COURT FILE NO.: CV-20-00652384-00CL

DATE: 20210716

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Hudson’s Bay Company ULC Compagnie de la Baie d’Hudson SRI, Plaintiff

AND:

Oxford Properties Retail Holdings II Inc., CPPIB Upper Canada Mall Inc., OMERS Realty Management Corporation, Montez Hillcrest Inc., Hillcrest Holdings Inc., Yorkdale Shopping Centre Holdings Inc., Square One Property Corporation, Scarborough Tow Centre Holdings Inc., Oxford Properties Retail Holdings Inc., and Kingsway Garden Holdings Inc., Defendants

BEFORE: C. Gilmore, J.

COUNSEL: Jonathan C. Lisus, James Renihan and Carter Liebzeit, Counsel for the Moving Party Plaintiff

Deborah Palter and Alexander Soutter, Counsel for the Responding Party Defendants

HEARD: In Writing

ruling on costs

overview

[1] This motion came before me on June 8, 2021. The decision was released on June 24, 2021. The moving party applicant (“HBC”) was successful in obtaining relief from forfeiture. The responding party (“the Landlord”) was successful in obtaining all arrears (with interest) and ongoing rent, albeit on certain deferred terms to accord with the Ontario phased re-opening plan.

[2] I requested written submissions on costs which have now been received. The Landlord seeks costs of $300,000 based on partial indemnity costs of $297,430 plus additional costs in relation to an Offer to Settle which was not accepted by HBC. HBC seeks partial indemnity costs of $218,388. Alternatively, HBC requests that each party bear their own costs.

[3] As will be set out below, this is not a case for costs. While I did not accept the principle that the parties were to each bear some of financial consequences of the pandemic for the purposes of the motion, I see no reason not to do so on the issue of costs given the divided success and the outcome.

THE POSITIONS OF THE PARTIES

The Landlord

[4] The Landlord seeks costs on the basis that it had complete success. HBC received no abatement of rent nor was it successful in its argument that the Landlord was in breach of the lease.

[5] The Landlord submits that HBC’s success with respect being granted relief from forfeiture does not mean it was a successful party. In Jungle Lion Management Inc. v. London Life Ins. Co., 2020 ONSC 165, the Court awarded full indemnity costs to the Landlord stating that “The Plaintiff may appear to be successful if it salvages its tenancy, but that does not mean the Landlord was not actually “right”(para 25).

[6] The Landlord served an Offer to Settle on HBC on February 8, 2021. The Landlord offered to accept 75% of rent from April 1, 2020 to February 1, 2021 and 100% of rent thereafter. The Landlord achieved a better result on the motion as they were awarded 100% of their rent plus interest. The Offer was withdrawn on June 5, 2021 but the Landlord submits that it was open for acceptance for four months and that the Court may still consider the Offer pursuant to Rule 49.13 of the Rules of Civil Procedure.

[7] HBC engaged in self-help by withholding rent until required to pay in accordance with Justice Hainey’s Order seven months later. It withheld rent to “preserve cash” when it had the ability to pay. Such behaviour should not result in reduced or shared costs.

[8] The Landlord submits that the issues on the motion were extremely important as the rent abatement sought by HBC would have cost the Landlord hundreds of thousands of dollars. Further, HBC’s argument that the Landlord failed to meet operating standards, if successful, would have had a far-reaching impact on this Landlord, its other properties and commercial tenancies in general.

[9] The Landlord filed extensive material on the motion including four affidavits and two experts’ reports. There were cross-examinations and extensive research and lawyer time involved.

[10] Given all of the above, the Landlord seeks costs of $300,000.

HBC’s Position on Costs

[11] HBC submits that it successfully defended the Landlord’s attempt to forfeit the lease and it is entitled to its partial indemnity costs. Alternatively, the parties should bear their own costs.

[12] The cases relied on by the Landlord with respect to costs on a successful defence of a forfeiture claim all involved tenants with a history of delinquency. In this case, the Court described HBC as a “model tenant”. In Mimi’s Parlour Ltd. v. 1816112 Alberta Ltd., 2021 ABQB 446, the Court extensively reviewed cases in which the tenant had successfully defended against forfeiture noting a number of cases in which the successful tenants were required to pay costs, others where the tenant received costs and others where each party was ordered to bear their own costs. In the end, in Mimi’s Parlour Ltd., the Court awarded costs to the tenant, describing the tenant as “not an indifferent or cavalier rent payer” whose defaults were the “products of harsh business circumstances” [Covid 19] (para 22).

[13] The Landlord responds and argues that Mimi’s Parlour is distinguishable in that the tenant paid all of its arrears immediately after the lease was terminated. All of the cases relied on by HBC dealt with relief from forfeiture and not whether the Landlord had breached the lease or whether an abatement of rent should be ordered.

[14] HBC submits that the Landlord’s Offer should be given no weight as it was withdrawn prior to the hearing and after most of the evidence had been delivered and well after HBC’s successful injunction motion. The bulk of legal expenses including the emergency hearing before Justice Hainey had already been incurred by the time the Offer was served.

[15] HBC referred to several comments made by the Court about the uniqueness of the case and the circumstances including the Court referring to an “unprecedented health crisis” and the resulting “unforeseen and disastrous circumstances.” HBC referred to the costs endorsement in Henderson v. Henderson, 2015 ONSC 4884 in which the Court made a nominal costs award ($10,000) following trial partly because the Court considered the matter in issue to be “novel”.

ANALYSIS AND RULING

[16] This is not a case for costs. HBC was successful in obtaining relief from forfeiture and a deferral of rent. The Landlord was successful in receiving all of its rent without the Court intervening to re-write the parties’ lease. While the interest rate on the arrears of rent was reduced, I do not view this as a re-writing of the lease as it was not a fundamental term of the lease.

[17] I do not give the Offer to Settle any weight in these circumstances as it was withdrawn a full three days before the motion. HBC proceeded after that point to weigh its litigation risks without the context of an outstanding Offer.

[18] Finally, the circumstances of this situation simply cannot be ignored. In a unique and unforeseen crisis, it would be unrealistic for one party to bear all of the financial consequences.

[19] I order that each party is to bear their own costs. The Order provided by the parties is attached.

C. Gilmore, J.

Date: July 16, 2021