COURT OF APPEAL FOR ONTARIO

DATE: 2006-10-16

DOCKET: C44518

RE: ORCHARD HEIGHTS PROPERTIES INC. (Plaintiff/ Respondent) – and – REINDORF FINANCIAL NETWORK INC., EXTURA HOLDINGS CORPORATION, JOHN OHLER, THE CANADA TRUST COMPANY, CHRISTOPHER TSIMENIDIS, WERNER ERIC REINDORF, JANET EVELYN REINDORF and REINDORF INVESTMENTS INC. (Defendants/Appellant)

BEFORE: MacPHERSON, CRONK and GILLESE JJ.A.

COUNSEL: Glenn E. Cohen for the appellant Extura Holdings Corporation David J. Kirwin for the respondent

HEARD & RELEASED ORALLY: October 12, 2006

On appeal from the confirmation order of Justice Joseph Donohue of the Superior Court of Justice dated October 21, 2005.

E N D O R S E M E N T

[1] Pursuant to a consent judgment dated October 12, 2004, a reference was held before Deputy Registrar Stevens in London to determine the matters at issue in this action, including the issues as between the respondent, the second mortgagee, and the appellant, the third and fourth mortgagee, of lands in Chatham. As relevant to the proceedings before this court, by reasons dated May 17, 2005, the Referee:

(1) allowed the respondent credits in its favour on the mortgage account for the sum of $6,204.78 in respect of utilities expenses paid by the respondent and the further amount of $10,163.64 owed to Union Gas;

(2) denied the respondent’s claim for a credit in its favour on the mortgage account in the sum of $10,000 in respect of a payment made by the mortgagor to the respondent; and

(3) allowed the respondent a credit in its favour on the mortgage account in the additional sum of $5,000 paid by the mortgagor to Mr. Hanson, one of the respondent’s solicitors, on account of legal fees incurred by the respondent in connection with the negotiation of an extension of the mortgage in question.

[2] On October 21, 2005, on subsequent motions to oppose confirmation of the Referee’s report, Donohue J. confirmed the Referee’s report in all save the following respects (the “confirmation order”). First, he allowed the respondent credit for all utilities expenses paid in the sum of $50,825.72 (and confirmed the amount of $10,163.64 owed to Union Gas). Second, he disallowed any credit to the respondent for the $5,000 payment made by the mortgagor on account of the respondent’s legal fees incurred in association with the mortgage extension.

[3] The appellant appeals that part of the confirmation order that credited the respondent with the full amount of the utilities expenses ($50,825.72) and the additional sum owed to Union Gas ($10,163.64). The respondent, in turn, cross-appeals from those aspects of the confirmation order that disallowed the $5,000 credit on account of legal fees paid to the respondent’s solicitor and that upheld the Referee’s decision to disallow any credit to the respondent for the $10,000 payment by the mortgagor to the respondent at the time of the extension agreement.

1. Appeal

[4] We are satisfied that the appeal must be allowed in part. No credit should be allowed to the respondent, as against Extura, for utilities payments in excess of the sum of $6,204.78. No invoices from the utilities supplier were produced on the reference. Letters from the supplier indicated that a total of $6,204.78 was required to be paid by the respondent in order to maintain service at the mortgaged premises. It is undisputed that this amount, in fact, was paid by the respondent. The balance of the claimed utilities arrears, however, were identified by the supplier as referable to persons other than the mortgagor. Moreover, the respondent appears to have made no inquiries to ascertain either the monies actually owed by the mortgagor or the proper identity of the debtors.

[5] In these circumstances, the respondent failed to meet its obligation to establish the reasonableness of the utilities payments as ‘just allowances’ to the mortgage account.

[6] In all other respects, we would dismiss the appeal.

2. Cross-Appeal

[7] We would also dismiss the cross-appeal for the following reasons.

[8] In relation to the $10,000 payment by the mortgagor to the respondent, both the Referee and Donohue J. disallowed the respondent’s claim for credit. The Referee noted at paragraph 6 of his reasons that there was no evidence before him that the $10,000 was paid as a bonus, as alleged by the respondent. The record supports that finding. Accordingly, as there is no reason to interfere with this finding, it follows that the Referee correctly directed that the amount of $10,000 be credited to the appellant Extura on the mortgage account.

[9] In respect of the $5,000 payment on account of the respondent’s legal fees with Solicitor Hanson, Donohue J. reversed the Referee on the basis that there was no evidence to support this charge. There appears to have been no account rendered to support this charge; nor does the record before us contain such an account. In our view, therefore, Donohue J.’s determination of this matter must stand.

3. Disposition

[10] In the result, the appeal is allowed in part and para. 1(i) of the confirmation order dated October 21, 2005 is amended to read as follows:

The [respondent] is entitled to charge in its favour to the mortgage account utility payments in the total amount of $6,204.78, plus the Union Gas fee in the sum of $10,163.64.

[11] The cross-appeal is dismissed.

[12] Finally, the funds previously paid into court by the appellant Extura, in the sum of $48,545.40, shall be paid out to it, together with all accrued interest thereon.

[13] The appellant Extura is entitled to its costs of these proceedings, fixed in the total amount of $14,000, inclusive of disbursements and GST. We make no change to the costs disposition of Donohue J.

“J. MacPherson J.A.”

“E.A. Cronk J.A.”

“E.E. Gillese J.A.”