Court File and Parties

COURT FILE NO.: CV-22-00001327-0000 DATE: 2023 11 29

ONTARIO SUPERIOR COURT OF JUSTICE

B E T W E E N:

WE CARE FUNDING LIMITED PARTNERSHIP R. Kesarwani, for the Applicant Applicant

- and -

1569635 ONTARIO LIMITED G. E. Cohen, for the Respondent Respondent

HEARD: In writing

DECISION ON COSTS

Emery J.

[1] In my Reasons for Judgment released at 2023 ONSC 5658, the following relief was granted to the applicant We Care Funding Limited Partnership (“WCF”):

a. Entitling WCF as the holder of a 50% interest in the second mortgage registered with the respondent 1569635 Ontario Limited (“156”) to pay out the other 50% interest held by 156 for a discharge or assignment of that interest; and

b. To pay 156 in the amount of $1,334,880.16 up to October 6, 2023, plus interest after that date.

[2] In para. 102, I invited any party seeking costs to make submissions on those costs, with responding submissions expected by October 31, 2023 if the parties could not agree.

[3] As it turns out, both parties seek their costs of the application. WCF seeks $57,051.51 on a substantial indemnity scale for its costs, alleging that 156 acted unreasonably leading up to and on the application. WCF takes the position that, but for that conduct, this proceeding would not have been necessary. In the alternative, WCF seeks its costs in the amount of $41,021, inclusive of disbursements and HST.

[4] On the other hand, 156 claims costs based on the standard charge terms incorporated by the mortgage. It also claims entitlement to those costs claiming to be the successful party because of the result achieved on the application. 156 seeks those costs in the amount of $$62,135 plus additional counsel fees of $9,967 at a substantial indemnity level, or $42,264 plus additional counsel fees of $6,712 on a partial indemnity scale.

[5] In view of these competing claims for costs, the nature of the application and the resulting judgment, the court must make the necessary determinations of entitlement, scale and amount of the costs to award.

Entitlement

[6] The general rule on costs in civil matters in Ontario has traditionally been to award costs to the successful party. I see no reason to depart from the general rule in this case. The question here is to determine which of the parties was successful on this application.

[7] 156 took an adverse position on almost every issue with respect to this litigation, beginning with the statutory basis for WCF to bring the application (conceded at the hearing), the standing of WCF as an affiliate of the owner/mortgagor, then as the co-mortgagee (before WCF finally advanced the claim as holder of the third mortgage subsequent in priority to the second charge). 156 then advanced its claims for interest, charges and fees above and beyond the principle $1 million owing as the proper amount payable (with varying degrees of success).

[8] Despite all the calculations and numbers set out in the judgment, the fundamental finding of fact is that $1,299,640.50 was the proper amount payable to 156 for its 50% interest as of May 20, 2022. That was the date WCF paid $1,680,274.50 into trust with the Accountant of the Superior Court of Justice. WCF then made an offer to 156 to pay $1,110,541.46 from those funds for its 50% interest, and to leave the remainder in trust to litigate over.

[9] WCF increased its offer to $1,250,000 on January 18, 2023, which still fell short of the ultimate result.

[10] In an offer to settle dated June 14, 2022, 156 offered to accept payment in the amount of $1,350,000 plus the sum of $29,212.50 for costs and disbursements up to that point (subject to assessment). 156 increased its demand during the proceeding to $1,520,000.

[11] While both parties made offers to settle under Rule 49, neither asserts that any offer to settle was in an amount that would have any effect on costs except with respect to being an offer to settle under Rule 57.01. In the absence of an effective offer to settle, it would appear that entitlement must be determined on the basis of which party was the more successful overall.

[12] It is clear from a numerical point of view that WCF offered an amount that was closer than any offer made by 156, but that offer was still $49,640 less than the proper amount payable as of May 20, 2022. It is possible that this offer might qualify as “any offer” made by a party in the opening words of Rule 57.01(1). However, this offer was an increase of another offer that was not as reasonable, and the offer was made in the middle of the hearing. It was not an offer that shows that 156 was acting unreasonably, or that it would have been unnecessary for WCF to bring the application but for its conduct. I therefore do not attach any significance to this offer under Rule 57.01.

[13] The measure of success is determined by the reasonableness of the positions taken by the parties on the issues the court was asked to determine from the outset, and the results achieved. Absent special circumstances to order otherwise, costs should follow the event: Ehsaan v. Zare, 2018 ONCA 453, at para. 10.

[14] In my view, 156 was the successful party on this application. It was successful in resisting the request of WCF for a discharge statement when that request was made by WCF in the wrong capacity (and not as the third encumbrancer), or not made by Anthem as the mortgagor at all. 156 was entitled to take the position that legal rights under the law relating to mortgages requires strict adherence. WCF was the party that brought the application to compel the buy-out of the interest of 156 in the second mortgage for a lesser sum; WCF did not offer full payment of the total interest due; and WCF offered far less to 156 for its interest in the second mortgage despite having paid a greater sum to the Accountant.

[15] Instead, 156 was successful in compelling WCF to properly assert its rights (realized only on making its submissions in reply on the application), and it recovered judgment for the proper amount payable that was greater than the amount WCF had offered at any time. Although 156 acknowledges that its claims to a lender’s fee and for s. 17 interest was denied, Mr. Cohen correctly identifies that in dollar terms, 156 “won” (the $174,000 more it was awarded) more than it “lost” (the $108,500 it was disallowed) in the final analysis.

[16] While WCF has enjoyed a certain degree of success, I find that it should be the party to pay costs as 156 was the more successful party. 156 is therefore entitled to its costs of the application.

Scale

[17] 156 seeks its costs on a substantial indemnity scale as a matter of contract under the standard charge terms. However, a claim for costs on this basis are subject to two conditions:

a. The claim for costs must come within the contractual language of the applicable provisions of Standard Charge Terms 200433. Those terms include the following entitlement to additional costs at para. 8: “legal fees (as between solicitor and client) and expenses which may be incurred in taking, recovering and keeping possession of the land…and generally in any other proceedings taken in connection with or to realize upon the security given…”; and

b. As a matter of law, it is open for the court to exercise the discretion under s. 131(1) of the Courts of Justice Act, R.S.O. 1990, c. C.43 to award costs contrary to an agreement between the parties: see Bosse v. The Mastercraft Group Inc. at page 33.

[18] This entire application has been an exercise in motivating, if not compelling 156 to take accept the proper amount payable to discharge or assign its interest in the second mortgage. 156 has cast itself as the reluctant payee, no doubt to expand the time it can claim interest on the principle amount owing at 13.99% per annum, compounded. It’s purpose in this case was precisely the opposite of what the standard charge terms contemplate a mortgagee would incur in fees; it incurred fees to resist that payout, not to enforce it.

[19] 156 expended legal fees to maximize the amount of money it would receive, not to take, recover or keep possession of land, or to realize on security. In doing so, the basis for the costs 156 is claiming fell outside the ambit of s. 8 of the standard charge terms. This entitles 156 to an award of costs on a partial indemnity scale, but at no greater level.

Quantum

[20] Regardless of the scale on which costs are awarded, the amount of those costs must be fair and reasonable: Boucher v. Public Accountants Council for the Province of Ontario. These costs should be measured with reference to what amount the other party could reasonably expect to pay in costs if unsuccessful.

[21] I have compared the claims for partial indemnity costs of both parties and I find them to be similar. However, Mr. Kesarwani’s partial indemnity costs are calculated at 60% of his substantial indemnity rate, whereas Mr. Cohen’s partial indemnity costs are more like 67% of his substantial indemnity rate. If Mr. Kesarwani’s partial indemnity variable was increased to 65%, his claim for fees would be for an even greater amount.

[22] As part of the exercise of my discretion to fix costs in an amount that is fair and reasonable to the parties, I find that WCF could reasonably have expected to pay between $40,000 and $50,000 in costs had it been the more unsuccessful party.

[23] This court awards the costs of the application to 156 fixed in the amount of $45,000 all inclusive. I consider this amount to be fair and reasonable having regard to all the circumstances. It is an amount sufficient to partially indemnify 156 for the costs set out in its Costs Outline, as well as $2,400 plus HST for the additional counsel fee claimed in its submissions.

Emery J. Released: November 29, 2023