Court File and Parties

COURT FILE NO.: 15-63793 DATE: 2023/06/14 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Emmy Verdun, Dave Seibel, and Neil Marshall, Plaintiffs AND Paulette Martel, Defendant

BEFORE: Justice R. Ryan Bell

COUNSEL: Melinda Andrews, for the Plaintiffs Paulette Martel, self-represented

HEARD: In writing

Costs Endorsement [^1]

Overview

[1] The plaintiffs (the members of the co-tenancy committee) were entirely successful in their claim against Ms. Martel. I granted the plaintiffs judgment for arrears owed by Ms. Martel under the Co-Tenancy Agreement in the amount of $19,902, together with interest at the rate of 15 per cent per annum, calculated monthly in the amount of $27,331.92 as at December 1, 2022: Verdun v. Martel, at para. 58.

[2] The plaintiffs now seek their costs on a full indemnity basis in the total amount of $87,875.37, inclusive of HST and disbursements, with interest at the rate of 15 per cent per annum, calculated monthly where the costs are not paid. The plaintiffs seek 100 per cent recovery of their costs on three bases: (i) under s. 4.1(g) and s. 11 of the Co-Tenancy Agreement; (ii) under the Mortgages Act [^2] because the matter specifically relates to recovery of Shared Expenses that form a charge under that statute; and (iii) jurisprudence arising in the context of condominiums which the plaintiffs argue is analogous on the issue of costs.

[3] The plaintiffs submit that the time incurred by counsel was reasonable having regard to the result achieved, the importance of the issue, the committee’s r. 49 offer to settle of April 15, 2021 [^3], the unsuccessful party’s reasonable expectation of costs, and Ms. Martel’s re-litigation of Beaudoin J.’s decision in Furr v. Duhamel [^4].

[4] Ms. Martel submits that the plaintiffs’ costs are grossly exaggerated, and that the plaintiffs are only allowed to incur legal fees connected to the “Shared Property.” Ms. Martel also argues that the committee “cannot charge an owner’s freehold property” under the Mortgages Act. She claims that she did not “relitigate anything” and that she should never have had to defend her freehold title.

The contract argument

[5] As I confirmed in my reasons for judgment, the Co-Tenancy Agreement is a valid contract, binding on owners: Verdun, at para. 16.

[6] Section 3.1 of the Co-Tenancy Agreement confirms that the committee is responsible for managing the Shared Property, which includes estimating the annual Shared Expenses. Section 4.1(g) provides that the Shared Expenses of the Shared Property include “the cost of legal, accounting, managing, auditing and engineering services or other professional advice and services required by the Co-Tenancy Committee.” Section 11 confirms that each owner “shall indemnify and save harmless the other Owners from and against any losses, costs, damage, injury or liability whatsoever which any other Owner may suffer or incur resulting from or caused by an act or omission of the Owner … with respect to the Shared Property.” I agree with the plaintiffs that, given the Shared Expenses for the Shared Property include legal fees, the committee is entitled to rely on the indemnification provision in s. 11 to recover its legal fees incurred in this proceeding.

The Mortgages Act argument

[7] In my reasons for judgment, I referred to s. 4.5 of the Co-Tenancy Agreement which provides that an owner’s arrears in respect of Shared Expenses shall constitute a first charge upon the owner’s unit, subject only to municipal taxes having statutory priority, and that such charge “shall be deemed to be a charge to which the Mortgages Act, R.S.O. 1990, c. M. 40 applies”: Verdun, at para. 49. Under s. 4.6 of the Co-Tenancy Agreement, the terms of the charge are “those of the terms set out in the charge terms filed under the Land Registration Reform Act, R.S.O. 1990, c. L4, as number 911.”

[8] Section 8 of the charge terms states that the chargee is entitled to recover “all costs, charges, legal fees, and expenses incurred in registering the charge and generally in any other proceedings taken to realize the security given in the charge, and these amounts shall be with interest at the rate provided for in the charge.”

[9] Ms. Martel’s submission in relation to the Mortgages Act is incorrect. There is a charge that arises by contract under s. 4.5 of the Co-Tenancy Agreement; it arises automatically and it is one to which the Mortgages Act applies: Verdun, at para. 53. The applicable charge terms are clear that the chargee is entitled to recover “all legal fees.”

Jurisprudence in the condominium context

[10] The plaintiffs argue that the principle of 100 per cent recovery for legal costs in matters for unpaid shared/common expenses in “shared property communities” has been upheld by the courts. The plaintiffs say that while King’s Landing is not a condominium, but rather a private community whose owners are contractually bound by the Co-Tenancy Agreement, in both community arrangements, owners live in close proximity to each other on the property with certain shared features and responsibilities.

[11] In Metropolitan Toronto Condominium Corporation No. 868 v. Pang [^5], the court relied on the phrase “all reasonable legal costs” in s. 85(3) of the Condominium Act 1998 [^6] as signaling that the condominium was entitled to recover all the legal costs it incurred to enforce the debt owed by Ms. Pang, so long as the costs incurred were reasonable: Pang, at para. 10. As the court in Pang noted at para. 9,

[a]s the Court of Appeal has recognized, [the] Condominium Act is designed to ensure that innocent unit owners are not left with the financial burden of legal fees and costs incurred to enforce a debt owing by another unit owner: Metropolitan Toronto Condominium Corp. No. 1385 v. Skyline Executive Properties Inc. at para. 40.

[12] The court in Pang concluded that the legal fees claimed by the condominium were reasonable, even though they exceeded the amount owed by Ms. Pang for her unpaid common expenses and interest: Pang, at para. 10. That is also the case here.

[13] While King’s Landing is not a condominium, the principle that “innocent” unit owners ought not to be left with the financial burden of legal fees and costs incurred to enforce a debt owing by another unit owner is equally applicable in the co-tenancy context. The Co-Tenancy Agreement and the charge terms confirm that the committee is entitled to recover all legal fees incurred to enforce a debt owing by another owner – Ms. Martel.

Time incurred was reasonable

[14] In exercising my discretion under s. 131 of the Courts of Justice Act [^7], I have considered the following r. 57.01(1) factors, in addition to the principle of indemnity.

[15] First, the plaintiffs were entirely successful against Ms. Martel. I accept that the matter was very important to the committee and the other owners of King’s Landing. The importance of Shared Expenses to the community is reflected throughout the Co-Tenancy Agreement, including in s. 4.5 (priority of Shared Expenses), s. 4.6 (default in the payment of Shared Expenses), and s. 4.6(c) (non-avoidance of the obligation of an owner to contribute towards the Shared Expenses).

[16] Second, Ms. Martel refused to accept the committee’s r. 49 offer to settle dated April 15, 2021. The terms of the offer would have allowed Ms. Martel to pay $27,000 in full satisfaction of the arrears and interest compared to the $47,233 now owing under the judgment.

[17] Third, I find that the amount of time spent by counsel is reasonable. The action proceeded as a four-day trial, almost eight years after the action was commenced. The plaintiffs have applied an approximately 25 per cent discount to the fees claimed. In addition, Ms. Martel has been on notice for years – since 2013 – that if the committee was required to take legal action to enforce the charge against her unit, it would add to the costs for which she was responsible. In my view, the costs claimed are in an amount that Ms. Martel could reasonably expect to pay in relation to the action.

[18] Fourth, I find that Ms. Martel’s conduct in relitigating the retaining wall issue – previously decided by Beaudoin J. in Furr v. Duhamel and upheld by the Court of Appeal – lengthened the proceeding. As I noted in my reasons for judgment: “[t]he retaining wall – and Ms. Martel’s liability for the Shared Expenses related to it – is again at issue before me. So, too, is Ms. Martel’s narrow interpretation of the Co-Tenancy Agreement”: Verdun, at para. 22.

Conclusion

[19] In all the circumstances, I conclude that the plaintiffs’ costs are reasonable and proportionate. The plaintiffs are entitled to their full indemnity costs in the all inclusive amount of $87,875.37. This amount is to be paid by Ms. Martel to the plaintiffs within 30 days. Pursuant to the Co-Tenancy Agreement, the applicable rate of interest on this amount is 15 per cent per annum, calculated monthly in the event the costs are not paid within 30 days.

Justice R. Ryan Bell Date: June 14, 2023

Footnotes

[^1]: The reasons for judgment reported at Verdun v. Martel, 2023 ONSC 2594 were issued prior to the filing of the amended amended statement of claim. The title of proceedings in this costs endorsement reflects the amended pleading now filed. [^2]: R.S.O. 1990, c. M.40. [^3]: Rules of Civil Procedure, R.R.O. 1990, Reg. 194. [^4]: 2018 ONSC 1780, aff’d 2019 ONCA 824, application for leave refused, . [^5]: 2021 ONSC 2737. [^6]: S.O. 1998, c. 19. [^7]: R.S.O. 1990, c. C.43.