COURT FILE NO.: CV-20-641519-0000

DATE: 20200831

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Myles Mendes

AND:

Myra Mendes

BEFORE: Mr. Justice Chalmers

COUNSEL: P. Carey, for the Plaintiff

P. Baxi, for the Respondent

HEARD: July 29, 2020

ENDORSEMENT

Overview

[1] Myles Mendes (“Myles”) was the registered owner of a property known municipally as 2809 Victoria Park Avenue Road, Toronto. He sold the property on February 26, 2020. The original closing date was March 27, 2020.

[2] On March 5, 2020, Myles’ sister Myra Mendes (“Myra”) registered a Caution on the title of the property pursuant to section 71 of the Land Titles Act, (“Act”). The Caution states that, “Myra Mendes has an unregistered estate, right, interest or equity in or within lands owned by Myles Mendes.” The Caution also states that the consideration for the Caution was $415,458.53. As a result of the registration of the Caution, the sale of the property did not close on March 27, 2020.

[3] Myles first became aware of the Caution on March 11, 2020. The registration of the Caution was initially improper because it had not been signed by a lawyer. On March 27, 2020, the Caution, signed by a lawyer was registered. Myles brought this Application to have the Caution removed. The hearing of the Application was scheduled for May 26, 2020. On May 22, 2020 Myra discharged the Caution. The sale of the property closed on May 26, 2020.

[4] Myles is claiming damages and costs related to the delay in closing the sale of the property due to the presence of the Caution on title. For the reasons set out below, I find that Myles is entitled to the expenses incurred over the approximately two-month period from the date of the original closing to the date the sale closed on May 26, 2020. I assess damages in the amount of $21,251.01, and award costs fixed in the amount of $30,000 inclusive of counsel fee, disbursements and H.S.T.

Issues

[5] The following issues will be addressed in this endorsement:

(a) Did Myra have a right to register the Caution on title?

(b) What damages did Myles sustain as a result of the registration of the Caution?

(c) The amount to be awarded in costs.

Analysis

Did Myra have a right to register the Caution on title?

[6] Section 71 of the Act, reads as follows:

s. 71(1) Any person entitled to or interested in any unregistered estates, rights, interests or equities in registered land may protect the same from being impaired by any act of the registered owner by entering on the register such notices, cautions, inhibitions or other restrictions as are authorized by this Act or by the Director of Titles.

[7] This section allows for a registration on title by any person with an unregistered interest in land. It does not require any prior judicial determination of entitlement such as a Certificate of Pending Litigation or Mareva injunction.

[8] To safe-guard against misuse of the right to register a Caution on title, section 132 of the Act provides as follows:

s. 132 A person who registers a caution without reasonable cause is liable to make to any person who may sustain damages by its registration such compensation as is just, and the compensation shall be deemed to be a debt due from the person who has registered the caution to the person who has sustained damage.

[9] Myles argues that Myra did not have reasonable cause to register the Caution on title.

[10] Myra took the position that her claim was based on mortgages taken by Myra on the property known municipally as 685 Seneca Hill, Toronto. Myra had commenced a separate action against Myles, in which she claims a debt owing to her by Myles based on transactions involving the Seneca Hill property. The amount claimed in that action is $415,458.52, which is the same as the consideration set out in the Caution.

[11] Myra stated that she believed she had an unregistered interest in the Victoria Park property because she had loaned money to Myles which was used to acquire and carry the Victoria Park property. She swore an affidavit in this Application in which she deposed that she loaned to Myles the amount of $2,925.00. This amount is significantly less than the consideration set out in the Caution in the amount of $415,458.52. Myra did not provide an explanation for why the amount of $2,925.00 was not the consideration set out in the Caution.

[12] In support of her position that she loaned the amount of $2,925.00, Myra submitted a bank draft. Myles disputes that this is evidence of a loan from Myra. It is his position that he obtained the bank draft as a result of the refinancing of the Seneca Hill property.

[13] According to Myra, Myles told her that he would pay back the loan in the amount of $2,925.00 when the Victoria Park property was refinanced or sold. There is no written agreement which provides that the loan was to be secured by the property or that it would be repaid when the property was sold. All agreements relating to an interest in land must be in writing: Canadian Western Trust Co. v. 1324789 Ontario Inc., 2019 ONSC 4789, at para. 26.

[14] Myles did not execute a document which provides that the loan of $2,295.00 was a charge on the Victoria Park property. Only a debt created through a transfer, charge or other instrument executed by the mortgagor may be registered under the Act: 1842752 Ontario Inc. v. Fortress Wismer 3-2011 Ltd., 2020 ONCA 250, at para. 39.

[15] I conclude that Myra did not have reasonable cause to register the Caution on title. Even if there was a loan in the amount of $2,925.00, this is not an interest in land for the purposes of registering a Caution pursuant to the Act. I find that Myles is entitled to compensation from Myra pursuant to s. 132 of the Act.

What damages did Myles sustain as a result of the registration of the Caution?

[16] Myles claims the additional interest and expenses incurred between the date of the original closing on March 26, 2020 and the actual closing date of May 27, 2020.

[17] Myra argues that she is not liable for the interest and expenses which were incurred before she was aware the property had been sold. She states that she did not learn of the sale until May 7, 2020. She also argues that Myles did not move promptly in taking steps to remove the Caution from title.

[18] In his affidavit sworn on July 20, 2020, Myles deposes that he became aware that the Caution was registered on title on March 11, 2020. The Caution was originally defective because it was not signed by a lawyer. That defect was corrected, and the new Caution was registered on March 27, 2020. Myles did not immediately bring an Application to remove the Caution. He initially tried to resolve the issue without retaining counsel. Between April 21 and April 30, 2020, Myles attempted to contact Myra to discuss the Caution. He left telephone messages which were not returned. He sent e-mails which did not bounce back. He sent text messages. On April 21, 2020, he taped one of the e-mails to her front door. He received no response to his attempts to contact her. Myra, in her affidavit, states that she did not receive any e-mails, telephone calls or text message from Myles.

[19] I find that Myles made reasonable efforts to contact Myra to discuss the Caution. Myra either received the messages and e-mails from Myles asking that she remove the Caution and failed to respond, or she intentionally avoided his attempts to contact her.

[20] On May 13, 2020, Myles’ counsel wrote to Myra’s counsel advising of the sale of the property and asking that the Caution be removed from title. On May 14, 2020, Myra’s counsel advised that her claim was based on mortgages taken out on the Seneca Hill property and that the funds from the Seneca Hill mortgage were used to acquire and carry the Victoria Park property. Myra refused to vacate the Caution unless the net proceeds were held in trust. Myles did not agree to hold the proceeds of the sale in trust.

[21] The Application to vacate the Caution was scheduled for May 25, 2020. On May 21, 2020, Myra advised that she will not withdraw the Caution unless she is released from any claim for damages or costs related to its registration. Myles did not agree to this condition. On May 22, 2020, (the last business day before the hearing of the Application) Myra withdrew the Caution.

[22] I find that Myles moved promptly to respond to the Caution. Once Myles became aware of the Caution, he attempted to resolve the matter directly with Myra. When she did not respond to his efforts, he brought this Application. The first hearing date of the Application was just over two months after he first learned of the Caution. Once the Caution was removed, Myles was able to complete the sale of the property the next business day.

[23] I conclude that Myra is responsible for the interest and expenses from the original date of the closing on March 27, 2020 to the actual closing date on May 26, 2020.

First Mortgage

[24] The First Mortgagee prepared a discharge statement as of March 27, 2020. The cost to discharge the mortgage at that time was $392,147.03. The First Mortgagee prepared a discharge statement as of the actual closing date on May 26, 2020. At that time the cost to discharge the mortgage was $395,010.89. The difference is $2,863.86.

CIBC Writ

[25] The CIBC registered a Writ on the property. The CIBC prepared a discharge statement as of March 27, 2020. The cost to discharge the Writ at that time was $69,280.64, which included legal fees in the amount of $2,884.25. The CIBC also prepared a discharge statement for the actual closing date of May 26, 2020. At the time, the cost to discharge the Writ was $71,465.12. The creditor did not claim any additional legal fees. The difference is $2,184.48.

Second Mortgage

[26] The Second Mortgagee expected to have its mortgage discharged at the time of the original closing date on March 27, 2020. It prepared a discharge statement which provided that the amount to be paid on closing to discharge the mortgage was $402,050. As a result of the postponement of the closing, the Second Mortgagee instituted Power of Sale proceedings on May 7, 2020. The Power of Sale documentation provides that the amount to be paid on May 7, 2020 was $412,654.32. The per diem interest amount was $135.67. As of the date of the actual closing on May 26, 2020, the amount paid to discharge the second mortgage was $416,292.53, which included $2,713.40 for the interest from May 7, 2020 to May 26, 2020 and the discharge fee of $924.81. The difference between the amount owing on March 27, 2020 and the amount on May 26, 2020 is $14,242.53.

Taxes and Insurance

[27] Because the sale of the property did not close on March 27, 2020, Myles was required to pay the property taxes and insurance for April and May 2020. The only evidence as to the amount of the taxes and insurance premiums is the affidavit of Myles sworn July 20, 2020. He did not produce the supporting documentation. Although the documentation was not produced, there is no dispute that additional taxes and insurance were incurred due to the delay in the closing. Myles was not cross-examined on his affidavit. I am satisfied, based on Myles affidavit evidence, that he paid additional property tax in the amount of $1,656.98 and insurance premiums of $303.16.

[28] Myra argues that any damages to which Myles may be entitled are set off against the additional rent received from March 27, 2020 to May 26, 2020. The sale of the Victoria Park property was to close on March 27, 2020. Myles was required to provide vacant possession on closing. The tenancy was terminated in anticipation of closing and as a result no rent was received from March 27, 2020 to May 26, 2020.

[29] I find that as a result of the Caution filed on the property by Myra, the closing of the sale of the property was moved from March 27, 2020 to May 26, 2020. The additional interest charges, taxes and insurance incurred over this 59-day period totaled $21,251.01.

The amount to be awarded in costs

[30] Myles was successful on the Application and is entitled to his costs. Myles delivered a Bill of Costs which provides that his costs on a substantial indemnity basis are $45,489.76, and in the alternative, his costs on a partial indemnity basis are $31,587.34. Myra did not submit a Bill of Costs.

Offers to Settle

[31] Myles attempted to settle the Application before the hearing date. On May 22, 2020, Myles offered to settle on the basis that Myra pay $20,998 in damages, plus partial indemnity costs, discounted by $5,000. The total amount of the offer was approximately $28,600, inclusive. Myra did not respond to the offer.

[32] On June 10, 2020, Myles offered to settle on the basis that Myra pay $21,343.28 in damages, plus partial indemnity costs in the amount of $17,592.40. The total amount of the offer was $38,935.69 inclusive. Myra did not respond to the offer.

[33] On July 23, 2020, Myles offered to settle on the basis that Myra pay $21,729.95 in damages, plus costs of $27,497.18. The total amount of the offer was approximately $50,000, inclusive. Myra did not respond to the offer.

[34] I find that Myles is entitled to damages in the amount of $21,251.01. Myles offered to settle for less than this amount on May 22 and June 10, 2020. The offers made on May 22 and June 10, 2020 did not remain open as of the date of the Application and therefore are not considered to be R. 49 offers. I have taken into account the efforts made by Myles to settle the Application in the exercise of my discretion.

Factors in Exercising Discretion

[35] Costs are to be fair and reasonable and within the expectation of the parties: Boucher v. Public Accountants Council for the Province of Ontario, [2004 O. J. No. 2674 (C.A.). The Respondent did not submit a Bill of Costs/Costs Outline and as a result, I have no guidance as to her expectation of what she might have expected to pay if unsuccessful on the Application.

[36] Proportionality is also a governing principle in fixing costs. In this case, I award damages in the amount of $21,251.01. Myles claims costs in excess of the amount in issue on the Application. A cost award which exceeds the damages is not necessarily inappropriate: Bonaiuto v. Pilot Insurance Company, 2010 ONSC 1248 (SCJ) at para. 7. As noted by Lane, J. in 163972 Canada Inc. (c.o.b. Teenflo) v. Isacco, [1997] O.J. No. 838, 69 A.C.W.S. (3d) 435 (Gen. Div.):

That the costs significantly exceed the amounts at stake in the litigation is regrettable, but it is a common experience and is well known to counsel as one of the risks involved in pursuing or defending a case such as this to a bitter end rather than finding a compromise solution. To reduce the plaintiff's otherwise reasonable costs on this basis would simply encourage the kind of intransigence displayed by the defendants in this case: 163972 Canada Inc. (c.o.b. Teenflo) v. Isacco, at para. 3.

[37] In exercising my discretion, I may consider whether the conduct of a party unnecessarily lengthened the proceeding or if a party refused to admit something that should have been admitted: Rule 57.01 (e) and (g).

[38] I find Myra’s conduct was unreasonable. She registered a Caution on the property when she had no interest in the property. The Caution provided that the amount of the consideration was $415,458.53, however the only evidence she could point to in support of her position was that she had loaned Myles $2,925.00. Myles disputes that Myra loaned this amount to him, but even if this was a loan, this does not create a right to register a Caution on title. Also, if the amount of consideration set out in the Caution was $2,925.00, the issue may have been resolved without delaying the closing.

[39] It appears that Myra registered the Caution on title in an attempt to gain some leverage over Myles. Myra initially stated that she would remove the Caution if the proceeds of the sale were held in trust. Myles refused. After Myles brought this Application, Myra stated that she would remove the Caution if Myles agreed to not pursue a claim against her for the costs and expenses related to the registration of the Caution. Again, Myles refused. Myra removed the Caution on the eve of the Application. Counsel for Myles described this conduct as “brinksmanship”. I agree.

[40] Myra did not voluntarily withdraw the Caution until the last business day before the Application hearing. As a result, Myles was put to the expense of bringing the Application to remove the Caution that should not have been registered in the first place. A party who practices brinksmanship does so at the risk of costs: 1188710 Ontario Ltd. v. Gartner 2012 ONSC 6551, at para. 15.

[41] Myra argues that the amount of costs claimed by Myles is excessive. It is her position that 79.4 hours for Mr. Carey and 25 hours for Ms. Watson (student) is not justified given the amount claimed and the relatively straightforward nature of the dispute. I am of the view that although the proceeding was of moderate complexity and the amount of the damages modest, the issues were important. Myra had registered a Caution for $415,458.53. It was necessary for Myles to remove the Caution to allow the sale of the property to take place. If the sale had not taken place, Myles would have been subject to a Power of Sale by the second mortgagee and additional costs and expenses. Although the Caution was voluntarily withdrawn, Myles was required to prepare materials on this issue, and was required to argue the Application with respect to the issues of damages and costs.

[42] I fix the Applicant’s costs in the amount of $30,000 inclusive of counsel fee, disbursements and H.S.T.

DISPOSITION

[43] For the reasons set out above I make the following order:

(a) I award damages to the Applicant in the amount of $21,251.01; and

I award costs to the Applicant fixed in the amount of $30.000 inclusive of counsel fee, disbursements and H.S.T.

________________________ Chalmers, J.

Date: August 31, 2020