Court File and Parties

Court File No.: CV-22-683480 Date: June 2, 2023

Superior Court of Justice - Ontario

Re: 2708320 Ontario Ltd. cob Viceroy Homes v. Jia Development Inc., CB Bridle Path Inc. and Kingsett Mortgage Corporation;

Before: ASSOCIATE JUSTICE C. WIEBE

Counsel: Andrea Gorys for CB Bridle Path Inc. (“Bridle Path”); Robert Hine for Jia Development Inc. (“Jia”); Brendan Bowles for Folger, Rubinoff LLP (“FR”);

Decision Date: April 14, 2023.

COSTS DECISION

[1] On April 5, 2023 I heard argument on two motions, one by Bridle Path and the other by Jia. Both motions claimed two forms of relief, namely an order discharging the claim for lien of the plaintiff, 2708320 Ontario Ltd. cob Viceroy Homes (“Viceroy”), under Construction Act, R.S.O. 1990, c. C.30 (“CA”), section 47 on the grounds that the claim for lien was frivolous, vexatious and an abuse of process, and an order dismissing the Viceroy action due to the fact that it had not complied with my removal order of January 16, 2023 and hired a lawyer or obtained an order granting it leave to represented by a non-lawyer. No one appeared for Viceroy on April 5, 2023 despite the clear knowledge its principal, Andrew Sun, had of the motions. Mr. Bowles appeared for an interested party, Fogler, Rubinoff LLP (“FR”), but made no substantive submissions.

[2] Orally, I granted both motions in their entirety on April 5, 2023. On April 14, 2023 I released my written reasons for this decision. I directed that the Bridle Path and Jia serve Mr. Sun and Mr. Bowles and upload costs outlines and written submissions on costs. They did so. FR was the only one to deliver responding written submissions on costs.

[3] Bridle Path wants full indemnity costs from Viceroy for the action and the motion in the amount of $88,150.55, or, in the alternative, substantial indemnity costs of $79,761.35. Jia wants substantial indemnity costs from Viceroy and Mr. Sun for the action and the motion in the amount of $48,036.75 or, in the alternative, partial indemnity costs from the same parties in the amount of $40,909.84.

[4] There was no issue that Bridle Path and Jia succeeded completely on their motions and deserve costs. That is what I rule. The issue is the quantum.

[5] Concerning the Bridle Path claim, Mr. Bowles focused on CA section 86(2). This provision specifies that costs allowed a party in a construction lien proceeding should not exceed what it would have cost the party to take “the least expensive course” if that course was not taken. He criticized the quantum of hours shown in the Bridle Path costs outline for Ms. Gorys, a junior lawyer, Alison Kuchinsky, a senior lawyer, Mark St. Cyr, and law clerks. He criticized the rates shown for the law clerks as being excessive. He argued that, without any responding motion material from Viceroy, this time and expense was not the least expensive course of action. He argued that Ms. Gorys’ time should have spent no more than 24 hours on this action and motion, that there was no justification for the time of the other lawyers, and that there should have been no more than 20 hours of law clerk time at a student’s rate. He criticized Bridle Path for spending so much time on its section 47 motion when the Viceroy claim could have been disposed of under Rule 15.04(7) when Viceroy failed to hire a replacement lawyer. He submitted that Bridle Path should be awarded $30,000 in costs.

[6] I find that these submissions lack merit. It is all a matter of proportionality and perspective. The Viceroy frivolous, vexatious and abusive claim for lien was in the amount of $3,740,300. The subject land contained a much delayed project. The owners were trying to sell the land and were having trouble doing so, something that Viceroy was well aware of given the owners’ failed attempt to sell the land to Bill in March, 2022. The size of the Viceroy claim for lien was a significant impediment to any sale. It made posting security for the claim for lien a significant issue.

[7] This impediment was further enhanced by the fact that Viceroy hired experienced construction lawyers from a reputable, downtown Toronto law firm to preserve and perfect the Viceroy lien. This sent the message that, while the claim for lien appeared to have no merit and while it appeared to have been registered for an improper purpose, Viceroy would defend its claim for lien vigorously and must have hidden evidence that would allow its claim for lien to pass the “triable issue” test on a CA section 47 motion.

[8] The impediment of the Viceroy claim for lien became even more acute when the owners succeeded in finding a new buyer in December, 2022 with the sale closing at the end of January, 2023. With the stakes now quite high and in these circumstances, I do not criticize Bridle Path for applying all available resources, including senior and junior counsel, extensive research, a detailed cross-examination, and the preparation of detailed affidavits and factum, to move as quickly as possible and attack the Viceroy claim for lien as thoroughly as possible. There was little margin for error.

[9] Viceroy’s abandonment of its claim for lien remained unclear until the very end. FR remained the lawyer of record for Viceroy for a while, even after the motion was brought and during the aborted completion of the cross-examination in early January, 2023. Viceroy made no effort to resolve the motions. Finally, and most importantly, Viceroy’s definitive decision not to hire a replacement lawyer and its definitive non-response to the motions became evident only at the time the motion was argued on April 5, 2023. Until that time, I expected a replacement lawyer to appear for Viceroy at any time and ask for an adjournment. This all made Bridle Path’s work and the volume of its work on both its section 47 and Rule 15.04(7) motions understandable and justified.

[10] Having said that, I do find Ms. Gorys’ time for research and affidavit preparation somewhat excessive. With Mr. Sun’s admissions at the cross-examination, the owners’ pathway to success on the motions became clearer. I will make a slight adjustment in the Bridle Path award.

[11] Concerning the standard of the costs award, I note that an award of actual costs is an extraordinary award. In Net Connect Installation Inc. v. Mobile Zone Inc., 2017 ONCA 766 the Court of Appeal heard an appeal of a summary judgment motion ruling in part concerning costs. The motions judge ruled that the appellants had not only breached the contract between the parties, but had moved assets out of the country to avoid execution and fabricated evidence. The motions judge gave the respondents an award of actual costs in the amount of $144,991. The Court of Appeal stated the following in paragraph 8 about awards of actual costs: “It follows that conduct worthy of sanction would have to be especially egregious to justify the highest scale of full indemnity costs.” It upheld the costs ruling.

[12] I find that the conduct of Viceroy in this case equally merits the highest scale of full indemnity costs. As indicated in my motions ruling, Viceroy essentially fabricated a huge claim for lien to encumber the subject land at a time when it knew or ought to have known that the owners were trying to sell the land. The extortionary purpose of the Viceroy claim for lien was clear from the evidence. What could be more worthy of the severest sanction than this?

[13] I have decided to award Bridle Path its actual costs of the motions and action in the amount of $85,000, which Viceroy must pay forthwith.

[14] Concerning the Jia claim, Mr. Bowles argued that Jia took a secondary role in the motion and should have, as the least expensive course of action, minimized its costs accordingly. He argued that there should be no award for the preparation of a statement of defence, which was never served. He argued that the use of two senior lawyers, as was the case with Jia, was not what a losing party should reasonably expect to pay in costs for a party that took a secondary role in an unopposed motion. He argued that Mr. Hines should have spent just a few hours (ie. 12 hours) vetting Ms. Gorys’ work. He submitted that Jia should get no more than $5,000 in costs. He took no position on Jia’s effort to obtain costs from Mr. Sun.

[15] I do not agree with these submissions. Jia did not take a secondary role in the motions. It put forward critical evidence that in large measure determined the outcome. Mr. Pei was the one with the relationship with Mr. Sun. As a result, Mr. Pei’s detailed affidavit provided key evidence of his conversations and correspondence with Mr. Sun, evidence that exposed Mr. Sun’s motivation behind the Viceroy claim for lien. In the argument of the motions, Jia in fact showed restraint by not filing a factum or making oral argument. The work done by Jia on a statement of defence was justified. The claim for costs is for the entire action. Jia had been served with the statement of claim, and, given Mr. Sun’s apparent willingness to ignore rules, Jia needed to be ready to deliver a pleading on short notice.

[16] Finally, I reiterate that Jia, as co-owner of the land that was entirely separate from Bridle Path, had a vital and separate interest in the success of these motions, particularly in light of the pending sale. As with Bridle Path, Jia was justified in bringing all available resources to bear on the motions in the circumstances. This is what a party such as Viceroy, who concocted a huge claim for lien to frustrate the owners efforts to sell the property, should reasonably expect to pay in the circumstances. Finally, I reiterate that the certainty of Viceroy’s abandonment of its claim for lien was not evident until the motions were argued on April 5, 2023.

[17] I will make some adjustment to account for potential duplicative work by the two senior lawyers and, like Ms. Gorys, perhaps some excessive research given the clarity of the evidence and issues in the end.

[18] As to the standard of the costs award, this is certainly a case crying out for an award of the claimed substantial indemnity costs given my findings on the motions. I have already granted Bridle Path the highest award of costs based on actual costs. The kind of abusive behavior exhibited by Viceroy in this matter needs to be discouraged in the strongest terms.

[19] I have decided to award Jia $45,000 in substantial indemnity costs for the costs of these motions and the action.

[20] There is finally the question of whether Mr. Sun should be personally liable for the costs awarded to Jia. I find that he must be so liable. I do so on two grounds. Under the common law, the corporate veil can be pierced to make liable a person who controls the corporation and uses it as a shield for fraudulent and improper purposes; see 642947 Ontario Ltd. v. Fletcher at paragraph 68. There is no doubt from the evidence in the motions that Mr. Sun dominated Viceroy at the relevant times and caused it to register and perpetuate a totally groundless claim for lien for extortionary purposes. The corporate veil should be pierced to make him liable for the costs of Jia.

[21] Under CA section 86(1)(b) a person “who represented a party” and who “knowingly participated in the preservation or perfection of a lien . . . where it is clear that the claim for a lien is without foundation, is frivolous, vexatious or an abuse of process, or is for a willfully exaggerated amount” may be found liable for costs and the costs may be on a substantial indemnity basis. I have found that the Viceroy claim for lien was frivolous, vexatious and an abuse of process. The evidence in the motions satisfies me that Mr. Sun represented Viceroy and knowingly participated in its conduct in preserving and perfecting the lien. He must be found liable to pay substantial indemnity costs to Jia as a result.

[22] I, therefore, rule that Viceroy and Mr. Sun are jointly and severally liable to pay Jia the above noted costs in the amount of $45,000, and this payment must be forthwith.

Date: June 2, 2023 ASSOCIATE JUSTICE C. WIEBE