The owners are ultimately responsible for litigation

YCC #385 at 2645 Jane Street

This is an unusual case as it involved a condo corporation putting a lien on a unit then selling it without the mortgagee (CIBC) being aware that the unit was in arrears for unpaid court costs.

The money raised by the sale was put in trust pending a court decision on whether the the condo or the bank had first priority on the sale proceeds.

The condo corporation's management should have exercised their lien rights within 90 days but they did not. That decision is posted in the Liens page on this website. This posting deals just with the costs.

In this decision, the judge makes some very important points:
1.
In my opinion, he wrote this as if he was a school teacher marking a student's paper. There are pointed remarks of what the lawyer, and the lawyers, should have done.
2.
The offers to settle. I wonder if the YCC #385 directors fully understood the risks of refusing the bank's settlement offers. The judge stated that both offers were very substantially advantageous to the condo corporation. Isn't getting half better than absorbing a total loss of perhaps $200,000 or more? (based on a rough estimate of loosing half of the proceeds from the unit plus paying the legal fees for both sides.)
3.
It was interesting to read just how big a discount CIBC received from its law firm.
4.
"The unit holders elect their managers and the conduct of litigation by management is ultimately their responsibility."

This puts the onus on the owners to be aware of what decisions their board and management are making and to hold them accountable. For this to happen, condo boards need to inform the owners of what they are doing and I am confident that most condo boards fail to do so.

Alternatively, the owners must take the initiative to read the monthly board minutes in a timely manner and attend all owner meetings, or send a responsible proxy to represent them.

I am sure that the judge's opinion gives little comfort to condo owners who have a hell of a time getting their boards cooperation allowing them to examine the corporation's records although this decision may assist owners in the future getting the courts assistance in this regard.

CIBC Mortgages Inc. v. YCC No. 385
Ontario Superior Court of Justice
Court File No: CV-14-517576
Before: Justice S.F. Dunphy
Release date: 21 December 2016

Costs Endorsement

[1] I released my decision in these two related applications on November 24, 2016. I awarded the successful party, CIBC, costs and invited the parties to make written submissions not to exceed five pages regarding scale of costs and amount.

[2] What followed was a virtual blizzard of submissions by both parties without the tiniest regard for the limitations on submissions specifically imposed by me:
a.
December 1, 2015, CIBC Costs Submission, (5 pp, exclusive of Outline
(9 pp));
b.
On December 13, 2016, YCC Request to Reconsider, (2 pp plus 18 pages of attached cases readily available on line despite my request not to do so);
c.
December 15, 2016, CIBC Addendum, (3 pp);
d.
December 16, 2016, YCC Cost Submission, (14 pp submissions followed by 12 cases, plus copies of statutory authorities and dockets);
e.
December 19, 2016, CIBC Reply Cost Submissions, (4 pp); and
f.
December 20, 2016, YCC Reply to Reply, (3 pp).

[3] Suffice it to say that the issue of costs has been thrashed out about as
thoroughly as the case was fought.

[4] When the court sets size limitations on submissions, these are not to be treated as mere suggestions or guidelines to be followed or ignored as counsel’s fancy may dictate.  If reply and reply to reply are not invited, they are not expected to be filed either except in extraordinary cases. The excessive zeal shown in diving as deeply into the matter of costs as has been done here is quite symptomatic of the manner in which the two applications were conducted. Proportionality and reasonableness ought ever to be the lodestar held in view when conducting litigation.

Note # 1: Limitations ... are not to be treated as mere suggestions or guidelines to be followed or ignored as counsel’s fancy may dictate.

Note #2: If reply and reply to reply are not invited, they are not expected to be filed either...

Note #3: Proportionality and reasonableness ought ever to be the lodestar held in view when conducting litigation.

Request to Reconsider
[5] YCC asks that I reconsider my award of costs to CIBC as successful party. It does so on the basis that I have jurisdiction and that I had not heard submissions on the matter of costs.

[6] I do not propose to wade into the mire of whether I have jurisdiction. CIBC submits that YCC waited until after it had received CIBC’s costs submissions delivered per my order to make its position on reconsidering the costs award known. The question of jurisdiction is clearly one that is more theoretical than real. I might have been persuaded to issue an award of costs of $1.00 or nil based on the costs submissions received without having to “reconsider” my award of costs to the successful party. YCC did not lack the ability to make that submission in any event.

[7] I should like to remind the parties that costs are on the table at every appearance in court – be it a motion or an application (as was the case here). Both parties filed written arguments and had every opportunity to address the matter of costs generally and as deeply as they thought fit.  I accept – and indeed made allowance for – the fact that offers to settle must necessarily be kept confidential before a ruling on the merits is made. In my view, if a party intends to argue that costs should not follow the event as they normally do, I expect a submission to that effect will be made in oral or written argument.  I cannot accept that either side was denied an opportunity to address the issue of entitlement to costs – neither was prevented from expanding upon their facts by making submissions on the subject if thought advisable. If the existence of offers to settle may have rendered that submission awkward to advance, then a specific request not to rule on costs for that reason could be made orally or in writing.  There is no prejudice to be feared from the mere revelation that the allocation of costs may require consideration of the settlement positions of one, the other or both parties.

Note #4: costs are on the table at every appearance in court – be it a motion or an application (as was the case here).

Note #5: In my view, if a party intends to argue that costs should not follow the event as they normally do, I expect a submission to that effect will be made in oral or written argument.

[8] Parties should not be surprised to see that one side or the other has received costs as asked when they have failed to address the subject at all at the hearing (or have only addressed their own desire to receive costs if successful without addressing the opposite scenario). Every motion record contains a request for costs and every factum filed on a motion invariably contains one as well. Costs are part and parcel of deciding a motion. Indeed, absent consideration of settlement offers, the amount of costs is best spoken to when neither party knows who has been successful and the reasonable expectations of the losing party can be most candidly assessed.

Note #6: ... the amount of costs is best spoken to when neither party knows who has been successful and the reasonable expectations of the losing party can be most candidly assessed.

[9] I have reviewed the Request to Reconsider of YCC and the Addendum of CIBC in response thereto. YCC’s main request is that no order of costs be made—I have all the jurisdiction I need to consider that request in connection with fixing scale and quantum of costs, both of which matters were reserved to me. I see no reason to reconsider my ruling that costs follow the event but will take all the submissions of the parties into account in considering scale and amount, up to and including considering the advisability of making a nil or nominal award as requested by YCC.

Scale of Costs
[10] The normal expectation is that costs are awarded to the successful on a partial indemnity basis. Among the factors that may argue for a higher scale of costs—in whole or in part—is settlement offers.

[11] No Rule 49-compliant offers to settle have been placed before me. CIBC did however make two offers to settle neither of which was formally compliant with Rule 49 of the Rules of Civil Procedure. CIBC nevertheless submits that I should have regard to them in exercising my discretion. Rule 49.13 of the Rules of Civil Procedure gives me full discretion to consider the amount, timing and terms of any offer to settle in exercising my discretion as to costs.

[12] Both offers (August 21, 2014 and July 8, 2016) would have seen the sales proceeds held in trust divided broadly in half (the latter offering somewhat less to YCC than the first). The precise amounts are not material so much as the fact that CBC offered a very real and substantial compromise and its offer was rejected. Both offers were very substantially advantageous to YCC who was entirely unsuccessful in its claim to full priority over CIBC’s mortgage. Costs might have been avoided had YCC show sufficient flexibility to compromise rather than insist as it did on an all-or-nothing hearing that it ultimately lost.

Note #7: Both offers were very substantially advantageous to YCC who was entirely unsuccessful in its claim to full priority over CIBC’s mortgage. Costs might have been avoided had YCC show sufficient flexibility to compromise rather than insist as it did on an all-or-nothing hearing that it ultimately lost.

[13] I agree with CIBC that I may take the two offers into consideration in considering the exercise of my discretion. While I do take them into consideration, I am not prepared to depart from the “normal rule” of partial indemnity costs on the basis of the two offers. I shall however take their existence into account when considering the other issues raised by the parties (allegedly excessive hours, collateral issues pursued, hourly rates, etc.).

Amount of Costs
[14] CIBC submits that lead counsel’s hourly rate charged on this file was a deeply discounted rate offered to CIBC relative to the normal hourly rate charged. Counsel’s normal hourly rate was $590 while CIBC received a discounted rate of $300. While CIBC accepts that the principle of indemnity precludes seeking recovery of costs in excess of those actually paid, it relies on the decision of Corbett J. in Mantella v. Mantella, 2006 CanLII 17337 (ON SC) to argue that the “usual” ratio of 50% or 75% of actual fees ought not to apply.

Note #8: CIBC ... argue(s) that the “usual” ratio of 50% or 75% of actual fees ought not to apply.

[15] I agree with this submission. While the recommendations of the Costs Subcommittee of the Civil Rules Committee in 2005 do not have mandatory force of law, they have often been adopted as offering a helpful guideline on appropriate hourly rates, when adjusted for intervening inflation over the following decade. In the Toronto region, such inflation has added more than 20% to the scales established in 2005. Lead counsel on this file for CIBC was called to the bar more than 20 years ago and would thus have a suggested maximum rate under the guidelines of about $420 ($350/hr x 1.2). The $300 rate proposed is well within the range of reasonableness for partial indemnity rates and is indeed substantially below the figure that would be otherwise applicable but for the fee agreement negotiated by CIBC with its counsel. Following the reasoning in Mantella, I find the hourly rates proposed by CIBC to be reasonable in the context of a partial indemnity assessment of costs (other timekeepers had fewer hours and were submitted at rates corresponding to the Costs Subcommittee guidelines).

[16] CIBC claimed a total of $52,989 in fees plus $6,888.57 in HST plus $9,444.61 in disbursements plus $1,188.67 in HST for a total of $70,510.85. This compares to an amount at issue that was just under $100,000.

Note #9: fees... a total of $70,510.85. This compares to an amount at issue that was just under $100,000.

[17] A very significant portion of the time charged was for cross-examinations or examinations of witnesses. These produced voluminous (and expensive transcripts). The output of that laborious process was negligible. None of the transcripts were used at the hearing—small pieces of non-controversial information doubtless emerged that found their way into the hearing but the effort was out of all proportion both to the issues and the amounts at issue. YCC submits that almost $17,000 in fees (including HST) sought by CIBC were consumed in these examinations and in compiling the four volumes of exhibit briefs, also largely without use.

[18] I am mindful of not applying hindsight too zealously in micromanaging the decisions taken along the path leading to a successful litigation outcome. I am also mindful that examinations may become necessary and, if necessary, more drawn out when a bilateral spirit of cooperation in minimizing costs and maximizing efficiency is lacking. My observations of the conduct of this case born of having had to wade through the great bulk of that largely unhelpful output suggests that there is plenty of responsibility to be shared on all sides.

Note #10: a bilateral spirit of cooperation in minimizing costs and maximizing efficiency is lacking. My observations of the conduct of this case born of having had to wade through the great bulk of that largely unhelpful output suggests that there is plenty of responsibility to be shared on all sides.

[19] Despite all of these considerations, I find that I must make some reduction to reflect the excessive time and energy expended in these examinations. I would exclude $8,000 of the fees calculated by CIBC to give effect to this consideration. I have chosen not to adjust the disbursements charged to this endeavor beyond the fee reduction noted.

[20] Mr. Phull has made a spirited case for my disallowing costs altogether or awarding CIBC only a nominal or reduced amount of costs. His basis for doing so is the general consideration that (i) the issue that decided this case was a relatively novel one; (ii) the unnecessary time expended on examinations; and (iii) the consumer protection intentions of the Condominium Act, 1998, S.O. 1998, c. 19 compounded with the fact that “innocent” unit owners will be footing the bill.

[21] I reject these submissions.

[22] Many issues raised before the courts have elements of novelty about them. Absent the twin features of novelty and ambiguity presented by most legal issues, the lawyer’s role should have long since been reduced to that of a document scanner with judges reduced to impersonal on-line algorithms. While I have no doubt that there are many in Palo Alto who even now labour diligently to bring about the dawn of that yearned-for golden age, it is the here and now that must concern me. I have no hesitation in finding that the pursuit of the private interests of the parties in this litigation far outweighed any altruistic considerations of advancing a point of law in the general public interest.

Note #11: I have no hesitation in finding that the pursuit of the private interests of the parties in this litigation far outweighed any altruistic considerations of advancing a point of law in the general public interest.

[23] I have already sufficiently accounted for the examinations undertaken and have noted that the excesses are a shared responsibility. The degree of sharing should reflect that one party made sincere and advantageous settlement offers that were rejected and the unsuccessful party bore significant responsibility for the length and number of examinations that were undertaken.

Note #12: ... one party made sincere and advantageous settlement offers that were rejected and the unsuccessful party bore significant responsibility for the length and number of examinations that were undertaken.

[24] Finally, the consumer protection plea on behalf of innocent unit holders wears thin here. The unit holders elect their managers and the conduct of litigation by management is ultimately their responsibility. Poverty, if seriously pleaded in mitigation of costs, would require more evidence than this.

Note #13: The unit holders elect their managers and the conduct of litigation by management is ultimately their responsibility.

[25] YCC provided me with confusing “redacted dockets” but no comprehensive Outline of Costs from which I might have usefully compared the costs expectations of both parties in order to assess more thoroughly the reasonable expectations of the losing party. Instead, YCC sought to demonstrate the time it had expended on the examinations that it claims were unnecessary. As I have stated, the responsibility for the excesses in the pre-hearing process are quite divided in my view and I intend to make no further adjustment on that score.

[26] Accordingly, I have determined to award CIBC total costs for fees and disbursements of $62,510.85 including HST. This figure is still unacceptably high in relation to the amount at issue. However, it was an expense that CIBC offered YCC reasonable and early prospects of avoiding and it was one that was inflated due to lack of pragmatism and cooperation for which I find fault cannot be laid solely or even predominantly at CIBC’s feet. It is, alas, the fairest result I can fashion from the clay that I have been given.

Note #14: ... it was one that was inflated due to lack of pragmatism and cooperation for which I find fault cannot be laid solely or even predominantly at CIBC’s feet.

[27] Order accordingly. This order applies to this court file (CV-14-517576) and the related application of CV-14-512825 that was heard together. The formal order should be issued and entered under the dual style of cause.


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