Court File and Parties

COURT FILE NO.: CV-22-628 DATE: 20230221 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

JANET FLEMING Applicant – and – YORK UNIVERSITY and THE TORONTO-DOMINION BANK Respondents

Counsel: O. Thompson for the Applicant B. Kolenda and D. Salter for the Respondent, York University

HEARD: February 15, 2023 (via Zoom)

Costs Endorsement

McCarthy J.

[1] The parties return before me on the issue of costs and for the settling of the form and content of an order. The important issue at the hearing of the application was how the proceeds of sale (“the sale proceeds”) from two properties (“Osprey” and “Lot 29”) would be allocated.

[2] Pursuant to s. 131 of the Courts of Justice Act, R.S.O. 1990, c. C.43, the costs of, and incidental to, a proceeding are in the discretion of the court. The court should be guided by the principles set out in r. 57.01 of the Rules of Civil Procedure, R.R.O 1990, Reg. 194.

[3] On October 4, 2022, I released reasons in which I ordered, inter alia: a) that the sale proceeds from Lot 29 be paid towards the discharge of the TD Bank mortgage; b) that York was entitled to recover a 2016 costs award from the Lot 29 sale proceeds; c) that legal costs pertaining to the sale of the Osprey property be paid from the sale proceeds of the two properties: and d) that the balance of sale proceeds from Osprey be paid to York in partial satisfaction of the 2016 fraud judgment of Conway J. (“the Conway judgment”).

[4] Counsel for both parties advised that two points of disagreement remain: i) the entitlement to and quantum of costs on the application; and ii) whether the $16,813.56 account rendered by McCarthy Tétrault LLP to York for legal fees (“the MT account”) is properly payable out of the sale proceeds in-line with sub-paragraph 24(iv) of my reasons.

[5] The Applicant contends that because of the nature and history of the litigation, the unnecessary steps taken by the Respondent, and the fact that success on the application was divided, the parties should bear their own costs of the litigation. In respect of the MT account, the fees greatly exceed any reasonable amount that should be charged for two simple real estate transactions.

[6] York seeks its costs of the application on a substantial indemnity scale in the amount $79,187.76. York asserts that it was entirely successful on the application aside from that part of the order which granted the Applicant $2,450 to compensate for legal costs incurred for the sale of the properties. York points to the improper activity that the Applicant has engaged in: attempting to draw down the equity in Osprey by using the line of credit against the property for purposes other than legal fees; and proceeding to list Osprey for sale in direct contravention of a previous order of Gilmore J. (“the Gilmore order”), with the clear intent of fettering York’s ability to recover upon the Conway judgment. In respect of the MT account, York contends that this expenditure was necessary to ensure the orderly sale of the properties in complex and litigious circumstances.

[7] I cannot help but conclude that the Respondent York was largely, if not entirely, successful on the application. The allocation of sale proceeds from the two properties was the key issue before me. I accepted the position advanced by York. The allocation sought by the Applicant would have resulted in a net benefit to her of $430,000. The result of my order was that, after the discharge of the TD mortgage, nearly all the remaining sale proceeds were paid to the benefit of York.

[8] The Applicant’s allegations of collusion and bad faith against York were completely unfounded and baseless. I utterly rejected the Applicant’s argument that the sale proceeds should be used to pay the costs award made against her in the Gilmore J order.

[9] Aside from the court allowing her the modest legal costs she incurred for the property sales, it is difficult to understand how the Applicant could claim that she achieved any measure of success on the application.

[10] The issues before the court were challenging and complex. The litigation involved a dissection of previous court orders, a review of what I referred to in my reasons as a long and tortured history of litigation, a consideration of the doctrine of unclean hands, marshalling and priorities, and allegations of bad faith and collusion.

[11] The issues were important to York who stood to lose out on the recovery of nearly $430,000 towards the Conway judgment if the Applicant’s position had prevailed.

[12] There have been four court appearances on this application. The first of these, on June 1, 2022, was on short notice to York. This understandably warranted the immediate attention and focused preparation of skilled counsel. York prepared extensive responding material. The litigation also featured a document intensive cross-examination on supporting affidavits as well as research into the law of equity and marshalling. The factum prepared by York was highly polished and of great assistance to the court.

[13] I found that the Applicant had no entitlement to the equity in Osprey; it followed that she lacked legal or equitable standing to command or have a voice in how the sale proceeds from Osprey were to be apportioned or distributed.

[14] As stated at paragraph 19 of my reasons, the Applicant’s conduct in attempting to list and sell Osprey 29 constituted a direct violation of the Gilmore order and a poorly veiled attempt to compromise the ability of York to recover on the Conway judgment. This action on her part served to prolong and complicate the application.

[15] The fact that she was ordered to pay $60,000 in costs to York in the Conway judgment must have informed the expectations of the Applicant as to the costs exposure she would face by taking the bold and unilateral action of listing Lot 29 for sale in the face of a prohibiting court order.

[16] That leaves the principle of proportionality. The application featured important and complex issues with the allocation of significant funds at stake. The litigation required the experience, attention, and expertise of York’s counsel over a relatively short but nevertheless intensive period of litigation.

[17] I would stop short of awarding costs on a substantial indemnity basis for the simple reason that an application for some of the relief sought by York would have been necessary in any event. It is true that the Applicant’s conduct was reprehensible; but that did not really alter the landscape. The only way for York to access funds to apply towards the Conway judgment was to tap into the equity on the properties. York was always going to take a back seat to the secured creditor TD vis a vis any proceeds from Lot 29.

[18] I find that the amount calculated and submitted by York for costs on a partial indemnity scale is reasonable and proportional to the conduct of the parties, the issues, the amount at stake and the reasonable expectations of the parties. The disbursements relate to the litigation and were necessary and reasonable for its prosecution.

[19] That being the case, I order the Applicant to pay to the Respondent York University the sum of $54,705.38 for costs on a partial indemnity scale. Those costs are fixed and payable forthwith.

[20] Finally, I find that the legal services provided by McCarthy Tétrault LLP were necessary and reasonable. These were no ordinary real estate transactions: attention had to be given to the implementation of an existing court order, the prospect of a prohibited sale by the Applicant and the vacating of prior restrictions on title. Ongoing communication and close collaboration with York’s litigation counsel in such circumstances was to be expected. As well, the principle of indemnity weighs in favour of allowing this “legal cost” to be paid under sub-paragraph 24 (iv) since it represents an incurred cost for York.

Disposition

[21] The Applicant shall pay the Respondent York University the sum of $54,705.38 for costs of the application inclusive of HST and disbursements. The amount of $16,813.56 shall be paid in respect of the legal fees incurred by York with McCarthy Tétrault LLP. Those amounts shall be paid out of the sale proceeds of the two properties in accordance with the orders given at paragraph 24 of my reasons dated October 4, 2022.

[22] The form and content of a proposed order/judgment was not sufficiently canvassed at the costs hearing. York is invited to submit for consideration and execution by the court a draft proposed order reflecting these allowances for costs and other items ordered by the court. Should York encounter difficulty in obtaining the approval as to form and content of the proposed order from the Applicant, York may forthwith schedule a case conference before me without delay through the trial coordinator.

McCarthy J.

Released: February 21, 2023