Legal Blog

Concepts

We frequently review cases that raise some interesting legal concepts, but whose facts are so convoluted or whose issues are so diverse that they are difficult to summarise. Invariably, these cases gravitate to the bottom of the pile. Sometimes, they stay at the bottom and are then discarded; other times, they get appealed and the appeal decisions are usually more focused. We will now review two such decisions, both appealed, so that we can move the cases out of the pile.

Deemed Admission

Rule 19.02(1)(a) states that a defendant who has been noted in default (for failing to file a statement of defence in time) is deemed to admit the truth of the allegations of fact made in the statement of claim. However, we often see allegations in a statement of claim that are not merely allegations of fact. They are allegations of mixed fact and law or, in some cases, conclusions of law. So, what exactly is being admitted when a defendant is noted in default? This question was answered in Paul’s Transport Inc. v. Immediate Logistics Limited, 2022ONCA573.

A transport carrier was suing the “middleman” for deliveries that the carrier had made on behalf of the middleman and for which the customer had paid the middleman. These facts are simple; the procedural machinations, which resulted in three motions and one appeal, were not. Only one issue was interesting to us.

Interest 

The statement of claim pleaded that it was an implied term of the agreement between the plaintiff and defendant that “the amount due and payable to the plaintiff is subject to an interest rate of 2% per month as explicitly stated on each invoice. The plaintiff accordingly states that it is entitled to pre-judgment interest of 2% per month on the outstanding Invoices calculated from the due date of each invoice.” The various motion judges allowed this interest.

The Court of Appeal decided that whether a term can be implied into a contractual arrangement between the parties is not purely a question of fact; rather, it is a question of fact and law. Accordingly, does Rule 19.02(1)(a) apply?

The case of Umlauf v. Umlauf (2001), 53 O.R. (3d) 355 (C.A.) had decided that not only are the facts pleaded in a statement of claim to be taken as true under this Rule, but so too are the conclusions of law pleaded in it. Based on this proposition, once the defendant was noted in default, the defendant would be deemed to admit that the 2% per month interest charge was an implied term of the agreement.

Interestingly, if only because there was little judicial hand wringing, the Court of Appeal merely said that the proposition of law in Umlauf was not good law. Rule 19.02(1)(a) applies only to actual allegations of fact, not statement of mixed facts and law or conclusions of law.

Pyrrhic

In this case, the defendants won the battle over the deemed admissions, but lost the war. In previous motions, in which there were affidavits and cross examinations, one of the motion judges relied on the motion evidence and found as a fact that the defendant had been advised in advance by way of an oral agreement that outstanding balances were subject to a 2% per month interest charge.

This finding had two consequences:

1. Section 4 of the Interest Act, which cuts the interest rate to 5% per year when a written agreement expresses interest for a period less than a year, did not apply. The agreement was oral.

2. Although the deemed admission of facts in the pleadings did not assist the plaintiff, the motion judge’s findings of fact were conclusive.

The Court of Appeal allowed the interest charge.

Condo Dispute

In Mohamoud v. Carleton 2021 ONCA191, a condo unit owner brought an application alleging that the condo corporation contravened (i) ss. 89 and 90 of the Condominium Act because it failed to properly maintain and repair the common elements of the condo building and (ii) s. 135 of the Act because it acted in a manner that was oppressive or unfairly prejudicial, or that unfairly disregarded her interests. The application involved a noise complaint relating to fans located on the roof directly above the owner’s unit.

Merits

A condo corporation need only act reasonably when responding to a unit owner’s complaints regarding common elements. The application judge held that the condo corporation did act reasonably and, given the evidence, that decision was unassailable on appeal.

As to the allegation regarding oppression, the Court said:

“Under s. 135(2) of the Act, the court must determine whether the impugned conduct is, or threatens to be, oppressive or unfairly prejudicial to the applicant or unfairly disregards their interests. The test under s. 135(2) has two prongs. First, the court must assess whether there has been a breach to the claimant’s reasonable expectations. If the answer is yes, the court must then go on to consider whether the conduct complained of amounts to oppression, unfair prejudice, or unfair disregard of the relevant interest.”

The Court held that the unit owner failed on both grounds.

First, the application judge found that the unit owner failed to satisfy the first prong of the test; the condo corporation had acted reasonably and complied with its statutory obligations. Second, even it had not, the evidence, as set out by the application judge, was consistent with the finding that the condo corporation did not unfairly disregard the unit owner’s interests or act in a manner that was oppressive or unfairly prejudicial to her.

The Court listed what the condo corporation had done in dealing with the complaint and noted that the application judge was satisfied that the condo corporation had addressed the complaint in a reasonable manner. Specifically, it met with her, communicated with her orally and in writing, visited her unit on multiple occasions, retained contractors and experts to investigate, and followed the recommendations of the experts. The Court deferred to those conclusions.

Further, as to the complaint that the condo corporation acted too slowly, the Court noted that the corporation tried to address the complaints in a timely manner, took action even when it was contrary to the professional advice that it had received, took the unit owner’s concerns seriously, and spent considerable amounts of money trying to address those concerns.

Costs

Section 134(5) of the Act allows a condo corporation to obtain costs ancillary to a damage award. However, this section applies to a situation in which the corporation is the applicant applying for damages for a breach of the Act, bylaws, etc. In this case, the corporation was a respondent and the section did not apply.

The lawyers for the corporation had refused to produce their time dockets, claiming solicitor-client privilege. The judge stated: “I see no reason why CCC25 could not have produced redacted dockets and, where appropriate, substituted generic descriptions of tasks to make redacted docket entries meaningful.” As it happens though, the unit owner’s lawyers submitted a costs outline claiming fees that were higher than the claimed fees of corporation’s lawyers and, therefore, the judge did not penalise the corporation for not producing the dockets.

At one point, well into the litigation, the corporation offered to allow the unit owner to withdraw her application on a without costs basis. She refused. The judge therefore allowed partial indemnity costs to that point and substantial indemnity costs thereafter. Ultimately, the judge awarded $70,000 in costs. The Court of Appeal did not reverse, or even discuss, this aspect of the decision.

 

Image courtesy of myrfa.

Written by Jonathan Speigel, the founding partner of Speigel Nichols Fox LLP, leads the litigation and construction practices.