Court File and Parties

OSHAWA COURT FILE NO.: CV-12-809712-SR
DATE: 20131217

SUPERIOR COURT OF JUSTICE – ONTARIO

RE: 1628612 Ontario Limited, Plaintiff/Responding Party

-and-

Miriam Pickering, Defendant/Moving Party

BEFORE: The Honourable Madam Justice C.A. Gilmore

COUNSEL:
Brianne L. Simionati, for the Plaintiff/Responding Party
Clinton V. Ellis, for the Defendant/Moving Party

HEARD: December 3, 2013

ENDORSEMENT

Overview

[1] The defendant/moving party seeks to amend her statement of defence and assert a counterclaim against the plaintiff.

[2] The plaintiff/responding party has an outstanding motion for summary judgment but I determined that motion would be heard following the decision in the amendment matter, thus allowing the plaintiff time to respond to the amended statement of defence and counterclaim.

[3] The plaintiff’s statement of claim was issued on November 2, 2012. The plaintiff claims $100,000 in relation to unpaid rental arrears and associated charges. The statement of claim was served on the defendant shortly after it was issued. The defendant, while it appears she may have had some assistance from counsel who was not on record, remained unrepresented until October 2013 when Mr. Ellis became involved and went on the record as her counsel. The defendant served her statement of defence in this matter on plaintiff on November 21, 2012.

[4] Now that the defendant has counsel, her position is that the claim is deficient and she seeks to make a counterclaim against the plaintiff. As such, she seeks to amend her statement of defence and add a counterclaim. An amended statement of defence and counterclaim was provided in the defendant’s motion record and attached as Exhibit B to her affidavit, sworn October 10, 2013.

[5] The plaintiff resists any amendment to the defendant’s statement of defence. The plaintiff raises several arguments, most of which center around the fact that the amended statement of defence is not much different than the original, other than adding a claim relating to the landlord’s alleged fiduciary duty and the limitation period. The plaintiff’s position is that neither of these are properly framed or proper causes of action in the factual circumstances of this case.

Background Facts

[6] The case concerns a commercial lease between the plaintiff corporation and the defendant. The lease relates to commercial premises in which the defendant’s son, Devon Taylor, was allegedly intending to operate as a restaurant.

[7] While the heading of the lease recites the year 2008, paragraph 3 of the lease sets out that it is for a period of five years, commencing May 1, 2008 and ending April 30, 2013. The base lease amount is $3,000 a month, plus GST payable on the first day of each month. However, there was no dispute between the parties that in consideration of the landlord assuming responsibility for certain other charges, that the actual rent that was paid was $4,000 per month. Those additional charges and responsibilities included garbage disposal, snow removal, yard maintenance, building maintenance, and property taxes. The lease did not include utilities and the terms of the lease required that the defendant indemnify the plaintiff for any liability for utilities.

[8] The plaintiff claims that the defendant did not pay the utility bills, causing the plaintiff to pay $1,860.44 to Durham Region for water, sewer, and electricity.

[9] According to the plaintiff, the defendant also defaulted on rent payments totalling $65,000 between January 2009 and October 2012.

[10] In addition, the tenant was required to have proper insurance on the commercial premises and on December 18, 2009, the insurance was cancelled thereby requiring the plaintiff to pay $8,974 to maintain insurance on the property.

[11] In June 2012, the plaintiff distrained against the subject property and on June 22, 2012, the locks were changed and the plaintiff took possession of the property. The plaintiff paid $776.88 to a bailiff for services. The property was leased to another individual commencing November 1, 2012. No additional payments were made on the lease.

[12] The defendant is a sixty-eight year old retired nurse and a widow whose career was cut short by an injury. The defendant’s position is that she has never been a tenant of the property during the relevant period and has never made any payments toward rent, utilities, or insurance for the subject property.

[13] Further, the defendant claims she was contacted by the plaintiff by telephone regarding the signing of the lease and was not given the opportunity to obtain independent legal advice which the plaintiff knew, or ought to have known, that the defendant would need. The defendant argues that it is critical for the court to understand that she never met the landlord. Any meetings between the landlord and any third party did not involve her. She only got a call asking her to sign the lease.

[14] The defendant maintains that it was not explained to her that she was to be the main lessee. In fact, she had no knowledge of any arrears of owing to the plaintiff until she received the statement of claim and a copy of the lease was provided at that time.

[15] The defendant takes the position that she never operated the restaurant, nor was she ever told of any obligation with respect to payment. She submits that she was lead to believe that she would not be the only one on the lease and the plaintiff therefore conspired to make her liable even though she was a non-tenant.

[16] The defendant submits that her original statement of defence did not properly incorporate all of the history regarding the role of the plaintiff in the matter and how the plaintiff has benefited from a possible loss by the defendant. As the lease has now come to the attention of the defendant, she understands its content and wishes to seek her remedies. She is able to now assert her claim with a more informed mind and history through counsel in amending the statement the defence and asserting a counterclaim against the plaintiff. The defendant wishes to assert that the plaintiff does not have a claim against her, may be suing the wrong party, and that the plaintiff has caused harm to her which is compensable.

The Position of the Moving Party/Defendant

[17] The defendant submits that there are deficiencies with the lease which she signed. Her signature is not witnessed and there is no date of execution. The defendant has no recollection of meeting with the landlord. She does recall receiving a call from him asking if she was prepared to sign a lease. While the defendant did want to assist her son, Devon, who wanted to open a restaurant, she did not understand that she would be solely liable for any default. She did not go to the landlord’s office. Rather, the lease was brought to her home and she does not deny that she may have signed it and returned it. She did not receive a copy of the lease.

[18] The defendant’s recollection was that the lease was only for a short time and that there would be someone else signing it along with her. She did not take steps with respect to the restaurant by way of incorporating a company or opening up a bank account to administer the financial affairs of the business. No money received by the landlord came from her and she was not aware of any payment difficulties until she was served with the statement of claim in 2012.

[19] Since the claim was commenced, she has received certain documents from the landlord but maintains that she never discussed such things with the landlord, nor did she and the landlord ever discuss her financial obligation in relation to the lease. Had she known about the financial implications, she would never have signed it. She did not obtain a lawyer because had no interest in the business and no intention to attend at or assist with the business.

[20] Although the defendant cannot deny that her name appears on the lease, she never acted as a tenant and the rent for the landlord came from another source. The landlord knew, or ought to have known, that she was not going to be part of the business and that only her son would operate the business. The fact that her name is on the lease does not make her a tenant. The draft amended statement of defence states that the conduct of the plaintiff, under the circumstances in which the lease was signed, required the plaintiff to discharge its fiduciary duty towards the defendant which it clearly failed to do. Given the enormity of the financial obligation, there was a clear risk to the tenant and the landlord should have done more than remaining silent. The defendant’s counsel submitted that the defendant was in a special category of vulnerability given that she has received no benefit and that there was no consideration for the lease.

[21] While the plaintiff alleges that the defendant was involved in negotiations with respect to the lease because of certain amendments that were made, there is no evidence that the defendant participated in such negotiations. In fact, she emphasized that any amendments to the lease agreement were only initialed by the representative of the plaintiff.

[22] Clearly the landlord was communicating with someone by email concerning the issues relating to the lease, but it was not her. She does not even own a computer. Further, there was no consideration for the signing of the lease as the landlord cannot prove that the tenant received any benefit since she was not operating the restaurant or receiving any income from it.

[23] The defendant submits that she has legitimate defences which need to be pleaded including a limitation period defence and a cause of action against someone else. The defendant needs to have the opportunity to put all of the relevant information before the court. There is a substantial amount of money at stake and the defendant should have the opportunity to provide a proper statement of defence and counterclaim.

Position of the Plaintiff

[24] The plaintiff argues that regardless of whether or not the defendant thought she was a tenant, she had the lease in her possession for over a month and appointed someone to negotiate amendments. The plaintiff’s counsel went through a number of amendments that were made to the lease, all of which were initialed by James Bedwell, the principal of the plaintiff corporation.

[25] While the defendant seeks to amend on the basis that she now has counsel, the lease document contains a hand-written note on the top of the first page indicating that it was sent to counsel, Ms. Qui. Plaintiff’s counsel indicated that she received written communication from Ms. Qui, who said that she would be amending the statement of defence. Ms. Qui then asked for two adjournments of the motion to amend and Mr. Ellis was retained only a few weeks before this motion and the plaintiff’s motion for summary judgment.

[26] The plaintiff submits that the amended statement of defence is similar to the original save that it adds some history to the matter and adds a claim in relation to the fiduciary duty of the landlord and the limitation period defence.

[27] The landlord’s position is that all of this is simply a ploy for delay as the limitation period does not apply to real property. Specifically, the plaintiff points to section 17 of the Real Property Limitations Act (the “Act”), which sets out that a limitation period of six years applies to rental arrears. Therefore, the plaintiff is well within the limitation period.

[28] As for whether there is any fiduciary duty between the landlord and tenant, the plaintiff relies on Toulany v. Abboud[1] for the proposition that the categories which frame a fiduciary duty relationship are not present in this case. The Toulany case cites International Corona Resources Ltd. v. Lack Minerals Ltd.[2] in which the Supreme Court sets out the characteristics of fiduciary relationships as: (1) one party has scope for the exercise of a discretion; (2) and the ability to unilaterally exercise the discretion so as to effect the others interest; and (3) the other is vulnerable to at the mercury of the fiduciary. The plaintiff argues that the indispensible feature of dependency or vulnerability is not present in this case and there is therefore no fiduciary duty.

[29] The plaintiff also argues that the fact the defendant did not claim that she did not understand the lease when she entered into a legally binding contract. A lack of legal advice is not a free-standing defence, unless there is some undue duress or pressure. There is no evidence that the landlord pressured the tenant to sign the lease.

[30] Finally, the plaintiff argues that the lack of consideration argument is also not supportable, notwithstanding that the defendant did not make payments or run the business. The consideration was that she was helping out her son in signing the lease.

Analysis and Argument

[31] The amendment sought relates to Rule 26.02 and Rule 27.07 of the Rules of Civil Procedure. Specifically Rule 26.02 sets out as follows:

A party may amend the party’s pleading,

(a) without leave, before the close of pleadings, if the amendment does not include or necessitate the addition, deletion or substitution of a party to the action;

(b) on filing the consent of all parties, and, where a person is to be added or substituted as a party, the person’s consent; or

(c) with the leave of the court.

[32] In the present circumstances, Rule 26.02(a) and (b) do not apply and, as such, the defendant seeks leave of the court.

[33] In addition, Rule 26.01 of the Rules states as follows:

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

[34] The language of Rule 26.01 is mandatory and, as such, the court shall grant an adjournment unless there is prejudice for which there can be no compensation by way of costs or an adjournment. I find in the instant case that the defendant should be allowed to amend her statement of defence and add a counterclaim.

[35] I agree with counsel for the defendant that there is a substantial amount at stake. While I also agree that some of the defences and/or claims that the defendant seeks to add may be tenuous, the parties have not yet been cross-examined on their affidavits and at this stage in the litigation, the defendant should have an opportunity to fully plead her defences and counterclaim.

[36] The plaintiff will be proceeding with its motion for summary judgment and at that stage, the court will have an opportunity to consider whether or not the defences and counterclaim have merit. The parties will have completed cross-examinations by that point, allowing the court to have better evidence upon which to make its decision.

[37] While there have been delays in this case, there is no reason why the motion for summary judgment cannot proceed expeditiously and terms of future steps set out in this order such that there is no further delay to prejudice the plaintiff.

[38] As such, I make the following orders:

(a) the defendant is hereby permitted to amend her statement of defence and add a counterclaim, as per the amended statement of defence attached as Exhibit B to her affidavit, sworn October 10, 2013;

(b) the amended statement of defence and counterclaim shall be served on the plaintiff forthwith;

(c) the plaintiff’s motion for summary judgment shall be scheduled forthwith with scheduling to be done in consideration of the timelines for serving and filing the amended pleadings and the time to respond as well as any cross-examinations.

[39] If the parties cannot agree on costs, I will receive written submissions 14 days from the date of release of this endorsement. Cost submissions shall be no more than 2 pages in length commencing with the defendant. All costs submissions shall be delivered via email through my assistant at jennifer.beattie@ontario.ca. If no submissions are received within 35 days of the first costs submission being due, the issue of costs will be deemed to have been settled as between the parties.

Justice C.A. Gilmore

Released: December 17, 2013

[1] 1998 CarswellNS 472.

[2] [1989] 2 S.C.R. 574, International Corona Resources Ltd. v. Lac Minerals Ltd..