



COURT OF APPEAL FOR ONTARIO

CITATION: CIBC Mortgages Inc. v. York Condominium Corporation
    No. 385, 2017 ONCA 542

DATE: 20170628

DOCKET: C63135

Strathy C.J.O., Cronk and Pepall JJ.A.

BETWEEN

CIBC Mortgages Inc.

Applicant (Respondent)

and

York Condominium Corporation No. 385

Respondent (Appellant)

AND BETWEEN

York Condominium Corporation No. 385

Applicant (Appellant)

and

CIBC Mortgages Inc.

Respondent (Respondent)

Jonathan Fine and Maria Dimakas, for the appellant

Benjamin Frydenberg, for the respondent

Heard: May 8, 2017

On appeal from the judgment of Justice Sean F. Dunphy of
    the Superior Court of Justice, dated November 24, 2016, with reasons reported
    at 2016 ONSC 7343, and the costs order of Justice Dunphy, dated December 21,
    2016, with reasons reported at 2016 ONSC 8036.

Cronk J.A.:

Introduction

[1]

This statutory interpretation case involves a priorities contest between
    the appellant, York Condominium Corporation No. 385 (YCC), and the
    respondent, CIBC Mortgages Inc. (CIBC), under the provisions of the
Condominium
    Act, 1998
, S.O. 1998, c. 19 (the Act).  The primary issue on appeal is
    whether YCCs statutory lien under s. 85(1) of the Act against a particular
    unit in the condominium (Unit 302) regarding unpaid common expenses owing under
    s. 134(5) of the Act lost priority over CIBCs first mortgage on the property
    because YCC allegedly failed to register a lien certificate in a timely
    fashion.

[2]

Section 134(1) of the Act permits a condominium corporation, among
    others, to bring proceedings in the Superior Court for an order enforcing
    compliance by a unit owner with the provisions of the Act, the Condominium
    Declaration or the condominium corporations by-laws and rules.  Section 134(5)
    requires the corporation to add to the common expenses for the unit any award
    of damages or costs made in such proceedings, together with its own additional
    actual costs in obtaining the compliance order.  These sums can then be
    collected through the lien enforcement provisions in s. 85 and, ultimately,
    through the sale of the unit, if necessary.  Under s. 85(2), the lien expires
    three months after the default that gave rise to the lien occurred, unless
    the corporation registers a certificate of lien.  The main issue in this appeal
    is when that default occurred.

Relevant Statutory Provisions

[3]

YCCs lien claim is based on s. 85(1) of the Act.  That section reads:

If an owner defaults in the obligation to contribute to the
    common expenses, the corporation has a lien against the owners unit and its
    appurtenant common interest for the unpaid amount together with all interest
    owing and all reasonable legal costs and reasonable expenses incurred by the
    corporation in connection with the collection or attempted collection of the
    unpaid amount.

[4]

Section 85(2) of the Act addresses the perfection of a lien arising under
    s. 85(1).  It directs:

The lien expires three months
after the
    default that gave rise to the lien occurred
unless the corporation
    within that time registers a certificate of lien in a form prescribed by the
    Minister.  [Emphasis added.]

[5]

The Act also provides for notice of a statutory lien to be furnished to
    the affected unit owner, and for the manner of enforcement of the lien. 
    Sections 85(4) and (6) state:

At least 10 days before the day a certificate of lien is
    registered, the corporation shall give written notice of the lien to the owner
    whose unit is affected by the lien.



The lien may be enforced in the same manner as a mortgage.

[6]

Section 86 addresses the priority of a s. 85(1) statutory lien.  As
    relevant to this appeal, ss. 86(1), (3) and (5) provide:

Subject to subsection (2), a lien
    mentioned in subsection 85(1) has priority over every registered and
    unregistered encumbrance even though the encumbrance existed before the lien
    arose  .



The corporation shall, on or before the day a certificate of
    lien is registered, give written notice of the lien to every encumbrancer whose
    encumbrance is registered against the title of the unit affected by the lien.



Subject to subsection (6), the lien loses its priority over an
    encumbrance unless the corporation gives the required notice to the
    encumbrancer.

[7]

Section 134 of the Act concerns the institution of proceedings to
    enforce compliance by a unit owner with the provisions of the Act, the
    condominium Declaration, the condominium corporations by-laws and rules, and
    related matters.  Section 134(1) reads in part:

Subject to subsection (2)  a corporation  may make an
    application to the Superior Court of Justice for an order enforcing compliance
    with any provision of this Act, the declaration, the by-laws, [or] the rules 
    .

[8]

Section 134(5), the provision at the heart of the dispute in this case, provides
    for the recovery by a condominium corporation, as common expenses, of damages
    or costs awarded under a compliance order, plus any additional actual costs to
    the corporation in obtaining the [compliance] order (Additional Actual
    Costs).  The common expenses aggregated under s. 134(5) can trigger a s. 85(1)
    lien claim.  Section 134(5) states:

If a corporation obtains an award of damages or costs in an
    order made against an owner or occupier of a unit,
the
    damages or costs, together with any additional actual costs to the corporation
    in obtaining the order, shall be added to the common expenses for the unit and
    the corporation may specify a time for payment by the owner of the unit
. 
    [Emphasis added.]

Background Facts

[9]

The following chronology sets out, in brief, the pertinent background
    facts.

January 28, 2010            The owners of Unit 302 grant a
    first mortgage on their condominium unit, in the amount of $135,000, to CIBC;

February 14, 2011          YCC obtains a compliance order
    under s. 134(1) of the Act in the Superior Court of Justice against one of the
    owners of Unit 302, restraining that owner from harassing YCC staff and other
    residents.  In granting the compliance order, the court also awards costs in
    favour of YCC, in the amount of $15,000, payable within 30 days from the date
    of the order (the Costs Order);

March 16, 2011               The
    unit owner fails to pay the Costs Order as required;

August 3, 2011                In accordance with s. 134(5)
    of the Act, YCC adds the amount of the outstanding Costs Order and Additional
    Actual Costs, totalling $44,272.63, to the amount of common expenses owed by
    the owners of Unit 302 (the Claimed Common Expenses);

August 15, 2011              YCC, for the first time,
    demands payment of the Claimed Common Expenses from the defaulting unit owner,
    on or before September 14, 2011.  In its demand letter, YCC warns that if
    payment is not forthcoming by September 14, it will register a lien under the
    Act against Unit 302;

September 15, 2011       The unit owner fails to pay the
    Claimed Common Expenses, as demanded;

November 10, 2011        YCC
    delivers a notice of lien to the owners of Unit 302;

December 12, 2011        YCC registers a certificate of
    lien on title to Unit 302 for the Claimed Common Expenses, having also served
    CIBC with a copy of the certificate;

February 28, 2013           YCC commences litigation
    against the owners of Unit 302, seeking possession of the unit and payment of
    the Claimed Common Expenses;

May 6, 2013                    YCC serves the owners of
    Unit 302 and CIBC with a Notice of Sale Under Lien regarding the unit;

October 18, 2013            YCC
    obtains a writ of possession regarding Unit 302;

November 27, 2013        YCC
    obtains possession of Unit 302;

December 27, 2013        The owners of Unit 302 default in
    payment under the CIBC first mortgage;

April 7, 2014                    YCC agrees to sell Unit
    302 to a third party for $110,000, with a closing date of May 30, 2014;

May 2, 2014                    CIBC commences enforcement
    proceedings on its mortgage;

May 13, 2014                  CIBC first learns of the sale
    of Unit 302.  By this time, the amount of YCCs lien for the Claimed Common
    Expenses has increased to $113,616.68.  In light of the pending closing of the
    sale of Unit 302, YCC and CIBC agree that the sale should proceed, with the net
    sale proceeds to be held in trust pending determination of entitlement to them;

May 30, 2014                  The closing of the sale of
    Unit 302 occurs, yielding gross proceeds in the sum of $110,173.02;

October 22, 2014            CIBC
    obtains judgment on its mortgage against the owners of Unit 302, in the amount
    of $135,411.79, plus interest and costs, and an order for possession of the
    unit.

[10]

YCC maintains that its statutory lien for the Claimed Common Expenses has
    priority over CIBCs first mortgage by reason of s. 86(1) of the Act.  The
    amount of the lien (comprised of the Costs Order and Additional Actual Costs,
    including legal costs incurred by YCC with two different law firms in
    connection with its s. 134 compliance proceeding) is said to be $113,616.68 as
    of the date of sale of Unit 302.  As agreed by the parties, the net amount of
    $94,006.01 is currently held in trust by YCCs lawyers, pending resolution of
    the parties competing claims to the net proceeds of sale of Unit 302.

Applications Judges Decision

[11]

In late 2014, both parties applied for relief in the Superior Court of
    Justice.  In its application, YCC sought, among other things, declarations that
    its lien is good and valid and that CIBC is not entitled to any part of the
    Unit 302 sale proceeds.  CIBC also claimed declaratory relief, including
    declarations that YCCs lien is invalid and ought to be discharged and that
    YCCs lien rights, if any, expired prior to registration of its lien certificate
    on December 12, 2011.  CIBC also sought an order requiring that the net sale
    proceeds, and certain other funds that it claimed had been wrongly deducted by
    YCCs lawyers from the sale proceeds, be paid to it.

[12]

The applications judge held that YCCs lien had expired prior to the
    registration of its lien certificate.  In his view, the relevant owner of Unit
    302 defaulted for the purpose of s. 85(2) of the Act on March 17, 2011 when the
    owner failed to comply with the Costs Order by March 16, 2011, as required. 
    This default, he held, triggered the three-month perfection period under s.
    85(2) of the Act.  As the three-month period had run its course prior to YCCs registration
    of its lien certificate on December 12, 2011, its lien lost its priority
    status, otherwise conferred by s. 86(1) of the Act, over CIBCs first mortgage.

[13]

The applications judge summarized his conclusions, at para. 3 of his
    reasons, in this fashion:

The exceptional right to assert priority lien rights under s.
    85 of the [Act] strikes a delicate balance between the rights of a variety of
    affected stakeholders, including unit owners and mortgage holders.  The
    common-sense meaning of default when used in relation to an obligation to pay
    is that default occurs when the payment is due but not made.  Payment of the
    court-ordered costs by the unit holder was first due but not paid on March 17,
    2011  There is but one default arising from non-payment of the costs ordered
    and that default occurred when those costs were not paid on the last day
    specified for their payment.  While section 134(5) authorizes but does not
    require the condominium corporation to extend the time for payment of amounts
    that are required to be added to common expenses, no such extension of time was
    granted by the condominium corporation before the default occurred or indeed at
    any time before the three month period for registering a lien expired.  Having
    failed to register a lien within three months of the time that the default
    first occurred, there was no lien right to revive (or perfect) on December 12,
    2011 when notice of the lien was registered.

[14]

The applications judge, therefore, dismissed YCCs application and
    granted declarations that its certificate of lien is invalid and that its lien
    rights had expired prior to the registration of its lien certificate.  He
    ordered that YCCs lien certificate be discharged and that the funds held in
    trust by YCCs lawyers from the sale of Unit 302, together with certain other
    funds described later in these reasons, be paid to CIBC.  He also awarded CIBC
    its costs of the applications, fixed in the total amount of $62,510.85, inclusive
    of disbursements and HST.

[15]

YCC appeals.  Its main argument is that the applications judge erred in
    his interpretation of s. 134(5) of the Act, leading him to further err in his
    determination of the commencement date for the three-month lien perfection period
    provided for under s. 85(2) of the Act.  YCC also seeks leave to appeal and, if
    leave be granted, appeals from the applications judges costs ruling.

Issues

[16]

There are two issues on appeal.  The central issue is whether YCC
    preserved the priority assigned to its statutory lien by s. 86(1) of the Act,
    by registering its lien certificate within three months of the unit owners
    default that gave rise to the lien, as required by s. 85(2).
[1]
The determination of this question turns on the interplay between ss. 85(2) and
    134(5) of the Act and, in particular, on when the default giving rise to the
    lien occurred, thereby triggering the three-month perfection period under s.
    85(2).  As I have said, YCC also seeks leave to appeal the applications judges
    costs award in favour of CIBC.

Discussion

(1)

Priorities Dispute

[17]

In my view, the applications judge correctly interpreted ss. 85(2) and 134(5)
    of the Act and properly applied them to the facts of this case.  As a result, I
    see no basis for appellate interference with his findings that CIBCs mortgage
    has priority over YCCs lien and that CIBC is entitled to receipt of the net
    sale proceeds from Unit 302 now held in trust by YCCs solicitors.  I reach
    these conclusions for the following reasons.

(i)

Interpretive Approach

[18]

At the outset, I observe that the interpretation of ss. 85(2) and 134(5)
    of the Act must be undertaken in accordance with the well-established modern
    approach to statutory interpretation.  This approach requires that the words
    of [an] Act are to be read in their entire context and in their grammatical and
    ordinary sense harmoniously with the scheme of the Act, the object of the Act,
    and the intention of Parliament:
Rizzo & Rizzo Shoes Ltd. (Re)
, [1998]
    1 SCR 27, at para. 21, quoting Elmer Driedger,
Construction of Statutes
,
    2nd ed. (Toronto: Butterworths, 1983), at p. 87.

(ii)

Purpose of Sections 85(2) and 134(5)

[19]

Section 85(2) of the Act is concerned with the perfection of a statutory
    lien arising under s. 85(1).  It requires that, to preserve the priority of a
    s. 85(1) lien accorded by s. 86(1) over other encumbrances, a lien claimant must
    register a certificate of lien in prescribed form within three months after the
    unit owners default that gave rise to the lien.

[20]

Section 134(5) of the Act is primarily directed at ensuring the recovery
    by a condominium corporation of damages or costs awarded in its favour in a
    compliance proceeding, together with any Additional Actual Costs.   For this
    purpose, it requires, in mandatory terms, that the condominium corporation add
    the awarded damages or costs and any Additional Actual Costs to the amount of
    common expenses otherwise owed by the responsible unit owner.  As this court
    held in
Metropolitan Toronto Condominium Corp. No. 1385 v. Skyline
    Executive Properties Inc.
, [2005] 253 D.L.R. (4th) 656, at para. 39, s.
    134(5) thus affords a condominium corporation a broad right of recovery for
    costs incurred in obtaining a compliance order and also provides an effective
    enforcement mechanism for the collection of those costs.

[21]

Recently, in
Toronto Standard Condominium Corporation No. 1908 v.
    Stefco Plumbing & Mechanical Contracting Inc.
, 2014 ONCA 696, 377
    D.L.R. (4th) 369, this court examined the legislative purpose behind the
    provisions of the Act dealing with the collection of common expenses, including
    s. 134.  While recognizing that the Act has consumer protection aspects, the
    court also held with respect to these provisions, at para. 41:

[T]his part of the Act is designed to safeguard the financial
    viability of a condominium corporation in a manner that fairly balances the
    rights of the various stakeholders.  Lane J. was correct in
York
    Condominium Corp. No. 482 v. Christiansen
(2003), 64 O.R. (3d) 65 (Ont.
    S.C.J.) when he observed, at para. 5: [A] principal object of the Act is to
    achieve fairness among the parties  owners, their tenants, their mortgagees,
    the corporation itself  in raising the money to keep the common enterprise
    solvent.

[22]

The
Stefco
court went on to state, at para. 42:

In restricting the availability of the
    priority for common expenses to circumstances where the condominium corporation
    has registered its lien and provided notice to encumbrancers, the legislature
    has balanced the right and obligation of a condominium corporation to collect
    common expenses against the right of a mortgagee to have notice of a default in
    the payment of common expenses.  This right of notice is of significant benefit
    to a mortgagee.
It allows a mortgagee to determine if it should take
    steps to protect its interests under s. 88, by paying the common expenses,
    treating the failure to pay as a default under the mortgage, and commencing
    enforcement proceedings.  [Emphasis added.]

[23]

In
Stefco
, the court also examined the purpose of s. 134(5)
    itself.  The court cited with approval, at para. 43, the following passage from
Skyline
, at para. 40, regarding s. 134(5):

[T][he section was intended to shift the financial burden of
    obtaining compliance orders from the condominium corporation and ultimately,
    the innocent unit owners, to the unit owners whose conduct necessitated the
    obtaining of the [compliance] order.  Furthermore, the section was enacted to
    provide a means whereby the condominium corporation could, if necessary,
    recover those costs from the unit owner through the sale of the unit.

[24]

Stefco
and
Skyline
confirm that the Act does not seek
    to prefer the rights of a condominium corporation at the expense of the rights
    of an affected mortgagee.  They instruct that the purpose of the common
    expenses collection provisions of the Act generally, and s. 134(5)
    specifically, is to provide a remedial mechanism for a condominium corporation
    to recover the damages or costs awarded in its favour under a compliance order,
    together with any Additional Actual Costs, directly from the unit owner whose
    conduct precipitated the compliance proceeding.  However, this statutory
    objective is intended to be achieved in a manner that respects the delicate balancing
    of the interests of all stakeholders, including those of non-defaulting unit
    owners and affected mortgagees, which underlies the Act as a whole and the
    common expenses collection provisions themselves.

[25]

Section 134(5) must be interpreted in light of these guiding
    principles.

(iii)

Interpretation of Sections 85(2) and 134(5): Date of Default

[26]

The applications judge held that default occurred for the purpose of s.
    85(2) of the Act when payment was due under the Costs Order by March 16, 2011
    and not made by March 17, 2011.  He reasoned as follows, at para. 51:

The common-sense meaning of default when
    used in relation to an obligation to pay is that default occurs when the
    payment is due but not made
.  Payment of the court-ordered costs by the
    unit holder was first due but not paid before March 17, 2011.  Whether or not
    the payee had notice of the order, he had notice of the proceeding giving rise
    to it.
As with any order, including default judgments,
    the order was effective when made and in accordance with its terms.  The order
    on its face required payment by March 16, 2011.  The payee was in default
    within the meaning of s. 85(2) of the [Act]  whether he knew it or not  on
    March 17, 2011.  No step was required on the part of YCC 385 to make the amount
    payable.
It was payable whether or not the corporation took some
    additional step on its own books to add the amount to its ledger of common
    expenses for the unit.  [Emphasis added.]

[27]

YCC attacks these critical findings on several grounds.  Its central argument
    is that the applications judges finding regarding the timing of the unit owners
    default for the purpose of s. 85(2) rests on a misinterpretation of s. 134(5)
    of the Act.  In its factum, YCC submits the applications judge erred in wrongly
    extending the jurisdiction of the court, by holding that the setting of a
    default date for the payment of the Costs Order also constitutes the default
    date for the payment of the Claimed Common Expenses.

[28]

This argument focuses on the wording specify a time for payment by the
    owner of the unit, in s. 134(5).  YCC maintains that default under the Costs
    Order is distinct from, and unrelated to, default in payment of common expenses
    under s. 134(5).  The applications judges alleged error regarding the timing
    of the unit owners default, YCC says, essentially disregarded and rendered
    meaningless its discretionary power under s. 134(5) of the Act to specify a
    time for payment by the owner of the unit.

[29]

YCC further argues that, because s. 134(5) provides discretionary
    authority to a condominium corporation to specify a time for payment by the
    owner of the unit of common expenses, that is, those sums added to common
    expenses in compliance with s. 134(5), the section operates to empower the corporation
    to give a unit owner extra time to pay common expenses, prior to the
    commencement of the three-month lien perfection period set out under s. 85(2). 
    In other words, YCC submits, s. 134(5) provides a discretionary redemption
    period during which a unit owner is able to cure a default in the payment of
    common expenses, without the necessity of the registration of a lien.

[30]

I would reject YCCs interpretation of the interplay between ss. 85(2)
    and 134(5) of the Act, for several reasons.

[31]

First, the language of the Costs Order is straightforward.  The costs
    awarded under it were expressed to be payable within thirty (30) days of the
    date of this Order, that is, by March 16, 2011.  The costs were not paid by
    that date, with the result that the unit owner was in default of the Costs
    Order on March 17, 2011.  I did not understand YCC to suggest to the contrary.

[32]

The important point in this context is that it is the obligation created
    by the Costs Order that anchors YCCs lien claim.  It was the unit owners non-compliance
    with the Costs Order that YCC relied on to assert a statutory lien under s.
    85(1).  It follows that this was the default event that gave rise to the lien
    within the meaning of s. 85(2).

[33]

Second, and importantly, nothing in ss. 85(2) or 134(5) provides that a
    condominium corporation that asserts a lien for unpaid s.

134(5) common expenses is relieved of its
    obligation to perfect its lien in accordance with s. 85(2), in order to maintain
    the priority of the lien over other encumbrances.

[34]

YCC relies on the decision of this court in
Skyline
to argue
    that there is a difference between an award of costs and any Additional
    Actual Costs under s. 134(5).  It submits that while the courts have
    jurisdiction over awards of costs, including the timing for payment of
    court-ordered or assessed costs, condominium corporations have exclusive
    jurisdiction over the timing for payment of s. 134(5) common expenses,
    including Additional Actual Costs added to common expenses under the section.  As
    a result, YCC maintains, there can be no default in payment of common expenses
    until the corporation, in the exercise of its discretion under s. 134(5),
    specifies a date for payment of them.

[35]

In my view, YCCs reliance on
Skyline
to ground this argument
    is misplaced.  Neither
Skyline
nor
Stefco
involve the timing
    of a unit owners default for the purposes of ss. 85(2) or 134(5).

[36]

It is true that
Skyline
, like s. 134(5), differentiates between
    Additional Actual Costs, which
Skyline
holds can include legal costs owing
    as between a client and its own lawyer beyond those ordered by a court to be
    paid or assessed against an opposing party, and an award of costs that the
    court directs one litigant to pay to another litigant:
Skyline
, at
    para. 8.  However,
Skyline
does not address the notion of differing
    dates of default for the failure to pay an award of costs, on the one hand, and
    the failure to pay s. 134(5) common expenses, on the other hand.

[37]

In the end, when ss. 85(2) and 134(5) are read in their grammatical and
    ordinary sense, in the context of their legislative purposes and the scheme of
    the Act itself, I see no support for the proposition that s. 134(5) is intended
    to permit a condominium corporation, in the exercise of its discretion under s.
    134(5) to specify a time for payment of common expenses, to effectively enlarge
    the lien perfection period after a default in payment has already occurred.

[38]

Third, the applications judge accepted, at para. 45, CIBCs argument
    that YCCs interpretation of the interplay between ss. 85(2) and 134(5): would
    result in the [condominium] corporation having the unilateral ability to alter
    the deadline for perfecting its lien (and notifying the mortgagee whose rights
    are thereby impacted negatively) for a potentially unlimited amount of time.  YCC
    disputes this, arguing that there is no prejudice to an involved mortgagee
    arising from the deferred registration by a condominium corporation of a lien
    certificate for the payment of s. 134(5) common expenses.

[39]

I agree with the applications judge.  I again underscore this courts
    holding in
Stefco
that the provisions of the Act dealing with the
    collection of common expenses seek to maintain a balance between a condominium
    corporations mandate to collect those expenses and a mortgagees right to have
    notice of a unit owners default in the payment of common expenses.  YCCs argument
    discounts the importance of a mortgagees rights to receive notice of a unit owners
    default and, upon receipt of such notice, to elect whether to take remedial steps
    to cure the default.

[40]

A mortgagee is not entitled to notice of a s. 134(1) compliance
    proceeding initiated by a condominium corporation.  And, under s. 86(3) of the
    Act, the corporation is required to give written notice of its lien to a
    mortgagee only on or before the day a certificate of lien is registered.  Any
    significant delay in registration of the lien, therefore, can result in
    significant delay in the provision of notice to an affected mortgagee of the
    unit owners default and the corporations assertion of a statutory lien
    consequent upon that default.

[41]

This result, in my opinion, would cut sharply against the carefully
    calibrated balancing of stakeholder interests embodied in the Act, including under
    the lien enforcement scheme envisaged by s. 85 and the common expenses
    collection scheme under s. 134.

[42]

As
Stefco
instructs, at para. 42, a mortgagees right to
    receive notice of a unit owners default in the payment of common expenses is
    of significant benefit to a mortgagee.  Delayed notice of a lien to a
    mortgagee, occasioned by the delayed registration of the lien on title, can
    compromise the mortgagees position and statutory rights between the date of
    the unit owners default and the date of the lien claimants lien registration. 
    The requirement that notice of the lien be given to the mortgagee permits the
    mortgagee to deal with the outstanding common expense arrears as soon as
    possible to limit further erosion of its mortgage security.

[43]

Consider this example of the risk of prejudice to the mortgagee. 
    Assume, as occurred here, that a condominium corporation does not register its
    lien certificate for many months after the unit owners default giving rise to
    the lien.  The mortgagee, unaware that the unit owner has defaulted, advances
    further funds to the unit owner under the existing mortgage.  In these
    circumstances, the prejudice to the mortgagee arising from late notice of a condominium
    corporations statutory lien is manifest.   The mortgagees exposure has been
    increased.

[44]

Fourth, YCC argues that its interpretation of ss. 85(2) and 134(5)
    furthers the consumer protection focus of the Act because it permits a
    condominium corporation to defer the collection of a monetary award (damages or
    costs) obtained under a compliance order and recovery of any Additional Actual
    Costs, by affording a unit owner additional time within which to pay
    outstanding common expenses.  This, YCC submits, furthers the public interest
    by providing a mechanism for the avoidance by the unit owner of the jeopardy
    posed by enforcement proceedings including, potentially, the forced sale of the
    unit in question.

[45]

I would also not accede to this argument.

[46]

I agree that s. 134(5) is designed to permit a condominium corporation
    to forbear enforcement of its right to collect s. 134(5) common expenses by specifying
    a particular time for payment of those common expenses by the unit owner.  But it
    does not follow that the condominium corporation is thereby relieved of its
    obligation to perfect its lien under s. 85(2) simply because the amount claimed
    under the lien is, as a matter of law, to be added to existing common expenses
    in accordance with s. 134(5).  The default giving rise to the lien is the
    failure to pay a monetary award obtained in a compliance proceeding, together
    with any Additional Actual Costs incurred in obtaining the compliance order. 
    In this case, the failure to pay relied upon by YCC to assert a lien is the default
    in payment under the Costs Order.   Once that default occurred, s. 85(2) was
    engaged.

[47]

Fifth, meaning may be accorded to both ss. 85(2) and 134(5) of the Act without
    accepting the interpretation of these provisions urged by YCC and without
    forfeiting the opportunity to provide a unit owner with additional time to pay
    outstanding s. 134(5) common expenses.

[48]

As I see it, ss. 85(2) and 134(5) interact in the following fashion: i)
    s. 85(2) contemplates that, in order to preserve priority for its statutory
    lien over other encumbrances, a condominium corporation must perfect its lien
    within the three-month period set out under s. 85(2); ii) the three-month
    period begins to run when the unit owner fails to pay the obligation relied
    upon to invoke the lien; iii) where that obligation arises by reason of a
    damages or costs award in a compliance proceeding, the corporation is obliged under
    s. 134(5) to add those amounts and any Additional Actual Costs, to the common
    expenses owed by the applicable unit owner; and iv) having done so, and armed
    with a perfected lien, the condominium corporation is then free, in the
    exercise of its discretion under s. 134(5), to defer payment of the aggregated
    s. 134(5) common expenses by specify[ing] a time for payment by the owner of
    the unit.

[49]

This interpretation of ss. 85(2) and 134(5), in my opinion, conforms
    with both the lien perfection and the common expenses recovery schemes set out
    under the Act.  It also preserves, in the public interest, the balancing of stakeholder
    interests that underlies the Act by ensuring that a condominium corporation
    must provide notice of and perfect its statutory lien on a timely basis.  And,
    it avoids inconsistency or conflict between ss. 85(2) and 134(5).

[50]

I make this final point regarding the interplay of ss. 85(2) and 134(5)
    of the Act.

[51]

It is true, as YCC points out, that condominium corporations have a duty
    under s. 17(3) of the Act to take all reasonable steps to ensure compliance by
    unit owners with the Act and the condominium Declaration, by-laws and rules.  There
    is also no doubt that s. 134(5), as remedial legislation, is intended to
    insulate a condominium corporation, in the interests of all unit owners, from
    the financial burden of obtaining a compliance order against a defaulting unit
    owner:
Skyline
, at paras. 40 and 46.  Further, it is clear that the s.
    85(1) lien mechanism can be utilized by a condominium corporation to collect
    both the costs of obtaining a compliance order and any damages or costs awarded
    by the court under such an order:
Skyline
, at para. 50.

[52]

However, this does not mean that YCC was obliged to resort to s. 85(1)
    to recover the amount owing under the Costs Order.  That order was enforceable
    against the defaulting unit owner in the same manner as any other money
    judgment: see
Skyline
, at para. 50.  YCC elected to invoke the s.
    85(1) statutory lien mechanism in respect of the Costs Order, as it was
    entitled to do.  But having so elected, it could not then assert the priority
    of its lien over that of other encumbrances without complying with the lien
    perfection rule established by s. 85(2).  Such compliance did not occur here.

(iv)

Conclusion

[53]

For these reasons, I conclude that the applications judge did not err in
    his interpretation of ss. 85(2) and 134(5) of the Act or in the application of
    those provisions to the facts of this case.  YCC failed to register its lien
    certificate within three months of the unit owners default in payment of the
    Costs Order, the default which gave rise to YCCs lien claim.  YCC therefore
    failed to perfect its lien security in accordance with s. 85(2) of the Act. 
    Consequently, its lien lost the priority over CIBCs first mortgage that it
    otherwise would have possessed under s. 86(1) of the Act.

(v)

Other Considerations

[54]

One additional consideration, particular to the facts of this case, must
    be addressed.

[55]

The Costs Order in favour of YCC was made on February 14, 2011.  Default
    under the Costs Order occurred on March 17, 2011.  Yet, YCC did not register
    its lien certificate until December 12, 2011, almost six months after the June
    2011 expiration of the three-month lien perfection period set out under s.
    85(2).

[56]

There is no evidence that, at any time prior to the registration of its
    lien certificate, YCC entered into discussions or other communications with
    either of the owners of Unit 302 regarding the timing for payment of the Claimed
    Common Expenses under s. 134(5), which, as I have stressed, originated with the
    Costs Order.   To the point, there is no evidence that YCCs delay in
    registering its lien certificate was intended to assist the unit owners by
    deferring collection efforts regarding the Claimed Common Expenses.

[57]

Yet the quantum of the Claimed Common Expenses continued to mount
    significantly.  The costs awarded under the Costs Order are in the sum of
    $15,000.  As I have said, by May 2014, YCCs lien claim totalled $113,616.68.

[58]

On the record before this court, it appears that YCCs delay in
    registering its lien certificate and the ballooning costs forming part of the Claimed
    Common Expenses arose because of internal YCC matters, including the
    involvement of two different law firms to assist it in obtaining the compliance
    order and in responding to unsuccessful efforts by the defaulting unit owner to
    challenge the validity of the order.

[59]

In brief, it is undisputed that YCC was placed under the administration
    of a court-appointed administrator in November 2010, the administrator fired
    YCCs property manager and YCCs lawyers who had carriage of the compliance proceeding,
    the administrator retained new solicitors for YCC in March 2011 and a new
    property manager, and the outgoing property manager failed to inform its
    successor of the compliance proceeding and the Costs Order.  As a result, YCCs
    new property manager appears to have first learned of these matters on an
    unspecified date in June or July, 2011.

[60]

Further, the record indicates that, although YCCs new solicitors
    obtained a copy of the issued and entered Costs Order by June 23, 2011, a
    demand for payment of the Claimed Common Expenses was not forthcoming until
    August 15, 2011, almost two months later.

[61]

The main component of YCCs $113,616.68 lien claim as at May 2014
    consisted of $82,261.88 for legal costs, of which $44,272.63 represented costs
    billed by YCCs first solicitors.  The balance represented costs charged by
    YCCs second solicitors, in the sum of $37,989.25, plus interest and additional
    miscellaneous costs.  In the result, by the time Unit 302 was sold, the amount
    owed by the unit owners as s. 134(5) Claimed Common Expenses was more than
    seven and a half times the amount originally awarded under the Costs Order.

[62]

These facts, of course, do not affect the proper interpretation of ss.
    85(2) and 134(5) of the Act.  However, they do paint a compelling picture of
    undue delay by YCC in seeking to enforce its lien claim and recover the Claimed
    Common Expenses, with attendant adverse financial consequences for the owners
    of Unit 302.

[63]

I therefore agree with CIBCs submission that, on this record, it
    appears that the perfection of YCCs lien claim simply fell between the
    cracks.  This strongly militates in favour of the conclusion that YCCs August
    2011 demand letter did not form part of any intended accommodation or
    forbearance plan for the owners of Unit 302 but, rather, that it was a
    misplaced effort to pursue a lien claim that had been forgotten or overlooked,
    and already expired.

(2)

Funds Wrongly Deducted from Sale Proceeds

[64]

On the closing of the sale of Unit 302, YCCs solicitors applied the sum
    of $9,952.01 against the sale proceeds on account of invoices rendered by them
    to YCC.  The applications judge found that, of this sum, $4,530.98 related to
    matters that did not directly concern the process of selling Unit 302.  He
    therefore ordered that $4,530.98 be disgorged and paid to CIBC, together with
    the $94,006.01 net proceeds of sale.

[65]

I do not understand YCC to challenge this part of the applications
    judges decision on this appeal and I see no basis for appellate interference
    with it.

(3)

Costs Appeal

[66]

YCCs factum does not address its proposed appeal from the quantum of
    the applications judges costs award in favour of CIBC.  However, during oral
    argument, YCC submitted that the applications judge erred in his costs ruling
    by fashioning an award that is excessive and that fails to take account of
    alleged misconduct by CIBC in conducting out-of-court cross-examinations and
    examinations, which resulted in unnecessary costs and the generation of largely
    irrelevant or useless materials, including unnecessary transcripts.

[67]

There are several difficulties with this submission.  First, it is true
    that the applications judge concluded, at para. 17 of his costs reasons, that
    the process of gathering out-of-court testimony in this case was laborious
    and yielded negligible output that was out of all proportion both to the
    issues and the amounts at issue.

[68]

However, the applications judge did not fix responsibility for the costs
    associated with that out-of-court process solely on CIBC.  To the contrary, he
    was critical of the conduct of both parties, stating, at para. 18: My
    observations of the conduct of this case born of having had to wade through the
    great bulk of that largely unhelpful output suggests that
there is plenty of responsibility to be shared on all sides

    (emphasis added).

[69]

Second, having addressed what he viewed as the unnecessary expense and
    unproductive nature of many of the cross-examinations and examinations
    conducted by the parties, the applications judge, at para. 19, reduced the fees
    recoverable as costs by CIBC to take account of the excessive time and energy
    expended in these examinations.  In so doing, he expressly considered, and
    rejected, YCCs submission that CIBC should be awarded no costs or only nominal
    or reduced costs in the circumstances of this case.  He stated, at para. 23:

I have already sufficiently accounted for the examinations
    undertaken and have noted that the excesses are a shared responsibility.  The
    degree of sharing should reflect that one party [CIBC] made sincere and advantageous
    settlement offers that were rejected and the unsuccessful party bore
    significant responsibility for the length and number of examinations that were
    undertaken.

[70]

Third, the applications judge also considered whether CIBCs costs
    should be further discounted, or disallowed altogether, either because of the
    suggested novelty of the issue raised or the consumer protection aims of the
    Act.  He provided clear and cogent reasons for his conclusion that neither
    factor warranted any further adjustment.  I see no reversible error in his
    reasoning or conclusions on these issues.

[71]

Finally, the applications judge was alert to the governing principles
    regarding an award of costs.  In the end, he concluded, at para. 26:

Accordingly, I have determined to award CIBC total costs for
    fees and disbursements of $62,510.85 including HST.  This figure is still
    unacceptably high in relation to the amount at issue.  However, it was an
    expense that CIBC offered YCC reasonable and early prospects of avoiding and it
    was one that was inflated due to lack of pragmatism and cooperation for which I
    find fault cannot be laid solely or even predominantly at CIBCs feet.  It is,
    alas, the fairest result I can fashion from the clay that I have been given.

[72]

In all these circumstances, I am not persuaded that the applications
    judges costs award is plainly wrong or tainted by an error in principle. 
    Accordingly, there is no basis for appellate interference with his
    discretionary costs ruling.

Disposition

[73]

For the reasons given, I would dismiss the appeal, grant leave to appeal
    costs and dismiss the costs appeal.  I would also order that CIBC deliver its
    brief written costs submissions to the Registrar of this court within 15 days
    from the date of the release of these reasons and that YCC deliver its brief
    responding costs submissions to the Registrar within 15 days thereafter.

Released:

JUN 28 2017                                     E.A.
    Cronk J.A.

GRS                                                  I
    agree G.R. Strathy C.J.O.

I
    agree S.E. Pepall J.A.





[1]

In its factum, YCC also raised a limitations period argument
    in support of its attack on the applications judges decision.  It abandoned this
    argument shortly before the appeal hearing.


