Executive Summary: Key Legal and Evidentiary Issues

• Two foreclosure petitions involving the same debtors disputed the appropriate scale of costs — full indemnity versus the "usual order" of tariff costs at Scale A.

• Under s. 20 of the Law and Equity Act, the court retains discretion to order special costs in foreclosure proceedings without a finding of reprehensible conduct worthy of censure.

• Multiple security documents including a loan agreement, general security agreement, indemnity agreement, and mortgage each contained covenants for full indemnity costs.

• A post-default forbearance agreement reaffirmed the full indemnity costs provisions and included a required prepayment of $15,000 designated as a "Professional Fee."

• The mortgage was entered into for commercial purposes over bare lands acquired for a commercial intent, namely development purposes, distinguishing it from a simple residential foreclosure.

• The court granted full indemnity costs but preserved the mortgagors' right to an accounting of the Professional Fees paid to prevent double payment.

The background and the parties involved

Beem Credit Union, the petitioner, brought two foreclosure petitions in the Supreme Court of British Columbia against several respondents, including Global City Properties (Aloha Estates) Ltd., 1321393 B.C. Ltd., Global City Properties Ltd., Chuck Day Enterprises Ltd., Jaswant Singh Dhillon, Jaswinder Kaur Dhillon, The Crown in Right of British Columbia, and All Tenants or Occupiers of the Subject Lands and Premises. Both petitions, filed under Dockets H251002 and H251004, sought separate orders nisi but involved the same debtors. The hearing took place before Associate Judge K. Robertson in Vancouver on January 15, 2026.

The nature of the dispute

The sole issue in dispute was the appropriate scale of costs to be awarded in the foreclosure proceedings. The petitioner, Beem Credit Union, sought indemnity costs as provided for in the lending and security documents. Counsel for the mortgagor opposed anything other than what is referred to as "the usual order for costs," which would result in tariff costs assessed at Scale A, in accordance with s. 20 of the Law and Equity Act (LEA) and s. 5 of Appendix B of the Supreme Court Civil Rules. The parties further disputed what the starting point is for a cost analysis — whether the starting point is that costs are at Scale A, with the onus being on the petitioner to establish the higher scale or type of costs, or whether an initial analysis is to be undertaken by the court before that determination occurs.

The legal framework for indemnity costs in foreclosure proceedings

Associate Judge Robertson drew on his own prior decision in Blueshore Financial v. 1134038 B.C. Ltd., 2023 BCSC 2304, where he had provided an overview of the background of indemnity costs orders, including a summary of the various cases that have considered the issue in the context of foreclosure matters, noting the inconsistent treatment that had been given in that respect. The judge reiterated that in foreclosure proceedings, the court retains the discretion under the LEA to order special costs without a finding of reprehensible conduct worthy of censure, just as it retains the discretion to order party-and-party costs notwithstanding that a mortgage term or covenant provides for special costs. The mandatory nature of Appendix B is triggered only once that discretion has been exercised and an order for party-and-party costs has been made.

The court also considered the Court of Appeal's comments in Peace River Partnership v. Cardero Coal Ltd., 2023 BCCA 351, which held that where a contractual indemnity provision meets the threshold test of "clearly and unequivocally" establishing the right to indemnification, that provision will be presumptively enforceable, and the burden shifts to the party opposing indemnification to establish why the court should exercise its discretion to depart from the terms of the contract. Additionally, the court referenced Halifax Financial Corporation v. Edgemont Hollingsworth Heritage Revitalization Corporation, 2024 BCSC 751, which noted that the starting point in foreclosures is an award of ordinary costs but that there are circumstances that support departing from that starting point where there is a contractual full indemnity costs provision. The court in that decision outlined several non-exhaustive factors, including the debtor's promise in the mortgage to pay indemnity costs, whether the mortgage was given in a commercial transaction involving a sophisticated debtor, the complexity of the proceedings, conduct of the debtor that unnecessarily lengthened or delayed the proceedings, the inadequacy of the tariff measured by the discrepancy between ordinary costs and full indemnity, and whether the debtor neglected a reasonable opportunity to settle.

The contractual provisions and the forbearance agreement

The lending transaction involved much more documentation than a residential Form B mortgage. Although the security documentation was not as extensive as what is sometimes seen for construction and development loans, it included documents such as a separate loan agreement, a general security agreement, and an indemnity agreement, in addition to the mortgage. Prior foreclosure proceedings had been commenced, and the parties entered into a forbearance agreement. The forbearance agreement was entered into post-mortgage default and contained an acknowledgment as to the validity and enforceability of all of the terms in the security agreements, each of which provided for a full indemnity of costs. The forbearance granted the borrowers a lengthy two-year period to May 8, 2026 had there been no default thereunder.

The forbearance agreement included its own indemnity costs covenant requiring the mortgagors to "covenant and agree to indemnify and save harmless the lender and the lender parties from all claims arising out of the forbearance agreement" and to indemnify the lender "for any and all legal fees on a solicitor and own client full indemnity basis and other professional service fees and disbursements plus applicable tax in connection with the forbearance agreement." Under the covenant to pay provisions, the mortgagors further covenanted to "indemnify and reimburse the lender for all fees and expenses for legal and other professional services incurred by the lender on a solicitor and own client full indemnity basis," with all such amounts to be added to the principal of the loan and repaid with the indebtedness plus interest. One of the further terms of forbearance was a required payment of $15,000 "on account of the Professional Fee," with the amount being slightly different in one of the subject actions. The court was advised that those payments were in fact made.

The court's analysis and ruling

The court observed that under the plain wording of s. 20 of the LEA, the starting point is the contractual term. However, the court noted that the use by the courts of the phrase "usual order" is the recognition that in the gross majority of foreclosure matters, particularly residential mortgage foreclosures, the circumstances reasonably justify a departure from the contractual term in accordance with s. 20 of the LEA without any consideration by the court being needed, unless there is a request that the court not exercise its discretion under the LEA in favour of upholding the contractual costs provision.

Turning to the applicable circumstances, the court found that the mortgage was entered into for commercial purposes. It was not over commercial lands, but instead the lands were bare lands which were acquired for a commercial intent, namely development purposes — the intent was investment in a commercial enterprise. The proceedings also had some history, including the prior foreclosure proceedings and the forbearance agreement. A significant factor was the forbearance agreement, by which there was a confirmation of the full indemnity of costs post-default. The court agreed that such a provision should not effectively stand as a veto over the "usual rule," but held that there is some weight to be given to a forbearance agreement or an agreement for indemnity costs entered into post-default. By entering into the forbearance agreement, the petitioner had altered its rights for recovery, including a significant time lapse of two years, and this consideration was granted based on the promises and covenants of the debtors, including the indemnity provisions in respect of costs.

The court acknowledged that some factors did not weigh in favour of indemnity costs, given the lack of complexity of the transaction and the lack of evidence with respect to the conduct of the parties being something that caused costs to increase other than by virtue of the preparation and entering into of the forbearance agreement — which likely was taken into account in setting the Professional Fee. Notwithstanding this, the alteration of positions when added to all of the circumstances of the matter led the court to conclude that this was an appropriate matter to grant full indemnity costs. Associate Judge Robertson ruled in favour of Beem Credit Union, granting indemnity costs on the basis that nothing is precluding the owners from requiring an accounting as to the Professional Fees paid, to ensure that those payments do not result in a double payment. No exact total amount of costs was determined in this ruling.