BARRIE COURT FILE

COURT FILE NO.: 10-0749-SR
DATE: 20130719
CORRIGENDA: 20131004

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: GABRIEL MOROCH, Plaintiff

AND:

TARAS HUCAL and IRENE HUCAL, Defendants

AND:

SYLVIA HOLLOWAY (LYON), ROBERT LYON, EMIL MOROCH AND BOGDAN MOROCH, Third Parties

BEFORE: THE HON. MR. JUSTICE G.M. MULLIGAN

COUNSEL:
W. M. Adams, Counsel for the Plaintiff

S. Morris and B. Morris, Counsel for the Defendants

J.D. Harris-Lowe, Counsel for the Third Parties, by his agent M. Adams

A. Cheung, Counsel for the Office of the Public Guardian and Trustee

HEARD: July 16, 2013

REVISED ENDORSEMENT

The text of the original endorsement has been corrected with text of corrigendum
(released October 4, 2013) appended.

[1] The plaintiff, Gabriel Moroch (“Moroch”), brought a motion to amend his Statement of Claim and to obtain a Certificate of Pending Litigation (“CPL”). The defendants, Taras Hucal and Irene Hucal (“Hucals”), opposed the issuance of a CPL. Sylvia Holloway (Lyon), Robert Lyon, Emil Moroch and Bogdan Moroch (“the third parties”), sought an order compelling answers to undertakings, and the relief was granted on consent. The plaintiff and defendants both sought the appointment of the Public Guardian and Trustee for the plaintiff, Gabriel Moroch. The Public Guardian and Trustee took no position with respect to Mr. Moroch’s capacity, but agreed to accept the appointment if same was made. Based on the submissions made, an order was granted appointing the Public Guardian and Trustee (“PGT”) as litigation guardian for the plaintiff. The defendants brought a motion seeking to strike out paragraph 11 of the plaintiff’s Reply. On consent, this relief was granted subject to the plaintiff amending its Statement of Claim to incorporate material raised in paragraph 11 of the reply, with a further period of time for the defendants to serve and file an Amended Statement of Defence with respect to this issue.

[2] The plaintiff sought an amendment to the Statement of Claim to add the following, “A declaration that the plaintiff has an equitable mortgage against the defendants’ cottage property, more particularly described herein.”

[3] The main issue unresolved is whether or not the plaintiff is entitled to a Certificate of Pending Litigation in the circumstances of this case. As the plaintiff sets out in its Notice of Motion:

If the relief in subparagraph (a) [amending the Statement of Claim] is granted, leave to register a Certificate of Pending Litigation against the lands, more particularly described as Part Lots 22 and 23, Concession 13, being Part III on Plan 19R-6276, Township of Guilford, County of Haliburton.

[4] The following facts will provide background for the discussion that follows. The plaintiff issued a Statement of Claim against the defendants on the 14th day of July 2010. The plaintiff claimed a monetary judgment against the defendants. The claim did not request a CPL against the defendants’ property. Underlying the claim was a loan agreement between the parties, dated the 6th of December 2007. The operative paragraphs of the agreement provided as follows:

And whereas Hucal has approached Moroch for a private mortgage to finance the building of a cottage on the land and premises as described as follows: Part of Lots 22 and 23, Concession 13, Township of Guilford, County of Haliburton, being Part III, Plan 19R-6276; and whereas Moroch has agreed to grant a mortgage to Hucal with terms and conditions as set out below.

Now therefore witnessed that a consideration of the sum of five hundred thousand dollars ($500,000), the parties agree as follows:

(i) The mortgage will run for a period of one year, commencing the 6th day of December 2007, with a balance due, date being the 6th day of December 2008.

(ii) Interest will be charged at 2.4% per annum, calculated semi-annually, not in advance.

(iii) Payments in the amount of $1,000 will be made on the 6th day of each and every month, commencing the 6th day of January 2008.

[5] The mortgage was referred to in the Statement of Claim at paras. 5, 6, 7 and 8, as set out therein. Para. 8 concludes this issue by stating, “The defendants breached their agreement with the plaintiff by failing or refusing to provide the mortgage on their cottage property.”

THE DEFENDANTS’ POSITION

[6] The defendants oppose the relief sought on four bases:

(i) that Rule 26.01 mandates that such relief “shall” be included in the originating process;

(ii) the issue of the equitable mortgage is raised beyond the applicable limitation, and so no CPL should issue; and

(iii) the granting of a CPL now, years after the original claim was filed and served, would prejudice the defendants.

(iv) Over the course of the litigation, the defendants have used the subject property to raise funds to defend this action by way of various mortgage relief. To grant this CPL now would cut off their ability to fund the litigation and therefore prejudice their right to defend an action which they have diligently defended over the years. Further, there are no special circumstances requiring a CPL to issue on the facts of this case.

ANALYSIS

[7] This motion brings into review Rule 42.01(2), which provides as follows:

A party who seeks a Certificate of Pending Litigation shall include a claim for it in the originating process or pleading that commences a proceeding, together with a description of the land in question sufficient for registration.

[8] The issue of amending the Statement of Claim to include the equitable mortgage relief requires a consideration of Rule 26.01, which provides as follows:

26.01 On motion, at any stage of an action, the court shall grant leave to amend a pleading on such terms as are just, unless prejudice would result so could not be compensated for by costs or an adjournment.

[9] The defendants rely on Frohlick v. Pinkerton Canada Ltd. (2008), 2008 ONCA 3, 88 O.R. (3d) 401. In Frohlick, the Court of Appeal examined that rule in light of the limitation period issue, finding to a presumption of prejudice against the defendants. However, the Court noted on the facts of the case before it at para. 8:

The 1999 salary reduction which the appellant now sought to plead in support of the constructive dismissal claim is unrelated to the 2001 events and constitutes a separate and distinct cause of action.

[10] On the facts before me, I am not satisfied at this stage of the proceedings that the limitation period has expired, given the references to the mortgage in the Statement of Claim. In my view, that is a triable issue and ought not to be foreclosed at this stage of the proceedings.

[11] I am satisfied that the plaintiff can amend its Statement of Claim with respect to the claim for the equitable mortgage relief. In my view, it flows from the Statement of Claim and does not raise a new cause of action.

[12] However, I am not satisfied that a CPL should issue at this stage of the proceedings. The Statement of Claim was issued over three years ago. The issue of the mortgage was in play because it was referred to in the Statement of Claim, but no CPL was requested in the claim. The defendants have mortgaged the property from time to time to fund their defence of this proceeding. To grant the relief sought at this late date would severely prejudice the defendants, and such prejudice cannot be overcome by costs. Clearly, the plaintiff has not demonstrated any urgency for the CPL, three years having passed since the plaintiff commenced the action. Nor has the plaintiff adequately explained the delay in seeking such.

CONCLUSION

[13] I therefore grant the plaintiff’s request to amend the Statement of Claim to seek the equitable mortgage relief. However, I dismiss the plaintiff’s claim for a Certificate of Pending Litigation with respect to the subject property.

COSTS

[14] Counsel reached an agreement that the successful party should be awarded costs of $3,500 all inclusive. It is therefore ordered that the plaintiff pay costs to the defendants in the amount of $3,500 all inclusive, forthwith.

MULLIGAN J.

Date: October 4, 2013

C O R R I G E N D A

1. Page 1, first paragraph, lines 9 and 10 now read: ... Based on the submissions made, an order was granted appointing the Public Guardian and Trustee (“PGT”) as litigation guardian for the plaintiff. ...