Hilson v. 1336365 Alberta Ltd.
[Indexed as: Hilson v. 1336365 Alberta Ltd.]
Ontario Reports Court of Appeal for Ontario Doherty, Sharpe and L.B. Roberts JJ.A. December 18, 2019
148 O.R. (3d) 609 | 2019 ONCA 1000
Case Summary
Debtor and creditor — Guarantee and indemnity — Liability of guarantor
Cross-appeal by plaintiff from trial judge's decision reducing amount owing on guarantees by 50 per cent to account for proceeds of settlement received by plaintiff in negligence action against solicitor who had acted for her on these and other transactions allowed — Trial judge erred in reducing amounts owed under guarantees — Double recovery not applicable in this case.
Real property — Proceedings — Practice and procedure — Limitation periods
Appeal by defendants from trial judgment finding them liable on their personal guarantees for 25 mortgages dismissed — Applicable statutory limitation period for the claim on the guarantees was 10 years pursuant to the Real Property Limitations Act and not the two-year period in the Limitations Act — Guarantees fell within any other instrument to repay whole or part of any money secured by a mortgage in s. 43(1) of Real Property Limitations Act — Real Property Limitations Act, R.S.O. 1990, c. L.15, s. 43(1).
Facts
Appeal by the defendants from trial judgment finding them liable on their personal guarantees respecting the amounts owed on 25 mortgages. Cross-appeal by the plaintiff from the trial judge's decision reducing the amount owing on the guarantees by 50 per cent to account for the proceeds of a settlement received by her. The plaintiff had sued the lawyer who had acted for her on these and other transactions for negligence. The allegations of negligence included but were not limited to failure to obtain proper security for her mortgage investments. That action was settled for a global sum. The trial judge reduced the amount owing on the guarantees by 50 per cent to account for the proceeds of the settlement and to avoid double recovery.
Held: The appeal should be dismissed.
Cross-appeal allowed. The trial judge did not err in finding that the applicable statutory limitation period for the claim on the guarantees was ten years pursuant to the Real Property Limitations Act and not the two-year period in the Limitations Act, 2002, S.O. 2002, c. 24, Sch. B. The guarantees fell within "any other instrument to repay the whole or part of any money secured by a mortgage" in s. 43(1) of the Real Property Limitations Act. The trial judge erred in reducing the amounts owed under the guarantees. The facts of this case did not at this point engage the double recovery or double satisfaction principle. The trial judge's determination that a 50 per cent reduction was appropriate was entirely speculative. The appellants had not established that their liability under the guarantees had been reduced by satisfaction of the guaranteed debt. The trial judge's finding that the guarantees were valid and enforceable was not consistent with his finding that 50 per cent of the settlement should be attributed to the claim on the guarantees. Until the plaintiff actually achieved full or substantial satisfaction of the debt she was owed, there could be no question of double recovery.
Cases Referred To
- Cunningham v. Wheeler; Cooper v. Miller; Shanks v. McNee, [1994] 1 S.C.R. 359
- Cuttell v. Bentz, [1985] 6 W.W.R. 193, 65 B.C.L.R. 273
- Treaty Group Inc. v. Drake International Inc., [2005] O.J. No. 5232, 36 C.C.L.T. (3d) 265
Statutes Referred To
- Interpretation Act, R.S.O. 1990, c. I.11, ss. 4, 10
- Land Registration Reform Act, R.S.O. 1990, c. L.4, s. 1
- Limitations Act, 2002, S.O. 2002, c. 24, Sch. B
- Real Property Limitations Act, R.S.O. 1990, c. L.15, s. 43(1)
- Registry Act, R.S.O. 1990, c. R.20, s. 1
Authorities Referred To
- Ruth Sullivan, Statutory Interpretation, 3rd ed. (Toronto: Irwin Law, 2016)
- David M. Walker, The Oxford Companion to Law (Oxford: Clarendon Press, 1980)
Appeal Information
APPEAL from the judgment of Lococo J., [2018] O.J. No. 1581, 2018 ONSC 1836, 95 R.P.R. (5th) 279 (S.C.J.).
Counsel:
- Jonathan L. Rosenstein, for appellants
- Howard W. Reininger, for respondent
Decision
BY THE COURT:
A. Introduction
[1] The panel that originally heard this appeal ordered that the appeal be re-heard by a differently constituted panel: [2019] O.J. No. 4139, 2019 ONCA 653. That panel withdrew the reasons it had released in error after the original hearing. No submissions were made to us with respect to those reasons and this panel has not read or considered those reasons in coming to the following conclusions.
B. Background
[2] The respondent's claim against the appellants, Ross and Barbara Lightle, is based upon certain guarantees. The guarantees relate to 25 mortgage loans given by the respondent to the named corporate entities formed by the appellants to invest in 25 separate interests in a residential real estate development known as "Godstone". The mortgages went into default and the respondent sued the appellants on their guarantees.
[3] There were two types of guarantee. The mortgages themselves contained guarantees (the "covenant guarantees") and the appellants executed five separate instruments by which they personally guaranteed the amounts owing on the 25 mortgages (the "stand-alone guarantees").
[4] The trial judge found the appellants liable on the five stand-alone guarantees, rejecting their argument that the claim was barred by the Limitations Act, 2002, S.O. 2002, c. 24, Sch. B. He found that as the evidence only proved that they had authorized the registration of the 1336367 Alberta Ltd. mortgages, they were only liable on the covenant guarantees for those mortgages.
[5] The respondent had sued the lawyer who had acted for her on these and other transactions for negligence. The allegations of negligence included but were not limited to failure to obtain proper security for her mortgage investments. That action was settled for a global sum. The trial judge reduced the amount owing on the guarantees by 50 per cent to account for the proceeds of the settlement and to avoid double recovery.
C. Issues
[6] The following issues arise on this appeal.
[7] First, the appellants submit that the trial judge erred in finding that the applicable statutory limitation period for the claim on the stand-alone guarantees was ten years pursuant to the Real Property Limitations Act, R.S.O. 1990, c. L.15, and not the two-year period in the Limitations Act.
[8] Second, the appellants submit that the trial judge erred by reducing the amount owing by only 50 per cent to account for the proceeds of the settlement and argue that the proper reduction is 100 per cent.
[9] Third, by cross-appeal, the respondent submits that the trial judge erred by reducing on account of the settlement the amount owing by as much as 50 per cent. The respondent argues that there should no reduction on account of the settlement, or if there is a reduction, it should only be 28.8 per cent.
[10] Fourth, by cross-appeal, the respondent argues that the trial judge erred in dismissing the claims based upon four of the five covenant guarantees.
D. Analysis
(1) Limitation Period
[11] The appellants submit that the respondent's claim is governed by the Limitations Act and, as the respondent's claim was brought more than two years after the claims on the guarantees arose, her claim is statute-barred.
[12] The trial judge rejected that submission and found that the respondent had brought her claim within the applicable limitation period, namely, ten years, as her claim was governed by the Real Property Limitations Act, s. 43(1):
43(1) No action upon a covenant contained in an indenture of mortgage or any other instrument made on or after July 1, 1894 to repay the whole or part of any money secured by a mortgage shall be commenced after the later of,
(a) the expiry of 10 years after the day on which the cause of action arose; and
(b) the expiry of 10 years after the day on which the interest of the person liable on the covenant in the mortgaged lands was conveyed or transferred.
(Emphasis added)
[13] The crucial question is whether the stand-alone guarantees fall within the emphasized words: "any other instrument . . . to repay the whole or part of any money secured by a mortgage".
[14] "Instrument" is routinely used to describe a formal legal document in writing: P.G. Osborn, A Concise Law Dictionary, 5th ed. (London: Sweet and Maxwell, 1964), at p. 171; David M. Walker, The Oxford Companion to Law (Oxford: Clarendon Press, 1980), at pp. 626-27; Daphne A. Dukelow and Betsy Nuse, The Dictionary of Canadian Law (Toronto: Carswell, 1991), at p. 523. The word "instrument" is not defined in the Real Property Limitations Act.
[15] In support of their argument that "instrument" should be given a narrower meaning that does not embrace the stand-alone mortgage guarantees, the appellants make two submissions.
[16] First, they submit that the language of s. 43(1) must be read in the light of the circumstances that existed at the time of its predecessor's enactment in 1939 and that "instrument" should be narrowly interpreted to deal only with those specific circumstances.
[17] Second, they argue that the interpretation of the word "instrument" in the Real Property Limitations Act should be governed by the definition of that same word in the Registry Act, R.S.O. 1990, c. R.20, s. 1, limiting the meaning to instruments affecting title to land and executed with the requisite formalities to allow for registration.
[18] In our view, the trial judge properly rejected both submissions.
[19] We deal first with the historical argument.
[20] Prior to 1893, the limitation period to enforce a mortgage was ten years. However, the limitation period to enforce the covenant to pay the mortgage was the 20-year period that applied to specialties. That was because the covenant was contained within a sealed document and a sealed document was a specialty.
[21] The legislature removed that anomaly by amending the Limitations Act in 1893 to exclude covenants contained in a mortgage from the definition of specialty, with the result that both claims to enforce the mortgage and claims on the covenant were from that point governed by the same limitation period.
[22] In 1939, the legislature amended the Mortgages Act to make a new owner who purchased from the original mortgagor and was liable to indemnify the mortgagor for the mortgage debt directly liable to the mortgagee for the debt secured by mortgage.
[23] A corresponding amendment in 1939 to what would become the Real Property Limitations Act, s. 43(1) introduced the words "or any other instrument" that are at issue on this appeal. The appellants argue that as this language was used to accommodate the new provision in the Mortgages Act making the new owner liable to the mortgagee, it can have no wider meaning today and therefore must be restricted to covenants contained within mortgages.
[24] We are unable to accept that submission.
[25] First, there is no legislative history to support the narrow meaning. At the time, there was no Hansard of the legislative debates. The appellants can point to no record of committee reports or background studies to explain the evolution or purpose of the amendment.
[26] Second, even assuming that the appellant's contention regarding the immediate purpose of adding the words "any other instrument" is plausible, the plain meaning of those words does not require or support such a narrow interpretation. If the legislature had truly intended to limit the meaning to covenants by subsequent purchasers, it could easily have said so. Instead, the legislature used general language that can readily be interpreted to embrace stand-alone guarantees.
[27] Third, we agree with the trial judge, at para. 51, that there is "no justification for having different limitation periods depending on whether the guarantee covenant is in the mortgage or in a separate document". Giving "any other instrument" the narrow reading sought by the appellants would introduce an anomalous distinction between identical guarantees. It would also create an awkward distinction between the limitation period to enforce a mortgage and the limitation period to enforce a closely related promise to pay the debt secured by the mortgage. The legislature removed a similar distinction that existed before 1893 and it is difficult to see why the legislature would want to create a similar distinction in 1939.
[28] Fourth, we do not accept the submission that the appellants' contention is supported by the principles of statutory interpretation. The argument that when interpreting the word "instrument" we should rigidly adhere to the specific problem that motivated its enactment would be contrary to the Interpretation Act, R.S.O. 1990, c. I.11, s. 4: "The law shall be considered as always speaking and, where a matter or thing is expressed in the present tense, it is to be applied to the circumstances as they arise, so that effect may be given to each Act and every part of it according to its true intent and meaning." This direction should be read together with s. 10 that all statutes "shall be deemed to be remedial . . . and shall accordingly receive such fair, large and liberal construction and interpretation as will best ensure the attainment of the object of the Act according to its true intent, meaning and spirit". See, also, Ruth Sullivan, Statutory Interpretation, 3rd ed. (Toronto: Irwin Law, 2016), at pp. 120-21. Unless the language of an enactment compels us to do so, we should avoid interpreting legislation in a way that produces impractical and unjust results.
[29] We turn to the appellants' submission that the meaning of "instrument" in the Real Property Limitations Act should be governed by the definition of "instrument" in the Registry Act.
[30] It is hardly surprising that the Registry Act defines "instrument" as meaning instruments affecting title to land and executed with the requisite formalities to allow for registration. That is what the Registry Act is all about -- creating a public record of formal documents that affect interests in land to ensure the integrity of title to land and to allow third parties to investigate title. If an "instrument" does not affect title to land, there is no reason to clutter the public record by registering it. Section 43(1) of the Real Property Limitations Act has a very different purpose, namely, to establish an appropriate limitation period for claims arising under and in relation to mortgages. That purpose does not engage the same concerns as those arising under the Registry Act and it has no relationship to registrability of documents. The legislature did not incorporate the Registry Act definition in relation to s. 43(1) as it did in another situation where incorporation made sense to do so: see the Land Registration Reform Act, R.S.O. 1990, c. L.4, s. 1.
[31] For these reasons, we reject the submission that the trial judge erred in concluding that the applicable limitation period for the claims on the stand-alone guarantees was ten and not two years.
[32] This makes it unnecessary for us to deal with the respondent's argument that the stand-alone guarantees did affect title because a guarantor who makes a payment to discharge to mortgage debt acquires an equitable right to redeem the mortgage.
(2) Covenant Guarantees
[33] As we have dismissed the appeal with respect to the stand-alone guarantees, it is unnecessary for us to consider the respondent's cross-appeal, arguing that the trial judge erred in dismissing the claims based upon four of the five covenant guarantees.
(3) Credit for the Settlement Proceeds
[34] The respondent sued her solicitor and her investment advisor, claiming that as a result of their negligence, she suffered losses on the Godstone mortgages and other similar real estate investments. The total amount of the claims against the solicitor for the several investments on which the solicitor acted for the respondent was $4,156,799. The respondent claimed approximately $6 million against the investment advisor who had been involved in more investments than the solicitor. The respondent's total claim against the solicitor was settled for $1.2 million net of legal fees. The settlement funds were not attributed to any particular transaction or acts of negligence. The claim against the investment advisor, who is now bankrupt, remains outstanding.
[35] It was common ground before the trial judge that the respondent's claim on the stand-alone guarantees had to be reduced on account of the settlement, to avoid double recovery. The appellants took the position that as the respondent had led no evidence to establish the validity of the claims in relation to the other investments, their claim on the stand-alone guarantees should be reduced by 100 per cent of the settlement. The respondent took the position that since there was no attribution of the settlement funds to any particular transaction or act of negligence, the reduction should only be approximately 16 per cent, derived by calculating the ratio between the amount owing on the guarantees and the total amount of the claims against both the solicitor and the claim against the investment advisor.
[36] The trial judge rejected both positions and determined that 50 per cent of the settlement should be allocated to reduce the amount owing on the guarantees.
[37] On the cross-appeal, the respondent makes two arguments.
[38] First, the respondent submits that there should be no reduction in the claim on the guarantees to account for the settlement. The trial judge erred in reducing the claim by 50 per cent when there was no evidence or principled basis to allow such an allocation. Alternatively, if there is to be a reduction on account of the settlement, it should be for 28.8 per cent rather than 50 per cent, based on the ratio between the amount owing on the guarantees and the total amount of the claims against only the solicitor.
[39] The respondent's arguments essentially rest on the fact that the claim against the appellants is a claim under guarantees for a debt owing and yet to be collected, while the claim against the solicitor was for damages in negligence at large without any allocation to the respondent's loss arising from unenforceable guarantees. The negligence alleged included the failure to ensure properly enforceable guarantees to secure the mortgages and the loss claimed included the amount secured by the guarantees. The respondent contends that the negligence claim cannot reduce the amount owing on the debt and the issue of double recovery only arises in relation to the negligence claim when and if the respondent actually recovers what she is owed on the guarantees.
[40] Although the argument that there should be no reduction of the guarantee claim because of the settlement was advanced by the respondent late in the day, the issue of double recovery is advanced in the respondent's factum (at paras. 62-74) and in oral argument. The argument that there should be no reduction of the judgment based on the settlement is open to the respondent based on the evidentiary record. It is therefore an argument with which we can properly deal on appeal.
[41] In our respectful view, the trial judge was led astray by the trial submissions of the parties. The facts of this case do not at this point engage the double recovery or double satisfaction principle. The trial judge's determination that a 50 per cent reduction was appropriate was entirely speculative.
[42] The appellants' argument rests on the submission that as a matter of law the amount owed under the stand-alone guarantees can be reduced by the recovery in the settlement of the negligence claim against the respondent's solicitor. Assuming, without deciding, that the appellants' submission is sound in law, we are satisfied that it fails on the evidence in this case. It is the appellants' burden to demonstrate that their liability under the guarantees has been reduced by satisfaction of the guaranteed debt. In our view, they have not met their burden in this case.
[43] The rule against double recovery in negligence is a corollary of the fundamental principle of full and fair compensation. As McLachlin J. explained in Cunningham v. Wheeler; Cooper v. Miller; Shanks v. McNee, [1994] 1 S.C.R. 359, at pp. 368-69 S.C.R., "[t]he fundamental principle" is that the plaintiff is entitled to damages in an amount "which will return the plaintiff to the position the plaintiff would have been in had the accident not occurred, in so far as money is capable of doing this". The corollary is that "the compensation must be fair to both the plaintiff and the defendant". The ideal is to achieve compensation that is "full and fair . . . awarding damages for all the plaintiff's actual losses, and no more. The watchword is restoration; what is required to restore the plaintiff to his or her pre-accident position. Double recovery is not permitted" (emphasis added).
[44] The rule against double recovery derives from both common law and equitable principles. At common law, recovery against one wrongdoer barred action against another while equity provided a remedy against unjust enrichment. The rule is commonly applied in tort actions where two wrongdoers are responsible to compensate the plaintiff for a loss. The plaintiff is entitled to pursue claims against both tortfeasors but cannot recover more than his or her loss: recovery against one wrongdoer will reduce the amount the plaintiff can recover from the other. As explained in Treaty Group Inc. v. Drake International Inc., [2005] O.J. No. 5232, 36 C.C.L.T. (3d) 265 (S.C.J.), at para. 7, citing Cuttell v. Bentz, [1985] B.C.J. No. 2443, 65 B.C.L.R. 273 (C.A.): "The important point however is that 'it is clear that one cannot recover a loss twice.' (at p. 277) This is because, as Lambert J.A. explained at p. 283, 'The rationale of the rule is that the claimant should not be permitted to receive in compensation a total amount greater than the loss he has suffered.'"
[45] We agree with the respondent's submission that her claim for the guaranteed debt owed to her by the appellants was neither barred nor diminished by reason of her claim in negligence against her solicitor and that the guaranteed debt should not be reduced on account of the settlement of the respondent's claim against her solicitor.
[46] The related point is that the rule is against double recovery. It does not preclude a plaintiff from pursuing different defendants for the same loss and only precludes a plaintiff from recovering more than he or she lost. Here, there is no basis in the evidence to conclude that the respondent has recovered anything on the debt guaranteed by the appellants. Indeed, the trial judge's finding that the stand-alone guarantees are valid and enforceable is not consistent with his finding that 50 per cent of the settlement should be attributed to the claim on the guarantees.
[47] There is no dispute that the respondent has recovered nothing under the guarantees. Recovery against the appellants will depend not only upon the outcome of this appeal but also upon the solvency and means of the appellants to pay the debt they owe. Until the respondent actually achieves full or substantial satisfaction of the debt she is owed, there can be no question of double recovery.
[48] Accordingly, we allow the cross-appeal on this issue and set aside that portion of the trial judge's judgment reducing the amount owing to the respondent on account of the settlement with the solicitor.
E. Disposition
[49] For these reasons, we dismiss the appeal, allow the cross-appeal on the double recovery issue and substitute for the judgment given below judgment in the respondent's favour for the full amount owing under the stand-alone guarantees.
[50] The respondent is entitled to her costs of the appeal, fixed at $25,000, inclusive of disbursements and HST.
Appeal dismissed.
End of Document