Mathieson v. Ostrowski, 2013 ONSC 1984

CITATION: Mathieson v. Ostrowski, 2013 ONSC 1984

DIVISIONAL COURT FILE NO.: 250/11

DATE: 20130419

SUPERIOR COURT OF JUSTICE - ONTARIO

(DIVISIONAL COURT)

RE: PENELOPE JANE MATHIESON, Applicant/Respondent in Appeal

• and – MARK CASIMIR OSTROWSKI, Respondent/Appellant

BEFORE: M. Brown R.S.J., Swinton and Lederer JJ.

COUNSEL: Rochelle Cantor, for the Applicant/Respondent in Appeal Yan David Payne and Andrew Pelletier, for the Respondent/Appellant

HEARD at Toronto: March 19, 2013

E N D O R S E M E N T

The Court:

[1] Mark Ostrowski (“the appellant”) appeals from a judgment of Kruzick J. dated April 7, 2011 in an application for partition and sale under the Partition Act, R.S.O. 1990, c. P.4. After a trial lasting several days, the application judge determined the appropriate sale price of a property that had been jointly owned by the parties while they were in a common law relationship. The property had ultimately been purchased by the appellant in March 2009. The judge also determined the appropriate distribution of proceeds and interest.

[2] The appellant raises a number of issues, including the argument that the application judge erred in determining that the respondent, Ms. Mathieson, owed nothing by way of contribution for the initial purchase of the property; that she was entitled to occupation rent for the period in which the appellant lived on the property from their separation in 2005 up to the sale in March 2009; and that the appellant was not entitled to set off his payments for maintenance, repair and utilities in the calculation of the occupation rent.

[3] With respect to each of these issues, we find no error by the application judge. There was evidence that the appellant had contributed $22,500 more than the respondent to the initial purchase of the property. However, there was also evidence that the respondent had repaid at least $15,000 over the years. As well, the application judge took into account the lack of any demand by the appellant for repayment until this application was launched. He found that nothing was owing in relation to the initial purchase. Given the evidence, he was entitled to reach that conclusion.

[4] With respect to the claim for occupation rent, the application judge found that the appellant had ousted the respondent. This finding is in accordance with the case law holding that a common law spouse must prove ouster in order to claim occupation rent. He also held that the appellant’s conduct, in refusing to have the property sold, entitled the respondent to equitable relief. Again, there was evidence to support the judge’s finding of ouster and his finding that occupation rent should be paid.

[5] The application judge refused to allow the appellant to deduct maintenance and repair costs and electricity and heating costs as a setoff to the occupation rent, which he quantified at $90,000. The application judge found that these were personal and business expenses incurred during the occupancy. Again, that was a finding he was entitled to make on the evidence before him.

[6] The application judge did allow the appellant to deduct $60,242.23 for carrying costs of the property from the date of separation in 2005 to the sale in 2009. He stated in his reasons that this amount was agreed upon by the parties.

[7] The application judge made a palpable and overriding error in stating that the parties agreed to this sum. In fact, the carrying costs for payments on the mortgage (principal, interest, property taxes and insurance), as set out in the Agreed Statement of Facts before him, total $79,897.12 – some $19,654.89 higher than the figure he used.

[8] The respondent submits that the difference reflects some $18,000 that she paid for joint expenses in excess to what the appellant paid in a period prior to their separation. However, the application judge stated specifically that the $60,242.33 figure reflected costs after the date of separation. He made no mention of any payments prior to separation.

[9] As a result of this error of fact, the amount awarded for occupation rent is incorrect. When the correct amount for carrying costs is subtracted from $90,000, the remainder is $10,102.88. Divided by two that results in an occupation rent of $5,051.44. To that, the application judge added half of the amount left in the parties’ bank accounts ($1,153.19). Together, those figures result in an occupation rent of $6,204.63, rather than $16,153.00.

[10] The application judge also made an order with respect to real estate commission that resulted in the order to the appellant to pay $2,619.13 to the respondent. Both counsel on this appeal conceded that they had difficulty in understanding this aspect of the application judge’s reasons because of the apparent contradiction between paragraphs 39 and 41 of the reasons.

[11] The application judge appears to have found that both parties should be responsible for the real estate commission. He noted that the respondent’s counsel had paid $7,619.13 for commission out of funds advanced by the appellant after the sale and held in trust by respondent’s counsel.

[12] Given the finding that both parties should pay commission, the application judge should have ordered each party to be responsible for one half of the commission, an amount of $3,809.57 each, rather than the $2,619.13 he ordered the appellant to pay. The application judge also seems to have failed to take into account that the funds from which respondent’s counsel made the advance were funds paid by the appellant.

[13] Finally, the application judge ordered pre-judgment interest on all the funds owing to the respondent from the date of the application. It was reasonable to make such an order with respect to the period when the respondent was deprived of the use of her funds by the appellant’s refusal to cooperate in a sale, as the occupation rent would not adequately compensate her for that deprivation.

[14] The application judge correctly calculated the amount owing on $160,000 from the date of the application to the date of the sale, since she received that amount after the sale.

[15] However, he also ordered pre-judgment interest on the remaining amount owing until the date of judgment. In our view, he erred in doing so, as he failed to take into account that the appellant had paid $30,000 into court and the respondent’s counsel received another $35,000 to be held in trust at the time of the sale.

[16] In our view, the appellant should not be ordered to pay interest on the amount paid into court nor on the amount held in trust by respondent’s counsel. The respondent is entitled to interest earned on the amount in court, which the application judge ordered paid out to her.

[17] On the amount paid to her counsel, the reasonable expectation would be that the funds would have been held in an interest bearing account while in trust. At the argument of the appeal, respondent’s counsel indicated that she held the funds in a non-interest bearing account. The appellant should not have to pay interest on that amount, over which he had no control. It was unreasonable not to invest the funds, given the length of time they have been held.

[18] Accordingly, the amount of pre-judgment interest should be calculated only on the amount owing to the respondent up until the date of sale, as set out below.

[19] The following are the amounts owed to the respondent in accordance with this decision:

Half interest in the property $204,025.87

Occupation rent 6,204.63

Less one half commission (3,809.57)

$206,420.93

Interest up until sale in 2009 13,790.05

$220,210.98

[20] The following are the amounts to be credited to the appellant:

Paid into court $ 30,000.00

Paid to respondent’s counsel 195,000.00

$225,000.00

Minus one half commission (3,809.57)

$221,190.43

[21] This leaves a credit owing to the appellant of $979.45 from the funds held in trust, as explained below.

[22] The respondent has already received $160,000.00. The application judge also ordered that she be paid the $30,000.00 held in court to the benefit of the proceeding. His order should properly have included a reference to the interest as well.

[23] The respondent has a remaining credit of $30,210.98. Her counsel holds $27,380.87 in trust. Of that amount, $979.45 shall be paid to the appellant. This leave a balance of $26,401.41 to be paid to the respondent. Notionally, there should be a credit of $3,809.57 added to that amount, to reflect that the appellant’s funds have been used to pay the full commission, while the respondent should have paid half. That gives a notional total of $30,210.98, which equals the remaining amount owing to the respondent.

[24] If the parties cannot agree on costs of the appeal, they may make brief written submissions through the Divisional Court Office within 30 days of this decision.

M. Brown R.S.J.

Swinton J.

Lederer J.

DATE: April 19, 2013