Overview

[1] This is an appeal from the November 2020 decision of George W. Barycky, Deputy Judge of the Small Claims Court.

[2] Following a trial of six days over a 10 month period, and the receipt of lengthy written submissions, the deputy judge issued a ruling in which he dismissed the plaintiff’s claim on the basis that the Small Claims Court lacked jurisdiction. Exclusive jurisdiction over the subject matter of the claim resided, he found, with the Landlord and Tenant Board.

[3] There are two key issues on appeal:

(1) the issue of jurisdiction was not pleaded or raised by either party or by the deputy judge prior to the release of his ruling. In the absence of jurisdiction being raised by the parties or any notice from the deputy judge that he was even considering the issue, the plaintiff submits he was deprived of procedural fairness; and,

(2) this is not a case where the jurisdiction issue can be sent back for a proper hearing, given that the deputy judge has already issued a decision on the point. Accordingly, the plaintiff askes this Court to determine the issue of jurisdiction, to find that the deputy judge erred in law and to find that the Small Claims Court did have jurisdiction to adjudicate the plaintiff’s claim in the unique circumstances of this case.

Background

[4] Briefly, the plaintiff was the tenant of a single family home in Oakville. He was told by the landlord, and accepted, that he was responsible for yard maintenance and snow removal. Years later, he had a falling out with his landlord. He initiated proceedings before the LTB for certain claims associated with the termination of his tenancy. He also planned to initiate a claim, articulated as a restitutionary claim for unjust enrichment, seeking compensation for his cost of yard maintenance and snow removal, in the Small Claims Court. The claim before the LTB was resolved in a LTB-mediated settlement under the RTA. Part of that settlement was an agreement that the plaintiff would pursue his unjust enrichment claim in the Small Claims Court.

[5] The claim was commenced. The defendant defended on the merits but did not raise the issue of jurisdiction. Nor was the issue of jurisdiction raised by anyone, including the deputy judge, during the trial or in argument. Following the trial, the deputy judge took the matter under reserve.

[6] The trial judge issued his ruling in November 2020, dismissing the claim solely on the basis that the claim fell within the exclusive jurisdiction of the LTB.

The Ruling Was Made On A Basis Never Pleaded Or Raised

[7] It is well established that to decide a case on a basis never pleaded or raised amounts to a denial of procedural fairness.

[8] In Garfin v. Mirkopoulos, 2009 ONCA 421, Sharpe J.A. wrote (at paras. 19 and 20):

Because the appellant did not plead that Mirkopoulos agreed with Crossen that he would pay the appellant’s legal fees, Mirkopoulos could not be expected to know that he should be prepared to meet that allegation. The trial judge erred in awarding judgment against him on a ground not pleaded and not litigated at trial.

It has been repeatedly held was held that it is inappropriate for a case to be decided on an issue not identified by the parties in the pleadings and dealt with at trial: see e.g. TSP-INTL Ltd. v. Mills (2006), 81 O.R. (3d) 266 (C.A.), at para. 35.

[9] The Federal Court of Appeal offered a recent summary of the state of the law on the same principle in Tervita Corporation v Commissioner of Competition, 2013 FCA 28 at paras. 71-73:

In the normal course of judicial proceedings, parties are entitled to have their disputes adjudicated on the basis of the issues joined in the pleadings. This is because when a trial court steps outside the pleadings to decide a case, it risks denying a party a fair opportunity to address the related evidentiary issues: Rodaro v. Royal Bank of Canada (2002), 59 O.R. (3d) 74 (C.A.) at paras. 60 to 63; Nunn v. Canada, 2006 FCA 403, 367 N.R. 108 at paras. 23 to 26; Labatt Brewing Company Ltd. v. NHL Enterprises Canada, L.P., 2011 ONCA 511, 106 O.R. (3d) 677 at paras. 4 to 9 and 21.

However, this does not mean that a trial judge can never decide a case on a basis other than that set out in the pleadings. In essence, a judicial decision may be reached on a basis which does not perfectly accord with the pleadings if no party to the proceedings was surprised or prejudiced: Lubrizol Corp. v. Imperial Oil Ltd., [1996] 3 F.C. 40 (C.A.) at paras. 14 to 16; Barker v. Montfort Hospital, 2007 ONCA 282, 278 D.L.R. (4th) 215 at paras. 18 to 22; Colautti Construction Ltd. v. Ashcroft Development Inc., 2011 ONCA 359, 1 C.L.R. (4th) 138 at paras. 42 to 47.

A trial judge must decide a case according to the facts and the law as he or she finds them to be. Accordingly, there is no procedural unfairness where a trial judge, on his or her own initiative or at the initiative of one of the parties, raises and decides an issue in a proceeding that does not squarely fit within the pleadings, as long as, of course, all the parties have been informed of that issue and have been given a fair opportunity to respond to it: Pfizer Canada Inc. v. Mylan Pharmaceuticals ULC, 2012 FCA 103, 430 N.R. 326 at para. 27; Murphy v. Wyatt, [2011] EWCA Civ. 408, [2011] 1 W.L.R. 2129 at paras. 13 to 19; R. v. Keough, 2012 ABCA 14, [2012] 5 W.W.R. 45.

[10] The evidence before me is that lack of Small Claims Court jurisdiction was not pleaded or raised during the trial. Further, the evidence is that the deputy judge gave no notice or indication of his approach to this issue before releasing his decision, dismissing the claim for lack of jurisdiction.

[11] In these circumstances, it was an error of law for the deputy judge to dismiss the plaintiff’s case on a basis not pleaded or raised. On this basis alone, the decision cannot stand.

Does Section 194(2) of the Residential Tenancies Act Give Rise to Small Claims Court Jurisdiction in the Unique Circumstances of This Case?

[12] The more involved question is whether, notwithstanding the deputy judge’s error in denying procedural fairness, the circumstances of this case do or do not permit the Small Claims Court to assert jurisdiction.

[13] The deputy judge made the following findings:

the plaintiff’s claim, although framed in restitution, clearly has its foundation in a residential tenancy
the landlord purported to contract out of the Residential Tenancies Act by imposing maintenance obligations (yard work and snow removal) on the tenant
property maintenance and snow removal were clearly the landlord’s responsibility in law under the RTA; the landlord foisted these responsibilities onto the tenant
the tenant, under a misapprehension of the landlord’s legal obligations, performed the maintenance work himself or paid others to do it
nine years after the fact, after a falling out with the landlord about other matters, the tenant claimed to have “discovered” his legal rights under the RTA and sought compensation for his labour and out-of-pocket expenses incurred to perform these maintenance obligations
the RTA clearly contemplates a tenant applying to the LTB for relief: s. 20(1) sets out the landlord’s responsibilities; s. 29(1) provides a venue for a tenant application to the LTB; s. 30 provides for remedies, including an abatement of rent and monetary awards
characterizing the tenants claim as “equitable” sounding in restitution does not alter the essence of the claim. The substance of the claim, not its form, matters. In this case, the substance of the claim is for breach of the RTA and the landlord’s obligations thereunder. The LTB unquestionably has jurisdiction
failure to apply to the LTB, opting out or reserving a right of civil suit outside the LTB, where the LTB otherwise has clear jurisdiction, does not confer jurisdiction on the Small Claims Court
in fact, the tenant did pursue an application before the LTB in the last few weeks of the tenancy and his occupancy of the rented premises. The parties apparently reached a resolution; however, the terms were never presented to the court

[14] Until this last finding of the deputy judge, I can find no fault with the deputy judge’s findings or conclusions. It is this last point, however, which illustrates one of the reasons a trial judge should never proceed down a path that has not been raised or argued. This is because, while there was a settlement of the tenant’s application to the LTB, the relevant terms of that settlement were disclosed to the deputy judge in the Agreed Statement of Facts filed at the trial. Para. 34 of the ASF states:

At a Case Management Conference before the Landlord and Tenant Board on August 30, 2016, with the assistance of the Board officer, Olga Zsiga agreed to pay a $2,000 rent abatement to settle Andrew Nicholls’ application. Mr. MacKenzie represented Olga Zsiga. Andrew Nicholls specifically raised the fact that he wished to bring this Claim in Small Claims Court at the hearing with the Landlord and Tenant Board officer, which position was not opposed or discussed by Mr. MacKenzie. Olga Zsiga agreed that Andrew Nicholls would be free to bring this Claim in Small Claims Court for restitution on the basis of unjust enrichment against Ms. Zsiga despite the settlement the parties had reached with respect to the Landlord and Tenant Board issues.

[15] While the gist of the deputy judge’s reasons on LTB jurisdiction is sound and well supported, because the plaintiff did not know it was in issue, the deputy judge’s attention was not specifically brought to this paragraph of the ASF or to s. 194(2) of the RTA.

[16] Section 168 of the RTA provides that the LTB has exclusive jurisdiction to determine all applications under the RTA and with respect to all matters for which jurisdiction is conferred on it by the RTA. Section 3(1) of the RTA, on which the deputy judge relied, provides that the RTA “applies with respect to rental units in residential complexes, despite any other Act and despite any agreement or waiver to the contrary” (emphasis added). However, s. 194(2) of the RTA contains an exception to this basic prohibition against “contracting out”. Section 194(2) provides:

Despite subsection 3(1) and subject to subsection (3), a settlement mediated under this section may contain provisions that contravene any provision under this Act.

[17] Para. 34 of the ASF stipulates, as a fact which had to be accepted by the deputy judge (and which must be accepted by this Court), that a settlement mediated by the LTB under the RTA expressly provided that the plaintiff could bring his claim for restitution on account of the maintenance work he had to perform or pay for, in the Small Claims Court, not before the LTB.

[18] Nightingale J., sitting as a single judge of the Divisional Court in Morrison v. Rose, 2018 ONSC 3635, considered a situation where a settlement before the LTB contemplated that certain claims, even though they fell within the jurisdiction of the LTB, “would be resolved all at once in the same forum in Small Claims Court” along with other claims which, the LTB held, were not within its jurisdiction. The Small Claims Judge in that case declined to hear the LTB matters. Nightingale J. found that the trial judge erred in not following the direction of the LTB.

[19] Morrison, however, is distinguishable. In Morrison, the LTB made a finding that it did not have jurisdiction over certain claims. In order to avoid a multiplicity of proceedings, the LTB declined jurisdiction over other claims that it could have heard, so as to allow all the interrelated claims to be dealt with all at once in one proceeding. This is consistent with the approach taken by a full panel of the Divisional Ct. in Trinidade v. Jantzi, 2021 ONSC 1927. There, the Court held that the LTB can, and should, decline jurisdiction in favour of proceedings already underway in the Superior Court of Justice where it is necessary to prevent an abuse of process. In both cases, the reasons are founded on provisions of the Statutory Powers Procedure Act. These cases stand for the proposition that the LTB’s exclusive jurisdiction may yield in certain circumstances where it is necessary in the interests of justice.

[20] Here, however, there is no comparable issue. There is no suggestion that the mediated settlement of some of the plaintiff’s claims before the LTB, and the deferral of LTB jurisdiction over others, was necessary to prevent an abuse of process. Indeed, as the deputy judge found, the plaintiff’s maintenance claims could have been brought before the LTB.

[21] This case raises the narrow question, apparently for the first time, whether, as part of a mediated settlement before the LTB, the parties can agree, and the LTB can endorse, implicitly if not explicitly, that a proceeding otherwise within the jurisdiction of the LTB can proceed before the Small Claims Court.

[22] Section 194(2) is confined to a very narrow set of circumstances. The parties must agree, as part of a mediated settlement before the LTB, to an action which might otherwise contravene a provision of the RTA and the LTB must be prepared to countenance that mediated settlement as being, not only in the party’s interests but in the broader public interest as well. It will be the rare case where this confluence of interests will align in this way. It will be the even rarer case (or perhaps never) where the LTB, in the role of mediator, will countenance the deferral of its jurisdiction over a residential tenancy claim in the absence of some compelling reason to do so. Within that narrow set of circumstances, however, the scope of the provision appears broad: “despite subsection 3(1) … a settlement mediated under this section may contain provisions that contravene any provision under this Act.”

[23] While the most obvious form of LTB endorsement of a mediated settlement would be, as it was in Morrison, an express order or finding of the LTB, s. 194(2) does not require that; it is sufficient to come within the purview of s. 194(2) that a settlement mediated under the LTB’s auspices has been reached and accepted by the LTB.

[24] Unambiguous proof of the preconditions for the application of s. 194(2) would, absent an express order of the LTB, also be rare. Here, the contents of para. 34 of the ASF, supported by the defendant’s conduct in failing to raise any objection to Small Claims Court jurisdiction, meets the required threshold under s. 194(2).

[25] While there are “policy” concerns around undermining the broad and necessary effect of s. 3 of the RTA and the LTB’s exclusive jurisdiction under s. 168(2), these concerns are mitigated by the narrow, highly unusual set of circumstances necessary to come within the s. 194(2) exception. I must also consider, in weighing this broader concern, the fact that the parties have, apparently in good faith, invested a huge amount of time, energy and cost in the Small Claims Court trial. A great deal of time has gone by since the events in question. The plaintiff’s access to the LTB is, by now, time-barred. The parties are entitled to have an adjudicated end to this dispute, one way or another.

[26] In these unique circumstances, I find that the plaintiff’s claim falls within the purview of s. 194(2). This constitutes an exception to the otherwise overarching jurisdiction of the LTB in this case and the prohibition against “contracting out”. The evidence supports the conclusion that the LTB, implicitly at least, endorsed the parties’ agreement in a mediated settlement. The Small Claims Court, as a result, has jurisdiction to hear and decide this dispute on the merits.

[27] The plaintiff asks the Divisional Court to go further and to decide the case on the merits. I can think of no circumstance in which an appellate court would do such a thing unless, perhaps, the legal question of jurisdiction was the only issue in dispute. Here, everything is in dispute. It was the substance of those disputes that took six days of trial before the deputy judge.

[28] The deputy judge heard all of the evidence, reviewed all of the documents and considered all of the submissions. Only he can assess the reliability, credibility and weight of the evidence and arguments. My conclusion, that in the unique and highly unusual circumstances of this case, the Small Claims Court has jurisdiction to resolve this dispute, is in no way a comment on any aspect of the merits of the plaintiff’s claim or the defendant’s defence. That is for the deputy judge, and the deputy judge alone, to decide.

[29] For these reasons, I remit the matter to the deputy judge to decide the claim on the merits.

[30] I am compelled to say, by way of concluding observation, that the resources and cost of these proceedings has been completely out of proportion to the matters and amounts in issue. There has never been, as far as I can tell, any formal effort to settle this case. The parties reached a settlement of the LTB proceeding with the assistance of a mediator. They would be well advised to reach a settlement in this one as well. To this end, I strongly recommend, as a precondition to the matter being remitted to the deputy judge for a decision on the merits, that the parties attend (and share the cost of) a mediation before a private mediator to engage in a bona fide, concerted effort to resolve this matter without the need for further legal/judicial proceedings.

Costs

[31] Although the plaintiff is acting on his own behalf, I accept that, as a lawyer, he has probably foregone billable time due to the time spent on his appeal. No attempt, however, was made to quantify this lost opportunity. In any event, the award of costs is never a mechanical or arithmetic exercise. Both sides have sought what are, in the overall context of this dispute, astronomical amounts by way of costs. In all of the circumstances, I fix costs of the appeal at $10,000. In recognition of the fact that this could well be a Pyrrhic victory for the plaintiff, I order those costs payable in the cause.

Penny J.

Released: October 19, 2021

CITATION: 2021 ONSC 6890

DIVISIONAL COURT FILE NO.: DC-20-00000031-0000

DATE: 20211019

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

BETWEEN:

ANDREW MIDGLEY NICHOLLS

Plaintiff/Appellant

– and –

OLGA ZSIGA

Defendant/Respondent

REASONS FOR JUDGMENT

Penny J.

Released: October 19, 2021

Nicholls v. Zsiga, 2021 ONSC 6890

Case Summary

Overview

Background

The Ruling Was Made On A Basis Never Pleaded Or Raised

Does Section 194(2) of the Residential Tenancies Act Give Rise to Small Claims Court Jurisdiction in the Unique Circumstances of This Case?

Costs

Judge

Counsel

Parties

Areas of Law

Fact Patterns

Financial Outcomes

Issues

Statutory Provisions 3