Court File and Parties

COURT FILE NO.: 14/46455 DATE: 20200219 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Janet Louise Hilson, Plaintiff (Defendant by Counterclaim) – and – Carole Evans, Defendant (Plaintiff by Counterclaim)

COUNSEL: Howard W Reininger, for the Plaintiff (Defendant by Counterclaim) Orie Niedzviecki, for the Defendant (Plaintiff by Counterclaim)

HEARD: November 27, 28 and 29, 2018

Reasons for Judgment

L. Sheard J.

[1] The defendant [1], Carole Evans, is the guarantor of a second mortgage (the “Evans Mortgage”) granted by Evans & Sons Investments Inc. (“E. & S.”) on 21 condominium units (the “Evans Units”) located at 35 Breckenridge Drive in Kitchener, Ontario in Waterloo Condominium Corporation No. 340 (“WCC”). The Evans Units were subject to a first mortgage in favour of The Equitable Trust Company (respectively, “E.T.” and the “E.T. Mortgage”).

[2] In July 2008, the plaintiff, Janet Louise Hilson, purchased an interest in the Evans Mortgage. Hilson seeks to recover the amount she paid to acquire that interest as well as other amounts Hilson asserts should be added to the principal due under the Evans Mortgage.

[3] On January 27, 2011, E.T. sold the Evans Units under power of sale. Evans asserts that Hilson recovered the amount she paid for her interest in the Evans Mortgage from surplus funds realized by E.T. on the sale. Evans also disputes that the principal due under the Evans Mortgage should be increased as claimed by Hilson.

Background

[4] On April 27, 2007, Hilson purchased an interest in a second mortgage registered against 20 units in WCC (the “Lakeshore Units”).

[5] On July 23, 2008, Hilson paid $170,000 to purchase an interest in the Evans Mortgage.

[6] With respect to these, and other investments unrelated to this action, Hilson relied upon the advice and recommendations of her investment and financial advisor, Howard Paul Ivany (“Ivany”). Reliance on Ivany may have resulted in Hilson’s loss of the bulk of her wealth, something over $6 million. This action is one of several lawsuits brought by Hilson against Ivany, her former lawyer, Terence S. Reiber (“Reiber”), and against other guarantors, to try to recover monies invested through, and on the advice of, Ivany.

[7] The Evans Mortgage matured on May 7, 2008 and was in default when Hilson purchased an interest in it on July 23, 2008. The E.T. Mortgage was also in default at that time. Hilson relied entirely on Ivany respecting this purchase. Ivany did not tell Hilson about the default.

Ivany Reiber Claim

[8] On August 8, 2011, Hilson commenced an action against both Ivany and Reiber (the “Ivany Reiber Claim”). Hilson claimed $6,286,799.12 from Ivany and $4,156,799.12 from Reiber for losses Hilson alleges she suffered on various investments she made on the advice of Ivany.

[9] The allegations made by Hilson in the Ivany Reiber Claim have some relevance to the issues here. They include that (i) Ivany made investments without her knowledge, using his signing authority on Hilson’s personal bank account and on the bank account of 1771085 Ontario Limited (“177”), a company owned and controlled by Hilson; (ii) Ivany misled Hilson about how her funds were to be used: for example, instead of paying for repairs and maintenance on the Evans Units and Lakeshore Units, the funds were used for other purposes [2]; and (iii) Ivany did not disclose that the Evans Mortgage and the E.T. Mortgage were in arrears at the time that Hilson bought an interest in the Evans Mortgage.

[10] In the Ivany Reiber Claim, Hilson asserted that Reiber’s legal advice fell below the requisite standard of care and/or Reiber acted for Hilson on investments in which Reiber had an undisclosed financial interest.

[11] Hilson settled her claim with Reiber for the gross amount of $1.3 million. One of the issues raised at trial is whether, and in what amount, credit should be given to Evans for monies recovered from Reiber relating to the Evans Mortgage. As described in more detail below, that issue was addressed by the Court of Appeal for Ontario in a separate action brought by Hilson against other defendants (the “Lightle Action”) [3].

Positions of the Parties

[12] Hilson claims payment from Evans, as guarantor of E. & S.’s obligations under the Evans Mortgage. Hilson alleges that $1,303,519.54 is now due and owing under the Evans Mortgage. Hilson seeks to recover that amount from Evans, together with interest, at 12% per annum, calculated from December 1, 2018.

[13] Hilson breaks out her claims under three general headings, and each will be addressed in turn:

i. The sum of $170,000 that Hilson paid to acquire her interest in the Evans Mortgage, plus simple interest on that amount from and after July 23, 2008; ii. The amounts paid to keep the E.T. Mortgage in good standing; and iii. The amounts paid to WCC for repairs and renovations to the Evans Units.

[14] Evans admits that she guaranteed the Evans Mortgage. However, she disputes that there is any money owing to Hilson under the Evans Mortgage. Evans asserts that

i. Hilson was fully repaid her $170,000 investment from surplus funds generated from E.T.’s power of sale of the Evans Units; ii. Hilson must give credit to Evans for monies Hilson recovered from Reiber relating to the Evans Mortgage; iii. Hilson is not entitled to increase the amount due under the Evans Mortgage for payments made by Hilson prior to July 23, 2008, the date on which Hilson purchased the Evans Mortgage; iv. Payments made by 177 may not be added to the amount due under the Evans Mortgage because 177, a stand-alone corporation, has no interest in the Evans Mortgage and is not a party to this action; and v. Hilson has failed to show that monies she alleges to have paid for repairs or renovations to the Evans Units, were, in fact, used for that purpose.

The Evidence at Trial

[15] This trial took place in November 2018. At trial, Hilson, asked that no decision be rendered until after the release of the decision by the Court of Appeal in the Lightle Action. The court released its decision on August 13, 2019 but later retracted it due to the court’s error. The court conducted a new hearing in October 2019 and released its second decision on December 18, 2019, which explains why this decision was not released within the usual timelines.

[16] The way in which this case was presented at trial was somewhat unconventional. Pursuant to the provisions of r. 53.07(4) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, Hilson called Evans as her first witness. As an adverse party, Evan’s evidence was given by way of cross-examination. At the completion of her cross-examination, Evans chose not to then be examined by her own lawyer although she was permitted to do so. At the conclusion of Hilson’s case, Evans opted to lead no evidence.

[17] On Evan’s cross-examination, her Affidavit sworn May 2, 2016, counsel for Hilson asked that this Affidavit be marked as an exhibit. This affidavit had been relied upon by Evans on a motion before Arrell J. On her cross-examination, Evans confirmed that her affidavit was true at the time it was sworn and remained true. On that basis the Affidavit was marked as a trial exhibit. As mentioned below, Hilson sought to rely on Evans’ Affidavit as part of her case.

[18] Hilson was the second and final witness to give evidence at the trial. As part of her case, Hilson sought to rely upon her Request to Admit, to which Evans had failed to respond. At trial, Evans moved for leave to file a Response To Request to Admit. Pursuant to the Order made on that motion, Hilson was permitted to rely upon her Request to Admit, except for paragraphs 9 and 10, which were deleted.

[19] At the conclusion of the trial, the parties were asked for written submissions, which were received and considered. Following the release of the Court of Appeal’s decision in the Lightle Action on December 18, 2019, the parties filed updated submissions.

Consideration of the Issues

i. Hilson’s payment to purchase an interest in the Evans Mortgage

[20] There is no dispute that on July 23, 2008, Hilson paid $170,000 for an interest the Evans Mortgage. Although the Evans Mortgage contemplates the payment of compound interest at 12% per annum, Hilson limits her interest claim to simple interest at the rate of 12% per annum.

[21] As noted above, Evans asserts that Hilson recovered her initial investment of $170,000 from the funds generated from the power of sale of the Evans Units. Those funds were received by Hilson in 2011 and 2012.

ii. Amounts paid to keep the E.T. Mortgage in good standing

[22] Hilson claims to have advanced a total of $161,946.30 toward the E.T. Mortgage. This amount includes $64,617.63 paid toward the E.T. Mortgage prior to Hilson’s purchase on July 23, 2008 of her interest in the Evans Mortgage and the $97,328.67 paid by 177 after July 23, 2008 to keep the E.T. Mortgage in good standing.

[23] Hilson testified that on June 6, 2008 she provided Reiber with $56,724.63 and on July 8, 2008 she gave him a second payment of $7,875 for a total of $64,617.63. Reiber was instructed to pay those funds to E.T. to keep the E.T. Mortgage in good standing. I accept this evidence.

[24] Whether E.T. received the funds from Reiber and applied them to the E.T. Mortgage has not been made out in the evidence. Neither Reiber nor a representative of E.T. testified at trial and no E.T. Mortgage statements were produced, which might have shown what monies were received from Hilson and credited to the E.T. Mortgage.

[25] Evans argues that the payments made by Hilson prior to her purchase of the Evans Mortgage are, at best, an unsecured claim against E. & S., which became a bankrupt on April 13, 2010. In the joint bankruptcy proceedings of E. & S. and the owner of the Lakeshore Units, Hilson confirmed that $455,166 [4] of the debt E. & S. owed to her was unsecured. Hilson exercised her rights as an unsecured creditor in voting to defeat the joint proposal. Evans asks the court to consider this evidence and to infer that Hilson recognized that the claims she now advances under Evans’ guarantee were not secured by the Evans Mortgage.

[26] In written closing submissions, Hilson asserts for the first time that she ought to be allowed to recover funds paid prior to July 23, 2008 based on “equitable subrogation”.

[27] In Evan’s written closing submissions, she disputes Hilson’s entitlement to assert a claim for equitable subrogation after the completion of the trial, when Hilson’s pleading does not include a claim for that relief and Hilson did not raise such a claim during the trial.

[28] I find that Hilson’s failure to seek this relief in her statement of claim, or raise it during the trial, is a sufficient basis upon which to deny Hilson’s claim now for this equitable relief. Notwithstanding that finding, I have considered the parties’ submissions on this issue.

Equitable Subrogation

[29] Hilson relies upon J. A. MacFarlane Engineering Co. v. Chetti, [2009] O.J. No. 342 (S.C.) and Coupland Acceptance Ltd. v. Walsh et al., [1954] S.C.R. 90.

[30] In MacFarlane, the plaintiff believed that it held a valid mortgage against a home owned by Gaetana Chetti. The plaintiff had negotiated the mortgage with Chetti’s husband and had advanced funds. Following a default on this mortgage, Chetti denied any knowledge of the mortgage.

[31] The monies advanced by the plaintiff had been used to pay off an existing mortgage on Chetti’s home as well as other debts, all of which constituted a charge against Chetti’s home. There was no dispute that Chetti had received the benefit of the amounts advanced by the plaintiff lender and the court accepted the plaintiff’s submissions that Chetti would be unfairly enriched if she were not required to repay the funds advanced.

[32] The court considered the doctrine of equitable subrogation by which the plaintiff sought to subrogate its rights to the rights of the original mortgagee. The court noted that the fundamental principle underlying the doctrine is fairness and concluded that no injustice would be done by ordering Chetti, the property owner, to repay the value of the benefit received, even though the plaintiff’s mortgage might be found to be invalid.

[33] Likewise, in Coupland, monies advanced by the plaintiff were used to pay off an existing mortgage and the lenders were permitted to stand in the place of the original mortgagees.

[34] The facts in this case are distinguishable from those in MacFarlane and Coupland. Here, Hilson purchased an interest in the Evans Mortgage after she had made the payments that she now seeks to add to the Evans Mortgage. There was no evidence that Hilson sought to add those payments to the Evans Mortgage either prior to, or at the time of, her purchase. The evidence at trial was that when arriving at the purchase price for her interest in the Evans Mortgage, Hilson accepted that the principal owing was $595,000 and that the $170,000 represented her respective share of the $595,000.

[35] The remedy sought is discretionary; in exercising its discretion, the court ought to consider the benefit or injustice to the parties. The evidence is far from clear that the $64,617.63 paid by Hilson was of any benefit to Evans. Evans guaranteed the Evans Mortgage believing her guarantee was limited to the amounts owing under the Evans Mortgage as well as any additional amounts that were properly added to the Evans Mortgage pursuant to the applicable Standard Charge Terms (the “SCT”). Evans denied knowing that Hilson had made payments toward the E.T. Mortgage. Her evidence was that the rents from the Evans Units well exceeded the amount required to carry the E.T. Mortgage.

[36] I note that at the time Hilson paid the $64,617.63 toward the E.T. Mortgage, she already owned an interest in the second mortgage registered on the Lakeshore Units. Therefore, it would be fair to conclude that the payments made by Hilson prior to July 23, 2008, were made to protect Hilson’s position as the holder of a second mortgage on the Lakeshore Units. On this basis, I can find no unfairness to Hilson in denying the relief sought.

[37] The defendant relies on L-Jalco Holdings Inc. v. MacPherson, 2018 ONCA 488, [2018] O.J. No. 2786 and on Grahoui v. Yassine, 2017 ONSC 5108, [2017] O.J. No. 4483.

[38] In L-Jalco, the plaintiff’s funds had been used to pay off an existing first mortgage, which had the effect of putting the second mortgagee into first position. There was default and the property was sold under power of sale. The plaintiff asserted a claim for equitable subrogation to place their interests ahead of the second mortgagee. The lower court found that the plaintiff had paid off the first mortgage knowing that the second mortgagee would not postpone her interest and refused to grant the remedy of equitable subrogation.

[39] The Court of Appeal upheld the lower court’s decision. It applied the principles recognized in Mutual Trust Co. v. Creditview Estate Homes Limited (1997), 149 D.L.R. (4th) 385 (Ont. C.A.), at p. 390 that “the fundamental principle underlying the doctrine of subrogation [is] one of fairness in the light of all of the circumstances”.

[40] In Grahoui, beginning at paragraph 208, Kane J. surveys the law on equitable subrogation and lists the principles he extracted from the cases that should be considered when asked to grant an equitable charge. At paragraph 213 (d) of the decision, Kane J. adopts the reasoning in Mutual Trust Co. and states that “an equitable mortgage creates a charge in equity which attaches to the land but does not transfer the legal estate in the property to the mortgagee”. The overarching principle found in the jurisprudence is that the relief should be granted to prevent unfairness or injustice to one party and an unanticipated windfall or unjust enrichment to the other party.

[41] In this case, Hilson not only asks the court to recognize an equitable mortgage but seeks to attach to that equitable mortgage Evan’s contractual obligations given as guarantor of the Evans Mortgage. None of the cases cited by either party speaks to the obligation of a guarantor and all appear to contemplate or require some involvement of the mortgagor. There is no such evidence here.

[42] For all the foregoing reasons, Hilson’s claim for an equitable subrogation is dismissed. As a result, I find that Hilson is not entitled to add the monies she paid prior to her purchase of an interest in the Evans Mortgage to the principal owing under the Evans Mortgage.

Monies paid by 177

[43] I turn now to Hilson’s claim that monies alleged to have been paid by 177 toward the E.T. Mortgage should be added to the principal due under the Evans Mortgage.

[44] In part, Hilson relies upon the SCT in support of her claim that amounts paid after July 23, 2008 to keep the E. T. Mortgage in good standing should be added to the Evans Mortgage. Paragraph 8 of the SCT provides that amounts paid by the “Chargee” and set out in that paragraph “shall be added to the principal amount secured by the Charge”.

[45] Hilson asserts that she and 177 are, in essence, one and the same, and that whether funds came from Hilson personally or from 177, any advances should be added to the principal amount owing under the Evans Mortgage. Hilson acknowledged that, aside from the $64,617.63 she paid prior to July 23, 2008, the balance of the $161,946.30 was paid by 177. Hilson takes the position that whether monies came from her or 177 is an accounting issue which may be of concern to the Canada Revenue Agency but not to this court. I disagree.

[46] Notwithstanding Hilson’s evidence that all of the money in 177’s bank account came from her, in law, a corporation is a separate legal entity. 177 is not a “Chargee” as defined under the SCT. That fact cannot be disregarded in the circumstances of this case. Hilson testified that, at the time these amounts were paid, she did not understand the implications of making advances through 177. She testified that she used 177’s bank account for “convenience”. Assuming that is so, the evidence is that Hilson has, and is pursuing, her remedies against those on whom she relied for that incorrect understanding. Those claims are specifically raised in the Ivany Reiber Claim.

[47] Hilson’s claim for recovery of amounts paid by 177 towards the E.T. Mortgage also fails for other reasons. One major failing was that Hilson did not call any evidence to show that payments by 177 were, in fact, applied toward the E.T. Mortgage. Perhaps for understandable reasons, Hilson did not call Ivany or Reiber to testify as to how the funds were applied. However, Hilson also did not call a representative of E.T., nor produce any documents that might have evidenced that payments made by 177 were credited toward the E.T. Mortgage.

[48] Evans did acknowledge that the E.T. Mortgage was kept in good standing. However, that admission falls short of an acknowledgement that the E.T. Mortgage was kept in good standing in whole or in part as a result of payments made by Hilson. Evans testified that she believed the monthly income from the Evans Units was close to double the amount required to keep E. & S.’s share of the E.T. Mortgage current. Evans testified that she expected that the rental income would first be used to keep the E.T. Mortgage and Evans Mortgage current, and then, only if there was surplus income, would monies be used for other purposes.

[49] For the reasons given above, I find that Hilson is not entitled to add amounts paid by 177 to the principal due and owing under the Evans Mortgage.

iii. Amounts paid to WCC for repairs and renovations to the Evans Units

[50] Hilson seeks to add a total of $294,680.20 to the principal owing under the Evans Mortgage, plus simple interest on that amount, calculated at the rate of 12% per annum from June 25, 2009.

[51] Hilson calculates the above amount on the following basis:

(a) Payments made to WCC between June 2008 and July 2008 $292,500.00 (b) Payments made to WCC on August 27, 2008 $370,000.00 (c) Payment made by 177 to WCC in 2009 $286,860.41 (d) Less: amounts repaid by WCC ($360,000.00) Total paid: $589,360.41 Less: 50% of amount paid, to be attributed to Lakeshore Units ($294,680.21) Net amount to be added to the Evans Mortgage: $294,680.20

[52] For the reasons given above, I do not allow Hilson’s claim for any amounts paid prior to her purchase of an interest in the Evans Mortgage nor any payments made by 177. That leaves for consideration the payments made by Hilson personally to WCC and/or to Canlight Hall, WCC’s property manager, on August 27, 2008.

[53] Tab 7 of Hilson’s Request to Admit [5] contains Hilson’s schedule of payments related to the Evans Mortgage/Units. She records two payments made on August 27, 2008: a payment of $150,000 to WCC and a payment of $220,000 to Canlight Hall.

[54] Attached to the Evans Affidavit sworn May 2, 2016 [6], is the Affidavit of Richard G. Hall, an Executive Vice President of Canlight Hall, without exhibits. As stated above, at trial, Evans confirmed the truth of her Affidavit. At paragraph 25 of the May 2, 2016 Affidavit, Evans stated that she relied on the Hall Affidavit to the extent it did not contradict her own position. Hilson seeks to rely on portions of the Hall affidavit.

[55] At paragraph 25 of his Affidavit, Hall states that Hilson was repaid, with interest, the $150,000 she lent to WCC. Hall’s Affidavit is consistent with Hilson’s evidence that she received $360,000 plus interest from WCC, which I find included the $150,000 Hilson lent to WCC. Accordingly, Hilson cannot add that amount to the Evans Mortgage.

[56] Hall also speaks of the $220,000 paid by Hilson to Canlight Hall. Hall’s evidence was that this advance from Hilson went toward a “rental pool” of 41 properties: the 20 Lakeshore Units and the 21 Evans Units. In her calculation of her claim against Evans, Hilson acknowledges this “pooling” by allocating only 50% of the $220,000 to the Evans Units.

[57] Evans testified that she never agreed to have the Evans Units treated as a rental pool with the Lakeshore Units. Evans stated that some of the Evans Units were occupied by tenants and could not be renovated. That evidence was unchallenged by Hilson, who had no firsthand knowledge. There was no evidence at trial as to the respective rental income earned by the Lakeshore Units and the Evans Units or how that “pooled” rental income was spent.

[58] Hilson asserts that pursuant to paragraph 22 of the SCT, she is entitled to add amounts paid to WCC and/or to Canlight Management if the payment was made pursuant to a “Special Assessment” and/or for repairs and renovations to the Evans Units. A request for payment of a Special Assessment was made by Canlight by letter dated September 30, 2008. However, as all the monies advanced by Hilson, personally, pre-dated that letter, I find that none of her payments were made pursuant to a Special Assessment.

[59] Hilson’s evidence as to what amounts she advanced to renovate or repair the Evans Units falls short of the onus she must meet as plaintiff. Hilson acknowledged that she has no firsthand knowledge of how the funds she advanced were used, or whether all or any of those funds were actually used for repairs and renovations to the Evans Units. In the absence of any firsthand knowledge of how funds were spent, Hilson simply used a 50/50 allocation as between the Lakeshore Units and the Evans Units of the funds she advanced. That rough estimation was based on the approximately equal number of Lakeshore Units (20) and Evans Units (21).

[60] Hilson put forth no firsthand evidence or other evidence from which the court could determine what amount, if any, of Hilson’s August 27, 2008 advance to Canlight was, in fact, used for renovations, repairs or maintenance of the Evans Units.

[61] The onus is on a plaintiff to prove her claim. In the circumstances of this case, it was incumbent upon Hilson to provide cogent and detailed evidence to establish that the advances she made were, in fact, used to improve the Evans Units. Hilson has failed to provide that evidence. In fact, in the Ivany Reiber Claim at paragraph 45, Hilson herself alleges that monies she advanced were not used for repairs and renovations.

[62] For the foregoing reasons, Hilson’s claim under this heading fails.

Credits to be Deducted

[63] I return now to a consideration of what amounts may be owing to Hilson under the first heading: the $170,000 Hilson paid to purchase an interest in the Evans Mortgage together with simple interest on that amount at the rate of 12% per annum, from and after July 23, 2008.

[64] Evans asserts that Hilson’s claim under this heading must be reduced by amounts received by Hilson from the sale of the Evans Units as well as a portion of the amounts recovered by Hilson from Reiber.

Amounts received from the sale of the Evans Units

[65] In her statement of claim, Hilson acknowledges that on January 3, 2011 she received the sum of $188,087.27 arising from the sale of the Evans Units under power of sale. Hilson claims that this payment should be credited toward the repairs and renovations she funded. Hilson asserts that “as a creditor” she is entitled to apply the $188,087.27 as she sees fit and is not required to allocate the surplus funds to the principal owing under the Evans Mortgage.

[66] Hilson acknowledges that she received a second payment of $35,569.30 from the sale of the Evans Units on March 23, 2012 and that this amount should also be credited toward the amounts owing under the Evans Mortgage.

[67] As determined above, I have found that Hilson is a “creditor” of Evans only with respect to the principal and interest owing under the Evans Mortgage and not with respect to the balance of Hilson’s claims. Accordingly, the amounts Hilson received from the sale of the Evans Units must be applied against Evan’s obligations, as described above.

[68] The final issue to address is whether Hilson is required to give any credit to Evans for monies Hilson recovered from Reiber. In the Lightle Action [7], the Court of Appeal held that the “guaranteed debt should not be reduced on account of the settlement of the respondent’s [Hilson] claim against her solicitor [Reiber].”

[69] Evans submits that the facts here are different.

[70] In this action, Hilson has acknowledged that she reached a settlement with Reiber in the Ivany Reiber Claim. Hilson recovered the gross amount of $1.3 million from Reiber. When she was examined for discovery, Hilson undertook to advise Evans of her position as to what portion of her settlement with Reiber should be credited toward Hilson’s claim against Evans.

[71] Evans asserts that when Hilson answered her undertaking in 2016 she admitted that 13% of the amount Hilson recovered from Reiber, or $169,000, should be credited toward her claim against Evans. On April 12, 2017, counsel for Hilson wrote to Evans counsel to correct Hilson’s earlier answer. This letter reads, in part:

This letter shall constitute my answer and correction as required by Rule 31.09 of the Rules of Civil Procedure and this letter will be relied upon pursuant to that Rule at the trial of this matter.

As of this date the plaintiff has incurred legal fees and disbursements of $720,168.50 in Canadian funds plus $125,656.84 in US funds with respect to pursuing borrowers to whom the plaintiff loaned money with respect to investments solicited by Howard Paul Ivany in actions against Ivany or Reiber here or in the United States of America.

Therefore, the plaintiff’s net recovery with respect to the settlement of Reiber was approximately $542,000.00.

This represents a recovery of 9% of her claim and, therefore, the claim against the defendant Evans in this matter should be reduced by 9% of the amount owing and outstanding. [Emphasis added.]

[72] At trial, Hilson led evidence that she had incurred additional legal fees and disbursements to pursue her claims, which further reduced her recovery from Reiber such that, if any credit were to be given to Evans for funds Hilson recovered from Reiber, the percentage should be reduced from 9% set out in the April 2017 letter to 3%.

[73] In her written submissions, Hilson submits that the answer given to her undertaking was “conditional” upon a court finding that the credit was permitted at law.

[74] Evans disputes Hilson’s right to “correct” her answer to her undertaking without an explanation for the change or correction and asks this court to consider both answers to the undertaking. Evans takes further issue with the position taken by Hilson in her written submissions, made after the Court of Appeal decision in the Lightle Action, that Hilson’s answer was “conditional”.

[75] In the Lightle Action, the Court of Appeal overturned the trial judge’s finding that the defendants should be credited with 50% of the amount Hilson recovered from Reiber. The court found that the 50% reduction was “entirely speculative”. [8]

[76] The court found that the appellants (guarantors) failed to meet their “burden to demonstrate that their liability under the guarantees has been reduced by satisfaction of the guaranteed debt.” [9]

[77] The court accepted Hilson’s submission that her claim on the guaranteed debt was “neither barred nor diminished by reason” of her negligence claim against Reiber and that “the guaranteed debt should not be reduced on account of the settlement of” Hilson’s claim against Reiber. [10]

[78] The court’s reasons are founded on the rule against double recovery. The court concluded that there was no evidentiary basis on which to conclude that Hilson had recovered anything on the guaranteed debt. [11]

[79] I reach the same conclusion here. While I have found that Hilson has made a significant recovery on the debt guaranteed by Evans, I have also dismissed most of Hilson’s claims on the basis that the amounts she seeks to recover were not secured under the Evans Mortgage or recoverable from Evans as guarantor. As noted earlier in these reasons, one of Hilson’s claims in the Ivany Reiber Claim is that, by reason of the acts or omissions of Ivany and Reiber, the funds advanced by Hilson were unsecured.

[80] Given that the majority of Hilson’s claims in this action relate to advances that I found to be unsecured, I cannot conclude that there is an evidentiary basis to conclude that the monies Hilson recovered from Reiber related to the debt guaranteed by Evans.

[81] Evans submits that she was entitled to rely on Hilson’s undertaking concerning the credit to be given to Evans for monies recovered from Reiber. In the Lightly Action, Hilson also took the position that some percentage of the Reiber funds should be credited against the guaranteed debt. Despite that, the Court of Appeal allowed Hilson to argue that no credit should be given.

[82] I conclude that it would be wrong in law to hold Hilson to the position she took in an undertaking and even at trial, in the face of the Court of Appeal’s decision in the Lightle Action.

[83] I am bound by the decision of the Court of Appeal and conclude that Evans is not entitled to a credit for any amounts recovered by Hilson in her claim against Reiber.

Delay in Release of this Decision

[84] Hilson asked that this decision not be released until after the Court of Appeal released its decision in the Lightle Action. Neither the parties nor I contemplated that the (final) appellate decision in the Lightle Action would not be released for more than one year following the trial of this action.

[85] The usual timelines require a trial judge to release a decision within six months of the delivery of final submissions. In this case, that deadline was June 2019. Given the reason for the delay in the release of this decision, I conclude that it would be appropriate to invite submissions on whether that delay should bear upon the interest accruing on Hilson’s claim.

Further Submissions: Amount Owing to December 1, 2018, Interest Rate, and Costs

[86] I have not calculated the amounts that may be owing by Evans as guarantor of the Evans Mortgage to December 1, 2018 and leave it to the parties themselves to undertake those calculations based on my findings above.

[87] The parties are also encouraged to canvas whether an agreement can be reached on whether there needs to be any adjustment to the interest accruing on Hilson’s claim.

[88] Similarly, the parties are encouraged to reach an agreement on costs.

[89] If the parties are not able to agree on any or all of the three issues listed above, then they may make written submissions to me.

[90] Written submissions are to be as follows:

(i) On the issue of the calculation of the amount owing as of December 1, 2018, written submissions shall not exceed one page; (ii) On the issue of whether there should be any adjustment to interest that would otherwise accrue from and after December 1, 2018, written submissions shall not exceed two pages; (iii) On the issue of costs, the parties may file written submissions of no more than three pages, double-spaced, in addition to any pertinent offers and draft bills of costs; (iv) Written submissions are to be delivered to me at my chambers at the Sopinka Court House on the following timetable: a. Evan’s submissions shall be delivered within 21 days of the date of the release of these Reasons; b. Hilson’s submissions shall be delivered within 14 days of the delivery of Evan’s submissions. (v) If no submissions are received within 35 days of the date of the release of these Reasons, the parties will be deemed to have settled all issues as between themselves and no further decision will be released by me.

Sheard J. Released: February 19, 2020

Footnotes:

[1] At the opening of trial, Evans advised that she was not pursuing her counterclaim. [2] Ivany Reiber Claim at paras. 40, 45(b)-(d). [3] Hilson v. 1336365 Alberta Ltd., 2019 ONCA 1000, [2019] O.J. No. 6423, at para. 45. [4] Minutes of the Joint First Meeting of Creditors, Trial Exhibit #2, Tab 4. [5] Trial Exhibit #1 [6] Trial Exhibit #4 [7] Hilson v. 1336365 Alberta Ltd at para. 45. [8] At para. 41. [9] At para. 42. [10] At para. 45. [11] At para. 46.