Court File and Parties

Court File No.: CV-24-00723170-0000
Date: 2025-04-16
Court: Superior Court of Justice - Ontario

Between:
Condoman Developments Inc., 1808176 Ontario Inc. and Howard Youhanan, Plaintiffs
– and –
Cannect International Mortgage Corporation, Cannect Mortgage Investment Corporation, Lookout Condoman Developments Inc., Theodopolis Development Corp., 2638169 Ontario Inc., 2638170 Ontario Inc. and Marcus Tzaferis, Defendants

Before: E.M. Morgan

Counsel:
Wojtek Jaskiewicz and Denna Jalili, for the Plaintiffs
Matthew Gottlieb, Philip Underwood, and Dantae Gagnier, for the Defendants, Cannect International Mortgage Corporation, Cannect Mortgage Investment Corporation and Marcus Tzaferis

Heard: Cost submissions in writing

Costs Endorsement

Background

[1] The Plaintiffs (collectively “Condoman”) are real estate developers who defaulted under an umbrella mortgage of $46,000,000. The mortgagees/Defendants, Cannect International Mortgage Corporation, Cannect Mortgage Investment Corporation, and Marcus Tzaferis (collectively “Cannect”), attempted to enforce their rights in the usual way by exercising a power of sale over a number of the secured properties. They were met with an injunction motion seeking to prevent them from collecting on this massive debt.

[2] On March 14, 2025, I issued my decision dismissing the injunction motion: Condoman Developments v. Cannect International Mortgage, 2025 ONSC 1641. It was a hard-fought motion that was preceded by a number of case conferences and an interim injunction which had the effect of delaying enforcement by Cannect until the full injunction motion could be heard.

[3] In the concluding sentence of my reasons for decision, I stated: “There is no reason to stop Tzaferis/Cannect from exercising their power of sale or from pursuing any of their contractual or mortgage remedies”: Ibid., at para. 80. That includes any provision in the mortgage relating to the payment of costs.

Mortgage Terms and Costs Provisions

[4] The costs provisions relating to the mortgage in issue are found in the Loan Commitment dated November 7, 2022 (the “Commitment”) and the detailed charges that go along with it (the “Charges”). This agreement was freely entered into by the parties, each with their own independent legal advice, and is binding: Ibid., at paras. 50-54.

[5] Section 16 of the general loan conditions in the Commitment provides that the Borrowers [i.e. Condoman] and Guarantors will indemnify and hold the lender [i.e. Cannect] harmless from any “loss, liability or expense incurred as [a] result of the enforcement for any claims for … Legal … Fees, or any other matter in relation to this loan”. The Charge terms, at p. 16, further provide:

The Borrower shall pay to the Chargee on demand all legal fees payable on a full indemnity basis, costs and out-of-pocket expenses incurred … with respect to: … (b) the exercising of any or all of the rights, remedies and powers of the Chargee under this Charge or any of the instruments and documents comprising the Security Documents or relating thereto, or in defending or taking any measures to defend any action, claim, cause of action or in proceedings directly or indirectly relating to the provisions of any such instrument or document[.]

Discretion and Contractual Right to Costs

[6] Costs are generally discretionary under section 131 of the Courts of Justice Act. That said, the discretion is not unbounded. While the costs must be fair and reasonable, the reasonableness is not at large, but rather is measured with a view to the circumstances of the mortgage: Acquaviva v. Holmes, 2022 ONCA 891, para 11. If the costs suit the mortgage at issue, an agreement requiring full indemnity costs will be binding, or, as the Court of Appeal has put it: “As a general proposition, where there is a contractual right to costs the court will exercise its discretion so as to reflect that right”: Bossé v. Mastercraft Group Inc.; see also Burr v. Tecumseh Products of Canada Limited, 2023 ONCA 135, para 130.

[7] In Everest Finance Corporation v. Jonker, 2023 ONCA 87, a motion judge reduced a mortgagee’s costs by one-third after a successful mortgage enforcement motion, citing the overarching discretion to adjust costs to fit the judge’s sense of fairness. The result was a cost award in an amount more in line with partial indemnity costs. The Court of Appeal, however, disapproved of the deduction, at para. 8:

The motion judge does not appear to have appreciated that her discretion in awarding costs did not extend to changing the contractual terms of the mortgage. The mortgage provided for full indemnity costs for steps taken to recover the amount due.

Parties' Positions on Costs

[8] In view of its contractual right, Cannect seeks full indemnity costs in the amount of $268,500. Condoman contends that Cannect should only be awarded partial indemnity costs in the range of $118,000.

[9] Condoman takes the position that the mortgage terms in respect of costs do not apply because the mortgage action has not been adjudicated with finality. Since the recently concluded motion was for an interlocutory injunction, Condoman argues that it is premature to invoke the mortgage terms. More specifically, it is Condoman’s position that the costs provision in the Commitment pertains to the costs of getting the mortgage and the cost terms in the Charge refer to the costs of discharging the mortgage. Condoman submits that the injunction motion falls into neither of those categories.

[10] Cannect replies with an explanation based on those documents themselves. First, it points out that section 16 of the Commitment quoted above does not just cover legal fees involved in acquiring the mortgage. Rather, it specifically states that the borrower is responsible for the lender’s “Legal … Fees, or any other matter in relation to this loan” [emphasis added]. Section 16 is clear on its face that it covers mortgage enforcement as much as mortgage acquisition, management, and discharge.

[11] Second, Cannect attached to its costs submissions the Charge terms that apply to one of the secured properties – the Gladstone property – as an example of the terms by which Condoman as borrower is bound. As indicated above, the Charge expressly makes the borrower liable to pay “all legal fees payable on a full indemnity basis, Costs and out-of-pocket expenses incurred”. Condoman takes the position that this Charge term is irrelevant because the “Gladstone mortgage is not at issue in this proceeding”.

[12] It is difficult to see the logic of that assertion. The Gladstone mortgage is part of the security for the larger Cannect International Loan, which is the subject of the injunction motion. The Gladstone security was expressly identified as part of the mortgage security at issue in my reasons for decision: Cannect, supra, at para. 11. In any case, counsel for Cannect points out that the Gladstone terms were used as an example of the Charge terms, and that each set of Charge terms, all of which are in the record, is identical for each of the other secured properties.

Comparison to Other Cases

[13] As a final argument, Condoman references my own costs decision in Crystal Lakes Developments Inc. v. Dongrab Co., 2023 ONSC 2009 as a comparison to the present case. It notes in its submissions that in Crystal Lakes I found that a five-lawyer team acting for the mortgagee was effective but too expensive to impose on the borrower who had defaulted on its loan repayment. Notwithstanding that the mortgage in issue authorized the lender to claim full indemnity costs, I lowered the amount from the $269,353.44 claimed by the lender to $163,000 – an amount roughly equivalent to the lender’s costs when calculated on a partial indemnity scale.

[14] Condoman complains that Cannect employed a three-lawyer team to resist the injunction motion, and that, like in Crystal Lakes, that level of legal “fire power” is not reasonable to impose on the unsuccessful borrower. But with the greatest of respect, the comparison is not apt. As indicated in the Crystal Lakes injunction decision – i.e. the decision on the merits that preceded the costs ruling cited by Condoman – there were two mortgaged properties at issue in Crystal Lakes and the total amount owing was $4,482,721.46: Crystal Lakes Developments Inc. v. Dongab Co. Inc., 2023 ONSC 1236, para 7. The Cannect mortgage, by contrast, involved multiple properties and is 10 times larger than the Crystal Lakes mortgage.

[15] In view of what is at stake in the case, the amount of resources deployed by a lender to collect $40.6 million is bound to significantly outweigh the resources devoted to collecting $4.4 million. Without putting too fine a point on it, the extra zero matters a great deal to the parties.

[16] The present motion, involving a combination of development properties and individual condominium units, was also correspondingly more lengthy and complex than the two loans at issue in Crystal Lakes. If we were to strictly compare the two cases, one would likely conclude that Cannect was sparing in the expense it went to in confronting Condoman’s legal challenge.

Application of Rules and Conclusion

[17] Rule 57.01(1)(0.a) of the Rules of Civil Procedure expresses the principle of indemnity for the successful party in fixing an amount for costs, while Rule 57.01(1)(0.b) provides that the amount claimed by the successful party should not take the unsuccessful party by surprise. Under the circumstances, there should be no surprise at all that Cannect incurred costs of $268,500 to ensure that a $46,000,000 debt is enforceable.

[18] Condoman shall pay Cannect costs of the motion in the all-inclusive amount of $268,500.

E.M. Morgan
Date: April 16, 2025