



COURT OF APPEAL FOR ONTARIO

CITATION: 2651171 Ontario Inc. v. Brey, 2022
    ONCA 205

DATE: 20220309

DOCKET: C69185

Rouleau, van Rensburg and Roberts
    JJ.A.

BETWEEN

2651171 Ontario Inc.

Plaintiff
(Appellant)

and

Patrick Brey and Grapevine Realty Inc.

Defendants
(Respondents)

J.F. Lalonde and Lauren Benoit, for the
    appellant

Miriam Vale Peters and Matthew
    Miklaucic, for the respondent, Patrick Brey

Michael Swindley, for the respondent, Grapevine
    Realty Inc.

Heard: January 7, 2022 by
    video conference

On appeal
    from the judgment of Justice Sally A. Gomery of the Superior Court of Justice
    dated March 1, 2021, with reasons reported at 2021 ONSC 1492.

COSTS ENDORSEMENT

[1]

On February 17, 2022, this
    court allowed the appellants appeal, set aside the motion judges judgment,
    allowed the appellants claim for damages arising out of its failed real estate
    purchase in the amount of $4,632.10, and ordered the return of its $25,000
    deposit held by the listing agent, the respondent, Grapevine Realty Inc.
    Grapevine took no position on the appeal and accordingly makes no claim for
    costs.

[2]

The appellant was also
    awarded its costs of the appeal in the all-inclusive amount of $15,000 and its costs
    of the motions for summary judgment and the action in an amount to be
    determined and subject to any offers to settle. The parties were unable to
    agree on the latter amount and have provided written submissions that we have
    reviewed.

[3]

The appellant requests costs
    of the motions for summary judgment and the action on a substantial indemnity
    scale in the amount of $
40,572.04
. It bases its
    entitlement to an elevated scale of costs on its offer to settle dated October
    17, 2019, made under r. 49.10(1) of the
Rules of Civil Procedure
[1]
,
which it served with its statement of claim. The appellant offered to settle
    the action in exchange for the return of the appellants $25,000 deposit plus
    costs. The offer provided that if it were accepted on or before November 1, 2019,
    the respondent, Patrick Brey, would pay the appellant its partial indemnity costs;
    if accepted thereafter, the respondent Brey would pay the appellant its costs
    on a partial indemnity basis up to the date of service, and its costs on a
    substantial indemnity basis following that date and up to the date of the
    acceptance of the offer. The offer remained open until one minute after the
    commencement of the trial.

[4]

The respondent Brey raises a
    number of objections to the appellants costs submissions and argues that the
    costs should be reduced. First, he submits that the docketed fees of
    appellants counsel between January 22 and 29, 2021, related to the leave
    motion that was settled by the parties on a no costs basis on January 29, 2021,
    must be deducted from the appellants claimed amount. Second, he says that the amount
    claimed by the appellant is grossly disproportionate to the result ultimately
    achieved by the appellant on appeal. Finally, the appellants unproven
    suggestions of fraud that it made in its reply factum and its oral submissions
    on the motions against the respondent Brey should be taken into account. The
    respondent Brey raises no objection to the appellants claimed disbursements.

[5]

We shall consider these submissions
    in turn.

[6]

First, there is no question
    that the appellants offer was made more than seven days before the hearing of
    the motions, not accepted by the respondent Brey, had not expired, and the
    result obtained by the appellant as a result of this appeal is more favourable
    than its offer to settle. As a result, the appellant is
prima facie
entitled to its costs on a partial indemnity basis to the date the offer was
    served and substantial indemnity costs from that date, unless the court orders
    otherwise: r. 49.10(1) of the
Rules of Civil Procedure
, R.R.O. 1990,
    Reg. 194.

[7]

While a court retains the
    discretion to order otherwise under r. 49.10(1), this discretion has been
    very narrowly construed. As this court cautioned in
Niagara Structural
    Steel (St. Catharines) Ltd. v. W.D. Laflamme Ltd.

(1987),
58 O.R. (2d) 773 (C.A.), at para. 12
,

resort should only be had to the exception
    where, after giving proper weight to the policy of the general rule, and the
    importance of reasonable predictability and the even application of the rule,
    the interests of justice require a departure.

We do not see any
    circumstances here that would justify a departure from the general cost
    consequences stipulated under r. 49.10(1). Accordingly, the appellant is
    entitled to costs on a substantial indemnity basis.

[8]

With respect to the quantum
    of the appellants costs, we are not persuaded that the appellant has claimed
    any costs related to the settled leave motion. It is not clear from the dockets
    what time was expended on just the settled leave motion between January 22 and
    29, 2021. We are therefore unable to conclude that the appellants claimed
    costs include any amounts related to the settled leave motion and decline to
    make any deduction.

[9]

Further, we do not accept
    the respondent Breys submission that the amount of costs claimed by the
    appellant is grossly disproportionate. The overarching consideration is whether
    the costs claimed are reasonable, fair, and proportionate in all the circumstances
    of the case, having regard to the factors set out in r. 57.01 and the
    reasonable expectations of the losing party:
Boucher v. Public Accountants
    Council for the Province of Ontario
(2004), 71 O.R. (3d) 291 (C.A.). The
    result achieved in the action is only one of the factors to be considered.

[10]

In our view, the appellants
    costs are reasonable, fair, and proportionate. They were incurred in relation
    to the appellants claim, the respondent Breys counterclaim and the two
    motions for judgment, which included cross-examination on affidavits. As the
    respondent Brey acknowledged in his written cost submissions before the motion
    judge, this was a moderately complex proceeding and not a routine breach of
    contract. The appellants claimed costs are comparable with (indeed less than)
    the respondent Breys costs and the $50,000 in costs that the motion judge
    awarded, and thus within his reasonable contemplation if he lost the appeal and
    had to pay the appellants costs of the motions and the action.

[11]

Finally, we address the
    respondent Breys submission that the appellants costs should be reduced
    because of the appellants alternative submission on the motions that the
    respondent Brey fraudulently misrepresented that the property could be used as
    a fourplex. We agree there should be a reduction.

[12]

Regardless at what stage in
    the proceedings they are raised, unfounded allegations of fraud may attract
    serious cost consequences as a form of chastisement and a mark of the courts disapproval
    because of their extraordinarily serious nature that go directly to the heart
    of a persons very integrity:
Bargman v. Rooney
(1998), 30 C.P.C. (4th)
    259 (Ont. Gen. Div.), at paras. 18-19.

[13]

In the present case, the
    appellant did not plead fraudulent misrepresentation. Rather, the issue of
    fraudulent misrepresentation was raised as an alternative argument to its main
    contention of negligent misrepresentation. The motion judge declined to
    determine this issue because it was not advanced in its statement of claim. She
    also stated that had the claim been properly advanced, she would have dismissed
    it in the absence of any credible evidence that [the respondent] Brey
    intentionally misled [the appellant] and other potential purchasers about the
    lawful use of the Property or potential exposure as a result of the renovation
    of the Property forty-five years earlier.

[14]

The appellants allegations
    of fraudulent misrepresentation occupied a small part of the proceedings and
    did not form the basis for the motion judges decision. Nevertheless, based on
    the motion judges reasons, they appear to have been proffered without regard
    for the rule that fraud must be strictly pleaded and strictly proved:
Toronto
    Dominion Bank v. Leigh Instruments Ltd. (Trustee of)
, [1998] O.J. No. 4221
    (Gen. Div.), at para. 17. Moreover, while not all unsuccessful allegations of
    fraud and dishonesty lead inexorably to cost consequences, where, as here, a
    party makes such allegations unsuccessfully with access to information
    sufficient to conclude that the other party was merely negligent and neither
    dishonest nor fraudulent, costs sanctions may be appropriate:
Hamilton v.
    Open Window Bakery Ltd.
, 2004 SCC 9, [2004] 1 S.C.R. 303, at para. 26.

[15]

As a result, we are of the
    view that a reduction of the appellants costs is appropriate as a reminder
    that allegations of fraud and dishonesty are simply not to be made unless
    there is every reasonable likelihood that they can be proved:
Bargman
,
    at para. 19.

[16]

Accordingly, we order that
    the respondent Brey shall pay to the appellant its costs of the motions and the
    action in the amount of $35,000, inclusive of disbursements and all applicable
    taxes.

Paul
    Rouleau J.A.

K.
    van Rensburg J.A.

L.B. Roberts
    J.A.





[1]

As
    provided for under r. 49.02(2), r. 49.10(1) also applies to motions, with
    necessary modifications.


