COURT FILE NO.: CV-22-677711

DATE: 2022 08 22

SUPERIOR COURT OF JUSTICE - ONTARIO

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

RE: MK GENERAL CONTRACTORS INCORPORATED, Plaintiff

- and -

EGFROST HOLDINGS LIMITED and 2753299 ONTARIO INC. o/a LEVICANN, Defendants

BEFORE: Associate Justice Todd Robinson

COUNSEL: M. Yailaqi, for the defendant, 2753299 Ontario Inc. o/a Levicann (moving party)

R. Hanna, for the plaintiff (responding party)

HEARD: August 12, 2022 (by videoconference)

COSTS ENDORSEMENT

[1] The defendant, 2753299 Ontario Inc. o/a Levicann (“Levicann”), moved for various relief arising from its position that the lien against Levicann’s leasehold interest by the plaintiff, MK General Contractors Incorporated (“MK”), was preserved out of time. Primary relief on the motion was rendered moot when MK opted to voluntarily release its lien prior to scheduled cross-examinations on affidavits.

[2] Following the release of MK’s lien, the parties agreed that MK’s contract claim would continue as an ordinary action, but were unable to agree on either a form of order, costs of Levicann’s motion, and how costs of the defendant landlord, Egfrost Holdings Limited (“Egfrost”), would be addressed. No one appeared on behalf of Egfrost. I heard submissions from counsel for Levicann and MK, with my decision on costs of this motion reserved. The form of order was finalized at the hearing, but I reserved signing the order pending my decision on costs.

[3] Levicann seeks its substantial indemnity costs of this motion in the amount of $19,932.03 including HST and disbursements. MK disputes that Levicann is entitled to any costs, taking the position that it should be entitled to a nominal costs award of $1,500 to $2,000 in all the circumstances, but alternatively that costs of the motion should be in the cause.

[4] There is some merit to MK’s position in the context of this particular motion and the dealings between the parties, which are somewhat unique. Nevertheless, I am unconvinced that costs should be in the cause or that Levicann should be denied any costs. I do not agree, however, that substantial indemnity costs are appropriate and am swayed by MK’s arguments on proportionality and reasonable expectations. I am awarding partial indemnity costs of the motion to Levicann fixed in the amount of $7,000, including HST and disbursements.

Analysis

a. Legal framework

[5] Costs in a lien action are governed by s. 86 of the Construction Act, RSO 1990, c C.30. As set out in s. 50(2), the rules of court apply to lien actions except to the extent of an inconsistency with the Construction Act. The court has repeatedly held that rule 57.01 of the Rules of Civil Procedure, RRO 1990, Reg 194 (the “Rules”) is not inconsistent with the Construction Act and is also applicable in exercising discretion under s. 86.

[6] Together, s. 86 of the Construction Act and rule 57.01 of the Rules afford broad discretion to fashion a costs award that the court deems fit and just in the circumstances. Costs awards should reflect what the court views as a fair and reasonable amount that should be paid by the unsuccessful party rather than any exact measure of the actual costs to the successful litigant: Davies v. Clarington (Municipality), 2009 ONCA 722 at para. 52. The overall objective is to fix 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.

b. Necessity of opposition

[7] Whether it was necessary to oppose this motion is a seriously disputed matter. Both sides take very different views of the need for MK to oppose.

[8] Levicann’s position is that the lien was unquestionably out of time, so MK had no basis to oppose the motion and ought to have consented from the outset. The motion was necessary because of Levicann’s obligation under its lease with Egfrost to deal with the lien and Egfrost holding Levicann responsible for costs. Levicann submits that MK wrongly continued to maintain that its lien was valid, despite Levicann having challenged timeliness prior to perfection.

[9] Levicann submits that, once this motion was brought, the extent of evidence put forward was necessary and appropriate given the nature of the motion and the “best foot forward” obligation when seeking relief akin to summary judgment under s. 47 of the Construction Act. Levicann submits that its evidence clearly supported that MK’s lien was preserved out of time and argues that MK admitted it by voluntarily releasing the lien before the motion was heard. By that point, though, Levicann submits that its legal costs had been significantly (and needlessly) heightened through MK’s opposition to the motion.

[10] In response, MK paints a very different picture of the motion and the result. MK disagrees that it could simply have consented to the motion. Rather, it argues that, because of the relief initially sought, MK had no choice other than to oppose the motion. That relief was not only to vacate the claim for lien and certificate of action, but also to dismiss the action in its entirety.

[11] Levicann did ultimately withdraw its relief seeking dismissal of the action, but only after MK had served responding motion materials. MK submits that, until the dismissal relief was formally withdrawn, it had to continue opposition. Once withdrawn, MK thereafter decided to release its lien, without admitting that the lien was not timely. MK submits that its decision was based on the risk that there was no nexus between Levicann and Egfrost for the work, in which case the lien would be unenforceable against Egfrost or the premises. MK submits that timeliness was and remains arguable.

[12] I generally agree with MK that the relief as framed by Levicann warranted opposition. Although Levicann’s counsel did communicate his view that this action should be converted to an ordinary action, that was not the relief actually sought when the motion was brought. It was later added as relief before the first return before me by way of a further amended notice of motion, but MK correctly points out that it was only added as alternative relief to the primary request for dismissal of the action. That dismissal relief was only formally withdrawn after MK’s responding materials were served through a further further amended notice of motion.

[13] Nevertheless, the circumstances of communications between counsel are significant. It is evident that the sole sticking point between the parties has consistently been costs of this motion and costs payable to Egfrost, not dismissal of the action. Both prior to and following formal withdrawal of the dismissal relief, Levicann expressed willingness to settle this motion on terms that the claim for lien and certificate of action be vacated and that the parties consent to an order converting MK’s action and Levicann’s counterclaim into an ordinary action, plus costs. That position was expressed prior to MK’s responding motion materials being served.

[14] MK has not provided any clear timeline for when it made the decision to willingly release its lien to resolve this motion. In my view, whether MK’s decision was motivated by disproportionate costs of proving a lien that may not actually be enforceable against the landlord or premises or an admission that the lien was not timely, the result is the same: MK abandoned pursuing its lien after a motion seeking to declare it expired was brought.

[15] MK was evidently willing to forego its lien. Levicann had made clear that it was willing to forego the dismissal relief prior to the deadline for MK’s responding materials. I have been directed to nothing supporting that MK reasonably believed that dismissal was still genuinely being pursued when it prepared responding materials. Costs was the only issue in dispute between the parties. In my view, formal opposition through responding materials on the merits was thereby not genuinely necessary.

c. Offers to settle

[16] Levicann has provided me with three written offers to settle. The first, made in mid-May, purports to be a formal offer to settle under rule 49 of the Rules. The second and third were made in emails sent in late June and early July. The terms vary, but the initial offer contemplated costs of $7,500 plus HST payable to Levicann, and the last offer contemplated costs of $5,000, all-inclusive.

[17] Levicann’s last offer expired on July 6, 2022, the day prior to the scheduled cross-examinations. On the same day, MK voluntarily released its lien. MK’s counsel wrote to confirm the release, that MK’s affiant would not be produced for cross-examination, and reiterated that costs should be in the cause, failing which costs would need to be argued.

[18] All of Levicann’s offers included terms dealing with Egfrost’s costs claims that are not in the result, namely payment of fixed costs or indemnification for Egfrost’s costs claim against Levicann. Since Egfrost did not attend the hearing, I have made no order with respect to Egfrost. As set out in my endorsement, a consent dismissal or discontinuance, and any terms thereof, must be discussed with Egfrost.

[19] Nevertheless, it is within my discretion to consider any offer to settle. I am satisfied that I cannot simply ignore Levicann’s willingness to accept costs of $5,000, all-inclusive, and convert this action to an ordinary proceeding at the same time that MK was voluntarily releasing its lien, albeit that there were other terms dealing with Egfrost’s costs. Other than correspondence and a case conference before me, no further material steps took place between the early July exchange and the hearing. Given the costs now claimed, Levicann’s offer represents a significant compromise from its actual costs.

[20] I am also mindful that Levicann’s last two offers include reasonable partial indemnity costs given the nature of the motion and materials. MK refused to pay anything, despite costs in the cause being the exception to the typical order that costs follow the event. Notably, subrule 57.03(1) of the Rules expressly provides that costs of a motion should be payable within 30 days “unless the court is satisfied that a different order would be more just.”

d. Failure to respond to s. 39 request for information

[21] I accept MK’s submission that the failure by Levicann to respond to MK’s request for information under s. 39 of the Construction Act is a factor for costs.

[22] Under s. 39(1) of the Construction Act, any person having a lien or who is the beneficiary of a trust under Part II of the Construction Act is entitled to require disclosure of specific information within 21 days. Shortly after the statement of claim was issued, MK’s counsel sent a request for information to Levicann, which included requests for particulars of the lease and whether all or any part of the improvement was accounted for under the lease.

[23] Levicann did not response to the s. 39 request. Levicann’s counsel did not challenge the substance of the request for information, but rather took the position that MK’s request was “moot” given the facts and evidence and Levicann’s position that this was not properly a construction lien matter. In my view, that position is legally incorrect, but I need not address it.

[24] MK argues that, had the relationship between Egfrost as landlord and Levicann as tenant with respect to the improvement been disclosed, it may have materially impacted MK’s position if there was no nexus between Egfrost and Levicann for MK’s work. The suggestion was that, since the lien claim is modest, if MK’s lien could not reasonably be enforced against the landlord or property, MK would unlikely have pursued it. That would lead to the same result: pursuing only a claim against Levicann in contract.

[25] Whether a tenant is obliged to provide lease information under s. 39 was not argued, but I am nevertheless satisfied that Levicann’s refusal to respond to the request was, in effect, a decision to stonewall MK on information that, had it been provided, would have allowed MK to assess whether its claim against Egfrost was viable and whether to pursue its lien.

e. Proportionality and unnecessary costs

[26] I agree with MK that proportionality and reasonable expectations are also factors that must be considered here, particularly given the statutory directive in s. 86(2) of the Construction Act that, where the least expensive course is not taken by a party, the costs allowed shall not exceed what would have been incurred had the least expensive course been taken.

[27] MK’s lien is for $68,377.61. Levicann’s costs outline indicates that it incurred total legal fees of $21,757.56, including HST and disbursements. MK argues that incurring costs equal to one-third of the total claim on a motion that would not resolve the action, including a total of four iterations of the notice of motion that continually modified and changed the relief, was beyond the reasonable expectations of MK.

[28] MK submits essentially that Levicann took an overly aggressive approach to this motion in seeking dismissal of the action. Levicann’s approach was, in MK’s submission, unnecessarily complex and the costs outline reflects significant over-preparation given that the crux of the dispute over timeliness was a narrow legal issue, namely whether coordinating an electrical safety inspection by the Electrical Safety Authority constituted lienable services.

[29] MK points to the decision in Moon v. Sher. In that case, the Court of Appeal held that, when costs are being fixed, a successful party should not expect the court to fix costs requiring a losing party to pay for over-preparation and the losing party should equally not expect to have to do so. Over-preparation is an issue between the client and their lawyer: Moon v. Sher, [2004] OJ No 4651, 2004 CanLII 39005 (CA) at para. 33.

[30] I agree with MK that Levicann’s costs claim is disproportionate. Although Levicann submits that experience of counsel is a factor in the number of hours spent, that is not a full answer. Levicann further argues that it had a “best foot forward” evidentiary onus, but that onus on a motion to discharge is limited to the bases on which discharge is sought.

[31] The challenge to timeliness was, as MK submits, on a fairly narrow issue, namely whether or not the contract remained incomplete and any lienable services were supplied on October 21, 2021 as claimed by MK. If not, then MK’s lien was expired. The specific dispute over whether an electrical safety inspection constituted lienable services was itself a predominantly legal issue.

[32] I do not dispute the need for evidence from Levicann supporting its position that the contract was completed in August 2021 with all remedial work completed in September 2021, but I agree with MK that well over 450 pages of motion materials (excluding authorities) was not necessary. Levicann’s approach to the motion more in line with a summary judgment motion than the targeted s. 47 motion that it was framed to be. I also agree with MK that Levicann’s lengthy reply affidavit does not constitute proper reply evidence, containing new evidence and positions that could have been included from the outset.

[33] Unnecessary costs were also incurred through Levicann’s refusal to adjourn the first hearing before me. Immediately upon MK’s counsel becoming aware that a delayed surgical procedure had been re-scheduled for a date approximately 2 weeks before the hearing, he sought an adjournment, which was refused. MK then sought an urgent case conference, but Levicann did not agree. That resulted in MK preparing a responding motion record to support its adjournment request, to which Levicann ultimately consented. In my view, MK is entitled to its costs of those materials and the adjournment.

[34] Levicann’s costs outline does not delineate the various fee items claimed. Instead, it blocks together all steps in the motion for an aggregate time claim of 62.7 hours. It is impossible for me to assess the reasonableness of the time and fees claimed for each of the various fee item. I have thereby assessed reasonable costs on those items for which I am granting Levicann its costs, balanced with the proportionality concerns and my views on certain unnecessary costs. Levicann’s disbursements are reasonable and were not challenged by MK.

f. Scale of costs

[35] Levicann has not convinced me that substantial indemnity costs are appropriate here. I do not find any conduct by MK supporting heightened costs. I did not adjudicate the timeliness issue, so cannot accept Levicann’s submission that the lien was clearly out of time and, essentially, that MK has abused the lien remedy by pursuing a lien. Although I am considering Levicann’s offers, I agree with MK that Levicann did not “beat” any of them given the terms regarding Egfrost.

Disposition

[36] For the reasons above, I fix costs of this motion payable to Levicann in the amount of $7,000, including HST and disbursements. Order to go in an amended form of draft order submitted, as amended electronically prior to signing.

ASSOCIATE JUSTICE TODD ROBINSON

DATE: August 22, 2022