



COURT OF APPEAL FOR ONTARIO

CITATION: Mihaylov v. 1165996 Ontario Inc., 2017 ONCA 218

DATE: 20170316

DOCKET: C61890

Gillese, Benotto and Roberts JJ.A.

BETWEEN

Emil Mihaylov and Sofia Mihaylov

Applicants (Appellants)

and

1165996 Ontario Inc. and Donald Abel

Respondents (Respondents)

Stephen R. Jackson, for the appellants

Ryan O'Neill, for the respondents

Heard: November 25, 2016

Reasons concerning costs, supplementary to the judgment
    in
Mihaylov v. 1165996 Ontario Inc.
, 2017 ONCA 116, released on February
    13, 2017.

Gillese
    J.A.:

[1]

By reasons dated February 13, 2017 (the Decision), this court allowed
    the appeal, in part, in this matter.  The Decision affirmed the validity of the
    easement granted in the 1979 Agreement that is registered against the parties
    respective properties.  However, in all other regards, the appellants were
    successful.  Costs of the appeal were ordered in favour of the appellants in
    the amount of $3,000, all inclusive.

[2]

At para. 131 of the Decision, the court indicated that if the parties
    were unable to resolve the matter of costs of the Application and
    Counter-Application below (the Proceedings Below), they could make written
    submissions on that matter.  The parties have been unable to resolve that
    matter and the court has now received and reviewed their costs submissions in
    relation to it.

The Parties Positions on
    Costs of the Proceedings Below

[3]

The appellants seek costs of the Proceedings Below on a substantial
    indemnity basis in the amount of $14,440.  They say that, bearing in mind the
    result on appeal, they were substantially successful in the Proceedings Below because
    their position on the scope of the easement and the rights that flow therefrom
    was upheld.  The appellants then point to the general principle this court
    follows when an appeal is allowed: the order for costs below is set aside and
    costs are awarded to the successful party:
Hunt v. TD Securities Inc.
(2003),
    43 C.P.C. (5th) 211 (Ont. C.A.), at para. 2.

[4]

The appellants acknowledge that the costs of the Proceedings Below would
    normally be on a partial indemnity basis which, in this case, would be just
    over $12,000. However, they ask this court to express its disapproval of the
    respondents actions by making the costs award on a substantial indemnity basis. 
    In support of this argument, the appellants have attached to their costs
    submissions copies of correspondence between counsel since the Decision was
    released.  They say that this correspondence shows that there never was a leak
    in the pipeline so the respondents never had an immediate need to repair it and,
    in turn, that means that the Proceedings Below were unnecessary.

[5]

The respondents submit that the parties should bear their own costs of
    the Proceedings Below.  They dispute the suggestion that there was no leak in
    the pipeline. They say that success below was divided, noting that their contention
    that a valid easement had been created and continued to exist was upheld on
    appeal.  Consequently, their right to draw water from Sturgeon Lake by means of
    the pipeline that runs below the appellants land was affirmed.

[6]

The respondents acknowledge that the appeal resulted in them losing on
    the issue of the scope of the easement, including their right to enter on the
    appellants land to effect repairs without the appellants prior permission and
    to lay a new pipeline.  They also acknowledge that when an appeal is allowed,
    the general principle is that the order for costs below is set aside and costs
    are awarded to the successful party on a partial indemnity basis.  However,
    they point to the courts discretion to depart from this approach in unusual
    circumstances:
Kopij v. Metropolitan Toronto (Municipality)
(1999), 85
    A.C.W.S. (3d) 763 (Ont. C.A.), at para. 2.  They say that the facts of this
    case are unusual circumstances warranting a departure from the usual approach.

Analysis

[7]

I do not view this matter as amounting to unusual circumstances such
    that the court should exercise its discretion and depart from its usual
    approach when deciding on costs of the Proceedings Below.  This was a civil
    dispute which required the court to rule on legal questions so that the parties
    could clearly know what their respective rights and obligations were and, with
    that clarity, govern themselves accordingly.

[8]

However, it is important to note that the appeal in this matter was
    allowed only in part.  Accordingly, while the order for costs below must be set
    aside, it does not automatically follow that the appellants are entitled to
    their full costs of the Proceedings Below.  The quantum of costs must reflect
    the fact that there was divided success in those proceedings.  In my view, the
    appellants enjoyed greater success.  While the respondents succeeded on the
    question of whether a valid easement had been created and continued to attach
    to each of the parties lands, the appellants succeeded on the issues that drove
    the Proceedings Below  namely, whether the respondents could enter onto the
    appellants lands without their prior permission to repair the pipeline and
    whether the respondents had the right to replace the existing pipeline.

[9]

As for the scale of costs, I am not satisfied that the court should
    depart from the general principle that costs are to be awarded on a partial
    indemnity basis.  The finding of reprehensible behaviour warranting the
    sanction of costs on a substantial indemnity basis is not to be made lightly. 
    The suggestion made about the respondents conduct is based on correspondence that
    arose after the conclusion of these proceedings and which has not been tested
    in the crucible of litigation.  The meaning to be taken from that
    correspondence is disputed.  To resolve that dispute would require the court to
    make credibility findings.  Those types of findings cannot be made on the basis
    of the record before the court.

DISPOSITION


[10]

For these reasons, I would order costs of the Proceedings Below in
    favour of the appellants fixed at $8,000, all inclusive.

Released: March 16, 2017 (E.E.G.)

Eileen E. Gillese J.A.

I agree. M.L. Benotto J.A.

I agree. L.B. Roberts J.A.


