SUPERIOR COURT OF JUSTICE - ONTARIO
RE: BANK OF MONTREAL v. STEPHEN SMITH
BEFORE: Gray J.
COUNSEL: Mark Hartman, for the Applicant (Responding Party) Bernard Baum, for the Respondent (Moving Party)
HEARD: February 10, 2009
E N D O R S E M E N T
1Mr. Smith moves for a stay of a judgment of Murray J. dated June 13, 2008, reported at (2008), 71 R.P.R. (4th) 52 (S.C.J.), pending an appeal to the Divisional Court. In his judgment, Justice Murray granted a declaration that a 10-year lease held by Mr. Smith, on a property secured by a mortgage held by the Bank of Montreal, is unenforceable as against the Bank. The lease is unregistered.
2Strictly speaking, the merits of Justice Murray’s decision are not before me. It is sufficient to note that, of the several issues that were argued before him, Murray J. held against Mr. Smith on one critical issue, which I will briefly discuss. Hence, the appeal to the Divisional Court.
3The property in issue is subject to the Land Titles Act. To paraphrase, s. 44(1) of that Act provides that the requirement for registration does not apply where land is subject to an unregistered lease that runs for a period not longer than three years, where there is actual occupation. This lease, being for 10 years, is not subject to that provision and, being unregistered, is not enforceable as against the Bank, unless the Bank has actual notice of the lease: see United Trust Co. v. Dominion Stores Ltd., [1977] 2 S.C.R. 915. Justice Murray held, based on the evidence before him, that the Bank did not have actual notice of the lease. Thus, he held, it is not enforceable as against the Bank.
4The Bank now moves for an order granting a writ of possession. As noted, Mr. Smith moves for an order granting a stay of Murray J.’s judgment, pending the appeal to the Divisional Court. Counsel agree that the Bank’s motion is moot if a stay is granted.
5The Bank’s mortgage was registered on September 11, 2006, securing the principal amount of $1,239,300. It requires monthly payments of $7,669, commencing November 1, 2006. The mortgage went into default on January 1, 2007. The mortgagor is bankrupt.
6For some considerable time, Mr. Smith has made no payments on account of rent, in the required amount of $2,500 per month, although he says he has made significant repairs to the property, and is entitled to offset the cost of those repairs against his obligation to pay rent.
7There is no dispute between the parties that the test to be applied for a stay is the classic test set out by the Supreme Court of Canada in R.J.R. MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311. The Court must consider three factors:
a) whether there is a serious issue to be tried;
b) whether the moving party will suffer irreparable harm if the stay is not granted; and
c) whether the balance of convenience favours the moving party.
8In this case, I am prepared to assume that there is a serious issue to be tried, in the sense that Mr. Smith has an arguable case on appeal. I note, however, that Mr. Smith’s case on appeal is not a strong one. As indicated, Murray J. held that the Bank did not have actual notice of Mr. Smith’s lease. The Divisional Court is likely to hold that that is a question of fact or, at its highest, a question of mixed fact and law. On such a question, the appellant must show palpable and overriding error: see Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235. As indicated, however, I am prepared to assume that Mr. Smith has shown that there is a serious issue to be tried.
9With respect to the issue of irreparable harm, the Supreme Court of Canada held in R.J.R. MacDonald, supra, at para. 59, that “’Irreparable’ refers to the nature of the harm rather than its magnitude.”
10In this case, if the stay is not granted, Mr. Smith will be evicted from his home. He has lived there for several years. He operates his business from those premises. All of his possessions are there. It will be difficult for him to secure other accommodation.
11While the inconvenience suffered by Mr. Smith, if he is evicted, can be potentially quantified in monetary terms, I think the nature of the harm he will suffer is, in a practical sense, irreparable. If he is evicted, and he subsequently wins his appeal, the premises cannot be restored to him. The Bank will, in all likelihood, have sold the premises by then. Even if the premises have not been sold, it will be difficult, if not impossible, to unscramble the egg. Thus, I conclude that Mr. Smith has established irreparable harm.
12In terms of the balance of convenience, the scales are somewhat evenly balanced.
13The Bank will be prejudiced by delay. Indeed, it has been prejudiced already. There was almost no equity in the property at the time the mortgage was granted. It is likely that any equity there was has been eaten up by the loss taken by the Bank on the payments that have not been made for over a year, and on the realty taxes the Bank has had to pay. Mr. Smith has paid no rent since at least the date of Murray J.’s judgment, although he has offered to pay $2,500 per month to the Bank in the meantime; that offer was refused.
14As a condition of granting a stay, it is open to me to fix reasonable terms.
15In determining appropriate terms, I start with the obvious observation that the Bank currently has a judgment in its favour. As noted by Robins J.A. in Ogden Entertainment Services v. United Steelworkers of America, Local 440 (1998), 38 O.R. (3d) 448, at p. 450:
In determining whether a stay should be granted, regard must be had to the judgment under appeal and a strong case in favour of a stay must be made out. The Court must proceed on the assumption that the judgment is correct and that the relief ordered was properly granted. The Court is not engaged in a determination of the merits of the appeal on a stay application.
16While this observation was made in the context of determining whether a stay should be granted at all, it is equally applicable, in my view, in determining what terms should be imposed on an appellant pending appeal.
17In this case, Mr. Smith seeks to remain in the premises during the currency of his appeal, notwithstanding that there is a judgment of Murray J. that did not sustain his position. It is not inequitable, in my view, to require Mr. Smith to pay something to assist the Bank in defraying its ongoing losses until the appeal is disposed of. Those losses are accruing at the rate of over $9,000 per month. It would not be unfair to require Mr. Smith to pay $4,500 per month until the appeal is heard and disposed of. I will not characterize those payments as rent, as to do so would potentially create other problems.
18Mr. Smith, as noted, has not paid rent or any occupation cost since at least the date of Murray J.’s judgment. The equivalent of rent from June 13, 2008 until today, at the rate of $2,500 per month, would be about $20,000. It would not be unfair to require Mr. Smith to pay the Bank a lump sum $20,000, in addition to requiring him to pay $4,500 per month hereafter.
19Mr. Smith’s counsel advises that the appeal to the Divisional Court can be perfected by the end of this week. I have made inquiries of the Registrar in Brampton, where the appeal will be heard. I am advised that if the appeal is perfected by the end of this week, it can be heard during the sittings in May, 2009.
20In the result, I order that the judgment of Murray J. be stayed pending the determination of Mr. Smith’s appeal to the Divisional Court, on the following terms:
a) Mr. Smith shall pay to the Bank of Montreal the sum of $20,000, on or before February 13, 2009;
b) Mr. Smith shall pay to the Bank of Montreal the sum of $4,500 on the first day of each and every month commencing March 1, 2009, until his appeal to the Divisional Court is disposed of;
c) Mr. Smith shall perfect his appeal to the Divisional Court on or before February 13, 2009;
d) Mr. Smith’s appeal to the Divisional Court shall be placed on the list to be heard at the sittings of the Divisional Court in Brampton in May, 2009.
If the terms in any of (a), (b) or (c) are not complied with, the Bank is given liberty to renew its motion for a writ of possession on short notice.
21If Mr. Smith succeeds in his appeal to the Divisional Court, he shall be refunded any amount that he has overpaid, that would otherwise be rent that he would be required to pay at the rate of $2,500 per month. If Mr. Smith’s appeal is dismissed, any amounts he has paid to the Bank shall be credited to the Bank’s mortgage account.
22The costs of this motion shall be reserved to the Divisional Court.
Gray J.
DATE: February 10, 2009
COURT FILE NO.: DC-08-5400
DATE: 20090210
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Bank of Montreal v. Stephen Smith
BEFORE: Gray J.
COUNSEL: Mark Hartman, for the Applicant (Responding Party) Bernard Baum, for the Respondent (Moving Party)
ENDORSEMENT
Gray J.
DATE: February 10, 2009