Executive Summary: Key Legal and Evidentiary Issues

• Morgan Investments Group Inc., 1000185781 Ontario Inc., and 1001259155 Ontario Inc. brought a motion for a stay of certain endorsements pending appeal, which was dismissed.
• Central to the costs dispute was whether costs should be awarded "in the cause" or fixed and payable immediately under Rule 57.03(1)(a) of the Rules of Civil Procedure.
• None of the three elements required to obtain a stay were established by the moving parties.
• ADI Development Group Inc. and Tariq Adi sought substantial indemnity costs of $45,680.08, which the court declined to award.
• Substantial indemnity costs were not warranted because the conduct of the moving parties did not rise to the level of malicious or reprehensible behavior.
• Partial indemnity costs of $26,950.90 were ordered payable to ADI Development Group Inc. and Tariq Adi within 30 days.

Facts of the case

The dispute arose from a costs endorsement following an unsuccessful motion for a stay. The Morgan Investments Group Inc. ("Morgan"), 1000185781 Ontario Inc. ("Affiliate Lender"), and 1001259155 Ontario Inc. ("100 Ontario") — collectively the Secured Lenders and Morgan — sought to stay certain endorsements of Justice Black dated October 7, 2025, October 30, 2025, and November 5, 2025, pending their appeal from his endorsement dated August 27, 2025. That motion for a stay was dismissed: The Morgan Investments Group Inc. et al. v. Adi Development Group Inc. et al., 2025 ONSC 6527. The matter before Justice Faieta concerned only the question of costs arising from that dismissed stay motion.

Procedural and contractual context

No specific policy terms or contractual clauses were directly at issue in this costs decision. The proceeding arose in the context of a court-ordered buy-out, which Adi Development Group Inc. and Tariq Adi ("ADG") alleged the stay motion was brought to disrupt at the eleventh hour. ADG also noted that the moving parties had rejected ADG's offer to post a $1.5 million charge on another real estate project in order to keep the buyout on track and avoid the stay motion entirely. These factual allegations were raised in the context of ADG's argument for substantial indemnity costs, not as standalone contractual claims.

Reasoning and analysis

Justice Faieta addressed two issues: whether costs should be awarded in the cause, and what amount of costs was appropriate. On the first issue, Morgan relied on Hanemaayer v. Freure, [2004] O.J. No. 4469, arguing that costs of motions for leave or stay pending appeal should generally be in the cause or reserved to the appellate court. The court rejected this reliance, finding that Hanemaayer dealt only with motions for leave to appeal and made no statement about motions for a stay pending appeal. Rule 57.03(1)(a) of the Rules of Civil Procedure directs that, on a contested motion, the court shall fix costs and order them paid within 30 days unless a different order would be more just. The court found no just reason to depart from that rule, noting that none of the three elements for obtaining a stay had been established and that it would be unfair to make ADG bear the risk of delayed cost recovery.

On the question of the appropriate amount, the court applied the principles set out by Roberts J.A. in Apotex Inc. v. Eli Lilly Canada Inc., 2022 ONCA 587, which require costs to be fair, reasonable, and proportionate — not merely a reflection of actual costs incurred. ADG sought substantial indemnity costs of $45,680.08, arguing that the stay motion was brought in bad faith, that the moving parties misled the court by characterizing the Secured Lenders as strangers to the litigation, and that the parties failed to establish a serious issue to be tried. Justice Faieta rejected the request for substantial indemnity costs, finding that Morgan had not misled the court and that the conduct reflected hard-fought but misguided litigation rather than the malicious or reprehensible conduct required to attract elevated costs under the standard articulated in Net Connect Installation Inc. v. Mobile Zone Inc., 2017 ONCA 766, and Davies v. Clarington (Municipality), 2009 ONCA 722. The court also declined to second-guess the time billed by ADG's counsel, noting that the matter was handled on an expedited basis. The court observed that the Secured Lenders' own partial indemnity costs of $28,146.63 exceeded ADG's partial indemnity costs of $26,950.90. While the Secured Lenders characterized the motion as simple with minimal materials, the court found this did not reduce ADG's entitlement to partial indemnity costs.

Ruling and overall outcome

Justice Faieta ordered that the Secured Lenders and Morgan jointly pay partial indemnity costs of $26,950.90 to Adi Development Group Inc. and Tariq Adi within 30 days. The court found it unnecessary to apportion costs between the Secured Lenders and Morgan, as Morgan had supported the relief sought and advanced its own arguments on the motion. Adi Development Group Inc. and Tariq Adi were the successful parties on the costs motion.