Court File and Parties
COURT FILE NO.: CV-11-435360 DATE: 20180628 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Toronto Standard Condominium Corporation No. 2051
AND:
Georgian Clairlea Inc., Residences of Clairles Gardens Inc., Anthony Maida, Frank Maida, Gene Maida, Georgian Corporation, The Equitable Trust Company and Firm Capital Mortgage Fund Inc.
AND:
Georgian Properties Corporation
BEFORE: J.T. Akbarali J.
COUNSEL: Megan L. Mackey for the Plaintiff Jonathan H. Fine and Maria Dimakas for the defendants and the Third Party
HEARD: In writing
Endorsement
[1] On May 31, 2018, I released reasons in a summary judgment motion brought pursuant to a settlement agreement between the parties: 2018 ONSC 2515. I later released brief reasons addressing issues the parties raised subsequent to my summary judgment reasons: 2018 ONSC 3909.
[2] In my summary judgment reasons, I found that three debt instruments - a promissory note, a service unit mortgage and a parking unit mortgage - that the third party, Georgian Clairlea Corporation (“Georgian”) sought to enforce against the plaintiff were oppressive. I found that the promissory note was unenforceable and I significantly decreased the principal value of the mortgages. I also granted judgment on three smaller claims advanced by the plaintiff, although I reduced one claim to an amount that Georgian accepted. As I explain in my reasons on the summary judgment motion, the active party opposing the plaintiff in this litigation is the third party, with the defendants either having had the claims against them discontinued or stayed due to their assignments into bankruptcy.
[3] In these reasons, I deal with costs.
Who is entitled to costs?
[4] The plaintiff states that it is entitled to its costs because it is the successful party, having enjoyed the most success on the motion.
[5] Georgian argues that it is also entitled to its costs pursuant to the terms of the mortgages which provide that all solicitor and client legal fees and expenses incurred in proceedings “taken in connection with or to realize upon the security given in the Charge…shall be, with interest at the rate provided for in the Charge, a charge upon the land in favour of the Chargee”. The terms also provide that “all amounts paid by the Chargee as aforesaid shall be added to the principal amount secured by the Charge and shall be payable forthwith with interest at the rate provided for in the Charge”.
[6] Georgian argues that its entitlement to costs can co-exist with the plaintiff’s entitlement because it is not asking for an award of partial indemnity costs to be assessed by the court, but rather it seeks costs provided for in the mortgage contract between the parties. It argues that an assessment of costs is necessary to determine why each step in the litigation was reasonably necessary to permit the mortgagee to fully and fairly prosecute its counterclaim or defend the action.
[7] I turn first to the plaintiff’s entitlement to costs. I agree that the plaintiff is the successful party on the motion. The plaintiff succeeded in obtaining a finding that all three debt instruments were oppressive. At all times before me, the plaintiff acknowledged that it owed money under the service unit mortgage; the only question was how much. I accepted the basis for the plaintiff’s calculation of the principal amount owing on the service unit mortgage although I increased it to account for a measure of profit to Georgian. In the result, the amount owing on the mortgage was much closer to the plaintiff’s calculation than it was to Georgian’s calculation. Georgian succeeded on its argument with respect to the interest rate.
[8] With respect to the parking unit mortgage, while I did not accept the plaintiff’s position that the mortgage ought to be unenforceable in its entirety, I did accept the plaintiff’s alternate position that the parking unit mortgage, valued by Georgian at the principal amount of $925,050 should be reduced to the principal amount of $73,000. I accepted Georgian’s position with respect to the interest rate.
[9] I concluded that the promissory note was unenforceable in its entirety. Finally, I granted judgment with respect to the three smaller claims advanced by the plaintiff, although I reduced one of them based on Georgian’s argument.
[10] I disagree with Georgian that success was divided on the motion because some amount has been found to be owing to it. Whether some amount was owing to it was never the realistic question. This is confirmed by the plaintiff’s February 2016 and November 2017 offers to settle, described below, in which the plaintiff proposed a payment to Georgian. The plaintiff’s success measured against the pleadings is apparent. It is also apparent when measured against its offers to settle.
[11] There is no reason to depart from the general rule that costs follow the event. The plaintiff is entitled to its costs of this motion.
[12] I next consider Georgian’s claim to costs.
[13] I accept that, where a mortgage provides for it, a mortgagee who incurs costs associated with the enforcement of the mortgage is entitled to its costs pursuant to the terms contractually agreed between the parties: Crown Trust Co. v. Nielsen, 1984 CarswellBC 110, at paras. 2-4, MCAP Financial Corp. v. Fernicola (In Trust), 2010 CarswellOnt21 at para. 19. Georgian also relies on de Lima v. TD Bank Financial Group, 2013 ONSC 1297, where, at para. 22, the court accepts that the costs provisions of a mortgage apply to situations where the mortgagee is defending its security interest as well as enforcing it.
[14] However, the cases on which Georgian relies, like Crown Trust and MCAP, are cases in which the mortgagee has been the successful party on the motion. In MCAP, the mortgagee succeeded in dismissing the plaintiff’s action, in which the plaintiff sought a right of set-off against a mortgage owing to the mortgagee. In Crown Trust, the mortgagee obtained an order nisi.
[15] In de Lima, the court recognized the mortgagee’s concession that costs always remain in the discretion of the court. Here, Georgian argues that in circumstances where there is a contractual right to costs, “the Court will exercise its discretion to reflect those rights”, and further, that different considerations apply when considering costs that are awarded pursuant to a contractual term and costs pursuant to the Courts of Justice Act, R.S.O. 1990, c. C.34. In particular, Georgian argues that the reduction in principle of the mortgages is a relevant factor with respect to the plaintiff’s claim to costs, but not to its rights pursuant to the mortgages.
[16] Where a mortgagor has contracted to pay costs on a solicitor and client basis, in the absence of special circumstances, the court should enforce the contract. “Special circumstances” include improper conduct in the conduct of the proceedings or some basis in equity upon which the court finds that the contractual provision ought not to be enforced: Penvern Investment Ltd. v. Whispering Creek Cattles Ranches Ltd. at paras. 2-3.
[17] In my view, Georgian’s argument fails to address the elephant in the room: this was an oppression application in which I found that each of the three debt instruments at issue, including the mortgages, were oppressive. A mortgagee who has been guilty of oppressive conduct may be deprived of his costs: Royal Bank v. Badger at para. 21; Canada Permanent Trust Co. v. Bernhardt, [1978] B.C.J. No. 829 at para. 23.
[18] Moreover, as I noted in my reasons on the summary judgment motion, when a judge makes a finding of oppression, unfair prejudice or unfair disregard, the Act provides that the judge can make “any order deemed proper” to redress the situation. The oppression remedy is an equitable one. It gives the court broad, equitable jurisdiction to enforce not just what is legal, but what is fair. In considering claims for oppression, courts should look at business realities, not merely narrow legalities: paras. 90 and 97.
[19] Were I to accede to Georgian’s submission, I would be determining that the plaintiff should bear the entirety of Georgian’s costs (presumably set-off against whatever costs the plaintiff obtains) to uphold two oppressive mortgages, the principal amount of which were significantly reduced in the result, in a proceeding in which Georgian’s conduct of the litigation significantly drove up costs. Such a determination would insulate any mortgagee holding an oppressive mortgage from the consequences of taking unnecessary or even outrageous positions in an oppression application involving the mortgage. Such a conclusion is antithetical to the operation of the oppression remedy. It is contrary to the reasonable expectations of any stakeholder in an oppression application.
[20] In my view, Georgian is not entitled to its costs of this proceeding. It did not succeed. The question of costs was not argued in the context of the main oppression application, but I have no hesitation in finding that setting aside any contractual entitlement to costs that Georgian claims under the mortgage is an appropriate remedy for the oppression I found existed. I also find that Georgian’s oppressive conduct is a special circumstance justifying that it be deprived of its contractual right to costs.
Quantum of Costs
[21] Fixing costs is a discretionary decision under section 131 of the Courts of Justice Act, R.S.O. 1990, c. C.43. The discretion must be exercised in accordance with the factors set out in r. 57.01(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, including the principle of indemnity, the reasonable expectations of the unsuccessful party, and the complexity and importance of the issues. Overall, costs must be fair and reasonable: Boucher v. Public Accountants Council (Ontario) at paras. 26 and 37, 71 O.R. (3d) 291.
[22] In addition, the plaintiff points to two written offers to settle which it made. In February 2016, the plaintiff offered to settle for an amount approximately 65% of the amount eventually awarded. The plaintiff states that its February 2016 offer to settle should be considered under rule 49.13 for the purposes of costs. It states that the court should consider this offer as an indication that the plaintiff made a genuine and continuing effort to settle the case, thus entitling it to costs.
[23] Moreover, on November 13, 2017, the plaintiff offered to settle the case for $3,500,000, all inclusive, an amount more than double the amount that Georgian was awarded. The plaintiff states that the provisions of rule 49.10 apply to its costs from November 2017 onwards.
[24] In contrast, Georgian made a single offer to settle after the hearing of the motion. This was a time-limited offer to settle for nearly $6 million, an amount significantly more than the quantum of the final judgment.
[25] The plaintiff also argues that Georgian’s conduct unnecessarily lengthened the duration of the proceeding. It points to the many, many briefs of materials which were filed by Georgian containing a number of documents that were unnecessary for the hearing of the motion, all of which unnecessarily complicated the motion and caused the parties to incur increased costs.
[26] For its part, Georgian argues that certain of the plaintiff’s claims to costs are excessive. It points to the plaintiff’s costs of the November 2017 pre-trial, for which the plaintiff claims $19,631.49. In its bill of costs, Georgian claimed $2,146.77 on a partial indemnity basis for the same pretrial. Georgian also argues that certain disbursements should be disallowed, totaling $5,586. These relate to a disbursement for agent’s fees that is unexplained and for two expert reports that were never produced.
[27] In my view, considering the plaintiff’s early position that its liability to pay some amount was not an issue, it is entitled to costs throughout. I have already noted that it is the successful party on the summary judgment motion. Taking into account the realities of this litigation and the issues that were actually at stake between the parties, in my view, the plaintiff is entitled to partial indemnity costs up to the date of its November 13, 2017 offer and substantial indemnity costs thereafter. I accept the plaintiff’s argument that costs in this action were needlessly inflated by the unnecessary steps taken by Georgian to place volumes of evidence before the court on this motion when much of it was neither necessary nor even referred to.
[28] Based on the plaintiff’s bill of costs, it seeks $160,453.20 commencing with the examination for discovery stage of this action. This reflects costs on a partial indemnity scale up to the November 2017 offer, and costs on a substantial indemnity scale thereafter. It claims no costs prior to July 15, 2015, the date of the parties’ settlement agreement pursuant to which they agreed to proceed to determine the issues between them on a summary basis.
[29] For the purposes of comparison, on a partial indemnity scale, Georgian’s bill of costs discloses costs of $484,265.76. This appears to include some time that precedes the parties’ settlement agreement, and costs of the motion to strike the plaintiff’s factum which I dealt with last summer. The plaintiff’s bill of costs does not include these costs. However, it does not appear that the additional steps included in Georgian’s bill explain the gross difference in the parties’ bills of costs. Georgian’s bill has not been broken down in a way to allow me to readily compare it to the plaintiff’s bill.
[30] In my view, some small reduction to the plaintiff’s bill of costs is appropriate to recognize that its costs of the pre-trial were significantly higher than Georgian’s costs, and thus outside Georgian’s reasonable expectations. I also allow a reduction for the disbursements which Georgian identifies as being related to the expert reports that were not relied upon. In my view, a reduction in the plaintiff’s costs of $10,000 is appropriate. This results in a costs award owing to the plaintiff in the amount of $150,453.20.
[31] In my view, costs in this amount would have been in the reasonable contemplation of Georgian, given the manner in which Georgian chose to litigate this action, and particularly this summary judgment motion, and having regard to its own costs. The plaintiff is entitled to fair and reasonable indemnity with respect to the expenses to which it has been put by Georgian.
[32] Subject to any agreement the parties reach with respect to set-off, I direct that Georgian pay costs of $150,453.20 to the plaintiff within 30 days.
Akbarali J. Date: June 28, 2018