COURT FILES NO.: CV-17-63377, 17-63374, CV 17-63375 SR, CV-17-63376

DATE: 2020/12/30

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

2257573 Ontario Inc.

Howard W. Reininger, for the Plaintiff/Defendant by Counterclaim/Moving Party

Plaintiff/Defendant by Counterclaim/Moving Party

• and -

Alex Aiden Fitzgerald Furney also known as Alex Furney, Maryam Furney and Hassan Hashemi

Trent Morris for the defendants, plaintiffs by counterclaim.

Defendants/ Plaintiffs by Counterclaim

costs ENDORSEMENT

[1] The court issued written reasons for judgment in this matter on October 13, 2020 cited as 2257573 Ontario Inc. v. Furney et al: 2020 ONSC 6002. I requested written submissions from counsel on costs and I have received thorough and helpful submissions for which I am appreciative.

[2] The plaintiff mortgagee sought judgment on four mortgages which had not been repaid to his company 2257573 Ontario Inc. (225) by the defendants. A summary judgment motion was brought on each mortgage and each motion was contested by the defendants. They argued that there was a genuine issue to be tried. I determined that a “mini-trial” take place in accordance with the Supreme Court’s recommendations in Hyrniak v Mauldin.[^1] At that time, I heard the evidence of the Anil Khingrani, the president and principal shareholder of the plaintiff, and the defendants Ms. Furney and Hassan Hashemi. After receiving submissions from counsel I rendered judgment in writing for the plaintiffs without ruling on the merits of the counterclaim.

[3] I allowed the defendants’ counterclaims to proceed. These allege that the defendants suffered damages as a result of being presented with overstated mortgage discharge statements. I could not discern any evidence of the alleged damages suffered by the defendants but as the issues (the alleged damages) were not before me because the plaintiff had not sought an order on the summary judgment motions for a dismissal of the counterclaims, I did not make such an order.

[4] The plaintiff acknowledged at the outset of the motion for summary judgment that the interest rates claimed (which included penalties, broker fees, lender’s fees etc) exceeded the criminal rate of justice. By putting the defendants to the proof of this issue, the plaintiff occasioned unnecessary expense by failing to admit what should have been admitted earlier. Furthermore, it was evident that as a mortgagee, it had failed in its obligation to provide accurate, legal mortgage statements to the mortgagor in a timely way. These are relevant factors for the court to consider in assessing costs.

[5] As a result, the plaintiff sought judgment just for the principal amounts actually advanced and interest at the rate actually stipulated in the mortgages.

[6] The defendants had paid nothing on the mortgages. Faced with what they alleged were overstated and illegal claims in the payout statements they received, they did not tender the amounts they alleged were due nor did they seek directions from the court under the Mortgages Act.[^2] Instead, they enjoyed the use of the plaintiff’s money while real estate prices continued to escalate. Ms. Furney, a licenced mortgage agent agreed with and signed the mortgage commitments which she later claimed contained illegal interest rates.

[7] The very great majority of the time in these summary judgment proceedings related to the defendants’ allegations of alleged misrepresentations made by the plaintiff to induce the defendants into granting the mortgages in question. The defendants were totally unsuccessful in that respect.

[8] The mortgages themselves incorporated the terms and conditions of Standard Charge Terms 200033 which provide that the mortgagors would be liable to the plaintiff mortgagee for its legal fees as between a solicitor and client.

The Law:

[9] The court clearly has the discretion to deny a mortgagee in a sale or foreclosure proceeding costs on a contracted solicitor and client basis. As a general rule, the agreement of the parties that costs of enforcement of the mortgagee shall be paid on a solicitor and client basis should not be disturbed. However, where there has been vexatious or oppressive conduct, a mortgagee may be deprived of its costs or some portion of them.[^3] The mortgagee’s contractual right to full indemnity for legal costs is only compromised if the court determines that there has been some improper conduct in the conduct of the proceedings at the mortgagee’s instance or some equitable basis upon which it is determined the contractual provision ought not to be enforced.[^4]

Position of the Defendant:

[10] In his very fair and helpful submissions, Mr. Morris urged the court to only award the plaintiff partial indemnity costs rather than substantial indemnity costs as agreed in the mortgages. I partially concur. That is appropriate to the time of the commencement of the summary judgment motions being heard. I find that the behaviour of the plaintiff to the opening of the argument of the motions was improper in that excessive interest, exceeding the lawful rates of interest which can be charged, was claimed. The failure to provide proper mortgage statements also exacerbated the conflict. The actual amount being claimed by the plaintiff was not clear until the motions for summary judgment were brought. The plaintiff brought four separate summary judgment motions, one for each of the mortgages. They each contained largely the same documents except the relevant mortgage document and the relevant mortgage commitment document.

[11] However, even when the plaintiff acknowledged the amounts claimed were excessive and reduced its claims, the defendants persisted in their defence of misrepresentation. They lost, and the costs should follow the event. Most of the time on the summary judgment motion was spent dealing with arguments, evidence and submissions with respect to the misrepresentation issue. I feel that the plaintiff is entitled to its costs on a substantial indemnity basis from the time of the preparation for argument of the summary judgment motion (to be distinguished from the time allocated for the preparation and service of the materials) to the rendering of judgment.

[12] In assessing costs, the court must in mind that an award must be fair and reasonable in the particular circumstances with due consideration to what the unsuccessful party could reasonably expect to pay.[^5] Mr. Morris has helpfully provided his partial indemnity costs for preparation and attendances in court and it is approximately $33,000 for fees based on his billing rate of $350.00 per hour. To that would have been added his disbursements of approximately $1200 and HST creating a final account of approximately $38,000 rendered to his client.

[13] In fixing costs, the court may be guided by the factors articulated in Rule 57.01(1). One of these is the principle of indemnity, including where applicable, the experience of the lawyer for the party as well as the rates charged and the hours spent by the lawyer. Mr. Morris agreed that the time and hourly rates charged in each of the accounts provided by the plaintiff’s counsel were reasonable. I do not find that unnecessary steps were taken by plaintiff’s counsel which extended the process unduly or unreasonably. I feel that the matter was somewhat complex as it related to discussions and charges related to four separate mortgage transactions with overlapping elements. The amount recovered in the proceeding was significant for the plaintiff and clearly important to it. The plaintiff’s refusal to acknowledge that its interest rates were criminal and that its mortgage statements were inaccurate is reflected in the reduction in costs of the Keyser Mason account to partial indemnity costs.

Account of Keyser Mason:

[14] The law firm of Keyser Mason was involved in the proceedings to enforce the mortgages from inception up to and including the service of the motion records for summary judgment. There were no cross examinations on affidavits filed. There was no exchange of affidavits of documents. The total amount billed by Keyser Mason was $28,639.26,

[15] The parts of the Keyser Mason bill dealing with the Counterclaims should be excluded from the account rendered by them. They include two invoices dated February 28, 2018 dealing with service of a Reply and Defence to Counterclaim totalling $1883.43. I also deduct with the consent of the plaintiff’s counsel, two invoices dated November 30, 2017 and April 30, 2018 totalling $2,4040.70, which dealt with issuing Notices of Sale. The total of these invoices is $4,388.13 reducing the account to $24,251.13.

[16] Because of the inaccurate mortgage statements and the excessive interest rates claimed by the plaintiff, the plaintiff’s costs to the commencement of argument before the court are reduced to $15,000 all inclusive to reflect costs on a partial indemnity basis.

[17] Mr. Morris urged the court in his submissions on costs not to award any costs relative to the work of Keyser Mason because the costs prior to the summary judgment motion are still at issue in the counterclaims the defendants may pursue. I disagree. They work they did was directly related to and necessary to the enforcement of the mortgages. If the defendants are successful in their counterclaim, they can seek the costs of those proceedings at the appropriate time. As Mr. Reininger stated in his submissions, there is no assurance that the defendants will even proceed with their counterclaims and even if they do, that they will be entitled to costs. I concur.

Account of Virk Law Firm:

[18] The plaintiff’s lawyers on this motion were Mr. Virk, who was succeeded after the first day of submissions by Mr. Reininger. Mr. Virk’s account on a substantial indemnity basis was $30,030.00. Mr. Morris took no issue with the hourly rates charged or the work done by Mr. Virk.

[19] I also concur with Mr. Morris’ submissions that the first nine hours of the costs claimed by the Manjeet Virk Law Firm were duplicated from the work done earlier by the Keyser, Mason, Ball Law firm. Those costs are therefore reduced by $2,700.00.

[20] Upon review of the account and considering the complexity of the matter, I assess the account of the Virk Law Firm on a substantial indemnity basis at $25,000 all inclusive.

Account of Reininger Law

[21] Mr. Reninger assumed carriage of the files after the first day of hearing. I have no doubt that there was duplication of work with that done by Mr. Virk, particularly in light of the somewhat confusing and voluminous number of documents.

[22] I concur with Mr. Morris that the defendants should not have to pay for the plaintiff’s decision to change counsel in the middle of these proceedings. Consequently, the charges for “overlapping work”, that is the time required for Mr. Reininger to get up to speed, are not payable by the defendants. I reduce Mr. Reininger’s Bill of Costs by $5,000 to reflect that duplication of effort.

[23] Mr. Reininger has claimed $28,772.63 on a substantial indemnity basis and $19,772.75 on a partial indemnity basis. Upon review of his Bill of Costs, his hourly rates and hours claimed are reasonable. He is an experienced civil litigation counsel and very effectively and forcefully presented the plaintiff’s case. Aside from the reduction of $5,000 for overlapping work, I have no hesitation in accepting his account as reasonable. The account of Mr. Reininger is therefore assessed at $23,772.63 all inclusive on a substantial indemnity basis.

Attribution of Costs to Separate Files

[24] Mr. Morris has urged the court to assess the costs separately for each file. In other words, he urges the court to attribute a percentage of the final amount assessed to different files. He suggests this because the same parties are not defendants in every case.

[25] I decline to do so. This matter was argued as a consolidated hearing. Mr. Morris represented all the defendants. The personal defendants are also cross-guarantors of the separate mortgages. The costs submissions were never presented to the court by attributing a separate bill of costs for each file as urged, which reflects the understanding of all involved that the entirety of the process was a consolidated hearing.

Conclusion:

[26] The plaintiff is granted judgment for its costs for these proceedings in the amount of $63,772.65. The judgment shall bear post-judgment interest at the rate of 12 per cent per annum which is the lowest interest rate payable on the four mortgages which were the subject matter of this litigation. I make this decision based on the historically low interest rates at the time of rendering this ruling. The defendants should not be given the benefit of the posted post judgment interest rates when they continue to enjoy use of the plaintiff’s monies in a rapidly escalating real estate market.

“Signed Electronically”

Turnbull, J.

Date: December 30, 2020

[^1]: 2014 SCC 7. [^2]: R.S.O. 1990, c. M.40 [^3]: Mayhew v Adams, 1930 114 (SK CA), [1930] 3 W.W.R. 539 (Sask.C.A.) at p. 541. [^4]: Penvern Investment Ltd. v. Whispering Creek Cattle Ranches Ltd., (1979), 1979 477 (BC CA), 9 R.P.R. 116 at p. 120 [^5]: Boucher et al. v. Public Accountants, 2004 14579 (ONCA), paras. 26 and 38.