Civil Backlog And The Cost Of Doing Nothing: Ontario Courts Show Increasing Willingness To Order Costs Where Parties Required To Bring Unnecessary Motions - Financial Restructuring

The current backlog in the Toronto Civil List – where even short motions are being scheduled more than a year out – has been the subject of increasing judicial recognition and commentary. The civil justice system has recently been described by Associate Justice Rappos as being in a "dangerous state".¹ In an attempt to do what they can to address this backlog, Ontario courts have shown an increasing tendency to grant relief to reduce the number of formal motions that are brought. One example is that courts have shown an increased willingness to deal with matters on a case conference without a formal record.² Another example is granting costs awards against parties that require an opposing party to bring a motion unnecessarily.³

In Sun v. Ryan Mortgage Income Fund Inc., 2024 ONSC 1168, Justice Myers recently indicated that mortgagees and the Director of Titles may be subject to adverse costs awards if they require an owner to bring a motion to delete a fraudulent mortgage registered against title.

Background and Decision

In Sun, a fraudulent mortgage was obtained and registered against the Applicants' property. The Applicants provided evidence that the identification and signatures provided to the mortgagee were forged and they did not receive the advance. The title insurer investigated and did not contest that the mortgage was a forgery.

The defrauded mortgagee and the Director of Titles required the Applicants to bring a court application to remove the mortgage from title to their property. The application was commenced in October 2022 and was not heard until February 2024, a delay of 16 months. The mortgagee and Director of Titles did not oppose the application and did not appear at the hearing.

Justice Myers had no trouble granting the unopposed order sought. However, Justice Myers added the following comments indicating that, if he had been asked, he would have granted full costs against the mortgagee and Director of Titles for requiring the Applicants to bring the motion and not removing the forged mortgage themselves:

[14] If there was a reason that the mortgagee and the Director of Titles were not willing to act, perhaps they ought to have told me. Otherwise, there is no apparent reason why they felt it necessary to require the applicants to endure the court's 16-month backlog and to incur unrecoverable costs to obtain the cover of a court order rather than making the decision themselves.

[15] Moreover, both the mortgagee and the Director of Titles could have consented to the relief sought rather than saying they were "unopposed." Had they consented to the relief sought, the matter could have been heard in writing more than a year ago. Instead, they chose to leave the court to wonder if anything was preventing them from accepting the applicants' evidence other than a bureaucratic desire to have someone else take responsibility for the decision that each of them was empowered to make without the need for this proceeding. They each had counsel and yet neither instructed their counsel to attend to make submissions to explain why they required the applicants to bring this proceeding or why they were not consenting to it.

[16] Absent a good reason to require this matter to come to court, it appears to have been an unnecessary proceeding. Moreover, it seems cruel to have required the applicants to wait from October, 2022 until today to obtain the relief that the respondents themselves could have granted without the cost or delay of this lawsuit.

[17] Given that the public knows about this court's backlog and constrained resources, the respondents' decisions to require the applicants to bring this unnecessary proceeding could have attracted costs sanctions against them under Rule 57.01 of the Rules of Civil Procedure.

[18] Had I been asked and had notice been given, I would have considered a request to order the mortgagee and the Director of Titles to pay the applicants' full costs. Both respondents had the ability to obviate the need for these apparently unnecessary proceedings.

[19] The applicants' counsel submitted that they just want the matter concluded. So they do not seek costs today.⁴

Takeaways

For secured creditors and mortgagees, Sun is a reminder that encumbrances should be removed from title where appropriate without requiring the owner to bring a formal motion, even if there are circumstances such as fraud and they would prefer the certainty of a formal court order. For owners that are being required to bring a formal motion, they may wish to bring Sun and the risk of an adverse costs award to the attention of opposing parties to see if the motion and the associated costs and delays can be avoided.

More broadly speaking, Sun indicates that everyone will be taken as having notice of the backlog in the Toronto Civil List. The appropriateness of decisions to require opposing parties to bring a motion to obtain relief – especially for matters such as rectifying a register or amending pleadings – will be considered with that in mind. Parties may be at an increasing risk of adverse costs awards where:

they require opposing parties to bring motions when matters can be dealt with on consent out of court; or
they do not oppose motions instead of consenting to them.

Footnotes

1. Adams v. Body Plus, 2024 ONSC 315 at para. 54.

2. See e.g. Miller v. Ledra, 2023 ONSC 4656; Think Research Corporation v. N & M Medical Enterprises, 2023 ONSC 6910.

3. See e.g. Moskowitz v. Toronto Transit Commission, 2023 ONSC 5535 at para. 33.

4. Sun v. Ryan Mortgage Income Fund Inc., 2024 ONSC 1168 [Emphasis added].

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