Court File and Parties

COURT FILE NO.: CV-18-1140

DATE: 20220825

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Thomas Maxwell, Plaintiff

AND:

Pauline Altberg, Defendant

BEFORE: Justice C. Boswell

COUNSEL: J. David Keith for the Plaintiff

John S. Contini for the Defendant

HEARD: Cost Submissions in Writing

COSTS ENDORSEMENT

Overview

[1] Mrs. Altberg loaned $50,000 to Mr. Maxwell in December 1995. The loan was secured by a collateral mortgage registered over Mr. Maxwell’s cottage in Muskoka.

[2] Mr. Maxwell made some payments on account of the loan, but it is unclear how much, if any, of the principal he paid down. He stopped making payments altogether in March 2005. The loan, by its terms, came due on December 28, 1998.

[3] On November 5, 2018 Mr. Maxwell issued a Statement of Claim seeking an order discharging the mortgage in favour of Mrs. Altberg. He claimed that any enforcement of the mortgage was, by then, statute barred by virtue of s. 23(1) Real Property Limitations Act, R.S.O. 1990, c. L.15. That Act provides that no action to enforce a mortgage may be brought more than 10 years after the mortgage became due, unless there has been a payment made in the interim, or a written acknowledgment of the indebtedness.

[4] Mr. Maxwell subsequently moved for summary judgment on his claim. The action, and the motion, were resisted by Mrs. Altberg on the basis that Mr. Maxwell had, in fact, made a $4,000 payment against the loan on May 28, 2010. She asserted that the loan payment caused the limitations clock to reset as of that date. The limitation period in which to commence a claim on the mortgage would not, on her accounting, have expired until May 28, 2020. She advanced a counterclaim in this proceeding on November 27, 2018 in which she sought judgment for the outstanding loan balance and enforcement of the mortgage. Thus, in her view, the applicable limitations period was never infringed.

[5] I heard Mr. Maxwell’s summary judgment motion on May 30, 2022. I released a ruling on that motion on June 23, 2022. I granted the motion for reasons released as 2022 ONSC 3680. By way of very brief summary, I concluded that it was Mrs. Altberg’s onus to establish that a payment had been made on the mortgage in May 2010 as she asserted. I found that her evidence was insufficient to meet that onus. In the result, I concluded that any claim on the mortgage was now statute barred and ordered that the mortgage be discharged and the counterclaim dismissed.

[6] I encouraged the parties to agree on the issue of costs. I invited their written submissions on a fixed timetable in the event they were not able to agree. I infer from the receipt of those submissions that an agreement was not in the cards.

[7] Mr. Maxwell asks that costs be awarded to him in the amount of $33,557.18 plus $1,000 for the preparation of his submissions on costs. He asserts that, as the successful party, he is presumptively entitled to his costs. He accepts that those costs should be fixed on a partial indemnity basis from the commencement of the proceedings to September 13, 2019, but asks that they be fixed on a substantial indemnity basis after September 13, 2019 on the basis that he served an offer to settle on that date and subsequently achieved a better result than the resolution proposed in his offer.

[8] I note that the offer to settle was on the basis that Mr. Maxwell pay to Mrs. Altberg the sum of $100 as a full and final settlement.

[9] Mrs. Altberg acknowledges the general convention that costs should follow the event and that Mr. Maxwell should be awarded some measure of costs. She urges the court to not give effect to Mr. Maxwell’s offer to settle on the basis that it contained no real element of compromise. Mrs. Altberg submits that the costs sought are otherwise excessive in light of the amounts at stake and the narrow issue for determination on the summary judgment motion. She asks that the court conclude that her defence of the action and the motion were reasonable in the circumstances. She suggests that costs be fixed in the range of $10,000 to $15,000 all inclusive.

The Governing Principles

[10] An award of costs, and the amount of the award, are in the court’s discretion. That discretion is grounded in section 131 of the Courts of Justice Act, R.S.O. 1990 c. C.43. Its application is guided by the factors enumerated in r. 57.01 of the Rules of Civil Procedure.

[11] The law is now well-settled that the overarching principles to be applied to the assessment of costs are fairness, proportionality and reasonableness: see Beaver v. Hill, 2018 ONCA 840; Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291 (C.A.); and Moon v. Sher (2004), 2004 39005 (ON CA), 246 D.L.R. (4th) 440 (C.A.). In the context of determining what is fair, reasonable and proportionate, due consideration must be given to the reasonable expectations of the parties. See Neubuerger v. York, 2016 ONCA 303 at para. 17.

[12] By convention, costs are generally awarded to a successful party and are ordinarily measured on a partial indemnity basis. See Bell Canada v. Olympia & York Developments Limited et. al. (1994), 1994 239 (ON CA), 17 O.R. (3d) 135 (C.A.). In special circumstances, costs may be awarded on a higher scale, but those cases are exceptional. They are reserved for cases where there has been “reprehensible, scandalous or outrageous conduct on the part of one of the parties.” See Young v. Young, 1993 34 (SCC), [1993] 4 S.C.R. 3, at para. 241. See also Mars Canada Inc. v. Bemco Cash & Carry Inc., 2018 ONCA 239 at para. 43.

[13] A higher scale of costs may also be applicable where triggered by the Rules. In particular, r. 49.10 provides that where a plaintiff makes an offer to settle at least seven days before the commencement of the hearing, which is not withdrawn or accepted by the defendant and where the plaintiff obtains a judgment as or more favourable than the terms of the offer, the plaintiff is entitled to partial indemnity costs to the date the offer was served and substantial indemnity costs thereafter, unless the court orders otherwise.

[14] Mrs. Altberg asserts that Mr. Maxwell should be denied any elevated costs because his offer to settle did not include a real element of compromise. The significance of an absence of compromise was addressed by the Court of Appeal in Walker Estate v. York-Finch General Hospital (1999), 1999 2158 (ON CA), 169 D.L.R. (4th) 689. There, the court held that it is not an absolute requirement that all offers to settle contain an element of compromise. Where, however, fairness is a relevant consideration, the absence of an element of compromise may be appropriately taken into account.

[15] As the jurisprudence has developed, since Walker, we now appreciate that fairness is always an overarching concern in relation to the exercise of the court’s discretion to award costs.

[16] That said, in Walker the court cautioned against the development of broad exceptions to the general rule provided for in r. 49.10, for fear that the general rule would no longer have general application. Citing its earlier decision in Data General (Canada) Ltd. v. Molnar Systems Group Inc. (1991), 1991 7326 (ON CA), 6 O.R. (3d) 409, the court instructed that there may be room for narrow exceptions to the general rule. In particular, after giving due consideration to the general rule, the presumptive award of substantial indemnity costs may be departed from where the interests of justice require a departure. See also Elbakhiet v. Palmer, 2014 ONCA 544 at para. 30.

[17] No particular guidance was provided as to how to assess what the interests of justice require in any given case. The court did offer that there may be a role for an element of compromise in a claim for liquidated damages where the defendant has relied on a defence of substance – one that could reasonably give rise to uncertainty about the question of liability. See also Calenese Canada Inc. v. Canadian National Railway Co., 2005 8663 (ON CA), [2005] O.J. No. 1122 (Ont. C.A.) at paras. 33-37.

Discussion

[18] Despite efforts over the years to create an environment where cost awards are predictable and measured in a somewhat scientific way, the exercise of the discretion to award costs remains more of an art than a science.

[19] In this instance, there is no dispute about entitlement. Both sides agree that, as the successful litigant, Mr. Maxwell is entitled to an award of costs. Where they are apart – significantly – is on what quantum would represent a fair, reasonable and proportionate award. In my opinion, that number is $15,000 for fees, plus HST of $1,950, together with disbursements in the amount of $3,444.32 (inclusive of HST). The total award is $20,394.32.

[20] In arriving at the number I have settled on, I have taken into account a number of salient factors.

[21] Of particular significance is my determination that this is one of the rare cases that falls within the recognized narrow band of exceptions to the operation of the general rule set out in r. 49.10.

[22] I need to put Mr. Maxwell’s claim into context. He borrowed $50,000 from Mrs. Altberg on specific terms. My review of the history of payments on the loan satisfies me that Mr. Maxwell did not make sufficient payments on the loan to keep the interest up-to-date, let alone reduce or retire the principal. He was in breach of the terms of the lending agreement almost from the get-go.

[23] Mr. Maxwell succeeded on his summary judgment motion largely because neither he nor Mrs. Altberg kept sufficiently careful accounts of the loan. It may well be that Mr. Maxwell made the purported $4,000 payment in May 2010 – but the evidence of that payment was not sufficiently reliable to settle that question. In the result, he has avoided the payment of what was clearly a significant outstanding balance as a result of the application of a limitations period.

[24] To be clear, Mr. Maxwell is not a rogue because he relies on a limitations period. He is lawfully entitled to rely upon that defence to any claim for payment of any outstanding loan balance. I mention the history of the loan solely for context.

[25] Mrs. Altberg’s defence to Mr. Maxwell’s claim was undoubtedly one of substance. There is some indication that Mr. Maxwell may have made a loan payment in May 2010. Had I concluded that he had done so, he would be looking at a very different result.

[26] In this context, Mr. Maxwell made an offer to settle. His offer of $100 represented 0.2% of the principal balance of the outstanding loan, disregarding for the moment that there may well have been significant interest owing on that principal.

[27] The purpose of r. 49 is clearly to foster settlement. See Niagara Structural Steel (St. Catherines) Ltd. v. W.D. LaFlamme Ltd. (1987), 1987 4149 (ON CA), 58 O.R. (2d) 773 (Ont. C.A.). The offer to settle made by Mr. Maxwell in no way served that purpose. It offered virtually no incentive for Mrs. Altberg to accept the offer. I note that the offer made no provision for costs. In the result, and according to r. 49.07(5), had Mrs. Altberg accepted the offer, she would have received $100 but been obliged to pay Mr. Maxwell his costs assessed to the date that the notice of acceptance was served.

[28] In the circumstances present here, I am satisfied that it is in the interests of justice to make an exception to the application of the general rule found in r. 49.10. Costs will be awarded on a partial indemnity basis only.

[29] Mr. Maxwell’s counsel assert that their partial indemnity fees are roughly $21,000. By comparison, Mrs. Altberg’s counsel’s Bill of Costs for partial indemnity fees totals roughly $9,500. This is not to suggest, of course, that the successful litigant’s costs are to be measured against whichever party appears to have the lower Bill of Costs. The principles of fairness, reasonableness and proportionality govern.

[30] The fact that Mrs. Altberg’s Bill of Costs is substantially lower than Mr. Maxwell’s tends to support my view that the costs incurred by Mr. Maxwell were unnecessarily high when viewed in the context of a case of modest complexity and value.

[31] This was not a complicated case. It was a one-issue case. The evidence martialled in relation to that one issue was very modest. The amount at stake was similarly modest, measured by today’s litigation standards.

[32] The work on the file consisted of the drafting and delivery of pleadings, the preparation of short affidavits of documents, some brief examinations and the preparation for and argument of a relatively brief motion.

[33] In my view, partial indemnity fees fixed at $15,000, in all the circumstances, is a more than fair, reasonable and proportionate award. It is also somewhat closer, in my view, than Mr. Maxwell’s proposed costs, to an amount that a litigant in Mrs. Atlberg’s position might reasonably expect to pay in the circumstances.

[34] In the result, costs are fixed at $20,394.32 all inclusive and payable by Mrs. Altberg to Mr. Maxwell within 30 days.

C. Boswell J.

Date: August 25, 2022