SCOTIA MORTGAGE CORPORATION Plaintiff - v. -, 2023 SKKB 70

KING’S BENCH FOR SASKATCHEWAN Citation: 2023 SKKB 70 Date: 2023 04 04 Docket: QBG-SA-00962-2020 Judicial Centre: Saskatoon ___________________________________________________________________________ BETWEEN: SCOTIA MORTGAGE CORPORATION Plaintiff - and - REGINALD SCOTT GAETZ Defendant Counsel: Nicholas C. Horlick for the plaintiff no one appearing for the defendant ___________________________________________________________________________ FIAT ROTHERY J.

April 4, 2023 ___________________________________________________________________________ [ 1 ] The plaintiff, Scotia Mortgage Corporation [SMC], obtained leave and sued the defendant, Reginald Scott Gaetz [Gaetz], for default on his mortgage granted against his condominium located in Humboldt, Saskatchewan. The mortgage was granted in support of monies lent to Gaetz, but none of the monies were granted for the primary purpose of purchasing the condominium. Gaetz did not defend the foreclosure action. SMC obtained an order nisi for sale by real estate listing.

SMC eventually applied for an order confirming sale of the condo for the sum of $102,500. At that time, the outstanding mortgage was in excess of $135,000. [ 2 ] Counsel for SMC is now in a position to apply for a deficiency judgment against Gaetz but requires the Court’s assessment of solicitor-client costs to determine the deficiency. Counsel has applied on notice, with service upon Gaetz. That is the appropriate procedure.

See: Royal Bank of Canada v Viloria , 2014 SKQB 110 at para 25 , 443 Sask R 121 , and CIBC Mortgage Inc. v Roberts , 2006 SKQB 44 . [ 3 ] Counsel for SMC filed a draft order seeking solicitor-client costs in the amount of $28,425.60, consisting of the following: Lawyers’ fees $ 9,460.00 Paralegals’ fees 14,924.50 GST 1,219.23 PST 1,463.07 Disbursements 1,358.81 TOTAL $28,425.60 [ 4 ] This is the amount referred to in the statement of account submitted to SMC from MLT Aikins [MLT] on January 24, 2023, for professional services rendered from November 5, 2020, to January 24, 2023. [ 5 ] Counsel submits that the terms of Gaetz’s mortgage permit SMC to seek an order of solicitor-client costs.

At paragraph 15(

C) of the mortgage, it states: C. Our expenses – You will immediately pay all our expenses of enforcing our rights. Our expenses include our costs of taking or keeping possession of your property, an allowance for the time and service of SMC’s and/or the Bank’s employees utilized in so doing, our legal fees which will be, where the law does not prohibit it, on a solicitor and own client basis and all other costs related to protecting our interest under this mortgage. … [Emphasis added] [ 6 ] In Saskatchewan, this contractual agreement for a mortgagor to pay a mortgagee’s legal fees on a “solicitor

and own client basis” is restricted by case law. The Saskatchewan Court of Appeal in Rozdilsky v Kokanee Mortgage M.I.C. Ltd., 2020SKCA 1 [Rozdilsky], stated at paragraphs 9 and 10: [9] A different set of considerations is engaged when a contractual agreement requires one party to a proceeding to pay the costs ofanother party on a solicitor and client basis. As a general proposition, where there is a contractual right to costs, the court will exercise itsdiscretion so as to reflect that right.

To put this in the context of a foreclosure proceeding, a mortgagee generally is entitled tosolicitor-client costs if the obligation to pay those costs is included as a term of the mortgage: Central Mortgage and HousingCorporation v Johnson, (SK CA), [1971] 5 WWR 163 (Sask CA); First Nations Bank of Canada v Ledoux, 2005SKQB 262, 266 Sask R 73; [Ledoux]; Royal Bank of Canada v Lafond, 2009 SKQB 346 at para 7, 341 Sask R 195; Royal Bank ofCanada v Partridge, 2018 SKQB 216 at para 7; Bossé v Mastercraft Group Inc. (1995), (ON CA), 123 DLR (4th) 161(Ont CA) [Bossé]. [10] This general proposition, however, is not an absolute rule; the court retains discretion to deprive a party of solicitor-client costs,even in the face of an express contractual obligation, where such costs are not appropriate in the circumstances: Fidelity Trust Companyv Hawrish, Ward and Ward (1986), (SK CA), 55 Sask R 10 (CA); 1269917 Alberta Ltd. v FMI Developments Ltd.,2011 SKCA 94, 375 Sask R 175; Karkoulas v Farm Credit Canada, 2005 SKQB 535, 274 Sask R 152.

An agreement between theparties does not supersede the court’s discretion over costs. The court may refuse to enforce a contractual provision regarding recovery ofsolicitor-client costs where there is good reason for so doing.

Such reasons may include vexatious, oppressive, fraudulent or otherwiseinequitable conduct on the part of the mortgagee, or other circumstances particular to the case that render the imposition ofsolicitor-client costs unfair, excessive or unduly onerous: Bossé at para 65; Ledoux at para 19. [7] First Nations Bank of Canada v Ledoux, 2005 SKQB 262 at para 19, [2006] 1 WWR 190 (endorsed inRozdilsky), states: [19] Thus, the mortgagee’s argument that the Court is rewriting contracts when it fails to award solicitor-client costs for reasons otherthan abuse or unreasonable conduct cannot be endorsed.

Notwithstanding the mortgagee’s contractual right to costs as between solicitorand client, the Court has the right to exercise its discretion as to costs in a manner contrary to the agreement. Admittedly that discretionmust be exercised judicially and for good reason. But the parameters are not nearly as circumscribed as the mortgagee would prefer.

TheCourt possesses that right where the costs claimed are unfair, or excessive, or unduly onerous in all the circumstances, and as Wright J.noted in MacKay [(1988), (SK KB), [1989] 1 WWR 178 (Sask QB)], one such circumstance is the consideration thatthe Act is consumer protection legislation. Additionally, or alternatively, the Court can justify an abatement of the amount claimed on thegrounds that the appropriate

interpretation of the contractual term “costs as between solicitor and client” involves applying a less liberalscale of costs. And see: Royal Bank of Canada v Lafond, 2009 SKQB 346 at para 10, 341 Sask R 195. [8] The law in Saskatchewan for setting the amount of reasonable solicitor-client costs in foreclosure actions isexplained in CIBC Mortgages Inc. v Greyeyes, 2017 SKQB 313, 17 CPC (8th) 410 [Greyeyes]. Mills J. set out a standard reference pointof solicitor-client costs of $4,500. That reference point was recently increased to $5,000 in First National Financial GP Corporation vMaurice, 2021 SKQB 248.

In The Bank of Nova Scotia v Smith, 2022 SKQB 162, Danyliuk J. reminded counsel that if an amount inexcess of the standard reference point for solicitor-client costs is sought, “it is incumbent on the mortgagee to bring forth cogent anddetailed evidence”. [9] Counsel for SMC submits that the mortgagee is entitled to solicitor-client costs in excess of $5,000 andidentifies an additional amount of $10,655.50 in solicitor-client costs due to Gaetz first refusing, and then restricting, the real estateagent’s access to the condominium for the purposes of listing and showing the property.

Two court applications were required,culminating with an order for vacant possession of the condominium. [10] Counsel for SMC submits that the extra costs were attributed to 23.5 hours of paralegal time, amounting to$5,582 in legal fees and 12.7 hours of lawyer time, amounting to $5,073.50 in legal fees. The extra time spent on the action isparticularized in the statement of account submitted to SMC by MLT.

More specifically, out of the 39-page statement of account,counsel attributes the entries on pages 2, 3 and 8 to 25 as legal fees directly arising from Gaetz’s difficult behaviour. [11] While the draft order filed with the application seeks solicitor-client costs of $24,384.50, the application isactually phrased as seeking the standard fee of $5,000 plus an additional $10,655.50 pertaining to the additional court applications,correspondence, emails and telephone attendances.

The issue is whether, or how much, of this additional amount of legal fees ought to beassessed against Gaetz. [12] Certainly, counsel has proven that additional legal fees have been incurred.

The problem is the calculation offees, including paralegal fees. [13] Counsel for SMC refers to the decision of Klebuc J. (as he then was) in Canada Trustco Mortgage Co. v LudwigEnterprises Inc., 2004 SKQB 370, 255 Sask R 72 [Ludwig], where the Court responded to the argument that “fees charged for servicesprovided by paralegals and other legal assistants are not recoverable as a distinct legal cost because they are included as part of thehourly rate charged by lawyers.”. [14] Klebuc J. rejected this argument.

At paragraphs 9 to 11 of Ludwig, Klebuc J. stated: [9] The legal services obtained by Trustco are described in seven detailed accounts from its lawyers, which include particulars ofwho performed a specific legal service, the time involved, and the hourly rate charged for each provider’s time. Many of the routine,non-complex services were provided by legal assistants at an hourly rate not exceeding 35 percent of the hourly rate charged by lawyersin charge of the foreclosure action.

The time spent by these legal assistants in performing specific services is well within the rangecharged by lawyers in other actions where their accounts were taxed under Rule 565 [now Rule 11-20].

[10] In my opinion, it is appropriate for legal assistants to provide routine services in foreclosure actions under the supervision of a lawyer provided the following requirements are met:

(1) The nature of the services performed are regarded as not being beyond the competence of legal assistants: conducting searches, drafting simple pleadings, attending to the service of documents, and correspondence with clients generally can be provided by experienced legal assistants.

(2) The hourly rate charged for work done by legal assistants should reflect their lack of legal training and the lack of complexity of the work performed.

(3) The supervising lawyer must not bill for the same service.

(4) The cost to the client, when viewed as a whole, should be less than if a lawyer had performed the non-complex services involved. These factors are not intended to be definitive for other factors that may come into play in other circumstances. [11] In the instant case, there is no suggestion that the legal assistants involved were incompetent or spent unwarranted time in performing their work. I therefore conclude that the cost of their work is recoverable as part of a solicitor-and-client account.

In addition, I would note that there will be circumstances where a solicitor-and-client account may be taxed down because the services of a legal assistant were not employed; for example, where a lawyer charges $240.00 for performing a specific routine service in a foreclosure action that could have been performed by a legal assistant at a cost of $80.00 or less. [ 15 ] Mills J. referred to Ludwig in the Greyeyes case that provided the rationale for using a standard reference point for setting solicitor-client costs in foreclosure actions.

Mills J. recognized the use of paralegals and endorsed the practice outlined in Ludwig at paragraph 16 of Greyeyes : [16] One justification for using a global approach in setting solicitor-client costs and not necessarily following automatically the bill presented occurs as a result of the variety of accounts that are presented to the court. The hourly rate charged by counsel to their client and presented to this court in the last two months varies by up to $225.00 per hour. Some law firms utilize specialized paralegals to do the work and charge for their time.

This is an acceptable approach, as stated in Canada Trustco Mortgage Co. v Ludwig Enterprises Inc. , 2004 SKQB 370 , 255 Sask R 72 . Some firms use lawyers to do all functions, leaving nothing to paralegals, and charge the full hourly rate, even for activity that requires no legal skill or training. [ 16 ] In this case, 23.5 hours of paralegal time has been documented in the statement of account rendered to SMC. While a large number of hours, I accept that they were warranted in this case as being billable hours.

The hourly rate for paralegal services started at $195.00 per hour in November 2020, and by 2022, the rate had increased to $260.00 per hour. Legal fees were billed at $365.00 per hour at the commencement of this action, and at $425.00 per hour by 2022. Thus, MLT billed SMC for its paralegal time at 61% of the lawyer’s hourly rate. [ 17 ] Certainly, MLT is entitled to charge its client paralegal fees at the rate the parties have agreed to.

However, Ludwig is authority for setting paralegal fees at an hourly rate that “reflect[s] their lack of legal training and the lack of complexity of the work performed.” While SMC may be willing to pay paralegal fees at 61% of a lawyer’s fee, that is not the calculation of an hourly rate that a third party is required to pay.

The amount suggested by counsel is far too high for the services rendered by the paralegal. [ 18 ] Furthermore, in reviewing the twenty pages of entries in the statement of account pertaining to the requisite additional court applications, approximately half of the entries allocated to the lawyer are identified as exchanges between the lawyer and the paralegal. This could be identified as overlap of the same legal service. Only about six billable hours of the lawyer’s time could be identified as legal work, by way of court attendances, preparation of affidavit material and correspondence with Gaetz’s counsel.

A more accurate estimate of billable hours allocated for the lawyer should be 6 hours, not 12.7 hours. [ 19 ] Thus, 6.0 hours of lawyer’s time billed at $425.00 per hour totals $2,550.00. The full 23.5 hours of paralegal time billed at $100.00 per hour totals $2,350.00. This hourly rate is closer to the ratio between the lawyer’s and the paralegal’s levels of expertise and training. [ 20 ] Another way of assessing the reasonableness of solicitor-client costs is comparing it to the party-and-party costs set out in the Tariff of Costs,

Schedule I “B”, Column 2 of The Queen’s Bench Rules . Each complex application within an action is set at $1,000.00. Thus, two applications would warrant $2,000.00 in party-and-party costs.

If the additional solicitor/client costs in this case are set at $5,000.00, that reflects the actual legal work undertaken, and is over twice the amount of party-and-party costs. [ 21 ] Considering all the factors as outlined in Rule 11-1 and the reasons stated herein, solicitor-client costs are set at the standard rate of $5,000.00 plus an additional $5,000.00 for the additional legal costs incurred by SMC for Gaetz’s behaviour regarding the sale of the mortgaged property. The time spent on this one issue cannot be more than the solicitor-client costs that are allocated for an entire foreclosure action.

Thus, the setting of the additional solicitor-client costs reflects this comparison. [ 22 ] While additional solicitor-client costs were awarded in this case, this decision is not authority for entitlement to solicitor-client costs of $2,500.00 for every extra application that might be required in a foreclosure action. The awarding of solicitor-client costs is dependent upon the extra time and effort caused by a difficult mortgagor, which must be proven.

As noted in this case, not only were there two court applications, but much additional correspondence and discussion with the mortgagor and the realtor added legal and paralegal time to the action. [ 23 ] It is hereby ordered that solicitor-client costs are assessed at $10,000.00 plus applicable GST and PST. Disbursements are set at $1,358.81. I thank counsel for SMC in providing the informative brief of law. “A.R. Rothery” J.

A.R. ROTHERY