Court File and Parties

COURT FILE NO.: CV-18-589736 DATE: 20190717 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: SALVATORE BENEDETTO, Plaintiff AND: 2453912 ONTARIO INC., Defendant

AND BETWEEN: 2453912 ONTARIO INC., Plaintiff by Counterclaim AND: SALVATORE BENEDETTO and RE/MAX WEST REALTY INC., BROKERAGE, Defendants to the Counterclaim

BEFORE: Justice Glustein

COUNSEL: Arieh Bloom, for the Plaintiff/Defendant to the Counterclaim, Salvatore Benedetto Mark A. Ross and Jeremy Lum-Danson, for the Defendant/Plaintiff by Counterclaim, 2453912 Ontario Inc.

Costs Endorsement

Overview

[1] I set out below my costs decision with respect to my reasons for decision cited as 2018 ONSC 4524.

[2] Both parties incurred approximately $10,000 in partial indemnity costs, which is reasonable given the complexity of the legal issues raised in this matter, and, in particular, the issue on this motion of whether a purchaser who uses the express language in s. 21(4) of the Business Corporations Act, R.S.O. 1990, c. B. 16 (“OBCA”) forfeits a deposit to the vendor if the purchaser fails to close an agreement of purchase and sale. That issue required significant research and thorough written submissions before the court and was of considerable importance to the parties.

[3] Further, the court can consider the similarity between the bills of cost as a factor reflecting the reasonable expectations of the unsuccessful party (Ward-Price v. Mariners Haven Inc., [2004] O.J. No. 5528 (S.C.) (“Ward-Price”), at para. 13).

[4] The successful defendant (the “Vendor”) does not rely on any egregious or otherwise improper conduct of the plaintiff Benedetto as a basis for substantial indemnity costs.

[5] The parties raise the following issues for this costs endorsement:

(i) Benedetto submits that no costs should be ordered since the issue before the court was “novel”; and

(ii) The Vendor seeks to rely on a Rule 49 offer to settle (the “Offer”) made prior to the motion in which the Vendor proposed settlement on the basis that Benedetto “provide … for the immediate release of the deposit … plus any interest accrued thereon”, with costs payable on a partial indemnity basis from the date of the offer.

[6] I address each of these issues briefly below.

Issue 1: Is the issue “novel” such that no costs should be ordered?

[7] Benedetto submits that no costs should be ordered because the issue of whether a purchaser who uses the express language in s. 21(4) of the OBCA forfeits a deposit to the vendor if the purchaser fails to close an agreement of purchase and sale is “novel”. I do not agree.

[8] Under the test set out in Baldwin v. Daubney, [2006] O.J. No. 3919 (S.C.) (“Baldwin”), relied upon by Benedetto, Spence J. set out the following requirements for the court to find a “novel” issue such that an order of no costs is appropriate (at para. 19):

For an issue to be novel in a way that is legally significant, it might be argued that the issue should not only be one which has not been decided in the factual context in which it now arises in the instant case, but is also one on which the law in the decided cases does [not] provide adequate guidance as to its resolution (whether that is so because of conflicts among the cases or a limitation on the appropriate scope of their application or some other factor). Such an issue could properly be regarded as “open”.

[9] Similarly, in Haufler v. Hotel Riu Palace Cabo San Lucas, 2014 ONSC 2686 (“Haufler”), also relied upon by Benedetto, M.G.J. Quigley J. held (at para. 30):

The novelty must be such that the issue is “open” in the sense that existing case law is inadequate to resolve the issue such that the parties would not be warned from raising it.

[10] I find that the decisions in Baldwin and Haufler do not assist Benedetto in seeking an order of no costs. To the contrary, they support a finding that costs should be ordered in favour of the successful defendant Vendor.

[11] There was no case directly on point, satisfying the first requirement in Baldwin that it “has not been decided in the factual context in which it now arises in the instant case”.

[12] However, the second requirement under Baldwin was not met. There was (using the language from Baldwin) “law in the decided cases [to] provide adequate guidance as to its resolution”, with no “conflicts among the cases or a limitation on the appropriate scope of their application or some other factor”. I relied on the settled law as to the law of deposit and found that s. 21(4) was consistent with such law. I also relied on similar reasoning (albeit in a trust purchase) in Adamis v. Aviks, 1983 CarswellOnt 3436 (Co. Ct.). I also rejected the submissions of Benedetto based on other case law upon which he relied.

[13] Similarly, under the Haufler test, it cannot be said that the “existing case law is inadequate to resolve the issue such that the parties would not be warned from raising it”. While I was required to apply principles of law relating to deposit and pre-incorporation contracts to the facts of the present case, there was no “open” legal principles not known by the parties which required a new approach to the law.

[14] For the above reasons, I do not make an order of no costs on this motion. I find that costs are payable by Benedetto as the unsuccessful party.

Issue 2: What is the effect of the Offer?

[15] The Offer did not propose any compromise on the part of the Vendor. Rather, it was an offer seeking the capitulation of Benedetto, by agreeing to the release of the deposit and payment of costs.

[16] While an offer to settle need not contain an element of compromise to qualify as an effective offer under Rule 49, the lack of an element of compromise in an offer is still a matter that the court can consider in exercising its discretion regarding costs (Ward-Price, at para. 7, citing Data General (Canada) Ltd. v. Moinar Systems Group Inc. (1991), 6 O.R. (3d) 409 (C.A.) (“Data General”)).

[17] In Ward-Price, Nordheimer J. (as he then was) refused a request for substantial indemnity costs in the face of an offer to settle without compromise. He held (at para. 7):

If this had been a hopeless motion, then the offer to allow it to be dismissed without costs might well be one that ought to attract the penalty of substantial indemnity costs. However, the motion was not hopeless. It raised important issues which had not been specifically addressed under the Class Proceedings Act, 1992. Given that the offer contained no meaningful measure of compromise in an effort to resolve a substantive motion, I do not view the offer made as appropriately invoking an award of costs on the higher scale.

[18] Similarly, in Data General, Morden A.C.J.O. spoke for the court and held that substantial indemnity costs were not appropriate when the offer contained no element of compromise and the issues in the case reasonably gave rise to uncertainty. He held (at 418):

I think that Rosenberg J. was right, on the facts of this case, in not giving effect to the general rule, i.e., in not granting Data General solicitor-and-client costs from the time of service of the offer. … The issue raised was complex and difficult -- reasonably giving rise to uncertainty as to the outcome. In the particular circumstances of this case, which include the fact that Data General's claim included no element of compromise, I think that the interests of justice justify a departure from the general rule.

[19] I rely on the above case law, I find that the motion raised a “complex” and “important” legal issue, “reasonably giving rise to uncertainty as to the outcome”. Consequently, I find that the lack of any compromise in the Offer supports a finding that the “general rule” for substantial indemnity costs from the date of the offer should not apply.

[20] While the issue was not “open” as I discuss above, Benedetto took a position that could “reasonably” be submitted, with some “uncertainty as to the outcome”. It was far from a “hopeless” position. While I did not accept Benedetto’s legal submissions, an order of substantial indemnity costs based on an offer with no element of compromise would not be appropriate under the principles in the case law set out above.

[21] Consequently, I find that an order of partial indemnity costs is appropriate.

Order

[22] For the above reasons, I fix costs at $10,000 inclusive of taxes and disbursements, payable by Benedetto to the Vendor within 30 days of this order.

GLUSTEIN J. Date: 20190717