2013 ONSC 2033, 2013 ONSC 2033

CITATION : TWIN PINES v. GNASS, 2013 ONSC 2033 COURT FILE NO.: 6936/12 DATE: 20130405 SUPERIOR COURT OF JUSTICE - ONTARIO RE: TWIN PINES SARNIA CONSTRUCTION LTD., Plaintiff AND: F W GNASS DEVELOPMENTS INC. and SARNIA-LAMBTON BUSINESS DEVELOPMENT CORPORATION, Defendants BEFORE: THE HONOURABLE MR. JUSTICE S. CAMPBELL COUNSEL: ROBERT B. GRAY, Counsel, for the Plaintiff D. BRIAN DONOVAN, Counsel, for the Defendant F W Gnass Developments Inc. No one appearing on behalf of Defendant Sarnia-Lambton Business Development Corporation HEARD: APRIL 4, 2013 RULING ON MOTION [ 1 ] This motion was brought by the plaintiff seeking

summary judgment for foreclosure without a reference. However the materials filed and the parties’ argument disclose that there are but two issues for the court to determine. FACTUAL BACKGROUND [ 2 ] The plaintiff, Twin Pines Sarnia Construction Ltd. (Twin Pines) holds a mortgage on property owned by F W Gnass Developments Inc. (Gnass). Twin Pines mortgage secured the principal sum of $104,985.53. There was no interest in the initial term and the balance was due June 30 th , 2009. The balance was not paid on the due date. The parties extended the mortgage on a number of occasions.

These extensions took a rather unusual form. They were prepared by a real estate agent as if they were extensions to a transaction that had not yet been closed. The extension provided for payment of interest in advance and a rebate of interest if the balance was paid before the new due date. Interest was paid on the 1 st and 2 nd extensions but not thereafter. [ 3 ] As evidenced by the pleadings and the motion materials Twin Pines and Gnass agreed that the balance owing as of October 1 st , 2012 is $157,185. They further agree that that amount has not been paid and Twin Pines is entitled to the judgment sought.

The parties disagree on how interest is to be calculated on the principal balance after October 1 st , 2012 and the costs that Twin Pines is entitled to receive. POSITION OF THE PARTIES [ 4 ] The plaintiff argued that the extension agreements disclose that the parties agreed that interest was to accrue at the rate of $55 per day. That is the amount to be rebated to Gnass for early payment. In argument, counsel for Twin Pines asserted that neither

section 6 or

section 3 of the Interest Act R.S.C. 1985 c. I-15 applied. The latter because the parties had clearly agreed on how interest was to be calculated. He submits that interest does not have to be expressed as a percentage rate. [ 5 ] With respect to costs counsel submitted that Twin Pines is entitled to solicitor and client costs pursuant to paragraph 8 of the standard charge term. That is now properly described as substantial indemnity costs and is equal to 90 percent of full indemnity cost.

Counsel filed the interim account submitted by him to his client and a cost outline for preparation and argument of this motion to support the amount of costs claimed. [ 6 ] Counsel for Gnass asserts the position that the rate of interest in the extensions, particularly the last extension is not clear. Therefore

section 3 of the Interest Act determines that the rate of interest should be set at 5 percent. He points out that not only was the form of the extension unusual but so was the wording. This includes the failure to include a statement that interest was to accrue both before and after default and to define the rate clearly. [ 7 ] With respect to the issue of costs Gnass concedes Twin Pines is entitled to substantial indemnity costs. However I was urged to consider the reasonableness of the amount claimed having regard to the circumstances and the provisions of rule 57.01 of the Rules of Civil Procedure.

ANAYLSIS [ 8 ] I would comment that I find this is a situation where the court can have a full appreciation of the evidence necessary to determine the issues on the record. The documents that were provided to the court in the parties materials in my view provide a complete record for determination of the two issues as well the parties agree that this is a situation where the issues can be resolved on a

summary judgment motion. [ 9 ] During the course of argument on behalf of Twin Pines I was referred to

section 6 of the Interest Act and why it did not

apply. I agree

section 6 is not applicable and so does Gnass. [ 10 ]

Section 3 of the Interest Act provides “Whenever any interest rate is payable by the agreement of parties or by law, and no rate is fixed by the agreement or by law, the rate of interest shall be 5 percent per annum.” It cannot be said that the rate of interest is fixed in this matter. The mortgage document itself provided that there was to be no interest chargeable on the principal balance. The extensions do not refer to a percentage rate but a dollar amount. This amount is different in each agreement. In addition a rebate amount is included if the mortgage is paid in full prior to the due date.

This is expressed as $55 per day. [ 11 ] While I accept Twin Pines argument that interest need not be fixed as a percentage it must be established. I have reviewed the extension agreements signed by the parties. I cannot determine that the interest to be added at the rate of $55 per day was applied here. [ 12 ] I asked counsel if either had attempted to confirm or calculate that the $55 a day figure was in fact utilized in the agreements. I advised that they had not.

Left to my own mathematical calculations I am led to the conclusion that the simple method of applying the $55 per day to the number of days does not equal the interest that is stated to be added. [ 13 ] There is no evidence on how the dollar amount was reached by the parties. The percentage rate that utilizing the $55 per day would equate to becomes lower with every extension agreement. The last extension agreement is no clearer on this issue than the earlier agreements. [ 14 ] In my view Twin Pines has not established that there is an agreed upon rate of interest.

Therefore I agree with Gnass that the appropriate rate of interest to be charged on the principal amount after October 1 st , 2012 is 5 percent per annum. [ 15 ] I do not interpret Twin Pines position on the issue of cost to be that they are entitled to be reimbursed any amount they are requested to pay for costs. That is the reasonableness of their costs should be considered by the court. [ 16 ] In considering the costs properly payable the court should direct itself to rule 57.01(1) of the Rules of Civil Procedure.

In considering those facts I would comment (1) the hourly rate claimed by counsel for Twin Pines is reasonable;

(2) Gnass pleading admitted the principal balance outstanding and raised one issue. It is reasonable to conclude that was motivated at least in

part in its desire to limit costs and therefore what it would expect to pay.

(3) The proceedings were not particularly complex and restricted to one issue;

(4) Gnass position has tended to shorten the proceedings. [ 17 ] Having regard to these factors I conclude the amount claimed by Twin Pines is modestly excessive I would fix fees at $8,000 plus H.S.T. and disbursements at $614.50 plus H.S.T.. The only deduction I have made from the disbursements claim is the Westlaw Research expense. [ 18 ] The defendant Sarnia-Lambton Business Development Corporation did not file any documents in this proceeding. They are therefore in default and judgment should issue against them as well.

SUMMARY [ 19 ] The plaintiff’s are entitled to judgment for foreclosure without a reference on the lands and premises described in the statement of claim. The following amounts are owing by the defendants (

a) for principal $157,185.00 (

b) for interest from October 1 st , 2012 to April 4 th , 2012 $ 3,983.05 (21.53 per day) (

c) for costs of this action and motion $ 9,734.39 (

d) for interest on the principal sum at the rate of 5 percent per annum from April 4 th to and including June 3 rd , 2013 $ 1,313.33 (

e) postjudgment interest on the costs from $ 49.60

April 4 th , 2013 to and including June 3 rd , 2013 at the rate of 3 percent per annum. Making a total amount $ 172,265.37 [ 20 ] At the conclusion of the motion I was provided by counsel for Twin Pines a draft judgment. I have made the changes resulting from this decision on that draft judgment. This is to assist the parties and the registrar’s office in having the order issued and entered. The Honourable Mr. Justice S. Campbell Date: April 5, 2013