Court File and Parties
COURT FILE NO.: CV-20-00654767-0000 COURT FILE NO.: CV-21-00665466-0000 DATE: 20240723 ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN: ROSEMONT MANAGEMENT INC. and MCCAUL LEASEHOLD MANAGEMENT LIMITED Applicants
- and – CITYZIEN PROPERTIES LIMITED and JOHN FARACI Respondents
- and – TERENCE TSE and BEST MOTORING FINE CARS LTD. Intervenors
AND BETWEEN: CITYZIEN PROPERTIES LIMITED Applicant
- and – ROSEMONT MANAGEMENT INC. Respondent
Counsel: Albert S. Frank, for Rosemont Management Inc. and McCaul Leasehold Management Limited Roy Wise for the intervenors Terence Tse and Best Motoring Fine Cars Ltd.
HEARD: In writing
PERELL, J.
Reasons for Decision - Costs
[1] Terence Tse and his corporation, Best Motoring Fine Cars Ltd. (“Best Motoring”), (collectively “Mr. Tse”), were intervenors in a proceeding by application. That proceeding by application has now been converted into a proceeding by action. In the now converted proceeding, Mr. Tse claims partial indemnity costs from Rosemont Management Inc. and McCaul Leasehold Management (collectively “Rosemont”) of: (a) $42,672.50, all inclusive, for the intervenor motion; and (b) $65,703.37, all inclusive, for intervening and successfully resisting a motion to enforce a settlement that would have partially ended the proceeding by application.
[2] This is a costs decision. It is about Mr. Tse’s costs for a motion in a lawsuit, that was suffering from metastasized procedural cancer.
[3] In unhelpful responding costs submissions, based on its interpretation of Justice Dow’s order on the intervenor motion, Rosemont submits that it is premature to make any award of costs until the completion of the action in which it presumptuously anticipates that it will be claiming and not paying costs.
[4] For the reasons that follow, I order Rosemont to pay Mr. Tse costs of $50,000, all inclusive, forthwith.
[5] In 2021, Rosemont sued Cityzien Properties Limited and John Faraci by application. That was an egregious procedural mistake because it should have been obvious from the get-go that the lawsuit was inappropriate for a proceeding by application. The action against Cityzien was about an abortive 2017 real estate transaction associated with a residential development at 49 McCaul St. in Toronto.
[6] Beginning in 2017, Rosemont had agreed to sell an income stream residential development to Cityzien. Years later, after Rosemont had allowed Cityzien to manage the development, the transaction was aborted. During its management of the property, Cityzien had leased gratis a residential unit for a fifteen-year term to its lawyer, Mr. Faraci. The real estate transaction did not close in March 2020 as scheduled. The management agreement was terminated at the end of 2020 and Rosemont retook possession and management of the income stream residential development. In 2021, by application, Rosemont sued Cityzien and Mr. Faraci. The application against Cityzien was for an accounting and for damages of approximately $1.0 million for the abortive real estate transaction and for sums misappropriated under the management agreement. Rosemont’s proceeding by application against the co-respondent Mr. Faraci was to vitiate the fifteen-year gratis lease.
[7] In 2021 - by counter-application – another absolutely inappropriate mode of procedure - Cityzien sued Rosemont for specific performance or alternatively for a refund of deposits of approximately $1.0 million and damages of approximately $8.0 million with respect to the abortive real estate transaction.
[8] The application and the counter-application were scheduled to be heard in August 2021. In the summer of 2021, imminent upon the hearing of the application and counter-application, and while the cross-examinations of Mr. Faraci were in the process of being conducted on August 5, 2021, Rosemont and Cityzien culminated settlement negotiations which had begun a few days earlier in late July 2021. The settlement between Rosemont and Cityzien involved Rosemont paying Cityzien $150,000 but keeping Cityzien’s almost $1.0 million in deposits from the real estate transaction. The parties agreed to mutual releases. Cityzien agreed to remove its registered claim to the property from the land titles registry.
[9] However, at the time of the culmination of the settlement negotiations, Rosemont’s negotiator, Asif Sajan, knew that Lawrence Wong, Cityzien’s negotiator, had not persuaded Mr. Tse, a Cityzien shareholder and director with a 40% interest, to approve the settlement. Mr. Sajan did not think and told Mr. Wong that Mr. Tse’s approval was not necessary. Mr. Wong nevertheless unsuccessfully kept trying to persuade Mr. Tse and his lawyer to agree to the settlement.
[10] Promptly upon the signing of the settlement documentation, Rosemont and Cityzien began to implement the settlement. Meanwhile for the imminent application and counter-application, on August 17, 2021 Rosemont delivered a Confirmation Form indicating that the application and counter-application had been settled save and except the claim against Mr. Faraci, which was to be adjourned. With the delivery of the Confirmation Form, all procedural hell broke loose.
[11] Mr. Tse sought to intervene in the application. He sought to oppose the settlement. He sought an adjournment. Maurice Neirinck, Cityzien’s lawyer, who apparently did not support the settlement, sought to be removed as Cityzien’s lawyer of record. Mr. Wong, who is not a lawyer, sought to represent Cityzien. Mr. Faraci screamed prejudice and abuse of process. Mr. Faraci’s lawyer sought an adjournment. Rosemont refused the adjournment requests. On August 24, 2021, Justice Sharma adjourned the application and counter-application.
[12] Between August 24, 2021 and April 2024 – amongst too many procedural blisters, burns, and verrucae to mention: (a) Mr. Wong continued to attempt unsuccessfully to have Mr. Tse agree to the settlement; (b) in a vigorously contested motion, Mr. Tse was added as an intervenor to oppose the settlement; (c) Mr. Neirinck was removed from the record as Cityzien’s lawyer, only years later to return; (d) Mr. Wong unsuccessfully sought to find a lawyer to represent Cityzien; (e) Mr. Neirinck got back on the record and Cityzien opposed the settlement and sought to resume its counter-application against Rosemont; (f) Cityzien commenced a separate lawsuit – by action - against Mr. Faraci and others; (g) there were numerous case conferences, numerous adjournments, numerous affidavits, and numerous cross-examinations; (h) Rosemont brought back on its motion to have the settlement with Cityzien enforced; and, (i) Mr. Faraci brought a motion to have Rosemont’s application dismissed as an abuse of process for Rosemont’s alleged failure to give prompt notice of a settlement that transformed the litigation landscape.
[13] Most if not all of this litigating was meta-litigation about the enforceability of the nebulous alleged settlement between some of the litigants without resolving who was at fault in the underlying litigation and without resolving the claims against Mr. Faraci at all.
[14] In the result of the meta-litigation, the motion to enforce the settlement was refused on terms; and the motion to permanently stay the application as against Mr. Faraci was granted on terms. [1] The terms of the orders were: (a) the settlement funds being held in escrow shall be returned to Rosemont; (b) Cityzien is at liberty to register a certificate of pending litigation against the 49 McCaul Street property; (c) Rosemont’s application shall be converted into a proceeding by action; (d) Rosemont shall deliver a Statement of Claim against Cityzien and as against any co-respondent, as it may be advised, save and except for Mr. Faraci; (e) Cityzien’s counter-application shall be converted into a defence and counterclaim in Rosemont’s action, and Cityzien shall deliver its Statement of Defence and Counterclaim; (f) in the applications converted into an action, Rosemont may not assert a claim as against Mr. Faraci, but Cityzien is at liberty to bring third party proceedings as against Mr. Faraci, and Mr. Faraci may deliver a Statement of Defence to the main action as he may be advised.
[15] The above terms were imposed because the application and the counter-application, which are no longer even partially settled, should never have been brought by application. The disputes among Rosemont, Cityzien, and Mr. Faraci could and can only be fairly resolved by action.
[16] Further details about this procedural fiasco can be derived from reading the Reasons for Decision. The above summary of some highlights is sufficient as background information for the matter now before the court, which is Mr. Tse’s claim for costs. (Rosemont, Cityzien, and Mr. Faraci have settled the matter of costs as amongst themselves.)
[17] Turning to the matter of costs, Justice Dow granted Mr. Tse’s motion to intervene in Rosemont’s motion to enforce the settlement that would have resolved the real estate dispute between Rosemont and Cityzien. Thus - as against Rosemont - Mr. Tse was successful in the intervenor motion and he was a successful party in Rosemont’s failed motion to enforce the settlement.
[18] As I shortly shall explain, there is no merit to Rosemont’s argument that a costs award is premature. As the successful party on two motions, Mr. Tse is normally entitled to his reasonable costs on a partial indemnity basis.
[19] Rosemont’s costs submissions are silent about whether Mr Tse’s claim of partial indemnity costs, which in the aggregate total $108,375.87, all inclusive, is reasonable. At first blush, the claim seems unreasonable and disproportionate for an abortive real estate transaction case that procedurally false-started and that has accomplished little to nothing in three years and will be continuing with a fresh start.
[20] The reasonableness of Mr. Tse’s costs claim is also obscured by the circumstances that Mr. Tse’s counsel acknowledges that he is a docket delinquent who has reconstructed and re-estimated his hours of legal service for Mr. Tse. There also appears to be claims for legal services that may be appropriate for a lawyer and client assessment, but which are not within scope for an opposing party to pay as a partial indemnity.
[21] Putting aside Rosemont’s argument that costs are premature, it is my assessment that in all of the circumstances of the immediate case, a reasonable award of costs to Mr. Tse for his success on both motions is $50,000 on a partial indemnity basis.
[22] I do not interpret, Justice Dow’s order on the intervenor motion as making an order that would or could interfere with my discretion to order costs on the motions that I decided.
[23] I do not interpret Justice Dow’s order to preclude my jurisdiction to order costs for the intervenor motion that Justice Dow decided. The operative paragraph about costs in Justice Dow’s Order stated:
- THIS COURT ORDERS that costs of this motion be deferred to the judicial officer [hearing] these applications.”
[24] In his Reasons for Decision, Justice Dow stated:
- I prefer the costs of the motion be deferred to the judicial officer that determines these Applications, if same occurs and so order.
[25] Justice Dow did not and could not deal with the costs of the motion to enforce the settlement. Mr. Tse was a successful party on that motion and is entitled to costs.
[26] Justice Dow could and did defer the matter of costs for the intervenor motion to the judicial officer determining the applications. I have determined the applications. The application against Mr. Faraci has been permanently stayed as an abuse of process. The application as against Cityzien has been determined to be an an inappropriate mode of procedure and has been converted into a proceeding by action. While the causes of action remain to be determined, there are no applications to be determined. I am the judicial officer who has determined the applications, and it is in the spirit of Justice Dow’s Order that he has deferred the costs of the intervenor motion to me. Mr. Tse was the successful party on the intervenor motion.
[27] Accordingly, I order Rosemont to pay Mr. Tse costs of $50,000 forthwith.
Perell, J. Released: July 23, 2024
COURT FILE NO.: CV-20-00654767-0000 COURT FILE NO.: CV-21-00665466-0000 DATE: 20240723 ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN: ROSEMONT MANAGEMENT INC. and MCCAUL LEASEHOLD MANAGEMENT LIMITED Applicants
- and - CITYZIEN PROPERTIES LIMITED and JOHN FARACI Respondents
- and - TERENCE TSE and BEST MOTORING FINE CARS LTD. Intervenors
AND BETWEEN: CITYZIEN PROPERTIES LIMITED Applicant
- and - ROSEMONT MANAGEMENT INC. Respondent
Reasons for Decision - Costs
PERELL J.
Released: July 23, 2024
[1] Rosemont Management Inc. v. Cityzien Properties Limited, 2024 ONSC 3120.