Executive Summary: Key Legal and Evidentiary Issues

• Enforcement of a commercial loan following default on a ~$14M real estate development financing, with judgment already granted for principal and accrued interest.

• Interpretation of a loan agreement costs clause broad enough to cover enforcement proceedings, aligned with typical lending provisions and supported by authority.

• Court’s residual discretion to fix costs despite contractual wording, focusing on fairness and reasonable expectations under Rule 57.

• Rejection of borrower’s “bad faith” narrative as unsubstantiated, narrowing issues to quantum and scale of costs.

• Scale of costs set at substantial indemnity given sophistication of parties, size of debt, and context of a major commercial development.

• Final costs fixed at $108,000 inclusive, payable forthwith by the respondents.

Facts
The dispute arose from a loan of approximately $14 million extended by the applicant to finance a condominium project in Ottawa undertaken by the respondent borrower and his companies. The applicant previously obtained judgment for the principal and accrued interest on the loan, and the present decision addresses only the award of costs flowing from that success.

Legal framework on costs
The loan agreement contained a clause permitting the lender to recover costs incurred in the enforcement or protection of its rights. The court held this language was sufficiently clear to encompass costs for enforcing the loan while in default, noting that such provisions are common in loan agreements and citing appellate authority to that effect. At the same time, the court emphasized it retains broad discretion to fix costs that are fair, reasonable, and appropriate, having regard to the circumstances and the paying party’s reasonable expectations under Rule 57.

Positions of the parties
The applicant sought full indemnity costs of $125,890, relying on the loan agreement. The respondents argued that the agreement did not clearly and unequivocally provide for full indemnity and contended that the applicant’s hourly rates were too high and overall fees excessive compared to the respondents’ costs. They proposed an award of $50,000 plus HST and disbursements.

Court’s analysis
The court accepted that the contractual costs clause was sufficiently clear to allow recovery of enforcement costs in principle. Nevertheless, exercising its discretion, the court assessed what level of indemnity was appropriate in light of Rule 57 factors: the very large debt, the lack of serious dispute over the amount owed, the respondents’ unsuccessful allegations of bad faith, the sophistication of both sides in commercial real estate and lending, and the involvement of experienced counsel. The matter was characterized as a major commercial real estate case of medium complexity, and the court also observed that the borrower might ultimately realize a significant profit on the project.

Outcome
Costs were awarded to the applicant on a substantial indemnity basis, fixed at $108,000 inclusive of fees, HST, and disbursements, payable forthwith by the respondents.