FORECLOSURES—2009
PAPER 7.1
Costs and Protective Disbursements
These materials were prepared by Brian C. Markus of Brian C. Markus Law Corporation, Vancouver, BC, for the
Continuing Legal Education Society of British Columbia, April 2009.
© Brian C. Markus
7.1.1
COSTS AND PROTECTIVE DISBURSEMENTS
I.
Costs ................................................................................................................................... 1
A. Background............................................................................................................................. 1
B. The Rule ................................................................................................................................. 1
C. The Exceptions....................................................................................................................... 2
D. Assessment ............................................................................................................................. 3
1. Rule 57............................................................................................................................ 3
2. Appendix B..................................................................................................................... 3
a. Fee Items ................................................................................................................ 3
i.
Number of Units.............................................................................................. 3
ii.
Scale................................................................................................................. 4
b. Disbursement Items ................................................................................................. 4
c. Taxes ....................................................................................................................... 4
II.
Protective Disbursements...................................................................................................... 4
III.
Appendix “A”—Petitioner’s Bill of Costs ............................................................................ 7
I.
A.
Costs
Background
Almost all mortgages provide that mortgagees are entitled to pay their legal expenses associated with
enforcement of their mortgages, and add those expenses to the mortgage balance. Such provisions were
normally enforced by the court (see Penvern Investments Ltd. v. Whispering Creek Cattle Ranchers Ltd.
(1979), B.C.D. Civ. 2768-01) prior to the pronouncement of s. 20 (formerly s. 18.2) of the Law and Equity
Act, R.S.B.C. 1996, c. 253 (the “Act”). The law was that such contractual provisions were a limitation on
the court’s normally wide discretion in the matter of costs Re: Law and Equity Act and In The Matter of
Several Proceeding (1986), B.C.D. Civ. 2768-16. The contract was to govern in the absence of special
circumstances CIBC Mortgage Corporation v. Lalji (1986), B.C.D. Civ. 27628-27 (C.A.).
B.
The Rule
The 1986 amendment to the Act changed the law. Section 20 provides:
In a foreclosure in which costs are awarded, the Court may, despite any covenant or
term of a mortgage … instead of making an Order in accordance with that covenant or
term, order that costs be payable … on a party and party basis … and the Court may
make no Order for costs …
It was clear that the Legislature did not want the court’s normal wide discretion as to costs limited by
provisions in mortgages any longer. Since the pronouncement of s. 20 the courts have largely restricted
mortgages to party and party costs. In Re: Law and Equity Act, the Court held that the mischief and
defect which s. 18.2 was to remedy was to remove the limitation that contractual provisions as to costs in
mortgages place on the Judge’s otherwise wide discretion and that costs in foreclosure proceedings are
now on the same footing as costs in any other civil proceeding. The presence of costs provisions in
7.1.2
mortgages is a factor to be taken into account by the court in awarding costs in foreclosure proceedings
but it is only a factor and is not to govern the awarding of costs (Lalji).
If a mortgagee’s conduct is unreasonable, the courts will deny a mortgagee its costs (Bank of
Montreal v. Duncan (1986), B.C.D. Civ. 2768-17).
In this case, the conduct of the mortgagee consisted of making improper demands for payment of
arrears which did not in fact exist. It only became apparent at the hearing that the demand for
payment was incorrect. Notwithstanding that there was one payment in arrears outstanding, the
Court declined to make an order for costs in favour of the petitioner and left open the question as to
the entitlement to costs of the respondent mortgagor.
C.
The Exceptions
Notwithstanding the foregoing, the court has awarded increased or special costs in foreclosure
proceedings since 1986 in the following circumstances:
(1)
Vancouver City Savings Credit Union v. Clifford Edward Alphonse Sigouin and others (24 January
2001), Vancouver Registry Action No. H000150, Scarth J.
This was a case in which the subsequent mortgagee relied on s. 14(1) of the Law and Equity Act
to compel the assignment of the mortgage and foreclosure action of the Petitioner. The
petitioner refused to assign because its request for payment of solicitor-client costs in
consideration was refused. The Court ruled that s. 14(1) of the Law and Equity Act does not
require a prior mortgagee to assign its mortgage and action to a subsequent mortgagee and in the
result upheld the right to be paid full solicitor-client costs in such circumstances.
(2)
Security Pacific Bank of Canada v. Crippen Engineering (1987), B.C.D. Civ. 2768-13, where the
loan was a commercial one and the lender’s security was a debenture instead of a mortgage.
(3)
Household Trust Co. v. Warren (1997), B.C.D. Civ. 640.32.60.20-01, where the proceeding is
settled before Order Nisi is granted.
This was a proceeding where the Court ordered that solicitor-client costs are due and payable
where the Order Nisi has not yet been granted. Master Brandreth-Gibbs found that s. 18(2) of
the Law and Equity Act did not apply in such circumstances. She found that the right to
payment on such accounts was subject to a review pursuant to the Legal Profession Act. This
reasoning differs somewhat from Andreff v. Toquart Recreational Village Ltd. (1992), B.C.D. Civ.
2769-02. In that case, the Court found that s. 18(2) of the Law and Equity Act did not apply.
The subsequent mortgagee seeking an Order for Conduct of Sale was entitled to special costs
which would be subject to a Registrar’s assessment. Further, in Granville Savings and Mortgage
Corporation v. Ireland (1995), B.C.D. Civ. 2768-02, the Court refers to the Andreff v. Toquart
Recreational Village Ltd. (1992), B.C.D. Civ. 2769-02, and found the Registrar’s decision to be
correct and in the result allowed Scale 5 costs to the respondent’s mortgagee.
(4)
Raith v. Jones (1996), B.C.D. Civ. 2768-04, where the loan is a vendor take-back mortgage and
the lenders are not institutional.
(5)
Canadian Imperial Bank of Commerce v. Cedar Hill Properties Ltd. (1996), B.C.D. Civ. 3583-10.
In this case the Court found that because of the difficult and complex nature of the case at hand
and its importance to the community generally costs were increased to 70% of special costs.
(6)
Royal Trust Corporation of Canada v. Patterson (1990), B.C.D. Civ. 2768-01, where a mortgagor is
granted relief from acceleration and the mortgagee has acted reasonably.
(7)
Saskatchewan Trust Co. v. Kalanj (1989), B.C.D. Civ. 2768-07, where a mortgagor refuses to
renew the mortgage to take advantage of an interest rate lower than prevailing rates.
7.1.3
(8)
Bank of Montreal v. First Canadian Land Corporation Ltd. (1989), B.C.D. Civ. 3711-01, where the
mortgagor’s conduct has been to delay the litigation unduly and put the lender to unnecessary
legal expense and in such a case, the mortgagee’s costs form part of the amount required to
redeem (355498 B.C. Ltd. v. Namu Properties Ltd. (unreported, December 21, 1998), Victoria
Registry action 96-3327, Scarth J.)
(9)
In Royal Bank of Canada v. Lothar Idler et al. (2004), 33 B.C.L.R. (4th) 93 (S.C. Master) 1524, the
petitioner obtained Order Nisi, but on subsequent applications, the Orders were silent as to
costs, and the Registrar found that he could not assess costs when the order had not specifically
provided for same(see also, Maurice v. Maurice, [1994] B.C.J. No. 2843 (S.C.)).
D.
Assessment
The procedure for assessment of costs is set forth in Supreme Court Rule 57 and Appendix B to the
Rules.
1.
Rule 57
Costs are normally assessed before the Registrar (Rule 57 (2)) (but see Rule 57 (23)).
A party who wishes to have costs assessed obtains an Appointment from the Registrar by telephone
and prepares and files a Bill of Costs in Form 67 and an Appointment in Form 24. Filed copies of the
Bill of Costs and Appointment must be delivered to (not served on) the party(ies) against whom costs
are to be assessed (and as good practice to all other parties of record) at least five days before the
assessment. The Rules relating to delivery and calculation of time apply. Although delivery is not
necessary where the party against whom costs are to be assessed has not filed an Appearance, the better
practice is to mail copies of the Bill of Costs and Appointment to that part’s last know address.
In assessing costs, the Rules and the jurisprudence direct the Registrar to inquire into whether or not a
particular claimed item is “necessary” and “reasonable.”
Unless the court orders otherwise, costs follow the event. Thus, a mortgagee that obtains Order Nisi
in a foreclosure proceeding is entitled, absent an order to the contrary, to its costs of the proceeding.
Unless the court orders otherwise, a party making a motion that is granted, whether or not it is
opposed, is entitled to costs in the cause. Unless the court orders otherwise, a party opposing a
motion that is refused is entitled to costs in the cause.
Evidence at an assessment can be either by affidavit or viva voce, or both.
At the conclusion of an assessment the Registrar must certify in Form 68 the amount of costs awarded
and the party assessing costs must file the certificate. The certificate has the force of a judgment.
2.
Appendix B
a.
Fee Items
Under Appendix B, there are two variables and a number of regulations that determine the total
amount of fee items awarded. The two variables are the “number of units” and the “scale.”
i.
Number of Units
The number of units is determined by the Registrar after hearing the evidence at the assessment and
within ranges established by the tariff in Appendix B. Some tariff fee items are fixed, allowing the
Registrar no discretion. Some tariff fee items have a range of units; in assessing those, the Registrar has
regard to how much time should have been spent. Since the tariff applies to all proceedings, it would
be very unusual to be awarded the maximum number of units within range of units (or close to the
7.1.4
maximum) for an item in a foreclosure proceeding; presumably, in order to maintain the integrity of the
tariff, the maximum should be reserved for complex litigation.
Where in a tariff item a number of units is allowed for each day of attendance in court, but the time spent
during the day is not more than two and one half hours, only half of the number of units are allowed for that
day. The same regulation applies to tariff items for preparation for such attendances. It would be unusual in a
foreclosure proceeding for a motion or hearing to exceed two and one half hours; essentially, all such tariff
items in foreclosure proceedings will accordingly be assessed at half the number of fixed units allowed.
ii.
Scale
The scale is the dollar figure that is multiplied by the total number of units awarded to determine the total
amount of the fee items awarded. Until 2006, costs were assessed on five scales; $40 (scale 1), $60 (scale 2), $80
(scale 3), $100 (scale 4), and $120 (scale 5). With the amendment made in 2006, there are now only three
scales; $60.00 (scale A), $110.00 (scale B), and $170 (scale C).
Paragraph 6 of Appendix B provides:
In a proceeding under Rule 50, uncontested at the hearing on any issue except costs, the
costs shall be assessed under scale A.
So in foreclosure proceedings, costs are normally assessed under scale A ($60 per unit). Scale A is for matters
of less than ordinary difficulty. Costs are normally assessed under scale B ($110 per unit) if the hearing is
seriously contested.
The Legislature’s use of the word “shall” in para. 6 of Appendix B seems to make it clear that if the Order
Nisi is pronounced unopposed, then the costs of the entire proceeding will be assessed at scale A. But that
may not be correct. In Canadian Imperial Bank of Commerce v. Sovereign Life Insurance Co. (1995), B.C.D.
Civ. 2768-03 (S.C.), the Court refused to allow the petitioner any costs (of the proceeding or related CCAA
and other foreclosure proceedings) apart from scale 2 costs as provided in Order Nisi. The Court of Appeal
(1998, B.C.D. Civ. 640.32.60,20-01) refused an appeal of that decision, although it did say in obiter that Rule
7.1 of Appendix B would allow the court in appropriate circumstances to order increased costs
notwithstanding an entered Order Nisi allowing only scale 2 costs. The Court did not allow increased costs
in that case because the issues dealt with on appeal were not of general importance, and the petitioner was
unsuccessful in the issues it had advanced on the appeal; the disparity between the scale 2 costs and the
petitioner’s legal expense (over $100,000) was not sufficient on its own to warrant increased costs.
b.
Disbursement Items
Disbursement items as well as fee items are in assessments of costs subject to the “reasonable and necessary”
test.
As guidelines, photocopies are allowed at $0.25 per page and facsimile transmissions are allowed at $0.35 per
page (see Master McCallum’s Notice of August 18, 2009).
c.
Taxes
GST and PST are allowed on fee and disbursement items.
II.
Protective Disbursements
Almost all mortgages provide that mortgagees are entitled to make various payments to protect the
mortgaged property, and add the monies paid to the mortgage balance as protective disbursements. Orders
Nisi should likewise provide that mortgagees can apply to the court for summary accountings of protective
disbursements incurred after Order Nisi. Such provisions are referred to as “further summary accounting”
provisions. Such a provision was considered at length in CIBC Mortgage Corporation v. Duguay (1991), 49
C.P.C. (2d) 129. The Court held that:
7.1.5
(1)
Expenses necessarily incurred by the first mortgagee to protect the mortgaged
property were recoverable as protective disbursements.
(2)
Protective disbursements are not “further advances” within the meaning of
s. 24 (1) of the Property Law Act, so such expenditures do not constitute
tacking.
(3)
Property taxes are a proper protective disbursement. So are appraisals and
reasonable property inspection fees.
I cannot see that bi-weekly inspections of the subject property could be considered to
be excessive or unnecessary, particularly in light of the nominal amount charged (in
this case, $25 per inspection). A prudent lender cannot be denied its cost of
conducting twice monthly inspections of its security in circumstances where the
security is in jeopardy. [para. 51]
In Dana Ventures Inc. v. Burkart, [2000] B.C.J. 569, the Court held as it did in the CIBC Mortgage
Corporation v. Duguay (1991), 49 C.P.C. (2d) 129, that the “liberty to apply” provision found in most
order nisi does not constitute a carte blanche for the mortgagee to accumulate a “wish list” of expenses
and charges. The Court found that the expenses incurred in fixing up a messy property to enable a
sale to take place was not necessary “to protect the Petitioner’s security … nor can I conclude, on the
evidence before me, that the expenses … were necessary to sell the property for a price that would
redeem the Petitioner’s mortgage and pay its reasonable costs.”
The Court goes on to say that in circumstances where the Petitioner is not sure as to the
appropriateness of significant expenses, it is best to seek “a remediation order or which in effect is the
Court’s permission to incur such expenses before hand.”
In Granville Savings and Mortgage Corporation v. Ireland (1995), B.C.D. Civ. 2768-02, the Court held
that:
(1)
Section 18.2 of the Law and Equity Act does not operate where a mortgagee
does not initiate a foreclosure proceeding (following Andreeff, supra).
(2)
A $150 discharge fee is an appropriate charge for preparing and executing a
discharge.
(3)
A mortgagee is entitled to its administrative costs of a collection on provision
of a breakdown of those costs.
(4)
All protective disbursements must be reasonably and necessarily incurred.
In Bank of Nova Scotia v. Sloan (1997), C.D.W.L.D. 2848, the Court held that:
(1)
One appraisal is an allowable protective disbursement. Subsequent appraisals
may not be allowable unless it can be shown they are reasonably and necessary.
In this case, three of the Petitioner’s four appraisals were not allowed.
(2)
Property taxes and utilities added to property taxes are allowable protective
disbursements.
(3)
Blanket insurance is an allowable protective disbursements.
(4)
Bi-weekly inspection (total almost $2,000) were not allowable protective
disbursements, notwithstanding Duguay, supra. In this case:
(a)
the Petitioner was collecting rents and knew the property was occupied;
(b)
the property was a short distance from the office of the Petitioner;
(c)
there was no evidence to show that bi-weekly inspections were necessary;
merely that they were the Petitioner’s standard practice.
7.1.6
In Idler, Master Baker considered some claims for protective disbursements, and concluded as follows:
(1)
Some, but not all visits to the property by Keyfacts Enterprises Canada
(“Keyfacts”) were allowed, where the subject property was a rural property
located on a lake near Prince George, British Columbia. The initial security
check was allowed as was the sum paid by Keyfacts for changing the locks, but
a report and photos were considered to be included in the inspection charges
and were disallowed.
(2)
Snow removal was not allowed as the Court was given no evidence that snow
removal was essential or well advised in the preservation of the security.
(3)
The Court did not allow a claim for lawn care, and considered it unlikely that
lawn care, gardening or landscaping would qualify as protective disbursements.
(4)
Spring clean up was considered a cosmetic matter and even if it may have made
the property more marketable, was not protective, and the charge was not
allowed.
(5)
A winterizing charge was considered a necessary protective disbursement.
7.1.7
III. Appendix “A”—Petitioner’s Bill of Costs
7.1.8
7.1.9