COURT FILE NO.: DC-07-00023-00

DATE: 20090217

ONTARIO

SUPERIOR COURT OF JUSTICE

(DIVISIONAL COURT)

B E T W E E N:

DAWN PETERS-BASCOMBE

Elsie E. Peters, for the Appellant

Appellant

• and -

OMNIWORKS VZ INC. carrying on business as STUDIO PAVAS

Kristine Anderson, for the Respondent

Respondent

HEARD: October 31, 2008

REASONS FOR JUDGMENT

(On appeal from the decision of the Honourable Deputy Judge Latimer dated February 20, 2007)

M.G.J. QUIGLEY J.

[1] The appellant, Dawn Peters-Bascombe, seeks to overturn in its entirety the decision of the Honourable Deputy Judge Latimer, dated February 20, 2007. In that decision, released three and a half months after a three day trial held with interruptions on February 13, June 26, and November 7, 2006, the Deputy Judge gave judgment in favour of the respondent, Studio Pavas in the amount of $6,271.90 with respect to its July 21, 2004 claim against the appellant. The respondent is a dance school and its claim was for unpaid school fees relating to the appellant’s daughter, Camelia, who was enrolled at the dance school from 2001 to 2004.

[2] Studio Pavas claimed that the appellant owed $6,988.83. The appellant issued an August 20, 2004 defence in which she claimed set-offs against her indebtedness to Studio Pavas on account of an alleged breach of contract. The breach of contract allegation arose out of an agreement that she claimed existed with Studio Pavas under which it would pay $15 per head to her for braiding the hair of the Studio Pavas dancers before their dance competitions in 2004. The appellant claimed that her entitlements under that contract were intended to be and ought to be offset against amounts she owed to Studio Pavas.

[3] However, nine months later she went further and issued a defendant’s counterclaim against Studio Pavas on May 24, 2005 for damages on account of a variety of wrongs allegedly done to her and Camelia, and for breach of a fiduciary duty allegedly owed to Camelia. The breach of fiduciary duty claim is based on the appellant’s allegations that representatives of Studio Pavas alienated, traumatized, embarrassed, physically abused and knowingly caused undue hardship to her daughter. She herself also claimed that she had been traumatized by representatives of Studio Pavas. She sought general damages of $10,000 under this head and for the other alleged wrongs.

[4] Following the trial, the Deputy Judge found in favour of Studio Pavas. He found that the amount owed by the appellant for unpaid dance lessons, costumes and competition fees was $6,556.90, but he reduced the amount awarded to Studio Pavas on account of one set-off. He allowed the appellant a credit for $285 in respect of costumes that Camelia never received or used, but otherwise dismissed her counterclaim against Studio Pavas. Deputy Judge Latimer granted judgment against the appellant for $6,271.90 plus costs and pre-judgment interest under the Courts of Justice Act from May 26, 2004, the date of the demand letter sent to her by counsel for Studio Pavas. The Deputy Judge stipulated that submissions could be made to him if the parties were unable to agree on costs.

[5] However, no agreement was reached and no submissions on costs were made. Instead, the appellant appealed. She challenges the entire ruling of the Deputy Judge. She also makes other personal and procedural allegations against him on this appeal. At issue is whether the Deputy Judge made errors of fact or law which would entitle her to succeed on this appeal, and whether there is any factual or legal foundation for the other allegations she makes.

Standard of Review

[6] The decision of the Supreme Court of Canada in Stein v. Kathy K (The), 1975 146 (SCC), [1976] 2 S.C.R. 802 definitively established the standard of review applicable to findings of fact on an appeal like this. The findings of fact reached by the trial judge are not to be reversed unless it can be established that the trial judge made a “palpable and overriding error”. In applying that standard, the accepted approach for an appellate court is to test the findings of fact made by the trial judge on the basis of whether or not they were clearly wrong on the record and the evidence that was before him or her on a balance of probabilities.

[7] This is a point of importance because the fact that this court might conclude on a balance of probabilities that the trial judge erred in a conclusion of fact that he reached does not give this court the right to substitute its view for that of the trial judge. The appeal can succeed on findings of fact only if one or more of the findings of the trial judge are clearly wrong on the evidence that was before him. Moreover, I accept as correct that the findings of fact reached by the trial judge are entitled to substantial deference. It was the Deputy Judge who heard the evidence, who had the witnesses before him, who observed their demeanour, and who was in the best position to assess their credibility and to make findings based on that evidence.

[8] On questions of law, the standard of review is one of correctness. This means that it is not open to me to find that a trial judge made an error of law unless a legal ruling or determination made by the judge is clearly and demonstrably wrong as a matter of law.

[9] Given the background to this appeal and the manner in which it was presented, I feel obliged to make several additional observations. The appellant did not set out the grounds of appeal in a clear or organized manner that tied in to the strong allegations and accusations she made against the trial judge in the Notice of Appeal. Appellant’s counsel seemed unable to accept the evidence as reflected in the transcripts, the law that could apply given that evidence, and the basis upon which the Deputy Judge reached the conclusions he did. Moreover, there were allegations of bias and other accusations made against the Deputy Judge, but no cogent evidentiary foundation was advanced to support them.

[10] The fact that the Deputy Judge made findings in favour of the respondent does not imply that the basis of the Deputy Judge’s decision was “one sided”, nor does it follow, as counsel contended, that “no reasonable person could have reached such a decision.” The mere fact that the Deputy Judge decided in favour of the plaintiff does not mean that he failed to give weight to the appellant’s evidence or denied her rights to natural justice, or committed other alleged procedural errors. There was no evidence before me nor was any pointed to in the transcripts of the proceedings to support these contentions. There was no evidence on the record before me that the Deputy Judge “was so biased that he had a total disregard for the evidence adduced by the Appellant.” Indeed, his review of the evidence makes clear that he did take account of and give weight to the defendant’s evidence in reaching the decision he did.

[11] The appellant’s focus on these unfounded and distracting factors, rather than on the evidence that was contained in the record, was a source of frustration as I heard the appeal. Thus, in order to get to the root of her arguments and determine which grounds had a real legal or factual foundation, I have read and re-read the transcript of the proceedings before the Deputy Judge numerous times to ensure that I understood his decision, understood the position of the parties on this appeal, and understood the evidentiary background against which he reached the decisions that he did. I regret that the time consumed by this process prevented me from releasing these reasons until now.

Analysis of Findings of the Trial Judge

1. The amount of the outstanding account

[12] The starting point in this matter is the existence of the appellant’s unpaid account for dance lessons for Camelia. There was considerable argument directed by the appellant to the inadequacy of the accounting systems at Studio Pavas. The appellant spent time on the appeal, as she did at trial, focused on the accounting to determine the exact amount of the debt, apart from the breach of contract allegations which she says must be taken into account in determining the quantum of any debt due from her to Studio Pavas. The Deputy Judge recognized and was also clearly frustrated by the problems with the accounting, and with trying to get the appellant to clearly articulate the charges from Studio Pavas that she disputed and those which she accepted.

[13] At the end of the trial, the Deputy Judge accepted the evidence of the accounts. However, he did not give them weight for numerical accuracy or the actual amounts of arrears they showed, but merely to show how the appellant’s arrears to Studio Pavas built up between 2001 and 2004, the years during which Camelia took lessons. Studio Pavas claimed $6,988.83, consisting of 2001-2 arrears of $1,891.05, 2002-3 arrears of $307.83 and 2003-4 arrears of $4,789.95. However, the accounts reflected a balance due of $6,575.46. The demand letter sent to the appellant by counsel for Studio Pavas demanded payment of a slightly lesser sum of $6,556.90. At paragraph 7 of his reasons, the Deputy Judge stated as follows with respect to these amounts:

The amount of $6988.83 requested in the claim is wrong. While Studio Pavas’ accounting records are somewhat confusing, I am satisfied that $6556.90 is the proper outstanding balance. That was the amount demanded from Peters-Bascombe in the letter dated May 26, 2004 from Studio Pavas’ lawyer (Tab 2 of Exhibit 2). Further, in her undated letter to Zahkoor, Peters-Bascombe acknowledged that she owed $6556.90 (Tab 1 of Exhibit 2).

[14] The appellant made reference on the appeal to several of the exhibits at trial and argued that the account summary amounts were not in agreement with the amounts claimed against her by Studio Pavas. She said it was not adequate for the Deputy Judge to look to the demand letter sent by the lawyer for Studio Pavas to quantify the amount that she owed. She said that if the accounting was wrong then the demand letter was wrong, and that necessarily means that the decision of the Deputy Judge that the amount owing was $6,556.90 was not reasonable. She claimed this was palpable and overriding error.

[15] This argument cannot succeed on this appeal and is rejected. The Deputy Judge acknowledged and sought to work through the difficulty with the accounting records at trial with the appellant, who was self-represented at the time. It is evident from the transcript that the Deputy Judge spent considerable time trying to understand and reconcile the amounts reflected in those accounts, and to determine the correct amount of the debt owing by the appellant to Studio Pavas (see: Transcript, June 26, 2006 at pages 114-115).

[16] However, I agree with the respondent’s submission on this appeal that in determining that the correct amount owing was $6,556.90, having regard to all of the evidence at trial, some of it conflicting, the Deputy Judge chose the lowest amount that he could of all of the amounts reflected in the accumulated evidence of the accounts. Moreover, and of obvious importance, the appellant acknowledged in a letter to Ms. Zahkoor, the principal of Studio Pavas, that $6,556.90 was indeed was the amount that she owed to Studio Pavas.

[17] Further, the appellant personally acknowledged before me on this appeal that this was the amount owing, apart from any set-offs due to her. It does not appear to me that the Deputy Judge made a reversible error in coming to this conclusion respecting the amount of the debt. It was a conclusion that it was open to him to reach on the evidence that was before him. Before considering whether any set-off was required owing to a breach of contract, the determination by the Deputy Judge that the amount owing was $6556.90 does not amount to palpable and overriding error in reaching a finding of fact. I would not disturb that finding on this threshold debt quantification issue.

2. Set-off claims

[18] Before moving on to the more complex issue of set-off claimed for breach of contract, let me deal first with several of the appellant’s other set-off claims. In doing so, it should be noted that the Deputy Judge observed in paragraph 10 of his reasons that the appellant had specifically acknowledged the existence of the debt, subject only to credits for hair-braiding and the competitive costumes. The hair braiding issue is central to the claim of breach of contract and is dealt with in greater detail below.

[19] With respect to the dancer’s costumes, Studio Pavas charged the appellant $285 for costumes for Camelia for the year end recital, but Camelia did not participate in that recital and she did not receive the costumes. She did not participate because the relationship between Studio Pavas and the appellant and her daughter had soured materially by that time over the continually accumulating arrears owed for Camelia’s dancing lessons. As well, the evidence before the Deputy Judge showed that personal animosity had begun to develop between them, no doubt exacerbated by the arrears situation. Ms. Zahkoor decided not to let Camelia participate in the year end competition or recital, although she denied in her testimony that she intended to cause any hurt to Camelia. On these findings, the Deputy Judge was correct in concluding that the appellant was entitled to a credit of $285 in respect of the costumes item since the Studio could not be allowed to charge for the costumes when they would not permit Camelia to participate in the year end recital where the costumes were to be worn.

[20] There were additional set off claims included in the defence and in the appellant’s counterclaims, and the Deputy Judge dealt with each of them. However, in light of the fact that the appellant acknowledged that the only credits that could be applicable were for the hair braiding and the costumes, and in light of the fact that the Deputy Judge dealt with both of these issues and gave credit to her for the competitive costumes that were not worn by Camelia, there could be no merit to these other set-off claims. I reference them here simply for completeness.

[21] The appellant alleged that Studio Pavas had refused to make an unspecified adjustment for violin lessons in 2001 and 2002, but at trial she acknowledged before the Deputy Judge that credit had been given to her. She also stated at that time that she did not dispute the Studio Pavas accounting for the 2001-2002 year. Secondly, in the appellant's claim and Exhibit 9, she asked for adjustment for solo, duet and musical-theatre lessons on the basis that Camelia did not receive those lessons. She did not quantify the amount of set-off that she was seeking. She claimed that the lessons had not been provided because Studio Pavas did not have anyone to teach those classes, but the Deputy Judge disagreed. He was “generally satisfied with the student attendance records presented by Studio Pavas” as Exhibit 5 which confirmed that when Camelia was absent from classes, other students were actually being taught. Thus, he found that the appellant’s claim under that heading could not have been correct when the evidence showed that the classes were actually taught, even if Camelia did not attend for those lessons. The finding of the Deputy Judge was that the most likely reason for her absence was a knee injury which Camelia sustained in October 2003 (see Exhibit 9, June 15, 2004 letter from Dr. Oken).

[22] The Deputy Judge correctly dismissed these additional set-off claims. His findings on these claims were fully supported by the record that was before him. While he made no explicit finding, it is evident that he did not find the appellant to be credible in her claim that the lessons for which Ms. Bascombe claimed credit had not actually occurred, as evidenced by the attendance record kept by the school that was introduced in evidence. Given the evidence that was before him, it was open to the Trial Judge to reach the conclusions that he did on these matters and I would not disturb them.

3. Claims for general damages

[23] The appellant also made a claim against Studio Pavas for general damages totalling $10,000 under a number of alleged heads of damage. These included damages for “breach of a verbal agreement, alienation of a minor, psychological trauma of a minor, failure to provide adequate instruction to a minor, breach of confidentiality, undue hardship to a minor and plaintiff, and breach of a duty to a minor.” The particulars of these claims were set out in the 10 sub-paragraphs of paragraph 23 of the Deputy Judge’s reasons for judgment. I do not intend to repeat them here.

[24] I agree with the Deputy Judge that these were serious allegations, but based upon my review of the transcripts and other evidence, I also conclude that these allegations were not substantiated by the evidence presented in this case on a balance of probabilities. This was not a case of the Trial Judge being biased against the appellant’s claims. There was simply inadequate evidence presented before the Trial Judge to make out the claims for damages, assuming that several of the heads of damage could even give rise to an award as a matter of law. The claim for breach of a verbal agreement appears to be just a different articulation of the breach of contract claim relating to the hair braiding, and is addressed in that analysis. The claim for breach of a duty to a minor must refer to the claim for breach of fiduciary duty that is dealt with below. Otherwise, I am unaware of actionable heads of damage under the other captioned heads claimed. I acknowledge that the classes of actionable tort may not be closed, but even if these claims were properly actionable, in my view the Deputy Judge correctly dismissed them for lacking any realistic or credible evidentiary foundation that even approached the balance of probabilities threshold of proof.

[25] The Deputy Judge noted that the appellant had the onus of proving these allegations on a balance of probabilities. To prove those allegations, she relied upon the testimony of her daughter Camelia and her own testimony, but the Deputy Judge noted that she did not call any corroborating witnesses, nor did she file any medical documentation that might have given support to the varied claims of injury and damage. While the Deputy Judge made no explicit findings of credibility with respect to the evidence presented on these claims by the appellant, it is evident and implicit in the findings he reached that he did not find these claims to be credible. He would not have felt the need to have corroborative evidence if he had been satisfied on the evidence that was before him that the testimony of the appellant and her daughter was credible and had adequately made out the claims asserted.

[26] While the Deputy Judge stated that he believed that the appellant may have genuinely believed that what she alleged was true, he concluded on this basis on the evidence before him that the claims had not been proven on a balance of probabilities. He dismissed the claim for general damages in the amount of $10,000. It is not open to this Court to substitute its view in the absence of palpable and overriding error made by the Deputy Judge on his findings of fact. I can find no such error, and would not disturb this conclusion.

4. Breach of fiduciary duty

[27] Let me briefly address the issue of alleged breach of fiduciary duty by Studio Pavas towards the appellant or her daughter. In her argument, counsel for the appellant claimed that Studio Pavas had an “obligation of safety” towards Camelia. She said they had “a fiduciary duty not to hurt her as a student”. However, there was no cogent evidence here that could support a claim for breach of fiduciary duty, and even ignoring that it was not argued in the appellant's factum, none of the other claims made in support of damages could have fallen under this head.

[28] The indicia of a fiduciary relationship are set out in Lac Minerals Ltd. v. International Corona Resources Ltd., 1989 34 (SCC), [1989] S.C.J. No. 83 at para. 145 and in Hodgkinson v. Simms, 1994 70 (SCC), [1994] 3 S.C.R. 377 at para. 32. Both cases have been cited in numerous subsequent decisions. In order for a fiduciary relationship to exist, there must be scope for the exercise of some discretion or power, the ability of that power or discretion to be exercised unilaterally so as to affect the beneficiary’s legal or practical interests and a peculiar vulnerability on the part of the claimant to the exercise of that power or discretion. However, outside of the established categories of fiduciaries, evidence of a mutual understanding is required that one party has relinquished its own self-interest and agreed to act solely on behalf of the other party. The mere existence of an expectation on the part of the appellant that Studio Pavas would act in Camelia’s best interests, even if it had been proven, would be inadequate to establish a fiduciary duty. Neither special nor exceptional circumstances were pleaded that Camelia was reliant or vulnerable to some authority that Studio Pavas had over her.

[29] Moreover, outside of the established categories of fiduciary relationship and absent such special pleaded circumstances, the claim cannot succeed: Treacher v. Lafarge Canada Inc., 2007 CarswellOnt 481 (S.C.J.O.) at paras. 3-4; Kopperson v. Blount, 2006 CarswellOnt 6531 (S.C.J.O.) at paras. 8-10. Even in the case of so-called power dependency relationships characterized by "unilateral discretion", which have been restricted to employer-employee circumstances to the best of my knowledge and research, there is at least a need to plead and prove that the plaintiff had a reasonable expectation in all of the circumstances that the defendant would act in her best interests, which was not done here: Mustaji v. Tjin, [1995] B.C.J. No. 39 (B.C.S.C.) at paras. 20-26; Thomas v. Woolworth Canada Inc., [1996] O.J. No. 2760 (Ont. Ct. Gen. Div.) at para. 6. It is true that the categories of relationship that may give rise to a fiduciary duty are not closed (Hanson v. Bank of Nova Scotia, 1994 573 (ON CA), [1994] O.J. No. 1250 (C.A.)), but there is no factual basis here upon which a claim for breach of fiduciary duty could have succeeded. Rather, the essence of this argument was that Studio Pavas owed the appellant and her daughter an “emotional” or “safety’ based duty of care that they breached. It seems to be more in the nature of a claim in negligence than for breach of fiduciary duty, but regardless of how they might best be legally characterised, the Deputy Judge concluded that on the evidence before him the claims had not been proven on a balance of probabilities. As previously indicated, I find that he made no error in doing so.

5. Breach of contract

[30] The issue that appeared to be the central focus of this appeal was the appellant’s claim for set-off based on breach of an agreement between herself and Ms. Zahkoor relating to hair braiding for the dancers before the 2004 dance competitions.

[31] The agreement was claimed to have been made in 2003 when the appellant registered Camelia for the 2003-2004 dance classes. By that time, the appellant was already well behind in what she owed Studio Pavas for dance lessons. She said she could not afford to pay for further lessons and would not have been able to register Camelia for further classes if she had not made the hair-braiding agreement with Ms. Zahkoor.

[32] The appellant’s position was that the promise to pay Studio Pavas for Camelia’s dance lessons for 2003-2004 was not an unconditional promise – it was conditional on her receiving monies she needed from braiding students hair to assist in paying for Camelia’a lessons. I note that it was not argued at trial or on this appeal that the hair braiding contract was intended by either party to eradicate all accumulating arrears that the appellant then owed Studio Pavas.

[33] At paragraph 14 of the Deputy Judge's reasons, he set out his understanding of the basis for the claim that was being made by the appellant with respect to the hair braiding. He stated:

Peters-Bascombe alleges that when Zahkoor and she were discussing Mercury's registration for dance classes for the 2003-2004 year, Zahkoor promised her the hair braiding for the dance competitions in 2004. Based on 61 students and $15 per student for three competitions, Peters-Bascombe expected to receive hair braiding revenue of $2,745.00. Peters-Bascombe claims that had it not been for the hair braiding revenue, she would not have registered Camelia Mercury for so many dance classes in 2003-2004, because she could not afford to pay for the lessons.

[34] His summary of the issue shows that the Deputy Judge was alive to the interaction in the appellant’s mind between receiving the revenue from the braiding of hair and her ability in the fall of 2003 to register Camelia in dance classes for 2003-2004. Moreover, he found and Ms. Zahkoor admitted that the two of them had discussed the issue of hair braiding at the time when they were talking about Mercury's registration for 2003- 2004 dance classes (my emphasis).

[35] The evidence showed that Camelia was a very talented young dancer with considerable future promise. Indeed, the Deputy Judge found that she taught in some classes at Studio Pavas, that Ms. Zahkoor did hire Camelia and that some of the income she earned was credited against her mother's outstanding account. As in most areas of endeavour, there were weaker students and stronger more talented students attending Studio Pavas, and it was to Ms. Zahkoors benefit to be able to place a strong dancer like Camelia with weaker students in order to help them. On the other hand, this resulted in Camelia not advancing on her own as quickly to the extent she was placed in classes that were perhaps below her level of aptitude. Camelia complained of being put in classes that were below her level.

[36] It was evident to me from the transcripts that this reality placed Ms. Zahkoor in a somewhat conflicted situation. She was unhappy that the appellant’s account with Studio Pavas had accumulated arrears going back to 2001 and she knew that the appellant was off work after an accident and had limited financial resources. However, she also knew and acknowledged in her evidence that Camelia was a sufficiently talented dancer that Ms. Zahkoor also wanted Camelia to continue at Studio Pavas in spite of the arrears situation. It was in her interest that Camelia should continue to take classes at Studio Pavas notwithstanding the fees that were owed.

[37] As for the hair braiding agreement, Ms. Zahkoor admitted in her evidence that she told the appellant that she could do the hair braiding again for the 2004 competitions. She had been quite content with the braiding of the dancer’s hair in at least 2002-2003. There is no disagreement on that point. As the Deputy Judge observed, the problem was that neither the appellant nor Ms. Zahkoor appear to have considered the possibility that the students’ hair might not be braided for the 2004 dance competitions, and as a result, that the appellant would be unable to earn the revenue from that source that she needed in order to pay for Camelia’s dance lessons. Neither of them could foresee that the teachers and the parents of the students would decide to forgo having the children’s hair braided for the 2004 competitions. However, that is exactly what happened.

[38] That decision appears to have been made at the end of 2003 or early in 2004. Again, however, neither of them considered or expected that Ms. Zahkoor might be away from Studio Pavas during that time to take treatment for a serious medical illness, or that for whatever reason, the decision to abandon the dancer’s hair-braiding might not be communicated to the appellant until February or March of 2004 towards the end of the season, when she would already have become indebted to Studio Pavas for the classes Camelia took between the fall of 2003 and that time. The Deputy Judge specifically observed that no evidence had been presented at trial to suggest that the decision to avoid hair braiding for the 2004 dance competitions was made in bad faith or to injure or alienate the appellant. It was simply a decision that resulted from the input of parents of the dancers not wanting their children’s hair to be braided for the spring 2004 dance competitions.

[39] Exactly when this decision was made and communicated was unclear and there was conflicting evidence on the issue, but it was certainly after Ms. Zahkoor and the appellant agreed in the autumn of 2003 that the appellant would do the 2004 braiding. It most likely occurred while Ms. Zahkoor was away from Studio Pavas taking medical treatment. It was not likely until the spring of 2004 that the appellant learned there would be no hair braiding for the 2004 competitions, many months after she had indebted herself further for Camelia’s lessons in the expectation of receiving that income.

[40] Against this background, the Deputy Judge made his findings on the appellant's breach of contract claim, at paragraphs 17 and 18 of his reasons:

While I sympathize with what happened, I dismiss the set-off claim for hair braiding, because Zahkoor never unconditionally promised to pay Peters-Peters-Bascombe a fixed or minimum sum for the hair braiding. The agreement between Zahkoor and Peters-Peters-Bascombe was that if there was hair braiding, then Peters- Peters-Bascombe would do it and she would be paid $15 per student. The agreement would have been breached had Studio Pavas gotten somebody else to do the hair braiding. However, because there was no hair braiding, there was no breach of the agreement.

However, if there was a contract to braid hair, then it was frustrated by the unexpected cancellation of the hair braiding for the 2004 competitions.

[41] I agree that the Deputy Judge correctly concluded that Ms. Zahkoor did not unconditionally promise to pay the appellant a guaranteed fixed or minimum sum for the braiding of the dancer’s hair, but that dealt with only half of the issue on the evidence that was before him. The Deputy Judge never made a finding with respect to the contractual bargain looked at from the appellant’s perspective, in spite of that evidence. As well, and of key importance to what was in the minds of the appellant and Ms. Zahkoor was exactly when they reached their agreement, but neither did the Deputy Judge make a finding of exactly when that agreement was reached, although he did make a clear finding that there had been an agreement.

[42] This is a critical point, because the time when the agreement was reached crystallizes what their expectations were and what was in their minds at the time they created their agreement. In failing to take account of the evidence he had before him on the subject of when the agreement was reached, and in failing to specifically make findings with respect to the evidence he had before him of the discussions between the appellant and Ms. Zahkoor and the promises that not only one, but both of them made, I find that the Deputy Judge reached a conclusion on this issue that ignored important evidence. I find that in doing so, he made a clear and important error of fact. It may well be that Ms. Zahkoor never unconditionally promised to pay the appellant for hair braiding. However, the Deputy Judge made no finding on whether the appellant’s promise to pay for Mercury’s dance lessons for 2003-2004 was a conditional or an unconditional promise. The evidence at trial was that her promise was not unconditional, but instead only a conditional promise from her perspective. She registered Camelia for 2003-2004 with the expectation that she would earn revenue from the braiding of hair and be able to apply it to her account with Studio Pavas. It was important for the Deputy Judge to take that evidence into consideration and make a finding specific to that point because the evidence showed that without that condition she could not afford to and would not have permitted Camelia to continue to take dance lessons at Studio Pavas.

[43] The evidence of Camelia given on June 26, 2006 at pages 22-24 of the transcript shows the other half of the bargain that the Deputy Judge does not appear to have taken into account in reaching the decision that he did. She testified first that Ms. Zahkoor had called the appellant at home in the summer of 2003 to tell her not to come back to the Studio. She also testified that Ms. Zahkoor invited her to come in and register just prior to registration for 2003-2004, but her mother was unhappy and concerned because she still owed money from the prior year and did not think she could afford lessons for the new season. They went to the Studio, met briefly with Tiffany Wirth who had already created a full schedule of classes for Camelia, and then waited for Ms. Zahkoor to arrive. Camelia testified that when she did, Ms. Zahkoor called them into her office and spoke about the dance classes that were set out on that schedule. Camelia testified that her mother told her she could not afford it, but Ms. Zahkoor said “you remember you’re braiding the hair, and you said, okay. So Susan sent me to class because I thought everything was okay…”

[44] In her cross-examination, the appellant also addressed the issue of the hair braiding. When asked whether it was her position that if the teachers all decided they did not want to have the dancers’ hair braided, she still believed she was supposed to get credit for it, The appellant replied as follows:

Well, I assumed that if the teachers and the parents did not want the hair braiding, then Ms. Zahkoor should have let me know in advance so then I could have removed Camelia from registering for the next semester for the amount of competitive courses that she was registered for. Then I would have pulled her out so then it would not have, you know, gone on for the next few months. (my emphasis)

Further, the appellant denied that she was advised in November of 2003 that there would be no hair braiding for the spring 2004 competitions, as Ms. Zahkoor had testified, but was told only at the end of February or beginning of March of 2004. To my mind, the appellant’s evidence is more credible on this point because Ms. Zahkoor was away on leave for medical treatment at the time she says notice would have been given.

[45] The evidence shows that the time when the appellant and Ms. Zahkoor reached their agreement was at the time of registration for the 2003-2004 dance classes. That would have been sometime between the spring and fall of 2003. At that time, based on the hair braiding she had done before, I find that Ms. Zahkoor did reassure the appellant that she would be able to earn revenue from the braiding of dancers’ hair which could be applied to her account, even though I accept that it was not unconditional or guaranteed.

[46] Given the state of the outstanding account at that time, it was just as important to Ms. Zahkoor to reassure herself that there would be a source of funds which could be applied to the account, not only to start to pay it off, but also because without that promise she would not have had the benefit of Camelia participating in the classes and helping other students, a result that was of clear benefit to her. Just as Ms. Zahkoor’s promise was not unconditional, neither was that given by the appellant. It was only because she understood that she would be able to earn the revenue from the braiding of the hair that she was prepared to or could financially permit Camelia to be a student at Studio Pavas for another year.

[47] Neither of the parties here made an unconditional promise to the other – rather what they did was reach an agreement that was based on conditional promises and expectations. It was a mutual contract of set-off. The appellant agreed to register Camelia at Studio Pavas for 2003-2004 in consideration of and conditional upon being able to earn the hair braiding revenue and apply it to her account. In consideration of the benefit she would realize by accepting Camelia into her classes, Ms. Zahkoor agreed that the appellant could do the hair braiding and apply what she earned against the outstanding account. Both of those conditions assumed that hair braiding would take place as it had in the past. Both of them operated in the belief and on the understanding and mutual assumption that hair braiding would take place, as it had in the past. Neither of their promises was unconditional.

[48] Notwithstanding my finding that the Deputy Judge erred in his conclusion as set out in paragraph 17 of his reasons, I find that he was correct both in fact and in law in his alternative conclusion reflected in paragraph 18. There, he concluded that if there was an agreement then the cancellation of the hair braiding for the 2004 competition, a cancellation that neither party anticipated or had any reason to expect would occur, resulted in the frustration of the agreement between them.

[49] In making the bargain that they did, both the appellant and Ms. Zahkoor operated on an assumption that hair braiding would occur, an assumption that turned out to be mistaken. An unexpected and supervening event occurred in the cancellation of the hair braiding that caused their agreement to become incapable of further performance. By the time the frustrating event occurred in late February or early March of 2004 when the decision to abandon hair braiding was communicated to the appellant, she had already partially performed her part of their bargain, because Camelia had taken classes in the fall 2003 semester, and registered and partially completed the spring semester classes. However, the determination that the appellant would be unable to braid hair because there would be no hair braiding prevented Ms. Zahkoor’s part of their bargain from being performed, in whole or in part. The Court is thus left in a position where there is an inequality of the parties’ positions resulting from the event of frustration. The parties cannot be returned to their positions when the agreement was made so some other appropriate and equitable result must be fashioned from the happening of that event, from the mistaken assumption on which their bargain was built.

[50] In S.M. Waddams, The Law of Contract, (4th ed.)(Toronto: Canada Law Book, 1999), at paragraphs 362 through 382, the learned author discusses mistake and frustration, and the basis and availability of total or partial relief from the effects of the event of frustration. He espouses a position that seems correct that whether the mistake between the parties is as to an existing fact at the time the contract is concluded or as to a future fact is essentially irrelevant. Cases of frustration such as this are instances where the court must intervene to provide a measure of relief on account of the mistaken assumption that the future event would occur, especially where one party has partially performed but the event of frustration will prevent the other party from being able to perform at all.

[51] In this case, the net total fees claimed to be due from the appellant to Studio Pavas for classes and competitions for September 2003 to June 2004 alone, the period in dispute, were $4,789.95 (paragraph 11 of Statement of Claim). The evidence showed that there was no expectation on the part of either the appellant or Ms. Zahkoor that the revenue expected to be earned from the braiding of the hair would totally offset either the accumulated arrears or the fees due for 2003-2004. The fact that this was never expected is also evidenced by the appellant having paid $1,375 toward that season, a reflection of the understanding between them that the earnings from hair braiding could, at best, only offset part of the fees otherwise due from the appellant for Camelia’s lessons. As such, it would be inappropriate to grant total relief to the appellant against those arrears and fees.

[52] The better and more just approach was that taken by the Deputy Judge in paragraph 19 of his reasons. There he said that had he been inclined to allow the contractual set-off claim advanced by the appellant, on the evidence before him he would have allowed a credit of $1,200, rather than the approximately $2,700 credit claimed by the plaintiff. Given the nature of their agreement, that it was never expected that hair braiding revenue would fully offset the fees that were due, and that the appellant’s conditional promise to register Camelia in lessons for 2003-2004 was made in the expectation of such a credit being provided to her, I agree with the Deputy Judge on the evidence that was before him that this was an appropriate amount of credit to provide to the appellant for her expectation. Allowing her a credit of that amount appropriately compensates her for the event of frustration that occurred between these parties, through no fault of either of them. On this basis, while Studio Pavas remains entitled to succeed in its claim against the appellant, the judgment awarded is reduced from $6,556.90 to $5,356.90, after taking account of $1,200 of additional set-off owing to the frustration of their contract.

Remaining issues

[53] Before concluding on this matter, there are two further points to address. On this appeal, counsel for the appellant claimed that the Consumer Protection Act, 2002, S.O. 2002, c. 30, Schedule A was applicable. This was neither pleaded nor argued at trial and for that reason alone can have no merit here. Nevertheless, on this appeal she claimed that Studio Pavas and Ms. Zahkoor had made unconscionable representations to the appellant and engaged in unfair practices contrary to sections 15 and 17 of that Act. I agree with the respondent, however, that the Deputy Judge specifically found that the decision to abandon hair-braiding was not made in bad faith or with a view to injure or alienate the appellant. Further, as I have found, the promises were conditional in both cases here. There were no unfair practices imposed upon the appellant, nor did Ms. Zahkoor make any unconscionable representations to her. This ground of appeal fails.

[54] Finally, there is the matter of the November 20, 2007 affidavit of the appellant, sworn after the trial was completed and the Deputy Judge had rendered his decision, which counsel for the appellant included in the appellant’s Exhibit Book filed on this appeal without bringing a motion to advance fresh evidence, as is required under Rule 61.16 (2) of the Rules of Civil Procedure. This was another example of difficulties on this appeal owing to the positions taken by the appellant’s counsel.

[55] Fresh evidence is not admissible on an appeal without a motion being brought and leave being granted. Thus, it was inappropriate to include a fresh affidavit without the leave of the court. In any event, the “fresh evidence” is in fact not fresh. I agree with the respondent that it was largely a reiteration of the plaintiff’s evidence at trial. Moreover, as for the continuing allegations of improper conduct by the Deputy Judge, it was evident as I have previously indicated that even though he was frustrated by her inability to clarify her position, the Deputy Judge did bend over backwards to assist the appellant as best he could, and to allow her every opportunity to articulate her defence. There is no factual or evidentiary basis here that supports either the accusations made against the Deputy Judge, or the admission of the November 2007 affidavit. I have given it no consideration in reaching my decision on this appeal.

Disposition and costs

[56] For the reasons set out above, the judgment granted by Deputy Judge Latimer is reduced to $5,356.90 after taking account of $1,200 of additional set-off owing to the appellant arising out of the frustration of the contract between her and Studio Pavas. Otherwise, the decision of the Deputy Judge is upheld in its entirety and the appeal dismissed. The Deputy Judge was accordingly correct in the costs order he made and in ordering the judgment to bear interest, but he did not fix those costs, the parties never agreed on the amount of the costs, and it must thus now fall to me to fix those costs. Ms. Anderson has filed a bills of costs for the trial before the Deputy Judge and also submitted a costs outline after this appeal was heard.

[57] While the appeal of the appellant has been allowed in part, that decision to permit her an additional set-off amount can have no material effect on the costs or interest awarded against her by the Deputy Judge at the end of the trial. The fact remains that Studio Pavas sued the appellant and was successful at trial. Studio Pavas remains successful against the appellant for that judgment after this appeal, albeit with the reduction resulting from the additional set-off that has been permitted. That set-off claim that was successful in part on this appeal was only one of the numerous counterclaims made by the appellant against Studio Pavas. All of those counterclaims failed except for the credits allowed for costumes and hair braiding. As such, Studio Pavas remains entitled to its costs from the trial.

[58] On this appeal, had the appellant chosen to contest the decision of the Deputy Judge only as it related to the set-off claim for hair braiding, then her appeal would have been totally successful and she would not have been liable for costs on the appeal. However, the appellant chose to appeal against the decision of the Deputy Judge “in its entirety”, which required that Studio Pavas respond on this appeal to not only that issue, but to all of the issues that the appellant raised at trial. That appeal has been rejected and dismissed apart from a reduction in the amount of the judgment owing due to the increased set-off. As such, at least on a prima facie basis, the appellant must remain liable for costs absent the presence of other considerations.

[59] Counsel for the appellant argued that no costs should be awarded against her because of her alleged limited financial resources, but for the reasons that follow this is a contention I cannot accept. This is not a case where the courts discretion should be exercised to avoid the appellant being required to bear the costs consequences of these proceedings, apart from the fact that no evidence was adduced before the Court to show what her financial resources are much less that they are limited. The prospect of having to pay costs if a party’s claims are unsuccessful at trial is meant to serve an important disciplinary function in litigation. It is meant in part to force litigants to make a realistic assessment of their prospects for success at trial and to understand that if they continue to prosecute claims based on a weak evidentiary foundation, there is the real prospect of not only not succeeding at trial, but of having to shoulder the other party’s costs in defending the action as well. It is hoped that this prospect will cause litigants to take a hard and serious look at their chances of success and accept that in some cases settlement may be the most prudent course of action. As the reasons that follow will show, however, the prospect of costs did not serve that function in this case.

[60] In this case, Studio Pavas demanded payment of its outstanding account but the appellant did not pay. Her initial defence simply claimed set-off entitlements against the amount Studio Pavas claimed from her, but she then issued a counterclaim nine months later in which she claimed general damages of $10,000 for the panoply of wrongs allegedly committed by Studio Pavas against her and her daughter Camelia, all of which were properly dismissed at trial. Had the trial proceeded solely on the set-off claims, presumably it would not have taken the three full days of trial that were required. Studio Pavas necessarily incurred increased litigation costs in defending against the counterclaim brought by the appellant, and it would simply be wrong and unjust to make Studio Pavas bear its own costs in these circumstances. Moreover, a number of settlement offers were made to her by Studio Pavas, as detailed by counsel for Studio Pavas in her costs submissions filed with the court at my request following the hearing of the appeal, but the appellant chose not to accept those offers. The respondent’s submission is that the circumstances here demand that Studio Pavas should receive the maximum costs allowable by this Court, and that this is a case where the appellant’s conduct and behaviour throughout the proceeding justifies an award outside of s. 29 of the Courts of Justice Act, R.S.O. 1990, c. C.43.

[61] The appellant acknowledged she owed $6,556.90 in her letter of May 26, 2004 written before the litigation commenced, yet at trial she challenged the amount owing to Studio Pavas for each one of the years for which arrears had accumulated. Despite being directed by the Trial judge to focus on the amounts and which items she disagreed with, the transcripts show she could not clearly identify what charges she objected to. She was not well prepared, even though I do acknowledge that she chose to represent herself at trial, but that lack of focus, preparation and clarity to her position certainly prolonged the trial and did add complication.

[62] Ironically, following the May 31, 2005 pre-trial, it appears the parties were able to settle the Studio Pavas claim for $3,697.95 which the appellant would have been able to pay off in monthly instalments of $250, but that settlement was contingent on her abandonment of her counterclaim for damages against Studio Pavas, a condition to which she would not agree. Two further offers to settle were made by Studio Pavas, including a final offer that both parties walk away from their respective claims on a without costs basis but the appellant made no response to these offers that were served on her via mail addressed to the address she used throughout the litigation. Moreover, even though she admitted she owed monies to them, the dispute being over how much, the appellant made no attempt to make any payment to Studio Pavas of even what she felt was properly owing to them.

[63] I agree fully with counsel for Studio Pavas that these actions and inactions of the appellant and her apparent failure to consider even an offer that would permit each party to walk away without costs forced the matter to go to trial, a trial that the appellant lost. There can be no doubt against this background that she must now pay costs to Studio Pavas, subject to reasonability. In fact, the actual Bill of Costs of Studio Pavas reflects that full recovery costs consisting of fees, disbursements and taxes totalled $11,265.11, but for the trial Studio Pavas claimed only the amount of $4,000. On the appeal, Studio Pavas claimed only partial indemnity costs in the very reasonable amount of $3,597.06, including fees, disbursements and taxes. This is a reasonable claim given the amount of material on the appeal to which Studio Pavas was forced to respond.

[64] In my view, given the background to this matter, the numerous offers to settle made to try to avoid the trial, the almost complete lack of success achieved by the appellant at trial, and the fact that this appeal was largely dismissed with only partial success reducing the amount of the judgment awarded against her by only roughly 20%, the costs claimed by Studio Pavas as the successful party are not only reasonable but eminently fair in all the circumstances. Accordingly, Studio Pavas will have judgment for $5,356.90, plus costs of $7,597.06, plus pre-judgment interest on the amount of the judgment under the Courts of Justice Act commencing from May 26, 2004, the date of the demand letter sent to her by counsel for Studio Pavas.

M.G.J. QUIGLEY J.

Released: February 17, 2009

COURT FILE NO.: DC-07-00023-00

DATE: 20090217

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

DAWN PETERS-PETERS-BASCOMBE

Appellant

-- and –

OMNIWORKS VZ INC. carrying on business as STUDIO PAVAS

Respondent

REASONS FOR JUDGMENT

M.G.J. QUIGLEY

Released: February 17, 2009