Court File and Parties

Court File No.: CV-21-00662986 Date: 2021-11-29 Superior Court of Justice – Ontario

Re: Fernbrook Homes (Strachan) Limited, Applicant/Moving Party And: Tarion Warranty Corporation, Respondent

Before: Davies J.

Counsel: Michael Farace, for the Applicant/Moving Party David Outerbridge and Shalom Cumbo-Steinmetz, for the Respondent

Heard at Toronto: In writing

Reasons for Decision on Costs

A. Overview

[1] Fernbrook Homes (Strachan) Limited built the Garrison Point condominium development in Toronto.

[2] Several people who bought condominiums at Garrison Point did not get occupancy of their units on the agreed upon date because of the delays caused by a problem with the water supply to the building and the suspension of building inspections during the early months of the COVID-19 pandemic. Some of the Garrison Point purchasers made claims to Tarion Warranty Corporation for delayed occupancy compensation and requested conciliation: Ontario New Home Warranties Plan Act, R.S.O. 1990, c. O.31, s. 17(1) (ONHWP Act).

[3] Fernbrook filed an Application seeking a declaration that the water supply issue and the suspension of building inspections in response to the COVID-19 pandemic, individually or collectively, meet the definition of an "Unavoidable Delay" under the ONHWP Act and no compensation is owing to the Garrison Point purchasers. Fernbrook's Application is scheduled for December 3, 2021.

[4] Fernbrook also sought an interim injunction to prohibit Tarion from taking any steps in the conciliation process until its Application is decided. I dismissed Fernbrook's application for an interim injunction (Fernbrook Homes (Strachan) Ltd. v. Tarion Warranty Corp., 2021 ONSC 4939).

[5] Tarion now seeks $86,845.95 in substantial indemnity costs.

[6] Fernbrook agrees that Tarion is entitled to costs as the successful party but argues that costs should be awarded on a partial indemnity basis in the amount of $20,000.

a. Should costs be awarded on a substantial indemnity scale?

[7] As the successful party, Tarion is presumptively entitled to costs on a partial indemnity scale. Costs on a higher scale can be awarded if I find Fernbrook's conduct during the litigation or leading up to the litigation was so reprehensible, scandalous or outrageous that it is worthy of sanction: Young v. Young, 1993 34 (SCC), [1993] 4 S.C.R. 3; Davies v. Clarington (Municipality) et al., 2009 ONCA 722, 100 O.R. (3d) 66, at para. 29.

[8] Tarion argues that costs on a substantial indemnity basis are justified for three reasons. First, Tarion argues Fernbrook adduced false and misleading evidence on its injunction application. Second, Tarion argues the injunction application was unnecessarily brought on an urgent basis. Finally, Tarion argues Fernbrook could have avoided the alleged irreparable harm altogether by paying out the compensation claims.

[9] I found the evidence adduced by Fernbrook on the application was misleading or inaccurate. Fernbrook argued that it would suffer irreparable harm to its reputation if Tarion proceeded to conciliate the claims made by the Garrison Point owners and registered Chargeable Conciliations on the publicly accessible Builder Directory. Fernbrook also argues that the registration of Chargeable Conciliations would undermine its ability to secure financing for other projects and to sell units in current and future projects. In support of its position, Fernbrook filed an affidavit that said Fernbrook has "zero Chargeable Conciliations registered against it." Fernbrook adduced a printout from the Ontario Builder Directory for Fernbrook Homes, which appears to say Fernbrook had no Chargeable Conciliations. Tarion adduced evidence that, in reality, 24 Chargeable Conciliations had been registered against Fernbrook between 2010 and 2018. No Chargeable Conciliations were registered against Fernbrook in 2019 or 2020 but Fernbrook had Chargeable Conciliations on its record. The affidavit filed by Fernbrook was inaccurate and misleading.

[10] Filing inaccurate or misleading evidence in support of an urgent, interim injunction is the sort of reprehensible conduct that can justify an enhanced cost order.

[11] Neither of Tarion's other arguments support a finding that Fernbrook acted in a scandalous, outrageous or reprehensible manner. Even if the injunction application could have been brought as a regular motion rather than an urgent motion that would not justify an enhanced cost order. Tarion intended to continue with the conciliation process even though Fernbrook had filed an application seeking a declaration about the definition of "unavoidable delay" in the warranties. Fernbrook was concerned that if Tarion proceeded with the conciliation process, its application would be moot. I did not accept Fernbrook's argument on the issue of mootness but there was nothing reprehensible, scandalous or outrageous about its position to seek an injunction on an urgent basis.

[12] Similarly, the fact that there might have been a way for Fernbrook to avoid the harm of having Chargeable Conciliations registered on its builder record does not make its position scandalous or outrageous. To avoid chargeable conciliations, Fernbrook would have had to pay all of the claims made by Garrison Point owners despite its position that the owners are not entitled to compensation. According to Tarion, it would have cost Fernbrook $540,000 to pay all the owners who filed delayed occupancy claims. Again, I did not accept that Fernbrook would suffer irreparable harm or that the balance of convenience favoured an injunction. Nonetheless, Fernbrook's decision to seek an injunction rather than pay more half a million dollars in claims it thinks are without merit is neither scandalous nor outrageous.

[13] I find this is an appropriate case for an enhanced cost order because Fernbrook filed false or misleading evidence in support of its injunction application.

b. What costs are reasonable and proportionate in all the circumstances?

[14] Regardless of the scale used to determine the costs, the quantum of costs ordered must be reasonable and proportionate having regard to the factors in r. 57.01 including the hours spent, the complexity of the proceedings, the importance of the issues, and the reasonable expectations of the losing party.

[15] On a partial indemnity basis, Tarion is seeking $57,897.30 (or 60 per cent of its actual costs of $93,246.19). On a substantial indemnity basis, Tarion is seeking $86,845.95. In my view, the costs claimed by Tarion are neither reasonable nor proportionate.

[16] While the record on this application was significant, the application was not complicated. Tarion conceded that Fernbrook's Application for a declaration as to the interpretation of "Unavoidable Delay" has merit. The only issues on the injunction application were whether Fernbrook would suffer irreparable harm if an interim injunction was refused and whether the balance of convenience favoured granting or refusing the injunction.

[17] The factual issues were also straightforward. Tarion only prepared one affidavit in response to the injunction application and there were no cross-examinations on any of the affidavits filed. The hearing lasted less than a day.

[18] In addition, much of the work done by Tarion to response to the injunction application is clearly relevant to Fernbrook's substantive application for a declaration about the meaning of "unavoidable delay" in the Ontario New Home Warranties Program Act.

[19] Even if costs are awarded on a substantial indemnity basis, $86,845.95 is not reasonable or proportionate to the issues in dispute and the complexity of the application.

[20] Fernbrook submitted a costs outline in which it claimed its actual costs on the injunction application were $50,615.53. Its substantial indemnity costs would be $45,553.97 and its partial indemnity costs would be $29,985.12. It is not reasonable to expect Fernbrook, as the unsuccessful party, to pay more than its actual fees even if an enhanced costs order is made.

[21] I find that an enhanced cost order is warranted in this case but not in the amount sought by Tarion. Fernbrook is ordered to pay Tarion $45,000 in costs, inclusive of HST and disbursements.

Davies J.

Date: November 29, 2021