COURT FILE NO.: CV-20-634996

DATE: 2020-10-19

SUPERIOR COURT OF JUSTICE - ONTARIO

IN THE MATTER OF the Construction Act, RSO 1990, c. C.30, as amended

RE: GTA RESTORATION GROUP INC., Plaintiff

- and -

MARY JANE BAILLIE and MARTHA BAILLIE, Defendants

BEFORE: Master Todd Robinson

COUNSEL: A. Max and A. Spatz, counsel for the defendant, Martha Baillie (moving party)

M. Milosevic, counsel for the plaintiff (responding party)

HEARD: In writing

COSTS ENDORSEMENT

[1] On July 21 and 23, 2020, I heard the motion of the defendant, Martha Baillie (“Baillie”), for an order pursuant to s. 47 of the Construction Act, RSO 1990, c C.30 (the “CA”) discharging the lien of the plaintiff, GTA Restoration Group Inc. (“GTA”), against the property at 20 Wychwood Park, Toronto. For reasons released August 31, 2020, I held that there was no triable issue with respect to exaggeration of at least a portion of GTA’s lien and ordered that the value of the lien should be reduced to $112,359.08, inclusive of HST. I invited the parties to make written submissions as to costs if they could not reach agreement.

[2] I have received and considered each party’s costs submissions. Baillie seeks her costs of the motion on a substantial indemnity basis in the amount of $80,973.99, inclusive of HST and disbursements. GTA seeks its own costs of the motion on a partial indemnity basis or, in the alternative, that there be no costs of the motion. GTA’s written submissions do not specify an amount claimed for costs, but partial indemnity costs in the amount of $26,103.25 are claimed in GTA’s costs outline.

[3] Baillie submits that GTA was on notice that its lien would be challenged as exaggerated in December 2019 and again through cross-examination on the lien, that GTA suggested settlement offers would be made that were never made, that Baillie’s motion was thereafter brought, and that willful exaggeration was ultimately found. Baillie submits that GTA’s conduct should be sanctioned by the court and that a substantial indemnity costs award is “necessary to preserve the integrity of the Construction Act scheme”, since anything less than a substantial indemnity award “would make it economically impracticable for a consumer to challenge a willfully inflated lien.”

[4] GTA submits that, although its lien was reduced, it was ultimately the more successful party because its lien was not discharged. GTA denies that the motion was necessary for it to agree to a reduction in its lien, citing an offer to settle the action made during the s. 40 cross-examination and telephone settlement discussions. GTA further submits that, since Baillie was unprepared to accept anything other than discharge of the lien, defending the motion was necessary. The result of the motion supports that opposing it was “clearly in the best interests of GTA and GTA was successful on the motion.”

[5] In determining costs of this motion, both s. 86 of the CA and, by operation of s. 50(2) of the CA, Rule 57.01 of the Rules of Civil Procedure, RRO 1990, Reg 194 apply. Those provisions afford broad discretion to fashion a costs award that the court deems fit and just in the circumstances. The general principles applicable when determining costs are well settled. Costs are discretionary. Rule 57.01 sets out a non-exhaustive list of factors to be considered by the court in exercising that discretion, which are in addition to considering the result of the proceeding and any written offers to settle. Rule 1.04(1.1), which is also applicable, requires the court to make orders that are proportionate to the importance and complexity of the issues and to the amount involved in the proceeding.

[6] Costs awards should reflect what the court views as a fair and reasonable amount that should be paid by the unsuccessful parties rather than any exact measure of the actual costs to the successful litigant: Zesta Engineering Ltd. v. Cloutier, 2002 CanLII 25577 (ON CA), [2002] OJ No. 4495 (CA) at para. 4; Davies v. Clarington (Municipality), 2009 ONCA 722 at para. 52. The overall objective is fixing an amount that is fair and reasonable in the particular proceeding, having regard to the expectations of the parties concerning the quantum of costs: Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 CanLII 14579 (ON CA), 71 OR (3d) 291 (CA) at paras. 26 and 38.

[7] I have considered all relevant factors in exercising of my discretion regarding costs. Without going through every factor in detail, I note the following:

(a) Baillie’s primary arguments for discharge of GTA’s lien were not successful, but I do not agree with GTA that successfully opposing discharge makes it the more successful party. In responding to the motion, GTA refused to concede any reduction in the amount of its lien and argued the motion should be dismissed in its entirety. Although I did not accept Baillie’s arguments for discharging the lien, other arguments advanced by Baillie were accepted. Notably, Baillie did successfully obtain a determination that GTA’s lien is, in part, wilfully exaggerated and should be reduced by $48,041.80, representing nearly 30% of the total lien. Combined with my other determinations in favour of Baillie, and notwithstanding some divided success, Baillie was the more successful party.

(b) I agree with GTA that a court has discretion to award costs against a successful party in a proper case: Parma General Contractors Inc. v Aloe, 2015 ONSC 6229 at para. 56. However, Parma is not a case where costs were awarded against the successful party. It is a case where a trial determination to award no costs (other than a previously ordered costs award) was upheld. No other case law has been provided supporting a costs award in favour of GTA in these circumstances. In my view, this is not a proper case for an adverse costs order against Baillie. Given the extent and nature of Baillie’s success, it would be unjust to deny her costs.

(c) For reasons above, I agree with Baillie that this motion was necessary. Moreover, the listing of the property for sale increased the necessity of the motion.

(d) I agree with Baillie that the motion was complex, involving detailed evidence, interpretation of the amendments to ss. 35 and 47 of the CA, and the interplay between the CA and the Consumer Protection Act, 2002, SO 2002, c 30, Sched A.

(e) Issues in dispute on the motion were important to both parties. Baillie viewed the lien as inflated and had legitimate concerns that it would impact her ability to list and sell the property. Baillie further challenged that GTA had received any authorization to gut the property as it did. For GTA, its entitlement to any lien was directly at issue on the motion. Moreover, GTA’s business practices were challenged and specifically alleged to be fraudulent in nature.

(f) Both parties claim their costs of the s. 40 cross-examination on GTA’s lien. These are not costs of this motion, but are rather costs properly claimed in the action. I have accordingly not considered these costs claims by either party. It would be premature to award costs of the cross-examination to either party when the lien and related action remain to be resolved. In my view, this includes disbursement costs related to the cross-examination, including the cost of transcripts.

(g) Aggregate hours claimed by both parties in their costs outlines are nearly the same, with the primary difference in fees being the much higher hourly rates charged by Baillie’s counsel. Work was allocated on both sides to more junior timekeepers, where appropriate, including students and clerks. Lawyers on both sides are generally of similar experience, although the rates claimed by Baillie for work performed by both the most senior lawyer and a summer student are quite high.

(h) GTA did make an offer to reduce its lien to $121,895.88, plus costs, on the same date as the telephone case conference to schedule the motion. That offer was made in a letter expressly noted to be “with prejudice”, although was not put before me on the motion. Regardless, the offer does not assist GTA. GTA maintained entitlement to the full lien in arguing its opposition and Baillie was more successful than the offer, obtaining an order reducing the lien to $112,359.08.

(i) GTA’s other offer was for settlement of the action in its entirety, made in April 2020. That offer does not assist GTA in costs of the motion. I have made no determination on any liability of Baillie, so it cannot be said that GTA obtained a more or less successful result than the payment offered to settle the lien and action. I do not accept GTA’s position that it was an offer to reduce the lien before the motion became necessary. It was a offer to settle the entire dispute that appears to have expired well before the motion was brought. That is a distinction with difference in assessing costs of the motion.

(j) Baillie’s only “offer” to settle appears to have been an email from Baillie’s counsel proposing to seek instructions to accept partial indemnity costs if GTA voluntarily discharged its lien. Although referenced in submissions, it is unclear what weight, if any, Baillie intended be given to the proposal in determining costs. The fact of the proposal has no bearing on costs, since it is not an offer to settle and, in any event, the ultimate result was more favourable to GTA.

[8] Reasonable expectations of the parties and proportionality are both significant factors in considering the costs claimed by Baillie on this motion. Although the total costs claim includes amounts for the s. 40 cross-examination, which are not properly viewed as costs of the motion, Baillie’s costs outline discloses a total of $89,218.19 in actual fees and disbursements. That figure represents approx. 55% of GTA’s total lien claim (approx. 50% of the total claim including non-lien amounts) and roughly double the actual fee amounts reflected in GTA’s costs outline. As acknowledged by Baillie’s counsel during submissions, even if I had granted the discharge relief, GTA would still have been entitled to pursue its non-lien claims against Baillie, so the action would not have come to an end. While Baillie’s costs outline no doubt reflects the actual costs incurred, I have reservations regarding the proportionality and reasonableness of those costs given the quantum in dispute. That, however, must be balanced with the necessity of the motion given GTA’s position and the listing for sale, as well as the injustice of indirectly suggesting that a party forced to defend an exaggerated lien claim should consider making payment to the lien claimant simply because it is more cost effective than the downside risk of not recovering costs of challenging the lien.

[9] With respect to Baillie’s claim for substantial indemnity costs, it is now trite law that substantial indemnity costs are not to be awarded unless special grounds exist to justify a departure from the usual partial indemnity scale, and are generally only warranted were there has been reprehensible, scandalous or outrageous conduct on the part of a party: Young v. Young, 1993 CanLII 34 (SCC), [1993] 4 SCR 3 at p. 134; Davies v. Clarington (Municipality), supra at paras. 28-29. One of the situations in which such an award is appropriate is where one party to the litigation has behaved in an abusive manner, brought proceedings wholly devoid of merit, and unnecessarily run up the costs of the litigation: Standard Life Assurance Company v. Elliott (2007), 2007 CanLII 18579 (ON SC), 86 OR (3d) 221 (SCJ) at para. 9. None of those leading cases, though, were decided in the context of a lien action.

[10] In a lien action, s. 86 of the CA expressly affords the court with discretion to award costs on a substantial indemnity scale. Only one case was put before me dealing with substantial indemnity costs in the context of a lien action. Baillie cites the decision in Brian T. Fletcher Construction Co. v. 1707583 Ontario Inc. (2009), 80 CLR (3d) 143 (SCJ Master), in which Master Albert held as follows, at paras. 43-44:

43 The intent of section 35 is to deter preservation of negligently or intentionally exaggerated lien claims. To merely reduce the amount required to vacate the liens to the maximum amount based on what ought to have been claimed does nothing to deter Fletcher’s negligent or intentional conduct in registering grossly exaggerated lien claims. Rather it sends a signal to the construction community that it is an acceptable tactic that the court will tolerate and the consequences are nothing more than putting the lien claimant in the position he ought to have been in had he not negligently or deliberately exaggerated the lien claim.

44 On the facts of this case if I were to treat the liens as exaggerated liens and allow them to continue in the appropriate amounts, rather than discharge them as improper general liens, it is appropriate to exercise discretion under subsection 47 of the Act and order that the liens may be vacated without posting any security, or if security has been posted it may be returned to the party posting it. Further, the moving parties' damages for having to bring these motions would constitute damages under section 35 of the Act, justifying an award of costs of these motions on a substantial indemnity scale.

[11] Baillie submits that the “burden of remedying a willfully exaggerated lien must not fall upon the victim” and makes further submissions regarding unfairness to “the victim of a willfully exaggerated lien.” I find the characterization of Baillie as a “victim” to be an unhelpful hyperbole. As set out in my reasons for decision, Baillie admittedly engaged GTA to perform at least some services, acknowledged that GTA’s invoice would be paid, but then made no payment to GTA with no explanation in the evidence for the apparent change in position. On the evidence before me, while I reduced the value of the lien to $112,359.08 without prejudice to Baillie seeking further reductions, I did not grant the requested full discharge or reduce the value of the lien to the requested amount of $16,000 or less. I found numerous triable issues. It does remain open for the trier of fact to find that Baillie was victimized by GTA, and that may be the ultimate determination, but the record before me does not support such a characterization at this stage. Accordingly, I do not view this case as being an appropriate one to address how costs incurred by an owner who has been victimized by a lien claimant should be assessed.

[12] Nevertheless, I agree with Master Albert that merely reducing a lien amount to the maximum amount that ought to have been claimed sends a signal to the construction community that wilful exaggeration of liens is an acceptable tactic that will be tolerated by the court. The lien remedy is an extraordinary one afforded to lien claimants in addition to existing contractual and tort remedies. It must be used fairly and appropriately, and counsel must advise their lien claimant clients accordingly. That includes ensuring that the amount of a claim for lien is an amount that is reasonably and fairly argued to be lienable and owing. Adverse costs awards are one means by which the court can deter lien claimants from pursuing wilfully exaggerating liens. They also encourage lien claimants (and their counsel) to review and consider both the quantum and lienability of provable services and materials before staunchly maintaining a challenged lien, if not also before registering that lien in the first place.

[13] Having carefully considered the fair and reasonable amount of costs that should be held payable on this motion, I have determined that a substantial indemnity award pursuant to s. 86 of the CA is warranted in the particular circumstances of this case. “Substantial indemnity costs” are defined in the Rules of Civil Procedure as an amount that is 1.5 times what would otherwise be awarded on a partial indemnity basis. Pursuant to s. 50(2) of the CA, the Rules of Civil Procedure apply except where inconsistent with the CA. I do not view the definition of “substantial indemnity costs” to be inconsistent with the CA and find it an appropriate means of calculating the substantial indemnity award in this case. I have accordingly determined a fair and reasonable costs award on a partial indemnity basis, taking into account the various considerations outlined and the element of divided success, and award an amount that is 1.5 times that amount, plus HST and disbursements.

[14] For all the foregoing reasons, I fix the costs payable by GTA to Baillie for this motion on a substantial indemnity basis in the amount of $34,500.00, inclusive of HST and disbursements, payable within thirty (30) days. Order accordingly.

MASTER TODD ROBINSON

DATE: October 19, 2020