COURT FILE NO.: DC-17-129
DATE: 20180621
ONTARIO
SUPERIOR COURT OF JUSTICE – ONTARIO
DIVISIONAL COURT
BETWEEN:
Margaret Morrison
Plaintiff (Appellant)
– and –
John James Rose
Defendant (Respondent)
David Sundin, for the Plaintiff (Appellant)
Tyler Nicholson, for the Respondent
John Rose
Plaintiff by Defendant’s Claim (Respondent)
– and –
Margaret Morrison and John Morrison
Defendants by Defendant’s Claim (Appellants)
Tyler Nicholson, for the Plaintiff (Respondent)
David Sundin, for the Respondent (Appellants)
HEARD: May 14, 2018
REASONS FOR JUDGMENT
[1] This is an appeal by the appellants (plaintiff and defendants by defendant’s claim) from the judgment of Deputy Judge C. Edward McCarthy (“the trial judge”) of the Cayuga Small Claims Court dated September 14, 2017.
[2] The plaintiff/appellant at trial claimed damages as the landlord for arrears of rent, utilities, property taxes and maintenance charges owing pursuant to a lease agreement on a parcel of land in a land lease community known as White Oaks Villages (“White Oaks”) near Hagersville, Ontario.
[3] The respondent tenant claimed damages against the defendants by defendant’s claim/appellants for breach of fiduciary duty.
[4] The trial judge awarded the plaintiff/appellant damages of $1529.98 for property tax arrears, dismissed the balance of her claims and dismissed the defendant’s claim in its entirety. The trial judge awarded no costs of either the plaintiff’s claim or the defendants’ claim.
Standard of Review
[5] An appellate court will not interfere with the trial judge’s findings of fact, inferences from such findings or of mixed fact and law unless it is satisfied that the finding was the result of a palpable and overriding error.
[6] A palpable and overriding error means a decision that is clearly wrong being contrary to the evidence, where the trial judge patently misunderstood or misapprehended the evidence or where there was no evidence whatsoever to support the trial judge’s conclusions. A palpable and overriding error must be plainly identifiable and the error is shown to have affected the result. Housen v. Nikolaisen (2002) 2002 SCC 33, 2 SCR 235.
[7] On a pure question of law, an appellate court is free to replace the opinion of the trial judge with its own. The standard of review on a question of law is that of correctness. Housen v. Nikolaisen, above.
[8] The award of damages by a trial judge is entitled to deference. A court on appeal should not alter a damage award made at trial merely because on its view of the evidence it would have reached a different conclusion. The appellate court should only intervene if there was no evidence upon which the trial judge could have reached the conclusion or where he proceeded upon a mistake or wrong principle or where the result reached at trial was wholly erroneous.
[9] With respect to the costs orders, an appellate court should only set aside the order if the trial judge has made an error in principle or if the costs award is plainly wrong. Hamilton v. Open Window Bakery Ltd., 2004 SCC 9.
Grounds of Appeal
[10] The appellants raised the following grounds of appeal:
a. Did the trial judge err in determining that utilities are a component of “rent” under the Residential Tenancies Act, 2006 (“the Act”)?
b. Did the trial judge err in determining that the maintenance charges would need to be addressed via an application to the Landlord and Tenant Board for increased rent pursuant to s. 126 of the Residential Tenancies Act, 2006?
c. Did the trial judge err in determining that the plaintiff/appellant did not have a claim based on unjust enrichment?
d. Did the trial judge err in determining that the partial payments made by the respondent to the plaintiff/appellant did not extend the limitation period of two years provided for in the Limitations Act, 2002?
e. Did the trial judge err in failing to award costs to the appellants?
f. If the appeal is allowed, what is the appropriate remedy?
Factual background
[11] The plaintiff/appellant is the owner of White Oaks. The respondent owns his house at lot number 37 but rents the land from the plaintiff/appellant on which it is located. The respondent was also leased an equal share interest in the common areas with the other 36 tenants.
[12] The lease entered into by the parties dated May 26, 2006 states as follows:
6.“The tenant shall pay to the landlord on the first day of each month, throughout the term of the lease commencing on the 26th day of May, 2006, a sum equal to the total of:
a) Basic Rent equal to $47.04 plus $1.96 interest;
b) Extra Charges composed of, but not limited to;
i) Common Area Fees plus GST as determined by the White Oaks Residents Committee or the landlord if the White Oaks Residents Committee has not been established
ii) Taxes on Rental Site and Common Area
iii) Utilities, including but not limited to gas, hydro, water, sewage.
- The tenant covenants with the landlord as follows:
a) to pay the Basic Rent +4% interest
b) to pay Extra Charges for Rental Site plus GST
c) to pay Extra Charges for Common Area Fees plus GST
d) to pay Extra Charges for Common Area maintenance and repair which includes but is not limited to hydro lines and equipment and other Extra Charges as contained herein if any
e) to pay all gas, hydro, water, sewage any other charges in connection with the rental site on an account in their own or their agent’s name. The Tenant further agrees to pay to the Landlord all costs associated with maintaining the equipment necessary to deliver the services mentioned in this section.”
[13] The history of the proceedings between the parties and others prior to the Small Claims Court action is significant and relevant to the issues on this appeal.
[14] The plaintiff/appellant initially applied to the Landlord and Tenant Board (“LTB”) in 2011 because of the respondent’s refusal to pay property taxes under the lease. The LTB rendered a decision on September 20, 2011 holding that the property taxes under the lease expressly falls outside the definition of rent in the Act. Hence, the plaintiff/appellant was required to commence her action to recover that debt.
[15] The respondent’s daughter Angela Rose also applied to the LTB for an order in 2011 alleging that the plaintiff/appellant was not entitled to claim reimbursement from her of her proportionate share of the hydro utility costs for her lot without approval from the LTB. The LTB rendered a decision on October 6, 2011 stating that the LTB’s approval was not necessary and that the appellant was entitled to collect that proportionate share of those hydro utility costs from her in addition to rent payable under the lease.
[16] The plaintiff/appellant then brought an application in 2014 before the LTB to evict the respondent from his premises because of his failure to pay the monthly rent, property taxes, water and hydro utility costs owing under the lease. No claim for maintenance fees had been charged by the plaintiff/appellant to the respondent before that or made by the plaintiff/appellant in that LTB application.
[17] The parties attended for the hearing of the application before the LTB on September 24, 2014. At the commencement of the hearing, the LTB member expressed her concern to the parties and counsel that the LTB did not have jurisdiction over the claims made by plaintiff/appellant for those utility costs and property taxes claimed other than the monthly rental charges for which the appellant was seeking compensation .
[18] The parties and their counsel clearly understood that the position of the LTB member was that those matters other than the monthly rent charges could not be considered or decided by the LTB because of its lack of jurisdiction under the Act. The parties, given that position, then decided that all the appellant’s amounts including the monthly rent up to that date and the respondent’s claims would be resolved all at once in the same forum in Small Claims Court.
[19] The parties in the hearing then consented to the following order of the LTB:
The Tenant shall pay $6000 to Brimage Law Group in trust within five days to be held pending an order of the Small Claims Court or an agreement on the consent of the parties.
The payment of $6000 is without prejudice to either the Landlord’s or the Tenant’s rights to advance their position with respect to the amounts currently claimed by the Landlord in any Small Claims Court action.
[20] The LTB member agreed with that proposal and issued its order to that effect on September 25, 2014.
[21] That order in my view effectively resulted in the LTB deciding its lack of and/or declining its jurisdiction over all of the claims of the plaintiff/appellant including the monthly rental charges and the other monthly charges claimed by the plaintiff/appellant but only up to that date.
[22] That is made clear by paragraphs 3 and 4 of that same consent order of the LTB which provided as follows:
Going forward, the Tenant is to pay all invoices rendered by the Landlord as they come due, failing which, the Landlord may re-apply to the Landlord and Tenant Board for termination of the tenancy.
Going forward, should the Tenant dispute any amounts of invoices from the Landlord the Tenant may apply to the Landlord and Tenant Board to determine the validity of the invoices.
[23] As both parties had agreed and the LTB had ordered that the Small Claims Court would decide the issues of the amounts currently claimed by the plaintiff/appellant at the LTB, the respondent did not raise any jurisdictional argument at the trial regarding the trial judge’s ability to do so.
[24] The trial judge awarded the plaintiff/appellant the amount owing for property tax arrears charged to the respondent totaling $1529.98. No appeal was raised with respect to that decision by either party and that part of the trial judge’s decision stands.
[25] Notwithstanding that background involvement at the LTB, its consent Order and the agreement of the parties, the trial judge decided that he could not address in Small Claims Court the plaintiff/ appellant’s claims for water and hydro utilities. He stated these utilities claims were clearly a component of the rent within the definition of rent under s.2 of the Act. He stated that the LTB was wrong as a matter of law when it takes the position that utilities are not a component of rent.
[26] The plaintiff/appellant had claimed payment for water services provided to the respondent at the rate of $45 per month commencing May 1, 2014. She also claimed hydro expenses of April 2014 of $120.83, May of $114.15 and June of $70.83 and from July 1 onward of $25 per month. This was for the unmetered hydro costs to cover the costs of street lighting and powering the large pumps that were necessary to operate the sewage systems of the subdivision. The plaintiff also attempted to claim approximately $8200 in lump sum arrears of hydro utility charges for a time period up to 2012 which was outside the two-year limitation period of the commencement of her action.
[27] The trial judge accordingly dismissed all the claims for the monthly water and hydro services and then dismissed the claim for $8200 in utility arrears because of the expiration of the two-year limitation period.
[28] The trial judge also found on the evidence that the respondent had in fact paid the monthly rent of $49 owing to October 1, 2016. However, he also held that the court had no jurisdiction over those arrears in any event while the respondent was in possession as that was a matter exclusively within the jurisdiction of the LTB. He dismissed the claims for rent arrears.
[29] The trial judge also refused to award damages to the plaintiff/appellant for her claim of monthly maintenance charges of $79 beginning January 1, 2015. The plaintiff/appellant’s evidence was that that amount was calculated because of her recurring snow clearing costs for the subdivision of $750 per month for six months of the year plus taxes together with the cost of maintaining 63 acres of land, hydro lines, and the cost of the on-site maintenance by her employees to take water samples and provide that information to the tenants. As indicated above, no claim for these maintenance charges had been made before the LTB.
[30] The trial judge dismissed that claim stating that although a claim for such charges was mentioned in the lease, there was no formula in the lease to properly apportion those charges among the tenants. He stated that even if there was a formula, since these charges were a component of rent, the same would have to be added to the rent by an application to the LTB to increase the rent under s. 126 of the Act which issue was already dealt with before the LTB.
[31] The trial judge also refused to award any part of these claims to the plaintiff/appellant based on unjust enrichment.
[32] He furthermore declined to award either party the costs of the plaintiff’s claim or for defending the respondent’s claim that was dismissed.
Analysis
[33] One of the main issues to be decided is what was the effect of the LTB order of September 25, 2014 made on consent of the parties.
[34] Section 168 (2) of the Residential Tenancies Act, 2006 provides as follows:
“The Board has exclusive jurisdiction to determine all applications under this Act and with respect to all matters in which jurisdiction is conferred on it by this Act.”
[35] Section 174 of the Act clearly states that the LTB has the authority to hear and determine all questions of law and fact with respect to all matters within its jurisdiction under this Act.
[36] In my view, the LTB’s exclusive jurisdiction under those sections includes its ability to decide whether the claims made to it by a landlord and/or tenant are arrears of rent and within its jurisdiction under the legislation.
[37] In this case, likely because of precedent decisions of the LTB including the provisions of its applicable Interpretation Bulletin, the position of the LTB member at the outset of the hearing was that the LTB had no jurisdiction to hear the plaintiff/appellant’s claims as rent other than the monthly rental charges.
[38] Based on that, the parties then agreed that all of their current claims including those for monthly rental arrears would be decided in Small Claims Court at the same time rather than have the LTB decide the monthly rental arrears issue separately from the Small Claims Court subsequently deciding the balance of the claims.
[39] The LTB agreed with that proposal and issued a consent order to that effect. In reality, the result of that decision is that the LTB declined its jurisdiction on hearing all the current matters in dispute before it so that they would be decided in Small Claims Court.
[40] However, the order is clear that the LTB specifically retained its jurisdiction over all invoices of the plaintiff/appellant rendered after that date and which it ordered the respondent to pay reserving as well the right of the respondent to dispute them by application to the LTB.
[41] In my view, the LTB was entitled to do so. That decision also is in the interests of the administration of justice by ensuring that the matters initially in dispute were heard and decided at the same time in one hearing and in the least expensive and most expeditious fashion.
[42] Accordingly, it was not relevant for the purposes of the trial judge whether he believed that the LTB had jurisdiction over the issues of the claims for rent, utility costs and maintenance charges made by the plaintiff under the Act; rather, what was relevant was the actual decision made by the LTB that it had no jurisdiction over some matters and that the LTB had declined its jurisdiction over others on consent of the parties.
[43] What is significant is that that order of the LTB is final and binding under s. 209 (1) of the Act. Section 209 provides as follows: “Except where this Act provides otherwise, and subject to section 21.2 of the Statutory Powers Procedure Act, an order of the Board is final and binding.”
[44] If there was any dispute with respect to that LTB order, the parties would be required to appeal that decision to the Divisional Court with leave on a point of law only under s. 210 of the Act. There was no such appeal.
[45] Accordingly, with the greatest respect, in my view the trial judge ought to have accepted that LTB order as final and binding on him. He erred as a matter of law in his ruling that the Small Claims Court had no jurisdiction to hear and decide some of those claims of the plaintiff/appellant as noted herein.
Maintenance Charges
[46] Both Counsel conceded that there was no claim made for maintenance charges by the plaintiff/appellant of $79 per month under the lease until January 1, 2015, some three months after the LTB decision of September 25, 2014.
[47] As indicated above, the LTB consent order is final and binding in all respects. In particular, the Small Claims Court was to decide the issues that were currently before the LTB i.e., those matters up until that date. By its terms, any issues in dispute between the parties going forward i.e., after September 25, 2014 had to return to the LTB. This could be done by application by the plaintiff/appellant to terminate the tenancy if the tenant did not pay their ongoing invoices ordered to be paid by the LTB or by application of the respondent if he disputed those invoices.
[48] In other words, the order on its face confirms that the LTB maintained its exclusive jurisdiction to hear and decide all issues regarding subsequent invoices charged by the plaintiff/appellant regarding the lease. This included the rent, property taxes, utility costs or other expenses claimed if they were in dispute as those matters were not transferred to the Small Claims Court to decide.
[49] The maintenance charges were not advanced by the plaintiff/appellant until January 1, 2015. The parties agreed that they wanted the Small Claims Court to decide that issue as well. However, in my view, they were not entitled to do that given the LTB’s maintenance of its exclusive jurisdiction over those matters under paragraphs 3 and 4 of its order.
[50] Accordingly, I agree with the result reached by the trial judge that he could not decide the issue of the maintenance charges claimed by the plaintiff/appellant of $79 per month commencing January 1, 2015. The basis for this is the clear wording of the LTB order as the LTB maintained its jurisdiction to decide any dispute over those charges.
[51] The trial judge therefore did not commit an overriding error in the result that the Small Claims Court could not decide the issue of the maintenance charges claimed by the plaintiff/appellant commencing January 1, 2015.
Water and Hydro Utility Charges
[52] The trial judge held that the water and hydro utility charges clearly were rent under s. 2 of the Act respectively. He indicated that he believed the LTB was wrong as a matter of law in taking the position that utilities were not a component of the rent.
[53] In my respectful view, the trial judge erred in not accepting the terms and finality of the LTB order of September 25, 2014.
[54] If he had done so, he should have found that he had the authority to decide the issue of those arrears of utilities for water and hydro services costs up to September 25, 2014.
[55] The trial judge found that it appeared that none of the amounts which the plaintiff/appellant claimed for water and hydro costs were out of line for what her costs no doubt amounted to and that they generally added up to $275 per month including the maintenance charges. He stated that the plaintiff /appellant needed to demonstrate on an annual basis to the tenant how much it costs for water and unmetered hydro, maintenance, taxes as well as a rational basis to allocate the same among the tenants.
[56] The trial judge unfortunately did not make any other findings of the specific costs of the plaintiff/appellant to be allocated to and payable by the respondent tenant other than to hold they were not out of line.
[57] The parties have agreed that they do not wish the matter to be referred back to the Small Claims Court as the trial judge is now retired. They wish this court to decide the issue of the proper amounts owing for utility charges based on the evidentiary record before it.
[58] The lease provides for the obligation of the respondent to pay its pro rata share of the hydro and water costs not as rent but in effect as a debt owing to the plaintiff/ appellant pursuant to the lease.
[59] The trial judge declined to award the $8200 amount for utilities and a $4119 amount for “other charges” because of the applicable two-year limitation period that applied to the action. He held that the only utility costs and charges that could be claimed were those that were incurred within the two-year period prior to the commencement of the action in March 2015. He rejected the position of the plaintiff/appellant that the respondent in effect made part payments on those arrears not paid. This position was based on the plaintiff/appellant’s accounting attempt to apply those last payments to the oldest outstanding accounts first .i.e., “the first in, first out” method of accounting. He accepted the respondent’s evidence that his payments of approximately $196 per month were made by him to cover the very specific payments on account which he believed were legitimate charges for each preceding month. This included charges for property taxes, water, and hydro expenses and he was not making payments on account of those other claims.
[60] In my view, the trial judge was entitled to accept the evidence which he did and was correct in rejecting the plaintiff/appellant’s position and holding that the limitation period barred the claims before the date of March 2013. He made no error in coming to that conclusion.
[61] Again, with due respect to the trial judge, he erred in not granting an award for the arrears of water and unmetered hydro expenses which he accepted were reasonable owing to the date of the LTB order of September 25, 2014. He erred in stating that the plaintiff had to bring an application before the LTB to have all those matters added to the basic rent.
[62] The 7 months of water expenses of $45 per month from March 1 to September 1, 2014 total $315 and the accepted respondent’s evidence was that he had paid $131.60 towards them for a difference owing of $183.40.
[63] The hydro expenses up to September 1, 2014 total $380.81. The accepted respondent’s evidence was that he had paid $272.21 towards them for a difference owing of $108.60.
[64] The lease agreement clearly provided for the respondent to pay both of those expenses and the plaintiff/appellant is entitled to additional damages for those two items in the total amount of $292.
Arrears of Rent
[65] The plaintiff/ appellant claimed payment of arrears of rent owing from April 2, 2013 of $49 per month. The trial judge found that the monthly rent was in fact paid on a consistent basis by the respondent except for the October 1, 2016 payment. There was supporting evidence at trial that the amounts the respondent admitted were payable including the monthly rent were in fact paid on a regular basis.
[66] The trial judge in error went on to state that the court had no jurisdiction over rent arrears while the respondent was in possession as it was a matter exclusively within the jurisdiction of the LTB. However, for the reasons indicated above, he made no overriding error with respect to the result that no arrears of monthly rent were owing to the plaintiff/appellant.
Unjust Enrichment
[67] The trial judge rejected the plaintiff’s claim for payment for damages based on unjust enrichment. He stated that the plaintiff could not use that principle to circumvent her obligations under the lease as modified by the Act. He further held that in any event there was clearly a juristic reason for not allowing a claim for unjust enrichment as the Act itself renders void most of the provisions of the lease. He also held that even if the Act was not in place, the lease gives no formula for determining the extra charges.
[68] In my view, even if there was some element of enrichment by the respondent at the cost to the plaintiff and it seemed unjust, there is a juristic reason for that according to the terms of the lease agreement between the parties and the provisions of the Act that applies to that agreement.
[69] The trial judge made no overriding error in rejecting plaintiff/appellant’s claim for unjust enrichment.
Costs Award
[70] The trial judge decided that neither the costs of either the plaintiff’s claim or of the defendant’s claim were to be paid to either the appellants or the respondent. He gave judgment to the plaintiff in the amount of $1529.98 for arrears of property taxes and dismissed the balance of the plaintiff’s claims for rent, water, hydro and maintenance charges. He dismissed the defendant’s claim of $15,000 in damages for breach of fiduciary duty.
[71] His reasons regarding the costs issues was restricted to “In the circumstances, there will be no order as for costs”.
[72] At the end of the trial, the parties were asked to provide written submissions on the merits of their claims. Counsel for the plaintiff/ appellant had already prepared a bill of costs but did not present it to the trial judge because of his request for written submissions. The appellants then provided detailed written submissions on the merits of the claims. They specifically stated at the end thereof that their submissions were subject to their right of making reply submissions to any response received from the respondent and their right to make costs submissions.
[73] The respondent in his written submissions simply stated that the plaintiff’s action should be dismissed with costs and the defendant’s action should be allowed with costs.
[74] Unfortunately and likely through inadvertence, the trial judge in rendering his decision did not then allow the appellants to make any submissions with respect to the issue of costs despite their right and request to do so which in my view was an error in principle. Accordingly, the trial judge’s ruling on costs should be set aside. The parties have agreed that I should decide the issue of costs of the trial with the results as amended by this decision.
[75] The plaintiff/appellant was successful at trial to the extent of her recovery of total damages of $1529.98 for arrears of property taxes and an additional amount by this decision of $292 for water and hydro utility services for a total of $1821.98. However, the appellants were also successful in obtaining a dismissal of the defendant’s claim against them for damages of $15,000.
[76] The parties agree that approximately 85% to 90% of the time spent dealt with the plaintiff/appellant’s claim with the additional evidence of the parties being restricted to the balance of the time for the respondent’s claim.
[77] There were no relevant offers to settle and the plaintiff is entitled to costs on a partial indemnity basis. The matter at trial took approximately two full days and the issues were of significant importance to both parties.
[78] The respondent’s counsel did not provide any details of the time he expended in defending the action and proceeding with his client’s claim but does not seriously dispute the hours claimed by appellant’s counsel. Appellant’s counsel was a lawyer of five years’ experience at the time of trial and claimed $275 per hour spent for a total partial indemnity costs claim of $3432 plus HST.
[79] Rule 19.02 of the Small Claims Court Rules confirms that any power under that rule to award costs is subject to s. 29 of the Courts of Justice Act which limits the amount of costs that may be awarded. That section confirms that an award of costs in a Small Claims Court shall not exceed 15% of the amount claimed unless the court considers it necessary in the interests of justice to penalize a party or a party’s representative unreasonable behavior in the proceeding. That reason did not occur here.
[80] An award of costs should not be made on a strictly mathematical calculation of the amount of counsel’s time spent multiplied by an hourly rate. Rather, it should be made on the basis of granting an award that is fair and reasonable in all the circumstances and in particular in an amount what the unsuccessful party would expect to pay. Boucher v. Public Accountant’s Council (Ontario) (2004), 2004 CanLII 14579 (ON CA), 71 O.R. (3d) 291, [2004] O.J. No. 2634 (O.C.A).
[81] As indicated above, the plaintiff/appellant was successful in part with respect to her claim but the appellants, as defendants to the defendant’s claim, were entirely successful in defending that claim against them.
[82] In my view, the appropriate amount of reasonable costs that the respondent should expect to pay to the appellants for the claim, defending his claim and the trial is the sum of $2500 plus HST plus disbursements of $329 which are not disputed. The decision of the trial judge is amended accordingly.
Costs of Appeal
[83] If the parties cannot agree on the issue of costs of this appeal, the appellants’ counsel shall provide brief submissions of no more than two pages in length plus a bill of costs within ten days from the date of this decision. Respondent’s counsel shall similarly respond within seven days thereafter. If no submissions are received, the parties will be deemed to have resolved the issue of costs of the appeal.
The Honourable Justice R.J. Nightingale
Released: June 21, 2018
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Margaret Morrison and John Morrison
Plaintiff (Appellants)
– and –
John James Rose
Respondent (Appellant)
John Rose
Plaintiff by Defendant’s Claim (Respondent)
– and –
Margaret Morrison and John Morrison
Defendants by Defendant’s Claim (Appellants)
REASONS FOR JUDGMENT
The Honourable Mr. Justice R. J. Nightingale
Released: June 21, 2018