CITATION: Black v. Owen, 2012 ONSC 400

COURT FILE NO.: 465/10

DATE: 20120130

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

B E T W E E N:

RICHARD BLACK, MARVIN GREEN AND JENNIFER LOFFT

Plaintiffs (Respondents on Appeal)

• and -

GERALD OWEN, KATHERINE ANDERSON AND GERALD OWEN AND KATHERINE ANDERSON IN THEIR CAPACITY AS TRUSTEES OF THE ESTATE OF IVON MACLEAN OWEN

Defendants (Appellant)

Anne E. Spafford, for the Plaintiffs (Respondents on Appeal)

Barnet H. Kussner and Tiffany Tsun, for the Defendant (Appellant) The Estate of Ivon Maclean Owen

HEARD AT TORONTO: January 11, 2012

Swinton J.

Overview

1Gerald Owen and Katherine Anderson, in their capacity as Trustees of the Estate of Ivon Maclean Owen, appeal the judgment of Deputy Judge Kilian dated August 11, 2010, in which he found Ivon Maclean Owen liable to the respondents for $4,052.11 plus costs of $525.00 and dismissed the claims against Gerald Owen and Katherine Anderson personally.

2At issue in this appeal is the liability of the late Mr. Owen, as a homeowner in Wychwood Park in Toronto, to pay annual levies for 2008 and 2009 for the upkeep and maintenance of certain properties held in trust for the benefit of homeowners in Wychwood Park. For the reasons that follow, I would dismiss the appeal.

Factual Background

3Wychwood Park (“the Park”) is a small community of 60 properties in an area of Toronto to the west of Bathurst Street and between St. Clair Avenue and Davenport Road. In 1874, Marmaduke Matthews built the first house in the neighbourhood, followed three years later by Alexander Jardine. In 1888, Matthews and Jardine registered a plan of subdivision and revised it in 1891 after they purchased an additional ten acres of land. The plan created 38 lots with a private park, a private roadway and drives. The goal was to create an artists’ colony.

4On July 3, 1891, Matthews and Jardine, their spouses and two other homeowners created a Trust Deed, which was registered with the Registry Office of the County of York. It appointed three Trustees to hold and maintain “the roadways, drives and the park reserve … as private property for the benefit of the owners.” The Trustees were to “keep the said roadways, drives, reserves and reservations in good repair and order for the benefit of the owners.” The owners who benefit from the Trust Deed are the owners of properties within the boundaries of the Park, now numbering 60 properties.

5The Trust Deed authorizes the Trustees to require owners of the lands affected by the Trust Deed to pay annual levies. It states that the Trustees have the right to collect $500 and “said sums as may be necessary” on March 1 each year from each owner in order to maintain the Trust Property and to pay taxes on it. The Trustees must provide each owner with a written statement of how the levy from the previous year was used by February 1 of the subsequent year. Before spending more than $500 and taxes in any year, the Trustees must call a meeting and seek approval from owners representing two thirds in number and over one half of the value of the lands in the Park.

6At the present time, the Park is entered by one of two gates (although one is usually kept closed). The roads within the Park are Trust Property. A limited number of houses on Alcina Avenue have access to a public street, but most of the residents have access to their properties by the private road. The title to the private road within the Park is currently in the names of James Stuart Johnston, Donald Fraser and Mary Jane Baillie in a deed registered in 1993. None of the current Trustees are named on the title.

7The City of Toronto does not provide maintenance for the Park roads. Therefore, the annual levy is used for the maintenance of the primary private road and other roads, including lighting, snow removal and repairs. As well, the annual levy is used for the maintenance of a ravine with a stream and pond and the tennis courts.

8The respondents in this appeal are the three current Trustees. They brought a Small Claims Court action against Ivon Maclean Owen, Gerald Owen and Katherine Anderson to recover the amount of the annual levy for 2008 and 2009 in the total amount of $4,052.11. Ivon Maclean Owen was the registered owner of a property in the Park located at 49 Alcina Avenue. His family has resided in this house since 1910 or 1911. Gerald Owen, his son, and Katherine Anderson, Gerald’s wife, moved into the Owen house around 1997. Ivon Maclean Owen died in November, 2010, but Gerald Owen and Katherine Anderson have continued this appeal in their capacity as his Estate Trustees.

9Gerald Owen, on behalf of all the defendants, took the position at trial that there is no legal obligation to pay the annual levy, as the Trust Deed is not registered on the title for 49 Alcina Avenue. The Owen property has been registered under the Land Titles system since the creation of the land titles system in Ontario in the 1880s. At the time this proceeding commenced, there were only two instruments registered on the title for the Owen property: a City of Toronto by-law designating the property as part of a Heritage Conservation District and a transfer from the estate of Sheila Owen to Ivon Maclean Owen.

The Decision of the Deputy Judge

10The Deputy Judge gave judgment against Ivon Maclean Owen, finding that Mr. Owen was bound by the Trust Deed because he had actual knowledge of the trust, as shown by the fact that he had paid the levy for years.

11The Deputy Judge also rejected an argument that the Owens received no benefit from the trust. He found that the trust was for the benefit of all the property owners in the Park, and it was irrelevant whether they made use of the benefits.

12With respect to an argument that there had not been a quorum at the annual meetings that approved the levies, the Deputy Judge held this was a matter to be determined at the annual meeting. He stated that he had not been provided with any minutes to show there had been defects at the meetings.

13Therefore, he held Ivon Maclean Owen liable to pay the 2008 and 2009 annual levies and dismissed the action against Gerald Owen and Katherine Anderson personally.

The Issues on Appeal

14The appellant argues that the trial judge erred in a number of ways. He alleges errors by the trial judge in his conclusions on the issues raised at trial. He also raised other arguments for the first time on this appeal. Those issues were not before the trial judge.

15The following two issues concern matters raised in the pleadings before the Small Claims Court:

1. The trial judge erred in finding that the appellants have an obligation to continue paying the annual levy pursuant to the Trust Deed because they had actual notice of the trust, given the provisions of the Land Titles Act, R.S.O. 1990, c. L.5.

2. The trial judge erred in failing to find that the annual levies were not properly imposed because of irregularities in the procedure at the annual meetings.

16The appellant also argues that the judgment should be set aside for the following reasons:

1. The obligation to pay the annual levies is a positive covenant that cannot run with the land and, therefore, cannot be enforced against the appellant, who is not a party to the Trust Deed.

2. The respondents did not have standing to bring this action, as they are not the registered owners of the Trust Property.

3. The Trust Deed is of no effect because it offends the rule against perpetuities.

17The respondents argue that the appellant should not be allowed to raise the issues set out in the preceding paragraph for the first time on appeal.

Did the trial judge err in finding that the appellant was required to pay the annual levy because he had actual notice of the Trust Deed?

18The appellant does not take issue with the finding of fact that he had actual notice of the Trust Deed, although Gerald Owen and Katherine Anderson take issue with a sentence in the reasons where the trial judge states that the “defendants” had actual notice and were bound by the Trust Deed. As I stated during oral argument, an appeal lies from the order of the trial judge and not his reasons. In his order, he found only Ivon Maclean Owen liable to pay levies for two years.

19The Supreme Court of Canada in United Trust v. Dominion Stores Ltd., [1977] 2 S.C.R. 915 had to determine whether the Land Titles Act (“LTA”) abolished the common law doctrine that allows a registered titleholder’s estate to be encumbered if the titleholder has actual notice of the encumbrance. The Court concluded that in Ontario, the common law doctrine of actual notice was not altered by the LTA, unless the alteration was made “by clear or appropriate words” in the legislation. In the situation before the Court in that case, the titleholder had actual notice of an unregistered leasehold interest at the time of purchase of the land, and, therefore, its interest was subject to that leasehold interest.

20I note that a similar result was reached in Bell Canada Inc. v. White Admiral Ltd., 2011 ONSC 5857 (S.C.J.), where the Court held that an easement was valid, although not registered on land in the Land Titles system, because the owner of the land had actual notice of the easement (at paras. 10, 13).

21The appellant argues that the trial judge erred in law in finding that he was liable to pay the levies because he had actual notice of the Trust Deed. He relies on the decision of Chapnik J. in Randvest Inc. v. 741298 Ontario Ltd. (1996), 30 O.R. (3d) 473 (Gen. Div.) for the proposition that the LTA has abrogated the common law doctrine of actual notice with respect to the existence of a trust.

22In Randvest, a numbered company was the registered owner of the land. A purchaser of the land raised an issue about the vendor’s capacity to convey good title, because a title search had revealed a transfer tax affidavit and statutory declaration attached to the prior deed making reference to another company as the beneficial owner.

23Chapnik J. reviewed the provisions of the LTA and concluded that “the legislative enactments are clear and unequivocal and indicate an intention not to recognize the existence of a trust relationship in a situation such as this” (at p. 4) (emphasis added). She relied on s. 62(1) of the LTA, which states that a notice of an express, implied or constructive trust shall not be entered on the register or received for registration. As well, s. 62(2) deals with the situation where an owner is described as a trustee, stating that such a description is not notice of a trust within the meaning of this section, and the owner can deal with the land or charge as if such a description had not been inserted, unless there has been a registration of a caution or inhibition. She then held that the inclusion of the terms of the trust as an adjunct of the earlier deed was not notice of a trust.

24As well, she referred to s. 72(1) of the LTA, which states,

No person, other than the parties thereto, shall be deemed to have any notice of the contents of any instruments, other than those mentioned in the existing register of title of the parcel of land or that have been duly entered in the records of the office kept for the entry of instruments received or are in course of entry.

25In my view, Randvest is distinguishable from the present case. Chapnik J. was dealing with a situation where the registered owner of the property appeared to be a trustee for another company. Her task was to determine whether the registered owner could convey good title regardless of the trust. The sections of the LTA on which she was relying, including s. 62, are found in Part VI of the LTA, headed “Part Owners”.

26There is no question that at the material time, the late Mr. Owen was the registered owner of 49 Alcina Avenue. There was no allegation that he was holding the property in trust for someone else, as in Randvest. Rather, the issue was whether he had an obligation to pay the annual levies as a beneficiary of the Trust Property.

27The Trustees claim in this proceeding that Ivon Maclean Owen, as the registered owner, was obliged to comply with the terms of the Trust Deed, because he had actual notice of those terms. In the appellant’s alternative argument on this appeal, the obligation has been described as a “positive covenant”. In oral argument, counsel conceded that the negative covenants in the Trust Deed were binding.

28In accordance with the Supreme Court’s decision in United Trust, the appellant was bound by the obligation to pay the annual levies, even though the Trust Deed is not registered on the property, because he had actual notice.

29Moreover, s. 72(1) of the LTA does not eliminate the common law doctrine of actual notice. All it states is that a person is not deemed to have notice of an unregistered document.

30Therefore, the trial judge did not err in law in finding that the appellant was bound to pay the annual levies imposed under the Trust Deed because of actual notice of the Trust Deed.

Did the trial judge err in failing to find the annual levies were not properly imposed because of procedural irregularities at the annual meetings?

31There was very little evidence at trial about the procedure at the annual meetings. Gerald Owen and Katherine Anderson testified at trial, but neither had attended the meetings at which the 2008 and 2009 annual levies were approved.

32Gerald Owen cross-examined Donald Gutteridge, who had been a trustee for several years, apparently retiring about two years before the trial. When asked how many households were typically at the annual meeting, he replied that it depended on whether there were significant issues. He then said, “I find it hard to say how many, but I would say it might be 60 percent” (Transcript, p. 26). Mr. Gutteridge said he did not know what the quorum was. Then there was the following exchange:

Mr. Owen: Q. Well, are you aware that under the trust deed vote requires not only a majority, an actual majority of all owners, but two-thirds of value as well?

Mr. Gutteridge: A. I am, yes.

Q. Has that ever been – ever been complied with?

A. No, it’s never been …

Q. In your experience …

A. … never been raised during my time, because …

Ms. Anderson: You didn’t know.

Mr. Gutteridge: A. I didn’t know.

33Gerald Owen testified that in his experience, the voting procedures at meetings did not comply with the requirements of the Trust Deed. His impression was that only one third of households took an active part (Transcript, p. 48).

34The onus was on the appellant to prove that the procedure used at the annual meetings did not comply with the requirements in the Trust Deed. No evidence was presented as to what actually occurred at the meetings which approved the 2008 and 2009 levies. In my view, the Deputy Judge did not err in refusing to give effect to the argument of procedural irregularity, given the lack of any cogent evidence about what happened at the November 2007 and December 2008 annual meetings. I would not give effect to this ground of appeal.

The New Grounds of Appeal

35New grounds can be raised for the first time on appeal if certain conditions are met:

1. there is a sufficient evidentiary record to resolve the issue;

2. the failure to raise the issue at trial was not due to a tactical decision; and

3. refusing to allow the argument would not result in a miscarriage of justice (Flora v. Ontario Health Insurance Plan (2005), 207 OAC 330 (Div. Ct.) at para. 27; McNaught v. Toronto Transit Commission (2005), 249 D.L.R. (4th) 334 (Ont. C.A.) at para. 32).

36One of the new arguments raised on appeal was framed as a challenge to the jurisdiction of the Small Claims Court to proceed with the claim, because the respondents were not the named owners of the Trust Property. There is no evidentiary record regarding the legal authority of the respondents to commence the action. Had the appellant raised this issue at trial, the respondents could have led evidence regarding their appointment as Trustees and their legal rights and obligations. This is an issue that should have been raised at trial and not for the first time on appeal. It would not be in the interests of justice to deal with it.

37The appellant also argues for the first time that the obligation to pay the annual levy is a positive covenant. He argues that the law is clear in Ontario that a positive covenant does not run with the land, even where a subsequent purchaser has notice (Durham Condominium Corp. No. 123 v. Amberwood Investments Ltd. (2002), 58 O.R. (3d) 481 (C.A.) at para. 33). As this argument raises almost a pure question of law, he submits, it can be raised on appeal. As well, the appellant’s counsel argues that the interests of justice would be best served by allowing the appellant to make the argument. While it was not raised at the trial level, the appellant was not represented by counsel at the Small Claims Court.

38The respondents argue that they would be prejudiced if this argument can proceed, as they had no notice of the positive covenant issue at trial. Had they been aware of it, evidence could have been adduced on the nature of the obligations set out in the Trust Deed and whether the obligation to pay the annual levies stems from a positive covenant on the land or from another legal obligation, such as an oral contract or because of estoppel.

39In my view, the interests of justice do not require the resolution of this issue on this appeal. The appellant did not raise this issue at trial, although the case law was readily available. The fact he did not have legal counsel at trial does not permit him to raise the issue now, as the respondents might well have responded in a different manner if the issue had been raised earlier.

40Moreover, this issue, if resolved as the appellant argues, would call into question the binding nature of the Trust Deed not only for the Owen property, but for the other properties in the Park as well. If this issue is to be litigated, it should be done in a manner that gives clear notice to the Trustees and, through them, to others in the community who are likely to be affected. Therefore, I decline to deal with the positive covenant argument as a ground of appeal.

41The appellant also argues that the Trust is void because of the rule against perpetuities. This argument was not raised before the trial judge, nor was I presented with proper legal authority on the application of the rule and the Perpetuities Act, R.S.O. 1990, c. P.9. Again, the resolution of this issue would likely affect other property owners in the Park, who have not received notice. Therefore, I decline to deal with this argument on appeal.

Conclusion

42The trial judge held that Ivon Maclean Owen had an obligation to pay the annual levies under the Trust Deed for 2008 and 2009. In coming to that conclusion, he did not err in law, nor did he make any palpable or overriding error of fact. Therefore, the appeal is dismissed.

43If the parties cannot agree on costs of the appeal, they may make brief written submissions through the Divisional Court Office within 30 days of the release of these reasons.

Swinton J.

Released: January 30, 2012

CITATION: Black v. Owen, 2012 ONSC 400