Court File and Parties

COURT FILE NO.: CV-21-9777 DATE: 2023-07-04 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

2327451 Ontario Inc. Applicant – and – McDonald’s Restaurants of Canada Ltd. Respondent

Counsel: Sumit Tangri, for the Applicant Andrew Parley & Sean Blakeley, for the Respondent

HEARD: Written Submissions

Decision on Costs

Cullin, j.

Overview

[1] This was an application which sought to determine the rights of a landlord, 2327451 Ontario Inc. (the “applicant”) and its tenant, McDonald’s Restaurants of Canada Ltd. (the “respondent”) under a lease agreement.

[2] On January 27, 2023, I rendered a decision which rejected several arguments advanced by the applicant, but which accepted its interpretation of the restrictive covenant in the lease. The interpretation was a central issue in the proceeding.

[3] Upon the release of the decision the parties were given an opportunity to make submissions regarding the issue of costs. This is my decision with respect to the issue of costs.

Positions of the Parties

[4] The applicant seeks partial indemnity costs. While no offers to settle were served, it submits that it made multiple efforts to resolve the parties’ dispute short of litigation, which efforts were rebuffed by the respondent. The applicant has filed correspondence exchanged between the parties regarding resolution discussions in support of its position.

[5] The applicant has submitted a Bill of Costs outlining partial indemnity costs of $22,558.59, plus HST of $2,932.62 and disbursements of $1,109.58.

[6] The respondent submits that the parties’ success on the application was split, and that each should bear their own costs of the proceeding. If partial indemnity costs are awarded, the respondent submits that those costs should be discounted to reflect its partial success in the proceeding; it submits that costs in the range of $15,000.00 would be appropriate.

The Law

[7] The court’s authority to award costs is set out in s. 131 (1) of the Courts of Justice Act, R.S.O. 1990, s.C.43, which provides:

Subject to the provisions of an Act or rules of court, the costs of and incidental to a proceeding or a step in a proceeding are in the discretion of the court, and the court may determine by whom and to what extent the costs shall be paid.

[8] The factors to be applied by the court in exercising its discretion under s. 131 of the Courts of Justice Act are enumerated in r. 57.01 of the Rules of Civil Procedure.

[9] As a general rule, costs are awarded having regard to the principle of indemnity noted in r. 57.01(1)(0.a); that is, they are payable to the successful party by the unsuccessful party.

[10] In Beniuk v. Leamington (Municipality), 2020 ONCA 424, the Court of Appeal confirmed that, where parties share mixed success in a proceeding, it is appropriate to adjust costs to reflect that mixed success.

Analysis and Disposition

[11] I agree with the respondent’s submission that the success in this application was mixed. The applicant was partially successful on the preliminary issue of the court’s jurisdiction to grant relief and was successful on the substantive issue regarding the interpretation of the restrictive covenant. It was not successful in establishing that the restrictive covenant was unenforceable, nor was it successful in establishing that the respondent acted in bad faith.

[12] While the interpretation of the restrictive covenant was a central issue in the proceeding, time and resources were allocated by the parties to the litigation of the remaining unsuccessful issues. In my view, any award of costs should be adjusted to reflect these efforts and the applicant’s mixed success.

[13] I do not agree with the respondent’s submission that each party should bear their own costs. At the end of the day, this litigation was necessary because the parties were at an impasse regarding the terms of their lease. The respondent submits that the issue of the lease was important and that it was necessary for it to vigorously defend the application; in my view, it was equally important to the applicant to advance the proceeding. The parties’ lease was subject to renewal in early 2023; the looming issue of the interpretation of the lease would not have assisted the parties as they attempted to negotiate the terms of the renewal.

[14] No formal offers to settle were exchanged by the parties. It appears that the applicant made some overtures to resolution in advance of the hearing, and that the respondent expressed some reticence to engage in negotiations while the litigation was ongoing. These “staring contests” were characteristic of the parties’ relationship even prior to the litigation and, in my view, reinforce the observation that the parties were at a standoff and that the litigation was a necessary next step.

[15] I find that the respondent’s proposed partial indemnity costs of $15,000.00 are reasonable, and I order that costs be fixed in this amount, plus HST and disbursements. I do not allow the applicant’s disbursement for “administrative fees” as this disbursement is not particularized and it appears not to be an assessable disbursement.

[16] I therefore order the respondent to pay partial indemnity costs to the applicant in the total amount of $17,934.53.

The Honourable Madam Justice K.E. Cullin

Released: July 4, 2023