CITATION: Hilson v. Evans, 2022 ONSC 1662

DIVISIONAL COURT FILE NO.: DC-19-00000044-00ML

DATE: 20220318

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

Dambrot, Stewart and King J.J.

BETWEEN:

JANET LOUISE HILSON

Plaintiff/Defendant by Counterclaim (Appellant/Respondent on cross-appeal)

– and –

CAROLE EVANS

Defendant/Plaintiff by Counterclaim (Respondent/Appellant on cross-appeal)

Howard W. Reininger, for the Plaintiff (Appellant)

Orie H. Niedzviecki, for the Defendant (Respondent)

HEARD at Hamilton (by videoconference): February 3, 2022

Dambrot J.:

[1] This is an appeal from the judgment of Sheard J. dated April 7, 2020, awarding $1,897.89 to the appellant on her claim for $881,703.10, and a cross-appeal from the decision of Sheard J. to award no costs to either party. The Reasons for Judgment are found at 2020 ONSC 1089 and the Reasons for Decision: Judgment Amount and Costs at 2020 ONSC 2129.

BACKGROUND

[2] In July 2008, the appellant purchased a $170,000 interest in a second mortgage (the “Evans mortgage”) from the Canada Trust Company. The mortgage had been granted by Evans & Sons Investments Inc. (“Evans & Sons”) in the total amount of $925,000. The Canada Trust Company owned $595,000 of the mortgage. The mortgage was registered on May 7, 2007, against 21 condominium units (the “Evans units”) purchased by Evans & Sons in Waterloo Condominium Corporation No. 340 (“WCC”), which consisted of 79 low-rise linked townhouses located in Kitchener, Ontario. Canlight Hall Management Inc. (“Canlight”) was the property manager of WCC as of January 1, 2008.

[3] The Evans mortgage was for a term of one year and matured on May 1, 2008. It provided for interest only to be paid at the rate of 12% per annum monthly. Evans & Sons defaulted in payment of the principal amount outstanding on the maturity date of the mortgage and made no payments subsequent to the maturity date.

[4] The Evans units were also subject to a first mortgage (the “Equitable mortgage”) in favour of the Equitable Trust Company (“Equitable Trust”) in the sum of $1,575,000. On January 27, 2011, Equitable Trust sold the Evans units under power of sale.

[5] The respondent was a guarantor of the Evans mortgage. The appellant’s claim against the respondent was for the amount the appellant paid to acquire her interest in the Evans mortgage as well as other amounts she claimed to have paid to Equitable Trust and WCC that she asserted should be added to the principal due to her under the Evans Mortgage.

[6] The respondent asserted that the appellant had recovered the amount she paid for her interest in the mortgage from surplus funds realized by Equitable Trust on the sale and disputed that the principal due under the Evans mortgage should be increased as the appellant claimed.

[7] The trial judge found that the appellant was not entitled to any payments she claimed to have made to Equitable Trust or to WCC, and that she had received all but $1,897.89 of the amount of principal and interest owing to her under the Evans Mortgage from the sale of the Evans units under the power of sale exercised by Equitable Trust. As a result, she gave judgment to the appellant in the amount of $1,897.89.

THE EVIDENCE

[8] The appellant is a retired chartered accountant. She received money from a divorce settlement, which she decided to invest. She invested approximately six million dollars in 15 mortgages, entirely on the advice of her financial advisor, Paul Ivany. Reliance on Ivany may have resulted in the appellant’s loss of the bulk of her wealth. Terrance Reiber was her real estate lawyer on all these transactions. One of the appellant’s investments was the aforementioned purchase of a share of the Evans mortgage for $170,000. The appellant was on the board of WCC.

[9] At the time of her purchase of an interest in the Evans mortgage, the appellant already owned an interest in another second mortgage against 20 different units at WCC (the “Lakeshore Units”). She had owned this interest since April 27, 2007. The Lakeshore Units were also subject to a first mortgage with Equitable Trust.

[10] When the appellant invested in WCC, she did so entirely on the advice of Ivany. She never asked to see any information about her investments and paid no attention to them. She left everything up to Ivany, who had signing authority for both her business and personal accounts. In fact, she was unaware that she had invested in the Evans mortgage at the time of her investment.

[11] The Evans mortgage was already in default when the appellant purchased her share. Ivany did not tell the appellant about the default.

[12] The appellant commenced an action against Ivany and Reiber on August 8, 2011. At the time of the trial of the underlying action on this appeal, the appellant had recovered $1.3 million from Reiber. Her action against Ivany was outstanding.

[13] The appellant first learned in 2010 that the respondent had guaranteed the Evans mortgage. She waited until 2014 to commence the underlying action. As I noted, the appellant’s claim against the respondent was for the amount the appellant paid to acquire her interest in the Evans mortgage as well as other amounts that she asserted should be added to the principal due to her under the Evans mortgage. Her claims fell under three general headings:

The sum of $170,000 that the appellant paid to acquire her interest in the Evans Mortgage, plus simple interest on that amount from and after July 23, 2008;
The amounts she claimed to have paid to keep the Equitable Mortgage in good standing; and
The amounts she claimed to have personally paid to WCC for repairs and renovations to the Evans Units.

[14] The trial proceeded in an unusual fashion. The appellant called the respondent as her first witness and cross-examined her as an adverse witness. The respondent’s counsel then elected to ask no questions of her. In the course of her evidence, the respondent confirmed that an affidavit she had filed on an earlier motion was true. The affidavit was then filed as a part of the appellant’s case. The appellant was the second and final witness to give evidence in the trial.

[15] The appellant was also permitted to file and rely on a Request to Admit. The respondent had prepared a Response to the Request to Admit but failed to deliver it. The trial judge accepted that this failure was through inadvertence and permitted the respondent to withdraw two of the deemed admissions resulting from the failure to deliver the Response. She was of the view that these two admissions raised triable issues and that permitting the withdrawal would not result in any prejudice that could not be compensated for in costs.

THE TRIAL JUDGE’S DETERMINATIONS

The Appellant’s Payment to Purchase an Interest in the Evans Mortgage

[16] There was no dispute that the appellant paid $170,000 for an interest in the Evans mortgage, that the Evans units were sold under power of sale by Equitable Trust on January 27, 2011, and that the appellant was entitled to recover that amount from the respondent together with the simple interest at 12% per annum that she claimed, less any amounts she received from the sale.

[17] There was no dispute that the appellant received $35,569.30 from the sale on March 23, 2012. What was in dispute was whether an additional $188,087.27 that the appellant received on January 3, 2011, should also be deducted, and whether the appellant was also entitled to recover the amounts she claimed to have paid to keep the Equitable Mortgage in good standing and the amounts she claimed to have paid to WCC for repairs and renovations to the Evans Units.

Amounts Allegedly Paid to Keep the Equitable Mortgage in Good Standing

[18] The appellant claimed to have advanced a total of $161,946.30 toward the Equitable mortgage to keep it in good standing. This amount included $64,617.63 paid toward the Equitable mortgage prior to the appellant’s purchase of her intertest in the Evans mortgage on July 23, 2008, and $97,328.67 paid by 1771085 Ontario Limited (“177”), a company owned and controlled by the appellant, after July 23, 2008.The trial judge rejected both of these claims.

1) Money allegedly paid to Equitable Trust prior to the appellant’s purchase of an interest in the mortgage

[19] With respect to the $64,617.63 amount, the trial judge accepted the appellant’s evidence that she had paid these funds to Reiber and instructed him to pay them to Equitable Trust to keep the Equitable mortgage in good standing. The appellant also produced a cheque drawn on Reiber’s trust account dated June 6, 2008, payable to Equitable Trust’s lawyers, Myer, Wassenar and Banach, in trust for $56,764.43, which had a notation on it that read “Equitable Trust mtg/Evans & Sons”. However, the trial judge found that the appellant had not established that these funds were ever actually paid by Reiber to Equitable Trust or credited to the Equitable mortgage.

[20] In addition, the trial judge noted, if the payments were made, they were made prior to the appellant’s purchase of a share of the Evans mortgage, and were, at best, an unsecured claim against Evans & Sons. As a result, these funds were not due and owing to the appellant under the Evans mortgage.

[21] However, in closing argument the appellant asserted for the first time that she ought to be allowed to recover funds paid prior to July 23, 2008, based on “equitable subrogation”. The trial judge denied this claim for equitable relief on the basis that the appellant had failed to raise it in her statement of claim or even during trial. Despite that finding she went on to consider the claim on its merits and denied it.

[22] The trial judge recognized thar the remedy sought was discretionary, and that in exercising her discretion, she had to consider the benefit or injustice to the parties. Here, she noted, the appellant not only asked the court to recognize an equitable mortgage, but sought, as well, to attach that equitable mortgage to the respondent’s contractual obligations as a guarantor of the Evans mortgage, in the absence of any evidence of involvement by the mortgagor. She refused to do so, for reasons that I will return to later.

2) Amounts Allegedly Paid by 177 to WCC and Applied towards the Equitable Mortgage for Repairs and Renovations to the Evans Units

[23] On September 30th, 2008, the property manager of WCC sent a letter to all unit owners and mortgagees advising that the board of directors had imposed a special assessment of $7,341.77 per unit for repairs and renovations for the period July 1st, 2008, to June 30th, 2009. The appellant testified that after September 30, 2008, 177 made payments totaling $97,328.67 to Equitable Trust towards the special assessment.

[24] The appellant asserted that she and 177 were, in essence, one and the same, that she paid the funds from 177 as a matter of convenience, and that, whether funds came from her personally or from 177, these payments should be added to the principal due under the Evans mortgage. In making this argument, the appellant relied on the Standard Charge Terms (“SCT”) incorporated into the terms and conditions of the interest in the mortgage transferred to the appellant. Paragraph 8 of the SCT provides:

[T]he Chargee may pay or satisfy any lien, charge or encumbrance now existing or hereinafter created upon the land, which payments with interest thereon at the rate provided for in the Charge shall likewise be a charge upon the land in favor of the Chargee and … all amounts paid by the Chargee as aforesaid shall be added to the principal amount secured by the Charge and shall be payable forthwith …

[25] The trial judge noted, however, that in law, a corporation is a separate legal entity. 177 is not a “Chargee” as defined in the SCT. Accordingly, her claim for recovery of amounts paid by 177 accordingly failed. If the appellant understood that she could use 177’s bank account for convenience, her remedy lies against those on whom she relied for that incorrect understanding. In fact, the appellant specifically raised those claims in her action against Ivany and Reiber.

[26] The trial judge went on to say that the appellant’s claim for recovery for the amounts paid by 177 also failed because she called no evidence to show that the payments by 177 were, in fact, applied toward the Equitable Mortgage. Understandably, the appellant did not call Ivany or Reiber to testify as to how the funds were applied. But neither did she call a representative of Equitable Trust or produce any documents that might have evidenced that payments made by 177 were credited toward the Equitable Mortgage. While the respondent acknowledged that the Equitable Mortgage was kept in good standing, that admission fell short of an acknowledgement that the Equitable Mortgage was kept in good standing in whole or in part as a result of payments made by the appellant.

Amounts Paid Personally by the Appellant on August 27, 2008, to WCC and Canlight Hall for Repairs and Renovations to the Evans Units

[27] The appellant sought to add a total of $294,680.20 to the principal owing to her under the Evans mortgage for payments she claimed to have made for repairs and renovations to the Evans units. I note that this number takes into account that she was repaid $360,000 by WCC, and further that she attributed a further $294,680.21 to repairs and renovations of the Lakeshore units. I have already discussed the payments she claimed to have made prior to her purchasing an interest in the Evans mortgage, and payments she said that 177 made. There remains to be considered payments totaling $370,000 that she claims to have made personally after purchasing her interest in the Evans mortgage. I will discuss these payments now.

[28] In the appellant’s Request to Admit, she included a list of advances made to WCC and Canlight, with confirming Credit Vouchers attached. The list included two items on August 27, 2008. The first was a personal advance to Canlight in the amount of $220,000 with the description “Funding Renovations”. The second was a personal advance to WCC in the amount of $150,000 with the description “Condo Reserves”. The appellant acknowledged in her evidence that she had no firsthand knowledge of how these funds were used. She did not know what amount, if any, of her advances were used for renovations, repairs or maintenance of the Evans Units, and no other evidence was adduced from which this determination could be made.

[29] In the affidavit of Richard Hall, an Executive Vice President of Canlight, he stated that the appellant was repaid the $150,000 she advanced to WCC with interest. This affidavit was before the trial judge for its truth and was consistent with the appellant’s own evidence that she received $360,000, plus interest, from WCC. The trial judge found as a fact that the $150,000 was included in the repayment and cannot be added to the Evans mortgage.

[30] As for the $220,000 paid to Canlight Hall, the appellant stated that this advance went towards a “rental pool” of 41 properties: the 21 Evans units and 20 other units known as the Lakeshore units, in relation to which the appellant was also a holder of a second mortgage. The appellant acknowledged this pooling and allocated only 50% of the advance to the Evans units. However, the respondent testified that she never agreed to have the Evans units treated as a rental pool with the Lakeshore units. Some of the Evans units were occupied by tenants and could not be renovated. Moreover, these payments were made before the Special Assessment was made, and as a result, these payments could not have been made pursuant to it.

[31] The trial judge concluded that there was no evidence from which she could determine what amount, if any, of the $220,000 advance was in fact used for renovations, repairs or maintenance of the Evans units. In fact, in her claim against Reiber and Ivany, the appellant alleged that these monies were not used for repairs or renovations. Since the onus was on the appellant to prove her claim, this claim also failed.

Credits Deducted from the Amount that the Appellant was Entitled to Recover From the Respondent as a Result of Payments She Received from the Sale of the Evans Units

[32] The trial Judge found that the appellant received $188,087.27 from the proceeds of the sale of the Evans Units in addition to the $35,569.30 that she acknowledged. As a result, the trial judge deducted both these amounts from the amount that the appellant was entitled to recover from the respondent.

THE ISSUES ON APPEAL

[33] The appellant raises the following issues in her appeal:

Did the trial judge err in finding that the appellant had failed to prove that Equitable Trust received the funds provided to the Appellant’s lawyer, Terrence Reiber?
Did the trial judge err in concluding that the appellant was not entitled to claim payments made to Equitable Trust prior to her purchase of the mortgage?
Did the trial judge err in failing to apply the doctrine of equitable subrogation to payments made by the Appellant to Equitable Trust prior to her purchase of the mortgage?
Did the trial judge err in concluding that the appellant was not entitled to claim payments made to Equitable Trust by the appellant’s corporation?
Did the trial judge err in concluding that the appellant was not entitled to claim payments made to WCC and Canlight?
Did the trial judge err in calculating the amount of recovery by the appellant from the sale by Equitable Trust?

STANDARD OF REVIEW

[34] On an appeal from a decision of a judge, the applicable standard of review is to be determined with reference to the nature of the question in accordance with Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235. On questions of law, the standard of review is correctness. On questions of fact, the standard of review is palpable and overriding error. A palpable and overriding error is an error that can be plainly seen and that affected the result, is unreasonable or is unsupported by the evidence. On questions of mixed fact and law, the standard is palpable and overriding error, unless there is an extricable question of law, in which case, the standard of review on that extricable question is correctness.

[35] Housen does not directly address the standard of review of exercises of discretion. However, appellate courts in Ontario have generally accepted that decisions involving the exercise of discretion should be paid great deference. An exercise of discretion should only be interfered with where there has been an error of law or where the discretion is exercised on wrong principles or on misapprehended evidence (see, for example, Elliott Lake (City) (Integrity Commissioner) v. Pearce, 2021 ONSC 7859 (Div. Ct.) at para. 30).

ANALYSIS

Did the trial judge err in finding that the appellant had failed to prove that Equitable Trust received the funds provided to the Appellant’s lawyer, Terrence Reiber?

[36] This ground of appeal relates to money that the appellant paid to Reiber prior to the appellant purchasing an interest in the Evans mortgage, with instructions that he in turn pay it to Equitable Trust to keep the Equitable mortgage in good standing.

[37] The appellant argued that:

having accepted that the appellant paid Reiber $57,724.63 on June 6, 2008, and $7,875.00 on July 8, 2008, for the purpose of keeping the Equitable Trust mortgage in good standing; and
in the face of the production of a cheque drawn on Reiber’s trust account dated June 6, 2008, payable to Equitable Trust’s lawyers, in trust, for $56,764.43 bearing a notation that read “Equitable Trust mtg/Evans & Sons”,

the trial judge made a palpable and overriding error in concluding that the appellant had not established that these funds were ever paid by Reiber to Equitable Trust or credited to the Equitable mortgage.

[38] I see no merit to this ground of appeal. In cross-examination, the appellant testified that she had no personal knowledge of how much of this money went to the Evans mortgage. All her knowledge regarding payments to the Evans mortgage came from Reiber. She never saw a mortgage statement from Equitable trust with respect to Evans. The appellant called no evidence from Reiber, Equitable Trust’s lawyers, or Equitable Trust itself and produced no documentary evidence showing whether these funds were applied to the Equitable mortgage, or if they were, how the funds were applied.

[39] The trial judge made no palpable and overriding error in finding that the appellant had not established that these funds were ever paid by Reiber to Equitable Trust or credited to the Equitable mortgage. It was a conclusion that was open to her on the evidence. In fact, in view of the state of the evidence, her conclusion was inevitable.

[40] Moreover, even if the trial judge erred in not finding that the full amount of these funds was paid to Equitable Trust and applied to the Equitable mortgage, it would not entitle the appellant to add it to her claim against the respondent, for several reasons. The first of these is the trial judge’s finding that if the payments were made, they were made prior to the appellant’s purchase of a share of the Evans mortgage, and were, at best, an unsecured claim against Evans & Sons. As a result, these funds were not due and owing to the appellant under the Evans mortgage. The appellant’s response to this is raised in the next issue.

Did the trial judge err in concluding that the appellant was not entitled to claim payments made to Equitable Trust prior to her purchase of the mortgage?

[41] The appellant argues that it was not open to the trial judge to reach this conclusion because the respondent did not plead as a fact that the payments to Equitable Trust had been made prior to the plaintiff acquiring her interest in the Evans mortgage. She relies on the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (“Rules”), and in particular, r. 25.07(4).

[42] Rule 25.07(4) provides:

In a defence, a party shall plead any matter on which the party intends to rely to defeat the claim of the opposite party and which, if not specifically pleaded, might take the opposite party by surprise or raise an issue that has not been raised in the opposite party's pleading.

[43] This rule does not assist the appellant. The onus was on the appellant to establish that the funds she paid were due and owing under the Evans mortgage. As a result, it was incumbent on her to plead, and prove that she had an interest in the Evans mortgage when she advanced the funds. She failed to do so. In fact, her pleadings and her evidence established the opposite.

[44] In her statement of claim, the appellant pleaded that she acquired her interest on the mortgage on July 23, 2008; that from June 6, 2008, to November 6, 2009, she advanced a total of $161,943.36 to Equitable Trust to keep the Equitable mortgage in good standing; and that she was adding these amounts to the principal debt owing to her under the Evans mortgage. While she did not disclose the dates and amounts of her payments to Equitable Trust in her Statement of Claim, her pleading is clear that some of these payments preceded her acquisition of an interest in the Evans mortgage, and as a result, there was no basis to include them in her claim.

[45] The evidence the appellant adduced at trial was to the same effect. She did not establish that she had an interest in in the Evans mortgage at the time she advanced the funds in question. Instead, in cross-examination, she testified that these advances were made before she acquired an interest in the Evans mortgage. She failed to prove her case on this issue.

[46] Contrary to the argument of the appellant, the respondent did not violate r. 25.07(4). The respondent did not rely on any matter that was not pleaded to defeat the appellant’s claim. What she did say in her Amended Statement of Defence and Counterclaim was that she had no knowledge about the payments to Equitable Trust, as she was entitled to do. The appellant was defeated by her own pleading, as elaborated on in her own evidence.

[47] I note that the appellant’s r. 25.07(4) argument was not limited to the suggestion that the respondent could not raise the timing of the payments to defeat her claim. She also argued that the rule precluded the respondent’s answer to the appellant’s doctrine of equitable subrogation argument, which the appellant raised for the first time in her closing argument. I will deal with the substance of that argument when I consider the next issue, but I will address the pleading argument here.

[48] The appellant put the argument as follows in her factum on appeal. She said that as the respondent did not plead that the appellant’s payments to Equitable Trust were made before the Plaintiff acquired the mortgage, the appellant could not have delivered a reply that would have pleaded the doctrine of equitable subrogation. The respondent, she continued, “did not plead the material facts on which she intended to rely, nor did she plead a version of facts entitled to be relied upon which was to defeat the claim of payment to Equitable Trust.”

[49] This argument is circular. The need for the appellant to rely on the doctrine of equitable subrogation arose only because the payments were made before the appellant acquired an interest in the Evans mortgage, and not because of any matter raised by the respondent. As I have shown, this was the appellant’s position in her pleadings and in her own evidence. There was no violation of r. 25.07(4) by the respondent because she did not plead what the appellant had already pleaded, particularly since she had no knowledge of it. Since the appellant knew that the payments preceded her acquiring an interest in the mortgage, she was aware that she had to plead equitable subrogation in her statement of claim if she wanted to rely on it. Since she did not, no fault can be found with the respondent for not addressing equitable subrogation in her pleading.

[50] For these reasons, I would not give effect to this ground of appeal and move to the next issue.

Did the trial judge err in failing to apply the doctrine of equitable subrogation to payments made by the appellant to Equitable Trust prior to her purchase of the mortgage?

[51] The trial judge denied this claim for equitable relief because the appellant had failed to raise it in her statement of claim or even during trial. As is clear from my discussion of the last issue, I am of the view that the trial judge did not err in denying the claim on that basis.

[52] However, despite that finding, the trial judge went on to consider the claim on its merits and denied it.

[53] The trial judge recognized that the remedy sought is discretionary, and that in exercising its discretion, the court ought to consider the benefit or injustice to the parties. Here, she noted, the appellant not only asked the court to recognize an equitable mortgage, but sought, as well, to attach that equitable mortgage to the respondent’s contractual obligations as a guarantor of the Evans mortgage, in the absence of any evidence of involvement by the mortgagor. She refused to do so, for reasons that included the following.

[54] First, she noted that the evidence is far from clear that the $64,617.63 paid by the appellant was of any benefit to the respondent. The respondent guaranteed the Evans Mortgage believing her guarantee was limited to the amounts owing under the Evans Mortgage as well as any additional amounts that were properly added to the Evans Mortgage pursuant to the applicable SCT. The respondent testified that she had no knowledge that the plaintiff had made payments toward the Equitable Trust Mortgage. She said that the rents from the Evans Units well exceeded the amount required to carry the Equitable mortgage. Furthermore, at the time that the appellant allegedly paid the $64,617.63 toward the Equitable mortgage, she already owned an interest in the second mortgage registered on the Lakeshore Units. As a result, the trial judge found that it was fair to conclude that the appellant’s payments made prior to July 23, 2008, were made to protect her position as the holder of a second mortgage on the Lakeshore Units. As a result, there was no unfairness to the appellant in denying the relief she sought.

[55] The trial judge went on to explain that the overarching principle in the jurisprudence is that relief should be granted to prevent unfairness or injustice to one party and an unanticipated windfall or unjust enrichment to the other party. Here, she said, the appellant not only asked the court to recognize an equitable mortgage but sought to attach to that equitable mortgage the respondent’s contractual obligations given as guarantor of the Evans mortgage. None of the cases on equitable subrogation cited to the trial judge addressed the obligation of a guarantor, and all of them contemplated or required some involvement of the mortgagor. There was no such evidence here. As a result, she dismissed this claim.

[56] The trial judge’s exercise of discretion attracts deference on this appeal. She made no error in law, did not misapprehend the evidence and did not exercise her discretion on any wrong principle. I would not give effect to this ground of appeal.

Did the trial judge err in concluding that the appellant was not entitled to claim payments made to Equitable Trust by the appellant’s corporation?

[57] This alleged error relates to payments totaling $97,328.67 made by 177 that the appellant said were made to Equitable Trust towards WCC’s special assessment of September 30, 2008. The appellant asserted that she and 177 were, in essence, one and the same, that she paid the funds from 177 as a matter of convenience, and that, whether funds came from her personally or from 177, these payments should be added to the principal due under the Evans Mortgage.

[58] This position is a curious one, since, on the one hand, the appellant, a CPA, testified that she advanced funds from her corporation rather than personally merely as a matter of convenience, while, on the other hand, she testified that she had no involvement in how or where the funds were coming from or for what purpose they were being used. That was all left up to her advisor Ivany, whom she sued for negligence. But curious or not, the trial judge rejected this argument as a matter of law. She said that it failed because, in law, a corporation is a separate legal entity, and this was not a charge under the mortgage. She went on to say that this claim also failed because there was no evidence that the payments by 177 were, in fact, applied toward the Equitable Mortgage.

[59] I see no error in either of these determinations. The first is correct in law, and the second is supported by the evidence, and involves no palpable and overriding error. I would not give effect to this ground of appeal.

Did the trial judge err in concluding that the appellant was not entitled to claim payments made to WCC and Canlight?

[60] This alleged error relates to two payments totaling $370,000, one for $150,000 and the other for $220,000 that the appellant claims were made by her personally on August 27, 2008, after she had purchased her interest in the Evans mortgage. One of the payments was made to WCC, and the other to Canlight, and both were for repairs and renovations to the Evans units.

[61] The trial judge found as a fact that the $150,000 was included in a $360,000 repayment made by WCC to her, and as a result cannot be added to the Evans mortgage. With respect to the $220,000, the trial judge found that there was no evidence from which she could determine what amount, if any, of that advance was in fact used for renovations, repairs or maintenance of the Evans units. In fact, she noted, in her claim against Reiber and Ivany, the appellant alleged that these monies were not used for repairs or renovations. Since the onus was on the appellant to prove her claim, this claim also failed.

[62] The appellant complains that the defendant did not deny these allegations in her Statement of Defence and did not plead any facts in defence of them, but only alleged that she had no knowledge of them. Once again, I do not understand how this complaint about the statement of defence assists the appellant.

[63] Rule 25.07 (2) provides that allegations of fact in a statement of claim that are not denied in the statement of defence are deemed admitted unless the defendant pleads to having no knowledge of them. In addition, r. 25.07(3) provides that that where the defence intends to prove a version of the facts that differs from that pleaded in the Statement of Claim, a denial is not sufficient, and the defence must plead its own version of the facts in its defence. Here, given the respondent’s pleading that she had no knowledge of these allegations, the onus was on the appellant to prove these claims, and she simply failed to do so. The respondent did not lead a version of the facts that differed from the appellant’s version and advanced no affirmative defence. The appellant has no complaint about the respondent’s pleadings.

[64] As for the trial judge’s findings of fact with respect to these two payments, I will simply say that they were amply supported by the evidence. The trial judge made no palpable and overriding error. I would not give effect to this ground of appeal.

Did the trial judge err in calculating the amount of recovery by the appellant from the sale by Equitable Trust?

[65] After analyzing the appellant’s various claims against the respondent, the trial judge determined that the appellant was a “creditor” of the respondent only with respect to the principal and interest owing under the Evans Mortgage and not with respect to the balance of the appellant’s claims. The trial judge then turned to consider what amounts had been received by the appellant from the sale of the Evans units. Obviously, her claim against the respondent had to be reduced by that amount.

[66] In her statement of claim, the appellant pleaded that on January 3, 2011, she had received partial payment from the further advance for repairs and renovations in the amount of $188,087.27. She was cross-examined about the details of this rather vaguely described transaction at trial. Initially, she did not recall receiving these funds. After having her memory refreshed with a transcript of her July 28, 2016, cross-examination for the purpose of a summary judgment motion, she acknowledged that she received this money as a result of the exercise of Equitable Trust’s power of sale of the Evans units, and that she chose to apply the payment specifically to repairs and renovations as opposed to the mortgage itself.

[67] Although the appellant claimed that this payment should be credited toward the repairs and renovations she claimed to have funded, the trial judge found that the appellant was not entitled to a claim for repairs and renovations, and instead applied the $188,087.27 against whatever principal and interest was owing. Accordingly, the trial judge reduced the appellant’s claim by this amount.

[68] The appellant also acknowledged that she received a second payment of $35,569.30 from the sale of the Evans Units on March 23, 2012, and that this amount should be credited toward the amounts owing under the Evans Mortgage. Accordingly, the trial judge reduced the claim by this amount as well.

[69] On appeal, the appellant argues that her claim should only have been reduced by $35,569.30, and not the additional amount of $188,087.27. Her argument flows from her Request to Admit dated April 12, 2017.

[70] In her Request to Admit, the appellant stated that she recovered $35,569.30 from the sale of the Evans units by Equitable Trust, and that “The Plaintiff has received no other monies from this property or from the Defendant”. The respondent did not deliver a Response to the Request to Admit, and so these statements and others in the Request to Admit were deemed to be true pursuant to r. 51.03(2), which provides:

Where the party on whom the request is served fails to serve a response as required by subrule (1), the party shall be deemed, for the purposes of the proceeding only, to admit the truth of the facts or the authenticity of the documents mentioned in the request to admit.

[71] Counsel for the respondent had in fact prepared a Response to the Request to Admit but discovered at the opening of trial that through inadvertence, he had failed to serve it. As a result, he brought a motion seeking to withdraw the deemed admissions. The trial judge accepted that the failure to file the Response was inadvertent and ordered that some of the deemed admissions be withdrawn, but not the two in issue here. As a result, according to the appellant, despite the evidence given by the appellant at trial, it was not open to the trial judge to reduce her claim by the additional $188,087.27.

[72] This is an unusual argument, and one that does not appear to have been made at trial. The appellant seeks to rely on a vague, general statement in her Request to Admit that, as she interprets it, contradicts not only a specific assertion in her Statement of Claim, but also her own evidence at trial. It would be artificial and unjust to insist that the trial judge had to accept the respondent’s deemed admission and ignore the appellant’s own evidence. The appellant responds by saying that the cross-examination about her assertion in her Statement of Claim should not have been permitted in light of r. 51.03(2). This rule ordinarily precludes a party in the position of the respondent from leading affirmative evidence to contradict the deemed admission. But that is not what the respondent did. She simply asked questions to elicit details about the vaguely worded claim that the appellant made in her statement of claim about the $188,087.27, a claim that had not been withdrawn. In answering the question, the appellant made a specific admission that appears to have contradicted her own general assertion in her Request to Admit. I fail to see how the trial judge erred in permitting the questions to be asked, or in relying on the answer.

[73] It is a rare occurrence for a party in a civil action to give evidence that contradicts a deemed admission flowing from her own unanswered Request to Admit, and there is little authority that addresses the effect of the contradictory evidence on the deemed admission. But this very thing occurred in Jama v. Basedeo, 2020 ONSC 2922. In that case, the applicant served a Request to Admit under r, 22(2) of the Family Law Rules O. Reg. 114/99 (“FLRs”), and the respondent did not file a Response. As a result, the trial judge ruled that certain statements set out in the Request to Admit were deemed to be admitted by the respondent, and that the respondent could not lead evidence contradicting the facts set out in the statements. However, at the trial, some of the facts that were deemed to be admitted were contradicted by evidence adduced by the applicant. As a result, the trial judge decided, at para. 21, that wherever the applicant’s own evidence, either in her testimony or otherwise adduced by her, contradicted facts in her Request to Admit, he did not deem those facts to be admitted by the respondent. In those instances, he made factual determinations based on the totality of the relevant evidence.

[74] I consider the approach taken in Jama to be sound, and consistent with the Rules. Rule 51.05 permits an admission made in response to a request to admit, a deemed admission under r. 51.03 or an admission in a pleading to be withdrawn with leave of the court. In effect, that is what the trial judge did in Jama (although operating under the FLRs, which have a similar provision at r. 22(5)), and that is what the trial judge did here.

[75] In my view, the trial judge did not err in including the amount of $188,087.27 in her calculation of the amount of recovery by the appellant from the sale by Equitable Trust. I would not give effect to this ground of appeal.

[76] Finally, I note that there were other grounds of appeal raised in the Notice of Appeal and in the Appellant’s Factum that were abandoned in oral argument. None of them have merit.

COSTS

[77] At trial, the appellant argued that under the mortgage, she was entitled to her costs on a substantial indemnity basis. She sought costs in the amount of $140,958.68, if calculated on a substantial indemnity rate or $94.853.27, if calculated on a partial indemnity rate. The respondent sought costs on a substantial indemnity basis, fixed in excess of $61,000, having regard to the appellant’s minimal success at trial – judgment in the amount of $1,897.89 on a 1.3-million-dollar claim.

[78] Rule 57.05 provides that if a plaintiff recovers an amount within the jurisdiction of the Small Claims Court, the court may order that the plaintiff shall not recover any costs. In carefully considered reasons, the trial judge concluded that this was a case in which she ought to exercise her discretion under r. 57.05 to order that the appellant not recover any costs.

[79] The trial judge also considered whether the facts here would justify an award of costs to the respondent under r. 57.01(2), which permits the court to award costs against the successful party “in a proper case”. She concluded that this was not such a case. She could identify no conduct on the part of the appellant that would warrant making a costs award against her.

[80] Both the appellant in her appeal, and the respondent in a cross-appeal, challenged the decision of the trial judge to award no costs. Absent an error in principle or a clearly unreasonable result, a high degree of deference is owed to a trial judge’s exercise of discretion in awarding costs. I see no basis upon which to interfere with the trial judge’s award of costs in this case.

[81] As for the costs of the appeal, the respondent asked for costs in the amount of $9,316.40 all inclusive, while the appellant asked for costs in the amount of $33,291. We consider the amount sought by the respondent to be reasonable, and award costs to the respondent in that amount.

DISPOSITION

[82] The appeal is dismissed. Costs are awarded to the respondent in the amount of $9,316.40, all inclusive.

Dambrot J.

I agree _______________________________

Stewart J.

I agree _______________________________

King J.

Released: March 18, 2022