Court File and Parties

Court File Nos.: CV-23-697926 & CV-23-700838

Date: 2025-10-20

Superior Court of Justice - Ontario

In the Matter of a reference under rule 54 of the Rules of Civil Procedure, RRO 1990, Reg 194 and s. 58 of the Construction Act, RSO 1990, c C.30, as amended

RE: 35 Mercer Limited, Plaintiff

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Intact Insurance Company and The Guarantee Company of North America, Defendant

AND RE: Flocor Inc., Plaintiff

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Standard Fire Protection Inc., 35 Mercer Limited, Madison Homes Limited, The Toronto-Dominion Bank, Aviva Insurance Company of Canada and Urban Integrated Group Inc., Defendants

Before: Associate Justice Todd Robinson

Counsel:

• N. Sandhu, for Flocor Inc.
• F. Souza, for Urban Integrated Group Inc., Urban Mechanical Contracting Ltd., and Standard Fire Protection Inc.

Heard: In writing

Costs Endorsement (Motion for Distribution of Admitted Basic Holdback)

Introduction

[1] This costs endorsement arises from the motion in this reference by Brunco Insulation Ltd. regarding holdback allocation and distribution (2025 ONSC 2353). Following unsuccessful attempts to schedule an oral hearing to deal with costs thrown away claimed by Flocor Inc. ("Flocor"), I directed that costs submissions proceed in writing.

[2] I have now had an opportunity to review and consider the parties' costs submissions. Flocor seeks costs thrown away against Urban Integrated Group Inc. ("UIG"), Urban Mechanical Contracting Ltd. ("UMC"), and Standard Fire Protection Inc. ("Standard Fire") (collectively, the "Urban Parties"). Flocor claims $17,475.39 on a substantial indemnity basis or, alternatively, $10,863.03 on a partial indemnity basis for costs thrown away from the motion. The Urban Parties oppose any costs in favour of Flocor and seek $5,186.70 in substantial indemnity costs for having to deal with Flocor's evidence on the motion and Flocor's claim for costs.

Applicable Legal Framework

[3] I previously determined that the Construction Act, RSO 1990, c. C.30 as it read on June 29, 2018 – i.e., the former Construction Lien Act (the "CLA") – continues to apply to the improvement and the liens and lien actions subsumed in this reference: 35 Mercer Limited v. Intact Insurance Company, 2024 ONSC 6466.

[4] Costs on this motion are governed by s. 86 of the CLA. It provides me with broad discretion to award costs against a party, including on a substantial indemnity basis. Pursuant to s. 86(2), where the least expensive course is not taken by a party, the costs awarded to that party shall not exceed what would have been incurred had the least expensive course been taken. Also relevant to assessing costs is the requirement that procedure in lien action be as far as possible of a summary character, having regard to the amount and nature of the liens in question: CLA, s. 67(1).

[5] By operation of s. 67(3) of the CLA, the Rules of Civil Procedure, RRO 1990, Reg 194 (the "Rules") apply except to the extent of any inconsistency with the CLA. Relevant to my decision on costs is subrule 57.01(1) of the Rules, which outlines non-mandatory and non-exhaustive considerations for the court in assessing costs. Case law has repeatedly held that subrule 57.01(1) is not inconsistent with the CLA and is applicable in exercising the court's discretion under s. 86.

[6] It is now trite law that costs awards should reflect what the court views as a fair and reasonable amount that should be paid by the unsuccessful parties rather than any exact measure of the actual costs to the successful litigant: Davies v. Clarington (Municipality), 2009 ONCA 722 at para. 52. The overall objective is fixing an amount that is fair and reasonable in the particular proceeding, having regard to the expectations of the parties concerning the quantum of costs: Boucher v. Public Accountants Council for the Province of Ontario (2004), 71 OR (3d) 291 (CA) at paras. 26 and 38.

[7] Both sides agree that I should apply the framework set out in my decision in Moskowitz v. Toronto Transit Commission, 2023 ONSC 5535 to Flocor's claim for costs thrown away. In that decision, at para. 9, I set out that there are three components to making out a claim for costs thrown away: (i) the step for which costs thrown away are claimed was reasonably necessary; (ii) fees and/or disbursements for the step were wasted or rendered useless; and (iii) conduct of the other party occasioned the wasted or useless costs. However, demonstrating all three elements does not guarantee an award of costs thrown aways. Costs of any step in a proceeding are always in the discretion of the court.

Preliminary Observations

[8] As a preliminary matter, in my view, both parties' submissions involve completely unnecessary mudslinging at one another that is entirely unhelpful and does not meaningfully advance the costs submissions of either side. Moreover, counsel have levelled personal attacks on each other through their clients' written submissions that, based on the material before me, are unfair and frankly inappropriate.

Analysis of Flocor's Costs Claim

Necessity of Costs Incurred

[9] Turning to Flocor's costs claim, I am not convinced by Flocor's arguments that the costs it incurred in responding to this motion were reasonably necessary. I say this for two main reasons. First, I reject its position that it was misled by the Urban Parties' "representations" about the contractual relationship between Standard Fire, UMC, and UIG. Second, Flocor has not demonstrated a sufficiently meritorious position on the motion in light of the "misrepresented" contractual relationship to have made its responding position necessary.

The Contractual Relationship Issue

[10] Mercer prepared an initial construction pyramid that was used to map out the parties relationships in my trial directions. There is no evidence before me regarding input from other parties to this reference. That chart misstated Standard Fire as having a direct contractual relationship with UIG. The missing contractual relationship between UMC and Standard Fire was not raised with me by any party until well into this reference, at which point my trial directions were amended to correctly reflect the contractual relationships.

[11] Flocor's submission is that the Urban Parties relied on the inaccurate and misleading representation of direct subcontract between UIG and Standard Fire. I do not agree that such an interpretation is fair based on the record before me.

[12] Much is made by Flocor over the relationship chart included in my trial directions. It was clearly inaccurate, but through no fault of any of parties. It indicated that Flocor was a subcontractor to UMC and that Independent Electric Supply Inc. was a subcontractor to Standard Fire. The pleadings confirm that neither is the case. It was my error in how the chart was prepared. Flocor asks me to put weight on failure of the Urban Parties to correct the inaccuracy in my trial directions. However, Flocor also failed to correct the misstatement of its own subcontract relationship.

[13] It is undisputed that Standard Fire's statement of defence erroneously pleads a subcontract with UIG. However, I accept that was an error. There is no evidence supporting that the Urban Parties maintained that contractual position in response to questions being raised about it.

Timeline of Disclosure

[14] Specifically, Flocor's lawyer requested a copy of the subcontract on August 27, September 17, and September 24, 2024. Its position is that the Urban Parties failed to produce the subcontract until November 22, 2024. Flocor argues that "at no time" before that did the Urban Parties' lawyer "correct its misrepresentation to the court regarding the contractual relationship between the Urban Parties." That is factually incorrect.

[15] I have been provided with three specific emails sent to all lawyers in this reference, including Flocor's lawyer, confirming the correct subcontract relationship between UIG, UMC, and Standard Fire. Those emails triggered clarification requests by other lien claimants. One was sent on September 24, 2024 (clarified on November 22, 2024), another on October 9, 2024, and a further one on October 22, 2024. Although the subcontract between UMC and Standard Fire was not produced until November 22, 2024, all three emails confirming that Standard Fire was a subcontractor to UMC predate Flocor's responding motion materials being sworn and served on November 22, 2024. Additionally, a response to Flocor's request for information under s. 39 of the CLA was provided on November 21, 2024, in which the subcontract relationship was again confirmed.

[16] In my view, Flocor had ample notice that Standard Fire's subcontract was with UMC, not UIG, well in advance of serving its responding motion materials.

Merit of Flocor's Intended Position

[17] Even if I were to accept that Flocor was mislead, which I do not, I am not convinced that Flocor's responding position was reasonably impacted by it. Notably, Flocor's opposition to the motion appears to have hinged on a novel legal argument with questionable legal merit.

[18] Following release of my decision regarding application of s. 87.3 of the Construction Act, Flocor conceded that its lien was not timely. Flocor submits that it nevertheless intended to argue that it had priority to the holdback funds otherwise payable to Standard Fire as a trust claimant ahead of lien claimants in other subcontract streams. It was going to rely on both classes and subcontract steams as distinguishing elements to holdback entitlement. In its costs submissions, Flocor describes its intended position as follows:

Flocor's efforts in opposing the Holdback Motion were meticulously tailored to a specific factual narrative: that the Standard Fire Class was a distinct stream leading to Flocor, and that the holdback which would become trust funds associated with that stream, were not to be diluted on a pro-rata distribution to all subcontractor lien claimants as though everyone belonged to the same stream/class.

That foundation collapsed on November 22, 2024, when the Urban Parties disclosed the true contractual chain. Flocor's materials, premised entirely on a false factual matrix, became unusable.

[19] It is beyond the scope of these costs submissions to decide whether a trust claimant could or does have any priority claim against holdback funds. There has been no argument before me on that issue. Flocor withdrew its position on the motion, so it is no longer an issue to be decided. However, I find it relevant in deciding whether it was necessary for Flocor to incur the claimed costs to consider the merits of that position.

Legal Basis for Flocor's Position

[20] The Urban Parties point out that there is case law supporting that entitlement to holdback applies only to valid lien claimants: see, for example, Ziebarth Electrical Contractors Ltd. v. 2461476 Ontario Inc., 2021 ONSC 3360 at para. 59. That is consistent with the provisions of the CLA. Pursuant to s. 22(1), holdback is retained only "until all liens that may be claimed against the holdback have expired or been satisfied, discharged or otherwise provided for" (emphasis added). Classes and priorities in ss. 79-80 are in respect of "persons having a lien" (i.e., lien claimants), not trust claimants.

[21] Flocor's factum on the motion dealt solely with costs. Flocor has put forward no case law or legal argument supporting that its proposed position on the motion was legally tenable. Specifically, I have been directed to no provisions of the CLA and no case law supporting that:

(a) holdback retained or required to be retained by an owner from a contractor is properly allocated along subcontract streams even where there are no valid liens in a particular subcontract stream;

(b) holdback allocated to lien claimants in one subcontract stream is unavailable to lien claimants in another stream if all liens in the first stream prove to be invalid; or

(c) there are circumstances in which a trust claimant has priority to holdback funds where there remain valid, subsisting, and unsatisfied liens arising from the improvement.

[22] Absent some articulated legal basis for the position that Flocor intended to take based on Standard Fire being in a separate subcontract stream, it is difficult to view the steps taken and costs incurred by Flocor as being "necessary". The fact that Independent Electric Supply Inc. took a similar position to the one taken by Flocor does not make the argument more meritorious.

Conclusion on Flocor's Costs Claim

[23] In my view, Flocor's costs were not made necessary or wasted as a result of any conduct or omission by the Urban Parties. I find no basis to award any costs thrown away.

Analysis of Urban Parties' Costs Claim

[24] With respect to the Urban Parties' costs claim, I agree with their submissions that Flocor has added unnecessary expense to the motion in how it has approached its costs claim. At the time of the motion hearing, Flocor was seeking $13,759.45 on a substantial indemnity basis or, alternatively, $8,854.12 on a partial indemnity basis. Given the heightened costs claim now advanced before me, Flocor has expended significant costs since that time advancing its costs position. It is difficult to view doing so as taking the least expensive course of action.

[25] Notably, my directions were clear on written costs submissions being limited to five pages. Flocor has used tightly compressed formatting to meet that page limit, but has then used 22 endnotes to add an additional two pages of citations and single-spaced submissions. Doing so was clearly seeking to cutely bypass the page limit by moving all of the citations and additional footnote submissions to follow the five pages of submissions.

[26] I also agree with the Urban Parties that Flocor has rehashed its prior costs arguments already advanced in its responding factum on the motion, which focused entirely on costs. It is unclear why Flocor did not simply rest on its existing submissions in the factum, instead opting to incur additional costs by recasting the same arguments.

[27] Flocor opted to take a position on the motion that it withdrew, but in my view the position taken was not reasonably necessary based on the Urban Parties' conduct or positions and, in any event, that position has not been demonstrated to be sufficiently meritorious to warrant an order for costs thrown away. Conversely, Flocor's staunch position in respect of these costs submissions has caused unnecessary costs to be incurred by the Urban Parties that, in my view, does warrant an adverse costs award.

[28] However, I am not convinced that substantial indemnity costs are properly granted against Flocor nor am I convinced that costs of anything more than these costs submissions should be awarded. The Urban Parties' costs outline fortunately separates out the latter. I find the rates, hours, and amount claimed to be reasonable and proportionate, particularly considering the time spent by Flocor on its own submissions.

Order

[29] For these reasons, I fix costs payable by Flocor to the Urban Parties in the amount of $1,500.00, including HST, payable within thirty (30) days. Order accordingly.

Associate Justice Todd Robinson

Date: October 20, 2025