A recent case, MTCC No. 1067 v. 1388020 Ontario Corp., considered the ability of a condominium corporation to collect interest on unpaid common expenses and to be reimbursed its legal costs relating to the default.
Prior to the court action, the unit owner and the condominium corporation had agreed on the amount of the unpaid common expenses that were overdue and payable, but the parties were unable to agree on the interest payable on the overdue amount. The corporation’s by-law provided that all arrears would bear interest at the rate of 30% above prime, compounded monthly. The unit owner unsuccessfully tried to argue that the court should exercise its discretion and reduce the interest rate. The judge determined that there was “absolutely no reason” not to enforce the interest rate set out in the by-law, which was the contractual arrangement governing the parties.
As by-laws must be confirmed by the owners of a majority of the units before a by-law becomes effective, it is reasonable for a corporation to expect that the interest rate set out in the by-law will be enforced.
The unit owner and the condominium corporation in this case were also unable to agree on the amount of costs payable by the unit owner to the corporation. While costs are in the discretion of the court, the Ontario Court of Appeal had previously confirmed that costs must be reasonable in the circumstances as the principle of indemnity must be balanced with the fundamental objective of access to justice:
“Rather than engaging in a purely mathematical exercise, the judge awarding costs should reflect on what the court views as a reasonable amount that should be paid by the unsuccessful party rather than any exact measure of the actual costs of the successful litigant.”
While on the one hand, a successful litigant should not have to bear the costs of a lawsuit in which they are successful, on the other hand, if an unsuccessful litigant is required to bear all of the costs of the successful litigant, this would discourage parties from asserting or defending their rights in court.
In the end, in this case the corporation was awarded costs in the amount of $30,000, inclusive of fees, HST and disbursements. While the case did not specify how much costs the corporation was seeking, the judge determined that several categories of the costs claimed were not recoverable – so the corporation was not fully reimbursed for its legal costs.
Knowing that successful litigants may not be fully reimbursed for their legal costs, this should encourage parties to settle disputes rather than proceed to a full trial, as the legal costs will continue to escalate as the litigation moves forward.
