Mason v. McCracken, 2019 ONSC 647

Superior Court of Justice

BARRIE COURT FILE NO.: CV-15-1511

DATE: 20190131

CORRECTED DATE: 20190221

ONTARIO

BETWEEN:

WAYNE DOUGLAS MASON and DIANE LILLIAN MASON Plaintiffs

– and –

ROBINA KHAN McCRACKEN, TARIQ HAMEED, JOZEF ZUBRZYCKI and BLUECHIP SERVICES INC. Defendants

COUNSEL: Judith L. Turner, for the Plaintiffs Ravinder Sawhney, for the Defendant, Robina Khan McCracken Shashi Raina, for the Defendant Bluechip Services Inc. Jozef Zubrzycki, Self-represented

HEARD: November 19, 20, 21, 22, 23, 26 and 27, 2018

Corrected Decision: The text of the original Decision was corrected on February 21, 2019 and the description of the correction is appended.

REASONS FOR DECISION

CASULLO J.:

1Mark Twain wrote that “truth is stranger than fiction, but it is because fiction is obliged to stick to possibilities; truth isn’t.” Mr. Twain may have had this case in mind.

2The Accountant for the Superior Court of Justice has been holding $1,170,246.92 to the credit of this action since March 2017. These funds represent the proceeds of sale of a property more fully described below. Four of the five parties to this action claim a stake to a portion of this money. How these funds came to be paid into court and, more importantly, the priority and amounts in which they are to be paid out, were the focus of this seven-day trial. The hearing took twists and turns that had no bearing on the issues before me, including allegations of sexual misconduct between two of the defendants. I will first introduce the parties, then set out the cogent facts, and finally address the legal issues.

THE PARTIES

The Plaintiffs

3The plaintiffs, Wayne (“Wayne”) and Diane (“Diane”) Mason, owned a 100-year-old farm house situated on a 42-acre piece of land in New Tecumseth (the “Property”), on which Wayne operated WD Mason Towing and Auto Wrecking. The Property had been in the Mason family for close to eighty years. By the time this matter came to trial, Wayne was suffering from dementia, so Diane acted as his litigation guardian. Diane has a grade 8 education and is not sophisticated with respect to business dealings. While Diane’s evidence was at times fanciful, and at other times naïve and child-like, unless stated otherwise, I prefer her evidence to that of the defendants McCracken and Zubrzycki.

4Wayne and Diane’s daughter, Pamela Horan, gave evidence at trial in a forthright and credible manner.

The Defendants

5The defendants appear to be interconnected in one way or another.

6The defendant Robina McCracken (“McCracken”) is a lawyer, licensed to practice in the province of Ontario. She obtained her realtor license in 2009. As at November 11, 2018, her LinkedIn profile confirms she is a licensed member not only of the Law Society of Upper Canada (as it then was) (“LSUC”), but also the Real Estate Council of Ontario, the Toronto Real Estate Board, and the Toronto Real Estate Board Commercial Division. As well, her profile indicates that over the last twenty years, she has successfully invested in various real estate ventures, including land acquisitions and development, pre-construction condominiums, rental properties, commercial properties, and leasing and managing properties.

7Little is known about the defendant Tariq Hameed (“Hameed”). He did not participate in the litigation, as the statement of claim was never served on him. By various accounts, Hameed either moved back to Pakistan in or about 2009, or was living in Canada in hiding. The relationship between McCracken and Hameed was never made clear during the trial. Diane thought they might be husband and wife. McCracken testified that Hameed was a client. However, business cards produced at trial show they were both involved with “All Canada Mortgage Solution Firm,” McCracken as President/Broker, and Hameed as Manager. On September 14, 2009, Hameed granted McCracken a Continuing Power of Attorney, confirming that he and McCracken jointly owned all assets.

8The defendant, Jozef Zubrzycki (“Zubrzycki”), is a private mortgage lender. He held three mortgages on the Property, one to Hameed and two to McCracken. McCracken represented both the borrower and the lender on the second and third mortgage. Zubrzycki and McCracken had prior dealings. While Zubrzycki initially cross-claimed against McCracken, the cross-claim was ultimately abandoned. Zubrzycki was self-represented at trial, although he had had a number of lawyers representing him throughout the course of the litigation. While I trust he did the best he could, Mr. Zubrzycki’s evidence was submitted in a haphazard manner and was difficult to follow. If he had a claim beyond the validity of his mortgages, it was not articulated.

9The defendant, Bluechip Services Inc. (“Bluechip”), is in the business of lending money secured by mortgages on real property. Bluechip held two mortgages on the Property, the first to Hameed and the second to Zubrzycki. McCracken represented both the borrower and the lender on the second mortgage. Bluechip and McCracken had prior dealings. While Bluechip cross-claimed against McCracken, the cross-claim was ultimately abandoned.

10Bluechip and Zubrzycki had prior dealings with one another, although the exact nature of their relationship was not expounded upon.

11Bluechip’s trial lawyer, Mr. Raina, was counsel for McCracken in 2015, when she and Zubrzycki were negotiating over outstanding monies owing.

ISSUES

12The eight issues to be decided in this matter are:

1. Are the Masons owed money for the unpaid purchase price of the Property?
2. Is McCracken liable to the Masons for the unpaid purchase price?
3. Are the Masons entitled to a vendor’s lien against the Property for the unpaid purchase price?
4. Is the Masons’ claim barred by the doctrine of laches?
5. If the Masons are entitled to a vendor’s lien, does it take priority over all, or any, of the mortgages registered on title to the Property?
6. Are the Masons liable to McCracken for occupation rent; if so, what is the quantum?
7. Is McCracken liable for punitive damages to the Masons?
8. Who is entitled to the funds paid into court, and in what amounts?

BACKGROUND

Property Transfer from Masons to Hameed

13Leading up to 2005, the Masons were in financial difficulty. Wayne mortgaged the Property, which had previously been free of encumbrances. When the mortgage payments fell into arrears, Wayne and Diane decided to sell the Property. It was located on Highway 89 and had significant commercial value. The Property was listed by Marc Ronan (“Ronan”) in 2005, for just under one million dollars. No reasonable offers were forthcoming.

14The Masons were next approached about purchasing the Property by Ronan and a local land developer, Mr. Biffis. The Masons had known Mr. Biffis for forty years. Diane, Wayne, and at least one of their children had worked for him in the past. Mr. Biffis had built a subdivision on a neighbouring tract of land, and he had similar intentions for the Property. Diane’s evidence is that Mr. Biffis offered to purchase the property for $750,000. Mr. Biffis also promised the Masons he would pay off all their debts, and give them a home, free of charge, in which they could live out the rest of their years.

15Diane testified that the Biffis deal was in the process of being completed – “started to fill out the papers” – when they were approached by McCracken and Hameed about purchasing the Property. How these two defendants and the Masons actually came to meet was never satisfactorily explained at trial.¹ We do know that Hameed offered to purchase the Property for $750,000. However, instead of paying the full purchase price, Hameed agreed to ensure the Mason’s first mortgage of $359,000 was discharged, and that other outstanding judgments against the Masons were satisfied. A title deed was registered on September 8, 2006, with the stated consideration of $750,000. Pursuant to McCracken’s trust ledger, a total of $410,000 was paid to the Masons, leaving $340,000 owing.

Balance of Purchase Price

16How Hameed and the Masons envisioned treating the outstanding balance of $340,000 formed the basis for this action.

17Diane’s evidence is that she and Wayne would be allowed to stay on the Property, rent free, until they received their $340,000. They would not be required to pay hydro, property taxes, or insurance. It was their understanding that Hameed planned to re-sell the Property at a profit, and once he did they would receive their money. There is evidence to support this, by way of four listing agreements between September 11, 2007 to December 19, 2009, with Hameed named as the seller, and a list price ranging from 1.5 million to 2 million dollars.

18According to McCracken, the Masons are not owed any money because Hameed received a $250,000 credit, in exchange for the Masons occupying the Property and running the towing and wrecking business. It was never made clear how long this arrangement was to stay in place, and no documentation was produced in support of this claim. As for the remaining $90,000, McCracken states this was received by the Masons in a private transaction. Again, no documentation was produced to support this contention.

19In her document brief, McCracken included a copy of a $25,000 cheque made out to WD Mason, dated October 9, 2007, purporting to be a payment toward the outstanding balance of $340,000. It was objected to by counsel for the Masons, on the basis that the cheque had not been produced during the course of the litigation. I ruled the cheque inadmissible. In the event I am mistaken, I find as follows. The cheque appears to be signed by Hameed and is drawn on the account of “Unicash Financial Centre,” a company operated by Hameed. The signature on the back of the cheque is dissimilar to the signatures of Wayne found on documents produced at trial. Even if the cheque was cashed by Wayne, I am not satisfied it represented a payment toward the balance of the purchase price. This despite the cheque’s reference to “6179 Highway 89”, the Property’s address, as such a reference could have been added at any time.

20McCracken acted as the solicitor for the Masons and Hameed in connection with the sale of the Property. McCracken states that Wayne and Hameed came to her with the deal worked out; she was simply retained to do the legal work. She said she suggested that Wayne obtain independent legal advice (“ILA”), but he chose not to do so. No Certificate of ILA was produced.

21Frustratingly, there is no documentation (i.e. an agreement of purchase and sale, or a reporting letter) to which the Court can turn for clarification, confirmation, or guidance, as to how the balance of the purchase price was to be treated. Apparently, this documentation did exist at one time. While McCracken’s file was destroyed by dint of her firm’s “file retention process,” Diane testified that the Mason’s documentation was either stolen or taken from them by McCracken and/or Hameed. Diane maintains that she and Wayne tried for many years to get their “papers”² back from McCracken and Hameed, which is supported through the handwritten notes Diane kept from 2008 onward, documenting their efforts in this regard. McCracken denies these requests were ever made, and refers to Diane’s notes as “self-serving.” I disagree. The notes were produced by McCracken, not the Masons, and not referenced until McCracken’s cross examination of Diane.

22The only record McCracken produced in respect of the transaction was a trust ledger statement confirming that $410,000 passed through her firm. These funds went to satisfy the existing first mortgage, a lien on the property, a small amount for legal fees, and $20,000 to Wayne.

Property Transfer from Hameed to McCracken

23In 2009, Hameed approached McCracken about purchasing the Property from him. While it was listed on the market, the Property was not selling, and Hameed wanted to move back to Pakistan. McCracken stated this was a time in her life when she was looking for an investment, so she visited the Property with a view to potentially purchasing it. The first visit she viewed the Property on her own; on the second visit Wayne gave her a tour.

24On September 9, 2010, Hameed granted McCracken a Power of Attorney for Property (“POA”). The POA specifically authorized McCracken to sell or mortgage the Property on Hameed’s behalf. Further, the POA provided that “all assets are jointly owned by the Donor [Hameed] and the Attorney [McCracken].” On the authority of the POA, McCracken acquired title to the Property from Hameed for 1.1 million dollars on November 12, 2010. The consideration consisted of the assumption of the existing mortgages on the Property, totaling $405,000 (more on these below), and the assumption of Hameed’s personal debts, indicated to be $810,000. This figure was not broken out, so it is unclear whether the $340,000 is included. McCracken acted on both sides of this transaction as well.

25Despite Hameed’s undertaking to pay the Masons the outstanding balance of $340,000 when he re-sold the Property, Hameed did not do so. When McCracken purchased the Property in 2010, she knew the Masons had not received their money.

26McCracken submitted that the Masons were fully aware that she bought the Property in 2010. She testified that during the tour of the Property with Wayne, he told her they were moving out in nine months. Despite the fact that they did not leave, McCracken took no steps to collect rent from the Masons, or remove them from the Property, for almost five years.

27Diane maintains she was unaware that McCracken purchased the Property in 2010.

28McCracken was no stranger to the Property. Diane, her daughter Tracey, and even McCracken, confirmed that from 2010 onward, McCracken would visit, although frequency was disputed. A “friendship” sprang up between Diane and McCracken – hugs, gifts, and a promise that McCracken would take Diane to visit her family in India, according to Diane. I put “friendship” in quotes because, while this was how Diane described it, McCracken testified that they had nothing in common that would lead to a friendship.

29Before setting out the facts that brought matters to a head, something should be said about the outstanding mortgages.

The Mortgages

30While there were various mortgages placed and discharged from 2006 onward, the mortgages relevant to this matter are as follows:

Mortgage Number	Registration Date	Mortgagor	Mortgagee	Principal Amount
1	October 9, 2008	Hameed	Zubrzycki	$200,000
2	October 19, 2009	Hameed	Bluechip	$165,000
3	October 9, 2012	McCracken	Bluechip	$153,000
4	November 19, 2013	McCracken	Zubrzycki	$170,000
5	May 14, 2014	McCracken	Zubrzycki	$100,000
Total				$788,000

31A few clarifications are necessary at this juncture. First, Mortgage 1 was initially $240,000. At trial, Zubrzycki claimed that the full $240,000 remained outstanding. For the following reasons, I find that the principal amount owing at trial was $200,000:

• A Mortgage Extension Agreement dated October 7, 2011, signed by Zubrzycki, indicates he received $40,000 on October 14, 2009 toward this mortgage, with the principal sum outstanding of $200,000. While Zubrzycki claimed McCracken made him sign “fake” papers when questioned about the Mortgage Extension Agreement, I find no evidence of this;
• A Transfer Agreement dated June 11, 2015, also signed by Zubrzycki, states the principal amount of the mortgage is $200,000; and
• The Notice of Sale under Mortgage dated August 31, 2015, again signed by Zubrzycki, and which was drafted by a lawyer at Zubrzycki’s behest, indicates the principal outstanding is $200,000.

32Second, none of the funds received from Mortgages 3, 4, or 5, placed after McCracken purchased the Property, were used to pay down the balance of the purchase price owed to the Masons.

33The third clarification is in respect of Mortgages 4 and 5. These two mortgages did not start out as mortgage commitments. In 2010, Zubrzycki loaned McCracken $170,000. In 2012 he loaned her another $100,000. These unsecured loans to McCracken were documented as Investment Agreements. It was not until 2013 and 2014, respectively, that the unsecured loans were converted to mortgages and registered on title to the Property.

34When the Mason’s $340,000 is added to the total of the five mortgages, there is $1,168,000 owing. Given that $1,170,246.92 has been paid in to Court, there are sufficient funds to pay out the principal amounts. However, each party expects interest and costs, which cumulatively will add over $200,000 to this amount. Needless to say, not all parties will be pleased with the outcome of this decision.

THE BREAKDOWN

35The Masons ultimately lived on the Property for eleven years, only moving out when the Property was sold by order of this Court. During these eleven years the Masons did not pay rent, hydro, taxes, or insurance on the Property. It is difficult to say just how long the status quo would have continued but for the following occurrences in 2013 and 2014.

Damage to Property

36In July 2013, a severe thunderstorm caused damage to the Property. Hoping the repairs would be covered through insurance, the Masons tried to find Hameed to facilitate this. Unsuccessful, they next reached out to McCracken, who came to survey the damage in August. At this visit, McCracken told the Masons there was no insurance, and they would have to pay to fix the damage themselves. It is Diane’s evidence that she did not find out McCracken had bought the Property until this visit.

McCracken Mortgage Defaults

37At some point in early 2014 McCracken defaulted on Mortgages 1, 4, and 5. In what I understand was an effort to address the issue, Zubrzycki visited the Property in May 2014 with McCracken (the “Visit”), with a view to purchasing it. Diane said she knew Zubrzycki before the Visit but could not say how. During the Visit, McCracken instructed Diane not to talk to Zubrzycki. Diane did anyhow, telling Zubrzycki that McCracken owed them a lot of money, and that they had an interest in the Property. According to Diane, McCracken was “furious.”

38A few days after the Visit Zubrzycki called Wayne and told him that McCracken owed him a lot of money as well, and that he was going to see a lawyer. He asked Wayne not to mention his call to McCracken. It may have been during this conversation that Zubrzycki suggested the Masons contact the Law Society of Upper Canada, as it then was, (“LSUC”).

39In late May 2014 Hameed called the Mason’s home from Pakistan, asking to speak to Wayne. Wayne was unavailable. In June 2014, Hameed called again, and this time left a message on the answering machine advising the Masons he had their papers. In July 2014 Hameed spoke with Wayne on the phone, offering him $125,000 to move out. Wayne declined. On August 1 2014 Hameed left a message on the Masons’ answering machine, offering them $150,000 if they moved out. The Mason’s daughter, Pamela, testified that she heard this recording.

Registry Visit and Complaint to LSUC

40By now, Wayne and Diane’s earlier suspicions began to mount, and they worried their $340,000 was at risk. They asked their daughter to take them to the registry office in Barrie. Here they discovered that their names were not on title to the Property. Diane’s evidence was that the woman assisting them at the registry office said they needed a lawyer.

41Instead of hiring a lawyer, the Masons wrote to the LSUC on September 12, 2014, lodging a formal complaint against McCracken (“Letter”). The Letter confirms that the Masons were to stay on the Property for five years, or until it sold, at which time they would receive the balance of the purchase price, plus 1%. Just what this 1% represented remained a mystery throughout the trial. Accordingly, I gave it no weight in my deliberations.

42While McCracken’s lawyer made much of the fact that the Letter states the Masons are owed $250,000, not $340,000, Diane satisfactorily explained that they did not know exactly how much they were owed at that time, as they did not have their papers.

43The LSUC complaint is being held in abeyance until the conclusion of trial.

44It appears that all bets were off after the Letter³. In March 2015, the Masons received:

• Notice to Terminate a Tenancy Early;
• Notice to End a Tenancy Early For Non-payment of Rent;
• Notice to Vacate Termination of Tenant;
• letter entitled Notice of Pay for Damage to the Property; and
• letter entitled Notice to Vacate and Notice to Pay Arrears of Rent.

45In April 2015, the Masons received:

• 3^rd Notice to Vacate and Notice to Pay Arrears of Rent; Notice to Cease and Desist Causing Damage and All Illegal Activities on my Property; and
• Notice of Hearing Under section 174 of the Residential Tenancies Act, 2006.

46A hearing before the Landlord Tenant Board took place on May 8, 2015, the details of which are not relevant for the within trial’s purposes, with the following exceptions:

• The Board found that McCracken’s evidence was inconsistent and waivered;
• McCracken was not awarded any of the monies she sought, being $314,467.66 in rent arrears, and $250,000 for damage to the Property; and
• Costs were not warranted because neither party had been clear about the nature of their relationship⁴ (emphasis added).

Notice of Sale under Mortgage

47On August 31, 2015, the Notice of Sale under Mortgage referenced in para. 30 above was issued in respect of Mortgage 1. According to Zubrzycki, this was done in an effort to get the Masons off the Property. Notice was served on all relevant parties, including McCracken, the Masons, and Bluechip. Shortly thereafter, on December 7, 2015, the Masons commenced this proceeding, which lead to the Order that the Property be sold, and ultimately culminating in this trial.

OTHER ISSUES RAISED AT TRIAL

Rental Income

48McCracken spent a significant amount of time trying to establish that the Masons earned rental income from the Property, which should be set off against the unpaid purchase price. It appears that a company, Lee Sheds, did rent space on the property. This was corroborated by Diane and her daughter, Pamela. However, I find that any rental income was paid to Hameed, not the Masons. In support, I rely on a lease dated November 20, 2008, specifying that Lee Sheds had no other financial commitments to the owners other than the lease. The owners of the Property are listed as Tariq Hameed and Amaline Bailey. The Masons are not named.

49The second source of purported rental income comes by way of an email from Joe Bellissimo to McCracken, dated March 15, 2015. Bellissimo tells McCracken that he had a verbal contract with Wayne Mason, paying him $300 per month to rent space. McCracken wanted the Court to find that Diane was being untruthful about rental income and relied on Bellissimo’s email to bolster this submission. McCracken did not call Bellissimo to testify at trial, so important information, such, as what the space was used for, the size of the space, where the space was located on the property, etc. was lacking.

50Further, counsel neglected to take Diane to Bellissimo’s email during his cross examination of her, thereby running afoul of the rule in Browne v. Dunne.⁵ As that rule provides, a party wishing to challenge the credibility of a witness must confront the witness with that contradictory evidence before leading it, thereby giving the witness a chance to respond.

51Bellissimo’s email holds no weight, and rental income shall not be imputed to the Masons.

Environmental Damage to the Property

52Diane testified that Wayne ran his towing business on the Property until he was too sick. The business was clearly being run with McCracken’s consent. In support, I reference the Statutory Declaration and Sworn Affidavit of Wayne Douglas Mason, confirming that WD Mason Towing and Auto Wrecking had been operating since 1980, continuously and without interruption. This document was witnessed by McCracken in 2012.

53At trial, McCracken confirmed that she was aware, when she bought the Property in 2010, that a wrecking yard was being operated on the Property. She conceded that the land on which a wrecking yard was being operated would not be pristine, and that it would be difficult to sell due to environmental concerns. She also agreed that the Property was sold on an “as is, where is” basis with no reduction for remediation, and that she had not spent any money cleaning up the Property in preparation for its sale. Despite these concessions, McCracken still sought $50,000 to remediate the Property.

54I find that the Masons are not liable to McCracken for any clean-up costs to the Property.

RESOLVING THE ISSUES

1. Are the Masons owed money for the unpaid purchase price of the Property?

55As noted, the only evidence produced in respect of payments made to the Masons was by way of McCracken’s trust ledger, confirming $410,000 had been paid. There was no evidence to support McCracken’s submission that Hameed had received a $250,000 credit against occupation rent, or that the remaining $90,000 was paid through means other than her trust account. Accordingly, I find the Masons are owed $340,000, representing the unpaid balance of the $750,000 purchase price.

2. Is McCracken liable to the Masons for the unpaid purchase price?

56McCracken acted for the Masons and Hameed when Hameed bought the Property in 2006. She was aware that Hameed paid $410,000 of the $750,000 purchase price, and that $340,000 was outstanding. She was aware that the Masons were entitled to live on the Property “for a certain period of time.”

57When McCracken purchased the Property from Hameed in 2010, she assumed all of his debts and liabilities. The Masons were still living there in 2010. The logical reason for this is because they had not received their $340,000.

58McCracken cannot be considered an arms-length third-party purchaser who acquired title without notice of the outstanding $340,000. In Chu v. Chen, 2004 BCCA 209, |238 D.L.R. (4th) 443, at para. 50, the court quoted from Mackreth v. Symmons (1808):

(A) person, having got the estate of another, shall not, as between them, keep it, and not pay the consideration; and there is no doubt, that a third person, having full knowledge, that the other got the estate without payment, cannot maintain, that though a Court of Equity will not permit him to keep it, he may give it to another person, without payment.

59I find that, having assumed Hameed’s debts and liabilities, McCracken is not entitled to keep her interest in the Property without paying the Masons the unpaid purchase price of $340,000. McCracken is liable to the Masons for this entire amount.

3. Are the Masons entitled to a vendor’s lien against the Property for the unpaid purchase price?

60A vendor’s lien is an equitable remedy securing all or any unpaid part of the purchase price: see Silaschi et al. v. 1054473 Ontario Ltd et al., 2000 CanLII 3021 (ON CA), 48 O.R. (3d) 313 (C.A.).

61The Court in 4345142 Ontario Inc. v. Access Self Storage Inc., 2008 CanLII 34362 (ON SC), set out the state of the law in vendor’s liens, quoting from the decision of the English Court of Appeal in Barclay’s Bank PLC v. Estates & Commercial Ltd. et al., [1997] 1 W.L.R. 415:

Even if the vendor executes an outright conveyance of the legal estate in favour of the purchaser and delivers the title deeds to him, he still retains an equitable lien on the property to secure the payment of any part of the purchase money which remains unpaid. The lien is not excluded by the fact that the conveyance contains an express receipt for the purchase money.

62The lien arises by operation of law and independently of the agreement between the parties. It does not depend in any way upon the parties’ subjective intentions. It is excluded where its retention would be inconsistent with the provisions of the contract for sale or with the true nature of the transaction as disclosed by the documents.

63The Masons submit they are unpaid sellers of real property and, as such, they are entitled to a vendor’s lien to secure the unpaid purchase price of $340,000.

64Both McCracken and Bluechip submit that the Mason’s possession of the Property for eleven years amounts to a waiver of the lien. Pursuant to 4345142 Ontario Inc., where waiver or abandonment of the lien is advanced “the onus lies on those denying the existence of the lien” (at para. 23).

65In other words, a waiver is held to an objective test, to be determined based on the parties’ agreement. Given the importance of a vendor’s lien, “there should be clear evidence or a manifest inference that the parties intended to exclude or waive the lien” (4345142 Ontario Inc. at para. 24).

66It cannot be inferred that Hameed and the Masons, or McCracken and the Masons, agreed that the lien would be vacated if the Masons continued to live on the Property, rent-free, beyond a certain date. No agreement or evidence was produced to support this understanding during Hameed’s ownership. And for the first five years she owned the Property, McCracken did not ask the Masons to leave, did not ask the Masons to pay rent, and did not tell the Masons they would be forfeiting the lien if they did not move out.

67On the evidence before me, I find that the Masons are entitled to a vendor’s lien. The lien was not vacated or waived by the Masons remaining on the Property for eleven years. I accept Diane’s evidence that they would have moved if they received their money.

4. Is the Masons’ claim barred by the doctrine of laches?

68The leading authority on the doctrine of laches is the Supreme Court of Canada’s decision in M.(K) v. M.(H), [1992] S.C.R. 6 in which LaForest J. described the doctrine as the following:

A good discussion of the rule and of laches in general is found in Meagher, Gummow and Lehane, supra, at pp.755-65, where the authors distill the doctrine in this manner, at p.755:

It is a defence which requires that the defendant can successfully resist an equitable (although not a legal) claim made against him if he can demonstrate that the plaintiff, by delaying the institution or prosecution of his case, has either (a) acquiesced in the defendant’s conduct or (b) caused the defendant to alter his position in reasonable reliance on the plaintiff’s acceptance of the status quo, or otherwise permitted a situation to arise which it would be unjust to disturb.

69I do not find that the Masons, by delaying the institution of this claim, have acquiesced to either Hameed’s or McCracken’s failure to pay the outstanding balance. Diane’s notes from 2008 plainly show that she and Wayne always expected to be paid the $340,000. While the notes do not specifically spell this out, Diane and Wayne persisted in their requests for the “papers” from Hameed and McCracken, which they wanted, nay needed, to reinforce their entitlement to the $340,000.

70Nor do I find that McCracken, Bluechip, or Zubrzycki altered their positions in reliance of the Masons’ acceptance of the status quo. McCracken allowed the Masons to remain on the Property until the breakdown in 2015. This did not prevent her, however, from listing the Property for sale in the hopes of finding a buyer. As for Bluechip, Mortgage 3 was advanced on the basis of equity in the Property, and not on anything the Masons may have done. The same can be said of Zubrzycki’s unsecured loans, which years later were converted to Mortgages 4 and 5.

71Accordingly, the doctrine of laches does not operate to bar the Masons’ claim.

5. Does the vendor’s lien take priority over any or all of Mortgages 1 to 5?

72A vendor’s lien will take priority over other security interests with notice. Accordingly, I must determine whether any of the mortgagees had notice of the vendor’s lien.

73Hameed entered into Mortgages 1 and 2, and there was no evidence tendered to establish that Hameed told either Bluechip or Zubrzycki about the vendor’s lien. Thus, the priority of Mortgages 1 and 2 are preserved.

74This is not the case for the remaining three mortgages. Recall that McCracken acted for both the borrower and lender in Mortgages 3, 4, and 5. A lawyer acts as agent for the clients she represents, and her knowledge is imputed to them. Because McCracken was fully aware, when acting on these mortgages, that the Masons had not been paid the outstanding balance of the purchase price, this knowledge flowed through to the mortgagors. Consequently, I find that both Bluechip and Zubrzycki had notice of the vendor’s lien, and that the vendor’s lien takes priority over Mortgages 3, 4, and 5.

75As Bluechip correctly points out, however, it is only the vendor’s lien for $340,000, and not the Mason’s other claims – punitive damages, for example – which takes priority.

6. Are the Masons liable to McCracken for occupation rent?

76Similar to a vendor’s lien, occupation rent is an equitable remedy. In Bergmann v. McMahon, 2010 ONSC 993, at para. 37, Justice Daley held:

The granting of occupation rent is an equitable remedy related to and arising in circumstances of unjust enrichment. The entitlement to occupation rent arises where those entitled to the property have been ousted.

77The Court of Appeal in Crate Marine Sales Limited (Re), 2016 ONCA 433, 132 O.R. (3d) 104, at para. 22, provides a succinct explanation of occupation rent:

[T]here is a long-standing principle that where a person occupies the property of another, that occupation gives rise to a rebuttable presumption, based on an implied contract, that the occupier will pay rent to the owner for the use of the property.

And at para. 23:

This presumption may be rebutted where there is evidence that the parties intended the occupier would use the land without an expectation of paying compensation to the owner.

78I find the issue of occupation rent the most difficult to reconcile with the facts as presented at trial. Was it reasonable for the Masons to expect to live on the Property, rent free, for eleven years? I believe it stretches the bounds of incredulity, but in the absence of evidence to the contrary, I can make no other finding. Certainly, Hameed did not anticipate the Masons should pay rent, as there was no agreement to this effect. And it is clear that McCracken did not expect the Masons to pay rent – during her first five years of ownership she did not make any such demands from them. In fact, McCracken only asked for rent after the Masons initiated the complaint to the Law Society.

79McCracken submits that allowing the Masons to stay on the Property rent-free for eleven years is akin to a vendor’s lien, and these two actions should cancel one another out. I disagree. The Masons’ expectations never wavered. They anticipated receiving the balance of the purchase price when Hameed sold the Property. In 2010 Hameed sold the Property to McCracken, but did not pay the Masons. McCracken received mortgage financing of over $400,000 during the first three years she owned the Property, and she too did not pay the Masons. Further, the Masons never agreed that remaining on the Property rent-free would, at some unknown point in the future, start encroaching on the $340,000 they were owed.

80The record is painfully silent, however, as to the Masons’ efforts to be paid. There was evidence as far back as 2008 that Diane and Wayne were trying to get their “papers.” I am mystified as to why they did not make the same enquiries into recouping the balance of the purchase price.

81Nevertheless, in all of the circumstances, I find that the Masons do not owe occupation rent.

7. If occupation rent is found to be owing, what is the quantum?

82Given my conclusion in respect of issue 6, there is no need to arrive at a quantum for occupation rent.

83If I am mistaken and occupation rent is found to be payable, I find as follows. McCracken suggested occupation rent should range from $3,000 to $5,000 per month. I was provided no documentation to support this range beyond the $3,500 McCracken said Lee Sheds paid per month. These ranges are not realistic, as I do not believe the Masons would ever contemplate paying anything approaching these amounts for rent. The Masons lived in an old farmhouse on the Property, and for an unconfirmed period of time between 2006 and 2015, they operated WD Mason Towing. I find that a reasonable amount to pay for occupation rent is $750 per month.

84If occupation rent is found to be payable, when the obligation to begin paying arose is problematic. Was it five years? Seven? There is no concrete evidence to rely on to arrive at a date. I find the obligation commenced on September 12, 2014, the date of the Letter, when the Masons knew matters had taken a worrisome turn.

8. Is McCracken liable to the Masons for punitive damages?

85Do McCracken’s actions meet the stringent test for punitive damages? In other words, are her actions sufficiently oppressive, malicious and high-handed that they offend the court’s sense of decency? See Hill v. Church of Scientology of Toronto, 1995 CanLII 59 (SCC), [1995] 2 S.C.R. 1130.

86The Masons submit that they do. In support, they rely on the British Columbia Court of Appeal’s decision in Chudy v. Merchant Law Group, 2008 BCCA 484, 300 DLR (4th) 56. In Chudy, the trial judge found that punitive damages were warranted given the actions and conduct of Chudy’s lawyers. I agree with the Court of Appeal that in those particular circumstances, punitive damages were warranted. This was both to send a message to lawyers looking to take advantage of the power imbalance in the solicitor/client relationship, and as a deterrent to lawyers contemplating such actions.

87To my mind McCracken’s conduct does not approach the egregious behaviour of the lawyers in Chudy. It is true that McCracken acted for both Hameed and the Masons in the 2006 transaction. However, given her evidence that Hammed and Wayne came to her with the terms already agreed to, her only role was to facilitate the transaction. She did not provide legal advice to Wayne during the 2006 transaction, nor do I find she acted as either Wayne or Diane’s lawyer in the ensuing eleven years.

88McCracken’s actions after 2010 are better described as untrustworthy rather than oppressive, malicious, or high-handed. I do not find they merit a punitive damages award.

DISBURSEMENT OF MONIES PAID INTO COURT

89I order that the $1,170,246.92 is to be paid out in the following manner:

1. To Zubrzycki on Mortgage 1 $200,000 plus interest, costs, and disbursements
2. To Bluechip on Mortgage 2 $165,000 plus interest, costs, and disbursements
3. To Wayne and Diane Mason $340,000 plus costs and disbursements
4. To Bluechip on Mortgage 3 $153,000 plus interest, costs, and disbursements
5. To Zubrzycki on Mortgage 4 $170,000 plus interest, costs, and disbursements
6. To Zubrzycki on Mortgage 5 $100,000 plus interest, costs, and disbursements

90I decline to award interest to the Masons. Much as there was no evidence to support McCracken’s claim for occupation rent, there is a similar lack of evidence to support the Masons’ claim for interest. I do not find it reasonable that the Masons expected to live rent free on the Property and earn interest on the outstanding balance of the purchase price at the same time.

COSTS

91Obviously, before the funds are dispersed, costs and disbursements are to be determined. I would ask that counsel contact the Barrie Trial Co-ordinator’s office to make arrangements for a two-hour costs hearing. If counsel intend to supplement oral submissions with written material, the plaintiffs are to serve their material no less than 20 days before the hearing, and the defendants no less than 10 days before the hearing. Material from all parties shall not exceed three pages exclusive of attachments (Bill of Costs, Costs Outline, and authorities, if any).

CASULLO J.

Released: February 21, 2019

February 21, 2019 – Corrections:

1. Para. 89, first line now reads: I order that the $1,170,246.92 is to be paid out in the following manner:

2. Para. 89, subparagraph 5. now reads:

3. To Zubrzycki on Mortgage 4 $170,000 plus interest, costs, and disbursements

Footnotes

1. 1In fairness, Wayne and Hameed were the main participants to the agreement, and neither testified.
2. 2While the definition of “papers” was never satisfactorily clarified, I take “papers” to mean the deed to the property, the Agreement of Purchase and Sale, and any surveys the Masons had in their possession.
3. 3There was evidence at trial about visits to the Property by McCracken and realtors that turned confrontational; hockey sticks being used to threaten, intimidation by and of persons visiting the Property, “For Sale” signs being erected and taken down, etc. However, I find that this information only served to cloud the narrative and was of little import to the issues to be determined.
4. 4This lack of clarity persisted at trial.
5. 5(1893), 1893 CanLII 65 (FOREP), 6 R. 67 (U.K.H.L.).