Court File and Parties
COURT FILE NO.: CV-15-522655 DATE: 20160520 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Nisha Adams, Plaintiff AND: Caleb Adams, Susan Carol Needles, Ira George Needles, Clayton Edward Adams, Toronto Police Services Board, William Blair, Cheryl Jones, Alexandra Read, Gerald Heaney, Tommy Cornett and David Partridge, Defendants
BEFORE: S. F. Dunphy, J.
COUNSEL: Gordon McGuire, for the Plaintiff Colin Pendrith, for the Defendants/Appellants Susan Carol Needles and Ira George Needles
HEARD: May 9, 2016
Endorsement
[1] This is an appeal from a decision of Master Pope dated March 18, 2016 concerning an ex parte certificate of pending litigation obtained by the plaintiff. The appeal is brought by the defendants George Needles and his wife Susan Needles, owners of the house and former parents in law of the plaintiff Nisha Adams. The defendant Caleb Adams is their son and Nisha his former spouse.
[2] In my view, the learned Master erred in finding that the non-disclosure by the plaintiff was not material. It is not necessary that undisclosed evidence would have been decisive to the motion in fact if it was material. The non-disclosed matters were material and understood by the plaintiff to be material to the defendants. The ex parte order ought to have been discharged as a result. Further, the decision of the Master to order payment into court of all proceeds of sale of the subject land went far beyond the amount claimed by the plaintiff on the most generous reading of her claim and was an error in principle. The Master’s order had the effect of granting the plaintiff execution before judgment on her claims relating to a domestic incident in 2014 that are entirely unrelated to her claimed interest in the subject property. But for my decision to dissolve the certificate of pending litigation, I would have ordered payment into court of no more than the amounts actually claimed by the plaintiff personally in respect of the pleaded agreement.
[3] For the more detailed reasons that follow, I am accordingly allowing this appeal and discharging the certificate of pending litigation.
Overview of facts
[4] In October 2005, the defendants George and Susan Needles moved out of their family home on Berner Trail in Scarborough. They had been living there with their son Caleb and his son. They had purchased the home for $195,000 in 2000 and had succeeded in acquiring a considerable equity stake in it – their mortgage had been paid down to $88,000. They are of modest means and intended to use their equity in the property to fund their retirement.
[5] The reason for the move was that their son Caleb had married the plaintiff Nisha and they wanted to help the growing family get established. They moved out of the home and into a co-op residence. Nisha was then expecting the couple’s second child. The young family lived in the house rent free for ten years, paying down what was left of the original mortgage on the house and paying for their own utilities. Some small improvements – estimated by the plaintiff to have cost something near $10,000 plus the couples’ own labour – were also added.
[6] A short agreement to memorialize the arrangements made was drafted by George in his own unsophisticated words in October 2005 (the “2005 Agreement”). The agreement’s purpose was indicated by its title: “Transfer of 123 Berner Trail agreement as discussed on Sunday Oct. 16th 2005”. The 2005 Agreement contemplated Nisha and Caleb making the mortgage and utility payments for about eight months. When the mortgage came up for renewal on June 1, 2006, they were to have the option of assuming it and obtaining a transfer of title to the house upon paying George and Susan $150,000. It further provided that Caleb and Nisha would be owed an amount equal to the principal portion of the mortgage payments made on the mortgage.
[7] The 2005 Agreement contains no express discussion of any outcome other than a sale to the couple and an assumption of the mortgage on June 1, 2006. The prospect of a sale to a third party was not directly referenced. The “sale” referenced in the text is “the sale” (not “a” sale or “any” sale) and in context refers to the intended transfer of the deed to Caleb and Nisha that is referenced in the document’s very title.
[8] The text of the 2005 Agreement is simply silent as to what would occur after June 1, 2006 if the option were not exercised.
[9] The 2005 Agreement was not a commercial arrangement. The plaintiff admitted on cross-examination that George and Susan were not profiting from it and that they were trying to help the family. This conclusion is self-evident from a review of its terms.
[10] The option was not in fact exercised on June 1, 2006. No new written agreement was entered into until March 2009 (the “2009 Agreement”).
[11] It is apparent that there were a number of oral discussions and understandings about what would happen next, none of which made their way into writing at the time. Some of these were summarized in the preamble to the 2009 Agreement. The description contained in that second agreement differs quite distinctly from the sparse written 2005 Agreement. Among other things, it referenced an understanding that the young couple would be entitled to the value of improvements made to the house. The 2005 Agreement contained no such stipulation. There is no evidence before me as to when those improvements were made or when that further agreement was made. The 2009 Agreement also refers to an understanding reached in 2007 that the amount to be paid to Susan and George would increase by 2% per year retroactive to 2005, suggesting that there was an understanding that the purchase option was being kept available in some fashion.
[12] Whether those unwritten arrangements amounted to a binding option for a particular time frame or simply a generous but informal offer without definite time limits and subject to being withdrawn upon a change in circumstance will be a matter for the trier of fact to determine. The plaintiff has made no specific allegations of any binding oral agreements arising between the parties and has referred only to the two named agreements. Her affidavit of March 30, 2015 used on the motion without notice to obtain a certificate of pending litigation referred to no verbal agreements either.
[13] In March 2009, George and Susan learned that Nisha had co-signed her mother’s mortgage and then had taken title to her mother’s home (she claims as bare trustee). In fact, she had become liable under the mortgage in 2003 and never disclosed the fact to her husband or the moving parties. She admitted on cross-examination that she knew and understood that this was a very significant fact to the moving parties George and Susan even if she believed it was none of their business.
[14] The importance of that fact to George and Susan is not hard to surmise. At a bare minimum, it meant that there was an undisclosed risk that the mortgagee of Nisha’s mother’s home might seek to be paid from any equity Nisha might obtain in the family home on Berner Trail. Given the admitted intentions of George and Susan, this was a very relevant fact. Whatever intentions of liberality they may have had vis-à-vis the couple did not likely extend to Nisha’s mother or her undisclosed creditors. The more immediate risk was that it disentitled the couple to first time homebuyer reductions in land transfer tax and compromised the ability of the couple to qualify for the financing necessary to complete the hoped-for purchase.
[15] Susan was then a primary school teacher and the higher income earner in the family. The family income would not readily support two mortgages. This unwelcome news put off to an unknown future date the time when Nisha and Caleb might be able to purchase the house.
[16] Susan admitted on cross-examination that she understood that this revelation meant that the couple would not be able to purchase the house – at least for the time being. Given the fact that facilitating the purchase of the house had been the whole purpose of the 2005 Agreement, this was a very material fact and she fully understood that.
[17] George drafted the 2009 Agreement in March 2009 to reflect the new situation. The plaintiff’s claim to an interest in the land is based upon this document and an alternative claim for unjust enrichment. On cross-examination, the plaintiff’s counsel took the position that the 2009 Agreement “speaks for itself” and thereby blocking attempts of the moving parties to delve further into what was agreed and the nature of the agreement.
[18] The 2009 Agreement contains a preamble of sorts that describing the history of the arrangements regarding the home up until that time. As mentioned earlier, it recites that it “was agreed at the time” of the 2005 Agreement that the value of principal payments on the mortgage and improvements made “would be [Nisha and Caleb’s] in cash”. That understanding must have post-dated the written 2005 Agreement. It recites a change made in 2007 as a result of which the “stake” of George and Sue was to increase by 2% per year and the fact that George and Sue had spent $4,300 fixing a leak in the roof and replacing the shingles. It recites the fact that Caleb and Nisha were found ineligible to purchase the property as a result of the mortgage co-signed by Nisha and concludes “with this, it was decided to stop the existing agreement” whereby Nisha and Caleb were receiving credit for paying down the mortgage (emphasis added). It concludes that from March 2009, the amount the principal of the mortgage (then standing at $41,000) gets paid down while Caleb and Nisha are living there “will not be theirs” and concludes:
“George and Sue upon the sale of their property, 123 Berner Trail, will receive the following: $150,000, + $3,000 (2006) + $3,000 (2007) + $3,000 (2008) + $3,000 (2009) + $4,300 (spent on roof) + the amount the principal gets paid down from March 2009”.
[19] The 2009 Agreement made no specific reference to a sale of the property to third parties, but continues to refer to “the sale” using the definite article. It doesn’t specifically refer to a sale to Nisha and Caleb either. Whether “the sale” can be said to refer to an eventual but now further deferred sale to the couple or “a” sale to third parties or both is at best unclear absent context.
[20] The document makes no reference to the timing of an eventual sale of either kind nor does it evidence any agreement on how long Nisha and Caleb will be permitted to continue living in the home. It is a spare document whose meaning will require considerable evidence of context in order to be interpreted. However, on its face it contains no express interest in land in favour of the plaintiff nor does it grant any express right to any proceeds of sale. Whether the amount of mortgage principle already paid to that point ($41,000) is considered a debt secured by eventual proceeds or simply an unsecured debt is not discussed. What payments were to be made for the right to occupy the home after the remaining balance of the mortgage was finally repaid (in 2012) is similarly not discussed.
[21] In June 2014 an incident in the family home occurred that resulted in the separation of the couple and very contentious family law proceedings between the plaintiff and her spouse. As a result of the incident, the plaintiff and her spouse were both charged with assault. The plaintiff was charged with assaulting Susan by kicking her in the chest and Caleb was charged with assaulting her in response by punching her in the arm. Suffice it to say that the parties have rather diametrically opposed versions of what occurred that night. Matters have degenerated from there.
[22] The outcome of the incident and the family law proceedings that followed was that Caleb was excluded from the family home and moved back with his parents. Susan and George attempted to regain possession of the house for which they were then receiving no rent and from which their son was now excluded. On June 29, 2014 they gave Nisha a Notice to terminate tenancy as of August 31, 2014. The plaintiff brought an application to assert tenant rights before the Landlord and Tenant Board in July. George and Susan responded with their own proceedings to remover her before the Board. After a hearing on October 24, 2014, the Landlord and Tenant Board ruled on October 27, 2014 that there was no residential tenancy arrangement to terminate. George and Susan changed the locks and removed Nisha shortly thereafter.
[23] On February 24, 2015, the plaintiff issued (but did not immediately serve) the statement of claim herein. The statement of claim includes claims for damages for malicious prosecution, negligent investigation and similar matters arising from the June 2014 incident and her removal from the house in late October 2014. Relevant to this proceeding are claims made for a declaration that the property is held by George and Susan in trust for the plaintiff and directing title be registered in her name as well as damages for breach of an alleged agreement in writing in March 2009. Those are direct claims to an interest in land and could potentially support a request for a certificate of pending litigation.
[24] In support of the claims for relief based on an alleged interest in land, the statement of claim pleaded that the 2005 Agreement had been amended by the 2009 Agreement to include a term that “Nisha and Caleb would upon any sale of the residence be entitled to the net proceeds after reduction for the amount owing to George and Susan Needles”. The claim also alleged the amount owed to George and Susan on a sale would be $207,300.
[25] The plaintiff moved without notice for a certificate of pending litigation on March 31, 2015. In support of the motion, an affidavit of the plaintiff sworn March 30, 2015 was filed. The order was granted and the certificate of pending litigation authorized to be placed on title to the Berner Trail home. The order and statement of claim were subsequently served.
[26] The plaintiff’s affidavit related her side of the June 2014 incidents and the proceedings before the Landlord and Tenant Board that resulted in her removal from the home in considerable detail. Indeed, more space in her affidavit was devoted to these issues than to describing the agreements by which she claimed an interest in the land to be protected.
[27] The defendants Susan and George brought this motion to vacate the certificate of pending litigation issued. It was alleged that the March 30, 2015 affidavit of the plaintiff used to obtain the ex parte approval of the certificate of pending litigation contained certain material omissions and misstatements.
[28] When the motion came on for a hearing before the Master, the plaintiff indicated that she would consent to a vacating of the certificate of pending litigation providing that this was done on terms that all of the proceeds of sale of the land should be paid into court. In reasons released March 18, 2016, Master Pope agreed with the plaintiff’s submission and vacated the certificate of pending litigation on terms that all of the proceeds of sale should be paid into court.
[29] In her reasons, the Master found that none of the alleged deficiencies in the plaintiff’s affidavit were material or in respect of material facts. She concluded that the plaintiff had established a reasonable claim to an interest in the land. While she did not order a sale of the land, she found that that in light of evidence that George and Susan had an intention to sell the land to fund their retirement, all of the proceeds of a sale of the land should be paid into court pending further order.
[30] The defendants appealed.
Issues to be decided
[31] This appeal raises the following three issues:
a. Did the Master err in failing to set aside the certificate of pending litigation in light of the deficiencies alleged in providing “full and fair disclosure of all material facts”? b. Was the Master correct in finding that the alleged 2009 agreement establishes a “reasonable claim to an interest in land”? c. Did the Master make an error of law or exercise her discretion on wrong principles in ordering as a term of vacating the certificate of pending litigation that all proceeds of sale be paid into court notwithstanding the plaintiff’s claim was to only a portion of the proceeds?
Discussion and analysis
[32] This is an appeal from an order of a Master. A Master’s decision will be interfered with on appeal only if the Master made an error of law, exercised her discretion on wrong principles or misapprehended the evidence to the point of committing a palpable and overriding error in appreciating it. On matters of law, the standard of review is that of correctness: Obsidian Group Inc. v. Kingswhite Properties Inc.; Denault v. Alplay, 2016 ONSC 1618.
[33] No direct issue has been taken on this appeal with the extensive evidence filed by the plaintiff in her ex parte application relating to what might loosely be described as “the equities” rather than the claimed interest in land that a certificate of pending litigation is intended to preserve and protect.
[34] While the court exercising discretion to discharge a certificate of pending litigation under s. 103(6) of the Courts of Justice Act is empowered to consider “any other ground that is considered just”, this ought not to be construed as an open-ended invitation to the moving party to introduce collateral issues of past conduct in the ex parte application that seeks it. If such information is nevertheless proferred, she had a duty to do so objectively and fairly at an ex parte hearing. The one-sided recitation of those contentious events was certainly intended to be prejudicial and cannot be said to have been drafted with much regard to fairness. Such practice on motions without notice is not to be encouraged. George and Susan had a right to have the status of their interest in the subject property considered on the merits of the case without being drawn into collateral issues relating to their son and his unfortunate marital situation.
(i) Full and fair disclosure of all material facts
[35] Rule 39.01(6) of the Rules of Civil Procedure requires a party to make full and fair disclosure of all material facts on a motion brought without notice and failure to do so is sufficient ground for setting aside any order obtained.
[36] The onus on the moving party is a “strong one” and does not depend on whether the order would have been made anyway: L’Unita Development Corp. v. 505369 Ontario Ltd. (at para. 20). The test is whether the facts were material to the decision, not whether they would have been determinative: 547CC Investments Inc. v. Colozza.
[37] In the case of United States v. Friedland, Sharpe J. (as he then was) found that on an ex parte motion, the moving party “is not entitled to present only its side of the case in the best possible light, as it would be if the other side were present. Rather, it is incumbent on the moving party to make a balanced presentation of the facts in law. The moving party must state its case fairly and must inform the court of any points of fact or law known to it which favour the other side” (at para. 27).
[38] Indeed, it is not enough to disclose the information somewhere in the exhibits. The relevant facts and issues must be brought specifically to the attention of the court: Allen v. Process Matters and Carrier (para. 37); L’Unita Development Corp. (at para. 21).
[39] The rationale for requiring full and frank disclosure on a motion without notice is obvious. The court and the absent adverse party are both entirely at the mercy of the moving party while none of the checks and balances of the adversary system are operative: United States v. Friedland (at para 26). The risk of the court being used as an instrument of injustice is great.
[40] In my view, the statements made and the information not disclosed or highlighted by the plaintiff’s materials used on the March 31, 2015 motion left a very one-sided and incomplete picture of the effect of the 2009 Agreement and the 2005 Agreement that preceded it. Whether the plaintiff can ultimately succeed in demonstrating rights similar to those claimed in her statement of claim is not for me to say on this appeal. It is sufficient for me to conclude as I do that her disclosure of the facts upon which her claim is based clearly failed to meet the required standard of full and fair disclosure required by Rule 39.01(6) of the Rules of Civil Procedure.
[41] The plaintiff’s motion materials misstated the effect of the 2005 Agreement by failing to mention its most central and important feature: the purpose and intent of the agreement was to assist the couple (Nisha and Caleb) to purchase the Berner Trail home. The very title of the 2005 Agreement “Transfer of 123 Berner Trail” indicates that purpose. The 2005 Agreement contained an option to purchase the property and assume the existing mortgage when it matured on June 1, 2006. It cannot be suggested that this was a market-value transaction from which George and Susan sought a profit and Nisha admitted as much. The failure to mention the existence of the purchase option and the entire purpose of the 2005 Agreement misstated a very central and material fact about the 2005 Agreement.
[42] Other important aspects of the 2005 Agreement were omitted or misstated. These include:
a. The 2005 Agreement was alleged to provide that “any value added to 123 Berner Trail by renovations or improvements by Caleb and I would be ours”. The 2005 Agreement provided no such thing. That fact that the 2009 Agreement described the 2005 Agreement in those terms merely corroborates George and Susan’s contention that these were evolving family arrangements based on continuing discussions, casting doubt on the extent to which binding legal obligations were intended to be created. The plaintiff’s affidavit contained no indication of a continuing series of oral understandings or arrangements. b. The 2005 Agreement did not provide that Susan and George “retained an interest” limited to the amount of $150,000 – it said nothing at all about the subject. The inference the plaintiff’s description of the 2005 Agreement left is that Susan and George had an interest at all events limited to $150,000, rather than an agreement that merely provided for a sale to Nisha and Caleb at that price and for a limited period of time. If their interest was already limited to $150,000 in 2005, then it could not have been retroactively increased by $3,000 per year in 2007. The plaintiff’s concession of the validity of this retroactive increase in the “interest” of Susan and George contradicts the plaintiff’s thesis of a vested, fixed interest in the residual value of the land from 2005 forward. c. The plaintiff described the 2005 Agreement as providing that the amount by which the principal of the mortgage was paid down “until the mortgage renewal date would be ours”. This was only partly true. The description in the affidavit neglected to mention that the mortgage renewal date was only seven months away (June 1, 2006). Further, what the text of the 2005 Agreement actually provided was that this amount “until June/06 will be principal owed from George and Sue to Caleb and Nisha”. The terms used in the 2005 Agreement to describe this obligation are those of a personal debt obligation. It contains no suggestion of any form of security for the debt or other interest in land. The document itself was silent as to the obligation if any in respect of principal paid thereafter in the event the option was not exercised.
[43] In fact, the 2005 Agreement is completely silent about the treatment of proceeds of a sale to a third party or the status of the arrangement if the purchase option was not exercised. The only sale mentioned is a possible sale to Caleb and Nisha.
[44] The plaintiff did not have a copy of the 2005 Agreement when her affidavit sworn March 30, 2015 was prepared. She knew it was in writing, but had been unable to locate a copy. Her affidavit contained no such reservation. While she might be excused for referring to the existence of the 2005 Agreement and confessing memory loss or ignorance as to all of its terms, her affidavit did not qualify her descriptions of the 2005 Agreement by any such uncertainty. Her affidavit made positive, unqualified and erroneous assertions about the contents of the 2005 Agreement. Those errors delivered an entirely one-sided and misleading picture of the purpose and effect of the 2005 Agreement and suggested continuity to her claimed interest in land arising from 2005 that was neither fair nor accurate.
[45] The only interests of the plaintiff that emerge clearly from an analysis of the text of the 2005 Agreement as written are (i) a personal claim of Caleb and Nisha jointly against George and Susan for the amount of principal paid down on the mortgage from October 2005 until June 2006 (i.e. seven months of payments at the rate of $602 of blended principal, interest and property tax every two weeks); and (ii) an option to assume the mortgage and take title to the property for $150,000 on June 1, 2006. The actual agreement makes no provision at all for what would happen after June 2006. None of these highly material facts emerged from her affidavit. The plaintiff may well be able to allege and prove other agreements or arrangements in the fullness of time. Her obligation on a motion without notice was to place the situation before the court as objectively as reasonably possible and not in its best possible light having regard to what she hoped to prove or argue.
[46] George and Susan described their arrangements with Caleb and Nisha as a series of family understandings. The general outline of the 2005 Agreement continued to apply but it was refined and evolved over time. They allege other understandings as well. They allege, for example, that the arrangements would not apply in the event of family breakdown. Those points will remain controversial until a hearing on the merits is held. The salient point is that the description of the 2005 Agreement provided by the plaintiff was incomplete and materially inaccurate.
[47] Was the 2005 Agreement material to the plaintiff’s claimed interest in land? Clearly the plaintiff thought so since she took the trouble to describe it in some detail in her affidavit. The interpretation of any contract requires an understanding of context. The interpretation of an agreement as informal and imprecise as the 2009 Agreement virtually depends upon it. The plaintiff’s references to the 2005 Agreement were intended to suggest that she had an interest in the land that has been growing continually since 2005 whereas that of George and Susan was firmly fixed and strictly limited. At best, that is an arguable case but hardly the only interpretation that might arise from a fair description of the arrangements and their context.
[48] The plaintiff’s description of the 2005 Agreement was intended to provide context for assessing her claims under the 2009 Agreement. Indeed, the plaintiff described the 2009 Agreement as an amendment to the 2005 Agreement. The true nature of the 2005 Agreement was unquestionably a material fact to her application on March 31, 2015. That true nature was not presented fairly or accurately.
[49] The plaintiff’s description of the 2009 Agreement was similarly inaccurate and incomplete. Rather than quote relevant passages from the text of the 2009 Agreement in her affidavit or factum, the plaintiff chose to paraphrase it and to do so in a fashion that largely mirrored the allegations in the statement of claim, but misrepresented the text of the 2009 Agreement itself.
[50] The 2009 Agreement did not include a term that “Caleb and Nisha would upon any sale of the residence be entitled to the net proceeds after reduction for the amount owing to George and Susan”. Paragraph 11(d) of Nisha’s affidavit asserted that it did.
[51] In fact, the 2009 Agreement is silent as to the destination of the proceeds of a sale beyond describing amounts that George and Susan were to receive from the sale of “their property”. The plaintiff suggests that her interpretation can be inferred. The defendants argue it cannot. Who succeeds in that debate cannot now be presumed without more evidence of context and a full and fair hearing. By providing the court with the inference she wished to draw rather than the words of the document itself in circumstances where it must fairly be conceded that there is considerable doubt, the plaintiff fell far short of the standard of fair and true disclosure required of her when she elected to proceed without notice.
[52] The inaccurate paraphrasing of this document is all the more significant given the position taken by the plaintiff (through counsel) on cross-examination that the 2009 Agreement “speaks for itself”, thereby foreclosing questioning of the plaintiff about discussions and understandings reached. If the 2009 Agreement speaks for itself, it is quite mute on this crucial element of her claim that goes to the very foundation of the plaintiff’s claim to an interest in the land.
[53] The 2009 Agreement is an informal document. Its interpretation will clearly be a matter of considerable dispute between the parties. Among the issues raised by the document are:
a. Is the 2009 Agreement is a legally binding agreement at all? b. Was the 2% annual increase in the purchase price stopped in 2009 or was it to continue? c. What was the term of the agreement? d. Did Nisha and Caleb have an on-going option to purchase the property? If so, on what terms? Was it subject to cancellation or was it perpetual? e. Did George and Susan have the right to change the terms of the purchase option by increasing the amount payable to them as they did in 2007 (and 2009)? f. What was to happen if Nisha and Caleb determined not to purchase the house for themselves? g. Who had the right to determine to sell the house or to conduct a sale? h. How were the proceeds of sale to a third party to be divided? i. What was payable for occupation after the mortgage was fully repaid? j. What rights of tenure did Nisha and Caleb have to live in the house and for how long? k. What rights of tenure did Nisha have to live in the house post-separation from Caleb?
[54] None of the above questions, every one of which is highly material both to the litigation and the nature of the claimed interest in land, is specifically addressed by the terms of the very sparse 2009 Agreement. All of these issues will require inferences to be drawn based on evidence and context or evidence of other agreements and understandings not reduced to writing. In such a case, producing an affidavit that merely repeats the aspirational conclusions contained in the statement of claim rather than quoting or producing a fair summary of the actual terms and frailties of the document upon which the plaintiff’s case relies utterly failed to discharge the burden incumbent upon a party that chooses to proceed by way of motion without notice.
[55] The plaintiff’s affidavit portrayed the 2009 Agreement as “amending” the 2005 Agreement and made no mention whatsoever of the fact that her own undisclosed financial obligations had thwarted the entire purpose of the arrangements.
[56] In my view, both the characterization of the 2009 Agreement as “amending” the 2005 Agreement and the failure to disclose the role the plaintiff’s own financial condition played in necessitating the new 2009 Agreement were misstatements or omissions of material facts known by the plaintiff to be material.
[57] In the October 24, 2014 proceedings before the Landlord and Tenant Board, the plaintiff’s lawyer took the position that the 2005 Agreement was null and void:
“We understand that Caleb who is her husband, he has a copy he took her copy. The matter is null and void in the fact that what was agreed upon in that written agreement was on the basis of them being able to purchase the property”.
[58] Despite having taken the position that the 2005 Agreement was “null and void” in October 2014, the plaintiff represented to the Court in her March 30, 2015 affidavit that it had merely been amended and entirely omitted to mention that the earlier written agreement had been premised on “them being able to purchase the property”. A change to that premise was clearly material. After March 2009, and as a result of the undisclosed financial condition of the plaintiff, that intention could no longer be realized. The plaintiff acknowledged on cross-examination that the prospect of the family purchasing the home was no longer going to happen, although she suggested that this was just “for now”.
[59] Characterizing the 2009 Agreement as an amendment of the 2005 Agreement when her lawyer had represented to the Landlord and Tenant Board that the earlier agreement was “null and void” and why was not fair and true disclosure. The reason for those earlier arrangements being “null and void” was also material and was similarly not brought to the court’s attention (although it was at least adverted to in the 2009 Agreement).
[60] The Master’s reasons acknowledged that the evidence of Nisha’s financial condition relating to the Brampton property had not been brought forward to her attention on March 31, 2015. However, she concluded that the evidence of the financial condition of Nisha was not material because it is “uncontroverted evidence that Nisha and Caleb paid down George and Susan’s mortgage by some $88,000 over some nine years, as well as doing significant renovations to the property to maintain its value at their expense, which ultimately benefited the owners. This is the basis for Nisha’s claims”.
[61] With all due respect to the Master, her summary reflected a misapprehension of the evidence and her conclusion regarding the materiality of the non-disclosure was in error.
[62] Factually, only $41,000 in principal had been paid on the mortgage by Caleb and Nisha prior to March 2009 when the 2009 Agreement was entered into. That amount was described as a debt obligation without reference to security in the only written agreement touching upon it (the 2005 Agreement is silent regarding payments after June 2006). The plaintiff and her husband had no claim (and made none) to the $47,000 in principal paid under the mortgage after 2009. Further, the “significant renovations” were not uncontroverted evidence since the plaintiff admitted that these had resulted in an expenditure of approximately $10,000 plus some of the couple’s own labour.
[63] While these factual errors misstated the level of the plaintiff’s claims, the Master also misconstrued the nature of the plaintiff’s claims. The amounts spent on renovations or in paying down the mortgage are advanced as an alternative unjust enrichment claim. Her main claim is based on the 2009 Agreement itself. The unjust enrichment claim is not the basis of the plaintiff’s claim and the very agreement upon which the plaintiff’s claim is based provides the juristic cause to invalidate all or most of that claim.
[64] In my view the plaintiff’s disclosure of both the 2005 Agreement and the 2009 Agreement failed to rise to the standard of full and fair disclosure of all material facts required to establish the existence of her claim to an interest in the land. The undisclosed facts were material in that they would have cast doubt as to whether the interest of the plaintiff can reasonably be said to extend to more than a simple monetary claim. The test is not whether a court would have authorized a certificate of pending litigation to issue notwithstanding disclosure of these facts, but whether the facts omitted were material. In my view the Master erred in law in concluding that they were not.
[65] It is apparent that the plaintiff simply copied the statement of claim almost verbatim in its most essential elements when portraying the 2005 Agreement and the 2009 Agreement in the March 30, 2015 affidavit. This was a dangerous choice to have made on a motion without notice. A statement of claim often describes the aspirational high water mark of what the plaintiff hopes the evidence will bear out. Fair and true disclosure is not the description most often applied by defendants to statements of claim they respond to.
[66] An affidavit to be used on a motion without prejudice is a very different thing from a pleading. The plaintiff was not entitled to paint a picture of the agreement in the most favourable light to her cause. She had had a duty to describe the agreement she founded her claim on in a fair and true manner. She had an obligation to bring portions of the agreement forward to the court’s attention that might suggest a conclusion other than the one she sought. The plaintiff knew that George and Susan were disputing the contractual rights she claimed – her action was premised on their alleged denial of her claimed rights under the 2009 Agreement. Her duty on a motion without notice was to make a good faith effort to put forward the facts and law that might explain why they were denying her claim. Copying the statement of claim was not the best starting point for discharging that duty when describing matters in controversy.
[67] Proceeding without notice was an option and not a requirement of Rule 42 of the Rules of Civil Procedure. There was nothing urgent about this case. There was no suggested imminent threat of a transaction being concluded and closed before a “with notice” motion could be heard. Real estate transactions take time to close and there was no suggestion of one being imminent.
[68] The plaintiff chose to proceed without notice but failed to discharge the burdens that come with that choice under Rule 39.01(6) of the Rules of Civil Procedure. The appropriate consequence of that conduct is not to reward it, but to sanction it with the dissolution of the order so obtained. Fair and true disclosure is not a requirement to be honoured in the breach.
[69] I am therefore allowing the appeal and ordering the dissolution of the certificate of pending litigation.
(ii) Reasonable claim to an interest in land
[70] The Master’s reasons concluded that the plaintiff had established a reasonable claim to an interest in land. In light of the plaintiff’s position on cross-examination that the 2009 Agreement “speaks for itself”, that is a conclusion subject to considerable doubt. The plaintiff has pleaded no active purchase option, can point to no clause of the 2009 Agreement that promises security for the monetary obligations described and has advanced an unjust enrichment claim in the alternative that suffers from the infirmity of an admitted contract that would provide a juristic cause that would defeat the claim in whole or in substantial part. It is by no means clear that the claim as presently pleaded establishes a reasonable claim to any interest in land. In light of the failures in the disclosure made at the hearing without notice, I do not find it necessary to make a ruling in that regard.
(iii) Terms of Discharge of certificate of pending litigation
[71] The plaintiff was prepared to consent to a discharge of the certificate of pending litigation on terms that all proceeds of sale be paid into court. The Master agreed with that submission.
[72] If I am wrong about the materiality of the non-disclosure by the plaintiff, I would nevertheless allow the appeal and vary the Master’s order.
[73] The plaintiff’s claim is premised on rights alleged to have been enjoyed jointly with Caleb. Her own interest in those claims is thus only half, the other half belonging to her husband Caleb. She has alleged no proprietary claim to Caleb’s interest and Caleb has not sought a certificate of pending litigation to protect his own interest. She has conceded in her pleading that Susan and George are entitled to a prior claim to proceeds of sale of at least $207,300. By ordering all proceeds to be paid into court, the Master has granted the plaintiff execution before judgment on other non-property claims that she has advanced in the judgment. This amounts to an error of law and not a mere disagreement about the manner of exercising discretion.
[74] I would have varied the order to provide that discharge of the certificate of pending litigation would be on terms that George and Susan pay into court one half of the net proceeds of sale after deduction of sales costs and the usual adjustments and after deduction of the amount of $207,300 that paragraph 67 of the statement of claim concedes is a prior claim to her interest.
Disposition
[75] I am therefore allowing this appeal, setting aside the order of Master Pope dated March 18, 2016 and discharging the certificate of pending litigation issued March 31, 2015. The moving parties are entitled to their costs both here and below. I shall receive written submissions from them by June 8, 2016. The plaintiff shall provide her reply to those submissions by June 22, 2016. Submissions should be restricted to four pages excluding outline of costs and should attach cases only if they are not available on a public legal information database. It may be assumed that the principles of Rule 57 of the Rules of Civil Procedure are well understood and counsel may govern themselves accordingly.
S. F. Dunphy J. Date: May 20, 2016