Court File and Parties
COURT FILE NO.: CV-19-00626838
DATE: 20201230
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: AMILETTE PERALTA, Applicant
-AND-
RONNIE PONCE, Respondent
BEFORE: Kimmel J.
COUNSEL: Hossein Niroomand and Murtaza Yailaqi, for the Respondent/Moving Party
Dan Rosman and Richard Minster, for the Applicant/Respondent on Motion
HEARD: December 14, 2020
ENDORSEMENT
Procedural Background of Summary of Outcome
[1] Amilette Peralta brought this Application pursuant to ss. 2 and 3 of the Partition Act, R.S.O. 1990, c. P.4 for the partition and sale of the condominium unit that she owned as a tenant in common with the respondent Ronnie Ponce at 38 Lee Center Drive, Toronto, unit 901 (the “Property”). The application came on for a hearing before me on January 14, 2020.
[2] The respondent failed to appear at the return of the application. I was satisfied based on the record before me at the time of the original hearing that Mr. Ponce had been served and was on notice of the hearing date. I granted the application permitting the applicant to sell the property and directed that the net sale proceeds be divided in accordance with the interests of the parties as indicated on title, with 99% to the applicant and 1% to the respondent, in addition to ordering various other ancillary relief (the “Partition and Sale Order”).
[3] Mr. Ponce sought the applicant’s consent to set aside the Partition and Sale Order immediately upon becoming aware of it the day after the order was made. When that consent was not forthcoming, he scheduled a motion to have the Partition and Sale Order varied or set aside on the first available date before me, which was March 26, 2020. That motion was adjourned due to the COVID-19 pandemic and temporary suspension of court operations. It was eventually re-scheduled and heard by me on December 14, 2020.
[4] After learning of the Partition and Sale Order, Mr. Ponce also commenced a separate family law proceeding on or about March 11, 2020 (FS 20-0161230, the “Family Proceeding”) in which he seeks, among other things, an equalization payment based on his assertion that Ms. Peralta held a 50% interest in the Property for him under a constructive trust.
[5] In the meantime, the Property was sold. The applicant has received 50% of the net sale proceeds and the remaining 50% is being held in trust by her lawyer, pending the outcome of this motion and the Family Proceeding.
[6] Mr. Ponce blames his failure to appear at the January 14, 2020 hearing on his lack of understanding of legal process. He does appear to have known enough to consult with a lawyer the day before the scheduled hearing, on January 13, 2020. Unfortunately, due to an administrative error by a member of the law firm that Mr. Ponce retained, the letter sent by email that day to counsel for the applicant was sent to the wrong email address (to “.com” instead of “.ca”) and was not received prior to the hearing. In that letter, counsel for the respondent delivered a notice of appointment of solicitor, indicated that Mr. Ponce would be opposing the relief sought and inquired about the hearing date, which apparently Mr. Ponce had not advised them of. Efforts by Mr. Ponce’s counsel to contact counsel for the applicant by telephone were not successful.
[7] Mr. Ponce’s position is not very sympathetic, given the number of months that he allowed to pass until he retained counsel on January 13, 2020, after being notified in September 2019 of the intended application and agreeing to the hearing date (which he himself confirmed he was aware of in an email sent to the applicant on September 26, 2019). In addition to having agreed to the hearing date back in September 2019, he allowed approximately month to pass after he was served with the complete application record (according to counsel for the applicant, it was served on December 18, 2019) before retaining counsel at the eleventh hour.
[8] Despite my lack of sympathy for the predicament that Mr. Ponce put himself in by waiting until the last minute to retain counsel in this proceeding, I am nonetheless satisfied that the Partition and Sale Order would not have been made by me on January 14, 2020 if counsel for Mr. Ponce had successfully delivered their letter and Notice of Appointment on January 13, 2020 and appeared to request an adjournment. That delivery failure was due to an administrative and inadvertent mistake on the part of the law firm acting for the respondent.
[9] Although Mr. Ponce did not tell his newly retained counsel about the January 14, 2020 hearing date that had been agreed to months earlier, Mr. Ponce says (and there is no evidence to the contrary) that he was uncertain about the hearing date because it was not indicated in the application record that was served in December 2019 or in the accompanying cover letter. It is acknowledged that no confirmation of the application hearing date was sent to Mr. Ponce by the applicant the week before. To add to the confusion, Mr. Ponce’s counsel was for some reason not able to find the matter on a court list when they checked, even though the applicant’s counsel has a record of it having been listed for hearing on January 14, 2020.
[10] In the end, all of this uncertainty supports the conclusion that the reason the respondent’s counsel was not in court on January 14, 2020 to ask for an adjournment was due to a mistake, and not due to Mr. Ponce having intentionally decided not to appear. Despite his own lack of diligence in the preceding months, ultimately, Mr. Ponce’s failure to appear on January 14, 2020 was the result of a mistake of his lawyer.
[11] The strong preference of the court is for the adjudication of disputes on their merits. Mr. Ponce has raised a defence to this application on the merits tied to his claim for a constructive trust in the Family Proceeding that has at least an air of reality to it. The respondent will be prejudiced in the Family Proceeding if the parts of the Partition and Sale Order declaring the parties’ respective entitlements to the net sale proceeds is not set aside, as a res judicata argument could be raised in response to the constructive trust claim.
[12] The prejudice claimed by the applicant is attributable to delay and associated economics. She wants to get on with her life and has been delayed by almost a year now as a result of Mr. Ponce’s failure to attend on January 14, 2020 (and by more than a year having regard to his prior lack of response to various initiatives on her part seeking his co-operation for the sale of the Property). The applicant is also concerned that the Family Proceeding is just another delay tactic and that the equity in the Property will be diminished by the legal fees associated with these already prolonged proceedings.
[13] While the court is sympathetic to these types of concerns, most of that delay is not Mr. Ponce’s fault but rather due to a combination of the court’s availability and the suspension of regular court operations due to the COVID-19 pandemic. Mr. Ponce did move expeditiously upon learning of the Partition and Sale Order, and did not interfere with the part of that order that allowed the applicant to sell the Property.
[14] The issues between the parties are a product of their relationship, which is complicated by the fact that they had a child together while Mr. Ponce was legally married to someone else. The issues arising from those relationships are beyond the scope of this proceeding. Insofar as there remain outstanding issues between the parties in the Family Proceeding, those need to be resolved. The applicant’s desire for finality can only be achieved once those issues have been adjudicated on their merits or settled.
[15] The respondent’s motion to set aside those portions of the Partition and Sale Order that have not yet been fulfilled is granted. The parties are in agreement that, if I grant this motion, this application should be stayed in favour of the Family Proceeding. I am so ordering, on the terms set out in more detail at the end of this endorsement.
Analysis
[16] The following issues must be decided on this motion:
a. What is the test to be applied by the court in considering whether to set aside or vary an order under Rule 38.11?
b. Has the respondent/moving party satisfied the test for setting aside or varying an order under Rule 38.11?
c. Should the court exercise its discretion to set aside or vary the Partition and Sale Order and, if so, on what terms?
The Test to be Applied on this Motion
[17] Rule 38.11 allows a party affected by a judgment or order made on an application to make a motion seeking the order be set aside or varied on the following basis:
a. The application was made without notice, or
b. The party failed to appear at the hearing of an application through accident, mistake, or insufficient notice.
Rule 37.14 is identically worded in these respects, when the court is asked to consider setting aside or varying an order made on a motion.
[18] In the context of a Rule 37.14 motion, Strathy J. (as he then was) explained that the purpose of Rule 37.14 is to prevent unfairness or a miscarriage of justice due to the absence of sufficient notice and to ensure a party is afforded an opportunity to respond. The respondent relies upon the five-part test set out in this decision of Strathy J. in Ontario (Attorney General) v. 15 Johnswood Crescent, 2009 CanLII 50751 (Ont. S.C.), at para. 34:
a. Proof of accident or mistake: The moving party must establish a failure to appear on the original motion through accident, mistake or insufficient notice. This is a precondition to relief under the rule. A party who has simply chosen not to appear on a motion cannot complain later if he or she does not like the outcome.
b. The party must move forthwith after the order comes to his or her attention: This is also a precondition to relief under the rule, but there is room for flexibility in the interpretation of “forthwith”, depending on the circumstances …
c. The length of the delay and the reasons for it: In considering whether to set aside an order, the court will consider whether there has been delay in bringing the motion and the reason for it. All other things being equal, the longer an order has been in effect, particularly where parties have acquired rights or changed their positions as a result of the order, the less likely it will be that the court will set it aside.
d. The presence or absence of prejudice: The court should consider whether a party will be prejudiced by setting aside the order or by failing to set aside the order. There will always be prejudice if an order is made against a party without sufficient notice and there will always be some kind of prejudice to the other party if the order is set aside. Nevertheless, the exercise of the court's discretion may require an examination of the relative prejudice to the parties.
e. The underlying merits of the moving party's case: It may be necessary to consider the underlying merits of the moving party's case in weighing the various factors, balancing the interests of the parties, and determining what is just in the circumstances. Lengthy delay in bringing the motion may be more readily forgiven if the moving party has a very strong case on the merits. It will be less readily forgiven if the party's case appears frivolous.
[19] The respondent does not dispute that these are the relevant factors for the court to consider, but insists that the first two factors are not preconditions to the consideration of any other factors. Rather, the respondent argues that all of the factors outlined should be considered and weighed by the court. The respondent points to other Rule 38.11 cases in which the court adopted the approach taken under Rule 19.08 when deciding whether to set aside a default judgment. For example: 1493201 Ontario Ltd. v. Giannoylis, 2016 ONSC 1210, 129 O.R. (3d) 616, at para. 12, and 2701988 Ontario Inc. v. Ok-Shim Jeong, 2020 ONSC 7522, at para 11.
[20] The applicant points out that in the Giannoylis case, Faieta J. expressly noted (at para. 9) that the parties did not provide any case law to him for the test for a motion under Rule 38.11. His observation that both Rule 38.11 and Rule 19.08 permit the court to set aside a judgment “on such terms as are just” led him to consider the principles applied under Rule 19.08 (at paras. 9 and 12). In the case of Ok-Shim Jeong the parties agreed that the analytical framework under Rule 38.11 was the same as under Rule 19.08 (at para. 11), relying on the approach adopted in Giannoylis. The decision of Strathy J. in Johnswood Crescent under the more directly analogous Rule 37.14 was not presented to the court for consideration in either of these cases.
[21] The factors that the court is to consider under Rule 19.08 have been held to be:
a. The moving party must move promptly after learning of the order to have it set aside.
b. The moving party must provide a plausible explanation or excuse for the default.
c. The moving party must establish an arguable case on the merits.
d. The court should consider the potential prejudice to the moving party should the motion be dismissed, and the potential prejudice to the respondent should the motion be.
e. The effect of any order the court might make on the overall integrity of the administration of justice.
See Mountain View Farms Ltd. v. McQueen, 2014 ONCA 194, 119 O.R. (3d) 561, at paras. 48-49.
[22] These factors are similar to those indicated in the Johnswood Crescent case, but none are identified as preconditions. The respondent urges a similar approach, and further relies upon the Rule 19 jurisprudence indicating that the factors should not be applied as rigid rules (Mountain View Farms, at para. 50).
[23] The only material difference that arises in the application of the two tests in this case is the contention by the applicant that the moving party must first establish, as a precondition to the other considerations, that his failure to appear on the original motion was the result of accident, mistake or insufficient notice. Having considered the cases presented by both sides and the words of the Rules, I agree with the applicant that the test on a Rule 38.11 motion, like on a Rule 34.17 motion, does include the first two preconditions set out in the Johnswood Crescent case.
[24] Rule 19.08 is entirely discretionary, in that it simply states that a default judgment can be set aside or varied on such terms as are just. Rule 38.11 has three components (each of which can also be found in Rule 37.14), only the third of which aligns with Rule 19.08:
a. First, to identify who may move: a person who is affected by a judgment [order] obtained on an application [motion] made without notice or who fails to appear at the hearing of an application [motion] through accident, mistake or insufficient notice may move to set aside or vary the judgment [order]…forthwith after the judgment [order] comes to the person’s attention...[ sub-rule 38.11(1)];
b. Second, to identify where and to whom the motion may be made [sub-rule 38.11(2)]; and
c. Third, to provide the court with a discretion to set aside or vary the judgment on such terms as are just [sub-rule 38.11(3)].
[25] As I read Rule 38.11, the moving party under Rule 38.11(1) (and 37.14(1)) must, as a threshold question, establish under the first component of Rule 38.11(1) that they are entitled to bring the motion to set aside or vary the judgment by demonstrating that they are a party affected by a judgment that was made without notice, or that they failed to appear at the hearing of the application through accident, mistake or insufficient notice. These latter criteria are disjunctive: Accident, mistake or insufficient notice. This is the first pre-condition that was identified in the Johnswood Crescent case, the other being the requirement that the moving party move forthwith, which is the other part of sub-rule 38.11(1).
[26] Once the threshold entitlement to bring the motion has been established, the court may go on to consider other factors under sub-rule 38.11(3), such as those set out in the Johnswood Crescent case, many of which align with the factors that the court also considers under Rule 19.08.
Have the Requirements Been Satisfied to Set Aside the Partition and Sale Order?
[27] I will consider in turn each of the components of the five-part test from the Johnswood Crescent case (at para. 34).
1) Has the Respondent Proven that his Failure to Appear on January 14, 2020 was due to a Mistake?
[28] The moving party must establish, as a precondition to the granting of any relief under this Rule, a failure to appear on the original motion through accident, mistake or insufficient notice. The sufficiency of notice is not at issue in this case. A party who has simply chosen not to appear on a motion cannot complain later if he or she does not like the outcome. See Johnswood Crescent.
[29] The applicant urges the court to find, based on Mr. Ponce’s conduct, that he made a choice to ignore the application. The following summary timeline is relied upon:
Summary Timeline of Events
Event
First Occasion
Ponce advised Court proceedings to commence 4 Occasions: Peralta/counsel write Ponce requesting consent and advise legal proceedings will commence
July 8, 2019 6 months, 6 days prior to Hearing Date
Ponce aware matter to proceed to Court 4 Occasions: Ponce responds to Peralta/counsel acknowledging the matter and/or Hearing Date
Aug 19, 2019 4 months, 26 days prior to Hearing Date
Ponce personally served with Notice of Application Available hearing dates included in cover letter. Served by email again days later (served 3 times total)
Sept 12, 2019 4 months, 2 days prior to Hearing Date
Ponce informed/notified of Hearing Date Ponce agrees to dates provided in cover letter of service. Peralta’s counsel confirms Hearing Date via email on September 25, 2019 and again on December 18, 2019 via regular mail with full Application materials.
Sept 25, 2019 3 months, 20 days prior to Hearing Date
Ponce confirms knowledge of Hearing Date: Ponce writes Peralta and confirms Hearings Date (see Exhibit “K” to Peralta Affidavit)
Sept 26, 2019 3 months, 19 days prior to Hearing Date
Hearing Date
Jan 14, 2020
[30] While the applicant did make efforts to enable the sale of the Property without the necessity of litigation, the parties were not in agreement about how the net sale proceeds would be distributed. Litigation over that issue appears to have been unavoidable given that Mr. Ponce has never agreed, in his dealings with the applicant over the sale of the Property, that his beneficial entitlement is limited to the 1% interest that is indicated on title.
[31] Mr. Ponce does not offer a strong explanation for why he did nothing between September 2019 and January 13, 2020 when he retained counsel, despite having agreed to the January 14, 2020 hearing date and admitting that he was served with the complete application record in December 2019. He claims the hearing date and location were unclear because the original notice of application, first served in September 2019 and later included in the application record that was served in December 2019, did not have a hearing date specified and the hearing date was not otherwise confirmed with the respondent when the record was served or thereafter.
[32] Mr. Ponce blames his inaction on his lack of sophistication and understanding of legal proceedings, but he clearly can read and understood enough to know that he needed to retain a lawyer. I doubt that it is a coincidence that he finally did retain counsel on January 13, 2020, the day before the hearing date that he had agreed to months earlier, even if the date had not been confirmed in any recent dealings. I do not condone his lack of responsiveness. It may be a relevant consideration for costs, but it is not the determining consideration on this motion.
[33] The threshold issue for purposes of this motion is focussed on the reason for the respondent’s failure to appear on January 14, 2020. That has been demonstrated on the record before me to be as a result of a mistake by the law firm that Mr. Ponce retained, which sent an email on January 13, 2020 to the wrong email address. That email was accompanied by a notice of appointment of solicitor and a letter indicating an intention to oppose the application and sought information about when it was returnable. It is reasonable for me to infer, and I do so infer, that, had that email been delivered to the correct email address, respondent’s counsel would have been informed of the hearing the next day and would have appeared to request an adjournment. That is enough in my view for the respondent to satisfy the threshold criterion or precondition of demonstrating that his failure to appear on January 14, 2020 was due to a mistake. Having gone to the effort to retain counsel, albeit at the last minute, it cannot be said that Mr. Ponce chose not to appear on the return of the application.
[34] The Rule 19.08 factor that the moving party provide an adequate explanation for the default is effectively replaced in a Rule 38.11 motion with a precondition that the failure to appear at the hearing be demonstrated to be by accident or mistake (or insufficient notice). I find that this precondition has been satisfied by Mr. Ponce in this case.
2) Did the Respondent Move Forthwith After the Partition and Sale Order Came to his Attention?
[35] This is also a precondition to seeking relief under Rule 38.11(1), but there is room for flexibility in the interpretation of “forthwith”, depending on the circumstances. See Johnswood Crescent, at para. 34.
[36] There can be no serious dispute that the respondent has satisfied this criterion in this case. The respondent’s counsel indicated immediately upon learning of the Partition and Sale Order that he intended to move to set it aside. When consent was not forthcoming from the applicant, a motion was scheduled before me to be heard in March 2020. It was adjourned as a result of the temporary suspension of regular court operations due to the COVID-19 pandemic and eventually rescheduled to December 14, 2020. Scheduling was done co-operatively on both sides.
3) The Length of the Delay and the Reasons for it
[37] In considering whether to set aside or vary an order, the court will consider whether there has been delay in bringing the motion and the reason for it. Here the delay was not in bringing the motion but rather in having it heard, which cannot be attributed to the moving party as it was due to the suspension of court operations and co-operative scheduling thereafter.
[38] All other things being equal, the court can and will also take into account whether, while the Partition and Sale Order has been in effect, the parties have acquired rights or changed their positions as a result of the order. See Johnswood Crescent, at para. 34.
[39] The applicant argued that the motion cannot be granted because it seeks to set aside the entire Partition and Sale Order, which includes various provisions authorizing and facilitating the sale of the Property, which has already occurred. The Notice of Motion dated January 29, 2020 (originally returnable March 26, 2020) did seek an order setting aside the Partition and Sale Order in its entirety. But during the ensuing delay, the parties agreed that the Property could be sold and 50% of the net sale proceeds were paid to the applicant. The applicant’s lawyer holds the remaining 50% in trust pending the outcome of this application and the Family Proceeding.
[40] At the hearing, counsel for the respondent clarified that Mr. Ponce only seeks to set aside those portions of the Partition and Sale Order that remain live issues today, namely:
a. Paragraph 4: requiring the respondent to pay any penalties charged by the mortgagee upon the sale of the Property (the amounts of such penalties, if any, were not in evidence before the court on this motion);
b. Paragraph 5: declaring and directing that the net proceeds from the sale be first used to repay the respondent the deposit monies he paid when the Property was purchased, in the amount of $8,500.00, and then be divided 1% to the respondent and 99% to the applicant;
c. Paragraph 7: ordering and directing the respondent to pay out of his entitlement to net sale proceeds the applicant’s partial indemnity costs of the application fixed in the amount of $6,227.53.
[41] The parties have not changed their positions on these remaining “live” issues in any irrevocable way. If the Partition and Sale Order is varied to set aside these provisions, they all can be addressed in the context of any future determination of the appropriate distribution of the remaining disputed 50% net sale proceeds held in trust. The analysis of this factor favours granting the partial variation of the Partition and Sale Order that is sought.
4) The Presence or Absence of Prejudice
[42] The court should consider whether a party will be prejudiced by setting aside or varying the order, or by failing to do so. There will always be prejudice if an order is made against a party without sufficient notice and there will always be some kind of prejudice to the other party if the order is set aside. Nevertheless, the exercise of the court's discretion may require an examination of the relative prejudice to the parties. See Johnswood Crescent, at para. 34.
[43] The prejudice to the respondent is real if paragraph 5 of the Partition and Sale Order is not varied. Mr. Ponce faces an argument that the relief he seeks in the Family Proceeding for a constructive trust, unjust enrichment and equalization under the Family Law Act, R.S.O. 1990, c. F.3, predicated on his claim to a 50% beneficial interest in the Property is res judicata because this paragraph of the Partition and Sale Order directs a division of the net sale proceeds based on the interests specified on title to the Property, of 1% and 99%. While it is suggested by the applicant that these arguments can be pursued in the Family Proceeding and traced back to the sale proceeds if successful, no comfort or assurance is provided that an issue estoppel will not be raised.
[44] The prejudice that the applicant claims—of inconvenience, delay and erosion of her share of the net sale proceeds in the prolonged legal proceedings—is the type of prejudice that can always be claimed, to some degree, by a responding party resisting such a motion. But it does not rise to the same level of prejudice as the substantive prejudice to the respondent’s legal rights if the Partition and Sale Order is not varied or set aside. The applicant is also protected by the fact that the remaining 50% of the net sale proceeds from the Property have not been distributed to the respondent, but are being held in trust; she will not have to chase him for the money if she is ultimately successful. The analysis of this factor favours granting the partial variation of the Partition and Sale Order that is sought.
5) The Underlying Merits of the Moving Party’s Case: Does the Respondent have an Arguable Case on the Merits?
[45] It may be necessary to consider the underlying merits of the moving party's case in weighing the various factors, balancing the interests of the parties and determining what is just in the circumstances. Lengthy delay in bringing the motion may be more readily forgiven if the moving party has a very strong case on the merits. It will be less readily forgiven if the party's case appears frivolous. See Johnswood Crescent, at para. 34.
[46] Delay is not an issue in this case. Therefore, the merits do not need to be shown to be overwhelming. It is reasonable to approach the merits assessment, in circumstances such as this, on a similar footing to what the court would consider on a Rule 19.08 motion to set aside default judgment. Under that test, the moving party need only show that he has an arguable position on the merits.
[47] The question is whether the moving party has shown that their defence has an air of reality. The Court of Appeal for Ontario has stated that the approach is “not comparable to the approach taken to summary judgment”. Specifically: “In determining whether a defence has an air of reality, it is not the role of the motion judge to make findings of fact and assess whether the defence will succeed.” See Zeifman Partners Inc. v. Aiello, 2020 ONCA 33, at paras. 33-34.
[48] To support his position on the merits, the respondent points to the following facts that he asserts in his affidavit, which were not challenged on cross-examination although the applicant disputes many of them:
a. the parties jointly purchased the Property when they were in a relationship and had a child together;
b. the respondent paid the entire down payment, closing costs, and legal fees for the purchase of the Property, with the Applicant contributing nothing at the time;
c. both parties were named on title to the Property, albeit in different proportionate shares;
d. the respondent was financially liable for the mortgage on the Property, and was involved in the mortgage renewals;
e. the respondent says he paid for the repairs, utilities, insurance, property taxes and maintenance fees for the Property; and
f. the respondent has contributed to their son’s living expenses and school fees.
[49] Mr. Ponce asserts that he and the applicant were common law partners and he claims a constructive trust for an equal share of the equity in the Property. The respondent contends that the applicant has been enriched by her titled 99% ownership of the Property, to the detriment of the respondent having regard to his contributions to the Property, its maintenance and upkeep and to their lifestyle and to their son’s wellbeing. The respondent argues that the applicant’s contributions are not of a disproportionately greater value to justify the discrepancy in legal ownership. He explains that the legal title to the Property was allocated based on advice received at the time of its purchase regarding savings on land transfer tax.
[50] In addition to disputing the factual contentions of the respondent, the applicant asks the court to take note that the documentary support for the latter two contentions provided by the respondent primarily pertain to the time period prior to the purchase of the Property. She also points to documents that indicate the respondent to be residing at a different address (with his wife) during certain relevant times.
[51] This alleged unjust enrichment brings into play the concept of joint family venture, which has significance in terms of available remedies under family law. According to the Supreme Court of Canada in Kerr v. Baranow, 2011 SCC 10, [2011] 1 SCR 269, at para. 89-99, the factors to be considered in determining whether a joint family venture exists are:
a) Mutual effort—did the parties pool their efforts and work towards a common goal?
b) Economic integration—how extensively were the parties’ finances integrated?
c) Actual intent—did the parties intend to have their lives economically intertwined?
d) Priority of the family—to what extent did the parties give priority to the family in their decision making?
[52] The respondent goes so far as to argue that the merits threshold is so low and that, once he has satisfied the technical requirements of Rule 38.11, unless it can be said that there is no merit to his position, the Partition and Sale Order should be varied or set aside. See Rougement Co-operative Homes Inc. v. Plummer, 2010 ONSC 1595, at para. 13. I prefer the air of reality test, and find that it has been met. The record before me is sufficient for me to find that there is at least an air of reality to respondent’s position in response to this application.
[53] There are apparent complexities to the legal relationship between the parties to this application that are beyond the scope of what is before the court on this application. These issues are raised by the factual assertions on both sides, which directly contradict each other, and cannot, and should not, be determined at this stage based on the written record before the court. I am satisfied that that those issues need to, and should, be determined on their merits. They have been raised and are squarely in issue in the Family Proceeding, which is broader in scope.
Do the Interests of Justice Favour Varying or Setting Aside the Partition and Sale Order? If so, on what terms?
[54] The court has the ultimate discretion to decide whether to set aside or vary the judgment on such terms as are just. This applies under both Rules 38.11 (37.14) and 19.08. Under Rule 19.08, the court has considered the integrity of the administration of justice and taken into consideration factors such as the interests of justice and the good faith (or lack thereof) of the parties in deciding whether to set aside the judgment in question.
[55] The applicant suggests that the respondent’s position is inequitable and illegal if the justification for the ownership proportions indicated on title was to avoid land transfer tax. The applicant denies any complicity in this and argues that it should not be condoned by the court (see Menard et al. v. Genereux et al. (1982), 1982 CanLII 2076 (ON SC), 39 O.R. (2d) 55 (H.C.)). I am not in a position to determine this “illegality” argument, nor whether it would not necessarily only apply to the respondent, or whether it was a joint tax structure. In any event, this type of “tax planning” would not necessarily lead to a finding of bad faith/lack of good faith. That would have to be more carefully examined on a more fulsome record which is not before me.
[56] The respondent also accuses the applicant of bad faith for having redacted an email in the application record that set out the respondent’s basis for opposing the application and his assertion of a 50% interest in the Property. The respondent maintains that the applicant’s explanation of the redacted settlement negotiations should not be accepted where the redactions were selective. It is suggested that the Partition and Sale Order might not have been made at all if the redacted portions had been disclosed to the court at the original hearing. This argument is speculative.
[57] Ultimately, none of the alleged bad faith/lack of good faith in this case rises to a level that would change the outcome that otherwise flows from the application of the Johnswood Crescent criteria that I have reviewed earlier in this endorsement. The Partition and Sale Order should be varied and the remaining “live” paragraphs set aside so that there can be an adjudication on the merits of the issues raised. This outcome is consistent with Rule 1.04 and the strong preference of the court for matters to be determined on their merits baring exceptional circumstances. See 1202600 Ontario Inc. v. Jacob, 2012 ONSC 361, para. 68; see also Zeifman at para. 47.
[58] The applicant provided authority to support his request that, if the motion was granted, the reinstated issues on this application be stayed in favour of the Family Proceeding. I do not need to review the law and authorities cited in support of this because the applicant agreed during oral argument to this as a term of any order made if the motion was granted. It makes good sense given that the Family Proceeding raises the same issues, in addition to other issues. There is no need for a multiplicity of proceedings involving the same parties when all remaining issues in both proceedings can be adjudicated in the Family Proceeding.
Summary of Disposition, Costs and Implementation
[59] For the foregoing reasons, I order and direct that the Partition and Sale Order be varied to remove paragraphs 4, 5 and 7 (or that they be set aside). As a term of that order and direction, I order the issues that remain to be determined in this application, as a result of the reinstatement of what had been encompassed by paragraphs 4, 5 and 7, are stayed pursuant to ss. 106 and 107 of the Courts of Justice Act R.S.O. 1990, c. C-43 and the parties are directed to adjudicate or resolve those issues in the Family Proceeding.
[60] I have set aside the partial indemnity costs award in favour of the applicant contained in paragraph 7 of the Partition and Sale Order. My decision to set aside the costs award is not a reflection of any criticism on the part of the applicant for having proceeded with that application in the circumstances known to the applicant at the time. If the respondent had appeared and asked for an adjournment, the applicant may well have been awarded some costs of that adjournment, if granted. However, given the overlapping issues that will now be determined as part of the Family Proceeding, it is not appropriate for the applicant to be awarded her costs of the application pending the determination of all of the issues in the Family Proceeding.
[61] The respondent wants his costs of this motion fixed and ordered payable now. He is content to be awarded an amount equal to what was indicated on the applicant’s costs outline for this motion, of $9,500.00 on a substantial indemnity scale or $5,100.00 on a partial indemnity scale. The respondent claims he offered an outcome close to what has been achieved on this motion and seeks the higher scale of substantial indemnity costs on that basis. He is prepared to offer a credit of $1,000.00 for the costs of the January 14, 2020 appearance that might have been awarded if his counsel had appeared and requested an adjournment.
[62] The applicant asks that the costs of this motion be addressed in the context of the broader Family Proceeding.
[63] The court has a broad discretion when determining the issue of costs. Rule 57.01 sets a non-exclusive list of factors that may be considered in the exercise of that discretion.
[64] I have considered the factors applicable in this case, including:
a. The principle of indemnity under 57.01(0.a), including the experience of the lawyer for the party entitled to costs as well as the rates charged and the hours spent by that lawyer; [no costs outline was submitted by the respondent/moving party but it was represented to the court that the costs outline of the applicant reflected an amount that was lower than what would have been claimed]
b. Under Rule 57.01(0.b), the amount of costs that the unsuccessful party could reasonably expect to pay in relation to the step in the proceeding for which costs are being fixed; [the amounts proposed are based on the costs outline provided by the applicant to the respondent before the motion, which is an indication of what the respondent might have reasonably expected to pay if unsuccessful]
c. The amount at issue in the proceeding (Rule 57.01(a)); [the amount at issue, which represents 50% of the equity in the Property, is significant to the parties]
d. The complexity of the proceeding (Rule 57.01(c)); [the proceeding is not overly complex, although the existence of overlapping issues with those raised in the Family Proceeding add to its complixity]
e. The importance of the issues (Rule 57.01(d)); [the issues are important to the parties]
f. The conduct of a party that unduly lengthened or complicated a proceeding (Rule 57.01(e), (f) and (g); [discussed below]
g. Any other matter relevant to the question of costs (Rule 57.01(i)). [discussed below]
[65] In reviewing most of the Rule 57.01 factors, there is nothing particularly unusual about this motion. I am also not satisfied that it would be an appropriate case in which to award anything beyond the standard of partial indemnity costs.
[66] There are some factors that warrant some further consideration. In my view, the respondent cannot be relieved of the responsibility for where we find ourselves today, even if he was successful on this motion. Early on (prior to issuing this application) the applicant offered to sell the Property and put half of the sale proceeds in trust pending a determination of the issues, and the respondent declined that suggestion, necessitating the application. The respondent was delinquent in responding to the application and retained counsel at the last minute creating the perfect storm for the mistake that then occurred with no margin for error. Further, the respondent appeared, at least on paper and even in the factum filed on this motion, to still be asking for the entire Partition and Sale Order to be set aside, which was not a realistic position given the intervening sale of the Property.
[67] In the exercise of my discretion under s. 131 of the Courts of Justice Act, and having regard to the factors under Rule 57.01, I am fixing the partial indemnity costs of this motion at $5,100.00, and ordering them to be payable in the cause of the Family Proceeding. The applicant’s costs of the January 14, 2020 attendance can be factored into the costs claimed by Ms. Peralta in the Family Proceeding, but the amount will have to be re-considered in the context of that proceeding given that the issues will be adjudicated on a contested basis and the outcome is not known at this time. Regardless of the outcome of the Family Proceeding, Ms. Peralta will be entitled to a credit of $1,000.00 in costs for the January 14, 2020 appearance that she would have incurred regardless, as a result of the respondent’s delinquency in responding to this application.
[68] Notwithstanding Rule 59.05, this endorsement is effective from and after the date indicated below and it is enforceable without any need for the entry and filing of a formal order. Any party may nonetheless submit a formal order for original signing, entry and filing.
Kimmel J.
Date: December 30, 2020