Executive Summary: Key Legal and Evidentiary Issues

• Three applicants sought damages of $280,000 for breach of a condominium purchase and sale agreement, plus the return of a $66,000 deposit and accrued interest of $463.81.
• A limitation clause in the purchase and sale agreement barred the applicants from recovering economic loss or expectation damages, effectively defeating their principal claims.
• Costs were awarded on a partial indemnity basis only, as the court found no reprehensible or scandalous conduct by the applicants that would justify substantial indemnity costs.
• Divided success on three main issues — partnership status, breach of contract, and interpretation of the exculpatory clause — warranted a modest reduction in the respondent's costs award.
• Significant unexplained discrepancies between the respondent's initial and final bills of costs, particularly in hours claimed and disbursements, raised concerns about potential overstatement.
• Proportionality was considered in light of a related $30-million proposed class proceeding commenced by the same applicants' counsel, which the court found influenced the scope and cost of the defence.

Facts of the case

On June 24, 2022, three applicants — Babak Shiralian, Samuel Anshilevich, and Alex Ilchenko — commenced an application before the Ontario Superior Court of Justice against Wyldewood Creek Inc., a condominium developer. All three had signed a purchase and sale agreement for a condominium unit to be built in Collingwood, Ontario. The respondent took the position that construction was impossible due to various issues with the City of Collingwood. The applicants sought $280,000 in damages for the alleged breach of contract, as well as the return of their $66,000 deposit plus accrued interest of $463.81. The deposit was refunded on March 17, 2023, during the course of the application. Interest, however, was not paid until after Justice McKelvey's ruling, which was released on April 30, 2025.

Contractual clauses at issue

The central contractual provision at issue was a limitation clause in the purchase and sale agreement, which stated that the purchaser would have no remedy or claim against the vendor for any economic loss, expectation of damages, or any other damages whatsoever. This exculpatory clause effectively shielded the respondent from all of the applicants' claims, save for the return of the deposit and the interest accrued on it. A separate provision extending the early termination date was also contested, as one applicant had not signed the amendment, raising a question as to whether the extension was binding on that individual.

Reasoning and analysis

In the April 30, 2025 ruling on the merits, the court addressed three principal issues. On the first issue — whether all applicants were partners — the court found in favour of the respondent. On the second issue — whether the respondent had breached the purchase and sale agreement — the court found in favour of the applicants. On the third and determinative issue — the proper interpretation of the exculpatory clause — the court again found in favour of the respondent, resulting in the dismissal of the applicants' substantial damages claims. Only the return of the deposit and the $463.81 in interest were granted.

At the costs hearing, the respondent sought substantial indemnity costs of $227,731.40 plus disbursements of $20,195.28, totalling $247,926.68, relying in part on a settlement offer of $10,000 made on September 19, 2024, during the hearing, which was subsequently withdrawn. The applicants argued that costs should not exceed $28,000. The court declined to award substantial indemnity costs, citing the Ontario Court of Appeal's decision in Davies v. Clarington (Municipality), 2009 ONCA 722, which held that elevated costs require a clear finding of reprehensible conduct — a threshold not met here. The court also noted that the applicants were within their rights to proceed in court and could not be penalized for declining arbitration. Applying the reasoning from Oakville Storage & Forwarders Ltd. v. Canadian National Railway (1991) and Murray v. Pier 21 Asset Management Inc., 2020 ONSC 5606, the court declined a distributive costs order but acknowledged that divided success warranted a modest reduction. The court further found that the respondent was not entitled to any costs for the period prior to March 17, 2023, given its unjustified delay in refunding the deposit; the applicants' partial indemnity costs for that period were agreed at $6,900, to be set off against the amount owing. The court also noted substantial discrepancies between the respondent's initial and final bills of costs — the claimed hours for cross-examination preparation and attendance rose from 22 to 37.9 hours, and disbursements increased from $3,799.46 to $20,195.28, a difference of $16,395.82 — which the court attributed to systemic billing problems in the respondent's counsel's office rather than to counsel personally. The hourly rate of $900 for senior counsel Andrew Parley, with 16 years of experience, was also found to exceed what an unsuccessful party could reasonably be expected to pay.

Ruling and overall outcome

Justice McKelvey ordered costs on a partial indemnity basis. Starting from a total partial indemnity claim of $147,738.78 (inclusive of HST), the court deducted $26,562 representing costs claimed prior to the deposit's return on March 17, 2023, reducing the figure to $127,631 inclusive of HST. A further deduction of $6,900 — representing the applicants' own costs up to that date — brought the net amount to $120,731 inclusive of HST. The court reduced this figure further to account for excessive hourly rates and potentially inflated hours, ultimately assessing a fair and reasonable costs award of $85,000 inclusive of HST. Disbursements were allowed at $3,799.46, based on the respondent's initial costs outline. The respondent, Wyldewood Creek Inc., was the successful party overall, and the applicants were ordered to pay a total of $88,799.46 within 30 days.