COURT FILE NOS.: CV-15-125070-00OT, and CV-16-554150-00A1
DATE: 20190913
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Kenneth White, Jacqueline Chepurnyj and Brenda Innes
AND:
6975429 Ontario Inc., carrying on business as Engreen Inc. and Anthony Guido
AND RE: Albino Armanasco and Anthony Fusco
AND:
Brenda Innes, Kenneth White and Jacqueline Chepurnyj
AND:
2402169 Ontario Inc., Engreen Inc. and Anthony Guido
BEFORE: Mr. Justice Chalmers
COUNSEL: C. Shammas, for the Moving Parties, Brenda Innes, Kenneth White and Jacqueline Chepurnyj
C. Horkins and J. Kuredjian, for the Responding Parties, 6975429 Ontario Inc. carrying on business as Engreen Inc., Anthony Guido, and 2402169 Ontario Inc.
HEARD: July 23, 2019
ENDORSEMENT
OVERVIEW
[1] This motion for summary judgment involves two separate actions that arise out of a share purchase agreement dated September 19, 2014, (the “Agreement”).
[2] The moving parties, Kenneth White, Jacqueline Chepurnyj and Brenda Innes (the “Innes Parties”) were the owners of 2402169 Ontario Inc. (“240”). Pursuant to the Agreement, they sold their shares in 240 to 6975429 Ontario Inc. carrying on business as Engreen Inc., (“Engreen”). The only assets of 240 were a quarry located at 3772 Highway 420, Magnetawan, Ontario (the “Property”), and the licence issued by the Ministry of Natural Resources; licence no.: 623846, (the “Licence”) which allowed 240 to operate a pit and quarry at the Property.
[3] The purchase price of the shares in 240 was $1,610,000, which was to be paid as follows:
i) a deposit of $20,000 to be paid prior to the execution of the Agreement;
ii) payment of $80,000 on closing, December 19, 2014;
iii) the sum of $100,000 to be paid within 60 days of closing;
iv) the sum of $100,000 to be paid within 150 days of closing;
v) the sum of $1,215,000 to be paid over 6 annual equal payments of $202,500 on the 1st, 2nd, 3rd, 4th, 5th and 6th anniversaries of the closing date; and
vi) Engreen agreed to assume and pay the amount of $95,000 which was owed by the Plaintiffs to the Canada Revenue Agency (“CRA”).
[4] The sum of $1,415,000 (which was the purchase price less the deposit of $20,000, the payment on closing of $80,000 and the assumption of the CRA debt) was secured by a promissory note executed by Engreen (“Promissory Note”), which provides that in the event of a default, the full amount secured becomes due and payable forthwith, without notice. In addition, Anthony Guido, the principal of Engreen executed a personal guarantee (“Guarantee”), pursuant to which Guido guaranteed the payment of all monies owing on the Promissory Note.
[5] The Agreement also provides that the three mortgages registered on the Property in the aggregate principal amount of $590,000, will remain outstanding at the time of closing. Engreen agreed to make all payments and assume all obligations of the mortgages after closing. Engreen and Guido executed the Covenant of Indemnity, which was attached to the Agreement as Schedule “A”, in which they agreed to indemnify the Innes Parties with respect to the mortgages as well as the amount owing to the CRA.
[6] The three mortgages registered on the Property are:
i) First Mortgage in favour of Armanasco and Fusco registered against the Property; Instrument No. GB70810, in the principal amount of $495,000;
ii) Second Mortgage in favour of W.J.R Hart Holding Ltd., Jack Nowack, Maria Nowack, Robert Anderson, and Nancy Anderson registered against the Property; Instrument No. GB70811, in the principal amount of $50,000;
iii) Third Mortgage in favour of Tony Pace, registered against the Property; Instrument No. GB70812, in the principal amount of $45,000. (collectively referred to as the “Mortgages”).
[7] The First Mortgage was also collateralized against the homes of Innes and Chepurnyj.
[8] Engreen paid the deposit of $20,000 prior to the execution of the Agreement and also paid the sum of $80,000 at the time of closing. Engreen failed to make the payment of $100,000 which was due within 60 days of closing; February 16, 2015. Engreen later paid $32,000 in installments from April 8, 2015 to July 9, 2015. Engreen did not make any additional payments as required pursuant to the Agreement. Also, Engreen did not pay the amount owing to the CRA and did not make the payments on the Mortgages.
[9] On December 23, 2015, the Innes Parties issued this action in the Ontario Superior Court at Newmarket; Court File No.: CV-15-125070-00OT, (the “Newmarket Action”). The Innes Parties are seeking damages against Engreen for the amounts owing pursuant to the Agreement and the Promissory Note. They also claim against Guido for damages arising out of the breach of the Guarantee and Covenant to Indemnify.
[10] In January 2016, Inspirit Resources Inc. (“Inspirit”) registered a $3,000,000 mortgage against the Property. Guido is the sole officer, director and shareholder of Inspirit.
[11] On April 4, 2016, Engreen and Guido served a Statement of Defence and Counterclaim in the Newmarket Action. Engreen and Guido take the position that they were induced into entering the Agreement, Promissory Note and Guarantee as a result of misrepresentations made by the Innes Parties. In the Counterclaim, Engreen and Guido claim damages against the Innes Parties for misrepresentation and breach of contract. Engreen and Guido allege that the Innes Parties made the following misrepresentations:
the Licence was unrestricted;
the Mortgages were in good standing at the time of closing; and
the construction equipment sold to Engreen was in good working order.
[12] The Guido Parties did not make the payments required on the Mortgages and, as a result, the Mortgages went into default. On June 3, 2016, the First Mortgagees, Armanasco and Fusco commenced an action against the Innes Parties in the Ontario Superior Court at Toronto; Court File No.: CV-16-554150-00A1, (the “Toronto Action”). The Innes Parties brought a third party claim against Engreen, Guido and 240 (the “Guido Parties”).
[13] Armanasco and Fusco brought a motion for summary judgment. By Order dated February 19, 2019, Justice Dow granted Judgment against the Innes Parties in favour of Armanasco and Fusco in the amount of $577,893.07, plus pre-judgment interest at the rate of 10% per annum from June 3, 2016 and costs of $35,000. The Judgment bears interest at the rate of 10% per annum. It was also a term of the Judgment that Innes and Chepurnyj are to deliver possession of their homes to Armanasco and Fusco.
[14] The Innes Parties bring this motion seeking summary judgment with respect to both the Newmarket and Toronto Actions. The Innes Parties argue the Actions are appropriate for summary judgment. The Guido Parties do not dispute that they defaulted on their obligations pursuant to the Agreement, Promissory Note and Guarantee. There is also no dispute that Engreen did not make the mortgage payments. The Innes Parties argue that the misrepresentation allegations can be resolved on the written record and are not issues requiring a trial.
[15] The Guido Parties argue that summary judgment is not appropriate. The Guido Parties argue that the misrepresentation issue involves disputed facts and credibility issues which cannot be fairly or efficiently determined on the written record.
[16] For the reasons that follow, I find that there are no genuine issues for trial. I grant judgment in favour of the Innes Parties in both the Newmarket and Toronto Actions.
THE ISSUES
[17] The issues to be determined on this motion are as follows:
i) Is summary judgment appropriate in the circumstances of this case?
ii) Did the Innes Parties make the following misrepresentations:
That the Licence was unlimited and not restricted to extraction above the water table;
That the Mortgages were in good standing at the time of closing; and
That the equipment was in good working order at the time of closing.
ANALYSIS
i) Summary Judgment
[18] A court may grant summary judgment if satisfied on the written record that there are no genuine issues requiring a trial: R. 20.04 of the Rules of Civil Procedure R.R.O. 1990, Reg. 194.
[19] A trial will not be required if the summary judgment process:
(a) Allows the court to make the necessary findings of facts, including findings of credibility;
(b) Allows the court to apply the law to those facts; and
(c) Is a proportionate, more expeditious and less expensive means to achieve a just result: Hryniak v. Mauldin, [2014] SCC 7, at para. 49
[20] In Hryniak, the Supreme Court set out a two-part test for summary judgment. The first step requires the judge to determine whether there is a genuine issue requiring a trial based on the evidence contained in the motion records. There will be no genuine issue requiring a trial if the written record allows the judge to reach a fair and just determination, in a process that is timely, proportionate and affordable: Hryniak, at para. 24.
[21] The second step is activated when the judge finds that there is a genuine issue requiring a trial. The judge must then determine whether the issues can be decided using the powers set out in Rules 20.04(2.1) and (2.2) of the Rules of Civil Procedure. These powers may be used if they will lead to a fair and just result: Hryniak at para. 66.
[22] I am satisfied that the written record is sufficient to allow me to make the necessary findings of fact to reach a fair and just determination of the issues. There are no genuine issues requiring a trial, and as a result, summary judgment is appropriate.
ii) Misrepresentations
[23] The Guido Parties allege that the Innes Parties made misrepresentations which caused Engreen to enter into the Agreement, including the Covenant to Indemnify and Promissory Note and caused Guido to execute the Covenant to Indemnify and Guarantee. They take the position that as a result of the misrepresentations, the Agreement, Covenant to Indemnify, Promissory Note and Guarantee are not binding, and the Innes Parties are not entitled to the damages claimed.
[24] To succeed on a claim of negligent misrepresentation, the party alleging the misrepresentation must prove:
(a) A duty of care;
(b) An untrue, inaccurate or misleading representation;
(c) The representor must have acted negligently in making the representation;
(d) The representee must have relied, in a reasonable manner, on the negligent misrepresentation; and
(e) Damages must have resulted out of the reliance on the misrepresentation: Singh v. Trump, 2015 ONSC 4461 at para. 203.
[25] The Guido Parties take the position that the Innes Parties made three misrepresentations;
That the Licence was unlimited and not restricted to extraction above the water table;
That the Mortgages were in good standing at the time of closing; and
That the equipment was in good working order at the time of closing.
Licence Was Unlimited
Representations Made by the Plaintiffs
[26] The Guido Parties take the position that the decision to enter into the Agreement, Covenant to Indemnify, Promissory Note and Guarantee was based on the Plaintiffs’ representation that the Licence was “unlimited”. They rely on a PowerPoint presentation prepared by the Innes Parties which was e-mailed to Guido on February 5, 2014. The e-mail was sent by Steven Rembach, (“Rembach”) who had introduced the Innes Parties to Guido. The PowerPoint presentation referred to the Licence as follows: “Licence Area: 42 Acres, Class A. Pit & Quarry, unlimited extraction” (emphasis added).
[27] On February 5, 2014, Rembach also sent an e-mail enclosing an appraisal report and site plan. The attachments were too large and Rembach sent a separate e-mail on February 5, 2014, with the site plan attached. Rembach sent two separate e-mails on February 6, 2014 with the appraisal report attached.
[28] The appraisal report dated March 17, 2009, was prepared by S. Rayner & Associates Ltd., (the “Rayner Report”). The Rayner Report included a letter dated November 4, 2008 from Jagger Hims Limited, Environmental Consulting Engineers (“Jagger Hims Letter”), which states: “We contacted the Parry Sound District Office of the Ministry of Natural Resources. The site is licenced (Licence #623846) to operate as both a pit and quarry above water with no yearly limit on tonnages.” (emphasis added). The Jagger Hims Letter also stated that, based on a conservative estimate the: “[T]otal licenced reserves are estimated at approximately 624,000 tonnes.” (emphasis added)
[29] On the basis of the estimated reserves of 624,000 tonnes that could be extracted pursuant to the Licence, the Rayner Report concluded that the appraised value of the Property was $2,600,000.
[30] The Rayner Report included several attachments, one of which was a copy of the Licence dated December 20, 2007. The Licence provides that it is subject to the conditions of the Licence and the requirements of the site plan. Guido testified on the cross-examination of his affidavit sworn May 30, 2016 that he understood the Licence was subject to the requirements of a site plan.
[31] On February 5, 2014, Guido received the e-mail from Rembach with the subject line: Site Plan. The e-mail attached the letter of opinion from Ernest J. Kaleny, professional engineer, dated July 18, 2012 (the “Kaleny Report”). The Kaleny Report states that the letter of opinion becomes the site plan for the Licence.
[32] The opening paragraph of the Kaleny Report provides:
Ernest J. Kaleny B.Sc. P. Geo. (EJK) was retained by Integrated Earth & Environment Limited (IE&E) to undertake the preparation of a Letter of Opinion, as outlined in the “Provincial Standards, Version 1, 1997 of the Aggregate Resources Act as amended for a Class A Category 3 and 4 Licence, a Pit and Quarry to be operated 1.5 meters and 2.0 meters respectively, above the established water table, letter dated May 2008”. This Letter of Opinion becomes part of the Site Plan, Licence Ref. No. 623846 as prepared by Integrated Earth & Environmental Limited. (emphasis added).
[33] In the recommendations section, the engineer states that: “3) At all times quarrying operations will be maintained 2 meters above the surrounding water table which is at an appropriate elevation of +/- 285m asl and 1.5 meters above the water table within the pit area.” (emphasis added).
[34] Guido’s evidence is that he received and reviewed the Rayner Report (which included the Jagger Hims Letter), and Kaleny Report before the closing of the share purchase.
[35] The Guido Parties take the position that the representation made by the Innes Parties in the PowerPoint presentation that the Licence was “unlimited”, was false, and that Engreen and Guido relied on the representation to their detriment.
[36] The Innes Parties take the position that the statement in the PowerPoint presentation was true. A Class A Licence provides for unlimited extraction without any yearly limit on tonnages. The Innes Parties deny making any representations that the Licence allowed for below-water-table extraction. The Rayner Report and the Kaleny Report produced by the Innes Parties before the sale, provide that the Licence was only with respect to above water table extraction. These reports were provided to Guido on February 5 and 6, 2014. Guido did not make any enquiries in writing to the Innes Parties regarding the information contained in the reports.
[37] I am satisfied on the written record, that the Innes Parties did not make a misrepresentation to the Guido Parties with respect to the Licence. The representation relied on by the Guido Parties was that the Licence was “unlimited”. In fact, the Licence was “unlimited” in that there was no annual limit on the amount that could be extracted. There is no evidence that the Innes Parties made a representation that the Licence allowed for below-water-table extraction. The Rayner and Kaleny Reports provide that the Licence was for extraction above the water table. The reports were received by Guido in February 2014, well in advance of the closing of the transaction.
Entire Agreement Clause
[38] The Innes Parties argue in the alternative, that any representation made with respect to the Licence is a pre-contractual representation which falls within the “entire agreement” clauses found in the Agreement.
[39] Section 1.3 of the Agreement reads:
This Agreement constitutes the entire agreement between the parties hereto pertaining to the subject matter thereof and supersedes all prior and contemporaneous agreements, understandings, negotiations and discussions, whether oral or written, of the parties and there are no warranties, representations or other agreements between the parties in connection with the subject matter hereof, except as specifically set forth herein. No supplement, modification, waiver or termination of this Agreement shall be binding unless executed in writing by the party to be bound thereby.”
[40] Section 4.6 of the Agreement reads:
This Agreement constitutes the entire agreement between the parties hereto. There are not and shall not be any verbal statements, representations, warranties, undertakings or agreements between the parties except as expressed herein, and this Agreement may not be amended or modified in any respect except by written instrument signed by the parties hereto.
[41] There are no representations in the Agreement with respect to the Licence.
[42] An entire agreement clause limits the expression of the parties’ intentions to the written contract. The entire agreement clause is to provide certainty and clarity as to what was agreed to by the parties: Soboczynski v. Beauchamp, 2015 ONCA 282, 125 O.R. (3d) 241, at paras. 43, and 44.
[43] The test to be applied to determine the enforceability of the entire agreement clause is:
i) Does the clause apply in the circumstances as based on the wording of the agreement;
ii) If the wording applies, was the clause unconscionable at the time of the agreement; and,
iii) If the clause was not unconscionable, the court must determine whether it should decline to enforce the clause due to public policy considerations: Tescon Contractors Ltd. v. British Columbia (Transportation and Highways), 2010 SCC 4, [2010] 1 S.C.R. 69, at paras 122, and 123.
[44] Guido takes the position that the Innes Parties, either in the PowerPoint presentation or orally, made representations that the Licence was unlimited and not restricted to excavation above the water table. The representation is not contained in the Agreement and therefore is a representation which falls within the entire agreement clauses. Both entire agreement clauses in the Agreement specifically exclude representations made by the parties which are not set out in the Agreement.
[45] The Guido Parties argue that the entire agreement clauses are not applicable because the clauses were unconscionable at the time of the Agreement. The Guido Parties argue that there was an informational imbalance and as a result, the entire agreement clause should not be enforced.
[46] In the negotiations of the Agreement, both parties were represented by counsel. There is no evidence of an informational imbalance. Guido was the owner of several quarries before becoming involved in this purchase and was aware of issues involving quarry licences and site plans. In any event, the information in the possession of the Innes Parties with respect to the Licence, namely the Rayner Report and Kaleny Report was provided to Guido in advance of closing.
[47] I am satisfied that there was no unequal bargaining power or an informational imbalance. I find that the entire agreement clauses were not unconscionable at the time of the Agreement.
[48] The Guido Parties argue that the enforcement of the entire agreement clause is contrary to public policy because it would encourage vendors to provide misleading information to purchasers and would not encourage honesty and full disclosure in the context of property transactions.
[49] For the reasons set out above, I am of the view that no misleading information was provided to the Guido Parties regarding the Licence. In any event, the public policy considerations of providing clarity and certainty in written contracts justifies the enforceability of the entire agreement clause. I therefore conclude that, in the circumstances of this case, the enforcement of the entire agreement clause is not contrary to public policy.
Common Law Duty of Honesty and Fair Dealings
[50] The Guido Parties argue that the Innes Parties cannot rely on the entire agreement because they breached their common law duty of honesty and fair dealings. The duty of honesty and fair dealings in contracts is described as follows:
Viewed in this way, the entire agreement clause in c1. 11.2 of the Agreement is not an impediment to the duty arising in this case. Because the duty of honesty in contractual performance is a general doctrine of contract law that applies to all contracts, like unconscionability, the parties are not free to exclude it. [citations omitted]: Bhasin v. Hrynew, 2014 SCC 71, at para 75.
[51] There is no evidence of any dishonesty or unfair dealings on the part of the Innes Parties. In fact, the evidence is to the contrary. Several months before the closing, Guido received the Rayner and Kaleny Reports, which state that the Licence applies to excavation above the water table.
[52] I am satisfied that the Innes Parties met the common law duty of honesty and fair dealings.
Mortgage Not in Good Standing at the time of Closing
[53] The First Mortgage in favour of Armanasco and Fusco was an “interest only” mortgage. The interest payment was $4,125 and payable on the 10th of each month. The first payment was due on March 10, 2014. The last payment due by the Innes Parties before the closing of the transaction was December 10, 2014.
[54] It was a term of the Agreement that the Innes Parties would make the interest payments on the Mortgages up to the date of closing, at which point the Guido Parties would assume the Mortgages. Engreen failed to make the mortgage payments after the closing date. Guido states in his affidavit that Engreen did not make its mortgage payments because of financial difficulties.
[55] The Innes Parties were required to confirm at the time of closing that the Mortgages were in good standing. On the day of closing, Friday, December 19, 2014, Chepurnyj contacted the First Mortgagees to confirm that all payments had been made. On Monday, December 22, 2014, Chepurnyj was advised that the October 2014 payment had not been paid and there was a Non-Sufficient Funds (“NSF”) fee of $400. Although she believed the payment had been made, Chepurnyj provided a new cheque to the First Mortgagee for the October payment, and the NSF charge.
[56] Guido, in his affidavit sworn May 30, 2016, stated that in late September 2015, he was required to make payments to bring the First Mortgage into good standing. The payments included $8,250 to cover the August and September 2015 mortgage payments. Those payments were the responsibility of Engreen. He also paid $800 in NSF charges. By letter dated April 1, 2015, from Fusco, the NSF charges related to cheques written in November and December 2014.
[57] Engreen takes the position that the Innes Parties made a misrepresentation that the Mortgages were in good standing at the time of the closing. I am satisfied that there was no material misrepresentation with respect to the Mortgages. The Innes Parties had made the mortgage payments before the closing of the transaction. Although there may have been a late payment, this was not material. The payment was made on December 22, 2014; within three days of the closing.
[58] Guido paid $800 for NSF charges which were incurred during the period of time when the Innes Parties were responsible or the Mortgage payments.
[59] The remedy available to the Guido Parties if the Mortgages were not in good standing at the time of closing, is set off. The Promissory Note executed by Engreen and Guaranteed by Guido provides as follows:
In the event that any of the first, second and third mortgages on the lands owned by 2402169 Ontario Inc. (PIN 52081-0440) are not in good standing or up-to-date as of December 19, 2014, the Undersigned shall be entitled to set-off any monies required to bring the said mortgages into good standing against the monies owed under this Promissory Note.
[60] The only amount required to be paid by Engreen to bring the Mortgages in good standing was $800 for NSF fees for the November and December 2014 payments. I find that the Guido Parties are entitled to a set off in the amount of $800, against the amounts owing on the Promissory Note.
[61] The Second and Third Mortgages were in good standing at the time of closing, and there is no allegation that a misrepresentation was made with respect to those mortgages.
Equipment in Good Working Order
[62] It is the position of the Guido Parties that the Innes Parties represented that the construction equipment which was transferred pursuant to the Agreement was in good working condition at the time of closing.
[63] The construction equipment is defined in the Agreement. The Agreement provides that the vendors are to transfer title and the keys of the equipment to the purchasers on closing. There is no representation in the Agreement that the equipment is in good working order.
[64] I am not satisfied that because the construction equipment is defined in the Agreement and that title and keys are to be transferred to the purchasers on closing, is sufficient to infer a representation that the equipment is in good working order. These terms in the Agreement are just as consistent with a transfer of the equipment on an “as is” basis.
[65] The Guido Parties allege that Chepurnyj made an oral representation that the equipment was in good working order. This is denied by Chepurnyj. In any event, an oral representation as to the state of the equipment falls within the entire agreement clauses and does not form part of the Agreement.
[66] In summary, I am not satisfied the Innes Parties made any representation with respect to the condition of the equipment. There is no term, express or implied, in the Agreement that the equipment was in good working order. Even if there was evidence of an oral representation, the entire agreement clauses would apply.
CONCLUSIONS
Newmarket Action
[67] For the reasons set out above, I conclude that the Innes Parties did not make any misrepresentations with respect to either the Licence, the state of the Mortgages or the condition of the equipment. As a result, the Agreement, Covenant to Indemnify, Promissory Note and Guarantee are valid and binding on Engreen and Guido.
[68] Pursuant to the payment schedule, Engreen was to pay the amount of $100,000 by February 16, 2015. This amount was not paid by that date and Engreen is in default of the Agreement. Engreen later paid $32,000. The balance of the payment due on February 16, 2015 was not paid. The amounts required by May 19, 2015, December 19, 2015, December 19, 2016, December 19, 2017 and December 19, 2018 were also not paid.
[69] The Promissory Note executed by Engreen and Guaranteed by Guido provides that in the case of the default of any sum, all of the money secured becomes due and payable forthwith.
[70] Engreen failed to make the installment payments pursuant to the Agreement and therefore the entire sum of $1,415,000 is due and payable. Engreen paid $32,000 of this amount by July 9, 2015 and therefore Engreen is entitled to a credit for this amount. For the reasons set out above, I also find that Engreen is entitled to a credit for the NSF cheques in the amount of $800. Pursuant to the Guarantee, Guido unconditionally guaranteed payment to the Innes Parties of all principal monies owing pursuant to the Promissory Note. The Innes Parties are entitled to Judgment against Engreen and Guido for the net amount of $1,382,200.
[71] It was a term of the Agreement that Engreen would assume the outstanding CRA debt in the amount to of $95,0000. Engreen failed to assume the CRA debt and is thereby in breach of the Agreement. Engreen and Guido executed the Covenant of Indemnity pursuant to which they agreed to “unconditionally indemnity and save harmless” the Innes Parties from the amount owing to the CRA up to the maximum amount of $95,000. I find that the Innes Parties are also entitled to Judgment against Engreen and Guido in the amount of $95,000.
[72] Therefore, the Innes Parties are entitled to Judgment against Engreen and Guido in the amount of $1,477,200.
[73] The Innes Parties did not make any misrepresentations and were not in breach of the Agreement. I dismiss the Counterclaim brought by Engreen and Guido in the Newmarket Action.
Toronto Action
[74] On February 19, 2019, Armanasco and Fusco obtained Judgment in the Toronto Action, with respect to the amounts owing pursuant to the First Mortgage. Judgment is in the amount of $577,893.07, plus pre-judgment interest at the rate of 10% per annum from June 3, 2016, plus costs in the amount of $35,0000. The Judgment bears post-judgment interest at the rate of 10%.
[75] In the Agreement, Engreen agreed to make all payments and assume all obligations of the Mortgages after closing. Engreen and Guido executed the Covenant of Indemnity which provides that Engreen and Guido will indemnify the Innes Parties with respect to all claims, costs, payments and demands arising out of the Mortgages. Engreen and Guido have not indemnified the Innes Parties with respect to the Judgment obtained with respect to the First Mortgage and are therefore in breach of the Covenant of Indemnity.
[76] I find that the Innes Parties are entitled to a declaration that Engreen and Guido are required to indemnify them with respect to all costs, claims, payments and demands in respect of the Judgment dated February 19, 2019. The amounts owing by Engreen and Guido will be determined by a reference.
Costs
[77] The Innes Parties are entitled to their costs of the Toronto and Newmarket Actions. The Innes Parties submitted a Bill of Costs in which they seek their costs for the two actions on a partial indemnity basis in the amount of $149,120.56, inclusive of fees, disbursements and HST. The Defendants submitted a Costs Outline in the amount of $29,564 for its partial indemnity fees for the summary judgment motion.
[78] The costs to which the Innes Parties are entitled must be fair and reasonable and within the expectation of the parties: Boucher v. Public Accountants, Council (Ontario) (2004), 2004 CanLII 14579 (ON CA), 71 O.R. (3d) 291 (C.A.).
[79] In assessing costs, the judge may consider the following factors:
• The principle of indemnity including the experience of the lawyer for the party entitled to costs, including the rates charged and the hours by that lawyer;
• The amount of costs the unsuccessful party could reasonably expect to pay;
• The amount claimed and recovered;
• The apportionment of liability;
• The complexity of the proceedings;
• The importance of the issues;
• The conduct of any party that tended to shorten or lengthen unnecessarily the duration of the proceedings;
• Whether any steps in the proceeding were improper, vexatious or unnecessary; and
• A party’s denial of or refusal to admit anything that should have been admitted: R. 57.01 of the Rules of Civil Procedure.
[80] The Innes Parties were successful with respect to both the Newmarket and Toronto Actions. The bulk of the work done on the file by counsel for the Plaintiffs was by Mr. McWilliam, a 2002 call and by Mr. Shannon, a 2018 call. Their hourly rates are reasonable; however, the time spent by the lawyers appears to be high. I also note that there were a number of different lawyers, students and clerks who worked on this file and, as a result, there may have been some duplication.
[81] The Actions were fairly complex. The Innes Parties were required to respond to the allegation of misrepresentations. The Actions were also of importance to the parties, particularly to Innes and Chepurnyj, who were exposed to a possession order regarding their personal homes as a result of the failure of the Guido Parties to assume the mortgage payments after closing.
[82] In all the circumstances, I fix the partial indemnity costs of the Plaintiffs in the amount of $95,000, inclusive of fees, disbursements and HST. The costs will be allocated as between the Toronto and Newmarket Actions.
DISPOSITION
[83] I grant Judgment in favour of the Innes Parties in the Newmarket Action as follows:
a) Judgment against Engreen and Guido in the amount of $1,477,200;
b) Pre-Judgment interest pursuant to the Courts of Justice Act, R.S.O. 1990, c. C.43, s. 129, from the date of the default of the Agreement, February 16, 2015; and
c) Costs on a partial indemnity basis, fixed in the amount of $70,000, inclusive of fees, disbursements and HST.
[84] I dismiss the Counterclaim brought by Engreen and Guido in the Newmarket Action
[85] I grant Judgment in favour of the Innes Parties in the Toronto Action as follows:
a) A declaration that the Innes Parties are entitled to contribution and indemnity from Engreen and Guido with respect to all costs, claims, payments and demands in respect of the Judgment dated February 19, 2019.
b) An order pursuant to R. 20.04(3) of the Rules of Civil Procedure directing that the amount payable by Engreen and Guido is to be determined by a reference.
c) Costs on a partial indemnity basis, fixed in the amount of $25,000, inclusive of fees, disbursements and HST.
[86] I dismiss the Counterclaim brought by the Guido Parties in the Toronto Action.
Chalmers, J.
Date: September 13, 2019