) ) DANIELLE BOILY, JUAN ESCUDERO, LISA BACKA-DEMERS, KANTA MARWAH, DOUG CUMMINGS v. RICHARD MAUREL, 2013 ONSC 2352

CITATION : Boily v.

Carleton Condominum corporation 145 , 2013 ONSC 2352 COURT FILE NO.: 11-51640 DATE: 2013-04-29 ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: ) ) DANIELLE BOILY, JUAN ESCUDERO, LISA BACKA-DEMERS, KANTA MARWAH, DOUG CUMMINGS and RICHARD MAUREL Applicants (Moving Parties) – and – CARLETON CONDOMINUM CORPORATION 145, DAN LITCHINSKY, AVIS MILLER, JEAN-GUY BOURGEOIS and CAROL SMALE Respondents ) ) ) ) ) ) ) ) ))))))))) Rodrigue Escayola, for the Applicants (Moving Parties) John Peart, for the Respondents (Respondents) ) ) HEARD: by written submissions decision on costs (motion for contempt) BEAUDOIN J. [ 1 ] The Moving Party, Juan Escudero (“Escudero”) seeks as against the individual Respondents both his moving party costs and the condominium corporation’s costs of this contempt motion, on a full indemnity basis, without the individual Respondents being entitled to seek indemnification of any of these costs from the condominium corporation. [ 2 ] Escudero maintains that contempt motions are one of those rare and exceptional cases warranting a full indemnity costs awards.

He notes my findings that the individual Respondents willfully and deliberately breached a prior court Order, all along acting in bad faith, unreasonably and dishonestly, Escudero was entirely successful, beat his Rule 49 offer, and seeks a quantum of costs which he claims is nearly identical to the costs incurred by the Respondents themselves, therefore meeting the test of the “fair and reasonable expectation” of an unsuccessful party with respect to costs.

Background [ 3 ] The Motion for Contempt was the third time the applicants sought the assistance of the Court to resolve a legal dispute regarding the configuration and appearance of the landscape of their condominium complex. I rejected the Respondents’ evidence and submissions and found them to be in contempt.

The Respondents were ordered, for a second time, to reinstate the previous podium configuration at the individual Respondents’ costs. [ 4 ] Escudero relies on the factors found at Rule 57.01 and specifically the fact that the Respondents were found to be in contempt and the fact that the Moving Party beat his Rule-49 offer. Factors to be considered [ 5 ] Escudero argues that elevated costs are usually awarded when there is a Rule-49 offer to settle or when there is a finding of reprehensible conduct on the part of the party against whom the costs award is being made [1] .

He notes that his Rule-49 offer, dated November 5, 2012, which provided for the reinstatement of the previous podium configuration at the individual Respondents’ costs, was exactly what the court ordered. [ 6 ] Rule 57.01(4)(

d) also permits the court to award costs on a full indemnity basis and the Moving party submits

that the present case is one of those rare and exceptional cases warranting such full indemnification in that the Respondents were found to have willfully and deliberately breached a prior court Order. The Respondents were put on notice of the Moving Party’s intention to seek full indemnity costs against the individual Respondents in letters of May 25 and June 8, 2012, and in the Notice of Motion and Factum. [ 7 ] He also argues that elevated costs awards are the “ rule and not the exception ” in cases of contempt proceedings [2] as such awards are seen as the “ appropriate and logical consequential result ”.

To order otherwise would impose on the Moving Party the financial burden of the contempt [3] . [ 8 ] In Metropolitan Toronto Condominium Corp. 626 v. Bloor/Avenue Road Investment Inc., [2009] O.J. No. 4899 at para. 6 (Div. Ct.) , the Divisional Court held that c ondominium board members are not immune against full indemnity costs awards.

Escudero reminds me that I previously concluded i n this very matter that “ the Board acted in bad faith in attempting to resile from the agreement their own solicitor had negotiated on its behalf ” [4] and ordered the bulk of the costs of the Motion to Enforce the Settlement to be paid by the individual board members personally. Principle of indemnity [ 9 ] The principle of indemnity requires that I consider the lawyer’s experience, the rates charged and the hours spend. The Moving Party has duly submitted a Costs Outline. The legal fees are $91,643 (plus disbursements and taxes ) for a total of $109,598.00.

He notes that his counsel submitted 13 detailed affidavits, including 3 expert’s affidavits. The Respondents cross-examined three (3) of the witnesses and the Moving Party cross-examined at length Dan Litchinsky whose admissions were critical to his success on the Motion. [ 10 ] Escudero argues that the principle of indemnity is particularly important in the present case since he is a single condominium owner; not suing for personal advantage or gain. He maintains that condominium owners cannot be expected to bear the financial burden of forcing their Board to comply with court Orders.

Moreover, he claims that there is a resulting inequity if he is not fully compensated for his legal fees while the Respondents appear to having their legal bills paid by all owners through their common expense or their reserve fund. The fair and reasonable expectation of the unsuccessful party [ 11 ] The Moving party rightly refers to the overriding principle of the defeated party’s fair and reasonable expectations of the costs awards to be assumed if unsuccessful [5] .

He notes CCC 145’s Status Certificate dated February 20, 2013 that apparently confirms that the Respondents’ own fees in relation to this motion exceed $106,000 and that all of these have been charged to the reserve fund.

This amount is similar to amount claimed in his own costs outline. [ 12 ] The Status Certificate reads as follows: Legal proceedings, Claims [19] … [T]he Corporation has received on August 31, 2012 a Notice of Motion, Ontario Superior Court of Justice, for an Order settling the endorsement of Justice Beaudoin of June 29, 2011 and requiring the Corporation and/or the other respondents in the Action to reinstate the courtyard/podium as it was prior to the podium removal. The outcome of this Notice of Motion cannot be determined at this time.

And this could lead to a special assessment or an increase in condominium fees. The legal fees and professional fees in relation to this case amount to $106,000 so far for this fiscal year.

All of these amounts were charged to the reserve funds The individual Respondents should bear all costs personally [ 13 ] Escudero cites case law that establishes that condominium board members may be held personally liable for costs [6] and that courts are refusing to impose on innocent owners the costs imposed by a board’s bad faith, arbitrary or illegal actions or its failure to comply with the Act . [ 14 ] The Moving Party has advanced a further claim not only as a party but also as a member of this corporation pursuant to s. 5 of the Condominium Act , s that the individual Respondents should personally bear the costs of all parties, including the costs of the Moving Party and of the Corporation.

He relies on these passages from my decision where I held: “ if the Respondents are not held accountable for their contempt, the result would be to impose on all of the owners, through their common elements fees, all of the costs of the work to be redone. ” For that reason, I ordered the individual Respondents to personally bear the additional costs of returning the podium landscape to the 2011 configuration. [ 15 ] He argues that the same logic should apply to legal costs.

It would be unfair for the innocent owners to have to pay, through their common expenses or reserve fund, the legal fees incurred by the Board to defend their own contempt and bad faith. Moreover, he notes that the Board’s decision to pay the Corporation’s legal fees out of the reserve fund contravenes subsection 93(2) of the Condominium Act , which provides that “ a reserve fund shall be used solely for the purpose of major repair and replacement of the

common elements and assets of the corporation”. [16] He argues that the authority to fix costs as between all parties is twofold. First,

section 131 of the Courts Justice Actprovides that, in addition to fixing costs, “the court may determine by whom and to what extent the costs shall be paid”. Second, Rule60.11(5)(

e) grants the Court the discretion to impose the costs on a party found to be in contempt. Since the individual Respondents werethe controlling mind behind the willful and deliberate breach of the 2011 decision, he says they were, in effect, the true litigating parties– not the Corporation, as was the case in Middlesex Condo. Corp. v.

Middlesex Condo Corp, 2013 ONSC 736, where costs wereimposed on the directors personally. [17] On the question of Directors’ liability, s. 38(2) of the Condominium Act, specifically provides that: No director or officer of a corporation shall be indemnified by the corporation in respect of any liability, costs, charges or expenses thatthe person sustains or incurs in or about an action, suit or other proceeding as a result of which the person is adjudged to be in breach of the duty to act honestly and in good faith.[7] [18] He concludes that not only should the individuals Respondents compensate him for his costs but they should alsocompensate the Corporation and its innocent owners for the cost incurred to defend their breach.

The importance of the issue [19] Escudero concedes that this matter was of the utmost importance to the all of the parties. The reconstruction of thepodium will likely remain in place for another thirty years. He also argues that contempt motions are inherently important sincecontempt of court order undermines the administration of justice and the rule of law.

Conduct of the board which is improper, vexatious andunnecessary [20] The Moving Party notes that the Respondents ignored the Applicants’ numerous warnings raised as early asSeptember 2011 and continued to reinstate the podium as they saw fit and in contravention to the Order.

By the time the motion forcontempt was heard, the Board had finished reinstating the entire podium, even installing non-complying peripheral planters after theNotice of Motion had been served. [21] Escudero complains that nearly $40,000 of his fees was incurred to respond to the Respondents’ plethora ofjustifications and their refusal to admit the obvious breach of the Order.

He was forced to obtain evidence from eight additional affiantsto counter the Board’s allegation that homeless individuals were camping in the vegetation, that emergency vehicles could not find thecomplex, that a safety concerned required additional lighting in the courtyard, or that the previous traffic circle was a temporarystructure. All of those arguments were rejected. He stresses that these costs could have been avoided had the Board sought directionsfrom the court when the disagreement became obvious.

Respondent’s submissions [22] The Respondents submit that the Applicant should be awarded partial indemnity costs to the date of the judgment; and that Ishould have regard to the factors set out in Rule 57.01(1) in arriving at that result. [23] They note that there two offers to settle and even though the result obtained corresponded to the Applicant’s Offer, they referto their attempts through their solicitors to resolve the Applicants concerns with regard to the re-instatement of the courtyard.

They referto Rule 49.10(1) in that it gives the Court the discretion has the discretion to award costs on other than a substantial indemnity basis andthat the cost consequences of a rejected offer are not automatic.[8] Similarly, Rule 60.11(5)(

e) also confers discretion in that it providesthat the court may order that the person in contempt pay such costs as are just. Similarly,

Section 131 of the Courts of Justice Act (Tab 2)states that the costs are in the discretion of the court and the court may determine by whom and to what extent the costs should be paid [24] They cite the Court of Appeal’s decision in Einstoss v. Starkman, 37 R.F.L. (5th) 77, ) at paras. 9-10 wherethe court held that there are two basic costs principals in awarding costs in contempt proceedings:

i) that substantial indemnity costs as opposed to partial indemnity costs will only be awarded in rare and exceptional cases; and ii) if the defendant's acts are deliberate attempts to frustrate the proceedings by fraud or deception, or the conduct of the defendantis calculated to harm the Plaintiff or where the reasonable conduct of the defendant compounds the complexity of the proceedings, theseare proper grounds to order substantial indemnity costs. [25] The individual respondents maintain that they did not deliberately attempt to frustrate my endorsement of June 29, 2011.Instead, they attempted to carry out the re​instatement of the courtyard to what they believed the endorsement required.

They say that theydid not re-instate the courtyard in a manner calculated to harm the applicant and that they did not conduct themselves in a manner tocompound the complexity of the proceedings.

[26] Having regard to the factors set out in Rule 57.01, they invite me to consider “the amount of costs that an unsuccessful partycould reasonable expect to pay” as well as issue of proportionality as in Rule 57.01(oa) [27] Respondents’ counsel was called to the bar in 1973. It is understood that counsel for the Applicant was called to the bar in2004.

The Respondents’ Bill of Costs claims costs of $34,647.72 on a partial indemnity basis and $54,080.68 on a full indemnity basis.They submit, if awarded, costs against the Respondent should be no greater than the partial indemnity or full indemnity amounts of theRespondents counsel. [28] They argue that they will incur a great deal of personal expenses to satisfy my judgment dated March 8, 2013 and to havethem incur substantial indemnity costs would be punitive.

Analysis [29] I agree with the respondents’ submissions that costs are always in the discretion of the court; even where Rule 49 may applyand even in cases of contempt. As a practical matter, an award of costs on partial indemnity scale rule generally satisfies the principle ofindemnification that is prominent feature of our litigation process. Costs on a substantial indemnity basis are reserved to cases where theconduct of a party during a proceeding invites a further sanction.

Costs on this higher scale are also appropriate when an importantpolicy is established in the Rules or where the integrity of our system of justice is put in issue. [30] Rule 49 is an example of an important policy that was put in place to encourage settlements. For this reason, there is apresumption of substantial indemnity costs in favour of a party who obtains a result that equals or is better than the result obtained in theproceeding. [31] Contempt proceedings are and should be rare. The integrity of our system of justice is at risk whenever a party to a proceedingwilfully ignores a court order.

In Einstoss v. Starkman Laforme, J.A. reviewed the case law and said this at paras 10-14: 10 The appellate jurisprudence regarding substantial versus partial indemnity discloses no cause of action for which substantialindemnity is presumed. Therefore, it would seem that any presumption in favour of substantial indemnity for any particular cause ofaction would be inconsistent with the basic premise that substantial indemnity is to be reserved for those exceptional cases.

If substantialindemnity is the general rule, or the usual order for contempt cases, such awards would be - by definition - no longer "rare andexceptional". 11 However, in the instance of findings of contempt, some trial judges have concluded otherwise. A useful

summary of this area isfound in 1307347 Ontario Inc. v. 1243058 Ontario Inc., [103 A.C.W.S. (3d) 271] wherein Nordheimer J. expresses the followingopinion: In my view, as I indicated in my reasons, the costs of a successful motion for a finding of contempt should be awarded on a solicitor andclient scale. There ought to be something approaching a complete indemnity to the successful party in such motions since to do otherwisewould involve some cost or punishment to the successful party arising solely out of the conduct of the other party in violating a courtorder. As Warren J. said in Rogers Cable T.V. Ltd. v.

International Brotherhood of Electrical Workers (IBEW), Local Union 33, [1994]B.C.J. No. 1035 (S.C.) at para. 8: "In my view therefore, were I to award special costs, it would be to recognize that as between the parties to the litigation, the conduct ofthe contemnor was outrageous or scandalous and to provide as close to complete indemnity as possible for the party obliged to bring onthe application. In my view, where there is contempt of Court, there is nothing offensive in an award of special costs, which may both actas a form of chastisement to the contemnor and provide indemnity for the complainant.

In my opinion it is precisely for this type ofsituation that special costs were designed." I note that the same conclusion has been reached in Ontario - see, for example, Leo Sakata Electronics (Canada) Ltd. v. McIntyre, [1996]O.J. No. 1437 (Gen. Div.), [62 A.C.W.S. (3d) 848] and Industrial Hardwood Products

(1996) Ltd. v. International Wood and AlliedWorks of Canada, Local 2693, [2000] O.J. No. 3510 (S.C.J.), [99 A.C.W.S. (3d) 952]. . 12 And, J.W. Quinn J. in Niagara (Regional Municipality) Police Services Board v. Curran, [ (ON SC), [2002]O.J. No. 179 (Ont. S.C.J.) at para. 49], stated that, "[i]t should be the rule, not the exception" to impose substantial indemnity in civilcontempt cases. 13 While substantial indemnity costs are frequently imposed in contempt cases, this is not always so. For example, in Dabkus v.Dabkus Estate, [[1997] O.J.

No. 96], Sutherland J. awarded substantial indemnity since the "conduct [merited] severe censure". In SussexGroup Ltd. v. Sylvester, [ (ON SC), [2002] O.J. No. 4350], Cumming J. awarded substantial indemnity costs for

"deliberate and wilful ... continuing contempt". However, in Cunningham v. North York Branson Hospital , [ [1997] O.J. No. 2574 ] , Sheard J. awarded "costs" (i.e., partial indemnity) for contempt of a judgment involving a minor breach of an injunction. 14 It would seem that some note of caution when dealing with contempt cases ought to be sounded. Courts should be wary of confusing the issues of costs in the main action (i.e., the action generating the contemned order), and costs in the contempt action.

While it may be that a person's contemning an order made in the main action would be strong evidence of deliberate frustration, it does not automatically follow that it is. Substantial indemnity should be awarded in the contempt action only if the contempt itself or the conduct of the contempt trial evinces a deliberate attempt at frustration. This no doubt will occur frequently but it is not necessarily inevitable, since the contempt itself may not be sufficiently egregious. [ 32 ] Justice Laforme went on to consider the application of the relevant caselaw to family law matters and concluded at para 23: 23.

The legal principles relied upon in my trial decision were straightforward and did not involve any complex questions of fact and law. However, the matter of a person's continuous intentional and wilful defiance of court orders must be considered one of utmost importance to the administration of justice. Ms. Starkman's conduct prior to the first motion was contemptuous in and of itself.

However, given her knowledge of the first motion, and that thereafter she nonetheless continued to act in the same contemptuous fashion, makes her conduct even more flagrant. [ 33 ] Justice Laforme considered the party’s conduct prior to the first motion and thereafter and assessed costs on a substantial indemnity scale. In the same way, CCC 145’s Board of Directors frustrated the Applicant’s attempts to convene a Special Meeting of the Owners at the very outset and this led to the first motion for an injunction.

Following a settlement negotiated between counsel, the Board tried to avoid the results of that agreement and a further motion was required to enforce its terms. Having lost both battles with the Applicant parties on the issue of the podium landscaping, they had a number of options when presented with my order of 2011. First and foremost, they could return to court for further clarification as my expressly endorsement invited them to do. They could have set an appointment to settle the terms of my order before commencing any work. They could have appealed my order if they were unhappy with the result.

They could have consulted with a lawyer before commencing any work. They could have tried to negotiate a mutually satisfactory resolution with the Applicants. [ 34 ] The Respondents chose to ignore all of those options and seized upon the use of the word “courtyard” in my endorsement as an excuse to do what they always intended to do before these proceedings were even commenced.

I will not reiterate the findings that I made against them in my decision other than to note that I found that “ [T]he Respondents breached the order wilfully and deliberately; ” and that “ [T]he Respondents acted neither honestly and in good faith, nor as a reasonably prudent person […] The Respondents adopted a narrow and self-serving

interpretation of my order and chose to reinstate elements that they preferred, despite the decision of this court ”. [ 35 ] In this case, I do find that this is one of these rare and exceptional circumstances where the Respondents’ conduct is worthy of sanction. From the date of the first appearance where I granted the interim injunction, to the date of the motion where I gave judgment in accordance with a settlement that was agreed to; they knew clearly what was in issue.

Their stubborn refusal to accept the Applicants’ success set them on a path of deliberate and continual contempt that should attract a costs award on a substantial indemnity basis. The Moving Party should not have to bear the costs of those actions. [ 36 ] I decline to order the Respondents to pay reimburse to condominium corporation for any legal fees that may have been paid on their behalf. I leave that issue for a majority of the unit owners to decide, but no part of the condominium corporation’s or its Directors’ fees are to be allocated to any of the named applicants.

They should not have to subsidize the Board’s contempt and I leave it to the other unit owners to decide if they wish to do so. [ 37 ] The amount claimed the Moving Party is significant; nearly twice the amount claimed by the Respondents in their Bill of Costs but it is consistent with the amount set out in the Status Certificate. The individual directors claim that it would be unduly punitive to impose these costs on them personally since they have been ordered to bear the costs of restoring the podium landscaping to its original configuration.

That argument is somewhat defeated by the evidence that they expect to have their own legal fees paid by the other unit owners. [ 38 ] The Moving Party’s counsel put together an extensive and persuasive record; considerable work was required to reply to the Respondent’s arguments. Cross-examinations were necessary and counsel sought and obtained critical admissions from Mr. Litchinsky that I relied upon in my decision. Costs for attendance on the motion and preparation of these submissions are also claimed. [ 39 ] While there was a clear attempt to divide the work between Mr.

Escayola and the Law Students assisting him, there is a total of 301 hours claimed for the students in addition to 179.9 hours for Mr. Escayola and this total appears excessive. I have reduced the student’s time by 1/3 to 200 hours for a total of $22,000.00. This results in fees being allowed at $80,467.50 + HST 10,460.77 for a total of 90,928.27. Disbursements are allowed as claimed in the amount of $5,875.56 (including HST). Total fees and disbursements are fixed in the amount of $96,803.83. These costs are to be paid by the Individual Respondents forthwith.

Mr. Justice Robert N. Beaudoin Released: April 29, 2013 CITATION: Boily v. Carleton Condominum corporation 145, 2013 ONSC 2352 COURT FILE NO.: 11-51640 DATE: 2013-04-29 ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: DANIELLE BOILY, JUAN ESCUDERO, LISA BACKA-DEMERS, KANTA MARWAH, DOUG CUMMINGSand RICHARD MAUREL Applicants (Moving Parties) – and – CARLETON CONDOMINUM CORPORATION 145,DAN LITCHINSKY, AVIS MILLER, JEAN-GUYBOURGEOIS and CAROL SMALE Respondents (Respondents) decision on costs Beaudoin J. Released: April 29, 2013 [1] Davies v. Clarington (Municipality), 2009 ONCA 722 at paras 28-31 and 40. [3] RBC v.

Yates Holdings Inc., (ON SC), 33 C.B.R. (5th) 268, aff’d in 2008 ONCA 474. [5] Davies v. Clarington (Municipality), 2009 ONCA 722 at paras. 15, 28-31 and 40.