Court File and Parties

COURT FILE NO.: CV-22-1842 DATE: 2023-10-25 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: HALTON CONDOMINIUM CORPORATION NO. 61, Applicant AND: Nikolay KOLAROVALIEV and Borislava BORISSOVA, Respondents

BEFORE: Kurz J.

COUNSEL: A. Casalinuovo, for the Applicant N. Simova, for the Respondents

HEARD: May 15, 2023

Costs Endorsement

Introduction

[1] On August 29, 2023, I granted an application by Halton Condominium Corporation No. 61 (“HCC 61”) under s. 134 (“s. 134”) of the Condominium Act, 1998, S.O. 1998, c. 19 (“the Act”) to enforce its non-smoking rule “(the Non-Smoking Rule”) against the Respondents. That decision was reported at 2023 ONSC 4921.

[2] HCC 61 was completely successful in its application. It now seeks its full indemnity costs of this proceedings and the steps leading to it on a full indemnity basis of $87,377.16. In the alternative, HCC 61 seeks its partial indemnity costs of $70,900.62. In sum, it argues that:

1. It was wholly successful;
2. On November 7, 2022, it made an offer to settle to the Respondents, by which they would agree to modify the grandfathering agreement and minutes of settlement upon terms very similar to those of my order. The offer included a term that the Respondents shall pay costs of $15,000. Upon the breach of an order based upon the terms of the offer, HCC 61 was at liberty to move again to prohibit them from smoking anywhere on the HCC 61 premises and to pay costs of that motion.
3. HCC 61 acted reasonably in this matter while the Respondents failed to do so. [1]
4. The Respondents’ fellow unit-owners should not be liable for the “transgressions” of their fellow unit-holders like the Respondents. Rather the Respondents should pay full indemnity costs, as the noncompliant unit holders in York Condominium Corporation No. 187 v. Sandhu, 2019 ONSC 4779 (“Sandhu”) were required to do. HCC 61 also cites a number of other cases in which transgressive unit-holders were required to pay full indemnity costs of a condominium corporation which was enforcing its bylaws.
5. Section 134(5) of the Condominium Act, 1998, S.O. 1998, c. 19 allows a condominium corporation to add any damages or costs awarded by a court to the corporation against a unit owner, to the common expenses for the unit.
6. Each of the HCC 61’s governing documents (its Declaration, By-law 14 and the Preamble to its Rules) all call for full indemnity by a unit holder when HCC 61 is enforcing compliance with its governing documents. Further the parties’ mediation Minutes of Settlement specifically contemplate the request for costs made in this application, should such a proceeding become necessary.

[3] The Respondents argue for a no-costs order. In the alternative, they argue that costs should be imposed on a lower than partial indemnity scale of 30% of HCC 61’s actual costs.

[4] In making their argument, the Respondents refer to the “well established … overarching principles” requiring a costs award to reflect reasonableness, fairness and proportionality: Barbour v. Bailey, 2016 ONCA 334 at para. 9. They also refer to r. 57.01(1)’s basket clause of “any other matter relevant to costs”.

[5] The other matters to which the Respondents refer are:

1. Their view that they acted properly and in accord with the HCC 61 Grandfathering Agreement regarding smoking.
2. The “unbearable financial burden” that a costs award such as that requested by HCC 61 would impose on the Respondents. They assert that Mr. Kolarovaliev has been laid off from work.
3. On October 27, 2022, they made an offer to settle in which they offered to sell and move out of their unit within 18 months. That offer also called for no costs and that they “will continue to act in accordance with the terms of said Grandfathering Agreement”.
4. This proceeding could have been resolved less expensively, in their estimation, at the Condominium Authority Tribunal. They refer to a case where costs were assessed at a far lower level than HCC 61 is requesting here: York Condominium Corporation 444 v. Ryan, 2023 ANCAT 81. They argue that they should not have to bear the full costs of HCC 61’s choice of forum.

Applicable Authorities

[6] Section 131 of the Courts of Justice Act, R.S.O. 1990, c. C.43 grants this court the discretion to determine the costs of a proceeding or step in a proceeding. It states:

131(1) 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.

[7] The Court of Appeal for Ontario has stated that "[m]odern cost rules are designed to foster three fundamental purposes: (1) to indemnify successful litigants for the cost of litigation; (2) to encourage settlements; and (3) to discourage and sanction inappropriate behaviour by litigants": Fong v. Chan (1999), O.J. No. 4600 (Ont. C.A.) at para. 22.

[8] In 394 Lakeshore Oakville Holdings Inc. v. Misek, 2010 ONSC 7238, [2010] O.J. No. 5692 (Ont. S.C.J.), at para. 10 Perell J. of this court reformulated and supplemented those purposes as follows: (1) to indemnify successful litigants for the costs of litigation, although not necessarily completely; (2) to facilitate access to justice, including access for impecunious litigants; (3) to discourage frivolous claims and defences; (4) to discourage the sanctioning of inappropriate behaviour by litigants in their conduct of the proceedings; and (5) to encourage settlements. (See also: Talwar v. Grand River Hospital Board of Directors, 2018 ONSC 6645).

[9] It is important to note that both decisions articulated the view that the goals of an award of costs are not limited to indemnity. There are broader, discretionary considerations involved, which are articulated in r. 57.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.

[10] Under Rule 51.07(7) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, the court is to "... devise and adopt the simplest, least expensive and most expeditious process for fixing costs ...". The general principles for the exercise of my discretion in determining costs are set out in r. 57.01(1). They include:

• The result of the proceeding; i.e. success. It is trite that there is a presumption that the successful party is entitled to their costs.
• However, a court is entitled to award costs against the successful party in the appropriate circumstances (r. 57.01(2)). That may particularly be so when the court grants an indulgence to a party. In the oft-repeated comment of Hawkins, D.C.J., in Fox v. Bourget, [1987] O.J. No. 2326 (Ont. D.C.): "the price of a granted indulgence is the payment of the costs of those who have sought, unsuccessfully, to prevent its being granted."
• offers to settle,
• the principle of indemnity,
• the reasonable costs expectations of the unsuccessful party for the step for which costs are claimed,
• the amounts claimed and recovered in the proceeding,
• the apportionment of liability,
• the complexity of the proceeding,
• the importance of the issues,
• the conduct of any party that tended to shorten or unnecessarily lengthen the proceeding,
• whether any step in the proceeding was taken improperly, vexatiously, unnecessarily, through negligence, mistake, or unnecessary caution,
• a party's denial or refusal to admit anything that should have been admitted,
• whether the dispute between the parties had been unnecessarily divided into more than one proceeding,
• any other matter relevant to the determination of costs.

[11] Those factors reflect the general principle set out in Boucher v. Public Accountants Council for the Province of Ontario, [2004] O.J. No. 2634 (O.C.A.). There, the Ontario Court of Appeal stated at para. 24 that costs awards should reflect "what the court views as a fair and reasonable amount that should be paid by the unsuccessful parties." That amount is not necessarily based on what the successful counsel is entitled to charge their client: Coldmatic Refrigeration of Canada v. Levtek Processing, [2005] O.J. No. 160 (Ont. C.A.).

[12] More recently, in Beaver v. Hill 2018 ONCA 840 at para. 10, the Court of Appeal for Ontario clarified that proportionality and reasonableness are the touchstone considerations to be applied in fixing costs in family law matters. While the Family Law Rules, under which Beaver v. Hill were decided, "embody a philosophy peculiar to a lawsuit that involves a family" (Frick v. Frick, 2016 ONCA 799, at para. 11), the principle in Beaver v. Hill should logically apply in equal measure to non-family civil litigation matters. As the Court of Appeal wrote in K.K. v. M.M., 2022 ONCA 72, at para. 51:

private family law disputes, while distinct from other civil litigation in many respects, are “civil” proceedings in the ordinary sense of the word: they concern private relations between members of the community in contrast to criminal or child protection proceedings, which both involve state action.

[13] In Davies v. Clarington (Municipality), 2009 ONCA 722, Epstein J.A., writing for the Court of Appeal of Ontario, summarized the principles set out in the Rules of Civil Procedure regarding the entitlement to enhanced costs in the face of offers to settle. She wrote:

[14] Rule 57.01(4) allows for elevated levels of costs:

57.01(4) Nothing in this rule or rules 57.02 to 57.07 affects the authority of the court under section 131 of the Courts of Justice Act,

(c) to award all or part of the costs on a substantial indemnity basis; (d) to award costs in an amount that represents full indemnity

[15] "Substantial indemnity costs" is defined in rule 1.03 as "costs awarded in an amount that is 1.5 times what would otherwise be awarded in accordance with Part I of Tariff A". This part of Tariff A was once the prescribed grid for "partial indemnity costs", but is no longer in effect. "Full indemnity costs" is not a defined term but is generally considered to be complete reimbursement of all amounts a client has had to pay to his or her lawyer in relation to the litigation: see M. Orkin, The Law of Costs, 2nd ed., looseleaf (Aurora, Ont.: Canada Law Book, 1993) at para. 219.05.

[16] Rule 49 deals with a specific aspect of costs: it is a self-contained scheme that addresses the manner in which offers to settle are brought into play. Its objective is to promote an offer of compromise and visit a cost consequence upon an offeree who rejects an offer that turns out to be as favourable as or more favourable than the judgment awarded to a plaintiff at trial…

Analysis of Costs Issue

[14] Considering the arguments and authorities cited above, I find that HCC 61 is entitled to costs on an enhanced but not full indemnity basis for the entirety of its costs claims for following reasons:

1. HCC 61 was fully successful in this application.

2. The result it obtained closely matched the terms of its written offer of November 7, 2022. Had the offer been accepted, the Respondents would have been exposed to a costs award far less than its alternative costs position of 30%.

3. I am also willing to grant costs for the period leading up to the issuance of the application because of the terms of HCC 61’s governing documents, the parties’ Minutes of Settlement and s. 134(5) of the Condominium Act, 1998, S.O. 1998, c. 19. That statutory provision grants HCC 61 a broad right to seek its costs of enforcement of its governing documents, including “any additional actual costs to the corporation in obtaining the order”. Those costs may be added to the unit holder’s common expenses. That provision has been broadly interpreted to mean that innocent condominium unit holders should not have to bear any of the costs of enforcement of governing documents against non-compliant unit holders: Metropolitan Toronto Condominium Corporation No. 1385 v. Skyline Executive Properties, [2005] O.J. No. 1604, at paras. 38-45, Muskoka Condominium Corporation No. 39 v. Kreutzweiser, 2010 ONSC 2453 at para. 16.

4. I echo the following comments of Bawden J. at para. 42 of Sandhu:

   42 The Condominium Act protects the innocent unit owners by imposing punishing measures on unit owners who create or permit litigation costs to arise. These punishing measures provide a powerful incentive to owners to avoid litigation altogether or to pay off the costs of the litigation immediately so that they do not become a burden on other property owners.

5. The Respondent’s offer did not respond to the issues of this application. HCC 61 was not asking them to sell and move out of their unit. Rather, it was asking for compliance with the Grandfathering Agreement, including a limitation on the Respondents’ smoking in their unit and on HCC 61’s premises. The term in the Respondent’s offer, stating that they ““will continue to act in accordance with the terms of said Grandfathering Agreement”, represented no compromise in the circumstances. Since they were in continual denial of their ongoing breaches of the Grandfathering Agreement, they were only offering a continuation of their noncompliant conduct for up to a further eighteen months or until April 27, 2024.

6. HCC 61’s governing documents and the parties’ Minutes of Settlement called for full indemnity costs if HCC 61 were required to apply to ensure compliance with those governing documents, including the Grandfathering Agreement.

7. The conduct of the Respondents was unreasonable in that they refused to change their behaviour in the face of HCC 61’s governing documents, the parties’ Minutes of Settlement and this application. Rather, they engaged in complete denial combined with personal attacks on a member of the HCC 61 board which lacked a shred of objective evidence.

8. On the other hand, HCC 61 acted reasonably and incrementally. It even spent its own money for a mediator in an attempt to avert this very application. It was also willing to engage in the remediation called for in the Minutes of Settlement. For their part, the Respondents walked away from those Minutes.

9. I will not penalize HCC 61 for choosing this court as the forum for this litigation. In light of the conduct of the Respondents, it was reasonable to seek an enforceable order of a court.

[15] All of that being said, the award of costs is not the equivalent of the grant of an unlimited expense account to the successful party. Costs claims must still be fair, reasonable and proportionate in the circumstances.

[16] Here, the Respondents failed to provide their own bill of costs. While not required to do so, that failure is relevant to any determination of whether HCC 61’s costs meet the reasonable costs expectations of the Respondents: Smith Estate v. Rotstein, 2011 ONCA 491, 106 O.R. (3d) 161, at para. 50, leave to appeal refused, [2011] S.C.C.A. No. 441. It is open to me in the circumstances to draw the inference that the amount claimed by HCC 61 was reasonable: Northwinds Brewery Ltd. v Caralyse Inc., 2023 ONCA 17, [2023] O.J. No 176, at para. 46.

[17] That being said, HCC 61’s counsel has not presented its detailed dockets to the court. Rather it only provides the broad statements generally setting out its services, found in its bill of costs.

[18] In reviewing HCC 61’s bill of costs, I note that over $20,000 of the claim predates the commencement of this application. It had agreed to cover the mediation costs. Its offer was not made until after this application was issued and the first attendance took place.

[19] I am not prepared to grant the costs prior to the issuance of the application on a full indemnity rate as the parties had reached an agreement at mediation which represented a form of compromise. Rather, I will grant costs of that stage on a partial indemnity basis, fixed at $12,000 [2].

[20] I also find that costs for the hearing of October 26, 2022 of 48.8 hours are excessive and incurred before an offer to settle was made. I would reduce the costs claimed for that stage to $15,000. With regard to costs after the HCC 61 offer was made, in accord with authorities cited above, I grant full indemnity costs of $41,012.22. Thus, total fees, inclusive of HST are $68,012.22.

[21] Regarding disbursements, I do not grant the mediator fee, which HCC 61 agreed to cover. I grant the remainder of disbursements claimed, for a total of $2,464.44, inclusive of HST.

[22] In total I order the Respondents to pay HCC 61 costs including disbursements and HST of $70,476.66.

Justice Marvin Kurz Date: October 25, 2023

Footnotes

[1] I note that HCC 61 included correspondence exchanged between counsel after the release of my decision in which settlement of the costs issue was raised. That correspondence should not have been placed before me. I place no weight on it in my determination of costs.

[2] The fees determined above are inclusive of HST