January 17, 2014
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Client: Do I have a good case?
Lawyer: Yes.
Client: How much is all this going to cost?
Lawyer: I don't know exactly.

This is obviously a crude oversimplification of an exchange that takes place (or should take place) at the onset of any litigated dispute, but that does not make it any less true. Samuel Butler once said, "It is better to have loved and lost than never to have loved at all." He also said, "In law, nothing is certain except the expense." Some people might jokingly suggest the credo of lawyers to be "it is better to have litigated and lost, than never to have litigated at all", but that's another story.

In all seriousness, the issue of costs is an extremely important factor to consider not only at the beginning of a dispute, but at regular intervals over the course of its duration. It is a reality that, in certain disputes, the high cost of legal services, the exposure to the other party's costs and the fact that successful litigants seldom recoup all of their costs, can sometimes make the difference between deciding whether to proceed, or not. Every case requires a careful evaluation of costs in the context of its overall circumstances and periodic reviews are required to determine if the assessment of the case, and consequently the potential impact of costs, has changed. This, for example, will include factors such as the amount in dispute, the relative strength of the case, as well as a multitude of other potential issues. Also, cases of any appreciable duration are usually in a constant state of evolution as circumstances change – new evidence comes to light, witnesses forget, witnesses suddenly remember, parties go bankrupt, and the list goes on.

The complexity of the rules surrounding costs typically mirrors the complexity of the cases that those rules are meant to govern. There are principles of "substantial indemnity" and "partial indemnity" to consider. There are the complicated factors surrounding the impact of offers to settle on costs, including the timing of such offers. Other factors that the Courts take into consideration in the award of costs under the rules of Court include the principal of indemnity, the amount an unsuccessful party can be expected to pay, the amount claimed, the amount recovered, the apportionment of liability, the complexity of the proceeding, the importance of the issues, the conduct of the parties resulting in delay, and several other factors concluding with "any other matter relevant to the question of costs". There is also the principle of "proportionality" that was infused in the rules of Court beginning in 2010 and that is very much in vogue, which can significantly influence cost awards. Last, but certainly not least, there is the overriding discretion of the Court in the matter of costs. In sum, there are practically no bounds to the factors a Court can choose to find relevant in determining the amount in costs one party should be ordered to pay another.

What does this mean for condominium corporations? Condominium law is a different animal altogether – it is replete with its specific intricacies and particularities, and the issue of costs is no exception to this rule. As if there weren't enough factors to keep in mind, the unique provisions of the Condominium Act (the "Act") add to the already busy mix on the subject of costs. The rules and principles discussed in the preceding paragraphs apply to all litigation, but there are some notable distinctions for Court cases implicating condominium corporations.

In the matter of applications to Court for compliance with the Act, condominium corporations benefit from a special privilege that is otherwise unavailable to other litigants. For instance, subsection 134(5) of the Act confirms that 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, will be added to the common expenses for the unit. Providing that the dispute is not captured by the mandatory mediation/arbitration provisions of the Act, a condominium corporation is in a position under the Act to claim "additional actual costs" and add such costs to the common expenses. The plain wording of the section seemingly grants condominium corporations broad powers of recovery of all their costs. The section has also been applied favourably towards condominium corporations by the Courts for a number of years now, commencing in 2005 with the decision of the Court of Appeal of Ontario in Metropolitan Toronto Condominium Corp. No. 1385 ("MTCC #1385") v. Skyline Executive Properties Inc.

However, Courts are often uncomfortable with the carte blanche type of language conferred by Section 134 in the matter of costs, and will often endeavour to reign-in the apparent straight-forward language of the Act with respect to additional costs incurred. Generally stated, the concern is that condominium corporations and their counsel will claim excessive amounts that are out of all proportion to the scope of the dispute, and which run counter to the general Court principles applying to costs.

Such narrowness of interpretation of the otherwise inclusive costs provisions of the Act was evident in the recent Divisional Court's decision in Durham Standard Condominium Corporation No. 187 and Morton (DSCC #187), released in September 2012. In that decision, the Court wrestled with the meaning of "additional actual costs." It was conceded that the higher Court had confirmed the ability of condominium corporations to recover actual costs (including legal and non-legal expenses) incurred by condominium corporations in obtaining the order, beyond a costs award granted by the Court at the time of final determination of the dispute. The Divisional Court stressed that the additional actual costs of the legal variety must be properly incurred. It was determined that reasonableness should govern whether costs are properly incurred. I would question whether there is any practical difference between "reasonableness" as per the Divisional Court's decision in DSCC #187, and the fairly recent notion of "proportionality" that pervades the general Court rules on costs.

In DSCC #187, the Divisional Court ultimately found that details were lacking in terms of "additional actual costs" in the evidence before the Application Judge and that the information upon which she based her initial costs award was not sufficiently detailed to allow her to make the costs award in question. For instance, time dockets and corresponding invoices paid by the condominium corporation could have been provided to show the time committed to the file, but these were not presented to the Court. The message sent by the Divisional Court in this decision appears to be that if "additional actual costs" are going to be claimed, detailed back-up documentation should be put before the Court. The Court respects the principles laid out by the Court of Appeal in 2005, but narrows them by making it known that specificity of "additional actual costs" will be required in order to be entitled to those amounts in a Court order.

Also in 2012, in the matter of Toronto Standard Condominium Corp. No. 1633 and Baghai (TSCC #1633), the Court of Appeal again reviewed the issue of legal costs through the prism of the Act. In that case, the Court was called upon to review the issue of what constitutes additional actual costs "in obtaining the order" within the meaning of subsection 134(5) of the Act. Running alongside the main dispute in that case was some associated litigation in the ongoing quarrel between the parties. TSCC #1633 defended itself against those ancillary proceedings and the Application Judge found that the costs incurred to deal with those issues were separate from costs incurred "in obtaining the order". Consequently, those costs were not fully recoverable. The Application Judge also found that the "additional actual costs" were subject to the Court's discretion on costs and the principles prescribed by the Rules of Civil Procedure set out above. The Court of Appeal agreed with the Application Judge that not all of the costs of different components of a litigated dispute between a condominium corporation and an owner can be necessarily considered as being incurred "in obtaining the order".

With respect to whether the general principles and the Court's discretion on costs should have any bearing, the appellate Court did not dismiss or affirm the ability of an Application Judge to consider those principles. Instead, the Court focused on what the Application Judge meant by "fair and reasonable" in dealing with "additional actual costs". Did she mean the amount that the unsuccessful party, expected to pay in costs to the successful party or did she mean the amount the successful party expected to pay its own lawyer? Relying on the decision in MTCC #1385, the latter was the correct test, and the Court of Appeal sent the issue back to the Application Judge for reconsideration.

There is no "cookie-cutter" or "one-size fits all" approach to efforts at managing the outcome of costs – every case must be given individualized attention and this is also true in condominium law. In the end, there is a balancing that takes place – condominiums must be able to enforce the Act and their governing documents and know they have a reasonable expectation of recovering the fees required to deal with the party that has committed the infraction. On the other hand, parties must have the knowledge that the Court will adjudicate their dispute while placing some limit on the amount of costs to which they are ultimately exposed.

It must also be remembered that only a mere fraction of Court cases relate to condominium law, so it would not be unusual for Courts to be unfamiliar with the unique provisions of the Act and the privileged position enjoyed by condominium corporations in the area of costs. The Courts are reluctant to distance themselves from the general principles governing costs, particularly at a time when access to justice is such a hot topic, and it is up to counsel to point out the particular rules surrounding costs in condominium law cases. It is also critical to have a well-documented file in order to convince the Court that the fees were indeed properly incurred in the circumstances of the case, and that the condominium corporation is fully justified in claiming the amount as against an owner. In essence, it goes a long way if the lawyer "shows his or her work", as the saying goes. Also, condominium corporations need to be aware that costs considered not to have been incurred "in obtaining the order”, may not be awarded in full and/or fully recoverable by way of common expenses.

In spite of the various issues outlined above, there is no question that there is additional legislated authority that is exclusive to condominium corporations in matters involving costs. However, even in condominium law cases, it is important to always be mindful of the general principles governing costs, and parties ignore them at their peril. Particularly, the effective use of offers to settle is indispensable in litigation. Parties who are able to show they made a deliberate effort to reasonably settle their dispute, particularly early on, will almost always be rewarded for having done so.

This content is not intended to provide legal advice or opinion as neither can be given without reference to specific events and situations. © 2017 Nelligan O’Brien Payne LLP.