SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: CV-10-400298

DATE: 20130603

RE: Rosedale Kitchens Inc., Plaintiff

AND:

2114281 Ontario Inc. and Merlin Restoration Ltd. and Banana Moon Inc., Defendants

BEFORE: Pollak J.

COUNSEL:
Jesse N. Rosenberg, for the Plaintiff

Jeffrey Levine, for the Defendant Banana Moon Inc.

HEARD: May 22, 2013

ENDORSEMENT

[1] The applicant, Banana Moon Inc. (“Banana Moon”), brings this motion to set aside the June 5, 2012 report of Master Albert. The parties have agreed on the issues referred to in the notice of motion, with the exception of the following issue in dispute which Master Albert identified in her reasons for judgment dated June 1, 2012 as follows:

In issue is whether Banana Moon advanced $25,000 of the mortgage funds on November 12, 2009, in which case the advance would not be available to lien claimant, or on November 19, 2009, in which case Rosedale Kitchens’ lien claim would have priority over Banana Moon’s mortgagee to the extent of the $25,000 advanced.

[2] From my review of the transcript of her reasons, it is clear that Master Albert held that the admission in question made by Banana Moon was an admission of fact with respect to the date the advance was made. It is also clear that for the detailed reasons she set out, Master Albert refused to give Banana Moon leave to withdraw the admission of fact that the advance was made on November 19, 2009 and substitute it with an admission that the advance was made on November 12, 2009.

[3] On this motion, Banana Moon argues that the admission referred to by Master Albert is properly classified as a request for an admission with respect to a legal conclusion; when the request to admit is really asking for a conclusion of law, one is inherently barred from making an admission of fact.

[4] Master Albert dealt with this argument as follows:

… and the next one, paragraph 36, is a request to admit that the validity of Rosedale’s aforesaid construction lien is not disputed on the ground of timeliness if the certificate of publication in respect of the property, as appeared in the Daily Commercial News on December 1, 2009, is found to be invalid by the court at trial. In its reply of January 29^th, 2012, the only clarification of fact that the defendant made that is relevant to the motion is in respect of paragraph 36, which the defendant correctly states, is that is a conclusion and an argument that cannot and should not be alleged as a fact. I interpret that to mean that the defendant has not admitted the truth of paragraph 36, and there is no need to withdraw that by the defendant admission in respect to paragraph 36 because there was no admission.

[5] She further states:

Having found that the defendant has not admitted paragraph 36, and only considering the admission as to the date of the advance to be an issue, the defendant argues that the plaintiff’s position is that the date of advance was admitted by reason of the passage of time because the reply was two days later than the deadline imposed by the rules. The facts do not support this contention. The defendant’s response by letter of January 19, 2012 provides a substantive response to the request to admit, and specifically addresses the facts with which the defendant takes issue, and does not admit. The defendant did not take issue with the fact asserted at paragraph 29 of the plaintiff’s request to admit. I find that the admission was not made through the passage of time as a deemed admission, but rather it was an actual admission asserted through counsel familiar with the facts and issues in the case. The defendant nevertheless asserts that leave to bring the motion should be granted because fairness requires the issue to be reopened and the admission withdrawn to do justice to the parties. If that were the case, then there would be no need for a leave test under the Construction Lien Act, because leave would have to be granted in virtually every case based on the defendant’s definition of necessity.

[6] As well, it is also clear that on the basis of the admission that the funds were advanced on November 19, 2009, the claim of Rosedale Kitchens Inc. (“Rosedale”) has priority over that of Banana Moon.

[7] Banana Moon submits that as it is “obvious” that the cheque was dated November 12, 2009 and not November 19, 2009, it cannot be that the admission referred to was one of fact.

[8] I do not accept that argument. Master Albert gives very detailed reasons as to why Banana Moon is bound by its admission and why leave to withdraw it is denied.

I find that the moving party has not satisfied the leave test under the Construction Lien Act to bring this interlocutory motion and withdraw the admission.

Had the defendant met the test for leave, I would nevertheless have dismissed the motion. The test for leave to withdraw an admission is threefold, and all three parts of the test must be met. The test is that the proposed amendment raises a triable issue, the admission was inadvertent or resulted in wrong instructions, and prejudice cannot be compensated by costs. The essence of the amendment sought is that the defendant wants to take the position at trial that the mortgage advance took place on November 12, 2009 rather than November 19, 2009. The significance is the quantum of funds over which the plaintiff can claim priority as a lien claimant, and whether the $25,000 advance is available to the plaintiff as a priority. The plaintiff admits that the defendant meets the first and third parts of the test. The date of the advance raises a triable issue, and prejudice cannot be compensated by costs. The sole issue on the motion is whether the admission was inadvertent. This action is between the mortgagee that advanced the funds to the owner and the lien claimant. Default judgement was signed against the other two parties, both argued to be owners by the plaintiff. The sole issue as between the mortgagee and the lien claimant is one of priority. It has been the focus of this litigation since it began in April 2010, and most certainly since the quasi-summary judgment motion heard and decided by Master Sandler in August 2010. The defendant asked the court to find that admitting that the date of advance was November 19, 2009 was inadvertent because the defendant had not seen the actual cheque which was dated November 12, 2009, and instead relied on the document that shows that funds were certified on November 19, 2009. The defendant’s position is that once it saw the actual cheque it realized that the advance was made on November 12, 2009, before the Rockett Lumber lien was registered, and not on November 19, the date that the funds were certified by the mortgagor. The defendant did not order a copy of the actual cheque until very recently when preparing for trial. It was within the defendant’s power and control to order the cheque at any time. Priority has been the sole issue vis a vis Banana Moon and the plaintiffs since the outset of the litigation. The defendant had the obligation as a party to litigation to obtain and produce all documents relevant to the matters in issue. In preparing its affidavit of documents, the defendants listed the advance as a November 19, 2009 advance. The defendant had the obligation and power to obtain a copy of the cheque at that time and it failed to do so. That is not inadvertence, nor is it mistaken instructions; that is litigation strategy. The courts have granted leave to withdraw admissions where there had been inadvertence or mistaken instructions. I find that the failure of a party to understand the importance of an issue until it reaches the stage of trial preparation is not inadvertence or mistaken instructions. Banana Moon had a disclosure obligation that it failed to meet. Had it done so, then it would have discovered the date of the cheque a November 12, 2009.

However, that information was available to Banana Moon in its documents because the date of the cheque is inserted in the certification form provided by the bank. I find that the defendant cannot now rely on inadvertence. The defendant relies on case law that states that a reasonable explanation is sufficient to grant leave to withdrawn an admission, Antipas and Coroneos. I find that on the facts of the case before me, the defendant’s explanation for making the admission is not a reasonable one. Though not argued before me, I am concerned that the plaintiff would be prejudiced if I were to grant leave to withdraw the admission. On April 26, 2011, I gave directions for trial preparations for a summary trial and fixed the trial date, first for March 7, 2012; adjourned on May 30^th, 2011 to today’s date for scheduling reasons of one of the parties. The last date to file affidavit evidence in-chief was February 10, 2012. The defendant’s motion to withdraw admissions was not served until May 8^th, 2012. The plaintiff would have based its trial preparation and litigation strategy on the case as it was. For these reasons I’ve refused leave to withdraw the admission. I would have refused leave to withdraw the admission had I granted leave to bring the interlocutory motion.

[9] Further, as discussed in detail below, this notice of motion does not deal with alleged errors of law arising from Master Albert’s refusal to grant leave to withdraw the admission.

[10] Master Albert’s reasons clearly indicate that her decision on priority is based on the admission of fact that the cheque was advanced on November 19, 2009. This is demonstrated in the following quote from her decision: “in any event, for reasons explained herein, funds paid by cheque written on November 12, 2009 but not certified until November 19, 2009 are advanced for purposes of the Construction Lien Act on November 19, 2009.”

[11] The comments that follow the words “in any event” are, in my view, “obiter”. Master Albert had already determined that, by reason of the admission of fact, the cheque made by Banana Moon was advanced on November 19, 2009; therefore, Rosedale had priority over the funds.

[12] By virtue of failing to include Master Albert’s reasons for denying their motion in their motion record (the Court requested the parties to provide it with a copy of the transcript), or referring to these reasons in their subsequent argument, it is readily apparent that Banana Moon did not base their arguments on this motion on Master Albert’s reasons for denying their motion. In the notice of motion, Banana Moon does not allege that Master Albert erred in dismissing its motion for leave to withdraw its admission, but rather requests this Court to set aside the report as a result of error of law in the Master’s obiter comments.

[13] There is, in my view, no legal basis to grant the relief requested on this motion; the motion is therefore dismissed.

[14] The parties both submitted and challenged each other’s costs submission as being unreasonably high. Rosedale is the successful party on this motion and would normally be entitled to be awarded costs. Should the parties be unable to agree on costs of this motion, brief submissions may be made as follows: Rosedale by 12:00 noon on June 13, 2013; Banana Moon by 12:00 noon on June 24, 2013, and Rosedale, by way of reply, by 12:00 noon on July 4, 2013.

Pollak J.

Date: June 3, 2013