Court File and Parties

COURT FILE NO.: 19-78797 DATE: 20200515 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

John Przybytek, Applicant AND 3002071 Canada Inc., Respondent

AND BETWEEN:

3002071 Canada Inc., Applicant AND John Przybytek, Respondent

Before: H.J. Williams, J.

Counsel: George Boyd Aitken, Counsel for John Przybytek Claude-Alain Burdet, Counsel for 3002071 Canada Inc.

Heard: In writing

Costs Endorsement

[1] John Przybytek was successful in his application to discharge a $50,000.00 mortgage in favour of 3002071 Canada Inc. The mortgage had been registered against a property in Fenelon Falls, Ontario owned by the applicant and his sister. I found the mortgage to be both invalid and unconscionable.

[2] Mr. Przybytek is asking for costs of his application, on a substantial indemnity basis, in the amount of $34,268.12, inclusive of fees, disbursements and HST.

[3] Mr. Przybytek is asking for a joint and several costs order against three persons:

1. 3002071;
2. 1457563 Ontario Inc., a co-applicant with the respondent in an application against Mr. Przybytek; and
3. lawyer Claude-Alain Burdet, who represented 3002071 and 1457563 on the application and who had previously acted for Mr. Przybytek and had arranged for Mr. Przybytek to borrow money from 1457563.

[4] Mr. Przybytek argues that foot-dragging and lack of cooperation on Mr. Burdet’s part added to the cost of the application. He says that Mr. Burdet failed to respond to requests for information and raised new issues at the eleventh hour, resulting in two adjournments, which delayed the hearing from March 11, 2019 to June 4, 2019. Mr. Przybytek also argues that Mr. Burdet filed but did not subsequently pursue what Mr. Burdet had described as a counter-application, in which 3002071 requested 12 heads of relief. Mr. Przybytek says that 3002071 did not act in good faith and that its actions and those of Mr. Burdet were intended to delay or frustrate Mr. Przybytek’s application.

[5] Mr. Przybytek also argues that he should not have been required to incur any costs to have the mortgage discharged because it was registered without his knowledge, the lender was a company operated by Mr. Burdet’s son, Mr. Burdet had acted both as Mr. Przybytek’s lawyer and as lawyer for the lender and Mr. Burdet did not inform Mr. Przybytek that he was representing the lender or that the lender was connected to his son.

[6] Mr. Przybytek relies on subrule 57.07(1)(c) of the Rules of Civil Procedure in support of his request for a costs order against Mr. Burdet.

[7] Subrule 57.07(1)(2) provides that a court may not make an order under subrule 57.01(1) “unless the lawyer is given reasonable opportunity to make representations to the court.”

[8] In an earlier endorsement, I gave Mr. Burdet an opportunity to retain counsel, to contact his professional liability insurer and to request a hearing. Although Mr. Burdet had responded to Mr. Przybytek’s costs submissions, albeit by filing submissions without serving them, Mr. Burdet did not respond to my invitation to request a hearing.

[9] In his application, Mr. Przybytek had asked for the mortgage to 3002071 to be discharged on the basis that it was invalid and unconscionable. Significantly, at the hearing, his lawyer argued that Mr. Przybytek required the discharge in order to sell his interest in the Fenelon Falls property to his sister, in order to comply with and preserve a settlement agreement. Although I accepted Mr. Przybytek’s arguments and ordered the discharge of the mortgage, as I now focus on the issue of costs, I consider it to be relevant that there was also a second mortgage registered against the Fenelon Falls property and that Mr. Przybytek failed to mention this mortgage in his application materials.

[10] The effect of my decision discharging the 3002071 mortgage was to move the second mortgage into first priority.

[11] The second mortgage was in favour of Law Loans Ltd., a company with the same address as Gibsons LLP, the law firm that represented Mr. Przybytek on the application. [1] The second mortgage was signed by a law clerk who swore one of the affidavits filed in support of Mr. Przybytek’s application and was registered by Gibsons LLP. The second mortgage was in the amount of $75,000.00.

[12] It was Mr. Burdet who brought the existence of the second mortgage to the court’s attention.

[13] The costs submissions filed on behalf of 3002071 identified the named partner of Gibsons LLP as the treasurer of Law Loans and said that the company belongs to the lawyer and his son.

[14] In his responding submissions, Mr. Przybytek did not refute 3002071’s assertion about the structure and ownership of Law Loans.

[15] 3002071 had offered to lift its mortgage to permit the sale of the property to Mr. Przybytek’s sister, provided the sale proceeds were either applied to Mr. Przybytek’s indebtedness to 3002071 or paid into court. In its costs submissions, 3002071 said that it had made its position in this respect clear “from the beginning.” Mr. Burdet made the offer in his oral submissions on the first return date of the application on March 11, 2019; if it was also made earlier or in writing, there was no evidence of this.

[16] Mr. Przybytek, obviously, did not accept 3002071’s offer. It now appears that he could not have accepted it; Mr. Przybytek could not have agreed to apply the sale proceeds to his indebtedness to 3002071 or to pay them into court, unless Law Loans had also been willing to discharge its mortgage.

[17] In his costs submissions, Mr. Przybytek said that he had invited 3002071 to remove its mortgage from title and to pursue a separate action for any amounts alleged to be owed by him. This arrangement would have moved the Law Loans mortgage into first priority, enabling Law Loans to realize on its security when Mr. Przybytek sold to his sister.

[18] It appears, then, that at its core, this application was a battle over whether a mortgage to a company with a relationship with Mr. Burdet or a mortgage to a company with a relationship with Gibsons LLP would be in first place when Mr. Przybytek sold his interest in the Fenelon Falls property to his sister.

[19] While I was not entirely convinced of Mr. Przybytek’s reliability as an historian, when he was cross-examined on the affidavits he filed in support of his application, he said he knew nothing about the Law Loans mortgage, just as he had said he knew nothing of the mortgage to 3002071.

[20] Costs are discretionary. (Courts of Justice Act, R.S.O. 1990, c. C. 43, s. 131.)

[21] Rule 49 of the Rules of Civil Procedure does not apply to the parties’ offers, which were not in writing or not before the court.

[22] Mr. Przybytek shall have his costs to March 11, 2019, the day Mr. Burdet offered to discharge the 3002071 mortgage. Neither party shall have costs after that date.

[23] The bill of costs filed by Mr. Przybytek indicates that his fees to and including March 11, 2019 total approximately $14,000.00 on a substantial indemnity basis. As I found the mortgage to 3002071 to be invalid and unconscionable, I consider the request for substantial indemnity costs to be appropriate. I will award Mr. Przybytek fees of $14,000.00 plus HST of $1,820.00. I will also award disbursements, inclusive of HST, in the amount of $750.00.

[24] Turning now to whether costs should be awarded against Mr. Burdet personally, I note that subrule 57.07(1)(c) is concerned with costs unreasonably incurred and not with professional conduct generally. (Carleton v. Beaverton Hotel (2009), 2009 ONSC 92124, 96 O.R. (3d) 391 (Div. Ct.)) It is a toss-up as to whether, to the extent that costs were unreasonably incurred following the date of Mr. Burdet’s March 11, 2019 offer, they were incurred because of Mr. Burdet’s conduct or because of Gibsons LLP’s interest in the Law Loans second mortgage. Two wrongs do not make a right. Even so, the basis for the irony of Mr. Przybytek’s argument that Mr. Burdet should pay costs in part because he had been Mr. Przybytek’s lawyer and had arranged for Mr. Przybytek to borrow money from a company operated by Mr. Burdet’s son prevents me from ordering costs against Mr. Burdet; the law firm that advanced that argument on Mr. Przybytek’s behalf did not deny Mr. Burdet’s assertion that it had engaged in the same behaviour. Mr. Przybytek’s request for costs against Mr. Burdet personally is denied. Mr. Przybytek shall have costs against 3002071 only.

[25] In conclusion, 3002071 Canada Inc. shall pay to Mr. Przybytek costs in the all-inclusive amount of $16,570.00.

[26] Mr. Przybytek’s lawyer shall serve a copy of this endorsement on Mr. Przybytek. A copy of the affidavit of service shall be filed when the draft order is submitted for my signature. The draft order may be submitted without the approval of 3002071.

Date: May 15, 2020

Footnotes

[1] At the hearing of the application, Mr. Przybytek was represented by Gibsons LLP; lawyer George Boyd Aitken, who was with that firm at the time, appeared on Mr. Przybytek’s behalf. Mr. Aitken continues to represent Mr. Przybytek but no longer practises with Gibsons LLP.