaintiffs’ lawyers. They submit that it was reasonable for them to expect that the Costs Outline of each of the Defendants would be less, not more, than the Costs Outline of their counsel.

c. The claims were not vexatious and whatever the frailties of the pleadings, they submit that the Defendants would have been able to understand the case that they were being called on to meet.

d. They submit that their counsel made a genuine and concerted effort to address the criticisms of the pleadings and commendably attempted to resolve the pleadings motions before the hearing.

e. Olympia Trust’s substantive objections to the pleading remain to be determined.

f. The total pre-argument time spent by Olympia Trust’s counsel was 115.4 hours, and the Plaintiffs submit that it was not reasonable nor was it to be reasonably expected that counsel would spend this amount of time on a pleadings motion. Further, while Mr. Styler attended the motion with Mr. Morris, he did not make submissions, and it is submitted that Olympia Trust should not be awarded $2,000 for his time in court.

[7] The Plaintiffs submit that having regard to the above circumstances and extrapolating from the amount awarded to the FFM Capital Defendants and taking into account: (a) the relative seniority of Mr. Morris and Mr. Styler to the counsel for the other participants in the motions; and (b) the preparation time and argument of the contested motion, the appropriate costs award to Olympia Trust is $20,000 inclusive of disbursements and taxes.

[8] I set out the principles about costs in class actions in Das v. George Weston Limited, 2017 ONSC 5583 in some detail, and I incorporate by reference those principles for the cases at bar.

[9] With the litigation continuing against Olympia Trust and with the merits of that litigation yet to be determined, I shall not decide the point about the application of the Mortgage Investment Direction and Indemnity Agreement to costs awards in the litigation at bar. For the purposes of determining the costs of the pleadings motions, I shall ignore the Agreement as a factor. Thus, Olympia Trust’s award will be on a partial indemnity basis.

[10] Applying the principles that govern the court’s discretion in awarding costs to the circumstances of the immediate case, the nub of the dispute between the Plaintiffs and Olympia Trust is about what the Plaintiffs, as the unsuccessful party to a pleadings motion, would have reasonably expected to pay for costs in complex class actions that will be continuing against Olympia Trust.

[11] In this regard, the Plaintiffs ought to have expected that Olympia Trust would defend itself vigilantly. I do not accept the proposition that the Plaintiffs reasonably expected that Olympia Trust’s lawyers would do less work in defending Olympia Trust than their lawyers would expend in prosecuting the cases against Olympia Trust. I disagree that the award to the FFM Capital Defendants or their own Bill of Costs establishes some sort of parameter for the appropriate award for the other parties. I disagree with their submission that it would be contrary to the fundamental objective of access to justice to make a substantial costs award to Olympia Trust; defendants as much as plaintiffs are entitled to access to justice and adverse costs consequences are applicable to both plaintiffs and defendants.

[12] I, therefore, disagree with the Plaintiffs’ submission that the appropriate award is $20,000, all inclusive. In my opinion, applying the normal principles for a costs award, the appropriate award is $35,000, all inclusive.

[13] Order accordingly.

Perell, J.

Released: September 28, 2017

CITATION: McDowell and Aversa v. Fortress Real Capital Inc., 2017 ONSC 5759

COURT FILE NO.: CV-16-558165CP COURT FILE NO.: CV-16-560268CP COURT FILE NO.: CV-16-561293CP COURT FILE NO.: CV-16-565287CP DATE: 20170928

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

ARLENE McDOWELL and SAVERIO AVERSA Plaintiffs

– and –

AND BETWEEN:

ARLENE McDOWELL Plaintiff

-and-

AND BETWEEN:

DAVID MARTINO Plaintiff

-and-

AND BETWEEN:

BRYAN MADRYGA and EILEEN WALLACE Plaintiffs

and –

REASONS FOR DECISION – COSTS

PERELL J.

Released: September 28, 2017

McDowell and Aversa v. Fortress Real Capital Inc., 2017 ONSC 5759

Case Summary

CITATION: McDowell and Aversa v. Fortress Real Capital Inc., 2017 ONSC 5759

REASONS FOR DECISION - COSTS

Judge

Counsel

Parties

Areas of Law

Fact Patterns

Financial Outcomes

Issues