Court File and Parties

Court File No.: CV-19-614363 Date: 2020/04/22 Ontario Superior Court of Justice

Between: MARSHALLZEHR GROUP INC. Plaintiff (Defendant by Counterclaim)

• and - IDEAL (BC) DEVELOPMENTS INC., IDEAL (BC2) DEVELOPMENTS INC., 2490568 ONTARIO INC., 2490564 ONTARIO INC., IDEAL DEVELOPMENTS INC. and SHAJIRAJ NADARAJALINGAM Defendants (Plaintiffs by Counterclaim)

Counsel: Stephen Schwartz for the Plaintiff (Defendant by Counterclaim) Mark A. Russel for the Defendants (Plaintiffs by Counterclaim)

Heard: In writing

Before: Perell, J.

Reasons for Decision - Costs

[1] The Plaintiff, MarshallZehr Group Inc., (“MZ”) signed a Commitment Letter to lend $15.2 million to the Defendants, Ideal (BC) Developments Inc., Ideal (BC2) Developments Inc., 2490568 Ontario Inc., 2490564 Ontario Inc., Ideal Developments Inc., and Shajiri Danarajalingam (collectively “Ideal”). MZ cancelled the loan commitment and demanded that Ideal pay certain charges. When Ideal refused to pay, MZ sued. Ideal counterclaimed for $1.3 million plus interest as damages for the alleged wrongful termination of the loan commitment. MZ brought a summary judgment motion. It sought: (a) a judgment for $508,071.09: (b) a declaration that it is entitled to an equitable mortgage to be registered against the title to the lands that were to be mortgaged; and, (c) the dismissal of Ideal’s counterclaim. I dismissed Ideal’s counterclaim, and I granted MZ a summary judgment for $508,071.09 [1] with costs on a partial indemnity basis.

[2] Although I awarded costs on a partial indemnity basis, I also asked the parties for written costs submissions if they could not agree about the matter of costs.

[3] MZ requests costs of $55,266.78, all inclusive of counsel fee, taxes, and disbursements ($4,287.11) on a substantial indemnity basis based on a contract provision in the Commitment Letter that was the subject matter of the litigation. In the alternative, MZ requests costs of $43,239.06, all inclusive, based on an unaccepted Offer to Settle dated December 19, 2019. MZ’s partial indemnity costs are $38,273, all inclusive.

[4] Ideal submits that the appropriate award should be $36,273, all inclusive on a partial indemnity basis. This submission reflects a $2,000 reduction for the disbursement for legal research.

[5] The relevant provision of the Commitment Letter stated:

All reasonable expenses of the Lender and the Borrower shall be paid by the Borrower including (but not limited to), … all legal costs regardless of whether the Borrower proceeds with the transaction and any costs of recovery of unpaid amounts should that be necessary. ….. Regardless, the Borrower is responsible for all reasonable legal fees incurred by the Lender ….

[6] Where there is a contractual right to costs on a substantial indemnity basis, generally speaking, the court will exercise its discretion to reflect the contract stipulation but the parties’ agreement does not preclude the court to exercise its discretion differently where there is a good reason for so doing. [2] In Bossé v. Mastercraft Group Inc. [3], the Court of Appeal stated:

As a general proposition, where there is a contractual right to costs, the court will exercise its discretion so as to reflect that right. However, the agreement of the parties cannot exclude the court’s discretion; it is open to the court to exercise its discretion contrary to the agreement. The court may refuse to enforce the contractual right where there is good reason for so doing – where, for instance, the successful mortgagee was engaged in inequitable conduct or where the case presents special circumstances which render the imposition of solicitor and client costs unfair or unduly onerous in the particular circumstances.

[7] In my opinion, in the immediate case, while there are some circumstances that would make an award greater than a partial indemnity fair and appropriate, there are also some circumstances that would make substantial indemnity costs or full indemnity costs unfair and unduly onerous. These circumstances explain my initial inclination to award costs on a partial indemnity basis.

[8] In the immediate case, the Commitment Letter was far from plainly written, and MZ used of its right to cancel and terminate the loan commitment muddied by the language of default and in an unclear albeit lawful exercise of its right to terminate. Before the Commitment Letter was terminated, there was no breach of contract by Ideal; rather, it did not satisfy the conditions for the completion of the transaction. At the end of the day, MZ made a health return on a loan that was withdrawn and of no benefit to Ideal. The judgment means that in addition to the $50,000 deposit it was holding, MZ will recover: (a) standby interest of $101,958.82; (b) a lender’s fee of $346,000.00; and (c) $59,948.07 for reimbursement of expenses. I, rather, doubt that the costs provision in the Commitment can fairly apply to those circumstances, standing alone.

[9] On the other hand, after the termination, MZ did not pay its obligations under the Commitment Letter and Ideal sued MZ for breach of contract. Those circumstances would trigger the Commitment Letter’s provision for payment of all reasonable legal fees.

[10] With these countervailing factors, in my opinion, the appropriate exercise of my discretion is to award more than a partial indemnity and less than a substantial or full indemnity. Accordingly, I award, MZ costs of $40,000, all inclusive.

[11] In the circumstances of the Covid-19 emergency, these Reasons for Decision are deemed to be an Order of the court that is operative and enforceable without any need for a signed or entered, formal, typed order.

[12] The parties may submit formal orders for signing and entry once the court re-opens; however, these Reasons for Decision are an effective and binding Order from the time of release.

Perell, J.

[13] Released: April 22, 2020

Footnotes

[1] Marshallzehr Group Inc. v. Ideal (BC) Developments Inc., 2020 ONSC 1547. [2] Re Nelson Education Limited, 2015 ONSC 4225. [3], [1995] O.J. No. 884 at para. 66 (C.A.), leave to appeal refused [1995] S.C.C.A. No. 205.