COURT FILE NO.: 20-83267

DATE: 2022-06-13

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: 1942091 ONTARIO INC.

AND

FIRM CAPITAL MORTGAGE FUND INC., FIRM CAPITAL MORTGAGE INVESTMENT CORPORATION, FIRM CAPITAL CORPORATION AND FIRM CAPITAL MORTGAGE INVESTORS CORP.

BEFORE: The Honourable Mr. Justice Pierre E. Roger

COUNSEL: Jason Rabin, Counsel for the Plaintiff

Scott McGrath and Alexander Soutter, Counsel for the Defendants

HEARD: In writing

Endorsement on costs

Roger J.

Background

[1] This matter came before me as two motions for summary judgment.

[2] The defendants sought the dismissal of the plaintiff’s action, alleging that there was no issue requiring a trial - that the plaintiff had no proper claim for an equitable mortgage.

[3] The plaintiff brought a cross-motion for partial summary judgment, asking the court to determine the proper amount of the proceeds of the power of sale, by considering various disputed items deducted by the defendants from these funds that the defendants still held in trust.

[4] I found:

(1) that the defendants were successful on their motion - that there was no genuine issue requiring a trial with respect to the plaintiff’s claim of equitable mortgage; and

(2) that the plaintiff was successful on its cross-motion - that the defendants were not entitled to many of the deductions they sought, and that they owed to the plaintiff the amount of $99,400.83 as the residual proceeds of the power of sale.

[5] I also allowed the plaintiff to make written submissions on prejudgment interest allegedly owing on the balance of the proceeds of sale held by the defendants.

Issues

[6] The issues to be decided include (1) costs - who should pay costs and in what amount, and (2) prejudgment interest – is it payable and, if so, in what amount.

Analysis and Findings

[7] The costs of and incidental to a proceeding or of a step in a proceeding are at the discretion of the court: s. 131 of the Courts of Justice Act, R.S.O. 1990, c. C.43. Rule 57 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (“the Rules”) provides for certain factors that the court may consider when determining costs.

[8] When determining costs, the overall objective is to fix an amount that is fair and reasonable for the unsuccessful party to pay, while also considering the other objectives of a costs award, including that of indemnity for the costs of litigation incurred by the successful litigant, that of encouraging settlements, and that of discouraging and sanctioning inappropriate behaviour by litigants.

[9] A party is prima facie entitled to prejudgment interest at the rate prescribed at ss. 127 and 128 of the Courts of Justice Act unless it is claiming an amount at a different rate.

[10] The defendants argue that, as the successful party, they are entitled to the costs of their motion and of the action in the amount of $100,689.00, less the costs attributable to the cross-motion. They say that the plaintiff is entitled to its costs of the cross-motion on a substantial indemnity scale in the amount of $17,821.95 and that the plaintiff is not entitled to pre-judgment interest. Consequently, they argue that, inclusive of taxes and disbursements, they are entitled to costs in the amount of $84,071.99.

[11] The plaintiff argues that because of an earlier offer, it should be paid costs of $39,142.20 for legal fees, consisting of $7,773.60 (partial indemnity) incurred before its offer of February 3, 2021, and $31,368.60 (substantial indemnity) incurred after February 3, 2021. Including disbursements and HST, this totals $45,515.37. It also argues that it should be paid interest at 2% on the amount that I found owing, from the time the property sold on November 22, 2018, to present.

[12] For the following reasons, I agree with the plaintiff’s submissions.

[13] The plaintiff was successful on its cross-motion. The plaintiff made a rule 49 offer on February 3, 2021, and it is not disputed that the plaintiff obtained a result as favourable as, or more favourable than, the terms of its offer. The amounts sought for fees and disbursements by the plaintiff are reasonable, proportionate, and within the reasonable expectations of the defendants.

[14] Moreover, although the defendants were successful on their motion, their motion could have been avoided if they had accepted the plaintiff’s proposal, made in the plaintiff’s email of October 29, 2021. I realize that the defendants had incurred costs to defend the plaintiff’s equitable mortgage claim by then, but I wish to send a signal to parties involved in civil litigation that they must seriously consider offers and proposals and must be reasonable because a failure to accept a reasonable proposal could impact costs. As well, these earlier costs incurred by the defendants can, in part, be set-off against the plaintiff’s costs incurred after October 29, 2021.

[15] One of the purposes of costs is to encourage settlement and encourage reasonable behaviour.

[16] In the circumstances of this case, it ultimately would have been beneficial to the defendants to have accepted the plaintiff’s proposal of October 29, 2021. The balance owing under this proposal was to be $100,000, virtually the same amount that I ordered, but this proposal would have allowed the defendants to deduct their costs of defending the plaintiff’s equitable mortgage claim, which claim would have been dismissed. The defendants did not respond to this proposal and instead proceeded with their motion. As a result, they incurred additional costs, forced the plaintiff to incur additional costs, and required this court to hear and decide these two motions for summary judgment when both motions could have been resolved on comparable terms, in or about November 2021. The defendants’ submissions on costs miss the point that hearing these motions would not have been required had they accepted this proposal. The defendants also kept, and continue to hold, the proceeds of sale in trust as some form of security for costs, when they should have known from the outset that these proceeds were payable to the plaintiff.

[17] Considering the circumstances of this case, I find that what is fair and reasonable for costs is that the defendants receive no further costs for these motions and action, and that the plaintiff be paid costs of $45,515.37 by the defendants within the next 30 days.

[18] Regarding prejudgment interest, the amended statement of claim includes a claim for prejudgment interest as per the Courts of Justice Act for the proceeds of the power of sale (see paragraph 3 (a)). There is no serious suggestion that the plaintiff abandoned its presumptive right to prejudgment interest and any failure to mention such claim in its notice of cross-motion is at best a procedural irregularity, which can be cured under rule 2.01.

[19] I disagree with the defendants’ argument that such an interpretation of paragraph 3 (a) or that to award prejudgment interest would violate the defendants’ rights to procedural fairness. There was, or should have been, no “real issue” with respect to the plaintiff’s right to receive the excess proceeds of the power of sale. Indeed, since the power of sale on November 22, 2018, the defendants have been wrongly withholding the excess proceeds: see, for example, Polsak, Re 1978 CarswellOnt 176. It has owed the plaintiff the excess proceeds since November 22, 2018, and the defendants knew or should have known this.

[20] The action was issued on March 26, 2020. The applicable prejudgment interest rate is therefore 2%.

[21] Prejudgment interest on the excess proceeds of the power of sale, which I found to be owing in the amounts of $99,400.83, is therefore payable by the defendants to the plaintiff at the rate of 2% from November 22, 2018, to the date of payment.

[22] All amounts found owing shall be paid by the defendants to the plaintiff within the next 30 days.

Released: June 13, 2022 Justice Pierre E. Roger

COURT FILE NO.: 20-83267

DATE: 2022-06-13

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

1942091 ONTARIO INC.

Plaintiff

– and –

FIRM CAPITAL MORTGAGE FUND INC., FIRM CAPITAL MORTGAGE INVESTMENT CORPORATION, FIRM CAPITAL CORPORATION AND FIRM CAPITAL MORTGAGE INVESTORS CORP

Defendants

Endorsement on Costs

Pierre E. Roger J.

Released: June 13, 2022