Executive Summary: Key Legal and Evidentiary Issues

• The dispute involved motions for possession of real property and the removal of a certificate of pending litigation related to a vendor take-back mortgage.

• The plaintiff prevailed in its motion to regain possession and sought solicitor-and-client costs based on contractual provisions in the mortgage agreement.

• The defendant unsuccessfully opposed both possession and the discharge of the CPL, prompting a costs award against it.

• The court applied Rule 57.01 and Section 131 of the Courts of Justice Act to determine reasonable costs, balancing proportionality and complexity.

• Costs were assessed based on divided success across multiple motions, including an adverse finding against the defendant’s interlocutory actions.

• The court granted the plaintiff $10,500 in costs, plus HST and disbursements, emphasizing the clarity of the mortgage's cost recovery clause.

Facts of the case

In 2642948 Ontario Inc. v. Jonny’s Antiques Ltd., the litigation arose out of a vendor take-back mortgage agreement tied to a share purchase transaction. The plaintiff, 2642948 Ontario Inc., had sold its shares in a company and financed the purchase by taking back a mortgage on the company’s property. The defendant, Jonny’s Antiques Ltd., was the purchaser. Following a breakdown in the business relationship and an alleged default under the mortgage, the plaintiff initiated proceedings to recover possession of the property and enforce its security rights.

As part of the litigation, the plaintiff brought motions to obtain possession of the mortgaged property and to discharge a certificate of pending litigation (CPL) registered by the defendant. Both motions were successful. The court issued an order for possession and allowed the CPL to be removed. The plaintiff subsequently sought costs on a solicitor-and-client basis, as provided for in the mortgage agreement.

Court’s analysis and findings

Justice Kristjanson of the Ontario Superior Court of Justice considered the parties’ submissions on costs under Rule 57.01 of the Rules of Civil Procedure and Section 131 of the Courts of Justice Act. The plaintiff claimed $14,227.38 in total, based on solicitor-and-client rates reflecting the enforcement provision in the mortgage. The defendant countered that no costs should be awarded, arguing that the CPL had some merit and that divided success should preclude full indemnity.

The court found that the plaintiff had been clearly successful on the two motions decided on February 29, 2024. The court order had required the defendant to vacate the property and discharged the CPL, which had encumbered the title. The plaintiff had also made a reasonable Rule 49 offer in advance of the motion, which the defendant ignored, contributing to unnecessary litigation costs.

Although the mortgage included a provision entitling the mortgagee to solicitor-and-client costs on enforcement, the court held that such clauses are not determinative. Instead, courts retain discretion to fix costs in accordance with the principles of fairness, proportionality, and reasonableness. The court also considered that the parties had success on different motions in the broader proceeding, and some issues had yet to be resolved.

Ultimately, the court awarded the plaintiff $10,500 in costs for the February 2024 motion, plus HST and disbursements. This amount was determined to be reasonable, proportionate, and reflective of the success achieved by the plaintiff in its bid for possession and CPL discharge.

Outcome and procedural posture

The court granted the plaintiff a partial costs award in the amount of $10,500, plus HST and disbursements, payable by the defendant. The decision confirms that while contractual provisions for solicitor-and-client costs are persuasive, they do not override the court’s discretion under Ontario’s cost rules. The ruling reinforces the principle that costs must be proportionate and reflective of actual success on the issues litigated. The broader litigation between the parties remains ongoing, but the plaintiff prevailed on the key possession and CPL-related motions at this stage.