2322484 Ontario Inc. v. Hirji, 2017 ONSC 7067

CITATION: 2322484 Ontario Inc. v. Hirji, 2017 ONSC 7067

DIVISIONAL COURT FILE NO.: 16-577

DATE: 20171212

SUPERIOR COURT OF JUSTICE – ONTARIO

DIVISIONAL COURT

RE: 2322484 Ontario Inc., Appellant

AND:

Karim Sadrudin Hirji and Sadrudin Bandali Hirji, Respondents

BEFORE: Kiteley J.

COUNSEL: Elizabeth Roberts, counsel for the Appellant

Roger A. Gosbee, counsel for the Respondents

Karen J. Sanchez, counsel for Payne Law Professional Corporation

HEARD at Toronto: September 19, 2017

ENDORSEMENT

Introduction

[1] 2322484 Ontario Inc. (232) appeals from the judgment of Deputy Judge C.M. Buie, dated November 3, 2016 in favour of the Appellant in that the Appellant would receive the sum of $25,000 plus costs at $2,125 and disbursements at $250 for a total of $27,375 plus pre-judgment interest from the funds held by the Accountant of the Superior Court, with the remaining balance of those funds to be paid to the Respondents. The issue in this appeal is the payment of the remaining balance to the Respondents.

Background

[2] Karim Sadrudin Hirji (Ms. Hirji) and Bandali Sadrudin Hirji (Mr. Hirji) had owned 677 Bloor St. West (Bloor Street) and had operated the Metro Theatre on the property.

[3] Ms. Jain was the principal shareholder and officer of 232. On July 21, 2013, 232 purchased Bloor Street for the sum of $2.9 million. Mr. Hirji[^1] and Ms. Hirji agreed to give a vendor take back mortgage in the amount of $900,000 (the mortgage). In addition the parties entered into a lease commencing August 31, 2013 (the lease) pursuant to which the vendor continued to occupy the property for a period of either three months (ending November 30, 2013) or until December 15, 2013. The parties agreed that the defendants (vendors) would pay monthly rental of $6,000 although they later disagreed whether that included HST or was inclusive of HST. The parties agreed that, for the duration of the lease, the amount of rent would be credited against the mortgage. The parties also agreed that the defendants (vendors) would continue to collect rent from the retail store for two months and that the rental income of $1,200 per month for a total of $2,400 would be set off against the mortgage payments.

[4] The defendants (as tenants) remained in the premises until November 30, 2013.

[5] 232 brought this action in which it alleged that the defendants owed a total of $32,205 on account of costs of removal of abandoned property, snow removal and rent for December to February in the amount of $6,780 per month. The plaintiffs limited their claim to the Small Claims Court maximum of $25,000.

[6] The defendants filed a statement of defence in which they asserted that the lease ended December 15, 2013 but that had they left on November 30, 2013; that pursuant to the lease, the rent was $6,000 per month inclusive of HST (i.e. $5,307.73 plus $690.27 HST); and they denied owing any of the other charges.

[7] The defendants also filed a claim for $25,000 for damages for breach of contract, breach of trust and unjust enrichment.

[8] The plaintiff filed a defence to the defendants’ claim in which 232 denied owing any amounts to the defendants.

Trial and Decision

[9] Evidence and submissions were heard on 8 days starting March 27, 2015 and ending January 29, 2016.

[10] August 7, 2015 was the sixth day of the trial. At the outset of the day, counsel for the defendants asked for leave to be permitted to withdraw which meant that the trial would have to be adjourned. The transcript reflects the submissions made including some information as to the reason for the request. Given the circumstances, the Deputy Judge gave leave to withdraw and then focused on the conditions that would be imposed on the defendants on account of the delay for which they were responsible.

[11] The vendor take back mortgage was due August 30, 2015. The plaintiff wanted to pay the mortgage but needed a discharge of mortgage to facilitate financing arrangements. The outstanding principal and interest as of August 30, 2015 was $59,235.31.

[12] After extensive submissions and several calculations, the Deputy Judge made an order dated August 7, 2015 adjourning the hearing to September 28, 2015; directing the defendants to pay costs of $700; directing the plaintiff to pay to the Accountant of the Superior Court the sum of $59,235.31; and within 7 days of that payment, directing the defendants to provide a discharge in registerable form.

[13] The trial resumed in September 2015. In a judgment released July 20, 2016 the Deputy Judge made the following findings:

(a) The defendants deliberately left the trade fixtures and chattels and therefore were responsible for the costs incurred in removing them in the amounts of $10,600 and $8,475 for a total amount of $19,075.

(b) The defendants knew that it was mandatory that a Smart Water Meter had to be installed and that the plumbing had to be repaired prior to the installation and therefore were responsible for the costs in the amount of $6,282.80.

(c) The lease started August 30 and ended December 15, 2013 and the defendants did not exercise the 20 day termination clause and were responsible for ½ of December’s rent plus HST in the amount of $3,390.

(d) The total of those amounts was $28,747.80 which exceeded the Small Claims Court limit.

(e) The lease clearly provided for a monthly rent in the amount of $6,000 plus HST.

[14] The Deputy Judge ordered submissions as to costs. In the costs endorsement released November 3, 2016, the Deputy Judge held as follows:

(a) In the judgment released July 20, 2016 the amounts awarded exceeded $25,000 and accordingly 232 was entitled to be paid $25,000 from the funds in court.

(b) The defendants were ordered to pay costs of $2,125 plus $250 for disbursements and prejudgment interest from May 27, 2014, to be paid from the funds in court.

(c) The remaining funds held in court were to be paid to the defendants.

Issues in the Appeal

[15] The evidence and the positions taken at trial indicated as follows:

(a) the parties agreed that the monthly rent owed by the Respondent was to be credited against the mortgage. The Deputy Judge held that the monthly rent was $6,000 plus HST in the amount of $6,780 for the months of September, October, November and for one half of the month to December for a total of $23,730. Because the parties had agreed to that set off, the Appellant did not assert it in the claim; and

(b) the Respondent received the rent from the retail store for two months in the total amount of $2,400 and the parties agreed that that amount was to be deducted from the mortgage balance.

[16] The Appellant had not claimed either of those amounts in the claim.

[17] The Appellant takes the position that the Deputy Judge erred by not deducting both of those amounts before releasing the balance of the funds in court to the Respondents. If the Deputy Judge had not erred in the arithmetic calculation, the Appellant asserts that the Deputy Judge would have ordered as follows:

Judgment

$25,000.00

Costs

$ 2,125.00

Disbursements

$ 250.00

Amounts set off against mortgage: $23,730: rent owed by the Respondents for 3.5 months at $6,780 (including HST) per month $2,400: rent collected by the Respondents from the retail tenant

$26,130.00

Total payment to plaintiff

$53,505.00 + interest

Total paid to Accountant, S.C.O. Balance paid to defendants from funds paid to Accountant, S.C.O.

$59,235.31 $5,730.31 + interest

Standard of Review

[18] The standard of review is correctness for questions of law and palpable and overriding error for questions of fact or questions of mixed fact and law.[^2]

Analysis

A. Calculation Errors?

[19] The evidence was that the parties had agreed that the monthly rental the Respondents were required to pay and the monthly rental income the Respondents received from the retail tenant would be credited against the mortgage. Neither of those claims were asserted in the claim. The only issue at trial was whether the payment of $6,000 included HST or HST was in addition. As indicated above, at paragraph 101 of the judgment, the Deputy Judge found that the lease clearly provided for a monthly rent in the amount of $6,000 and HST was additional.

[20] It was not a “calculation error” for the Deputy Judge to not reflect these amounts in the calculation of the amounts owed because they were not in the Appellant’s claim.

[21] Having said that, the question is entitlement to the funds remaining after the judgment in favour of the Appellant is paid from the money paid to the Accountant of the Superior Court.

B. Remedy

[22] This is a unique situation. The Appellant understandably takes the position that, of the payment the Appellant made into court of $59,235.31 in order to obtain a discharge, all but $5,730.31 belonged to the Appellant as demonstrated in paragraph 17. The Respondent takes the position that the Deputy Judge exceeded her jurisdiction in ordering the Appellant to pay $59,235.31 into court and the only outcome is, as the Deputy Judge stipulated, namely that the balance after payment of $25,000 and $2,125 and $250 should properly be paid to the Respondent.

[23] Pursuant to s. 23 of the Courts of Justice Act, the Small Claims Court has jurisdiction where the amount claimed does not exceed $25,000 exclusive of interest and costs. The claim asserted by the Appellant was capped at $25,000 as was the claim asserted by the Respondent for a total of $50,000. The Deputy Judge did not have jurisdiction to order the Appellant to pay into court the sum of $59,235.31.

[24] The Appellant and Respondent agree that the Deputy Judge exceeded her jurisdiction. They do not agree on what is to be done.

[25] I have read the transcript of the proceedings on August 7, 2015 and I understand why the Deputy Judge made that order. Counsel for the Respondents asked to be removed from the record. The Deputy Judge was satisfied that the circumstances warranted removal but the Deputy Judge was concerned about the prejudice to the Appellant as a result of the delay. The Appellant’s mortgage matured after the 6th day of the trial and before the resumption of the trial. The transcript indicates that the parties were co-operating in finding a resolution that would allow for the adjournment yet not prejudice the Appellant. The Deputy Judge made the order requiring the Appellant to pay the remaining amount owed on the mortgage ($59,235.31) without regard to the claims made in the trial. The transcript indicates that the parties consented to the payment into court of that amount.

[26] Having taken that creative step, the Deputy Judge adjourned the trial and ultimately granted judgment. The Deputy Judge did not reflect the agreed upon credits for the lease for 3.5 months and the rental income of $2,400. Those amounts were agreed in evidence but they did not form part of the Appellant’s claim. The anomaly is that the amount which the parties agreed was owing to the Appellant was not reflected in the judgment.

[27] S. 134(1) of the Courts of Justice Act provides that a court to which an appeal is taken may make any order or decision that ought to or could have been made by the court appealed from; order a new trial; and make any other order or decision that is considered just.

[28] If a new trial were ordered, it would likely be in the Superior Court. Given the amounts in issue, that would not be consistent with rule 1.04 of the Rules of Civil Procedure. Pursuant to s. 134(1), the Superior Court has the jurisdiction to resolve the unintended consequences of a consensual order that was caused by the removal of counsel representing the Respondent. This court must find a solution. The Superior Court has the jurisdiction to make an order that the Small Claims Court could not make.[^3]

[29] The evidence is clear: from the funds held in court, the Respondents owe the Appellant $23,730 and $2,400 and those amounts should be returned to the Appellant. The solution to this unique situation is for this court to grant a judgment in favour of the Appellant that reflects the amount owed as a result of the judgment of the Small Claims Court plus amounts admittedly owed by the Respondents.

Costs of the Appeal

[30] Counsel agreed that if the Appellant was successful, the Respondents would pay costs of $11,000.

Final Calculation

[31] Based on the foregoing, I calculate the amount owing as follows:

Judgment

$25,000.

Costs

$ 2,125.

Disbursements

$ 250.

Rent owed by Respondents for 3.5 months at $6,780 (including HST) per month Rent collected by the Respondents from the retail tenant

$23,730. $ 2,400

Total judgment

$53,505. + post-judgment interest from Nov. 3, 2016

Costs of the appeal

$11,000 plus post-judgment interest from December 12, 2017

Grand Total

$64,505 plus post-judgment interest as indicated above

Motion brought on behalf of former lawyer for the Defendants

[32] The law firm that had acted for the Respondents until the 6th day of the trial had obtained a Certificate and Report of Assessment dated February 13, 2017 which required Karim Sadrudin Hirji to pay $7,735.20. On May 23, 2017 Matheson J. had made a “stop order” pursuant to rule 72.05(12).

[33] On the return of this appeal, the law firm that had acted for the Respondents brought a motion for an order that any amounts owing to Respondent from the funds held by the Accountant up to and including the amount of $7,735.20 plus interest calculated at the rate of 2% from March 10, 2017 should be paid to the law firm.

[34] At the outset of this appeal, the law firm had brought a motion for an order that the amount reflected in the Certificate and Report of Assessment be paid to the law firm.

ORDER TO GO AS FOLLOWS:

[35] The appeal is granted. The judgment dated November 3, 2016 is set aside.

[36] In accordance with the calculation at paragraph 31, judgment to issue against the Respondent Karim Sadrudin Hirji in the amount of $64,505.00 consisting of $53,505.00 plus post-judgment interest from November 3, 2016 and costs of the appeal in the amount of $11,000 plus post-judgment interest from December 12, 2017.

[37] The Accountant of the Superior Court shall pay to the Appellants, all of the funds paid into court pursuant to the order of Deputy Judge C.M. Buie dated August 7, 2015.

[38] To the extent that there is a shortfall between the amount paid into court and the amount of $64,505 plus interest as calculated in paragraph 31, judgment shall issue against Karim Sadrudin Hirji in that amount plus post-judgment interest.

[39] The Appellant may have this order signed and entered without approval as to form and content by the Respondent.

[40] The motion by the Payne Law Professional Corporation is dismissed.

Kiteley J.

Date: December 2017

[^1]: Mr. Hirji died before the appeal was heard. An order to continue was not obtained. The judgment below will affect Ms. Hirji only. [^2]: Housen v. Nikolaisen, 2002 SCC 33 [^3]: Unimac-United Management Corp. v. St. Clare’s-Monaco Place, 2013 ONSC 6018 at para 5