COURT FILE NO.: CV-14-503414 DATE: 20190308 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Leslie Arthur Swan, Plaintiff AND: Durham Condominium Corporation No. 45, Defendant

BEFORE: Nishikawa J.

COUNSEL: Howard Wright, for the Plaintiff Sheldon Inkol, for the Defendant

HEARD: February 27, 2019

Endorsement

Overview and Procedural History

[1] The Plaintiff, Leslie Arthur Swan, is the owner of a unit in a condominium building located in Pickering. The Defendant, Durham Condominium Corporation No. 45 (“DCC 45”) is a condominium corporation created under the Condominium Act, 1998, S.O. 1998, c. 19, as amended (the “Act”).

[2] The Plaintiff brings a motion for summary judgment on his claim for indemnification by DCC 45 as a former director. The Plaintiff also seeks an order vacating the lien registered by DCC 45 on his unit. The Defendant brings a cross-motion for summary judgment dismissing the Plaintiff’s claims.

Factual Background

[3] Mr. Swan was elected to the Board of DCC in June 2009. He was subsequently elected President of the Board. Mr. Swan was removed from the board by a vote of the unit owners on September 17, 2009.

[4] After his removal from the Board, Mr. Swan commenced five proceedings in the Small Claims Court against Board members and the property manager for the premises. All five proceedings were dismissed on November 25, 2010. Mr. Swan’s appeal of the dismissals was unsuccessful: Swan v. Durham Condominium Corporation No. 45, 2012 ONSC 4639.

[5] In May 2010, DCC 45 commenced an application against Mr. Swan under s. 134 of the Act, seeking an order requiring that he remove a satellite dish that he had affixed to the common elements appurtenant to his unit, and a declaration that he had breached the applicable standard of care as a director, contrary to s. 37(1) of the Act (the “Application”). DCC 45 also sought a declaration that Mr. Swan was a vexatious litigant pursuant to s. 140 of the Courts of Justice Act.

[6] Mr. Swan brought a cross-application seeking an order reinstating him as a director and as President of the Board, and a declaration that DCC 45 had treated him oppressively (the “Cross-Application”).

[7] In a decision dated June 15, 2012, Sosna J. declared that Mr. Swan had breached s. 37(1) during his tenure on the Board but declined to make an order declaring that he was a vexatious litigant: Durham Condominium Corporation No. 45 v. Swan, 2012 ONSC 3441 (the “June 2012 Decision”). Sosna J. found that the relief sought in relation to the satellite dish was moot, since, by the time of the hearing, Mr. Swan had removed it. The Cross-Application was dismissed.

[8] On January 18, 2013, Sosna J. awarded DCC 45 $45,000 in partial indemnity costs: Durham Condominium Corporation No. 45 v. Swan, 2013 ONSC 344 (the “First Costs Decision”). In the First Costs Decision, Sosna J. addressed Mr. Swan’s claim that as a director of DCC 45, he acted honestly and in good faith and was entitled to be indemnified for his costs under s. 38(1) of the Act. Sosna J. rejected Mr. Swan’s submission, based on his finding that Mr. Swan had “failed to exercise the care, due diligence and skill that a reasonably prudent person would exercise in comparable circumstances” (at para. 16).

[9] Mr. Swan appealed the First Costs Decision to the Court of Appeal. On September 1, 2015, the Court of Appeal remitted the matter back to Sosna J. The Court of Appeal found that the First Costs Decision was ambiguous as to the applicability of the indemnity because it was unclear whether Mr. Swan was found to have acted negligently, in bad faith, or both: Durham Condominium Corporation No. 45 v. Swan, 2015 ONCA 590 at para. 16.

[10] On October 15, 2010, Sosna J. released an endorsement confirming his award of costs in the amount of $45,000 to DCC 45: Durham Condominium Corporation No. 45 v. Swan, 2015 ONSC 6705 (the “Second Costs Decision”). In the Second Costs Decision, Sosna J. found that based on s. 38 of the Act and the applicable by-law, a director is disentitled from indemnity if his or her actions are in bad faith or simultaneously in bad faith and negligent, but not if they are merely negligent. Sosna J. held that Mr. Swan was not entitled to be indemnified because he was found to have acted in bad faith in the exercise of his duties as a director. Sosna J. concluded that Mr. Swan’s actions were not merely negligent, but “deliberate, deceptive, dishonest, and in bad faith” (at para.16). Sosna J. awarded DCC 45 $25,000 in costs on the Application and $20,000 on the Cross-Application.

[11] Mr. Swan then sought to appeal the Second Costs Decision. Since he took the position that Sosna J. had improperly revisited the merits of the June 2012 Decision, he sought to appeal that decision too. In an endorsement dated June 24, 2016, Cronk J.A. allowed Mr. Swan further time to bring a motion for leave to appeal the Second Costs Decision and to bring a motion for an extension of time to file a notice of appeal of the June 2012 Decision.

[12] On September 23, 2016, Brown J.A. dismissed Mr. Swan’s motion for an extension of time to appeal the June 2012 Decision.

[13] On January 23, 2017, Mr. Swan’s motion for leave to appeal the Second Costs Decision was dismissed.

The Lien

[14] On February 28, 2013, DCC 45 gave Mr. Swan notice that pursuant to s. 85 of the Act, it would be registering a lien against his unit for a total of $225,841.81. The lien was registered on March 12, 2013 for $218,908.70, which were the legal costs. DCC 45 advised Mr. Swan that it would not take any steps to enforce the lien while Mr. Swan’s appeals were pending. DCC 45 was also seeking an assessment of its previous lawyers’ accounts, and advised Mr. Swan that it would not enforce the lien until this process was also concluded. Mr. Swan was kept apprised of the assessment and advised of the hearing date before the assessment officer, but did not participate. The matter was resolved with the assistance of an assessment officer, leading to a 38 percent reduction in the fees.

[15] In a letter dated August 9, 2018, DCC’s counsel wrote to Mr. Swan’s counsel advising the amount of the lien on title as follows:

Common expense contribution to and including August 2018: $5,930.00 Accrued interest on common expenses: $480.59 Legal costs incurred to date re lien: $2,316.58 Common expense chargeback: legal costs re litigation $105,512.04 Accrued interest on legal costs $19,825.59 Total amount owing: $134,064.80

Analysis

Principles Applicable to Summary Judgment

[16] Rule 20.04(2)(a) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, states that a court shall grant summary judgment if the court is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence.

[17] The Supreme Court of Canada has held that “summary judgment must be interpreted broadly, favouring proportionality and fair access to the affordable, timely and just adjudication of claims” Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, at para. 5. An issue should be resolved on a motion for summary judgment if: (i) the motion affords a process that allows the judge to make the necessary findings of fact, (ii) apply the law to those facts, and (iii) is a proportionate, more expeditious, and less expensive process to achieve a just result than going to trial: Hryniak, at para. 49.

[18] On a motion for summary judgment, the judge must first determine whether there is a genuine issue requiring a trial based only on the evidence before him or her, without using their fact-finding powers. If there appears to be a genuine issue requiring a trial, the judge should then determine if the need for a trial can be avoided by using the powers under rr. 20.04(2.1) and (2.2): Hryniak, at para. 66.

[19] On a motion for summary judgment, the court is entitled to assume that the record contains all the evidence that the parties would present if the matter proceeded to trial: Sweda Farms Ltd. v. Egg Farmers of Ontario, 2014 ONSC 1200, [2014] O.J. No. 851, at paras. 26-27, aff’d 2014 ONCA 878, [2014] O.J. No. 5815, leave to appeal to SCC refused, [2015] S.C.C.A. No. 97. Each party must “put their best foot forward” with respect to the existence or non-existence of material issues to be tried: Sweda, at para. 26.

[20] Both parties brought motions for summary judgment and agreed that there were no genuine issues requiring a trial. Based on the issues and the evidence before me, I find that a summary judgment motion affords a process that allows the court to make the necessary findings of fact and apply the law to those facts. I also find that a summary judgment motion is a proportionate, more expeditious, and less expensive process to achieve a just result than going to trial in this case.

Is Mr. Swan Entitled to an Indemnity?

Res Judicata

[21] There is no genuine issue requiring a trial regarding Mr. Swan’s entitlement to an indemnity as a former director of DCC 45. Mr. Swan raised this very issue in his submissions on costs after the Application and Cross-Application before Sosna J. and in his first appeal to the Court of Appeal. After the matter was remitted back, Sosna J. clearly held, in the Second Costs Decision, that Mr. Swan had acted in bad faith and was not entitled to be indemnified. Mr. Swan’s attempts to appeal that decision, and the June 2012 Decision, were unsuccessful. As the matter was conclusively determined by the court, the principle of res judicata, or issue estoppel, applies: Toronto (City) v. C.U.P.E., Local 79, [2003] 3 S.C.R. 77, 2003 SCC 63 at para. 23. Mr. Swan’s claim for indemnification is a collateral attack on Sosna J.’s Second Costs Decision and an abuse of process.

[22] To support his claim for indemnification, Mr. Swan relies upon the language of the declarations in the judgment that was entered on August 30, 2016, after the Second Costs Decision (the “Judgment”), to argue that it does not specifically state that he acted dishonestly or in bad faith. The intent of the Judgment is determined by giving the words their ordinary meaning consistent with the surrounding circumstances: Bradshaw v. Langley Estate, 2015 ONSC 4909 at para. 42. It is disingenuous to rely solely upon the language of the Judgment, which was only agreed to after significant discussion between counsel, when Sosna J. clearly found that Mr. Swan had acted in bad faith.

Limitation Period

[23] In the event that Mr. Swan’s claim to an indemnity is not barred by the doctrine of res judicata, it would nonetheless be statute-barred by the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B. Section 4 of the Limitations Act establishes a limitation period of two years from the date on which a claim is discovered.

[24] The Statement of Claim was issued on May 2, 2014. The basis for Mr. Swan’s claim for indemnification is the Application commenced against him on May 18, 2010. There is no discoverability issue. In the Statement of Claim, Mr. Swan pleads that “DCC 45 was put on notice by Mr. Swan prior to, during and after the proceedings commenced against him that DCC 45 would be responsible for fees and all expenses suffered or owed by him and would have to indemnify him.” Mr. Swan was thus aware of his claim for indemnification even before the Application was commenced.

[25] In addition, Mr. Swan’s lawyer wrote to DCC 45 claiming indemnification on his behalf as early as March 2011. On April 26, 2011, DCC wrote to advise that Mr. Swan would not be indemnified. Mr. Swan thus knew of his claim for indemnification at the latest, by April 26, 2011. It was not necessary to wait for the outcome of the proceeding in order for Mr. Swan to know that he had a claim.

[26] This action was not commenced until more than three years after DCC 45 refused Mr. Swan’s claim for indemnification. As it was not commenced within the two-year limitation period, it is statute-barred.

Should The Lien Be Vacated?

[27] Mr. Swan seeks an order removing the lien registered by DCC 45 for legal costs from his unit. The lien was registered pursuant to ss. 85 and 134 of the Act, which states, in relevant part:

Lien upon default

85 (1) If an owner defaults in the obligation to contribute to the common expenses payable for the owner’s unit, 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.

Compliance Order

134 (1) Subject to subsection (2), an owner, an occupier of a proposed unit, a corporation, a declarant, a lessor of a leasehold condominium corporation or a mortgagee of a unit may make an application to the Superior Court of Justice for an order enforcing compliance with any provision of this Act, the declaration, the by-laws, the rules or an agreement between two or more corporations for the mutual use, provision or maintenance or the cost-sharing of facilities or services of any of the parties to the agreement.

(5) If a corporation obtains an award of damages or costs in an order made against an owner or occupier of a unit, the damages or costs, together with any actual costs to the corporation in obtaining the order, shall be added to the common expense for the unit and the corporation may specify a time for payment by the owner of the unit.

[28] In Metropolitan Toronto Condominium Corp. v. Skyline Executive Properties, 2005 CarswellOnt 1576 (C.A.), the Court of Appeal considered the interplay of the above provisions of the Act. Doherty J.A. stated as follows (at para. 39):

Not only does s. 134(5) give a condominium corporation a broad right of recovery for costs incurred in obtaining compliance orders, it also provides an effective enforcement mechanism for the collection of those costs. The section declares that the “award of costs” and the “additional actual costs” may both be added to the common expenses for the unit. If the amounts are not paid, the condominium corporation may register a lien against the unit. The lien is enforceable in the same way as a mortgage (s. 85(2), s. 86(6)).

[29] Mr. Swan argues that the declaratory judgment obtained by DCC 45 pursuant to its Application is not a “compliance order” within the meaning of s. 134 of the Act, and that as a result, the legal costs incurred in obtaining the order cannot be secured by a lien.

[30] In my view, this is an overly narrow interpretation of s. 134 of the Act. As Doherty J.A. noted in Skyline, s. 134 is remedial. The rationale for s. 134(5) is to permit a condominium corporation that was successful on an application under s. 134(1) to add the costs assessed by the court and the actual costs of the application to the unsuccessful owner’s common expenses, in order to shift the financial burden from the innocent unit owners to unit owners whose conducted necessitated the obtaining of the order: Skyline at paras. 40 and 46. The language used in s. 134(1) is broad, and refers to “any provision” of the Act. It does not limit its application to compliance with a provision pertaining to a unit owner’s use of their unit or the common areas.

[31] In Perper v. York Region Condominium Corp. No. 860, 2012 ONSC 4888, the application was also in respect of declaratory relief in relation to a board meeting. The court found that declaratory relief was ordered pursuant to s. 134(1) and rejected the unit owners’ argument that the cost ramifications of s. 134(5) did not apply (at paras. 15-16). Compliance within the meaning of s. 134 is thus not limited to physical conduct or to compliance in respect of a unit owners’ unit. See also, Carleton Condominium Corp. No. 396 v. Burdet, 2015 ONSC 1361 at para. 33.

[32] Moreover, costs can be awarded against a unit owner pursuant to s. 134 of the Act even where the unit owner has addressed the conduct complained of prior to the hearing of the application: Simcoe Condominium Corp. No. 12 v. Walker, 2014 ONSC 4109 at paras. 21-22. The fact that Mr. Swan removed the satellite dish before the hearing of the Application did not disentitle DCC 45 from seeking its costs.

[33] In the Application, DCC 45 sought various relief, including an order for the removal of the satellite dish, and declarations regarding Mr. Swan’s failure to fulfil his duties as a director. Those aspects of the Application related to securing Mr. Swan’s compliance with the provisions of the Act or applicable by-law. Sosna J. found that Mr. Swan had breached his duties as a director under s. 37(1) of the Act and granted declaratory relief to this effect. DCC 45 incurred legal costs in attempting to ensure Mr. Swan’s compliance with the Act. The rationale of not requiring innocent unit owners to pay those legal costs applies equally here. Further legal costs were incurred with Mr. Swan’s numerous appeals. Costs of maintaining the order on appeal are included in the costs of obtaining the order: Skyline at para. 9.

[34] In my view, the fact that the Application resulted in a judgment granting declaratory relief as opposed to an order does not disentitle DCC 45 from costs under s. 134(5). Under r. 1.03 of the Rules of Civil Procedure, an “order” includes a judgment. Consistent with the language of the provision, DCC 45 “obtain[ed] an award of damages or costs in an order made against an owner or occupier of a unit[.]” As a result, there is no basis for vacating the lien.

[35] In Metropolitan Toronto Condominium Corporation No. 596 v. Best View Dining Ltd., 2018 ONSC 5058, the court identified options available for challenging a lien. DCC 45’s counsel specifically advised Mr. Swan of certain options, but Mr. Swan did not avail himself of any of them. Contrary to Mr. Swan’s assertion, no judicial determination of “additional actual costs” is required. Mr. Swan was made aware of the assessment of the accounts of DCC 45’s previous counsel and could have participated in that process. Having failed to participate in the very procedure to determine the “additional actual costs” that could be included under s. 134(5), Mr. Swan cannot now complain about that process. In any event, DCC 45 reduced the claim under the lien in proportion to the amount by which the legal fees were reduced by the assessment (38.5 percent).

DCC 45’s Claim Under the Lien

[36] The lien is registered for $218,908.70, based on the legal fees before the assessment. DCC 45 advised Mr. Swan in August 2018 that the total amount it claims as of August 2018 is considerably less: $134,064.80. While DCC 45 does not intend to enforce the lien for more than its claim, and has also advised Mr. Swan’s mortgagee of the reduced amount, I do not think that DCC 45 should be able to continue to hold a lien for the higher amount. Counsel for DCC 45 advises that there is no mechanism under the Act to amend the lien without discharging and re-registering it.

[37] In addition, based on my review of the case law and evidence, I am concerned that DCC 45 has included certain amounts in its lien claim that are not authorized under s. 134(5). The language of s. 134(5) is limited and does not entitle the condominium corporation to claim all legal costs associated with compliance. It is limited to situations where the condominium corporation obtained “an award of damages or costs in an order made against an owner or occupier of a unit.” As the Court of Appeal held in Skyline at para. 10, legal fees incurred for matters unrelated to compliance with the Act are not covered by s. 134(5).

[38] DCC 45 properly advised Mr. Swan that it was not including any amount for the Cross-Application. It is unclear to me from the evidence, however, if DCC included any portion of the legal costs relating to DCC 45’s application for an order declaring Mr. Swan a vexatious litigant under s. 140 of the Courts of Justice Act. That part of the proceeding was not to secure compliance with the Act and the legal fees associated with it should not be included. Also, DCC 45 advised Mr. Swan that an amount was added to the lien for a “compliance letter” sent to Mr. Swan directing him to cease driving his motorcycle through common areas. While this letter may have been written to secure Mr. Swan’s compliance with the Act and by-laws, no proceeding was commenced in relation to this conduct and no award of costs or damages was made. Fees incurred in connection with the compliance letter do not fall within the terms of s. 134(5) and should not be included.

Conclusion

[39] There is no genuine issue requiring a trial regarding Mr. Swan’s entitlement to an indemnity, as this claim is barred by the doctrine of res judicata and was commenced after the expiry of the limitations period. Similarly, there is no genuine issue requiring a trial as to whether the lien should be vacated. DCC 45’s motion for summary judgment is granted. Mr. Swan’s motion for summary judgment is dismissed.

[40] Nonetheless, the lien as currently registered far exceeds DCC 45’s claim and ought to be amended to reflect the actual amounts to which DCC 45 is entitled under the Act. To this end, I direct as follows:

(a) DCC 45 shall recalculate the amount that it is entitled to claim in a manner consistent with these reasons (the “Revised Amount”) and provide Mr. Swan with an updated statement; (b) The original lien for the amount of $218,908.70 is to be discharged; and (c) DCC 45 shall be permitted to register a lien for the Revised Amount.

[41] In the event that any issues arise with the discharge and registration of the lien, counsel may contact my assistant to schedule an appearance before me.

Costs

[42] At the hearing, DCC 45’s counsel submitted a bill of costs and costs outline. DCC 45 seeks costs of the proceeding on a substantial indemnity for a total of $31,044.09 including disbursements and HST.

[43] Substantial indemnity costs may be warranted where a party has engaged in reprehensible, scandalous or outrageous conduct in the proceeding: Davies v. Clarington (Municipality) (2009), 100 O.R. (3d) 66 (C.A.), 2009 ONCA 722, at paras. 28-29.

[44] The proceeding seeks to relitigate previous decisions of the court. Despite having held the position of director for approximately three months, Mr. Swan has litigated his claim to an indemnity for over six years. Nonetheless, I have found no reprehensible behavior in the conduct of the proceeding that would warrant substantial indemnity costs.

[45] Pursuant to the Courts of Justice Act, s. 131(1), the Court has broad discretion when determining the issue of costs. The overall objective of fixing costs is to fix an amount that is fair and reasonable for the unsuccessful party to pay in the circumstances, rather than an amount fixed by actual costs incurred by the successful litigant: Boucher v. Public Accountants Council for the Province of Ontario (2004), 71 O.R. (3d) 291 (C.A.). Rule 57.01(1) of the Rules of Civil Procedure sets out the factors to be considered by the court when determining the issue of costs. I have considered the factors set out in r. 57.01(1), as well as the proportionality principle in r. 1.04(1.1) of the Rules of Civil Procedure, while keeping in mind that the court should seek to balance the indemnity principle with the fundamental objective of access to justice.

[46] In bringing summary judgment motions, both parties have attempted to bring an early resolution to the matter. DCC 45 was successful in its motion and Mr. Swan, with the exception of the amount of the lien, was unsuccessful. The motion ought to have been fairly straight forward, but was unduly complicated by the voluminous and unfocussed material served on behalf of Mr. Swan.

[47] Based on my consideration of the relevant factors, I fix costs of the proceeding at $18,000.00 on a partial indemnity basis, inclusive of disbursements and HST.

Nishikawa J.

Date: March 8, 2019