Court File and Parties

COURT FILE NO.: 14-62967 DATE: 20181001 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN: STEVEN FURR and KATHLEEN LUNDGREN Applicants – and – MICHEL DUHAMEL, EMMY VERDUN and JACK HUGHES and THE KINGS LANDING CO-TENANCY COMMITTEE Respondents PAULETTE MARTEL Intervenor

Counsel: David McCutcheon, for the Applicants Eric Appotive and Allison Russell, for the Respondents Bruce Simpson, for the Intervenor Paulette Martel

HEARD: By written submissions

Decision on Costs

Beaudoin J.

[1] The Applicants sought a number of declarations and orders regarding a Co-Tenancy Agreement that governs a townhouse development known as “Kings Landing” in Ottawa, Ontario. The Respondents are the members of the Co-Tenancy Committee (“Committee”), which was established to manage Kings Landing’s Shared Property and Shared Expenses. The Intervenor, Paulette Martel (“Martel”), had separately commenced an action that raised issues in common with this Application. She was granted leave to intervene as an added party and her action was stayed pending the resolution of the Application.

[2] The Application required the interpretation of the Co-tenancy Agreement with regard to “Shared Property”, in particular, fencing and a retaining wall, and a determination of whether the members of the Co-tenancy Agreement had acted in bad faith in the performance of their duties.

[3] The hearing of this Application was adjourned on two occasions by former counsel to the Applicants. The second adjournment resulted in a Costs award against the Applicants. Furr v. Duhamel, 2017 ONSC 4623.

[4] I concluded that the fencing and retaining wall located along Greenfield Avenue were “Shared Property” within the meaning of the Co-Tenancy Agreement, and found that the allegations of bad faith were without merit.

The Respondents’ Submissions

[5] The Respondents seek their costs throughout. They claim to have incurred legal costs in the amount of $255,826.50 plus disbursements of $7,330.83 plus HST of $33,257.45 for a total amount of $297,339.10. This amount is net of “costs thrown away” that were previously recovered in the amount of $23,500 plus HST. The Respondents have reduced their claim to the all-inclusive sum of $225,000.00. The Respondents are seeking the sum of $188,700.00 from the Applicants and the sum of $36,300.00 from the Intervenor as explained in a chart that they have provided.

[6] The Respondents submit that the apportionment of costs as between the defence of the bad faith allegations and the issue of the interpretation of the Co-Tenancy Agreement is reasonably divided at 50%/50% (time and effort incurred for each).

[7] The costs with respect to the interpretation of the Co-Tenancy Agreement are claimed on a partial indemnity basis. The Respondents submit that the apportionment of costs as between the Applicants and the Intervenor in respect to the interpretation of the Co-Tenancy Agreement is fairly allocated at 60% payable by the Applicants and 40% payable by the Intervenor.

[8] The costs with respect to defending the bad faith allegations are claimed on a substantial indemnity basis in the amount of $115,100.00 against the Applicants.

[9] The Respondents note that the hourly rates claimed by them have previously been considered and approved when dealing with “costs thrown away.” They say that the rates are the lowest practice rates charged by counsel for the Respondents.

[10] In addition, the Respondents seek the sum of $5,000.00 plus HST of $650 for a total of $5,650 for the preparation of these costs submissions.

[11] The Respondents allege that the Applicants embarked on a strategic campaign to bring their reputations into disrepute within their community of Kings Landing. They claim that the Applicants are well educated professionals who had the benefit of legal counsel and fully appreciated the cost consequences of their serious allegations.

[12] The Respondents submit that the Applicants wielded their allegations of bad faith in an effort to coerce the Respondents to accede to their interpretation of the Co-Tenancy Agreement and that the Applicants maintained their bad faith allegations to the bitter end.

[13] The Respondents note that the Applicants made their strategic decision to issue their Application notwithstanding that the Intervenor had already issued her Statement of Claim on May 9, 2014. They argue that the Applicants were intent on taking control of the legal proceedings.

[14] According to the Respondents, the only Rule 49 Offer to Settle was delivered on October 31, 2017, shortly before the return date of the Application. They submit that the Offer to Settle required that the Respondents trade-off the best interests of the Kings Landing Community in order to exculpate themselves personally from the unfounded allegations of bad faith and the threat of substantial legal costs. It also required the Respondents to pay partial indemnity costs of $62,000 plus HST and disbursements. Further, that Offer meant that the Applicants’ position regarding the sound attenuation fence and retaining wall trumped the Intervenor’s position even though the Intervenor was not a party to the Offer.

[15] The Respondents emphasize that the relief sought by the Applicants included a declaration that the Respondents should be denied indemnity for their costs pursuant to ss. 3.7(a) and (b) and s. 11.3 of the Co-Tenancy Agreement.

[16] As for proportionality, the Respondents submit that the expectation of proportionality went out the window with the issuance of the Application and the Intervenor’s Statement of Claim. The potential damages were in the range of $6,600.00 for the Applicants and the Intervenor. They say that it was self-evident from the outset that the legal costs would significantly exceed any monetary damages. All other owners had the opportunity to participate in the Application and none did.

[17] The Respondents refer to Corbett v. Odorico, 2016 ONSC 2961, where the court cautioned against placing too much weight on the need for proportionality in fixing costs which could otherwise result in undercompensating a litigant for costs legitimately incurred. See also Chris Nash Building Inc. v. Buckland, 2010 ONSC 7076, 98 C.L.R. (3d) 157, at para. 22.

[18] The Respondents refer to the conduct, nature and scope of allegations, and the volume of the Applicants’ materials that drove the legal costs from the outset. The Respondents maintain that they were entitled and compelled to vigorously defend the unfounded bad faith allegations and respond comprehensively to the interpretation issue.

[19] Having regard to general principles set out in Rule 57, the Respondents submits that hourly rates charged and time incurred were fair, reasonable and anticipated by the Applicants and Intervenor. They refer to the Applicants’ failure to disclose all of the time incurred and hourly rates charged by their legal team.

[20] The Respondents cite the complexity of the claim that was created by the constellation of allegations; the historical documentation; the litany of documents and details underlying all allegations including the bad faith claim. The issues were important to the parties, and in particular, to the Respondents who faced serious allegations of bad faith and resulting cost consequences.

[21] As for the Intervenor, she filed two short affidavits with few exhibits and the Respondents concede that her conduct of the case was less heavy-handed. The Intervenor did not advance the bad faith allegations. The Respondents nevertheless submit that the Intervenor was persistent and uncompromising in advancing her interpretation of the Co-Tenancy Agreement. Although the time was evenly divided at the hearing, the Respondents submit that far more time and effort was incurred in defending the Applicant’s case prior to the actual hearing. The Applicants filed substantial affidavit materials. They demanded substantial undertakings. The Applicants delivered substantial material following the delivery of their affidavit and subsequent to the cross-examinations.

[22] The Respondents claim that these proceedings have impacted them personally. The gravity of the bad faith allegations and accusations along with the scope of documentary productions and cross-examinations required a significant personal sacrifice. In preparing these costs submissions, a significant amount of time was incurred and the Respondents propose $5,000.00 plus HST.

The Intervenor’s Submissions

[23] The Intervenor agrees that any costs awarded on the bad faith claim Application should be borne entirely by the Applicants, as she did not intervene on that issue. For her part, it was not clear how or why anyone would benefit from a finding of bad faith. She maintains that the interpretation of the Agreement was the critical issue and she submits that the issue could have been dealt with in a great deal less time.

[24] With respect to the arguments on the retaining wall and the fence, the Intervenor submits that she should not be required to pay more than and arguably less than, 25% of those costs. She notes that she was not involved in this action until the consent order of August 19, 2015. She submits that virtually all of the time spent on this file by the Respondent solicitors, up until the date, would have been spent whether or not she had intervened.

[25] She also notes that some of the costs incurred were incurred as a result of adjournments and that there were no delays incurred by her counsel. She concedes that her counsel spent as much time in making submissions as did counsel for the Applicants, but notes that her materials were relatively short and to the point. She adds that the time spent by her counsel in cross-examinations was substantially less than the time spent by counsel for the Applicants.

[26] While counsel for the Intervenor was copied with all of the undertakings, only a few of these documents were requested by her. Her own fees were increased by the fact that the documents requested by the Applicants had to be reviewed in case they were of some relevance.

[27] The Intervenor notes that the Applicants filed very lengthy materials and that the Respondents filed very lengthy affidavits in reply. She argues that there were very few facts upon which there was meaningful disagreement between the Respondents and herself. She repeats that the responding materials would have been considerably shorter if the only issue had been that of the retaining wall and fence and that 80% of the materials dealt with matters of little relevance or matters which were relevant only to the issue of bad faith. She repeats that this issue increased the hearing time, the time for spent on cross-examinations and the number of documents which needed to be reviewed. These allegations expanded her own costs.

[28] Counsel for the Intervenor argues that “undue focus on proportionality” will not always be fair. R & G Draper Farms(Keswick) Ltd. v. Nature’s Finest Produce Ltd., 2016 ONCA 626, 133 O.R. (3d) 395 at paras. 23-26; Marcus v. Cochrane, 2014 ONCA 207, 317 O.A.C. 251 at paras. 15-16; Boucher v. Public Accountants Council for the Province of Ontario, 71 O.R. (3d) 291 at p.299. The Intervenor emphasizes that her position was important for all other signatories and future signatories to the Co-Tenancy Agreement since the Agreement was far from clear on its face.

[29] The Intervenor takes no issue with the hourly rates set out in the Costs Outline of counsel for the Respondents. She also takes issue with the lengthy affidavit filed by the Respondent, Duhamel, and argues that the affidavits of other Respondents were, for a large extent, redundant and could have been much shorter.

[30] The Intervenor’s counsel provided his own Costs Outline and time dockets. With respect to the Offer to Settle, the Intervenor concedes that she was in no position to accept that Offer, but if it had been accepted by the Applicants, she asserts that her involvement in this case would have terminated and she could have proceeded with her own action which contains other issues. She submits that the Offer to Settle would have been satisfactory to her.

The Applicants Submissions

[31] The Applicants take the position that it would be fair and reasonable to award them partial indemnity costs in the amount of $40,000 because of their Offer to Settle made on February 2, 2015. They take the position that the outcome was more favourable than the ultimate result after a prolonged and much more complicated adversarial process that included the intervention by Martel.

[32] As for the Offer to Settle, the operative parts are as follows:

2. The Applicants shall consent to the dismissal of this Application upon confirmation and/or completion of the terms that follow.

The Respondent through the Kings Landing Co-Tenancy Committee (the “Committee”) or any of them shall:

a. restore the Applicants full status as voting members of the Kings Landing community;

b. within 30 days of acceptance of this Offer to Settle, withdraw or cause to be withdrawn Instrument No. OC 1575308 and Instrument no. OC 1564835 which are registered against title to 59 Kings Landing Private;

c. within 30 days of acceptance of this Offer to Settle, pay or cause to be paid the legal costs of the Applicants to the date of acceptance incurred in relation to the application on a full indemnity basis;

d. pending the final and binding adjudication of the allocation of responsibility for the cost of maintenance, repair, reconstruction or replacement of the Retaining Wall and Brick Column and Metal and Wood Screen Fencing and related issues as set out in the notice of application herein (the “Isssues”)

i. refrain absolutely from stating or attempting to collect the Special Assessment or the additional monthly Co-Tenancy Fees imposed by the Committee in relation to the Retaining Wall; and

ii. refrain from expending any further co-tenancy funds for the maintenance, repair, reconstruction or replacement of any property, including but not limited to the Retaining Wall and Brick Column and Metal and Wood Screen Fencing, except as expressly authorized by the Co-Tenancy Agreement;

e. with the assistance of the court as may be required, submit the Issues to adjudication in this Court on behalf of all owners and future owners of units of Kings Landing in a joint Application to which the Applicants herein will be party Applicants (the “Joint Application”) and

f. pay, on request from time to time, the legal costs of the Applicants in relation to the joint application. (Emphasis mine)

[33] In the alternative, the Applicants submit that there should be no costs awarded because the Co-Tenancy Agreement was ambiguous and the Applicants reasonably sought the necessary and inevitable court determination to resolve an issue that had been festering for a number of years among the unit owners.

[34] The Applicants state that this case arose from a complex and ambiguous Agreement which had been reasonably interpreted in conflicting ways over number of years. The right, interests and obligations with respect to co-tenancy in common properties are governed by the common law of contract – unlike condominiums which have the advantage of remedial legislation and a significant body of precedents. They submit that the contractual ambiguity in this case could only be resolved by court interpretation; looking at the wording of the Agreement and considering the surrounding circumstances in the conduct of the parties subsequent to the formation of the Agreement. They argue that evidence of conduct was a necessary element of the interpretation process.

[35] They maintain that the early Offer was not an ultimatum, it was a genuine attempt made in good faith by them to get an early and efficient court decision working cooperatively and on a less costly basis.

[36] The Applicants point out that the Respondents failed to disclose the Feb. 2, 2015 Offer to Settle in their submissions. The Applicants maintain that this Offer was made at the outset when the costs of this proceeding were negligible. They submit that the Offer effectively created a standstill and equality among all owners pending a cooperative application was neither costly, nor unreasonable. The Applicants maintain that the Respondents did not even negotiate. As a result, the Applicants maintain that the Application evolved into a far more complicated procedure with inclusion of Intervenor’s claim, with extensive materials and cross examinations.

[37] The Applicants allege that the Respondents, who were funded by insurance, made no offers and proceeded with a full adversarial litigation process, all the while keeping the lien on their property, refusing their votes at owners’ meetings and keeping in place the notices that had been registered on title to all units.

[38] The Applicants say the key issue driving this litigation was the interpretation of the Agreement which was to the benefit of all owners. The Applicants add that they had paid their share of the Respondent’s legal costs through the monthly co-tenancy fees in addition to their own legal costs. They claim that they suffered liens on their property and threats of power sale over modest amounts of disputed payments and that these represent a penalty.

[39] They maintain that the bad faith allegations arose only under the terms of the Agreement and were not allegations of fraud or of corrupt intent. They claim that the proceeding had been complicated by the action commenced by the Intervenor who submitted a second interpretation and sought declarations of monetary relief in her claim, including restitution. Finally, the Applicant submits that the court should not discourage parties from seeking a court interpretation to resolving festering co-tenancy disputes.

[40] In the further alternative, the Applicants submit that the costs claimed should be reduced to be proportionate to the nature and the amount of the matters in issue on the following basis. The amount in issue, in this case, was a $6600. The Applicants note that the proposed apportionment of costs between the Applicants and the Intervenor does not reflect the monetary and compensatory restitution claims made by the Intervenor.

[41] Further, and in any event, the Applicants submit that any costs should be reduced on a partial indemnity basis having regard to the amount in dispute and the Rule 49 Offer. They argue the substantial indemnity costs should not be awarded unless there are exceptional circumstances which do not exist in this case.

[42] The Applicants accept the hourly rates claimed by the Respondents but ask that if costs are awarded, the total amount of time should be reduced. They note that there were five lawyers for the Respondents that worked on this file and that the time and amounts claimed are excessive. They submit that junior counsel was not required at the hearing and did not take any significant role. The Applicants note that the Respondents are insured while they had to pay their own costs throughout. At the hearing, the Applicants had one counsel and a student, and the Intervenor had one counsel. The Applicants note that they have already paid substantial costs “thrown away” in connection with an adjournment.

[43] The Applicants note that the Intervenor actively participated in examinations and at the hearing, and insisted on advancing separate arguments that shared expenses could only apply to elements on co-owned land. They cite case law where costs were awarded equally against an Intervenor and a losing party when the Intervenor had participated fully in the proceeding as in the case here. David v. Pilot Insurance Co..

[44] The Intervenor has now chosen to appeal the ruling on the interpretation issue. As a result, there will be further costs on her appeal. The Applicants submit that it would be unfair to for them to pay all of their costs pending the appeal. They request either a separate allocation of costs between themselves and the Intervenor or a stay of costs order pending the appeal.

[45] As for the bad faith allegations, the Applicants maintain that they did not allege fraud or dishonesty. They maintain that the question of breach of duty was necessary in order to determine whether any action by Committee members would be indemnified by owners or be responded to by liability insurance. They say that they only advanced these claims once they realized that their early Offer to Settle was not accepted.

[46] The Applicants further argue that there is insufficient evidence from the docket records to make any meaningful allocation of costs between the Applicants and the Intervenor.

[47] In conclusion, the Applicants say that the stress and anxiety of the adversarial process has negatively affected their health and well-being. They claim that they have been labelled as “free riders” and defaulters which has further isolated them in their community. The Applicants say that they are not wealthy; they have taken out a second mortgage to pay their legal fees and will be required to sell their property in the event of a significant costs award.

The Reply Submissions

[48] With regard to the Offer to Settle dated February 2, 2015, the Respondents submit that this was consistent with an offer by their counsel dated December 17, 2014 which I referred to in my Decision and considered to be an “Ultimatum.” The Respondents submit that the February 2015 Offer was revoked, in any event, by the Applicants’ October 31, 2017 Offer to Settle.

[49] The Respondents claim that the February 2015 Offer was, in any event, unreasonable. Not only did it require that the Respondents, personally, or the Kings Landing Committee pay the legal costs of the Applicants to the date of the Offer on a full indemnity basis, but it also required that the Respondents pay the Applicants’ legal costs of the proposed joint Application. According to the Respondents, the February 2015 Offer was not a compromise, nor was it economical. It was simply not an option.

[50] As for the February 2015 Offer being made when costs were negligible, the Respondents note that the Applicants have refused to disclose to the court their own costs for this proceeding. Further, in other proceedings, the Applicants disclosed that they had already incurred legal fees of $88,691 by May 7, 2015. Furr v. Duhamel, 2017 ONSC 5358 at para.4. Their actual costs were not disclosed in the February 2015 Offer, and had the Respondents accepted it, they would have been liable for these costs and the full ongoing and uncapped legal costs of the Applicants. Mr. Furr’s 53 page affidavit with 75 exhibits was sworn on January 29, 2015 and the Respondents state that very few steps occurred between January 29, 2015 and May 7, 2015.

[51] The Respondents argue that the February 2015 Offer did not resolve any of the interpretation issues between the parties and they repeat that it was the Applicants’ intention to leverage the bad faith allegations to achieve their own ends.

[52] Moreover, the Respondents note that the February 2015 Offer failed to take into account the pre-existing action commenced by the Intervenor. None of the Applicants’ offers could unilaterally usurp the Intervenor’s rights. No Offer made the Intervenor a party to the Offer.

[53] As for the “comfort of insurance”, the Respondents submit that the Applicants sought a determination that the Respondents were in breach of their duties under the Co-Tenancy Agreement so as to disentitle them to indemnification from any coverage.

[54] The Respondents disagree that the bad faith allegations are somehow justifiable as being made in the context of the Agreement. They assert that the Committee only took steps after seeking legal advice. They submit that there is not a hint on the record that the Applicants were intimidated by the Respondents.

[55] As for the Respondents failure to bring an application to interpret the Agreement, the Respondents submit that by the summer of 2013, the issue of the retaining wall was resolved by the Kings Landing Community when they voted in favour of a resolution declaring the retaining wall part of the Shared Property. Only the Applicants and the Intervenor disputed that result. No other owner chose to be added as an Intervenor.

[56] As for the registration of the lien and of the notices, the Respondents maintain that these were not a penalty. The Applicants were in default of their co-tenancy fees. The Kings Landing Co-Tenancy Committee had an obligation to provide notice to any subsequent purchaser or encumbrancer. They say that the Applicants could have paid the sum of $6,600.00 under protest and without prejudice to their rights in order to allow for the lien and other notices to be removed from title to their property.

[57] The Respondents submit that their dockets are clear and that the Applicants’ own dockets would have identified all lawyers, students and others at Dentons that worked on behalf of the Applicants. The Respondents assert that they had far more issues and evidence to deal with and having two counsel at the hearing proved to be far more cost effective. According to the Respondents, the Applicants’ decision not to provide the record of their legal team’s time, dockets, work in progress and billings allows the court to infer that they have spent the same amount of time as or more time or fees than the Respondents in pursuing this litigation.

[58] The Respondents repeat that the costs now sought by them are net of the amount previously awarded. As for the Applicants paying their own costs, the Respondents express their understanding that their counsel is on an insurance retainer with LawPro, including the hearing of the Application.

[59] The Respondents add that there is no evidence in support of the allegations of community “ill will” and that, in any event, these are irrelevant to the issue of costs. They say that Applicants were the authors of their own community perception – good, bad or otherwise.

Further Reply by the Applicants

[60] I have permitted the Applicants to make further reply submissions.

[61] They assert that the early Offer was not revoked and remained in force until after the commencement of hearing. They repeat that the Offer could have been accepted at any time. They concede that the practical benefit diminished over time because the Application was complicated by the introduction of the Intervenor and the filing of substantial evidence. They repeat the reasonableness of that Offer as they have throughout their original submissions.

[62] They maintain that the Kings Landing community remained divided on the issue and that a court determination was necessary. Although the Applicants and the Intervenor were the only parties to move forward, the Applicants submit that there were still strong objections from other owners on these issues.

The Legal Framework

[63] The relevant rules are:

Proportionality

(1.1) In applying these rules, the court shall make orders and give directions that are proportionate to the importance and complexity of the issues, and to the amount involved, in the proceeding. O. Reg. 438/08, s. 2.

Offers to Settle

49.10 (1) Where an offer to settle,

(a) is made by a plaintiff at least seven days before the commencement of the hearing;

(b) is not withdrawn and does not expire before the commencement of the hearing; and

(c) is not accepted by the defendant,

and the plaintiff obtains a judgment as favourable as or more favourable than the terms of the offer to settle, the plaintiff is entitled to partial indemnity costs to the date the offer to settle was served and substantial indemnity costs from that date, unless the court orders otherwise. R.R.O. 1990, Reg. 194, r. 49.10 (1); O. Reg. 284/01, s. 11 (1).

Burden of Proof

(3) The burden of proving that the judgment is as favourable as the terms of the offer to settle, or more or less favourable, as the case may be, is on the party who claims the benefit of subrule (1) or (2). O. Reg. 219/91, s. 6.

Costs of Proceedings

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;

(i) any other matter relevant to the question of costs. R.R.O. 1990, Reg. 194, r. 57.01 (1); O. Reg. 627/98, s. 6; O. Reg. 42/05, s. 4 (1); O. Reg. 575/07, s. 1.

Conclusion

The Offer to Settle

[64] The Applicants have not satisfied the burden to prove that the judgement obtained at the hearing of the Application was as favourable as their Offer to Settle. The Applicants failed to persuade the court on the two issues to be decided. The Respondents were completely successful. While it is arguable that the process that they proposed in their Offers of December 17, 2014, February 2, 2015 and October 31, 2017 could have resulted in less costs, that argument fails for a number of reasons.

[65] First, the Intervenor was not a party to those Offers. The Respondents would have still been required to defend the broader allegations in the Statement of Claim commenced by the Intervenor one year earlier. There is no evidence that the Intervenor would have accepted the terms of that Offer if it had been extended to her. She opposed the position taken by the Applicants at the hearing.

[66] Second, the Applicants’ argument that they should not be penalized for seeking a solution on behalf of all owners is not persuasive. No application to the court was necessary. The Committee had received legal advice as to how to deal with this issue; proceed with a resolution under s. 9.5 of the Co-Tenancy Agreement or proceed to Arbitration. The Kings Landing community had already incurred legal costs in an arbitration and in a subsequent appeal in a case involving the location of air conditioning units. They were understandably reluctant to go to court again. This proceeding was commenced because the Applicants did not accept the results of the votes of the majority of the owners. Only one other unit owner chose to intervene.

[67] In my Decision, I described the Applicants early Offer made in December, 2017 as “an ultimatum.” The later Offers were not materially different. After originally agreeing that the “as built” fence and retaining wall were “shared property” (a fact that they did not disclose to the court), the Applicants changed their opinion about the issue and commenced their relentless campaign for the production of documents. In their Offers, they demanded that their legal costs amount be paid in full without disclosing an amount and on an ongoing basis. It would have been reckless for the Committee to commit the Owners to such an open-ended expenditure given the vote that had been taken. The total costs would have exceeded the cost to repair the retaining wall. We now know that the Applicants had already incurred costs of $88,691 by May 7, 2015.

[68] There is no issue that the Respondents are entitled to their costs; the only issues are quantum and scale.

Proportionality

[69] As for proportionality, that concept disappeared when the Applicants delivered their 53 page Affidavit with 75 exhibits. After the Application was adjourned in November, 2016, I recommended that the parties focus on the core issues:

1. Are the fencing and retaining wall along Greenfield Avenue “Shared Property” within the meaning of the Co-Tenancy Agreement?

2. If not, did the Co-Tenancy Agreement require an amendment with the consent of all owners as opposed to a resolution pursuant to article 9.5?

The Applicants insisted that a third issue be argued:

3. Did the Respondents act in bad faith or in breach of their duties and obligations pursuant to the Co-Tenancy Agreement with regard to items one and two?

[70] The bad faith argument greatly expanded the scope of the cross-examinations, the undertakings, and the documentary production and this issue easily doubled the hearing time. The principle of indemnity is the starting point in assessing costs. Moreover, the principle of proportionality is not limited to the amount in issue, but includes the importance and complexity of the issues. There is no dispute that the issues were both important and complex.

The Rule 57 Factors

[71] Our courts have repeatedly emphasized that the assessment of costs should not be an exercise in totalling the number of hours spent and multiplying that number by applicable hourly rates. As a result, the costs rules were amended to include the principle of set out in rule 57.01 (1)(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.”

[72] In this case, I agree that the costs of the proceeding should be evenly divided; 50% to the interpretation issue and 50% to the bad faith claim. I further agree that the Applicants should be solely responsible for the costs of the bad faith claims and that the Intervenor and the Applicants should share the costs of the interpretation issue and that the Applicants should a pay larger share of those costs given the brevity of the materials filed by the Intervenor.

[73] The hourly rates claimed by counsel are reasonable and I take no issue with the presence of junior counsel at the hearing. There were volumes of materials that had to be referred to. The Respondents were facing two sets of counsel who had completely different arguments. The Respondents had to prepare on three separate occasions.

[74] I have taken into consideration the amounts previously awarded. The Applicants have not disclosed their own costs, but given what was disclosed previously about their legal costs as of May, 2015, it is reasonable to assume that their own costs would have been at least equal to the amounts claimed by the Respondents.

[75] I fix the Respondents total costs in the all-inclusive amount of $200,000 or $100,000 per issue. Costs of the interpretation issue are fixed on a partial indemnity scale in the amount of $60,000. I fix the Applicants’ share at $32,000 and the Intervenor’s at $28,000.

[76] As for the cost of the bad faith claim, while there were no allegations of fraud or of dishonesty, the Applicants conduct is deserving of some sanction. The Applicants accused the Respondents of a lack of transparency while they were the ones who withheld critical information from the court. They named a member of the Co-Tenancy Committee (Hughes) as a Respondent and sought costs from him even though he was not a member at the time that the contested decisions were made. They accused the Respondents of not providing information when indeed, they had. More critically, the Applicant Steven Furr admitted that he altered a document that he placed in evidence before the court. Such conduct cannot be condoned.

[77] The bad faith allegations and the conduct of the Committee members were not necessary to interpret the meaning of the Co-tenancy Agreement. Their counsel argued the very opposite. These allegations were made solely to prevent the volunteer committee members from seeking indemnification for their legal fees through their insurer. The Applicants themselves sought costs on a substantial indemnity basis. For these reasons, I assess the costs of the bad faith claims at $85,000 which costs are payable solely by the Applicants.

[78] In conclusion, the Respondents costs are fixed in the amount of $145,000; $28,000 payable by the Intervenor and $117,000 by the Applicants. I decline to make any order for the preparation of Costs Submissions.

Mr. Justice Robert N. Beaudoin

Released: October 1, 2018