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Excessive legal costs
“I believe that there is an obligation on property managers to act wisely and prudently in their position of trust, with respect to paying accounts, whether it be for the plumber, the roofer and even the lawyers.”
Deputy Judge M. Klein

Costs: The elephant in the courtroom
By Mario Gravel
In the Fall 2013 edition of Condo Law, Mario Gravel wrote that condominium corporations are not guaranteed full legal costs when they win.

He cites two examples of where the judges did not allow full costs. It is an important article that all condo boards should read.

Below, I cite far more examples, of the courts rolling back fees, several which should have embarrassed the legal firms involved and many that point out how the use of Section 134.(5) of the Condominium Act appears to encourage aggressive legal costs being charged unit owners when their condo corporation wins court orders.

Court cases
Judge mindful of ongoing concerns over access to justice
Small Claims judge compares condo lawyers to plumbers & roofers
The training of a junior lawyer
Owner has condo's costs reduced plus can pay in interest-free installments
Small Claims—Condo gets 9% of their costs
Bank sues condo corporation
Condo law firm over-bills Royal Bank    (Part 1)
Condo law firm over-bills Royal Bank    (Part 2)
More Section 134.(5) cases
Co-op receives only minimal costs
How does $500 turn into a $33,000 claim?
Ex-Channel manager denied inflated legal fees
Why should $10,000 become $73,802.91?
How can legal costs jump so high, so fast?    (Part 1)
How can legal costs jump so high, so fast?    (Part 2)
Owner wins appeal on $20,000 Small Claims costs award
Condo owners are responsible for their residents
Board can treat charge-backs as common element fees
Judge cuts unreasonable fees to less than half
Owner must pay condo corporation's full legal costs
An application for court costs rolled back
Condo corporation awarded 9% of its legal costs
Partial costs cut by 20%—condo corporation wanted substantial costs
Judge lays into personal injuries lawyer
What are the legitimate costs allowed by section 134 (5) of the Act—Part 1
Abuse of Condominium Act section 134 (5)—Part 2


Dyke vs MTCC No. 972
Ontario Superior Court
Court File No:  CV-11-443081
Before:   Justice E.M. Morgan
Heard:   30 January 2015

Ms. Dyke lost this motion which dealt with her complaints that her new neighbour was making unnecessary noise.

What is very interesting is the judge's reasoning for awarded costs that were far lower than what the condo's law firm billed the corporation.

Justice Morgan wrote:  (abridged)
"Mr. Rutherford, counsel for the condo corporation (The Century Plaza) in the Application, has requested costs in the amount of just over $66,000 on a partial indemnity basis and $97,000 on a substantial indemnity basis. He concedes that the amount is high for a one-day motion, but counsel makes the point that the other condominium owners in the building should not have to bear the brunt of the high cost of defending this matter.

For her part, Ms. Dyke’s view is that the matter has been made more complex and costly than necessary due to the way in which it was defended. She also makes the point that a portion of the Costs Outline served by Mr. Rutherford relates to a failed mediation, which is not something that Ms. Dyke should have to bear. She indicates that she was seeking to enforce in a bona fide way what she viewed as her rights and that there is no reason to award costs on a substantial indemnity basis. She also submits that she simply cannot afford the level of costs sought by the condo corporation.

I feel considerable sympathy for Ms. Dyke. She has indicated that she is in poor health and is not currently working, and that the problems with the noise have caused her concern about the re-sale value of her condominium. Moreover, she has suffered the stress and anxiety of litigation during a difficult time in her life.

Overall, the court is required to consider what is “fair and reasonable” in fixing costs, and is to do so with a view to balancing compensation of the successful party with the goal of fostering access to justice.

Given that a large portion of Mr. Rutherford’s Costs Outline relates to either work that pre-dates the Applicant’s contempt motion or that was associated with the unsuccessful mediation attempts, his request contains a substantial amount of unrecoverable costs.

Further, while I take Mr. Rutherford’s point about sparing the innocent condominium owners excessive legal fees, I am mindful of ongoing concerns over access to justice.

A condominium owner in Ms. Dyke’s position finds it difficult enough to deal with a board that is managed in the way of a large corporation like MTCC No. 972 appears to be. She would have her access to justice entirely impeded if the costs she has to bear were as high as those requested here.

I will exercise my discretion to award MTCC No. 972 costs of this motion of just under one-third of its partial indemnity request. Ms. Dyke shall pay costs to MTCC No. 972 in the amount of $20,000, inclusive of HST and disbursements."

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Ruben Carriero vs John Carli and Anna Carli
Small Claims Court  Brampton
Court file No. SC-11-002106-00
Date: April 8, 2013

This is an extremely interesting judgment by Deputy Judge M. Klein in a Brampton Small Claim judgment in which he states that the Peel Condominium Corporation No. 110 was removed as a defendant—on consent and that he thought that this was a grave error.

It is obvious that the plaintiff would have been successful in getting the condominium corporation's legal fees reduced. Reduced by how much, the judge does not say.

The judge does say:
Par 8: It was not until after a ridiculously high amount of legal fees were expended by all parties, and after a Superior Court of Justice application at Brampton, brought by the condominium corporation against the defendants, when judgment was rendered, on consent, on November 9, 2010, wherein the dog was ordered to be removed and the defendants were ordered to pay $2,000 in costs.

Par 9: I was told at trial that the plaintiff, himself, including the charge-back fees, spent over $23,000 with respect to this matter.

Par 17: The plaintiff ought to have challenged the solicitors' fees rendered to the condominium corporation. It was clear when the property manager gave evidence at trial, that as the lawyers' accounts came in, the accounts were paid without question and then passed onto the plaintiff, who again, without question, paid them. I believe that there is an obligation on property managers to act wisely and prudently in their position of trust, with respect to paying accounts, whether it be for the plumber, the roofer and even the lawyers. In my review of the accounts rendered by the condominium corporation lawyers, I find that they were excessive and simply out of line. These accounts ought to have been challenged.

Par 22: Justice Nancy Backhouse ruled: "Section 134(5) is not an invitation to counsel to aggressively work a file or unreasonably build up costs..."

Par 24: ...The real issue is the extent to which condominium boards can recover their legal costs against unit owners. There are other cases that surmount to a warning to condominium managers and their boards that they can’t undertake litigation so recklessly and/or aggressively, and then expecting the courts to bless their tactics which attract unreasonable and disproportionate legal bills.

Plantiff had responsibilities
Par 27: The plaintiff seeks indemnification and places the blame squarely on the defendants. He is right and he ought to be compensated. However, as referred to above, there has to be some responsibility placed upon the plaintiff to mitigate in these circumstances. Aside from the fact that he took no action to remove the defendants from his premises, he never objected to these "overly aggressive" lawyers' fees.  It appears that he did not seek legal advice until October of 2010.  Had he done so sooner, those fees may very well have been drastically reduced.  Therefore, although I am placing fault on the defendants, I am not going to place the full brunt of the liability upon them, and am therefore ordering, indirectly, that the plaintiff share in part of the "burden."
 
Par 28: Again, I express my concern that the condominium corporation was removed as a party to these proceedings, for as in Bazilinsky, I would not have had any issue with drastically reducing the condominium's recovery on its legal fees.
 
Judgment
Par 28: The plaintiff shall have judgment against the defendants in the amount of $13,000.
 
Par 29: The plaintiff shall have costs fixed in the amount of $750.

Lessons for owners
Please read the entire judgment. It is written in clear language and it serves notice on irresponsible condo corporations to reign in their law firms.

It also urges owners to seek legal assistance (from a lawyer experienced in condo law) as soon as you realize that you are in a dispute with the condo corporation.

Lesson for landlords
Renting out your condo units has its risks. How long will it take for Mr. Carriero to recover the losses the condo corporation's manager and lawyers and his tenants gave him?

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YCC No. 301 v. James
Superior Court of Justice—Ontario
Before: Justice B. P. O’Marra
Court File No: CV-13-487955
Date:  09 June 2014

Costs Endorsement
On 07 February 2014 Justice Morgan had appointed the Office of the Public Guardian and Trustee as Litigation Guardian for Ms. James. On 14 April 2014 Justice O’Marra ordered that Valerie Victoria James vacate her unit and that the unit be sold.

YCC No. 301 was now seeking legal fees and other amounts as follows:
$117,769.65 on a partial indemnity scale; and
$125,230.48 on a full indemnity scale.

The costs submissions for the applicant include the following charges that are neither legal fees nor disbursements. They are as follows:
$ 2,828.05 Locksmith charges
020,868.84 Security charges
001,243.00 Plumbing charges
002,886.27 Fire inspection and environmental restoration charges
$27,826.16 Total

Those items are real costs incurred by the applicant as a consequence of the respondent’s behaviour but they are not “additional actual cost” within the meaning of the Act. They also cannot be described as having been incurred in obtaining the order. The award of costs will not include those items.

Analysis
The lawyers for the applicant have submitted for 305.8 hours. That includes 46.1 hours for Mr. Fine (1976 call to the Bar) and 243.4 hours by Joy Mathews (2012 call to the Bar). Both Mr. Fine and Joy Mathews attended and billed for motion scheduling dates as well as hearing dates. The combined court attendance total was 53.3 hours. It was not necessary or reasonable that both senior and new associate attend for the various scheduling dates.

I am satisfied that a considerable amount of work was required to thoroughly prepare the materials filed on behalf of the applicant. However, the number of hours required, particularly attributed to less experienced counsel, was excessive.

The applicant’s lawyers have significant experience and expertise in the area of condominium law. In my view, it is not reasonable expect that the applicant would pay for the excessive number of hours submitted for the lawyer who was called to the Bar in 2012. Most of those hours appear to be dedicated to the training and education of a young associate.

In my view, the applicant on this record would reasonably expect to pay the following to their own lawyers: 46 hours for Mr. Fine at his actual rate and 120 hours for the associate called to the Bar in 2012 at a partial indemnity rate plus disbursements of $5,277.11.

Result
Costs are payable to the applicant in the amount of $58,000 inclusive of disbursements and HST.
A
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MTCC No. 634 v. Adamo
Ontario Superior Court of Justice
Court File No: CV-14-498728
Before:   Justice D.L. Corbett
Date:  30 October 2015
 
Costs Decision
MTCC # 634 is a 31 year old condo tower at 255 Bamburgh Circle in Scarborough. It brought Mr. Adamo to court to get his fireplace brought into compliance with fire regulations.
 
By the time they got to court, he complied with the condo’s request so all that remained was costs.
 
At the hearing the condo produced a bill of costs showing a claim for partial indemnity costs of $30,000. During oral argument it moderated this position to $15,000, plus disbursements and HST.
 
Justice D.L. Corbett writes:
“I described this claim as appearing to be “exorbitant” given the nature of this application, which I suggested should ordinarily attract an order for partial indemnity costs in the range of $3,500 to $5,000. I directed that the applicant provide me with a docket narrative. Having reviewed the history of the file, it is now easier to understand how the costs got higher than one would ordinarily expect for a matter of this nature.
 
The underlying issue was not of Mr. Adamo’s making: it affected all owners of units with fireplaces. The condominium corporation gathered the necessary information and coordinated a remedial plan for all the affected owners. No doubt it was unwelcome news for the affected owners, but it was a maintenance problem that simply had to be fixed. Mr. Adamo resisted fiercely and took the position that the problem was caused by the condominium corporation’s failure to perform annual maintenance, a claim that was never proved. Mr Adamo was clear in his refusal to remedy the problem, either in the manner proposed by the applicant, or on his own, and told the condominium corporation that it would have to obtain a court order if it wanted to compel him to fix the problem.
 
In this context, Mr. Adamo has only himself to blame for the fact that the applicant incurred costs to bring this matter to court. The applicant took all reasonable steps and showed real patience with Mr. Adamo prior to commencing litigation.
 
On the other hand, the applicant’s entitlement to indemnity for costs is restricted to the costs reasonably necessary for the litigation itself, and not extra-litigation efforts to identify and rectify the problem. Those costs must be proportional and consistent with Mr. Adamo’s reasonable expectations of the costs he might be called upon to pay: Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 CanLII 14579 (ON CA), 71 O.R. (3d) 291 (Ont. C.A.).
 
Taking everything into account, I am satisfied that a reasonable award of partial indemnity costs is $9,000, inclusive. As indicated in my original endorsement, Mr. Adamo shall pay this amount at the rate of $500 per month, without interest, provided he continues to own his condominium. If he sells his condominium prior to retiring his costs obligations, then the balance of the costs order then outstanding shall be payable immediately.”
 
This is a very interesting case as the judge cut the condo’s costs down from $30,000 to $9,000. Furthermore, Mr. Adamo can pay this debt at a rate of $500 a month without interest. He has 18 months to pay the condo this costs award which is most likely far lower than what the law firm charged the condo corporation.

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Hadani v TSCC No. 2095
Small Claims Court
Court File No: SC-14-00000644-0000
Before: Deputy Judge Samuel S. Marr
Released: 24 August 2016

Ruling on Costs
TSCC # 2095 is a 36 storey 510 unit condo corporation at 628 Fleet St in Toronto in the Fort York district.

The Plaintiff (an owner) lost a Small Claims action in which he sought $16,599.68 in damages.

The Defendant (TSCC #2095) asked to be awarded its costs on a full indemnity basis. Its legal fees were $30,823.46, plus $2,169.89 in disbursements.

The amount that TSCC #2095 would get depended on whether the judge followed the provisions on costs found in Section 29 of the Courts of Justice Act or the cost provisions of the Condo Act and the condo's Declaration.

There is a detailed account of the defendant's arguments on why they should get full costs in the judgment. The judge concluded, in part:
"If the Legislature intended the ordinary cost Rules of the Small Claims Court not to apply to actions against Condominium corporations, it would have expressly said so...."
Costs
A cost claim that is almost twice as much as the amount sought by the Plaintiff in damages is not proportionate and accordingly is not fair or reasonable. The judge allowed TSCC #2095 15% of the Plaintiff's claim.

The disbursement claim was found to excessive and unreasonable for a small claims court action. The judge knocked the $2,169.89 down to $595.96; 27% of what was claimed.

TSCC #2095 was awarded a total of $3,085.91 ($2,489.95. for fees and $595.96 for disbursements, 9% of what they asked for.

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Royal Bank of Canada v. MTCC No. 1226

C
ourt File No. 12-35966
17 October 2012
Justice Whitten

In this case, the Royal Bank of Canada, who foreclosed on a condo unit, was being billed by the condo's law firm for excessive legal bills, bills that kept growing. The bank challenged those bills in court and won.

What is fascinating, is the language that Justice Whitten uses to describe the condo's law firm's actions.

The following is has been taken from the actual judgment.

The actual invoices are somewhat rich. Legal fees of $650.00 to prepare and register the Certificate of Lien is a bit high given that it was probably, as Gilbert described, "a cookie cutter" service.

The invoice of April 26, 2010, of $1,150.00 for preparation and issuance of Notice of Sale does present as excessive. The document is obviously producible through the relevant software and probably took all of ten minutes to produce. The same could be said of its issuance.

Similar comments could be made with respect to the invoice of April 14, 2010, with respect to the preparation and issuance of the Statement of Claim. $975.00 for filling in the blanks in the software program appears excessive.

The most detail is provided in the actual invoice of June 24, 2010. A fee of $3,703.50 is claimed for various activities with no indication how much time is consumed or by whom for each activity on the dates enumerated.

In that invoice, one notes that on May 20, 2010, "consider and confirm status of owner and strategy accordingly." Similarly, on June 21, 2010, someone met with a member of the firm B. Chaplick, "conversations were had with a client (about what?) ... Obtain instructions and discuss potential courses of action (keep in mind, this was a motion essentially to challenge the fees of F&D) ... Advise client that owners are known to be outrageously litigious (obviously someone within F&D is quite spooked by this challenge to their fees) ... review numerous motions of owner (there is actually only one at this time), and instructions to staff." (Who are the staff—are we talking about the office cleaners, the legal assistants?)

On June 22, 2010, there was effort directed to the preparation of a factum and book of authorities. One wonders, what were the pithy legal issues? The owners wanted an extension of time to file their pleadings and to challenge the legal fees.

The clerk cautioned that the total payout of $14,294.91 was only as valid as of the date of the email (i.e. June 25, 2010). This caution became a repeated mantra every time a request was made of F&D as to a payout figure.

No doubt these gratuitous remarks would add an element of drama to what normally would be a mundane commercial matter. In light of the fact that up until this point the unit holders had really only challenged the calculation of the legal fees of F&D, these remarks were totally uncalled for. Any litigant, no matter their deficiencies, is entitled to challenge legal fees, such a challenge is perfectly legitimate.

Those services as enumerated in the various invoices provided in June and July, 2010, were not "reasonable" costs in the meaning of s.85. They were non specific, products of F&D's hysteria in dealing with a difficult litigant.

F&D were not only flogging a dead horse, they were acting as if it would go around the track.

If F&D pursues collection of its fees against the condominium corporation, innocent unit holders will be penalized but not because of the former owners in this matter, but because of the irresponsible behaviour on the part of F&D. That is not the equity that Justices Lane and Doherty spoke of being protected under the statute.

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Royal Bank of Canada v. MTCC No. 1226
Court File No. 12-35966
14 January 2013
Justice Whitten

Jeffery Kukla, Counsel for the Applicant
Megan L. Mackey, Counsel for the Respondent

Ruling with respect to costs
[1]   By ruling dated September 17, 2012, this court ruled that the applicant was indeed entitled to a discharge of a lien filed by the respondent pursuant to s. 85 of the Condominium Act S.O. 1998 c.19. That ruling concluded with the usual invitation for agreement as to entitlement and the quantum of costs or submissions. The latter have now been received. Although the court did mention in the ruling the provisions of rule 57.07, the possible invocation of that rule is not a factor in the determination at hand.

[2]  Section 131(1) of the Courts of Justice Act establishes that costs are in the discretion of the court. As with any discretion, it is to be exercised with an eye to principle and fairness.

[3]   Rule 57.01 sets out the general principles applicable to the determination of costs. The pertinent principles in this matter are:  the complexity and importance of the issues and the efficiency of the litigation step. By “efficiency”, it is meant that the jurist regards the behavior of the litigants with a view to determining whether a particular step and response was necessary and competent. Obviously there is a broad range of litigation steps and responses from the purely obstructive to the advancement of a genuine legal or factual issue.

[4]  This application was of importance to mortgagees and condominium unit owners generally in determining what appropriate costs are to be included in the discharge of a lien filed by a corporation for unpaid common expenses.  The ramifications for the unit owner is that their equity stands to be diminished; for the mortgagee, there are fiduciary duties with respect to the funds dispersed. If there are no parameters as to the appropriate costs to be included, both unit owner and mortgagee can be at the mercy of the condominium corporation.  This is above and beyond the delay experienced in obtaining a discharge which, in some cases, would frustrate the possibility of a transfer of ownership.

[5]  The Condominium Act, by its language, sets out a straightforward mechanism for the discharge of common expense liens. The ruling of October 17, 2012, described a tortuous and evasive route to the discharge of the lien in this particular case. More expense was generated for both sides and was caused by the position taken by F&D, former counsel for the respondent. The economies to be gained by an early filing of a notice of discontinuance of the action on behalf of the corporation and the provision of a discharge of the lien were obvious.

[6]  Former counsel introduced into what would normally be a straightforward exercise extraneous factual considerations. The behavior of one of the unit holders in other non-related matters was of no consequence to a bank seeking to discharge a common expense lien. In a way, the bank was dragged along by F&D in its characterization of the original unit owners, incurring more expenses for both bank and the condominium corporation.

[7]   The response of F&D to this simple request for a discharge was not well thought out. The statutory regime was forgotten. The response was not a competent response. The details of additional expenses incurred by F&D were not really “details” at all, but merely notations of actions taken by various staff and members of a firm, without a description of the purpose behind the actions. It would have been difficult for an objective observer to determine what, exactly, was being done to merit the additional expense.

[8]    It would be hard to characterize the conduct in this response to a request for a discharge as being malevolent or a function of attrition, such that the substantial indemnity rate should apply. However, the careless and inept response merits a level of costs between substantial indemnity and partial indemnity.

[9]   The bill of costs submitted by the applicant reveals acceptable hourly rates and time expended. It is acknowledged that some time was expended because of the express concern of the court with respect to “reliance”. This musing by the court ultimately played no role in the ruling rendered. For that reason, it is appropriate to “back out” a sum representing the efforts of counsel in that regard, as it was not directly the result of the actions of either party.

[10]  The disbursements of $1,098.75 are acceptable. Given the comments above as to the appropriate level of costs, the fees payable to the applicant are fixed at $10,000.00, plus the appropriate HST. These costs are to be paid forthwith.

[11]  As indicated in the correspondence accompanying the cost submissions, counsel will arrange with the trial coordinator for a time to consider the implications of rule 57.07. That scheduling, of course, is premised on the fact that counsel will not be able to resolve between themselves as to whether there should be a contribution to the costs found above by the former law firm.

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Cooper v. 580 Christie Street Co-Op Inc
Ontario Superior Court
Court File No: CV-12-443847
before: Justice Mew
Date released: 11 August 2014

Glenn Cooper was terminated by the co-op in May 2010 and he failed in winning any of the five issues that he raised in his motion.

Costs
The co-op was seeking seeking partial indemnity costs, if successful, of $14,312.71.

Mr. Cooper was self-represented and did well on his own behalf.  His submissions were courteous and carefully presented.

The plaintiff’s motion did cause the defendants to amend their defence so to that extent, Mr. Cooper enjoyed some success.

Furthermore, on the issue of disclosure, the defendants chose to take a technically correct rather than a pragmatic approach which could have limited the scope of the motion.

It is appropriate that Mr. Cooper assumes some responsibility for the costs incurred by the defendants responding to his motion.

However, having regard to the overarching principle of proportionality and the principle that the court should fix an amount that is fair and reasonable to the parties against whom costs are awarded rather than an amount fixed by reference the actual costs incurred by the successful litigant, I would fix costs of the motion, payable by the plaintiff to the defendants within 30 days of the release of this endorsement, in the amount of $3,000.

So the co-op spent over $14,300 defending themselves, won the case and were awarded only $3,000 in costs.

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YCC No. 345 v. Qi
Court File No: CV-10-408077
Before: Justice Michael G. Quigley
Date: 08 July 2013

Costs Endorsement
A townhouse complex in Agincourt put a lien on a condo owned by a Chinese couple.

A minor problem of a NSF cheque for $497.51 in January 2006 by July 2012 became a whopping claim of $33,000 in arrears.

The condo charged the owners $25 a month for being in arrears plus 12% annual interest. On top of this were the corporation’s legal fees. This was all provided for in the YCC # 345’s Declaration and Bylaws. The total sum claimed on the summary judgment motion, including legal fees, was $46,735.

Unrepresented
On 12 April 2012, the owners went to court unrepresented. Justice Michael G. Quigley granted the condo judgment for possession of the defendants’ condominium unit. The judge ordered that YCC #345 was to have its costs of the motion, but he did not fix those costs at that time.

The owners then hired a lawyer, Ann Frances Rundle, and then they started doing far, far better.

What are reasonable legal costs?
YCC 345’s counsel argued that "reasonable legal costs" in this case must mean reasonable costs on a solicitor and client scale consistent with Article II (2) of YCC #345’s Declaration and Article 11, paragraph 7(b) of YCC #345’s Bylaw No. 1.

In other words, the owners must pay all of the condo’s penalties and legal fees
.

Plainly, that paragraph stipulates that, where a condominium owner is in default with respect to the payment of common expenses for a period of 15 days or more, the Board may bring legal action on behalf of the Corporation to enforce collection of those expenses and, in that event, "there shall be added to any amount found due all costs of such action including costs as between a solicitor and his own client."

The argument made by counsel for the condo is that by becoming condominium owners, owners such as these defendants must be taken to have understood and agreed contractually to pay that level of costs in the event that they defaulted in the payment of common elements or other expenses, because that is what is stipulated in the constating documents and bylaws of the condominium Corporation.

(Wait a minute! Do you think anyone would buy a condo if they knew that the board had the power to stiff them with such huge costs? Not likely.
—editor)

The defence
However, counsel for the defendants is of the view that only partial-indemnity costs are called for in this circumstance. She stated that the court's discretion to award costs, which is preserved under s. 131(1) of the Courts of Justice Act, is not superseded by any condominium declaration, that the Act stipulates that charges made to owners must be reasonable, and that only proper charges may be made to unit owners.

The ruling
Justice Quigley ruled that: “Notwithstanding the importance of common expenses, I do not accept the submissions of counsel for the Corporation that "whenever the condominium Corporation pays, the unit owners pay." The unit owners’ obligation is to pay proper common expenses. If the corporation enters into a contract that is not authorized by the Act, the declaration or the bylaws, the owner is well within her rights to refuse to pay…”
 
Nonetheless, counsel for YCC #345 distinguishes this case and argues that the decision in Mancuso should only apply to cases where there is no authorization in the condominium Constitution to apply all costs as charges to owners. Respectfully, the judge disagreed.

Justice Quigley concluded that this is a case where the scale of costs applicable on the assessment should be partial indemnity, rather than substantial indemnity or full recovery, and notwithstanding the language that may be found in the Declaration of the condominium Corporation, or its bylaws.

He found that five of the six reasons advanced by counsel for the defendants supported that conclusion:
1.
First, the legal expenses charged, totalling $35,767.73 as of July 31, 2012 are immensely disproportionate to the arrears of common expenses claimed by YCC #345 from the defendants and which were allegedly paid or available to be paid at all material times. The defendants cannot reasonably have been expected to anticipate that they would be asked to pay legal costs of this magnitude given the amount of their original default.
2.
In addition to the substantial legal costs claimed, YCC #345 has also been charged interest on arrears at a significant rate of 12% and it imposes a charge of $25 per month no matter what the state of the arrears.
(Some condos charge 24% per annual interest and Fine and Deo LLB has sold condos bylaw packages calling for 18%.)
3.
Legal fees of $18,503.43 were incurred before the summary judgment motion. They almost doubled to $35,767.73 at July 31, 2012 following the hearing of the motion. The relatively simple collection activity involved in trying to collect the common expense arrears and other amounts from these defendants, including the registration of the lien and preparing letters of demand, calls into question the reasonability of these amounts or whether they are excessive.
4.
YCC #345 could have taken steps to reduce the conflict between the condominium Corporation and the defendants by explaining and/or apologizing to them initially, when it was claimed that hurtful and discriminatory language was used, and when counsel for the defendants claims this was the only request they really made at that time.
5.
The defendants offered to settle this matter in 2008, only two years after the dispute commenced, but four years before the summary judgment motion was brought.

For those reasons, the judge found that the appropriate scale of costs that should be applied for the purposes of an assessment of costs in this matter, which he ordered, is the partial-indemnity scale.

The judge also stated that the defendants are permitted to pursue an appeal on the basis that the amounts claimed by YCC #345 were not reasonable, and thus that summary judgment ought not to have been granted.

The appeal
He further stated that if that appeal proceeds, it will hopefully permit some appellate clarification to be provided about how summary judgment motions judges are to respond in cases such as this where the conduct of condominium management may be questionable, but where the seemingly clear language in the Condominium Act and condominium Declarations and Bylaws appear to permit a condominium corporation, such as YCC #345, to claim all of the amounts that it did.

He concluded by saying that experience suggests costs issues in such cases will also continue to raise issues of fairness and the standard of conduct to be expected of both condominium corporations and their owners in disputes such as these relating to common elements and common expenses.

Condo law firm displeased
At least one lawyer who practices condominium law was not pleased with this decision. Here is what Richard Elia wrote: Fairness for All or Sanctity for the Offender?

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MTCC No. 943 v. Khan
Court File No: CV-12-9565
Date: 04 June 2013
Justice D. M. Brown

Two of the defendants in this action, Mihaela Jurkovic and Mohammad Irfan Naeem, were both former employees of Channel Property Management, the property management company for MTCC No. 943. (Mr. Naeem was the property manager.)

When MTCC No. 943 advised that it wished to discontinue its action against them, both sought their costs. A settlement was reached with Jurkovic in which she was paid costs of $6,500.00.

However, this particular hearing is interesting for two reasons. First, it describes the procedures that a plaintiff must take to discontinue its action against a defendant.

More interesting, is Justice Brown’s questioning of Mr. Naeem’s claimed legal costs. In the beginning, the defendant’s lawyer claimed about $9,000 in costs, which appeared reasonable to the judge.

Then, a week before the hearing of this motion, Naeem’s counsel issued a new invoice which billed his client $41,505.88 in fees, together with $160.25 in disbursements. He was looking for $51,700 from the condo corporation that was then dropped to $35,000.

The condo suggested $6,500, the same as what they paid Mihaela Jurkovic.

Justice Brown then asks:
"How, then, does Naeem arrive at a claim of some $51,000 or $35,000? On May 23, 2013, a week before the hearing of this motion, Naeem’s counsel issued Invoice No. 4266 which billed his client $41,505.88 in fees, together with $160.25 in disbursements. No evidence was filed to explain three groups of work which, according to the time and disbursements ledger, constituted the work included on Invoice No. 4266."

Justice Brown then gives a detailed reasoning on why he refuses to accept any of the costs listed in Invoice # 4266. He then goes on to say:

"That then leaves for consideration the approximately $9,000.00 billed or docketed for work performed up to the filing of the last pleading. In the circumstances of this case, where all parties except Mr. Khan were victims and the plaintiff had a bona fide basis to assert a claim against Mr. Naeem, any allowance of costs of discontinuance should be on a partial indemnity scale, or approximately $5,000.00, all in. Although I am strongly tempted not to award any costs given the extravagant cost over-reach revealed in the recent docket entries on counsel’s ledger placed before me, I suspect that such an approach did not result from any instructions from the client.

Consequently, I grant the plaintiff leave to discontinue this action against Mr. Naeem upon the payment to him of costs in the amount of $5,000.00,
all in."

Wow! It appears that the judge thought that the defense lawyer was trying to soak the condominium for greatly inflated legal fees and that Mr. Naeem came close to getting nothing.

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DSCC # 187 v James A. Morton
Ontario Superior Court
Divisional Court
File No: 393/12
Date: 13 September 2012
Before: Justices Aston, Aitken, Lederer

E.K. Chan:          for the Applicant
Samuel S. Marr:  for Mr. Morton

Introduction
The Appellant, (DSCC #187) appeals the decision of Justice Gilmore
dated 18 May 2012 in which she ordered that the Respondent, James Morton (“Morton”), pay to the condo corporation $23,000 following which the lien registered by DSCC #187 against Morton’s condominium unit would be discharged.

DSCC #187 seeks an order setting aside the order of Justice Gilmore and referring to a costs assessment officer the issue of the costs to which DSCC #187 is entitled under s. 134(5) of the Act and, therefore, the amount of the lien for common expenses which DSCC #187 is entitled to register against Morton’s unit.

Morton cross-appeals, asking that the order of Justice Gilmore be set aside and an order made that, upon payment of $10,000, the condo’s lien against his unit would be discharged.

History of the proceedings
The Applicant is a condo corporation in Oshawa. Mr. Morton, the owner of unit #302 has two dogs, both weighing over 20 kg. Earlier in 2012, he was ordered by Justice Glass to remove his two dogs from the condo corporation and pay the condo $10,000 in court costs.

On 16 March 2012, the condo corporation notified Morton that outstanding common expense arrears in regard to his unit amounted to $73,802.91 – the legal expenses the condo purportedly incurred to obtain the compliance order from Justice Glass against him.

In adding these costs to Morton’s common expenses, the condo was relying on s. 134(5) of the Act, which reads:

Addition to Common Expenses
134(5) If a corporation obtains an award of damages or costs in an order made against an owner or occupier of a unit, the damages or costs, together with any additional actual costs to the corporation in obtaining the order, shall be added to the common expenses for the unit and the corporation may specify a time for payment by the owner of the unit.
 
On March 30, 2012, DSCC #187 registered on title to Morton’s unit a lien in the amount of $73,802.91 pursuant to s. 85 of the Act, which reads:

Lien upon default
85(1) If an owner defaults in the obligation to contribute to the common expenses, the corporation has a lien against the owner’s unit and its appurtenant common interest for the unpaid amount together with all interest owing and all reasonable legal costs and reasonable expenses incurred by the corporation in connection with the collection or attempted collection of the unpaid amount.
 
Meanwhile, Morton had entered an Agreement of Purchase and Sale in regard to his condominium unit.  As a result of the lien, the sale fell through.

On 18 May 2012, Morton brought a motion before Justice Gilmore for an order that the lien in the amount of $73,802.91 be discharged upon payment of $10,000 – the amount of the costs award made by Justice Glass. In the alternative, Morton asked the Court to fix a reasonable and fair sum to be paid by him to DSCC #187 in order to have the lien discharged.

Justice Gilmore ordered Morton to pay DSCC #187 $29,000 under s. 134(5) of the Act, inclusive of the $10,000 costs award already made by Justice Glass. At the same time, she ordered DSCC #187 to pay Morton costs on the motion in the amount of $6,000. The net result was that, upon payment of $23,000, the lien was to be discharged.

Appellant’s submissions
DSCC #187 submits that Justice Gilmore made an error in law in determining that DSCC #187’s costs (as ordered by Justice Glass) and “additional actual costs to the corporation in obtaining the order” totalled $29,000, without explaining how she arrived at that figure.

DSCC #187 relies on the directions of the Court of Appeal in Toronto Standard Condominium Corp. v. Baghai Development Ltd to the effect that, in determining additional actual costs under s. 134(5) of the Act, the court must explain how it calculates the amount arrived at. It does not suffice for the court to simply pick an amount which it considers “reasonable” in some broad sense. DSCC #187 seeks an order referring the matter to an assessment officer, or to Justice Glass, to determine such costs.

Respondent’s Submissions
In response to DSCC #187’s appeal, Morton submits that there was some evidence before Justice Gilmore that allowed her to conclude that DSCC #187’s legal costs and additional actual costs amounted to $29,000, and her Reasons, when read as a whole, provide an adequate explanation as to how she arrived at this figure.

However, Morton’s primary and preferred argument is captured on the cross-appeal where he submits that DSCC #187 failed to place any evidence before Justice Gilmore that DSCC #187 actually incurred any additional costs above the $10,000 cost award and, therefore, the amount that Morton should have to pay to have DSCC #187’s lien discharged should only be $10,000.

For the reasons that follow, we accept this submission.

Standard of Review
On an appeal from the decision of a judge, the standard of review in regard to a question of law is correctness.

Meaning of Additional Actual Costs
It is not in dispute that the phrase “additional actual costs to the corporation in obtaining the order” included in s. 134(5) of the Act refers to costs actually incurred by the corporation in obtaining the compliance order over and above any costs that may be awarded in its favour against the opposing party.

This was made clear by Doherty J.A. in Metropolitan Toronto Condominium Corp. No. 1385 v. Skyline Executive Properties Inc:
[Section 134(5)] declares that the corporation may recover both “an award of costs” and “any additional actual costs”. Clearly, the language of s.134(5) contemplates recovery by the condominium corporation of costs beyond those that are addressed in a court order so long as those costs were actually incurred by the condominium corporation and were incurred in obtaining the compliance order.
 
Doherty J.A. went on to clarify that “additional actual costs” could include legal and non-legal costs, whether or not such costs are assessable between the parties. They can include legal costs included in a Bill of Costs presented at the time of a costs hearing but not ultimately allowed by the judge making a costs order between the parties.

As Doherty J.A. stated:
“Additional legal costs” will refer to those legal costs properly owed by [the condominium corporation] to its lawyers above and beyond the amounts awarded for costs by the court or in a court ordered assessment.  Those “additional legal costs” are properly added to the common expenses of the unit pursuant to s. 134(5) so long as they were incurred “in obtaining the order”. As actual legal costs refers to those costs properly claimed by a lawyer against his or her own client, the principles governing the assessment of legal bills as between a lawyer and his or her client, should govern any dispute between [the condominium corporation] and [the unit owner] as to the propriety of any part of the legal bills relied on by [the condominium corporation] in support of a claim for “additional legal costs” under s. 134(5) ...

As Doherty J.A. repeatedly stated in Skyline, the additional actual costs, whether legal or otherwise, must be properly incurred. Consequently, if an assessment of the legal accounts of a lawyer to its condominium corporation client would result in a reduction of such accounts, it is only the reduced amount that can be considered properly incurred and includable under the category of “additional actual costs” under s. 134(5) of the Act.  This was reinforced in Baghai where Armstrong J.A. stated:
In remitting the matter back to the application judge, I emphasize that while s. 134(5) of the Act may entitle [the condominium corporation] to more than it would get in an ordinary award of costs, the provision for “additional actual costs” does not automatically lead to whatever amount is claimed. Section 134(5) does not give counsel licence to spend the client’s money with impunity.

As I have just explained, there is a difference between the quantum of costs a losing party is reasonably expected to pay to the successful party, and the quantum of costs the successful party is reasonably expected to pay its own lawyer. But reasonableness remains the touchstone of both analyses.

Consequently, “additional actual costs” in the context of this litigation includes those costs actually, and properly or reasonably, incurred by DSCC #187 in obtaining the order from Justice Glass against Morton, over and above the $10,000 costs award made by Justice Glass. This is how Justice Gilmore interpreted this phrase and, in this regard, she made no error of law.

Requirement to Explain Determination of Additional Actual Costs
In the Court of Appeal decision in Baghai, released after the decision of Justice Gilmore in this case, Armstrong J.A. emphasized that a court determining “additional actual costs” under s. 134(5) of the Act must consider what would be a reasonable amount for the condominium corporation to pay its own lawyer to obtain the compliance order.

This assessment is based on the principle of quantum meruit.  The court must then explain how it arrived at the right amount. It is not sufficient for the court to take a broad-brush approach, refer to a number of factors, and then provide a number – without providing the underlying calculations.

Justice Gilmore referred to the scant evidence that had been placed before her. She had the costs outline submitted to Justice Glass on 05 January 2012 showing DSCC #187’s costs being $30,527 on a partial indemnity basis and $50,878 on a substantial indemnity basis.

She had a costs estimate in the range of $8,000 to $12,000 provided by DSCC #187 to Morton prior to the commencement of litigation.

Finally, she had the affidavit of DSCC #187’s lawyer to the effect that $73,802.91 (and not $50,878) was being claimed in the lien because, subsequent to 05 January 5, 2012, “his office had determined that there
was other legal work which had not – as of 05 January 2012 – been billed
to the file.”

As Justice Gilmore noted, what DSCC #187 failed to provide to her was any evidence as to what costs were actually charged to, collected from, or acknowledged by DSCC #187 as owing to its lawyer.

It would have been easy for DSCC #187 to have provided copies of invoices received from its lawyer and noted paid, or copies of invoices regarding disbursements. DSCC #187’s lawyer could have provided dockets to show the time devoted to obtaining the compliance order and the amounts charged in regard thereto. Instead, DSCC #187 claimed privilege in regard to this information.

Clearly, Justice Gilmore was frustrated with the lack of evidence before her but, at the same time, she was concerned about referring the matter to an assessment officer to determine “additional actual costs” on the basis of further and better evidence.

She decided that the case should not drag on. Morton had to be allowed to sell his condominium unit and DSCC #187 should be paid for legal fees and actual costs incurred in the matter.

In an effort to work with what she had and to provide a just and timely resolution, she arrived at the figure of $29,000. Unfortunately, how she arrived at that particular amount was not explained.

Regrettably, we find that Justice Gilmore erred in law in failing to provide the underlying calculations that led to the conclusion that $29,000 was the proper amount to attribute to the costs order of Justice Glass plus the additional actual costs incurred by DSCC #187 to obtain the compliance order against Morton.

Appropriate Order on Appeal
DSCC #187 urges the Court to refer the matter back to Justice Glass or, alternatively, to an assessment officer to determine “additional actual costs” pursuant to the guidance provided in Baghai. Morton urges us to allow the cross-appeal and find that DSCC #187 has not proven any additional actual costs under s. 134(5)beyond the cost award of $10,000 made by Justice Glass

It must be noted that DSCC #187 was well aware prior to the motion before Justice Gilmore that the calculation of its “additional actual costs” was very much in issue.  In his Notice of Motion, Morton specifically asked that the lien of $73,802.91 be discharged upon his paying $10,000 or, in the alternative, that the court fix a “reasonable and fair sum” to be paid in order to have the lien discharged.

In his affidavit in support of his motion, Morton raised numerous questions relating to how the legal fees purportedly incurred by DSCC #187 to obtain the compliance order could possibly have been so high.

In the Factum filed on behalf of Morton, his lawyer put DSCC #187 on notice that he would be arguing that DSCC #187 had failed to produce its lawyer’s dockets and that DSCC #187 had not provided any details regarding the time purportedly spent on the file.  Morton specifically alleged that the amount sought by DSCC #187 was unreasonable and unsupported by evidence.

In the face of such direct notice of the issues to be argued before Justice Gilmore, it was incumbent upon DSCC #187 to provide the necessary evidence to support its claim as to the costs it had properly incurred in order to obtain the compliance order. Such evidence should have been available. No reason has been advanced as to why all relevant evidence could not have been tendered on the motion, or as to why a further – costly – reattendance before an assessment officer was, or is, necessary.

DSCC #187 made a deliberate decision not to tender relevant and available evidence on the motion before Justice Gilmore as to additional actual costs under s. 134(5). The only evidence before Justice Gilmore relating to properly claimed costs under s. 134(5) was the costs award of $10,000 made by Justice Glass Consequently, any award made by Justice Gilmore must be limited to this amount.

Disposition and Costs
The appeal is dismissed. The cross-appeal is allowed. The substantive portion of the order of Justice Gilmore dated 18 May 2012 is set aside and, in its stead, an order is granted that the sum owing from Morton to DSCC #187 under
s.134(5) of the Act is $10,000.  The costs order of Justice Gilmore remains
in effect.

Morton seeks costs on a partial indemnity basis in the amount of $10,946 in regard to the appeal and cross-appeal, and in regard to responding to a motion to admit fresh evidence that DSCC #187 served but did not pursue.

DSCC #187 does not quarrel with the amount being sought by Morton. Costs are awarded against DSCC #187 in the amount of $10,946 inclusive of disbursements and HST.

As a result of the costs order, and the earlier costs order of $6,000 against DSCC #187 made by Justice Gilmore, the condo corporation now owes Morton the net amount of $6,946.

The lien in the sum of $73,802.91 registered by DSCC #187 on March 30, 2012 shall be discharged.

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PCC No. 452 v. Marek Jaworowski
Superior Court of Justice—Ontario
Court File No: CV-08-704-00
Date: 08 July 2010
Before: Justice Bielby

Counsel: J. Fine & K. Bailey, for the Plaintiff
               P. Wojtis, for the Defendant
 
 The plaintiff seeks summary judgment on its claim for possession, with respect to condominium unit 04, level 2, for Peel Condominium Plan No. 452.  The plaintiff also seeks leave to issue a writ of possession.

The defendant owns the unit in issue, suite 204, 335 Webb Drive, Mississauga, Ontario.

Between December 2006 and December 2007, the defendant fell into arrears with respect to his share of the common expenses. As a result, the plaintiff filed a lien against the unit.

This action prompted the defendant to bring an action in Small Claims Court claiming the “wrongful collection of condo fees and the reimbursement of legal fees, extra costs incurred and to establish the true balance of common element fees.”

The matter proceeded before Deputy Judge Klein on 18 December 2007. In his written judgment the deputy judge noted that the plaintiff claimed:

Arrears
5,880.00
Interst unknown
Legal fees $3,520.00

The defendant maintained he owed only $5,880.00 (nothing for interest and legal costs) but acknowledged when the lien was registered in January 2007 he was in arrears and that the lien was valid.

The Small Claims Court action brought by the defendant was dismissed and the plaintiff was awarded costs of $500.00. The deputy judge noted that the defendants (plaintiff in this action) actual costs exceeded that amount but felt that $500.00 was the maximum he could order.

The plaintiff indicated that at the time it commenced its action the arrears had risen to $6,532.37 as the defendant missed two payments in 2008 (January & September). That evidence was not challenged and I found that amount $6,532.37 to be the arrears of June 17, 2010, the date of the motion.

In the last week or so the defendant has paid the original arrears amount of $5,880.00 and has paid the $500.00 in costs. No payment was made on account of interest.

 Section 85 of the Condominium Act, 1998, S.O. 1998, c.19 is the vehicle by which a lien for arrears is authorized. It allows the lien not only for arrears, but interest on the arrears and reasonable legal costs incurred in the collection or attempted collection of the debt.

It should also be noted that the plaintiff commenced a Notice of Sale Proceedings in May 2007. As a result, and since the unit is occupied by the plaintiff, he brought this action for possession.

The lien is given priority even over prior registered mortgages (s.86 (1)).  The sale process is governed by the Mortgages Act.

Interest is claimed at the rate of 18% per annum, as authorized in the condominium by-laws. The plaintiff submits that the interest owing to the date of payment is $4,413.19. The number was not challenged by the defendant.

I also note there is a small portion of the arrears that remain outstanding, being the difference between $5,880.00 and $6,532.37, and there is another interest calculation to be made.

I find that at least $4,413.19, on the original amount of $5,880.00 is owing, with respect to interest.

Costs

The real issue before me relates to costs. As indicated, reasonable costs are recoverable.

The plaintiff was required to defend the defendant’s Small Claims Court action. That action related to the issues of the arrears. I find that the defence of the Small Claims Court actions was part of the collection process. Accordingly, the reasonable expenses incurred in the Small Claims Court action are recoverable, over and above the $500.00 costs award.

Before Deputy Judge Klein, the plaintiff advised the court that the total debt owed by the defendant included $3,520.00 in legal fees.


Less than one month later, by letter dated 09 January 2008, from the plaintiff’s counsel to the defendant, the total amount owing by the defendant was fixed at $30,715.86. This amount included costs of $23,587.51.

At this point in time, the plaintiff alleges the reasonable legal costs have risen to over $60,000.00. Given the size of the claim, this amount is disproportionate to the money in issue and the legal steps taken.

Justification for costs
Two authorities have been brought to my attention. The first is York Condominium Corporation 482 v. Christiansen, 2003 CarswellOnt 6533. The learned judge concluded that common expenses “are the lifeblood of the condominium” and the failure by one to pay his share of the expenses cause suffering to the other owners. (para 16)

The other authority is Metropolitan Toronto Condominium Corp. No. 1385 v. Skyline Executive Properties Inc., 2005 CarswellOnt 1576, a decision of the Ontario Court of Appeal.

The Court stated that the philosophy of the Condominium Act was to shift the financial burden to the wrong doer and away from the innocent owner. The Court also ruled, at paragraph 45, that the reasonable costs to be recovered, are between a solicitor and his client and are not limited to costs awarded in any ligation.

While the Skyline decision considered s.134 and while s.134 references the collection of “additional actual costs” as opposed to “reasonable costs”, I think the philosophy is the same, to shift the financial burden to the wrongdoer.

The Notice of Sale remains outstanding. If the plaintiff were to accept an offer to purchase, it would be bound to complete the deal. In these circumstances a judgment for possession would likely issue even if there is a dispute as to what is owed.

What are reasonable costs
In considering a motion for summary judgment, I am to determine if there is a triable issue. There is an issue as to what are the “reasonable costs”.

Notwithstanding this issue however, the defendant continues in arrears with respect to common expense charges in the amount of $652.37 interest and of some amount of costs.

Until the property is sold, the defendant still has an opportunity to correct the default and maintain possession. He cannot do so until the reasonable costs have been determined either on consent or by the Court.

Time needed
Given these facts I will not grant an order for possession at this time, and will adjourn the matter, as discussed, as to which counsel took no real issue with, to provide time to deal with the costs issue. However I will, as a condition of the adjournment, require the defendant to pay an amount which he is reasonably liable for.

I order the following:
1.
The defendant shall pay, within 30 days of the release of this endorsement, to the plaintiff, the sum of $4,413.18, being the majority of the outstanding interest.
2.
The defendant shall, within the 30 day period, pay to the plaintiff, the sum of $10,000.00, representing a contribution to costs.
3.
The defendant shall pay, within the 30 day period, the sum of  $652.37 being the balance of the common element arrears;
4.
The order as to costs is without prejudice to either party to argue the quantum issue;
5.
This motion is adjourned to a date to be arranged between my office and both counsel to argue the issue of what are “reasonable costs”; and
6.
The costs of today are reserved to the next return date.

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PCC No. 452 v. Marek Jaworowski
Superior Court of Justice—Ontario
Court File No: CV-08-704-00
Date: 20 August 2010
Before: Justice Bielby

Counsel: J. Fine & K. Bailey, for the Plaintiff
               P. Wojtis, for the Defendant

Endorsement on Reasonable Costs

Here is the judgment:
The matter was adjourned to 16 August 2010, to argue the issue of legal fees and expenses and what amount is to be considered “reasonable.”

When the condo corporation commenced its collection steps, the defendant started a small claims court action seeking, in effect, an accounting as to the arrears claimed.  The action was dismissed with costs of $500.00 awarded to PCC # 452, the plaintiff in this action.

In his endorsement, dated 18 December 2007, Deputy Small Claims Court Judge Klein noted that the outstanding legal fees to that point were $3,520.

In my earlier endorsement I ruled that the costs of defending the small claims court action were incurred as part of the collection process and are therefore recoverable under the lien. As a result, the condo is entitled to recover from the defendant the reasonable costs and expenses incurred in the collection steps it initiated as well as those incurred in the defence of the small claims court action.

There also may be interest owing on $652.37, being the arrears over and above what had initially been paid by the defendant. I have not been given this calculation, and will make no order in this regard.

The defendant submits that he wishes to pay off all of what he owes under the lien but argues the costs claimed by the condo are not reasonable.  So it falls to the court to determine the reasonable costs and expenses and to provide time to the defendant to redeem, if he is able to do so, by re-mortgaging.

In considering the issue I keep in mind that the arrears plus interest amount to no more than $12,000, and that the plaintiff’s costs of defending the defendant’s action were incurred in small claims court.

Counsel for the plaintiff has filed an amended bill of costs relating to the lien procedures and the costs argument, claiming fees, inclusive of taxes in the amount of $51,371.70. To this he added disbursements of $4,387.24, inclusive of taxes, for a total of $55,758.94.

For successfully defending the small claims court action, counsel for the condo corporation is claiming fees of $20,951.18, inclusive of taxes and disbursements of $1,619.04, inclusive of taxes, for a total of $22,570.22.

The plaintiff argues that the total of these two accounts, being $78,329.16 are reasonable and are to be added to the amount protected by the lien. This amount is 6.5 times greater than the claim for arrears and interest.

I accept that the plaintiff is entitled to the reasonable fees and expenses that it is required to pay to its own lawyers.

I conclude however that I have discretion to determine what are the “reasonable” costs incurred in the circumstances.

The case, Simcoe Condominium Corporation No. 27 v. Citifinancial, 2004, is a decision of Justice DiTomaso of the Ontario Superior Court of Justice.  He had to consider section 85 of the Condominium Act and exercised a discretion in determining what the reasonable legal expenses were.

Cimmaster Inc. v Piccione, 2010, is a decision of Justice Gray. I quote page 4 of his decision,
"The principle of proportionality is important and must be considered by a judge in fixing costs. I have had occasion to apply the principle even before the promulgation of the recent Rule amendments that specifically require it to be considered…In my view, as in Pitney Bowes, the concept of proportionality appropriately applies where a successful party has over resourced a case having regard to what is at stake."

The Pitney Bowes reference was with respect to an earlier decision of Justice Gray in Pitney Bowes of Canada Ltd v. Noia. This case involved a two-day trial under the simplified rules in which judgment was obtained in the amount of $13,400. Counsel for the plaintiff sought legal fees of $11,806.

Justice Gray allowed a fee of $1,000. At paragraph 7 Justice Gray states, “In my view, having regard to what was at stake, this expenditure of lawyers’ hours is entirely disproportionate.”

At paragraph 9, the learned judge refers to the Report of the Civil Justice Reform Project by The Honourable Coulter A. Osborne, wherein it is stated, “Proportionality, in the context of civil litigation, simply reflects that the time and expense devoted to a proceeding ought to be proportionate to what is at stake.”

Justice Gray, in paragraph 10, stated that in his opinion the principle of proportionality is encompassed in Rule 57.01(1)(0.b) which requires the Court to consider the “amount of costs that an unsuccessful party could reasonable expect to pay.”

I concur with the comments of Justice Gray and note that Rule 57.01 also allows the Court to consider the complexity of the proceedings and the amount claimed and recovered.

The fees requested by the plaintiff in this matter are far from reasonable.  To say the least, counsel for the plaintiff has over resourced this case even taking into account the small claims action. When the matter was before me on August 16th, 2010, two lawyers were in attendance on behalf of the plaintiff, which was completely unnecessary.  That is just one example of over resourcing. (Note: The same two lawyers were present at this hearing.)

The case of Mancuso v. York Condominium Corporation, No. 216, 2008 is authority for the proposition, which I accept, that section 85 of the Condominium Act allows me a discretion to fix the costs that are appropriate in the circumstances and that I can take into account Rule 57.01 and the reasonable expectation of the parties.

In the matter before me counsel for the defendant submitted that costs of $15,000 to $20,000 would be a reasonable amount. With respect to Rule 57.01(1)(0.b), this representation can be considered the amount of costs that an unsuccessful party could reasonably expect to pay.

I have also had regard to the plaintiff’s argument that whatever the defendant doesn’t pay will have to be shared by the other condominium owners.  I agree that this is, on its face, an unfairness.  However there is an unfairness in the amount of fees claimed. The plaintiff within the lien process is only entitled to reasonable costs and it is for me to determine that amount.

Within the plaintiff’s supplementary motion record is the bill of costs for the defence of the small claims court action. I do not intend to review the account hour by hour but make the following observation.  It is alleged that 35.9 hours were spent preparing for a trial and for attending on the trial for a full half-day. I find this to be excessive.

I will allow a fee of $3,000 for the time incurred with respect to the small claims court, together with the appropriate amount of taxes which counsel can work out. I will allow the disbursements as claimed in the amount of $1,619.04, inclusive of taxes.

With respect to the lien matters, a review of the amended bill of costs reflects excessive hours spent on the file. Again it is not my intention to review the account hour by hour but can provide, as an example of over resourcing, at page 8, under the heading, “Bill of Costs and Further Affidavits,” it is alleged that the hours spent on this sub issue was almost 35 hours, and involved three lawyers and a law clerk.

There is absolutely no proportionality to this account. It does not reflect the complexities of the issues, the amount claimed or the reasonable expectations of the other party.

More to the point the claim is not reasonable.

With respect to the lien issues, I fix the reasonable fees collectible under section 85 of the Condominium Act in the amount of $16,000.00, together with the appropriate taxes. I will allow the disbursements as claimed in the amount of $4,387.24, inclusive of tax.

In awarding these costs it is my opinion that the amounts allowed are in the upper range as to what is reasonable.

Once the plaintiff has calculated the HST/GST owing on the fees allowed and as advised the defendant in writing thereof, the defendant shall have 14 days to pay balance of the monies owed to the plaintiff.  If the funds are not paid in 14 days the plaintiff can move ex parte on affidavit evidence as to what has not been paid for an order for possession.

So a bill of $78,329.16 was reduced to $19,387.24, inclusive of tax.

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Wexler v. C.C.C. No. 28
Superior Court of Justice—Ontario
Court File No: 16-2191
Before: Justice P. Roger
22 June 2016

Norma Wexler had more luck this time. She asked for a motion for leave to appeal the costs award to the Divisional Court from the costs order of Deputy Judge Raymond H. Gouin, of the Small Claims Court at Ottawa.

Rule 62.02(4) of the Rules of Civil Procedure provides that leave to appeal shall not be granted unless:
(a)
there is a conflicting decision by another judge or court in Ontario or elsewhere on the matter involved in the proposed appeal and it is, in the opinion of the judge hearing the motion, desirable that leave to appeal be granted; or
(b)
there appears to the judge hearing the motion good reason to doubt the correctness of the Order in question and the proposed appeal involves matters of such importance that, in his or her opinion, leave to appeal should be granted.

The owner seeks leave to appeal alleging that Deputy Judge Gouin erroneously relied on Article X of the Condominium Corporation's Declaration, despite the findings of this Court in Pearson (Litigation Guardian of) v. CCC No. 178, contrary to s. 29 of the CJA.

For the reasons set out below, the motion for leave to appeal was granted.

A conflicting decision
Deputy Judge Gouin costs award depended largely on Article X of the condo's Declaration reasoning that it would be unfair that other unit owners should bear the costs of this litigation.

Article X makes no mention of legal costs. Here, the Deputy Judge was dealing with legal costs that seem to have no connection to the common elements such that his decision conflicts with the decision on this point in Pearson."

Matters of importance
"I find that the second branch of the test is also made out as it is desirable to grant leave to appeal as disputes of this nature, involving condominium corporations are frequently before the Small Claims Court and the proper interpretation of such provisions and their potential impact on costs awards, considering s. 29 of the CJA, reaches that threshold.

Further, I find that there is good reason to doubt the correctness of the Deputy Judge’s decision and that the appeal raises matters of general importance, considering s. 29 of the CJA.

The phrase “good reason to doubt the correctness of a decision” does not require a conclusion that the decision in question was wrong or even probably wrong. Nor does it require that the judge hearing the leave motion would have decided it differently had he or she been presiding as the motion judge. The test is whether the decision is open to serious debate.

I find that the decision of the Deputy Judge is open to serious debate. In exercising his discretion over costs, the Deputy Judge seems to have placed significant emphasis on irrelevant considerations. As indicated above, he indicates at paragraph 18 that he relies “essentially” on his finding that it would be unfair considering the condominium declaration. Section 29 of the CJA provides for an exception which does not incorporate such considerations. Consequently, there are good reasons to doubt correctness as the Deputy Judge appears to have exceeded his jurisdiction.

No submissions have been made on the issue of costs of the leave to appeal and these are reserved to the Court hearing this appeal."

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DCC No. 56 v Joanna Stryk
Ontario Superior Court—Newmarket
File No: CV-12-110450-00
Date: 12 April 2012
Madam Justice C. A. Gilmore

Would a condo corporation lien and put an 84 year-old woman’s unit up for sale? Sure it would and DCC 56 did.

History
When she bought her unit, the defendant, set up a pre-authorized payment plan for her common expenses. She did not authorize DCC 56 to take anything but common expenses from her account.

In October 2008, the defendant caused some damage to the condo’s parking garage door. She did not accept responsibility and refused to pay the $1,254.75 repair bill.

DCC #56 applied her monthly common expenses payments towards the charge-back and by allotting her monthly payments to pay the past shortages in her payments, the 90-day window for applying a lien to her unit remained fresh.

Then there was a second chargeback for a $220 plumbing bill that the defendant also refused to pay.
On 30 September 2011, DCC #56 registered a lien against the defendant’s unit for $1,901.46. This was for $14,75.11 in unpaid common expenses (actually the back-charges), interest of $15.97 and $419.38 in legal fees. (So far the legal fees are not too bad.)

On 07 November 2011, a letter was sent to the defendant saying that a lien was registered and the balance was now $3,810.90. On 19 December 2011, another letter was sent saying that the amount was now $4,689.32.

Note the jump between Dec 11 & Feb 12

On 14 February 2012 the lawyer issued a notice of sale and a second letter on 03 May 2012. On 25 July 2012, DCC #56 commenced an action against the defendant for vacant possession of her unit. The total owing that the condo claimed, as of 25 February 2012, was now $42,894.26.

At some point DCC #56 stopped accepting the defendant’s monthly common expenses and then charged her interest for the unpaid fees.

Questions for the judge
Was the defendant responsible for the damage to the garage door and the plumbing bill; and could the condo corporation use her monthly common element fees to pay the back-charges to keep the lien fresh? After hearing the evidence, the judge ruled that the defendant damaged the garage door. She dismissed the plumbing bill as being too small an amount for a trial.

The judge ruled that the condo corporation could use the defendant’s monthly fees to pay the back-charge and the oldest owing monthly fees to keep the lien fresh. She used four arguments:

The Act Section 92
(1) Where a declaration provides that an owner has an obligation to repair after damage and the owner fails to carry out the obligation within a reasonable time after the damage occurs, the corporation shall do the work necessary to carry out the obligation.

(4) An owner shall be deemed to have consented to the work being done by a corporation under this section and the cost of the work shall be added to the owner’s contribution to the common expenses.”

The Declaration
“Each owner shall indemnity the Corporation against loss, costs, damage or injury caused to the common elements because of willful or unlawful act or omission of such owner or any occupant or invitee of his unit.”

Bylaw 14 Article XI:
“… in addition to the foregoing, any losses, costs or damages incurred by the corporation by reason of any breach of any rules and regulations of the corporation in force from time to time by any unit owner or by members of his family and either by invitees or licensees shall be borne or paid for by such owner and may be recovered by the corporation against such owner in the same manner as common expenses.”

Fourth argument
“Due to the defendant’s non-designation of common expenses payments, DCC 56 was entitled to apply the defendant’s common expense payments to this debt.”

Finally, the judge said that the condo corporation was wrong to stop accepting the defendant’s monthly fee payments and charging her interest for non-payments.

Judgment
The lien was a valid one. The defendant was given 60 days to pay her arrears and the lawyers for both sides were to negotiate costs. If the negotiations failed, the judge would hear oral submissions.

Lessons for condo owners
If you get a bill from the board, pay it by cheque and write a note “under protest”. Then see a lawyer who is experienced in condo law to see where you stand.

Look at those legal fees; like cancer they multiplied by ten in just two months.

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TSCC No. 1908 v. Stefco
Ontario Superior Court of Justice
File No: CV-12-454835
Date: 09 January 2014
Justice Low

This case involved Stefco Plumbing and Mechancial Contracting Inc. being sued by an industrial condo corporation for failing to pay his fees. The application was not contested by Stefco but was defended by Stefco's mortgagee who won the case and kept priority on the lien placed on the condominium unit.

What I am interested in is the judge determinating the costs.

TSCC #1908 claimed total costs of $13,734.85 against Stefco. These costs comprised of $11,387.00 in fees, the balance being disbursements and HST.

In the judge's view, the costs claimed are significantly disproportionate to the amount of effort reasonably and necessarily expended on the application given that it was undefended.

In the judge's view, a reasonable amount for costs on a substantial indemnity basis, is $5,000 plus HST of $650. He allowed disbursements of $867.54 for a total of $6,517.54; less than half of what they claimed.

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Carleton Condominium Corporation No. 555 v. Guy Lagacé, Barbara Stinson-Shea and John Bowman Spero
Superior Court of Justice—Ontario
Before: Madam Justice C. D. Aitken
Counsel: James Davidson and Nancy Houle, for the Applicant

Patrick J. Lafrange, for the Respondents, Barbara Stinson-Shea and John Bowman Spero

Guy Lagacé, Unrepresented
Court File No: 03-CV-24074
Date:  13 April 2004

This court case dealt with the costs that a condo corporation received for a court application against the owners of a condo unit who were renting their unit to a tenant who was, along with his guests, repeatedly violating the Act and the condo corporation’s declaration, bylaws and rules.

I will comment about the actual case elsewhere as I want to focus on the judge’s awarding of the corporation’s costs.

Costs
The Bill of Costs presented by Nelligan O’Brien Payne was in the amount of:
3,000.00  represents legal fees for the original application.
2,701.25 represents costs attributable to preparation for the costs argument,
0500.00 represents counsel fees when submissions on costs were heard.
0884.82 Disbursements.
$7,137.02 inclusive of GST and disbursements.
The judge found the hourly rates of the lawyers involved on the file were reasonable.

She found the time, and therefore fees, attributable to the issue of costs to be excessive: it was greater than the time and costs associated with the Application itself.

She also found the disbursements excessive. For example, she had difficulty understanding why $178.35 would be incurred for courier expenses on such a simple file.

The judge also did not allow costs for such items as tabs and bindings, in that she considered these included in normal office overhead.

She found this to be a relatively simple matter, with the Application being a chronology of events, largely documented with letters and notices. Minimal argument was required at the initial hearing. The Bill of Costs was easy to prepare and is only two pages in length. The case law was easy to assemble, being largely cases argued by Nelligan O’Brien Payne.

In all of the circumstances, the judge concluded that the legal costs that can reasonably be considered costs incurred by the corporation amounted to $3,600 inclusive of disbursements and GST.

She ruled that this sum shall be added to the common expenses of Unit 11, Level 2, CCC 555 in the amount of $300 per month, until paid.

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Wentworth Condominium Corporation No. 34 vs Brendan Taylor

Superior Court of Justice
Docket: 13-40506
Before: Madam Justice J. A. Milanetti
09 January 2014

The owner's husband, Mr. Taylor has been confrontational and verbally aggressive to contractors and other tenants as well as his wife.

The corporation was seeking the following:

A Declaration that the Respondents have acted in a manner that is contrary to the Condo Act and the Applicant’s Declaration and Rules;
An Order requiring the Respondent, Brendan Taylor, to be of good behaviour and keep the peace while on the property;
An Order requiring the Respondent, Brendan Taylor, to refrain from communicating with or approaching, within 15 feet, except as duly authorized meeting of the owners, with four named persons.
An order that the Respondent, Samantha Johns, (the wife) ensure the occupants of her unit, including Mr. Taylor, comply with the Condominium Act and the Applicant’s Declaration, By-Laws and Rules.
the applicant seeks significant costs payable on a full indemnity basis.

The corporation wanted full indemnity costs of $28,281.71 ($24,060.00 of fees plus disbursements and HST).

The judge noted that the respondents were warned by the corporation's law firm that if an application were necessary, the costs could exceed $10,000 and would be sought to be paid by the applicants on a full indemnity basis.  Despite these legal warnings, it appears that Mr. Taylor continued to act like an idiot.

Ms. Taylor argued that she had done all she can to control her spouse’s unruly behaviour and she should not have to pay for his behaviour.

The judge ruled that as the property owner, she could not avoid responsibility for the consequences of her husband's actions. He was found a disruptive, difficult, aggressive and threatening force in this cooperative community. They were both warned that there would be financial consequences of failure to “turn this ship around”. Not only did that not occur, but this matter was adjourned from its first appearance in April 2013 five times until it was heard. They had plenty of opportunity to try and resolve it without further attendance and expense of court itself.

The judge ruled that It was clear that the balance of the condominium owners should not be faced with the legal expense of the intransigence of one of the unit holders. When people choose to live in a close community neighbourhood, they are bound to accept the responsibility of fairness and decency to their neighbours.

The judge found that costs shall be payable on a full indemnity basis

Excessive fees
The judge found the fees to be quite excessive. She allowed an aggregate sum of $15,048.00 inclusive of fees, disbursements and HST as the costs that are payable.

This was in her view more in line with what an unsuccessful litigant would expect to pay; most particularly when they had been warned of the significant financial consequences of failure to address the problematic behaviour more than a year in advance of the hearing.

Time to pay
The costs were added to the common expenses for the unit in 36 monthly installments in the amount of $418.00.

Lessons
1.
If a resident in a condo goes around being a jerk and threatens or is abusive to his or her neighbours, the owner may get stuck with the bill.
2.
If you are given legal advice, especially if it is from the condo's law firm, listen. If you don't believe them, get your own legal opinion.

Question
The law firm claimed $28,281.71 and the judge knocked it down to $15,048.00, almost half. Did the "innocent owners" get stuck with the difference or did the law firm adjust its fees?

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PCC No. 98 vs Rui Pereira
Superior Court of Justice
Court File No: CV-13-1986-00  Costs
Court File No: CV-13-1986-00  Judgment
Justice M. J. Donohue
30 January 2014

The judge awarded costs on an earlier decision

On 28 November 2013, the condominium corporation, a condominium tower at 965 Inverhouse Drive in Mississauaga, was successful in obtaining several court orders against Rui Pereira so he will have to behave himself but the corporation was unsuccessful in forcing him to sell his unit.

Now they needed to determine costs. The condo corporation sought substantial indemnity costs as follows:

Hours
Rate
00Total
Michael Gwyer
108.9
$225
$24,502.50
Sally Harris
010.2
$300
$03,060.00
Law Clerk
115.5
$085
$09,817.50
Disbursements


$01,259.95
Grand Total


$38,639.95

The condo corporation failed in their attempt to force Mr. Pereira to sell his unit but the court did find Mr. Pereira to be in breach of the Condo Act and his actions led to the condo having to incur their legal fees.

The judge said that would be unjust for the costs to be borne by the other members of the corporation and that substantial indemnity costs in such circumstances are appropriate.

The application was argued vigorously at a long motion with extensive briefs by both parties. As Mr. Pereira denied almost all the facts alleged he necessitated a further requirement on the applicant to provide further support to their claims. At the motion, more time was spent on argument by the respondent to exclude evidence which was unsuccessful.

His actions in the litigation thereby caused increased costs.

The judge gave the condo full costs of the application: $37,380 plus disbursements of $1,259.95.

The condo corporation wanted the costs to be payable forthwith. The judge found that to be overly harsh in light of the corporation’s ability to collect the costs as common expenses against the unit.

The judge ruled that the costs shall be added to the common expenses for Mr. Pereira condominium unit and shall be payable over a four year period by way of equal monthly instalments.

This was a very expensive judgment against Mr. Pereira as not only will be paying almost $1,000 a month in extra condo fees for the next four years but he will also have to pay his legal costs.

What are the lessons here?
1.
As soon as you get a written notice from the management company or the board, get a legal opinion from a lawyer experienced in condominium law. It may be the best $300 or so that you will ever spend.
2.
Listen and act on that advice.
3.
Try to get a reasonable settlement and the earlier the better.

I expect that this judgment to appear on all the condo law firm's blogs as it is a case where the condo corporation got its full costs, 100˘ on the dollar.


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Hadani v TSCC No. 2095
Small Claims Court
Docket:  SC-14-00000644-0000
Date:    24 August 2016
Deputy Judge Marr

Ruling on costs
An owner sued his condo corporation to have $16,599.68 returned that he paid to the condo for damages he caused to another unit. He lost the case and deputy Judge Marr had to decide what costs the condo corporation would be awarded.

The condo wanted full legal fees plus disbursements.

Requested
Awarded
Legal fees
$30,823.46 $2,489.95
Disbursements 2,169.89 595.96
Total
32,993.35
3,085.91

So the condo corporation was awarded 9% of the costs they occured. The owner did not get away lightly as he had to pay his legal fees.

The reasons for the cost award is given in detail.

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TCECC No. 1508 v. William Stasyna
Ontario Superior Court of Justice
Court File No: CV-11-00421537-0000
Justice Michael G. Quigley
Date: 06 March 2012

TCECC No. 1508 consists of 32 separate “Parcels of Tied Land” or “POTLs". The three respondents made landscaping alterations to the common elements close to the fences that ran behind their homes. In the eight years since it was built, a number of owners have adone this.

The Corporation wants those landscaping alterations removed and the common elements lands restored to their original state.
  
Conclusion
The recalcitrant owners must restore the common elements appurtenant to their properties to their original unaltered state.

I do not agree with the respondents that the corporation is barred by a limitation period or equitable defences. I also do not agree that applicant was required to comply with mediation and arbitration before commencing this litigation.

However, the applicant’s decision to insist on litigation when alternative dispute mechanisms were available to it informs my decision to reduce the costs owing to the applications.

Costs
The applicant argues that there is a jurisprudence awarding substantial indemnity costs to a condominium corporation. Substantial indemnity costs are only merited in cases where the party who is required to bear the costs has engaged in “reprehensible, scandalous or outrageous conduct.

Litigation does seem to have been unnecessary and wasteful when there was the mediation option open and available. Here too, I find that it is appropriate to exercise my discretion to reduce the partial indemnity costs owing to the applicant by 20 percent for its unnecessary and wasteful – though perfectly legal – conduct to pursue  this litigation when openings were made available to permit this dispute to be resolved between all unit-owners on a more conciliatory and consensual basis.

There is no question that the TCECC No. 1508 board had the technical right to act as it did. Yet, against the background of history here and the period of apparent inaction by prior boards, this board ought to have behaved in a more conciliatory manner in my view. This is especially so since the records of its meetings with unit-owners suggest that it may have been coddling to the seemingly overbearing views of one or two vocal and compliance-oriented unit-owners.

I am aware that in making this order, I am forcing the unit-owners as a whole, including these recalcitrant unit-owners, to shoulder these costs, together since it is inevitable that TCECC No. 1508 will seek to pass those costs on to unit-owners.

The respondents must certainly pay for costs associated with this action and this application, but as well, all unit-owners, including these respondents, ought to bear the costs associated with their board’s decision here to first litigate and only talk later. It was a decision that may have been legally correct, but that showed poor judgment in my view.

I choose not to reward that conduct by a more fulsome award of costs, in the hope the message will avoid the recurrence of future similar situations.

I order that costs be paid by the respondent to the applicant on a partial indemnity basis, reduced by twenty percent.

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Judge lays into personal injuries lawyer
Court File # 3491/03
Written by Michael McKiernan
09 September 2011

An Ontario judge has laid into a Burlington, Ont. lawyer for charging excessive fees that “dwarf the judgment” and referring her client to a litigation lender that charged an “unconscionable” rate of interest

Kathy Chittley-Young represented a woman injured in a motor vehicle accident. The action initially claimed $1.25 million in damages in 2003, but the parties agreed to reduce that amount to $750,000 ahead of the trial, and the final settlement was just $375,000 after the plaintiff was found 50-per-cent responsible for the crash. Chittley-Young claimed her costs were $560,000, plus another $230,000 in disbursements.

“The plaintiff, a woman of modest means, who suffered serious injuries in a motor vehicle accident causing permanent impairment, is now faced with another burden of unimagined proportions — a second catastrophic event — her legal costs. The legal costs and disbursements incurred and claimed by Ms. Chittley-Young produce a result that is contrary to the fundamental objective of access to justice,” wrote Ontario Superior Court Justice John Murray in his Aug. 31 costs decision.

Murray was struck by the number of hours docketed on the case: almost 800 hours for Chittley-Young; another 500 for Steven Kenney, a senior lawyer charged at a higher rate than Chittley-Young, but used in a junior counsel role, plus almost 400 hours of work by law clerks, for a total of 1,700 hours.

“The aggregate time spent on this file by plaintiffs’ lawyers and their clerks would equal the annual docketed hours for many successful lawyers,” Murray wrote.

He eventually awarded costs to Chittley-Young on a partial indemnity basis of $104,000.

The claim for disbursements was cut to $120,000 after Murray disallowed Chittley-Young’s claims for mileage and telephone usage. He also refused to include $90,000 in unpaid interest on a loan the plaintiff took out to fund the litigation.

Chittley-Young argued the $150,000 loan, taken from a company called Lexfund Inc. in November 2009, when the potential return was still more than $1 million, was necessary to get the case to trial as she could not afford to carry the disbursements. The effective annual rate of the loan was 51 per cent, so that after 24 months, the plaintiff would have owed more than $200,000 in interest, according to the judgment.

“The interest rate on the loan obtained by the plaintiff for disbursements is unconscionable. It is turning the world on its head to assert, as does Ms. Chittley-Young, that this is an access to justice issue and that ordering interest payments on the Lexfund is reasonable,” Murray said. “This loan agreement does not facilitate access to justice. This loan agreement does nothing to advance the cause of justice. It is difficult to believe that any lawyer would refer a vulnerable client to such a lender.”

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MTCC #1385 vs Skyline Executive Properties Inc.
Superior Court of Justice—Ontario
Docket: 02-CV-228486-CM2
Before: Justice Lax
28 June 2004

The condo corporation put a lien on the 59 units owned and/or managed by Skyline and the company wanted this lien declared invalid and for an order requiring its discharge.

The motion turns on the interpretation of section 134(5) of the Condominium Act, 1998, S.O. 1998, c.19, which reads:

Addition to common expenses
134(5) If a corporation obtains an award of damages or costs in an order made against an owner or occupier of a unit, the damages or costs, together with any additional actual costs to the corporation in obtaining the order, shall be added to the common expenses for the unit and the corporation may specify a time for payment by the owner of the unit.

The condominium corporation obtained two awards of costs for $38,000 and $10,000 in an order made against Skyline under section 134(3) of the Act and relied on section 134 (5) to add to the common expenses for the units owned and/or managed by Skyline, the amount of $209,749.55 as additional actual costs to the corporation in obtaining the order.

Background
MTCC 1385 is a residential complex of 189 units at the intersection of Front and Jarvis Streets in the City of Toronto.

In 2002, Skyline owned, operated or managed 95 of the units, which it was leasing for relatively short terms creating a transient population. The condo’s board passed a rule (“Rule E”) to prohibit this kind of short-term commercial use.

Skyline brought an application to restrain the Board from enforcing Rule E. In its counter-application, the condominium corporation sought declaratory and other relief to determine the validity of Rule E and to appoint an administrator.

Skyline’s motion for interim injunction was heard in May 2002 and was dismissed. It then requisitioned a meeting of unit owners with a view to repealing Rule E.

In August, the condominium corporation obtained an order restraining the holding of the meeting until after the hearing of the application and counter-application, which came on before Justice Hoilett on 02 & 03 October 2002.

At that hearing, Skyline abandoned its original application and the matter proceeded on the basis of the issues raised in the counter-application.

By Judgment dated December 20, 2002, Justice Hoilett determined that Skyline’s activities violated both Article 111(1)(a) of the Declaration and the condo’s Rule E. An administrator was appointed.

In April 2003, Justice Hoilett fixed the costs of the counter-application in the amount of $58,000. In his endorsement dated April 11, 2003, he wrote: “The costs I have fixed are intended to be on a substantial indemnity basis which, given all the circumstances of this matter, are wholly warranted”.

Skyline appealed the portion of the Judgment appointing an administrator and sought leave to appeal the award of costs. By endorsement dated December 12, 2003, the Court of Appeal affirmed the appointment of the Administrator, but granted leave to appeal the question of costs and allowed the appeal on this question. It substituted an order that the costs be on a partial indemnity basis, to be assessed.

The court awarded the condominium corporation costs of the appeal in the amount of $10,000.00.

On 02 June 2004, Assessment Officer Kane issued a Certificate of Assessment of Costs with respect to the Judgment of Justice Hoilett awarding costs to the condo corporation on a partial indemnity basis in the amount of $38,000.

After the hearing in the Court of Appeal and approximately six weeks prior to the date of the assessment referred to in the preceding paragraph, the condo corporation registered a lien for $194,350.72 for “arrears of common expenses to date”, plus $9,000.00 for legal collection costs against the 59 units then owned and/or managed by Skyline. It advised Skyline that if these amounts were not paid within 15 days, power of sale proceedings to enforce the lien would be commenced.

The claim for additional actual costs was in excess of $200,000 and included:
a.
Legal Accounts of Mark Arnold
$108,524.00
b.
Legal Accounts of Richard Elia
$41,164.59
c.
Additional Legal Costs
$11,391.74
d.
Administrative Costs
$20,052.22
e.
Property Management Services
$28,167.00

Analysis
This is the first time that a court is asked to interpret the language of section 134(5), and in particular, the phrase, “together with any additional actual costs to the corporation in obtaining the order”.

The corporation takes the position that the final order of the Court of Appeal was the culmination of an enforcement process that began on turnover and that it is entitled to all additional costs incurred in this process. It has included in the lien amount every cost incurred that pertains to Skyline from turnover of control of the corporation from the developer on 25 September 2001 through April 2004.

The corporation submits that section 134(5) is intended to provide full cost recovery to a corporation and rests its submissions on the proposition that in enacting this section, the Legislature intended that the costs of obtaining a compliance order be borne by the recalcitrant unit owner and not by innocent unit owners within the condominium the community. It contends that “additional actual expenses to the corporation in obtaining the order” means any and every expenditure that the condominium corporation incurs both before and after the order is obtained, including legal costs in excess of amounts awarded by the court.

Skyline disputed that the language of section 134(5) can support this interpretation and Justice Lax agreed.

How did we get section 134 (5) ?
Judge Lax explains.

When the Condominium Act 1998 was in draft form as Bill 38, CCI (Ontario branches) and ACMO presented joint recommendations for various amendments to Bill 38. They asked the Legislature to amend section 134(5) to include the italicized words so as to read, “together with any additional actual costs to the corporation in obtaining and enforcing the order”.

Their rationale was that additional costs may be incurred by the corporation in enforcing a compliance order. This recommendation did not find its way into the section. The reason may be that under the current Act, the corporation is given broad lien rights that enable it to collect unpaid amounts from defaulting unit-owners, including unpaid awards of damages or costs.

Section 134(5) requires the corporation to add the damages or costs of obtaining a compliance order, (together with any additional actual costs to the corporation in obtaining the order), to the common expenses for the unit and may specify a time for payment.
If the unit-owner defaults in payment, Section 85(1) gives the corporation a lien against the owner’s unit and its appurtenant common interest together with all interest owing for the unpaid amount and all reasonable legal costs and reasonable expenses incurred by the corporation in connection with the collection or attempted collection of the unpaid amount.

Thus, the effect of section 134(5) is to create a statutory debt, which, the corporation can collect through its statutory lien once a certificate of lien is registered as provided in section 85(3). It reads:
(3)  A certificate of lien when registered covers,
 
(a)   the amount owing under all of the corporation’s liens that have not expired at the time of registration of the certificate;
 
(b)   the amount by which the owner defaults in the obligation to contribute to the common expenses after the registration of the certificate; and
 
(c)   all interest owing and all reasonable legal costs and reasonable expenses that the corporation incurs in connection with the collection or attempted collection of the amounts described in clauses (a) and  (b) including the costs of preparing and registering the certificate of lien and a discharge of it.

Mediation & arbitration
Another feature of the current Act is the introduction of mediation and arbitration processes in section 132. The vast majority of compliance cases are, to use Mr. Arnold’s words, about “people, pets and parking” and arise from infringements of the Declaration, By-laws and Rules of the condominium corporation. They will now be governed by mediation and arbitration.

The Legislature has wisely determined that these disputes are better resolved in this manner than through the courts. Where these provisions apply, there can be no application to the court for an order under section 134, unless compliance is not obtained.

On this motion, the condo corporation filed affidavits from two experienced condominium lawyers. The substance of their evidence is that in the consultations that led to the enactment of section 134(5), there was widespread support for full cost recovery to require the party against whom a compliance order was made to pay all of the costs of the corporation in obtaining the order regardless of whether those costs were awarded by the court or were additional actual costs to the corporation in obtaining the order.

This evidence is of limited assistance in interpreting the section, but even so, the claim here goes well beyond this.

Legal Costs
There are sixteen legal accounts for Mr. Arnold’s services as litigation counsel. Five of the legal accounts cover the period from June to November 2002 and total $61,991.81.

He concedes that all of the services set out in these accounts are identical to the services described in the client ledger sheets presented at the assessment hearing. I observe that the Bill of Costs that was presented to Justice Hoilett was in the amount of $62,496.00.

The congruence in the amounts suggests that the corporation is now claiming to recover as “additional actual costs” an amount for legal services that Justice Hoilett in the first instance awarded on a substantial indemnity basis, but discounted to $58,000 and that the Court of Appeal awarded on a partial indemnity basis.

These accounts were assessed in the total amount of $38,000.00 and have been paid in full by Skyline.

The effect of including this in the lien amount is to render meaningless the order of the Court of Appeal allowing Skyline’s appeal of the costs order of Justice Hoilett and the assessment of these costs that followed.

The remaining eleven accounts rendered by Mr. Arnold cover the period from 31 December 2002 to 23 January 2004 and therefore post-date the Judgment.

As such, I fail to see how they can be characterized as costs to the corporation in obtaining the order. They total $72,388.91. The accounts include services for what appears to be an unrelated matter in connection with proceedings against a tenant of one of the units.

Further, many of the services described in the accounts relate to preparation for and attendance at the Court of Appeal on 12 December 2003, which costs were fixed by the court at $10,000.00 and paid by Skyline.

The effect of including this in the lien amount is to render meaningless the order of the Court of Appeal fixing the costs of the appeal.

The claim includes thirty-one accounts in the total amount of $41,164.59 for the services of Richard Elia, corporate counsel to the condominium corporation, although he played no part in obtaining the order and no claim was made for his time in the Bill of Costs submitted to Justice Hoilett.

Seventeen of the accounts cover the period from 31 October 2002 to 30 November 2003. With the exception of two accounts, all of the services described in the accounts were performed after the order of Justice Hoilett was obtained.

With respect to the two accounts dated November 21, 2002, one includes a disbursement charge of $2,150.00 for obtaining parcel register pages for 86 condominium units. In the other account, there is an entry for Mr. Elia’s time for attendance in court on 02 & 03 October 2002, although he did not participate in the hearing and his time was not included in the Bill of Costs.

The additional legal costs totaling $11,391.74 include legal fees charged by Miller Thomson for a trademark application, legal costs of Mr. Stein for the defence of a criminal assault charge and an account of the Administrator. The account of the Adminisrator cannot be an additional actual cost under section 134(5) as paragraph 9 of the Judgment of Hoilett J. provides that the Administrator’s fees and expenses are to be paid by the corporation. Skyline will share in this expense through its contribution to the common expenses of the 59 units it owns or manages.

The legal accounts of Miller Thomson and Mr. Stein have nothing to do with the obtaining of the compliance order.

Under the former Act, a condominium corporation had no ability to add to the common expenses of a unit-owner, the damages or costs awarded by a court. This has been addressed under the current Act in section 134. However, the Legislature did not remove the court’s discretion to determine the question of costs

 In an earlier case, Justice Aitken granted a compliance order against a tenant in a unit. The condominium corporation sought an order against the unit owners for costs on a substantial indemnity basis relying on section 134(5). At paragraph 15, the court stated:
Section 134(5) simply provides that if a corporation obtains an award of costs in an order made against an owner or occupier of a unit, the costs shall be added to the common expenses for the unit and collected accordingly. This subsection does not speak to the question of whether a costs order should be made in the first instance. Section 134(3)(b) confirms that the court, on an application by the condominium corporation for an order requiring someone to comply with the declaration, by-laws or rules of the corporation, may make an order requiring the persons named in the order to pay the costs incurred by the condominium corporation in obtaining the order. It does not require the court to do so.
 
As the condominium corporation had not given the owners adequate notice of the breaches by their tenant, costs were fixed on a partial indemnity basis and ordered added to the common expenses of the unit and paid by the owners of the unit at the rate of $300.00 per month.

In York Condominium Corp. No. 482 v. Christiansen, 2003 CanLII 11152 (ON SC), (1983), 64 O.R. (3d) 65 (S.C.J.); [2003] O.J. No. 343 (S.C.J.), Lane J. was asked to interpret provisions in the Condominium Act 1998 that give lien and attornment rights to a condominium corporation to enforce an owner’s obligation to contribute to the common expenses. The costs of the motions he heard were subsequently addressed through written submissions and fixed on a substantial indemnity basis Lane J. thought that this was the appropriate scale because the by-laws of the corporation provided for this and because he thought that the motions were an attempt by defaulting owners to avoid their obligations. He did not think that the rest of the owners should have to bear any part of these costs: See, York Condominium Corp. No. 482 v. Christiansen, [2003] O.J. No. 1371.

The condominium corporation relies on this decision, but ignores that the successful corporation in Christiansen did not receive all of its legal costs. Lane J. fixed the costs in an amount that he thought appropriate on the basis of the principles that apply to an award of costs under the Costs Grid and the Rules of Civil Procedure.

I pause here to note the different costs orders made by the courts in Lagacé, Christiansen, and here and the different reasoning that led to these orders. The endorsement of the Court of Appeal makes no reference to the kind of factors that led Justice Lane in Christiansen to award costs on a substantial indemnity scale.

With great respect, I would have thought that these factors commend an award on the higher scale. Lane J. does not refer to Mortimer v. Cameron and it appears that the argument addressed to him was different than the one heard by Justice Aitken in Lagacé.

I do not interpret the decision of the Court of Appeal as establishing a precedent that costs awards in compliance cases are to be on a partial indemnity basis. Costs are always in the discretion of the court and as compliance cases reach the court, this will no doubt be considered further.

It seems to me that a possible approach to the interpretation of section 134(5) is to make a distinction between assessable legal costs that are awarded under the Costs Grid and the Rules of Civil Procedure and other costs, which may include non-assessable legal costs, such as solicitor’s fees. Section 134(5) does not give the corporation an absolute entitlement to the former for the reasons given by Aitken J. in Lagacé.

The Legislature could have used words to accomplish this by providing that the corporation was to recover its costs of obtaining a compliance order on a substantial or full indemnity basis. Clearly, this determination has been left to the court.

In view of this, “additional actual costs” cannot include any amount for legal costs that could have been awarded by the court under the Costs Grid and the Rules of Civil Procedure. This would render meaningless the court’s jurisdiction to award costs, which is a precondition to the operation of the subsection. Accordingly, once costs are awarded, a condominium corporation may not add to the common expenses of a unit-owner as additional actual costs under section 134(5), assessable legal costs that were sought, but not awarded. Further, as “additional actual costs” must have been incurred to obtain the order, I do not see how they can include non-assessable legal costs that arise after the order is obtained.

The Act now provides for mediation and arbitration for the vast majority of compliance cases. Although the costs of these processes can be quite substantial, the Legislature did not see fit to provide for full cost recovery to the corporation. Rather, it left the determination of the payment of the mediator’s fees and expenses to the mediator under section 132(6), who specifies the amount each party will pay.

Where mediation fails to obtain a settlement, the parties are required to arbitrate under the Arbitration Act, 1991. Presumably, the arbitrator will determine how the parties will share in payment of these fees and whether to award costs of the arbitration to either party.  In my view, this is further support for my view that section 134(5) does not provide for full cost recovery to the corporation, despite the policy arguments that might favour such a provision.

In summary, the awards of costs of $38,000 and $10,000 that were made against Skyline are conclusive of the corporation’s legal costs in this case. The other legal costs included in the lien amount either post-date the order and are therefore not an additional actual cost of obtaining the order, or, were never presented to the court for scrutiny, or if presented, were rejected by the court, or, have nothing to do with the obtaining of the order. They cannot be swept in as “additional actual costs to the corporation”.

Administrative and Managerial Costs
The lien amount includes administrative costs of $20,052.22. Some of this amount is for the costs of meetings of unit-owners held during the period from September 2001 to January 2004. They include six owner information meetings, two Annual General Meetings held in 2003 and 2004, and one meeting requisitioned by owners to consider and vote on new house rules, which came into effect on March 5, 2002.

It is evident that some of these meetings post-date the order and some are required pursuant to provisions of the Act. Some of the information meetings may have been held to inform owners of the status of the litigation and on better evidence, I may have been prepared to find that the costs associated with those meetings are additional actual costs to the corporation, but on the record before me, I am unable to determine this.

Also included as an administrative cost in the lien is the amount of $10,793.91, which consists of a commitment fee plus interest for a $60,000 loan taken out by the condominium corporation in April 2003 to pay its day-to-day expenses.  The interest charges cover the period from 15 April 2003 to 15 April 2004 and therefore cannot have been incurred to obtain a compliance order granted in December 2002. I am unable to determine if the remaining amount for administrative costs is an additional actual cost of obtaining the order. Clearer evidence is required to make this finding.

Finally, the amount of $28,167 has been included in the lien amount as costs for managerial services. These are the services of two employees of the corporation’s property management company. In support of the claim, time sheets for these employees were provided but they cover the period from March 2003 through to January 2004 and amount to exactly one-half of the amount claimed. This was then doubled as a conservative estimate of employee time from September 2001.

In Christiansen, Justice Lane briefly discusses this. He states:
[52]  There were disputes about the reasonableness of certain costs and expenses raised in the material … The reasonableness of a $100 charge per Notice requires evidence and possibly credibility findings. The court is not equipped on a motion to deal with such matters. In my view, a cost can be incurred even where the work is done by an employee within the organization, not only where a payment is made to a third party. Employees do not come for nothing. But evidence would be required in support of the reasonableness of the employee’s salary allocated to the task.

I agree with his comments and think that employee time can equally be an item of additional actual costs under section 134(5). However, I again do not have the appropriate evidence to determine this. In summary, I accept that administrative costs and employee costs can support a claim for additional actual costs of obtaining a compliance order under section 134(5), but the onus is on the corporation to demonstrate that the costs were incurred to obtain the order. This has not been demonstrated on this motion.

Additional Actual Costs
What other costs might the Legislature have had in mind in enacting this provision? I make these suggestions.

There will be court applications in those situations that are not covered by section 132, and in the hopefully rare instances where there is a failure to obtain compliance using mediation and arbitration.

Prior to the commencement of an application under section 134(1), there may be meetings of the Board of Directors to address the problem. The condominium corporation’s corporate counsel or litigation counsel, or both, may be involved in advising the corporation. There may be employee time as I have mentioned, and there may be costs incurred by the corporation through the mediation and arbitration processes as well as legal costs that are not assessable under the Costs Grid and the Rules of Civil Procedure.

It seems to me that these kinds of costs could be considered to be additional actual costs to the corporation of obtaining a compliance order and if properly documented, come within the language of the subsection.

The provision may also encompass the corporation’s out-of-pocket expenses of such matters as registering the court order on title, filing the order with the Sheriff, and serving the order on the unit-owner.

I do not intend this to be an exhaustive or exclusive list but only to give some guidance on the kind of costs that, in my view, could reasonably be considered to be “additional actual costs to the corporation in obtaining the order”, and which the corporation would be justified in adding to the common expenses of the unit.

Order
The lien was declared invalid and that the lien was forthwith discharged.

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