Court File and Parties

COURT FILE NO.: CV-20-638343 DATE: 20221006

ONTARIO SUPERIOR COURT OF JUSTICE

RE: ROCCO SEBASTIANO, Plaintiff -and- BRUNELLO IMPORTS INC., JAMES SAVONA and MARINA SAVONA, Respondents

BEFORE: FL Myers J

COUNSEL: Stephen Schwartz, for the Applicant Emilio Bisceglia, for the Respondent James Savona and Marina Savona

READ: October 6, 2022

COSTS ENDORSEMENT

[1] For reasons reported at 2022 ONSC 5272, I granted an order enforcing the plaintiff’s mortgage against the proceeds of sale of one of the mortgaged properties.

[2] The plaintiff seeks his costs on a substantial indemnity basis under the mortgage.

[3] Absent good reason to do otherwise, in exercising discretion as to costs, the court will respect the parties’ agreement as to costs set out in a mortgage. In this case, the parties agreed that the mortgagee will be entitled to be paid his costs on a substantial indemnity basis. He seeks $33,342.15 all-inclusive.

[4] The Savonas submit that the plaintiff should not be entitled to costs of their prior motion to set aside a default judgment because that motion settled. See: Muskala v Sitarski, 2017 ONSC 2842, at para. 12. More fundamentally, the Associate Justice who made the order did not reserve costs. But for the next issue, the costs of a motion that has been resolved without costs are no longer available.

[5] The “but” here is that it was a term of the settlement and of the Associate Justice’s order that the motion to set aside the default judgment was deemed “abandoned” by the Savonas. It was not dismissed without a costs order.

[6] Rule 37.09 (3) provides that when a motion is abandoned, the responding party is entitled to costs unless the court orders otherwise:

(3) Where a motion is abandoned or is deemed to have been abandoned, a responding party on whom the notice of motion was served is entitled to the costs of the motion forthwith, unless the court orders otherwise.

[7] The Associate Justice did not order otherwise.

[8] I agree with the Savonas that when a matter is settled on all issues but costs, the court ought to be very reluctant to grant costs for the reasons set out in Muskala. But here, it was a term of the settlement that the motion would be treated in a manner that had costs consequences. I can think off no other reason for the motion to have been abandoned rather than dismissed except to invoke the costs provision of Rule 37.09 (3).

[9] Therefore, while the order of the Associate Justice does not award costs expressly, the Rules do. Accordingly, I reject the submission that the plaintiff should not be entitled to the $8,678.25 in fees claimed for the abandoned motion.

[10] The Savonas submit that the costs sought are disproportionate to the amount in issue and that costs of this magnitude will make litigation inaccessible. Their counsels’ fees for the motion alone on a substantial indemnity basis amounted to approximately $21,000 all-in. Adding the amount for the abandoned motion claimed by the plaintiff (plus HST) brings their equivalent costs to almost $31,000.

[11] I do not see a difference of about $2,300 between the parties as having a significant (or any) impact on access to justice. That is, mortgagors who incur fees and disbursements on their own counsel ought reasonably expect that the mortgagee will likely spend around the same amount on his.

The amount in issue on the motion was more than $450,000. Fees of $33,000 to obtain $450,000 are not at all disproportionate. The court routinely approves contingent fees in the order of 25% - 33% of the outcome. The fees here are not contingent. But they are also only about 7.5% of the amount in issue. I see no basis to reduce the fees sought by the plaintiff under the principle of proportionality.

[12] The fixing of costs is a discretionary decision under section 131 of the Courts of Justice Act. That discretion is generally to be exercised in accordance with the factors listed in Rule 57.01 of the Rules of Civil Procedure. These include the principle of indemnity for the successful party (57.01(1)(0.a)), the expectations of the unsuccessful party (57.01(1)(0.b)), the amount claimed and recovered (57.01(1)(a)), and the complexity of the issues (57.01(1)(c)). Overall, the court is required to consider what is “fair and reasonable” in fixing costs, and is to do so with a view to balancing compensation of the successful party with the goal of fostering access to justice: Boucher v Public Accountants Council (Ontario), 2004 CanLII 14579 (ON CA), (2004), 71 O.R. (3d) 291, at paras 26, 37.

[13] The rates claimed by the plaintiff’s counsel are well within market for counsel with their experience and expertise. The hours claimed equally strike me as reasonable. Given the outcome and the costs provision in the mortgage, in my view it is fair and reasonable to award the plaintiff his costs as claimed at $33,342.15.

[14] Borrowers know or should know that they erect hurdles to their secured creditor’s recovery at a steep cost if the creditor is successful at surmounting the barriers.

[15] As discussed in my prior endorsement, the Savonas want the mortgagee to take his first recovery from the bankrupt corporate defendant’s condominium property. Doing that could leave the Savonas with a prospect of receiving some recovery on their house. But, as I discussed, issues as between the Savonas and the subsequent encumbrancers on the condominium fall to the law of marshalling and are issues between them. The mortgagee is entitled to recover against the lowest hanging fruit as he chooses.

[16] Rather than dealing with the trustee in bankruptcy on behalf of the subsequent encumbrancers behind Mr. Sebastiano on the condominium, the Savonas chose to dispute Mr. Sebastiano’s entitlement to recover against the house proceeds. That choice carried a real risk of significant cost consequences. I see no basis to relieve them of the natural consequence of their decisions.

FL Myers J

Date: October 6, 2022