Court File and Parties

COURT FILE NO.: CV-16-11528-00CL DATE: 20190619 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Law et al., Applicants AND: Blairhampton Properties Inc., Cedar Ridge Recreational Club and C.R. Waterfront Access Corp., Respondents

BEFORE: L.A. Pattillo J.

COUNSEL: Scott R. Fairley, for the Moving Non-Party, Your Neighbourhood Credit Union Garvin J. Tighe and Alexander Melfi, for the Respondent/Applicants

HEARD: June 6, 2019

Endorsement

[1] This motion was commenced by Your Neighbourhood Credit Union (“YNCU”), a non-party and the holder of the first mortgage (the “Mortgage”) on lands legally described as Parts 1 and 7 of Plan 51R-38009 (the “Lands”) on April 24, 2017. The motion seeks an order setting aside the Judgment of Hainey J. dated January 5, 2017 (the “Hainey Judgment”) and ancillary relief set out in the Notice of Motion on the ground that it received no notice of the proceedings before Hainey J. (the “Motion”).

[2] The Lands are owned by the Respondents Blairhampton Properties Inc. (“Blairhampton”), and C.R. Waterfront Access Corp. The Hainey Judgment granted an easement over the Lands to the Applicants, Respondents on the Motion, on the basis that they had an implied easement over the Lands and also the right to an easement based on equitable estoppel. The Applicants are adjacent land owners who bought their land from Blairhampton on the promise of access over the Lands. The application was not opposed by Blairhampton.

[3] On November 16, 2016, the Applicants registered a Certificate of Pending Litigation against the Lands. On January 6, 2017, the Applicants registered the Hainey Judgment against the Lands.

[4] The Motion was not proceeded with as a result of an agreement between counsel for YNCU and the Applicants to await the Court of Appeal’s decision in respect of an appeal from the Judgment of Conway J. dated July 4, 2017 which granted easements to the Applicants over Parts 2 to 6 of Plan 51R-38009, located adjacent to and in between the Lands. In granting Judgment, Conway J. utilized the same reasoning as Hainey J.

[5] On February 22, 2018, the Court of Appeal overturned the Conway Judgment on the basis that the Applicants’ right to access to the lands in issue was contractual and could not be converted into rights that run with the land, either by implication or estoppel (2018 ONCA 204).

[6] On May 17, 2018, YNCU entered into an assignment agreement with Silsym Inc. (“Silsym”) whereby YNCU assigned to Silsym all of its right, title and interest in its loan with Blairhampton, its security for the loan which included the Mortgage on the Lands and the Motion (the “Assignment Agreement”). On June 14, 2018, Silsym registered a Transfer of Charge against the Lands in Land Titles. Notice of the Assignment Agreement was registered on June 26, 2018.

[7] Following the Assignment Agreement, the Motion was continued by Silsym in YNCU’s name by Supplementary Motion Record dated August 9, 2018 (as YNCU was a non-party to the application, an Order to Continue could not be filed).

[8] The Applicants oppose the Motion. No one appears for Blairhampton or C.R. Waterfront Access Corp. but that is not surprising given their position on the application before Hainey J.

[9] The Applicants submit that Silsym, who stands in the shoes of YNCU, ought not to succeed on the Motion because it had actual notice of the Hainey easement at the time of the Assignment Agreement. They submit that having registered the Transfer of Charge on June 14, 2018, more than a year and a half after they registered their easement on title, Silsym’s interest in the Mortgage is subject to their easement pursuant to s. 101(3) the Land Titles Act, R.S.O. 1990, c. L.5 (the “Act”).

[10] Further, the Applicants submit that the equities giving rise to the Hainey Judgment and the involvement of Silsym’s principal, Jim Innes (“Innes”), favour them and not setting aside the Hainey Judgment. Innes was Blairhampton’s accountant, and it is alleged he was intimately involved with the development from the beginning and in the planning scheme which gave rise to the issues concerning the easement which resulted in the Hainey Judgment.

[11] The Applicants further submit that YNCU/Silsym cannot succeed on the Motion because Rule 38 of the Rules of Civil Procedure can only be relied upon by a party or other person affected by the judgment and at the time of the Hainey Judgment, Silsym had no interest in the Lands and was not affected by the Hainey Judgment. They further submit that given the delay in bringing of the Motion, Silsym cannot meet the requirements of r. 38.11.

[12] In YNCU’s factum filed on the Motion, Rule 37 is relied upon for the relief sought. The Applicants take issue with YNCU proceeding under Rule 37 and say the Motion should be rejected because only Rule 38 can be relied upon to set aside a judgment with no notice. The Applicants are correct that the relief sought on the Motion cannot be obtained pursuant to Rule 37. Rather, it is Rule 38 and specifically r. 38.11. However, YNCU’s Notice of Motion relies on, among other grounds, r. 38.11. It is clear therefore that YNCU can rely on r. 38.11 for the relief requested.

[13] While I agree that under the Act, registration is title, I do not consider that the issue on this Motion falls to be decided based on the priorities of registration under the Act. The Assignment Agreement assigned both the Mortgage and the Motion. The issue is not whether Silsym’s interest in the Mortgage is subject to the Hainey easement in accordance with the priorities under the Act but rather whether YNCU (and its assignee, Silsym) is entitled to set aside the Hainey Judgment on the grounds that it received no notice pursuant to r. 38.11.

[14] Rule 38.11 provides in part that a party or other person who is affected by a judgment made without notice may move to set aside or vary the judgment, by notice of motion served forthwith after the judgment comes to the person’s attention and names the first available hearing date that is at least three days after service of the notice of motion.

[15] The Applicants concede that YNCU did not get notice of the application before Hainey J. Further, they take no issue with the fact that YNCU, as the holder of the Mortgage, was a person affected by the Hainey Judgment. While Silsym is not a person affected by the Hainey Judgment, as a result of the assignment, it stands in the shoes of YNCU in respect of the Motion. Further, it has continued the Motion in YNCU’s name.

[16] The evidence establishes that YNCU found out about the Hainey Judgment on January 29, 2017, 24 days after the reasons were released. The Applicants do not dispute that the Motion, which was commenced by YNCU on April 24, 2017, was commenced “forthwith”. They concede that the time from YNCU’s notice of the Hainey Judgment to commencement of the Motion was not unreasonable. Nor, given the agreement between counsel, do they take issue with the delay occasioned in bringing the Motion on by the appeal of the Conway Judgment.

[17] The Applicants’ complaint concerns the totality of time it took to bring the Motion on after the Court of Appeal’s decision which was approximately five months (February 22, 2018 to August 9, 2018) together with the time from when YNCU learned of the Hainey Judgment to when it started the Motion (approximately three months) which amounts to a total of slightly more than eight months to bring the Motion.

[18] I have no issue with the time it took YNCU to commence the Motion, particularly given the Applicant’s concession that the time was reasonable. Given the issues, I am satisfied the Motion was commenced “forthwith” after it came to YNCU’s attention. YNCU’s Notice of Motion stated that it was to be heard on the Commercial List on a date to be set by the court. Based the Commercial List’s practice in granting motion dates, that return date was appropriate in order to obtain the first available return date. The fact that the Motion was not heard quickly is also not a factor, given the subsequent agreement of counsel to put the Motion on hold pending the Court of Appeal decision. Finally, while it did take five months to restart the Motion following release of the Court of Appeal’s reasons overturning the Conway Judgment, r. 38.11 does not speak to the total time within which the Motion must be heard.

[19] Accordingly, I’m satisfied that the timing requirements of r. 38.11 have been met by YNCU.

[20] I am also satisfied that there is merit in YNCU’s position that the easement granted by the Hainey Judgment should be set aside. As noted, the Conway Judgment involved similar parties, similar contractual arrangements, dealt with land adjacent to the Lands, and adopted similar reasoning as Hainey J. in granting the easements. Given, therefore, that the Conway Judgment was set aside by the Court of Appeal on the basis that there was no entitlement in law to an easement, it follows that there is also no entitlement to the easements granted by the Hainey Judgment.

[21] Finally, to the extent that the equities are relevant, in my view, based on the record, they favour YNCU over the Applicants. YNCU clearly had an interest in the Lands and was entitled to notice of the application and the proceedings before Hainey J. which it did not get. The fact that YNCU assigned its rights in the Motion to Silsym does not affect those rights.

[22] For the above reasons, therefore, I am satisfied that the Motion should be allowed and the Hainey Judgment set aside. The relief requested in YNCU’s Notice of Motion is granted.

[23] The Moving Party is entitled to its costs. At the conclusion of the argument, counsel exchanged Cost Outlines and agreed, that as between them, the costs were $20,000 in total.

[24] Mr. Fairley also requested costs in respect of work done by YNCU’s first counsel on the Motion. In support he submitted a Cost Outline from YNCU’s first counsel dealing with the commencement of the Motion which involved preparation of the Motion Record and the cross-examination of John Ziccarelli, YNCU’s Director of Credit and Business Services.

[25] It is clear from the Cost Outline, which involves the time of five lawyers and totals partial indemnity costs of $81,779.83 (fees of $80,141.63 and disbursements of $1,638.20) that it deals to a great extent with matters other than the Motion to set aside the Hainey Judgment.

[26] While I acknowledge that YNCU’s first counsel should normally be entitled to some amount for commencing the Motion and sitting in on Mr. Ziccarelli’s cross-examination (the amount of partial indemnity costs claimed for the cross-examination is $21,750.90 involving three lawyers), given what I consider to be both a severely inflated and unreasonable costs claim, I do not consider that YNCU’s first counsel are entitled to any costs.

[27] In my view, having regard to the issues and the material filed, I consider that a partial indemnity fee of $20,000 to the Moving Party for the entire Motion is both fair and reasonable. Costs payable by the Applicants to the Moving Party fixed at $20,000 in total.

L.A. Pattillo J. Released: June 19, 2019