



COURT OF APPEAL FOR ONTARIO

CITATION: J.M.J. Family Trust v. Simcoe
    Block (1979) Limited, 2020 ONCA 741

DATE: 20201123

DOCKET: C68088

van Rensburg, Hourigan and Brown
    JJ.A.

BETWEEN

J.M.J. Family Trust and Marna Gariepy

Applicants

(Respondents)

and

Simcoe Block (1979) Limited

Respondent

(Appellant)

Marc Kestenberg and Kevin Schoenfeldt,
    for the appellant

Danny Nunes, for the respondents

Heard: November 17, 2020, by videoconference

On
    appeal from the order of Justice Markus Koehnen of the Superior Court of
    Justice, dated January 27, 2020.

REASONS FOR DECISION

[1]

The issue on this appeal is whether the
    application judge made a palpable and overriding error in ordering the
    reimbursement of legal fees related to the enforcement of certain promissory
    notes.

[2]

The facts may be briefly stated as follows.
    Three siblings, Marc, Gregory and Matt Gariepy, each lent $1 million to the
    appellant corporation, Simcoe Block (1979) Limited (Simcoe). Marc Gariepy
    advanced funds through the respondent J.M.J Family Trust, Gregory Gariepy
    advanced funds through his wife, the respondent Marna Gariepy, and Matt Gariepy
    advanced funds through his family trust.  All three siblings were shareholders
    and directors of Simcoe. Matt Gariepy managed Simcoe.

[3]

The parties that advanced the loans each
    received promissory notes for $1 million. A general security agreement (the GSA)
    secured the promissory notes and, among other costs, reasonable legal fees that
    the noteholders incurred in collecting the promissory notes. Simcoe failed to
    pay the promissory notes when due. The lenders had previously executed an
    agreement that required them to discuss any collection steps before enforcing
    the promissory notes. Discussions ensued over several months regarding the
    collection of the promissory notes, as well as the global resolution of other
    litigation between the parties. No resolution was reached.

[4]

In response to an application brought by the
    respondents for the appointment of a receiver, Simcoe repaid the promissory
    notes. The respondents sought an order for reimbursement of $118,242.11 in
    legal fees it had expended on collecting the promissory notes. Simcoes
    position was that enforcement costs were owed by it, but only in the range of
    $10,000 to $15,000.

[5]

The application judge rejected Simcoe's argument
    that most of the legal fees claimed were associated with the overall settlement
    of the siblings disputes and, therefore, not recoverable as costs incurred in
    collecting the notes. In reaching that conclusion, he noted that Matt Gariepy
    or Simcoe proposed that a global resolution of all disputes occur before the
    promissory notes would be repaid. In his analysis, the application judge also
    noted that the creditors were effectively dragged into the discussion of a
    global resolution in their effort to collect on the promissory notes.

[6]

Ultimately, the application judge ordered the
    reimbursement of legal fees in the amount of $78,039.79. He concluded that the
    legal fees claimed were expenses connected to the collection of the notes. 
    However, he accepted Simcoe's argument that some of the legal fees were
    duplicative, as there was overlap in the descriptions of tasks in the docket
    entries. For this reason, he reduced the legal fees claimed by a third.

[7]

Simcoe submits that the motion judge made
    palpable and overriding errors in finding that: (1) the settlement discussions were
    a necessary step in collecting the promissory notes; (2) all the commercial
    disputes arose out of the operation of Simcoe; (3) the respondents were dragged
    into a discussion of a global resolution; and (4) the GSA permitted the
    awarding of all sums incurred for legal fees rather than reasonable sums.

[8]

We are not persuaded by any of these
    submissions.

[9]

Regarding whether the settlement discussions
    were necessary to collect the promissory notes, the application judge concluded
    that enforcement efforts on the promissory notes were inextricably linked to
    the settlement discussions. There was ample support for that finding in the
    record, including correspondence from counsel for Matt Gariepy and/or Simcoe
    that linked the payment of the promissory notes to the overall settlement of the
    litigation. Similarly, the record supported the application judges conclusion
    that Simcoe was a central player in the commercial disputes among the parties.

[10]

Simcoe argues that the application judge erred
    in finding that the respondents were dragged into a discussion of the global
    resolution of the issues between the parties. On the contrary, it submits that
    the respondents were willing participants. We agree with the respondents
    submission that this is a tortured interpretation of the application judge's
    reasons. Fairly read, it is clear that the application judge was not finding that
    the respondents were forced into the discussions against their will. Instead,
    he accurately observed that Simcoe used repayment of the amounts due under the
    promissory notes as leverage to secure a global resolution of all issues
    between the parties.

[11]

Simcoes final submission is that the
    application judge erred in awarding the respondents legal fees on a full
    indemnity basis because this contravened the GSA, which limited the respondents
    recovery to only reasonable legal costs. It argues that if the parties intended
    that the respondents would recover all of their legal costs, the GSA would have
    stated so explicitly. It relies on
Boucher v. Public Accountants Council
    for the Province of Ontario
, (2004), 71 O.R. (3d) 291 (C.A.), for the
    proposition that the application judge was obliged to determine what a fair and
    reasonable amount was for costs.

[12]

There is no merit to this submission.
The GSA was a commercial document. It did not import
    litigation concepts of full, substantial or partial indemnity costs. It
    provided for recovery of
reasonable sums for expenses incurred
and did
    not tie the measure of reasonableness to the cost regime used for civil
    proceedings.

The application judge carefully reviewed the costs
    claimed and reduced them by a third to an amount that he found was reasonable.
    This was what he was required to do under the GSA.

[13]

The appeal is dismissed. Simcoe shall pay the
    respondents their costs of the appeal in the agreed upon all-inclusive sum of $10,000.

K. van Rensburg J.A.

C.W. Hourigan J.A.

David Brown J.A.


