COURT FILE NO.: CV-18-00609321-0000
DATE: 20220819
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
ESPARTEL INVESTMENTS LIMITED
Plaintiff
– and –
METROPOLITAN TORONTO CONDOMINIUM CORPORATION NO. 993
Defendant
Jonathan Kulathungam and Nipuni Panamaldeniya, for the Plaintiff
Megan Mackey, for the Defendant
HEARD: SEPTEMBER 13, 14, 15, 16, 17, December 3, 2021, by Zoom
a.p. ramsay j.
I. OVERVIEW
[1] The trial in this matter took place virtually, judge alone, over the course of six days. The plaintiff, Espartel Investments Ltd. (“the plaintiff”) brings this action for damages for overpayments made to the defendant, Metropolitan Condominium No. 993 (“the defendant”), and also seeks interest under a Reciprocal Agreement between the parties. Alternatively, the plaintiff seeks damages for breach of contract and unjust enrichment.
[2] The plaintiff owns a hotel and commercial complex in Toronto. The defendant owns a larger complex adjoining a condominium registered as Metropolitan Toronto Condominium Corporation No. 993 (“the defendant”). The parties share certain facilities and in accordance with a Reciprocal Agreement, the parties are each responsible for paying their proportionate share of the costs associated with the maintenance, repair and service of the shared facilities. The parties share a health club and underground garage. Banquet facilities for the plaintiff’s hotel are located in the defendant condominium building. The defendant pays the bills for the electricity consumed in these areas then bills the plaintiff at the end of the year, sending the plaintiff an invoice, which is the end result of information inputted at year end in an Excel spreadsheet by which it calculated the amount owed by the plaintiff. The parties have used this system for years.
[3] After a retrofit in 2015, the plaintiff requested changes to the 2016 invoice. In 2017, the defendant retained a consultant who identified several errors, including a conversion error from watts to kilowatts on the spreadsheet and an error with respect to the garage. The errors, if corrected, resulted in a significant reduction in the amount owed by the plaintiff to the defendant. By virtue of the process agreed to by the parties to determine the charge back for electricity to the plaintiff, the errors are longstanding.
[4] The plaintiff seeks to recover overpayments made to the defendant from 2006 to 2015. The plaintiff commenced this action by way of statement of claim issued on November 21, 2018. The plaintiff submits that it was not until August 22, 2017, when the plaintiff was advised of the errors discovered by the defendant’s consultant, that the plaintiff discovered that it had been overpaying for hydroelectricity. The plaintiff relies on the ten-year limitation period under the Real Property Limitations Act, R.S.O. 1990, c. L.15 or, alternatively, the two-year limitation period under the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B.
[5] The defendant submits that the claims are barred by the two-year limitation period under the Limitations Act, 2002, and argues that the ten-year limitation period under the Real Property Limitations Act does not apply. The defendant pleads, as a defence, a right to set off amounts for alleged underpayment in electricity and water costs by the plaintiff for the same period of time, and, in support of its claim for set off, relies primarily on a report it commissioned from an electrical engineer prior to the litigation.
II. THE PARTIES AND THEIR POSITIONS
i. The Plaintiff
[6] The plaintiff is the owner and operator of Ramada Hotel on Jarvis Street in Toronto, as well as a commercial retail condominium which is part of the same complex.
[7] The plaintiff contends that the sole dispute is the historical errors in calculating the electricity and the allocation of the hydroelectricity costs between the plaintiff and the defendant. It submits that the parties have operated for over 20 years utilizing an agreed upon Utility Agreement. In or around 2015, the plaintiff performed an electrical retrofit, installing lower wattages energy efficient bulbs in certain areas. The plaintiff submits that it was not until the report of the defendant’s consultant in 2017 that the plaintiff discovered the errors in the Utility Agreement which has existed for years and resulted in the plaintiff overpaying for hydroelectricity.
[8] The plaintiff submits that it is the defendant who is asking the court to re-interpret the Utility Agreement and to rewrite the Utility Agreement between the parties. The plaintiff argues that there is no error in the Utility Agreement which requires any “rectification.” The errors were in the implementation or the accounting of the terms of the Utility Agreement. The plaintiff argues that the Excel spreadsheet is not the Utility Agreement in and of itself, but rather a mechanism to implement the Utility Agreement. All that is required, argues the plaintiff, is a correction of a calculation which implemented the terms of the contract.
[9] The plaintiff maintains that the calculations were done by the defendant, and the errors were only discovered by the plaintiff in 2017. The plaintiff points to the fact that after the errors were discovered, the defendant corrected the errors retroactively for a two-year period (2016 and 2017) and corrected the errors moving forward. The plaintiff argues that the defendant has had the benefit of the overpayments, and it disputes the defendant’s defence for a claim for set off.
[10] The plaintiff questioned the necessity of the defendant’s expert electrical engineer.
ii. The Defendant
[11] The defendant condominium corporation, which adjoins the plaintiff’s property, is situated at 300 Jarvis Street, and is a residential condominium ("residential condominium") within the same complex. The residential condominium was created on November 1, 1991, by registration of its Declaration, and contains 124 residential units, 76 locker units and 87 parking units.
[12] The defendant argues that the hydroelectricity payments are not part of the Reciprocal Agreement. Although the defendant agrees that the electricity payments were made pursuant to the Utility Agreement, it argues that the Utility Agreement is nothing more than excel spreadsheets and was a crude calculation and not meant to accurately quantify the electricity usage by the parties. It argues that the Utility Agreement was essentially a spreadsheet used by the property manager of the condominium to input information harvested from the Toronto Hydro bills, and the spreadsheets and the bills are sent to the hotel which then pays the amount due for the period (year) in question. The defendant submits that the court must decide whether and under what circumstances the plaintiff can amend the Excel Spreadsheets from 2005 to 2015. It argues that the plaintiff’s attempt to “correct errors” is tantamount to asking the court for rectification.
[13] The defendant submits that the limitation period runs from the date of the payment.
[14] The defendant further argues that if the court were to find that the defendant breached the Utility Agreement, then it is entitled to set-off estimated underpayments for electricity use between 2005 and 2015 against any underpayments by the plaintiff in other areas as established by its electrical engineer in the amount of $322,372.95.
III. ISSUES
[15] Based on the pleadings, and the evidence at trial, the following issues are to be decided in this action:
i. Is the plaintiff entitled to damages for breach of the Reciprocal Agreement by the defendant, or, alternatively, for breach of contract or unjust enrichment?
ii. What is the applicable limitation period? And is the action statute barred?
iii. Is the defendant entitled to set off any award recovered by the plaintiff for damages for underpayment by the plaintiff in other areas?
IV. NATURE OF THE CLAIM
[16] In their closing submissions, the parties raised issues that were not pleaded. Though the defendant raised issues of rectification and mistake, none of these have been pleaded and therefore have not been considered by me.
[17] The plaintiff’s claim, as framed by the pleadings, is for a declaration that the defendant is in breach of the Reciprocal Agreement, and alternatively damages for breach of contract and unjust enrichment. The plaintiff claims damages in the amount of $882,043.35 plus interest at a rate of 30% annually and compounded monthly, calculated from the date of over-payments, for amounts allegedly owing by the defendant pursuant to a Reciprocal Agreement. In addition to the claim for damages, the plaintiff seeks an order declaring that it is entitled to a lien for the amount owing against the defendant's lands and interest, and a declaration that the lien is enforceable in the same manner as a mortgage under the Mortgages Act, R.S.O. 1990, c. M.40.
[18] The plaintiff maintains that pursuant to section XIII (1) of the Reciprocal Agreement, and until amounts owing are paid in full, the plaintiff is entitled to a lien in priority to other liens and charges, and claims interest at the rate of thirty percent (30%) per annum and compounded monthly.
V. THE EVIDENCE
i. Is the plaintiff entitled to damages for breach of the Reciprocal Agreement, breach of contract or unjust enrichment?
Pleadings, Admissions and Agreements
[19] In addition to the testimony of witnesses, the parties filed an Agreed Statement of Facts, a Joint Document Brief, with an accompanying agreement on each of the documents in the JDB, and a Joint Chronology, making effective use of these documents, and, without a doubt, reducing the number of witnesses called at the trial and, in the result, shortening the trial.
[20] The court also heard the evidence of Scott Thompson and Mustafa Younis on behalf of the plaintiff, and Robert Horwood and Andre Lebedev on behalf of the defendant. Overall, I found each witness to be credible. While I also found Mr. Lebedev to be a credible witness, he was called to provide opinion evidence to the court because of his pre-litigation report (“the Lebedev report”), commissioned by the defendant. I have made further comments below regarding the necessity of his evidence as the plaintiff raised this issue at trial.
[21] There is no dispute that Polygrand Developments Inc. (“Polygrand”) built the three-part development in the early 1990s.
[22] The defendant admits paragraph two of the statement of claim which pleads that the plaintiff owns and operates a hotel under the banner name of Ramada Plaza at 300 Jarvis Street as well as a commercial condominium at 298 Jarvis Street ("commercial condominium").
[23] The defendant condominium corporation was created on November 1, 1991, with the registration of its Declaration. The parties are not clear on when the turnover meeting occurred and Polygrand turned over control to the purchasers. Nothing in this trial however turns on that date.
[24] The parties entered into a Reciprocal Agreement dated November 25, 1991[^1], which was amended on September 20, 1995[^2].
[25] The parties do not dispute that in 1997, a receiver was appointed by the Hong Kong Bank of Canada and the property, then owned by Polygrand, was sold to the plaintiff on August 30, 1998, under power of sale.
[26] There is no dispute that the current process by which the defendant charges back, or more specifically invoice the plaintiff for hydroelectricity usage consumed over the fiscal year, has existed for over a decade. There is no direct evidence as to when the process was implemented. The parties agree however that the process of using the Excel spreadsheet started before 1998. The Excel spreadsheet has been called, interchangeably, the Utility Agreement, and an invoice. Based on the evidence of both Thompson and to some extent Horwood, I find that the Excel spreadsheet was in existence since at least 1998.
[27] And, based on the evidence and the admissions in the pleadings, I agree with the plaintiff that the Excel spreadsheet itself was the implementation of the terms of the Utility Agreement. The defendant was required to input information from the hydro bills in the Excel spreadsheet, making use of the built-in formulas to arrive at the plaintiff’s share of the expenses. Representatives of the parties themselves called the document what it was, ignoring the labels attached to it by counsel. Thompson, who testified on behalf of the plaintiff called it an invoice. Horwood, who testified on behalf of the defendant, called it a contract[^3]. Thompson’s uncontradicted and unchallenged evidence is that the plaintiff only received a PDF “invoice”, and the plaintiff never received a Word document.
[28] I accept that once generated from the inputted data and sent to the plaintiff, the Utility Agreement or invoice was a contract between the parties.
[29] There were two Excel spreadsheets used annually to determine any charge back to the plaintiff for water and hydroelectricity. The party’s issue before me is with respect to the consumption of hydroelectricity and not water, and to the extent that the defendant is seeking a set off, the consumption of hydroelectricity by the plaintiff in the areas identified by the Lebedev report. To be clear, though water is mentioned by the defence as a basis for set off, no such evidence was tendered at trial with respect to water usage by the parties.
[30] Counsel for the plaintiff submits that the plaintiff is not challenging the terms of the Utility Agreement, but rather seeks repayment for the amounts the plaintiff was overcharged for the period in question.
[31] In its statement of defence, the defendant admits paragraph five of the statement of claim. At paragraph five of the claim, the plaintiff pleads that the Hotel and commercial condominium share a number of facilities and services with the defendant which are set out in the Reciprocal Agreement dated November 25, 1991 and amended on September 29, 1995. The claim pleads that the November Reciprocal Agreement was registered on title to the plaintiff's property and the defendant's residential condominium as Instrument No. D293197 in November 1991 and July 30, 1998.
[32] Based on the admissions, the Reciprocal Agreement is registered on title to both the plaintiff’s and defendant’s property.
[33] The parties do not dispute that the defendant shares certain services and facilities with the plaintiff’s Hotel and commercial condominium corporation set out in the Reciprocal Agreement. When the plaintiff, Espartel, purchased the Hotel, it assumed the benefits, burdens, and obligations on behalf of Polygrand and the commercial condominium corporation as set out in the Reciprocal Agreement. The defendant also admits in its statement of defence that the parties share some facilities such as the underground parking garage and health club.
[34] Pursuant to the terms of the Reciprocal Agreement, the parties agreed to share certain facilities and services. The shared facilities as set out in Section VI(I) of the Reciprocal Agreement include, inter alia:
(a) Those parts of the HVAC, electrical and mechanical systems, energy management system, water main service and pumps, sanitary drainage system, storm drainage system, water service, fire line, sprinkler system and Bell Canada service situate in the Buildings as set out in Schedule A, excluding any equipment, including connecting cables, conduits, pipes, benefiting solely the Lands and/or Building or only one Owner and particularly distinguishable from common facilities as set out in Schedule A;
(b) The Road and ramp designated as Par 2, 5 and 6;
(c) Landscaped areas;
(d) The Health Club;
(e) The underground garage.
The Reciprocal Agreement provides that the parties share services that are defined in Section (VI)(2) as inter alia: Without restricting the generality of the foregoing
a) Maintenance and repair, including renovation or reconstruction as necessary, of the Shared Facilities to ensure that same are and will operate in accordance with Acceptable Standards;
b) Preparation and setting of annual budgets by the Owner of the Polygrand Lands with respect to all Shared Services and Shared Facilities and all matters related thereto;
c) Obtaining of any professional services, consultants, opinions, reports and advice with respect to the Shared Facilities; d) Snow removal of Parts 2, 5 and 6;
e) Landscaping.
[35] Paragraphs 6 and 7 of the statement of claim, which are admitted by the defendant, plead as follows:
- Pursuant to the terms of the Reciprocal Agreement, the parties agreed to share certain facilities and services. The shared facilities as set out in Section VI(1) included, inter alia:
(a) Those parts of the HVAC, electrical and mechanical systems, energy management system, water main service and pumps, sanitary drainage system, storm drainage system, water service, fire line, sprinkler system and Bell Canada service situate in the Buildings as set out in Schedule A, excluding any equipment, including connecting cables, conduit pipes, benefiting solely the Lands and/or Building or only one Owner and particularly distinguishable from common facilities as set out in Schedule A;
- The shared services were set out in Section VI(2)to include:
"Without restricting the generality of the foregoing:
a. Maintenance repair including renovation or reconstruction as necessary, of the Shared Facilities to ensure that some are and will operate in accordance with Acceptable Standards;
b. Preparation and settling of annual budgets by the Owner of the Polygrand Lands with respect to all Shared Services and Shared Facilities and all matters related thereto;
c. Obtaining of any professional services, consultant, opinions, reports and advice with respect to the Shared facilities;
d. Snow removal of Parts 2, 5 and 6;
e. Landscaping
[36] The parties do not dispute that each of them is separately metered for any consumption of electricity and water within their respective buildings, nor that each of them is responsible for paying the utility for invoices they receive.
[37] The parties agree that the plaintiff’s Hotel and the defendant residential condominium share utilities with respect to the health club (“Health Club”) and parking garage (“Parking Garage”). They do not dispute that all utilities consumed by the Health Club and Parking Garage are billed to and paid for by the defendant condominium. There is no dispute that there is no submetering for shared facilities.
[38] The parties do not dispute that there are also meeting rooms, a banquet hall and a kitchen (collectively the “Banquet Hall”) which are located on the second floor of the defendant condominium but are owned exclusively by the plaintiff. The Banquet Hall is not part of the shared facility. The utilities consumed by the Hotel on the Second Floor are billed to and paid for by the defendant condominium. There was some dispute, at the trial, as to whether a bridge to the Banquet Hall is part of the Banquet Hall, and this is dealt with more fully below.
[39] Since there are no submeters within the development to measure electricity consumption for the Health Club, and Parking Garage, which are shared, or of the Banquet Hall, the defendant Condominium is billed for the usage of utilities in those areas.
[40] The Reciprocal Agreement does not deal with the Banquet Hall facility.
[41] The parties do not dispute that the Reciprocal Agreement did not specifically set out how hydroelectricity was to be dealt with. They do not dispute that since at least 1998, they have operated under the Utility Agreement under which the cost for hydroelectricity and other costs were allocated as between the parties for the Health Club, the Parking Garage and the Banquet Hall. They inherited the formula by which the respective allocation of costs associated with hydro and the shared costs of the Health Club, and the underground Parking Garage were determined, as well as the electricity consumed by the defendant Hotel as part of the Banquet Hall.
[42] At paragraph 13 of its statement of defence, the defendant admits that the parties had negotiated a Utility Agreement pursuant to which the plaintiff paid for electricity based upon a formula inputted in a spreadsheet, and data inputted by the defendant from utility invoices to calculate the amount the plaintiff was required to pay. The defendant pleads as follows:
The parties therefore negotiated a Utility Agreement pursuant to which Espartel agreed to pay a portion of the Condominium’s invoices for electricity and water (the “Utility Agreement”). The terms of the Utility Agreement are:
(a) The amount Espartel is to pay for electricity and water is calculated pursuant to a formula (the “Formula”). Espartel devised the Formula or, in the alternative, accepted the Formula. Two excel spreadsheets, with built-in formulas, were created to calculate the amount that Espartel will pay for both electricity and water. The calculations contained in the excel spreadsheets were explicitly agreed to by both parties and used for many years.
(b) The Condominium pays all of its electricity and water bills throughout the year, including for utilities consumed by Espartel. At the conclusion of each fiscal year, the Condominium:
i. inputs data from all of the utility invoices it paid into two spreadsheets which calculate the amount Espartel is required to pay for utilities; and
ii. Provides the spreadsheets, and supporting invoices, to Espartel.
[43] There is no dispute that it was the defendant’s Condominium management company that inputted the information from the electricity bills into the Excel spreadsheet.
[44] Based on the admissions made by the defendant in its statement of defence, there was a negotiated agreement in place used by the parties for years and it was the defendant who was responsible for inputting the data in a spreadsheet, with built-in formulas, which would then calculate the amount owed by the plaintiff for electricity each year. At paragraph 13 of the statement of defence, the defendant admits that the spreadsheets “were explicitly agreed to by both parties”. The defendant pleads at paragraph 13 as follows:
The parties therefore negotiated a utility agreement pursuant to which Espartel agreed to pay a portion of the Condominium’s invoices for electricity and water (“the Utility Agreement”). The terms of the Utility Agreement are:
(a) The amount Espartel is to pay for electricity and water is calculated pursuant to a formula (the “Formula”). Espartel devised the Formula or, in the alternative, accepted the Formula. Two excel spreadsheets, with built-in formulas, were created to calculate the amount that Espartel will pay for both electricity and water. The calculations contained in the excel spreadsheets were explicitly agreed to by both parties and used for many years;
(b) The Condominium pays all of its electricity and water bills throughout the year, including for utilities consumed by Espartel. At the conclusion of each fiscal year, the Condominium:
(i) inputs data from all of the utility invoices it paid into two spreadsheets which calculate the amount Espartel is required to pay for utilities; and
(ii) Provides the spreadsheets, and supporting invoices, to Espartel.
Evidence of Scott Thompson
[45] Scott Thompson, the general manager of the plaintiff, Espartel, has been with the Hotel since 1991, when it was branded as Ramada Inn, and being operated by Polygrand. He started out as the catering manager and was promoted along. When the Hotel went into receivership in late 1997, the general manager left, and for a time he reported to Ernest and Young until the hotel was purchased in late August 1998 by Espartel Investments. He became the General Manager in 2015. He became involved with the Reciprocal Agreement or Shared Facilities Agreement in 2015. He may have gone over some of the expenses in 2014 but did not really look after much of the shared facilities.
[46] The Reciprocal Agreement (which he called the Shared Facility Agreement) sets out the cost sharing with a percentage for each of the different areas. His unchallenged and uncontradicted evidence was that, with respect to the Health Club, the residential condominium (the defendant) was responsible for 41%, the commercial condominium was responsible for 3%, and the Polygrand hotel (the plaintiff) was responsible for 56% of the expenses. He indicated that the same percentages applied to the underground parking, road, and ramp area. Thompson testified that the percentages are applied to repairs and items of the shared facilities. He testified that at year end, the plaintiff forwards its Excel spreadsheet to the defendant and in turn, the defendant forwards its Excel spreadsheet to the plaintiff, and the parties paid in accordance with the percentages established in the Reciprocal Agreement.
[47] A site plan dated May 2004 was entered into evidence, and the parties agreed on the truth of the content of the document. Thompson testified that the banquet area, which is located on the second floor of the defendant condominium, includes all areas highlighted by light pink, which would include the banquet hall kitchen, the bridge to the hotel, and cloakroom, public washrooms, courtyard meeting room, and Essex lounge function room. He indicated that the heating would be all of the heating for the area as well as the air conditioning.
[48] The legend on the site map identifies the Banquet Hall and related facilities including the bridge in pink, and the legend on the site map identifies this pink highlighted area as “Hotel Facilities”. I accept Thompson’s evidence, which is unchallenged and uncontradicted by any countervailing witnesses, and supported by the site map, that the bridge to the hotel is included in the Banquet Hall. I find therefore that the bridge was part of the Banquet Hall category on the Utility Agreement.
[49] He testified that the Health Club area is the yellow area which includes the swimming pool, change area and terrace. His evidence that that the bridge is included in the Banquet (Hall) is uncontradicted and unchallenged and supported by the evidence.
[50] As for the pool, Thompson’s evidence that the pool is part of the Heath Club is also supported by the evidence. I therefore accept that the pool was part of the Health Club category on the Utility Agreement.
[51] As for the Parking Garage areas, he testified that though it was not shown on the site plan, the parties shared the costs associated with the lights, doors, plumbing, snow melting and the fans for the shared parking levels. Again, his evidence is uncontradicted and I find the plumbing, snow melting and fans, part of the shared costs in connection with the Parking Garage identified on the Utility Agreement.
[52] There is no dispute that in or around 2016, the plaintiff carried out an electrical retrofit to install energy efficient lighting and fans in the Banquet Hall, Health Club and Parking Garage, which resulted in a change in the wattage. The parties do not dispute that in or around March 24, 2017, Thompson reached out to Jason Marcus, the Condominium’s building manager to inform him of the change in wattage to be inserted into the Algorithm and forwarded a revised Excel Spreadsheet (“Revised Spreadsheet”).
Report of Julian Segal
[53] Robert Horwood testified that it was his own personal experience that a change to lower wattage light bulbs would not result in much saving. The defendant therefore hired Julian Segal Inc., an independent consultant (the “Consultant”), to review the Revised Spreadsheet and provide advice. A report was prepared by Julian Segal Inc., dated February 14, 2017, and revised May 8, 2017.
[54] The parties filed the Segal report which was admitted for the truth of its contents. Segal did a site inspection, reviewed the spreadsheet for the November 1, 2015, to October 31, 2016, fiscal year, and provided a revised spreadsheet, which reflected his findings on the ground.
[55] The parties filed the Report at trial which was admitted for the truth of its contents.
[56] There is no evidence that the plaintiff received a copy of the Segal report.
[57] Segal identified errors in the Report and, in particular, identified in Appendix A to the Report the original calculations on the left-hand side and the corrected calculations (“Corrected Figures”) on the right-hand side. Both the parties accept the Corrected Figures.
[58] The Report identified that:
(a) for the years 2006 through to 2014, kilowatts (i.e. 0.75) was incorrectly inserted into the Algorithm contained in the Excel spreadsheets rather than watts (0.075).
(b) With respect to the Parking Garage “the actual total wattage including ballast is 150 watts (i.e. 0.150)” was not included previously in the formula.
[59] Segal concluded that for the period of January 1, 2016, to December 31, 2016, the incorrect calculations had charged back 437,492.74 units (kWh) to the Hotel when in fact, it should have only been 254,949 units.
[60] The parties have accepted Segal’s conclusions.
[61] There is no dispute that the defendant agreed to revise the spreadsheets for electricity payments from 2016 going forward. There is no dispute that the correction was based on the corrections suggested by Segal in his report.
[62] The defendant ultimately accepted the Revised Excel Spreadsheet and the amount of $142,785.34 initially claimed by the defendant from the plaintiff was reduced to $28,022.50. This amount was paid by the plaintiff for 2016 and accepted by the defendant.
[63] Based on Segal’s findings, which are accepted by the parties, I accept that the conversion of the bulbs from watts to kilowatts, was not done and there is no evidence that it was ever done in the past. In the result, when the plaintiff carried out the retrofit in 2015, the wattage in the banquet hall for a 14-watt lamp, which was indicated to be 0.14 in the spreadsheet, should have been 0.014 kilowatts, and similarly, in the area of the Health Club, the lamps indicated to be 0.25 kilowatts ought to have been 0.025 kilowatts.
[64] In addition, Segal identified what he called a “major discrepancy” in the Parking Garage area. He queried whether the lamps were possibly indicted as 24 watts and identified that they were actually 150 watts, or 0.150 kW. While, at the trial, Horwood questioned the inclusion of the wattage, the parties in fact agreed that the content of the report was true. Moreover, Thompson testified that the defendant did in fact provide a Revised Spreadsheet based on the information provided by their engineering study with the correct wattage of the bulbs for hydro cost for the November 1, 2015, to October 31, 2016, year, and the amount that the plaintiff owed for hydro was $28,022.50 as opposed to $142,785.34. He testified that the wattage was missing in the original calculation for the Parking Garage from the year before which meant a significant difference in wattage used in the garage from 560,640.00 KWH in the original as compared to 57,816.00 in the revised version. The hotel paid the $28,022, which was accepted by the condominium for 2016. Horwood agreed that in 2017, the plaintiff paid 24,728.23 for hydro based on the on the corrected calculations. He admitted that the hotel paid $20,484.57 in 2018, $20,701.33 in 2019, and $24,340.20 for 2020, all based on the corrected calculations.
[65] The inclusion of the wattage for the lightbulbs in the Parking Garage areas is also consistent with the purpose of the spreadsheet which is headed: “Hydro costs for the period November 1, 2015, to October 31, 2016/Calculation of hydro cost recovery from Espartel”. There is no other reasonable inference to be drawn from the evidence, and Segal was in the best position, having done a site inspection, to make a determination of the wattage of any lamps used, which he did, and, on the evidence, his conclusion was accepted by the parties.
[66] I therefore accept, on the evidence, as accepted by the parties by the concessions made and their conduct following receipt of the Segal report, that the spreadsheets used to determine the amount that the plaintiff was to pay incorrectly noted the wattage for the lamps in the Parking Garage areas as 24 watts when it ought to have been 150 watts (0.150 kW).
[67] Based on the report of Segal who actually conducted a site inspection, I make the following findings of fact, which affect the information in the second half of the Utility Agreement:
i. The Banquet Hall has 14-watt LED screw-in lamps installed in the old parr 75-watt fixtures.
ii. The (banquet) function rooms have 16-watt LED lamps installed in the old parr 75-watt fixtures.
iii. The Health Club has 33 fixtures with a total of 131 lamps of 25 watts, and after adjustments for the T8 fixtures, results in 29 watts which includes the electronic ballast current.
iv. With respect to the Parking Garage, the total number of fixtures on P1 and P2 is 64. Light fixtures installed the garage areas are 150-watt HPS (High Pressure Sodium).
Evidence of Mustafa Younis
[68] Mr. Younis holds a BA and MBA and has been the financial comptroller with Espartel since 2017. He has a thirty-year career in the hotel industry. He was a financial comptroller at another hotel before that for 11 years, and before that at a Ramada Hotel in Toronto, for 5 years.
[69] When he looked at the Excel spreadsheet for the year ending October 31, 2016, his main concern was to make sure that Espartel’s share, which was a percentage, was properly allocated to the right category. He also checked to ensure the amount of the invoice and the dates matched on the Hydro sheet. Thompson had advised him that they should be receiving a saving advised from the lighting retrofit but there was no change. The invoice was consistent with the previous years. There were no issues or concerns raised by the former controller regarding the wattage or the Excel spreadsheet. He did not notice any errors.
[70] In August 2017, he attended a meeting with Thompson. Prior to the meeting they had requested a revision of the wattage and when they received that invoice, the defendant requested the meeting. They were informed that there was a mistake in the hydro consumption calculation and that it was in favour of the hotel. They were told that should have been 0.075 instead of 0.75. and that the condominium would only go back two years because of statutory period. They requested a revised spreadsheet showing the corrections. The condominium prepared the revised spreadsheets. They did not make any changes to prior to 2015.
[71] The plaintiff has quantified the amount of overpayments made for each year from 2006 to 2015 with one or both errors corrected as follows:
| Year | TOTAL PAID | ERROR 1 | Errors 1 & 2 |
|---|---|---|---|
| 2006 | $ 78,561.16 | $27,766.53 | 14,473.37 |
| 2007 | $ 86,621.18 | $35,762.57 | 22,452.67 |
| 2008 | $ 81,940.72 | $33,811.64 | 21,194.06 |
| 2009 | $ 87,124.67 | $35,950.72 | 22,534.89 |
| 2010 | $ 94,072.99 | $38,837.54 | 24,388.01 |
| 2011 | $ 95,444.39 | $39,403.71 | 24,743.54 |
| 2012 | $ 101,436.59 | $41,877.56 | 26,296.99 |
| 2013 | $ 105,178.83 | $43,422.52 | 27,267.15 |
| 2014 | $ 115,403.86 | $47,644.33 | 29,869.48 |
| 2015 | $ 121,300.88 | $50,078.42 | 23,806.12 |
| Total | $967,085.27 | $394,555.54 | $237,026.28 |
| Total owing | $572,529.73 | $730,058.99 |
[72] Horwood’s discovery evidence read in at trial included an admission that the errors are contained in all of the calculations for the period claimed by the plaintiff. By their conduct and the acceptance of the conclusion in the Segal report, there were two errors in the Excel spreadsheets, or Utility Agreement, which resulted in the plaintiff overpaying for hydroelectricity. At trial, Horwood testified that the sole reason that the defendant has not reimbursed the plaintiff for any amounts earlier than 2016 is due to the statute of limitation. He admitted that the defendant has benefitted from the overpayment.
[73] I do not accept counsel for the defendant’s argument that the defendant does not admit there were errors in the spreadsheet from 2005 to 2015. Counsel for the defendant takes the position that the agreement was the spreadsheet and that the parties looked at it every year, and then they moved on to the following year. Counsel for the defendant argued that while the consultant retained by the defendant pointed out what he called, mistakes in the algorithm, and that the defendant accepted his report and going forward would deal with the spreadsheet in a different manner, the defendant has put forward no good reason, save for possible limitation argument, why the overpayments should not be recovered by the plaintiff. I have dealt with the claim for set off, below.
[74] The defendant argues that there are no mistakes in the spreadsheet because there is nothing to compare it to. The defendant argues that the court can only rectify the Utility Agreement only after determining what the original agreement was. I disagree. I accept the unchallenged and uncontradicted evidence of Thompson that the PDF spreadsheet that what he received was an invoice. On discovery, Horwood himself referred to it as a “contract” as evidenced from the read ins. At trial, he admitted that the Utility Agreement is what is contained in the excel spreadsheet. At trial, Horwood in fact admitted that on the bottom half of the document, the numbers did not change year after year. Additionally, the defendant has already admitted in its pleadings that that was the agreement between the parties. It cannot now resile from that admission. I also find that there was no negotiation once this invoice was forwarded from the defendant to the plaintiff with the hydro bills. On the evidence, the only time that the plaintiff asked that the invoice/Utility Agreement be amended was after the 2016 retrofit to reflect the lower wattage bulbs.
[75] There was no “negotiation” of the shared services or the percentage allocation. What was “negotiated” was any item that should not be included or what required an explanation as to how it relate to shared. I accept that there are instances where expenses are alleged to be shared costs and the parties required clarification to determine whether the item was authorized, or whether it relates to the shared facilities. The Reciprocal Agreement refers to a basket of repair, maintenance and professional services expenses that the parties were obliged to share, however those items are not before me for determination.
[76] Horwood himself made a number of admissions with respect to the Utility Agreement, or spreadsheet. With respect to the Banquet Hall, he did not dispute that the calculation included the number of light bulbs, times the wattage of the light bulbs, times the number of hours per day, times the number of days in the year. He agreed the same would be for the Health Club. He admitted on cross examination that the wattage should have been 0.075 and not 0.75, based on the Segal report. He indicated that there had been an improper conversion from watts to kilowatts
[77] With respect to the Revised Spreadsheet, Horwood admitted that corrections were made to the Banquet Hall calculation to take into account the change by the Hotel (plaintiff) to the 16-watt lightbulbs as well as a change from to watts to kilowatts as per Segal’s report. He admitted that the defendant made the corrections identified in the Segal Report. With respect to the Parking Garage, the correction of “44 x 15” was made. He admitted that the defendant also made the condo changes for the fans indicated by Segal, who queried the 24 watts stood for wattage and changed it to 150 watts. Horwood conceded that the condominium did make the changes identified by Segal who assumed 24 stood for wattage and changed it to 15. He conceded that in the earlier version the wattage had not been converted to kilowatts.
[78] Horwood agreed that the plaintiff was initially asked to pay $142,784.34 for 2016, which was reduced to $28,022.50, and which was accepted by the defendant. He agreed that the defendant is not disputing the amount paid. Horwood admitted that the parties have used the same formula for 2017, 2018, and 2019, and the amounts were accepted. The parties have not yet finalized 2020.
[79] With respect to the original Excel spreadsheets for the period 2006 to 2015 (Tab 16 of Exhibit 1), Horwood admitted that the figures for the Banquet Hall and Health Club should be corrected to reflect the wattage as 0.075.
[80] Given the manifest conversion errors in the spreadsheets for the period in issue, surely the original agreement, whatever it was, did not contemplate that the plaintiff would pay at least two to three times as much a year for the hydroelectricity. There is no dispute that the parties do not know the basis upon which the Excel spreadsheet was created. The court cannot speculate either.
[81] The conversion error identified by Segal appears on all the Excel spreadsheets for the years 2006 to 2016, before the last mentioned was revised.
[82] The defendant has admitted that there was a conversion from 2006 to 2015 in the failure of converting from watts to kilowatts.
[83] In its statement of defence, the defendant admitted at paragraph 13.a of its defence that the parties negotiated a Utility Agreement and the amount the plaintiff “is to pay for electricity and water is calculated pursuant to a formula” and that the “(t)wo excel spreadsheets, with built-in formulas, were created to calculate the amount that Espartel will pay for both electricity and water”. There is no evidence before the court that this “built-in” formula changed at any time. In Minutes dated August 29, 2017[^4], of one of the defendant’s board meetings, the defendant acknowledged the error with the formula disclosed by Segal. The Minutes indicate: “The Board of the Condominium engaged an engineering consultant to review the formula. He uncovered an error in the formula which incorrectly converted the wattage of the bulbs used into kilowatts.”
[84] The defendant has corrected the errors in the Excel spreadsheets based on the corrections identified in the Segal report.
[85] Both Horwood and Thompson testified that aside from the average costs per kWH, everything on the bottom of the spreadsheets remained the same, which is evident from the spreadsheets at tab 16 of Exhibit 1.
[86] On the evidence, the spreadsheets for 2006 to 2015 contain the same errors with respect to the conversion and the Parking Garage. There is no dispute that between 2006 to 2015, the plaintiff paid $967,085.27 to the defendant for its share of electricity.
[87] The plaintiff pleads breach of the Reciprocal Agreement, breach of contract, and unjust enrichment. There is no dispute that the Reciprocal Agreement deals with the Health Club and the Parking Garage, Road and Ramp, which are shared facilities. Horwood admitted as much at trial. However, on the evidence before me, the Reciprocal Agreement does not deal with the Banquet Hall or services exclusively to the retail component. The parties also dispute whether the Reciprocal Agreement governs electricity in the shared facilities. Regardless, I do not accept that the errors in the Utility Agreement which resulted in an overpayment by the plaintiff for electricity, resulted in a breach of the Reciprocal Agreement. In any event, neither party made any submissions to the court on the interpretation to be given to the Reciprocal Agreement with respect to the sharing of costs for electricity in the shared facilities or for the Banquet Hall, retail (commercial) component.
[88] The Reciprocal Agreement governs how the parties would deal with shared facilities, services to be provided to the shared facilities, professionals to be engaged for the benefit of shared the shared facilities, among other things, and the allocation of costs sharing between the plaintiff Hotel (and retail) and the defendant Condominium.
[89] The only evidence before me of a request to correct information in the invoice/Utility Agreement was the request made by Thompson in 2017 to ask the defendant to include the lower wattage bulbs after the 2016 retrofit.
[90] The genesis of the Excel spreadsheet/Utility Agreement cannot be determined from the evidence.
[91] The plaintiff alleges that the Utility Agreements were separate contracts and alleges that the defendant breached the Utility Agreement. The defendant admits in its pleading that there was a “utility agreement” between the parties with a built-in formula to calculate the amount that the plaintiff would pay for electricity. The defendant admitted at paragraph 13.b. ii. of its defence that it was the defendant who was responsible for inputting the data from all utility invoices. Horwood, who testified on behalf of the defendant also made this admission at trial.
[92] I accept, on the evidence that there was, annually, an agreement between the parties, that the plaintiff would pay what amounted to an invoice presented by the defendant for hydro consumed in the areas of the Health Club, Parking Garage and Banquet Hall. Scott Thompson, who testified on behalf of the plaintiff, indicated that the plaintiff only received a PDF document (the Utility Agreement). The plaintiff did not receive a Word version of the Excel spreadsheet. Thompson called the PDF document an invoice. I accept the unchallenged evidence of Thompson that there was no negotiation of the invoice (Utility Agreement). Regardless of how the Utility Agreement came into place, the plaintiff was obliged to pay this invoice. It was valid and binding on the parties.
[93] The admissions made by the defendant in the pleadings and the Agreed Statement of Facts, as well as Thompson’s evidence that the PDF Excel spreadsheet was an invoice, do support the argument that each Utility Agreement was a contract. Annually, the plaintiff agreed to pay the amount indicated for its consumption of electricity. Based on the evidence at trial, the amount owed to the defendant would be reconciled with any amounts that the defendant owed the plaintiff, but that does not take away from the fact that it was an invoice which was expected to be paid. I accept counsel for the defendant’s argument that each Utility Agreement was established each year and the parties would move forward to the next year.
[94] There is no evidence before the court that, apart from the request to correct the errors after the retrofit, there had been any “negotiations” by the parties about the numbers in the spreadsheets. Indeed, Horwood himself admitted that the defendant condominium inputted the data from the invoices at the top, and the bottom of the spreadsheet has remained the same, aside from a variation for the average cost per kWh arrived at annually.
[95] However, given the unique process adopted by the parties in billing the plaintiff for electricity consumption, it is not surprising that the error that existed in the excel spreadsheet, for an unknown period of time, was replicated year after year until Segal pointed it out in 2017. I find that the defendant only discovered the error as a result of Segal’s report. There being no evidence before the court on the origin of the errors, I cannot find that the defendant is in breach of contract.
[96] I do find however that, on the evidence, the elements of unjust enrichment are established. The three elements necessary to establish a claim for unjust enrichment are an enrichment, a corresponding deprivation, and the absence of any juristic reason for the enrichment: Pettkus v. Becker, 1980 22 (SCC), [1980] 2 S.C.R. 834.
[97] With respect to the first two elements, the plaintiff has demonstrated the existence of an enrichment or benefit in the defendant’s hands, and a corresponding deprivation or expense on the part of the plaintiff. The comptroller for the plaintiff, Mr. Younis, testified he inputted the correct wattage into the spreadsheets for the period 2005 to 2015 (tab 16 of Exhibit 1), which were provided to him from the defendant condominium. The parties tendered the spreadsheet as evidence at the trial and agreed on the truth of the content. I accept that the amount that was supposed to have been paid by the plaintiff between 2006 to 2015 is as represented in in the revised spreadsheets and summarized in the plaintiff’s chart, below.[^5] The parties also agree on amounts as calculated, using the corrected information provided by Segal in the spreadsheets revised by the plaintiff.[^6] I find that the plaintiff overpaid the defendant for the period 2006 to 2015. Horwood testified that the defendant did not make the corrections for 2015 because they understood the limitation to be two years and they corrected it two years. He admitted that that was the only reason why they did not correct beyond two years.
[98] The parties do not dispute that by virtue of the Utility Agreement, between 2006 and 2015, the plaintiff paid a total of $967,085.27 towards the shared expenses for hydroelectricity. On the evidence, including the revised calculations in the Excel spreadsheets included in the Joint Document Brief, for the same period of time, the plaintiff should only have paid 237,026.28. The plaintiff therefore overpaid $730,058 for its share of the electricity costs.
[99] The defendant has held the monies paid in error in deprivation of the plaintiff. Although not conclusive, Horwood admitted that the defendant received a benefit as a result of the errors. The benefit to the defendant is apparent from the Minutes of the defendant’s board meeting. As noted in the defendant’s Board minutes from February 27, 2018, tendered as evidence at the trial, “MTCC 993 will not consider reimbursing any omissions older than two years” which, in my view, is also an acknowledgement by the defendant that the omissions extended beyond two years.
[100] I find that it was the plaintiff’s concern regarding the high electricity cost, and the available government incentive, which prompted Thompson to carry out the retrofit in 2015. The plaintiff has therefore demonstrated an enrichment or benefit in the defendant’s hands, and a corresponding deprivation or expense on the part of the plaintiff. The first two elements of the test are therefore easily met.
[101] As for the third element of the test, the absence of any juristic reason for the enrichment, or, put another way, “there is no reason in law or justice for the defendant’s retention of the benefit conferred by the plaintiff, making its retention “unjust” in the circumstances of the case”: Pettkus, at p. 848; and Kerr v. Baranow, 2011 SCC 10, [2011] 1 S.C.R. 269, at para. 40 [Kerr]. In Kerr, at para. 43, Cromwell J. noted the court had adopted a two-step analysis for the absence of juristic reason:
The first step of the juristic reason analysis applies the established categories of juristic reasons; in their absence, the second step permits consideration of the reasonable expectations of the parties and public policy considerations to assess whether recovery should be denied:
First, the plaintiff must show that no juristic reason from an established category exists to deny recovery. . . . The established categories that can constitute juristic reasons include a contract (Pettkus, supra), a disposition of law (Pettkus, supra), a donative intent (Peter, supra), and other valid common law, equitable or statutory obligations (Peter, supra). If there is no juristic reason from an established category, then the plaintiff has made out a prima facie case under the juristic reason component of the analysis.
The prima facie case is rebuttable, however, where the defendant can show that there is another reason to deny recovery. As a result, there is a de facto burden of proof placed on the defendant to show the reason why the enrichment should be retained. This stage of the analysis thus provides for a category of residual defence in which courts can look to all of the circumstances of the transaction in order to determine whether there is another reason to deny recovery.
As part of the defendant’s attempt to rebut, courts should have regard to two factors: the reasonable expectations of the parties, and public policy considerations. [paras. 44-46]
[102] On the evidence before me, the plaintiff has established a prima facie case that there was no basis in law, either contract, common law, or statutory obligation to deny recovery. There is no reason in law or justice for the defendant's retention of the benefit conferred by the plaintiff. The onus shifts to the defendant to show that there is another reason to deny recovery. The defendant’s claim for set off based on the recommendations in the defendant’s consultant electrical engineering report, has been considered in the circumstances, and rejected, for the reasons discussed below. With respect to the second stage of the analysis, at para. 44 of Kerr, Cromwell J. noted:
Thus, at the juristic reason stage of the analysis, if the case falls outside the existing categories, the court may take into account the legitimate expectations of the parties (Pettkus, at p. 849) and moral and policy-based arguments about whether particular enrichments are unjust (Peter, at p. 990).
[103] Having concluded at the first step that the there is no established juristic reasons for the defendant to retain the overpayment, I note that with respect to the second step the court, it is important to consider “the reasonable expectations of the parties and public policy considerations to assess whether recovery should be denied”: Kerr, at para. 43. From the evidence, the reasonable expectation of the parties was that each party would pay their share of the electricity bill based on the percentage allocation from the Reciprocal Agreement and a longstanding agreement.
[104] I disagree with the defendant that the plaintiff is attempting to “retroactively amend” the Utility Agreement to recover the overpayment. This is not correct. The plaintiff is merely attempting to enforce the agreement that existed between the parties, one that has been admitted in the defendant’s own pleadings.
ii. What is the applicable limitation period? And is the action statute barred?
[105] In their Agreed Statement of Facts, the parties indicate: “Neither party was aware of the alleged errors until the Report was prepared by the Consultant. The Errors came as a surprise to MTCC 993.” The parties agree that the alleged errors were made known to the plaintiff by the defendant during a meeting that took place on August 22, 2017.
Minutes of a board meeting held by the defendant on February 27, 2018, noted that it was the defendant that discovered the error in the formula and brought it to the plaintiff’s attention. The minutes note, in part: It was also noted it was MTCC 993 who discovered the error in the formula for calculating Espartel's share of the hydro billing (an error which favours Espartel-Ramada) and brought it to their attention.
[106] There was no evidence, at the trial, to contradict the agreed statement by the parties.
Evidence of Thompson
[107] Thompson testified that he had had some dealings with the Utility Agreement before becoming general manager. In 2014, he was asked by his then manager to review expenses and to make sure that the correct amounts were inputted. Before becoming general manager, he had been asked by his former manager to ensure that the individual bills sent as back up were inputted in the spreadsheet properly and that the dates were correct. He understood that the charge for the kilowatt per hour was based on the average of the individual bills. He always received a PDF spreadsheet, which he testified was an invoice. He understood that the invoice indicated the number of light bulbs, times wattage of the bulbs, times the number of number of days in the year.
[108] When he took over as general manager, the hydro bill seemed a little high. On discovery he indicated it was outrageously high. At trial, he indicated that his concern with respect to the electricity went hand in hand with the program offered by the government.
[109] He received spreadsheets, in a PDF format, with attached bills for hydro and electricity, which was essentially an invoice from the defendant. The plaintiff did not fill anything in. There were no negotiations for hydro and water. He would merely go through to ensure that the proper amount was inputted as well as the proper average for the area. He was involved in 2015 with the spreadsheets and Excel spreadsheets. When the hotel was in receivership, he reported to Ernest & Young. Ernest & Young did not raise any concerns regarding the Utility Agreement, the spreadsheet, the wattage calculation, nor did they identify any errors. The defendant was responsible for providing information to the auditor for the joint auditor’s report. Neither he nor the Hotel had any dealings with the auditors. The shared facilities auditors never raised any issues with the hotel. They never raised any questions or concerns regarding errors in the calculations nor did they at any time raise any issue with respect to the wattage.
[110] He testified that the Reciprocal Agreement stipulated that there would be an “Owners’ Liaison Committee” and set out the composition with representatives from the hotel, residential condominium, and commercial condominium, however, to his knowledge, there had never been such a committee since he has been there. There were no annual budgets for the shared facilities. The practice of the parties in dealing with these types of expenses is that the plaintiff would deal with expenses associated with day-to-day operation and would charge back to the defendant, but they would discuss any large capital expenses, and come to an agreement. At the end of the year, he receives the hydro receipts, the Condominium expenses as well as an Excel spreadsheet of all the expenses for the year, with the percentage breakdown from the Reciprocal Agreement. Only hydro and water expenses were included in the Excel spreadsheet. As for other items, he would review them to ensure that they were properly related to the shared facilities and that the correct percentage was being charged and field any questions to the condominium’s accountant. It was the general manager and the accountant who would work on the shared facilities. He did not question the wattage in the Excel spreadsheets nor was he aware of anyone questioning it prior to 2017.
[111] Neither the plaintiff’s comptroller, nor KPMG who carried out audits, identified the error. He always went back to the previous years and the numbers were always similar. When he became the general manager, he noticed the cost of hydro was “quite high”, and he had a study done to see how much money would be saved if they took advantage of the government’s incentive for LED lightbulbs. The study indicated that they would save “a substantial amount of money”. He looked at ways internally to lower the hydro costs by changing the light bulbs to LEDs. The following year, he noted there was no change in the calculations for the wattage for the light. He sent an email to the condominium asking them to adjust the wattage from .75 to .14 in the banquet area, and to adjust the health club area. He also mentioned that the fan should be adjusted as the condo had done a retrofit in the garage area for three hours per day, which they had agreed on, as opposed to 24 hours a day.
[112] On March 24, 2017, Thompson sent an email to the accountant James Marcus indicating, in part:
Hi Jason,
The Electrical usage has to be adjusted which is simple, just change the existing excel formula from 75 watts to 14 Watts in the Banquet Hall and in the Health Club from 75 watts to 25 watts
Banquet Hall old 161 x .75 x 5 x 365 New 161 x .14 x 365
Health Club old 133 x .75 x 16 x 365 New 133 x .25 x 365
Garage Fans need to be adjusted based on the new system implemented with the fans only run a couple of hours per day versus 24 hours
Garage old 15 x .25 x 24 x 366 New should be 15 x .25 x 2 x 366
[113] The condominium’s response was that they did not believe this was how the wattage is calculated and that they would have an electrical engineer review the calculations. He and others were invited to a meeting in August 2017 by the defendant board. He was told that they had the study done, and the calculation for hydro was incorrect, but in their favour, and that the calculations were being redone and they would go back two years. He did not receive a copy of the report at the time.
Evidence of Horwood
[114] I found Horwood to be a candid and credible witness. He was elected to the Board of Directors in 2000 and became president of the board in 2004 or 2005 and has been the president of the board since that time. Horwood has a university degree in Mathematics and Physics. His past employment includes being the Chief Systems Programmer at the University of Montreal and working with the National Energy Board doing operations research. He has created several companies, some listed on the Toronto Stock Exchange.
[115] He testified that on November 9, 2006, the defendant terminated the management contract with Polygrand Management Services. They had been dealing with Lalach Management Inc. and he later learned that were related. The new management company was hired in January 2007. The auditor would receive the hydro bills from the condominium. Information was sent as well as any back up documents.
[116] He has no idea where the spreadsheets came from, but testified it appeared to be a crude way of indicating how the electricity costs would be shared between the hotel and the condominium. The board normally did not see the document. It has been used since he has been on the board. The property manager prepared the spreadsheets and he presumed it was Polygrand Property Management Services before their current property management company, TSE. On cross examination, he admitted that the Hotel (plaintiff) did not have anything to do with inputting the hydro bills. The Excel spreadsheet first came to his attention when the property manager notified him that the Hotel was planning to change the lightbulbs in the banquet area, and they wished to change the arrangement for electricity costs. They were going to lower the electricity costs and wanted the formula adjusted. On cross examination, he admitted that the condominium enters the information on the spreadsheet.
[117] The board hired Segal, and after Segal’s report, which indicated that there were numerous inconsistencies in the manner in which electricity was being calculated, errors in the calculation done for lightbulbs, a major discrepancy in the garage, and a credit that he did not know where it originated, the board determined to hire an electrical engineer to look at the consumption of electricity, and to balance the electricity as a whole between the buildings. The board organized a meeting with the Hotel, and he believes present were Thompson, Younis, the defendant’s property Manager, and the accountant. He testified that the condominium recalculated the amounts and informed the Hotel that they had had the study done. They adjusted 2016, which had not been finalized and adjusted 2017.
[118] A portion of his evidence at discovery was read in at trial. Horwood admitted that a zero should be added to the calculation of the wattage of the bulbs. In response to the question regarding what the decision of the board was to the Segal report, he stated that: “As I recall, we informed the hotel of the error in the original contract. We recalculated it. We called a meeting of the hotel staff and informed them.” He did not know whether the report was provided to Espartel. He was involved in the meeting with Espartel which he believed took place on August 22, 2017. The property manager, Malcolm Marcus attended the meeting as did Scott Thompson and Mustafa Younis, for the hotel Espartel. Horwood testified that they informed Thompson of the error in the wattage being out by a factor of ten, which resulted in in the amount to be reconciled being incorrect. He discussed at the meeting the general amounts for 2016 and 2017. There was no discussion about previous years. The condo first learned of the error with the Segal report, and it was a surprise to the condo and the condo board.
[119] Horwood admitted that the defendant did not know about the error until Segal’s report in May or June of 2017. He admitted that for the past 20 years no one picked up on the two errors identified by the Segal report. He testified that the two errors did not start 20 years ago and presumably were there longer than that.
[120] Horwood, who testified on behalf of the defendant, denied that any of the auditors ever told him there was an error in the spreadsheet. He indicated that that none of the accountants ever told him that there was an error in the calculations. On cross examination, he indicated that he told Younis and Thompson that there had been an improper conversion from watts to kilowatts. He assumed the Excel spreadsheet was sent to the auditors. He admitted on cross examination that no one at TSE Management ever told the board that there was an error in the spreadsheets. He agreed that that no one from TSE Management or the auditors caught the error.
[121] Minutes of the defendant’s board meeting on August 29, 2017, includes the following report:
[122] I agree with the defendant that the ten-year limitation period in the Real Property Limitations Act does not apply in this case. This is not an action to recover out of any land any sum of money secured by a lien or otherwise under the Reciprocal Agreement which would engage s. 23 (1) of the Act as it did in Toronto Standard Condominium Corp. No. 1487 v. Market Lofts Inc., 2015 ONSC 1067 [Market Lofts]. No lien rights have been crystallized by the overpayment and registered against lands under the Utility Agreement. The claim is seeking damages for overpayment for hydroelectricity. Only some of the shared facilities serviced are covered by the Reciprocal Agreement registered on title to the defendant’s property. Additionally, the claim is not in the nature of nature of “an action to recover any land" and thus the Act does not apply. The fact that land is incidentally involved in this case, does not mean that the action is governed by the Real Property Limitations Act: Zabanah v. Capital Direct Lending Corp., 2014 ONSC 2219, aff’d 2014 ONCA 872; Metropolitan Toronto Condominium Corp. No. 1067 v. L. Chung Development Co., 2012 ONCA 845; Market Lofts Inc.
[123] Market Lofts is distinguishable. In Market Lofts, the plaintiff sought damages based on the defendant's failure to meet its obligations under a shared services agreement registered on title. That agreement expressly provided for lien rights. Perell J., noted, at para. 49, that the fact that real property is incidentally involved in an action does not necessarily mean that the action is governed by the Real Property Limitations Act. The jurisprudence has also established that actions for damages for are not covered by the categories of actions encompassed by the Real Property Limitations Act. Metropolitan Toronto Condominium Corp. No. 1067 v. L. Chung Development Co., 2012 ONCA 845, at para. 7; Beniuk v. Leamington (Municipality), 2020 ONCA 238, at para. 51; Market Lofts, at paras. 53-54.
[124] Rather, the two-year limitation period under the Limitations Act, 2002 would apply.
[125] While the Limitations Act, 2002 does not refer expressly to claims in restitution, courts have held that limitation periods in that Act may be applied by analogy, when the claim in restitution is closely analogous to a claim in contract: (Canadian Microtunnelling Ltd. v. Toronto (City), [2004] O.J. No. 4823 (C.A.); Luscar Ltd. v. Pembina Resources Ltd. (1994), 1994 ABCA 356, 24 Alta. L.R. (3d) 305 (C.A.) at paras. 114-120).
[126] Section 4 of the Act presumes a two-year limitation period, which is rebuttable. Section 5 is a codification of the discoverability principle. The relevant sections read as follows:
Basic limitation period
- Unless this Act provides otherwise, a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered.
Discovery
- (1) A claim is discovered on the earlier of,
(a) the day on which the person with the claim first knew,
(i) that the injury, loss or damage had occurred,
(ii) that the injury, loss or damage was caused by or contributed to by an act or omission,
(iii) that the act or omission was that of the person against whom the claim is made, and
(iv) that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it; and
(b) the day on which a reasonable person with the abilities and in the circumstances of the person with the claim first ought to have known of the matters referred to in clause (a).
Presumption
(2) A person with a claim shall be presumed to have known of the matters referred to in clause (1) (a) on the day the act or omission on which the claim is based took place, unless the contrary is proved.
Demand obligations
(3) For the purposes of subclause (1) (a) (i), the day on which injury, loss or damage occurs in relation to a demand obligation is the first day on which there is a failure to perform the obligation, once a demand for the performance is made.
Same
(4) Subsection (3) applies in respect of every demand obligation created on or after January 1, 2004.
[127] In Vu v. Canada (Attorney General), 2021 ONCA 574, at para. 47 [Vu], the Court of Appeal noted:
Limitation periods are driven by when the ‘material facts on which [a cause of action] is based have been discovered or ought to have been discovered by the plaintiff by the exercise of reasonable diligence’: Central Trust Co. v. Rafuse, 1986 29 (SCC), [1986] 2 S.C.R. 147, at p. 224; see also Grant Thornton LLP v. New Brunswick, 2021 SCC 31, at paras. 29, 42. As noted by this court in Zeppa v. Woodbridge Heating & Air-Conditioning Ltd., 2019 ONCA 47, 144 O.R. (3d) 385, at para. 41, leave to appeal refused, [2019] S.C.C.A. No. 91: ‘discoverability means knowledge of the facts that may give rise to the claim. The knowledge required to start the limitation running is more than suspicion and less than perfect knowledge.’
[128] In Aguonie v. Galion Solid Waste Material Inc. (1998), 1998 954 (ON CA), 156 D.L.R. (4th) 222 (Ont. C.A.) at p. 170 [Aguonie], the Court of Appeal noted the principle of discoverability provides that
…a cause of action arises for the purposes of a limitation period when the material facts on which it is based have been discovered, or ought to have been discovered, by the plaintiff by the exercise of reasonable diligence. This principle conforms with the generally accepted definition of the term ‘cause of action’ — the fact or facts which give a person a right to judicial redress or relief against another.
[129] The jurisprudence makes it clear that to determine when a limitation period is triggered the court must decide when all the material facts on which the claim is based were discovered, or ought to have been discovered by the claimant by the exercise of reasonable diligence: Aguonie at para. 24; and Lawless v. Anderson, 2011 ONCA 102, at para. 22 [Lawless].
[130] In Lawless, at para. 28, the Court of Appeal noted that what “a prospective plaintiff must know are the material facts necessary to make a claim” and then the limitation period begins to run. The Court reiterated that requirement in Vu, at para. 49, indicating: “Knowing enough facts means knowing the ‘material facts’ that are necessary to make the claim: Lawless, at para. 28”.
[131] It is a test is of “reasonable discoverability” and not “mere possibility of discovery”: Crombie Property Holdings Ltd. v. McColl-Frontenac Inc., 2017 ONCA 16, 406 D.L.R. (4th) 252, at para. 35 [Crombie], citing Van Allen v. Vos, 2014 ONCA 552, 121 O.R. (3d) 72, at paras. 33-34.
[132] In the recent Supreme Court of Canada decision of Grant Thornton LLP v. New Brunswick, 2021 SCC 31, 461 D.L.R. (4th) 613, the Court at para. 3 stated “a claim is discovered when a plaintiff has knowledge, actual or constructive, of the material facts on which a plausible inference of liability on the defendant’s part can be drawn.” The Court went on to state, at para. 46:
The plausible inference of liability requirement ensures that the degree of knowledge needed to discover a claim is more than mere suspicion or speculation. This accords with the principles underlying the discoverability rule, which recognize that it is unfair to deprive a plaintiff from bringing a claim before it can reasonably be expected to know the claim exists. At the same time, requiring a plausible inference of liability ensures the standard does not rise so high as to require certainty of liability (Kowal v. Shyiak, 2012 ONCA 512, 296 O.A.C. 352)
[133] The defendant’s case of Scalamogna v. Di Toro, 2018 ONSC 6565 is distinguishable. On the motion for summary judgment on an action for misrepresentation by siblings in relation to the market value of estate property, the motion judge, Cavanagh J., noted the contradictory evidence of one of the plaintiffs, whose claim, he determined was statute barred. Cavanagh J. found that it was that plaintiff who had requested the valuation in 2008, had given evidence that she read the report and that she trusted and relied on her sisters and her lawyers. He concluded that the plaintiff’s claim was discovered on or about April 30, 2008, when she received and read the valuation report.
[134] The defendant also relies on Mitchell v. Pytel, 2021 ABQB 403 which is a decision of W.N. Renke J. of the Alberta Court of Queen's Bench. That case dealt with Alberta’s Limitations Act, R.S.A. 2000, c. L-12 and the jurisprudence interpreting the three elements of discoverability in s. 3(1)(a) of the Act[^7]. That section has some elements of the Ontario statute but is different than s. 5(2) of the Ontario statute.
[135] The defendant argues that any “so-called errors were discoverable when the plaintiff made the electricity payments” and the limitation period for mistaken payments begins to run from the date the payment was made. The defendant argues that the facts in BNSF Railway Company v. Teck Metals, 2020 BCSC 1133, are analogous to the facts of this case and relies on this case in support of the prescription of the limitation period. I disagree. On the evidence before the trial judge, at one period, the defendant billed the plaintiff by mistake and the plaintiff paid. On a separate occasion the plaintiff paid in ignorance of its responsibilities. Yet, during a third period of time, the plaintiff overpaid despite pointing out to the defendant, on numerous occasions, that they were wrong. In my view, that case is fact specific. The trial judge noted at para. 264: “There is an abundance of evidence that BNSF could have and should have known of its mistake as far back as 1990. There is an abundance of evidence that it was in BNSF's interest to monitor and audit its systems to in the pursuit of profitability.” The trial judge refers to a number of factors which he found would have revealed the errors noting at para. 265 that: “In the context of unique contractual arrangements, the overall value to BNSF of the Cominco relationship and the obligation of BNSF as a public company to provide audited financial statements to its shareholders and the investing public, reasonable due diligence would have revealed to BNSF the errors that it complains of in this action.” There were other factors referred to by the trial judge referable to the nature of the business operation of the corporation, among other factors.
[136] In the present case the plaintiff did have auditors and professionals, but no one caught it, not even the defendant or the defendant’s agents. The defendant has acknowledged that it brought the errors to the plaintiff’s attention.
[137] In assessing the plaintiff’s state of knowledge in this case, Thompson’s concern in 2015 that the electricity was high or even “outrageously high” did not in and of itself amount to a suspicion that the plaintiff was being overcharged. The parties had employed the same process for well over a decade. The expenses were consistent with previous amounts paid. No one in the previous 15 years had raised the possibility of overpayment as an issue, not even the professional property management company used by the defendant to input the data nor the professional auditors for the shared facilities. On its face, the error is not apparent.
[138] While in some cases suspicion may trigger that exercise as was the case in Crombie, that case is distinguishable as the motion judge concluded that the claims were readily available and discoverable.
[139] On the evidence before me, this case is most similar to Van Allen v. Vos, 2014 ONCA 552, 121 O.R. (3d) 72 [Van Allen], and the principle of “reasonable discoverability” would apply. In that case, the parties were partners in a dental practice for 20 years, but it was only after the termination of the partnership that the plaintiff’s accountant discovered that the profits of the partnership had not been distributed in accordance with the parties’ agreement for several years. The Ontario Court of Appeal held that under section 5(1)(b) of the Limitations Act, it is reasonable discoverability – rather than the mere possibility of discoverability – that triggers a limitation period: Van Allen at para. 34.
[140] The error was not evident on the face of the Utility Agreement or invoice. If an error is not apparent on the face of documentation (i.e., error in conversion of wattage in a formula) then it is not reasonably discoverable and therefore the limitation period under section 5(1)(b) is not triggered: Van Allen, at para. 34.
[141] The evidentiary threshold for a “reasonable explanation on proper evidence” as to why the claim could not have been discovered through the exercise of reasonable diligence is low, and the plaintiff’s explanation should be given a generous reading and considered in the context of the claim: Morrison v. Barzo, 2018 ONCA 979, 144 O.R. (3d) 600, at para. 32. Beyond that though, there is overwhelming evidence of a reasonable explanation and due diligence by the plaintiff. Thompson testified that at various times he was tasked with going through to ensure the bills were inputted correctly. On the evidence before the court, the defendant did input the bills correctly. They even arrived at the correct costs per unit, but in the actual implementation of the formula, though it indicated kWH for all to see, the defendant failed to actually convert wattage from watts to kilowatts. Since the defendant had the Word document and was responsible for its implementation to produce the Utility Agreement, the defendant should have caught the error, but did not. The errors though became imbedded, in a sense, and as the parties suggested, may have existed for 20 years. It no wonder that it came as a surprise to the defendant and to Horwood.
[142] None of the professional accountants, auditors or the management company noticed the errors which were only caught when the defendant retained the consultant Segal. Precluding recovery by the plaintiff due to the failure to retain an expert to review documentation that would have revealed the mistreatment of expenses would be to hold a party to an unreasonably high standard: Van Allen at para. 34
[143] On the evidence, I find that the plaintiff did not know or could not have known, with the exercise of reasonable diligence of the error in the formula which led to the overpayment until August 22, 2017, when the plaintiff’s representatives were advised by the defendant’s representatives of the error discovered by the Segal report. Accordingly, the statement of claim issued on November 21, 2018, was commenced within the two years from when the plaintiff knew that it had suffered a loss or damage, that the defendant had caused the loss or damage, and that the defendant would not pay beyond two years. I also take the following findings of facts into consideration:
i. The agreement by the defendant that “Neither party was aware of the alleged errors until the Report was prepared by the Consultant.”
ii. The defendant was responsible for inputting the information from the utility invoices into the Excel spreadsheets.
iii. The defendant was responsible for paying the utility company.
iv. The plaintiff did not enter any information in the Excel spreadsheets.
v. The Excel spreadsheet had a built-in formula to calculate the amount that the plaintiff was required to pay annually, after the information was inputted by the defendant.
vi. The original Excel spreadsheets between 2006 to 2015 all resemble the Utility Agreement/invoice below. There is no dispute that the defendant inputted the data from the invoices from the utility company. All the original invoices refer to kWh as the unit of measurement for the energy. The rate for calculating the monetary amount for the usage is noted on all the Utility Agreement to be “Average Cost per kWh”.
vii. There is no dispute between the parties that the formula at the bottom half of the Excel spreadsheet/Utility Agreement stayed the same, and the only thing that changed annually was the “Average Cost per KWH” number which was arrived at based on the average of all the bills inputted for the year. The bottom half of the document under the heading “Electrical Operating Costs”, which is same for all the years at issue, also indicates a measurement of “kWh”.
viii. Despite the conversion error in the 2016 Excel spreadsheet reviewed by Segal, he noted that the actual monetary value of a kWh (unit) cost of $0.160096 based on the electricity accounts for the previous year’s consumption appeared to be correct on the spreadsheet. In fact, this is also the case with respect to all of the original Excel spreadsheets/Utility Agreement (tab 16, Exhibit 1). That is, the actual monetary value of kWh (unit cost) was correct for each year: 2006 -0.0970006; 2007 -0.097128; 2008 -0.091664; 2009 -0.097433; 2010 -0.105478; 2011 -0.107015; 2012 -0.113734; 2013-0.117930; 2014 -0.129051; 2015 -0.136007. Since the unit cost per year was arrived at by averaging all the bills from the utility company, this signaled that the defendant had properly entered the data from the bills. It is the unit price that is then used to calculate how much the plaintiff owed based on the formula on the second half of the page. The actual monetary value remained the same in the revised, corrected spreadsheets tendered into evidence by the plaintiff (tab 17, Exhibit 1). As the unit cost is correct and the bottom half of the Utility Agreement, indeed the entire document, indicates that energy is being measured in kWh, I find that it is not apparent on the face of the Utility Agreement that there was an error in the formula.
ix. I accept the uncontradicted and unchallenged evidence of Thompson that the plaintiff only received a PDF invoice (Excel spreadsheet). I can only assume that since the plaintiff was not able to input any numbers to run the formula, the error would have been even less obvious to the plaintiff.
x. Even though it was the defendant and its agent (i.e., management) inputting the figures, the defendant was not aware of the errors.
xi. Horwood received the Excel spreadsheets from management when the plaintiff requested changes to reflect the lower energy bulbs before Segal was retained. Despite his education background (a degree in Mathematics and Physics) and work experience (National Energy Board), Horwood himself did not identify the errors. He first learned about the error because of the Segal report. It came as a surprise to him and the board.
xii. Horwood, the President of the board, and member of the board of directors of the defendant residential condominium since 2000, would have had access to the defendant’s budgets. He testified that the error was a surprise to him.
xiii. The auditors who prepared the shared facilities auditors report did not identify the error.
xiv. KPMG, who carried out financial audits for the plaintiff, did not identify the error.
xv. There is no evidence before me that any of the former managers for the plaintiff was aware of the conversion error in the Utility Agreement.
xvi. Segal identified a credit of 118,524.90 kWh in 2016 of unknown origins, which was not explained by the defendant at trial.
xvii. I accept the uncontradicted and unchallenged evidence of Thompson as to the informal process developed by the parties for dealing with day-to-day and major capital expenses. On the evidence, the shared facilities committee with representatives of both parties contemplated by the Reciprocal Agreement was not put in place. There was no shared budget for the shared facilities.
xviii. The plaintiff was not made aware of the error until August 2017 when its representative attended a meeting requested by the defendant’s board.
xix. Although Thompson thought the electricity costs were high, and even outrageously high, on the evidence, it was reasonable of him to consider these costs, as he did, taking into account the fact that amounts paid were consistent with what was paid in previous years.
xx. That the plaintiff did not know and could not have reasonably known of the overpayment is fatal to the defendant’s arguments.
xxi. Both sides operated for years without being aware of the conversion error in the formula. Horwood admitted that it goes back even beyond the years in issue. To conclude that the plaintiff knew or ought to have known of the error when the very party who had responsibility for inputting the information in the Excel spreadsheets, had access to the Word version of the document, and paid the invoices from the utility company, did not discover the error until the report of Segal, would be manifestly unjust.
iv. Is the Defendant Entitled to Claim a Set Off?
[144] The defendant seeks to set off any estimated underpayment in electricity and water costs against the damage award, on the strength of a report of a consultant electrical engineer. The defendant argues that the electrical engineer identified that the defendant was paying to heat the pool, the booster pump for the pool water, all the HVAC, as well as a lot of the second-floor area and the pool areas.
[145] In Telford v. Holt, 1987 18 (SCC), [1987] 2 S.C.R. 193 at para. 34, the Supreme Court of Canada articulated five principles of equitable set-off outlined in Coba Industries Ltd. v. Millie’s Holdings (Can.) Ltd., 1985 144 (BC CA), 65 B.C.L.R. 31 (C.A.) at 22 as follows:
The party relying on a set-off must show some equitable ground for being protected against his adversary’s demands: Rawson v. Samuel (1841), Cr. & Ph. 161, (1841), 41 E.R. 451 (Eng. Ch. Div.).
The equitable ground must go to the very root of the plaintiff’s claim before a set-off will be allowed: [British Arzani (Felixstowe) Ltd. v. International Marine Management (U.K.) Ltd., (1979), [1980] Q.B. 137, [1979] 3 W.L.R. 451, [1979] 2 All E.R. 1063 (Eng. Q.B.)]
A cross-claim must be so clearly connected with the demand of the plaintiff that it would be manifestly unjust to allow the plaintiff to enforce payment without taking into consideration the cross-claim: [Federal Commerce & Navigation Co. v. Molena Alpha Inc., [1978] Q.B. 927, [1978] 3 W.L.R. 309, [1978] 3 All E.R. 1066 (Eng. Q.B.), reversed in part [1979] A.C. 757, [1978] 3 W.L.R. 991, [1979] 1 Lloyd’s Rep. 201, [1979] 1 All E.R. 307 (U.K. H.L.)]
The plaintiff’s claim and the crossclaim need not arise out of the same contract: Bankes v. Jarvis, [1903] 1 K.B. 549 (Eng. Div. Ct.); British Anzani.
Unliquidated claims are on the same footing as liquidated claims: [Newfoundland v. Newfoundland Railway (1888), 13 App. Cas. 199 (Newfoundland P.C.)].
[146] The defendant’s evidence to support a defence of set off came primarily from its consultant electrical engineer, Lebedev. The defendant argues that it discovered that the Utility Agreement contained significant omissions, which is the basis for the defence of set-off.
[147] Counsel for the plaintiff questioned whether his evidence was necessary but brought no formal motion to challenge either his credential or the admissibility of his evidence. In the circumstances, Mr. Lebedev was permitted to testify at the trial.
[148] I found Mr. Lebedev to be a credible witness, and he did not exhibit any apparent bias or partisanship in favour of the defendant. I have commented on the usefulness of his opinion to the court, below.
[149] Mr. Lebedev is an electrical engineer and a director with McGregor Allsop. In the past five years he has completed costs sharing analysis for his clients, though this is not his primary duty. He was retained by the defendant to estimate power consumption for common loads shared between the residential condominium, the commercial building, and the Hotel. He was asked to evaluate electrical power consumption for equipment for shared areas. He examined everything except lighting for the shared areas. He also looked at the banquet hall and the bridge which were allocated 100% to the hotel.
[150] The sole issue before the court is the overpayment by the plaintiff for electricity (i.e., lighting), which is the sole area that Lebedev did not examine.
[151] He was given the Excel spreadsheets for the period 2006 to 2016. He was able to find electrical equipment supporting shared facilities which were not mentioned in the spreadsheets. He testified that the plaintiff paid a total of $164,027.68 for electricity consumption, except lighting, but consumed $486,400.62 resulting in a total owed of $322,372.94.
[152] The usefulness of Lebedev’s opinion questionable. His report is based on assumptions and hearsay, and facts not proven at trial. For example, with respect to the Banquet Hall, he calculated the costs of electricity using a blended rate between the various years. He outlined the list of equipment in the Parking Garage and reviewed the site drawings to compare them. He arrived at the number of hours for consumption “based on past experience and my opinion” to arrive at the kwh consumption per year and multiplied by 10 years, assuming that each year is equal, then multiplied by the blended rate, to arrive at the consumption as between the hotel, condominium, and retail component. There is no evidence from any witness as to any agreement, if any, by the parties. He testified that he did not have access to the Banquet kitchen. He relied on images.
[153] He included the elevators and the pressurization fans, located in the stairwell, on the basis that although the equipment was associated with the condominium, they could be used by people attending the Banquet Hall.
[154] On cross examination, he admitted that the pressurization fans are located exclusively in the stairwell of the condominium and are rarely used. He agreed that the energy attributable to the fans would amount to 2 kwh to the plaintiff or equivalent to 22 to 23 cents per year and, over ten years, would amount to approximately $2.20.
[155] As for the elevators located in the condominium, Lebedev indicated that he included the elevators as a result of interviews he had with desk people, and operational people who told him that deliveries could be taken up by elevators and guests to the Banquet Hall could use the elevators. He based the heating and air conditioning consumption on a study done by the University of Toronto for high rise buildings. Horwood testified that the Hotel would use the elevators “from time to time”. Horwood also admitted that the elevator is completely controlled by the condominium. Permission would be required for the plaintiff to use the elevator. The concierge has the key. The defendant has not asked the plaintiff to contribute towards utility. Thompson testified that the Hotel does not have access to the elevators, but there is an agreement that if there is an individual in a wheelchair or there are parcels then they may ask for permission to use the elevator.
[156] Lebedev suggested that the costs should be allocated with the plaintiff paying 11% of the costs and the condominium paying 89%. He admitted, on cross examination, that the elevators were not part of the Reciprocal Agreement. He admitted that he based his assumptions on his interview and indicated that it was not in the scope of his retainer to determine how many times the Banquet Hall (Hotel) guests used the elevator. He conceded that it was an item for the parties to discuss and agree or disagree on. The elevator is exclusive in the condominium building. He agreed that Schedule A of the Reciprocal Agreement lists all the various equipment that is to be shared and apportioned and he agreed that the elevators were not listed there. He indicated that he assigned a shared costs allocation but conceded on cross examination that unless the parties agreed there was no agreement.
[157] As for the wall-mounted heaters in the treadmill room, I accept the unchallenged evidence of Horwood, that these heaters were mounted in either 2016 or 2017, which is outside the time range being reviewed by Lebedev.
[158] As for the Health Club, Lebedev estimated the average consumption based on the size. He estimated that with respect to heating and air conditioning, the consumption was approximately 60,000 kWh. He assigned the plaintiff’s share at 59% or a total of 35,500 kWh. Although Thompson testified that he did not know whether the hotel paid to heat the pool, Lebedev did concede on cross examination, when directed to the Utility Agreement, that it was already included on the Excel spreadsheet, and further admitted that the plaintiff has in fact been paying the amount that he said that it should for this item.
[159] With respect to the pool, Lebedev admitted that it was not included in the Reciprocal Agreement. The Health Club is included in the Reciprocal Agreement and the Amendment. The site map tendered as evidence shows the pool included as part of the Health Club. The Health Club is on the Excel spreadsheet. On cross examination, Lebedev admitted that he did not know that the parties always treated the pool as part of the Health Club. Based on the evidence before me, any shared costs associated with the pool have already been dealt with under the Utility Agreement. To the extent that there are structural items such as the water heater, water pump, fan, and HVAC, there is no actual evidence before the court to indicate that these items are not already included and in fact, I prefer Thompson’s uncontradicted evidence on these items. I note for example that Lebedev conceded he had not inspected the HVAC system though he had received information that it had not been working for a long time, and agreed with the evidence of Thompson, who had testified that it had not been working for over 20 years. As for the defendant’s witness, Horwood testified at trial that he had no personal knowledge as to whether the equipment in the pool area works.
[160] The evidence of Thompson, which is uncontradicted and corroborated by the site map of the second floor, is that bridge is part of the Banquet Hall. Lebedev was not aware of this fact. Here again, Thompson’s evidence is uncontradicted that the bridge is part of the Banquet Hall calculation, and that the lighting is included in the calculation as well as the HVAC which is included a under heating category. Therefore, the Banquet Hall already being included in the Excel spreadsheet/Utility Agreement, I am not inclined to infer, absent any evidence to the contrary, that the parties have not already taken into account any energy costs in connection with the bridge.
[161] Horwood admitted on cross examination that the Utility Agreement deals with the Health Club and the Parking Garage which are shared facilities. He agreed that the Utility Agreement also deals with heating and HVAC which are part of shared facilities.
[162] Lebedev testified that the booster pump structure in the condominium should be included in the cost sharing. The defendant has not provided any evidence of any agreement between the parties, and accordingly the court will not impose such agreement on the parties, especially in light of the evidence that the Banquet Hall is on the second floor, and the booster pump is required to carry water to floors four and above.
[163] There were numerous other areas where the hearsay evidence relied on by Lebedev was pitted against the uncontradicted evidence of Thompson, or where there were indications that the plaintiff was not paying for electricity consumption, when they were already doing so. Thompson testified on re-examination that the parking machines were installed in 2016. He indicated that the garage exhaust fans are already charged back to the plaintiff as is the standby pump, and sanitary sump pumps which are part of the plumbing (sanitary and sprinkler which he indicates are all located in the Parking Garage). He noted that the electrical room fan is already part of the Utility Agreement. With respect to the Banquet Hall, Thompson testified that the heating and air conditioning were already charged back to the plaintiff. There were no kitchen freezers.
[164] In my view, Lebedev was candid when he suggested that his report presented an opportunity for the parties to discuss and come to an agreement on the various items. Indeed, Horwood, who is the president of the board, testified that he was hoping that the parties would sit down and have a discussion. Surely, therefore, the court is not able to set off amounts where no agreement exists on the items identified in the Lebedev report, and the report, in any event, was based primarily on hearsay evidence not proven at trial.
[165] Horwood himself testified that the electrical engineer (Lebedev) determined that there were a lot of places where electricity was being used which were not being addressed at all. He indicated that the condominium is looking at how they should sit down with the hotel and renegotiate the electricity sharing expenses.
[166] To the extent that the Utility Agreement reflects an estimate of electricity consumption, the court can only enforce the bargain that the parties made. They have, admittedly, applied the same allocation of percentages set out in the Reciprocal Agreement to arrive at the cost sharing for each area. There may in fact be areas where the plaintiff is overpaying, without relief. For example, Lebedev conceded this was the case with respect to snow melting. Thompson testified that though the report indicates the plaintiff should be using 7500 watts a year, in fact the plaintiff was being charged about 37,000, which is an overcharge.
[167] The court will not construct agreements for parties: John D. McAmus, The Law of Contracts (Toronto: Irwin Law, 2020) at pp. 729-730. In ter Neuzen v. Korn, 1995 72 (SCC), [1995] 3 S.C.R. 674 at para. 81, the Supreme Court of Canada cited G. Ford Homes Ltd. v. Draft Masonry (York) Co., 1983 1719 (ON CA), 43 O.R. (2d) 401 (C.A.) at para. 9 with approval to state that it is a “time-honoured caution” that: “…the courts will be cautious in their approach to implying terms to contracts. Certainly, a court will not rewrite a contract for the parties. As well, no term will be implied that is inconsistent with the contract.”
[168] In my view, the defendant has failed to establish, on the evidence, that there are some equitable grounds for being protected against the plaintiff’s demands.
[169] As for the necessity of Lebedev’s evidence, in my view, the plaintiff had good reason to ask the question. Given the issues involved in the case and the agreements between the parties (Reciprocal Agreement and Utility Agreements), and Horwood’s admission regarding possible renegotiation between the parties of the shared electricity expenses, Lebedev’s evidence was not necessary to assist the court. Expert opinion evidence is only admissible if it is (i) relevant; (ii) necessary to assist the trier of fact in drawing appropriate inferences; (iii) not subject to an exclusionary rule; and (iv) given by a properly qualified expert: R. v. Mohan, 1994 80 (SCC), [1994] 2 SCR 9). The Supreme Court has indicated that opinion evidence that does not meet these criteria should not be admitted: White Burgess Langille Inman v. Abbott and Haliburton Co., 2015 SCC 23 at para. 23, [2015] 2 SCR 182.
[170] Since Lebedev was allowed to testify, given the heavy reliance on hearsay evidence and the admissions made at trial, I would give little weight to his opinion and recommendations. In the result, I do not accept his conclusion that the plaintiff ought to have paid $486,400 for other energy consumption, other than lighting. On the evidence, I see no basis for a claim for set off.
VI. DISPOSTION
[171] I therefore make the following order:
i. The statement of claim was issued within the two-year limitation period under the Limitations Act, 2002.
ii. The plaintiff is entitled to judgment in the amount of $730,058.99.
iii. The defendant is not entitled to set off any amounts.
VII. INTEREST RATE
[172] The plaintiff is seeking pre-judgment interest rate in accordance with the Reciprocal Agreement, at a rate of 33% per annum. The defendant submits that as the Utility Agreement does not set out a rate of interest, the prejudgment interest rate in the Courts of Justice Act, R.S.O. 1990, c. C.43, applies. Given my finding that the overpayment is based on a claim of unjust enrichment and not a breach of the Reciprocal Agreement, the plaintiff is entitled to interest on the judgment in accordance with the provisions of the Courts of Justice Act.
VIII. COSTS
[173] If the parties are not able to agree on costs, they may schedule a conference call with my assistant within 30 days, to establish a schedule for the exchange of costs submissions.
A.P. Ramsay J.
Released: August 19, 2022
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
ESPARTEL INVESTMENTS LIMITED
Plaintiff
– and –
METROPOLITAN TORONTO CONDOMINIUM CORPORATION NO. 993
Defendant
REASONS FOR JUDGMENT
A.P. Ramsay J.
Released: August 19, 2022
[^1]: Exhibit 1, Tab 5 - Reciprocal Agreement dated November 25, 1991 [^2]: Exhibit 1, Tab 6: Amendment to Reciprocal Agreement dated September 29, 1995 [^3]: Read in from discovery transcript [^4]: Trial Exhibit 8 [^5]: Tab 16, Exhibit 1, Excel Spreadsheets as originally provided for the period 2005 to 2016 [^6]: Tab 17, Exhibit 1, Revised Excel Spreadsheets from 2006 to 2015 - as revised by the plaintiff [^7]: Subsection 3(1) of the Alberta Limitations Act provides as follows: 3(1) Subject to subsections (1.1) and (1.2) and sections 3.1 and 11, if a claimant does not seek a remedial order within (a) 2 years after the date on which the claimant first knew, or in the circumstances ought to have known, (i) that the injury for which the claimant seeks a remedial order had occurred, (ii) that the injury was attributable to conduct of the defendant, and (iii) that the injury, assuming liability on the part of the defendant, warrants bringing a proceeding.