



COURT OF APPEAL FOR ONTARIO

CITATION: Kilitzoglou v. Curé, 2018 ONCA 891

DATE: 20181108

DOCKET: C63816

Juriansz, Brown and Huscroft JJ.A.

BETWEEN

Helen Kilitzoglou

Plaintiff/Defendant

by way of counterclaim

(Respondent)

and

Shannon Curé and Tanya Curé, personally and as
    Estate Trustees of the Estate of Albert Curé, deceased

Defendants/Plaintiffs

by way of counterclaim

(Appellants)

Margaret Rintoul and Aly Virani, for the appellants

Leo Klug, for the respondent

Heard: September 20, 2018

On appeal from the judgment of Justice Hugh K. OConnell
    of the Superior Court of Justice, dated April 26, 2017.

Juriansz J.A.:

A.

INTRODUCTION AND BACKGROUND

[1]

The appellants, Shannon Curé and Tanya Curé, are estate trustees. They
    appeal personally and in their capacity as trustees of the estate of their late
    father Albert Curé.

[2]

Albert was a businessman who controlled a number of companies. The
    respondent, Helen Kilitzoglou, was an employee of one of the companies, Alca
    Design Ltd.
At the time of Alberts
    death, Helen was responsible for operating one of Alcas manufacturing
    facilities.
Helen also had a business, Life Line Manufacturing Inc.,
    which leased space and equipment from Alca.

[3]

Albert and Helen became a couple in February 1995. Both had children
    from previous marriages. In December 1996, Albert made a down payment of
    $140,000 on a residence on Westridge Drive in Vaughan. The residence was
    registered only in Alberts name. The balance of the purchase price of $540,000
    was financed by a mortgage, also in Alberts name. Helen paid for the extras.

[4]

In September 1997 Albert and Helen moved into the residence. Albert paid
    the mortgage and other expenses related to the residence. A few years later the
    parties negotiated a cohabitation agreement dated April 26, 2004, but the
    agreement was not signed until September and October 2005. The cohabitation
    agreement required Albert to transfer title of the residence to himself and
    Helen as tenants in common, and Albert made the transfer in August 2005.

[5]

Albert died suddenly in April 2007. His will, dated April 18, 2002,
    appointed his two daughters, the appellants, as estate trustees together with Alberts
    lawyer. The appellants were also the beneficiaries under the will. Helen was
    not a beneficiary, but the cohabitation agreement made available to her the option
    of remaining in the residence.

[6]

This appeal concerns the interpretation and application of articles 7(e)
    and (f) of the cohabitation agreement. These articles deal with Helens option
    to stay in the residence after Alberts death and the costs of maintaining the residence
    if she exercises that option. Articles 7(e) and (f) provide:

7(e) If at the time of CURÉs death KILITZOGLOU and CURÉ are
    cohabiting, KILITZOGLOU shall be entitled to continue to reside in the
    residence for up to three (3) years. CURÉ agrees to include in his will a
    provision to authorize and direct his Trustees to pay the ordinary and reasonable
    costs of maintaining the said residence including mortgage payments if any,
    realty taxes and insurance for the said three (3) years and until the home is
    sold. KILITZOGLOU, may choose to purchase the residence at any time prior to
    the expiry of the three (3) years.

(f) (i) In the event that KILITZOGLOU chooses not to purchase
    the said residence, upon the expiry of the three (3) years, KILITZOGLOU may
    remain in the said residence provided that she pays the sum of ONE HUNDRED AND
    FORTY THOUSAND ($140,000.00) to the residue of CURÉs estate
and thereafter
    pays the ordinary and reasonable costs of maintaining the said residence from
    her own resources
.

Should KILITZOGLOU choose not to reside in the said residence
    or upon vacating the said residence, it shall be sold and the proceeds shall be
    divided as follows:

(a) The sum of (140,000.00) ONE
    HUNDRED AND FORTY THOUSAND DOLLARS shall be paid to the residue of CURÉs
    estate if not already paid;

(b) The balance of said proceeds
    of sale shall be divided equally between KILITZOGLOU and the residue of CURÉs
    estate. [Emphasis added.]

[7]

The main issue on this appeal is what costs are included in the phrase
    ordinary and reasonable costs of maintaining the said residence in article 7(f).
    A review of the parties previous litigation is necessary to understand the
    judgment from which this appeal is taken.

B.

THE FIRST TRIAL

[8]

Article 7 was considered and commented upon by McKelvey J., who presided
    over the first trial between the parties. A review of the reasons of McKelvey J.
    is necessary as the appellants submit that the trial judge erred by purporting
    to decide matters already decided by McKelvey J. As well, Helen characterizes
    certain passages of McKelvey J.s reasons as findings, whereas the appellants
    characterize them as
obiter dicta
.

[9]

The first trial involved several proceedings that were tried together. Helen
    took the position that the cohabitation agreement was invalid and claimed
    support under the
Succession Law Reform Act
, R.S.O. 1990, c. S.26. Helen
    sought an order removing Shannon and Tanya as estate trustees and the transfer
    of Alberts interest in the residence to her. She also sought an order that the
    designation of beneficiaries on Alberts life insurance policy was invalid and
    that the proceeds of the insurance policy should be paid to her. Tanya brought
    an application seeking a declaration that the designation was valid and that she
    and the CIBC were the beneficiaries under the life insurance policy.

[10]

Helen
    also brought claims against the Estate, Alberts accountant, and Alberts
    lawyer for fraud, conspiracy and creating an artificial dividend from one of
    Alberts companies. Additionally, she brought a claim against Shannon and Tanya
    personally, Alberts accountant, and the trustee in bankruptcy, alleging fraud
    and conspiracy arising out of the improper appointment of the receiver manager
    in June of 2007 and consequential improper realization of assets arising out of
    that appointment. Helen claimed damages of $7,500,000, alleging a conspiracy to
    destroy her Life Line business by closing the Alca facility.

[11]

Prior
    to the trial before McKelvey J., Helen abandoned her claim that the
    cohabitation agreement was not legally binding and also abandoned her claim for
    dependents support.

[12]

At
    the first trial there were 33 days of evidence commencing May 21, 2012 and
    ending on July 26, 2013. McKelvey J. rendered judgment on February 14, 2014. He
    rejected all of Helens claims of fraud and conspiracy. He found Helen and Life
    Line were entitled to $72,520 from the Estate for certain business and rent losses
    suffered as a tenant of Alca. As between these parties, he found the
    beneficiary designation of Alberts life insurance policy was valid. He found
    that Helens payment into court of the sum of $140,000 pursuant to an order
    dated February 16, 2010 satisfied the condition in article 7(f)(i) of the
    cohabitation agreement, which required that she pay that amount to the Estate
    should she wish to remain living in the residence after three years. McKelvey
    J. found the Estate was not entitled to an order for partition and sale. He
    also found that Helens option to purchase the residence had expired as she had
    not exercised it within three years of Alberts death.

[13]

Before
    McKelvey J., the Estate acknowledged it was responsible for all the maintenance
    costs of the residence for the first three years following Alberts death as
    stipulated in article 7(e). McKelvey J. dealt with Helens claim for expenses
    she had incurred in maintaining the residence, as well as her claim for certain
    work that needed to be done but had not been done during the first three years.
    At the time of trial, the only work identified in Helens claim that had not
    been completed was the replacement of the roof and windows.

[14]

McKelvey
    J. decided that the aggregate amount of these claims was $84,106.25 and awarded
    Helen judgment against the estate in that amount. He indicated that the funds Helen
    had paid into court should be paid out to the Estate, subject to a set-off of the
    amount he found owing to Helen. McKelvey J. expressed some concern about
    awarding Helen compensation for the cost of replacing the roof and the windows
    when she had not yet incurred the cost of carrying out these repairs. He stated
    at para. 273 that [i]f [Helen] is to receive an award to cover the cost of
    these repairs, there may be an issue as to whether the Estate is entitled to
    any assurance that the repairs are actually carried out in light of the fact
    that the Estate is entitled to share in the proceeds of the home once it is
    sold. He left it to the parties to arrange a further attendance should it prove
    necessary.

[15]

McKelvey
    J., though he considered the issue was not before him, went on to provide his
    views on the application of article 7(f)(i) 
in the hope that it may be of some assistance to the parties at a
    later time. H
e stated that had he been required to, he would have found
    that upon the expiry of three years from Alberts death the Estate would remain
    responsible for the capital repairs relating to the residence and Helen would
    become responsible for the ordinary and reasonable costs of maintaining the
    residence. He would also have concluded that the mortgage payments would remain
    the responsibility of the Estate as Albert had failed to arrange for the
    mortgage insurance required by the cohabitation agreement.

[16]

McKelvey
    J. awarded Shannon and Tanya $83,526.98 in costs payable by Helen and Life Line.

C.

HELENS MOTION AFTER THE FIRST TRIAL

[17]

Helen,
    relying on McKelvey J.s comment that he left it to the parties to arrange a
    further attendance should it prove necessary, brought a motion to reopen the
    trial to permit her to adduce further evidence about the cost of repairing the
    windows and roof. She also sought to vary the reasons for judgment to allow for
    the cost of additional repairs not included in the judgment.

[18]

McKelvey
    J. dismissed Helens motion. He explained that he had included the opportunity
    for a further attendance for the benefit of the Estate, which was subject to a
    judgment for the amount of the repairs, even though they had not been made and
    there might be an issue as to whether [Helen] would perform the repairs once she
    received the funds from the judgment."

[19]

McKelvey
    J. ruled that it was not appropriate to reopen the trial to receive further
    evidence from [Helen] to update the costs estimates given at trial or to claim
    new expenses which were not raised at trial because the evidence could have
    been obtained for use at trial through the exercise of reasonable diligence. These
    claims related to issues which were dealt with in the trial before [him] [and]
    would have to be re-litigated almost in their entirety.

[20]

In
    particular, McKelvey J. noted that Helen had proceeded to trial with estimates,
    which were several years old, for the cost of the roof and window replacements.
    He pointed out that she could have obtained updated estimates and introduced
    them at trial, had she wished to do so. McKelvey J. went on to find that there
    was no acceptable explanation for why the other matters raised in her motion
    could not have been identified and addressed in the evidence at trial. He
    specifically identified Helens claim that the Estate should be responsible for
    remediating mould in the residence as a matter that she could have raised at trial.
    He concluded by adding, The interests of justice requiring finality in this
    litigation outweigh any potential benefit in re-litigating the home expenses.

[21]

As
    for the expenses following the three years after Alberts death, Helen argued on
    her motion that McKelvey J. had incorrectly characterized his comments about
    the allocation of these expenses as
obiter
. She argued that the
    interlocutory order that had consolidated the proceedings for trial left the question
    of who is responsible for capital improvements to the residence for McKelvey
    J. to determine. McKelvey J. found the interlocutory order was overtaken by
    amendments to the relief Helen sought and by the parties formal agreement on
    the issues to be determined at trial. He concluded, I was, therefore, correct
    in concluding that my comments with respect to responsibility for payment of
    capital expenses were, in fact,
obiter
, as indicated in my judgment.

D.

The TRIAL DECISION UNDER APPEAL

[22]

I
    now turn to the trial judgment under appeal. In her amended statement of claim filed
    March 18, 2015 Helen sought a declaration that Shannon and Tanya personally and
    as estate trustees were responsible for all mortgage payments and all capital
    expenses and capital improvements for the residence after the expiry of three
    years from Alberts death, and that her sole responsibility was limited to the
    ordinary and reasonable costs of maintaining the residence. She claimed that
    the capital expenses and capital improvements included mortgage payments, property
    taxes, insurance and all other related operational costs.

[23]

She
    also sought damages in the amount of $750,000 for the breach of the
    cohabitation agreement, and exemplary and punitive damages in the amount of
    $25,000. In their statement of defence, the appellants relied on the doctrine
    of
res judicata
and pleaded that most of Helens claims were
    incapable of being tried in the context of this action as they have been fully
    decided in the judgment of McKelvey J. The appellants took the position that
    Helen was responsible for all costs of the upkeep of the residence commencing
    on the third anniversary of Alberts death, and counterclaimed for payments
    made by the Estate relating to utilities, property taxes, insurance, and
    maintenance after those three years.

(i)

The factual matrix

[24]

Referencing
    the Supreme Courts decision in
Sattva Capital Corp. v. Creston Moly Corp.
,
    2014 SCC 53, [2014] 2 S.C.R. 633, the trial judge considered that the
    surrounding contextual circumstances of the cohabitation agreement included the
    fact that Albert and Helen were common-law partners for some nine years before
    the cohabitation agreement was executed, a relationship he described as entrenched
    and lasting. While the cohabitation agreement included a very wide, sweeping
    release in relation to support, maintenance and property transfer issues,
    Albert knew or should have known that Helens financial circumstances in 2004
    were tenuous, while his were sound. It was Albert who was in a position to keep
    the home maintained up to a reasonable standard. Additionally, on Alberts
    death in 2007 Helen was essentially without funds. The trial judge also considered
    it highly significant that Helen and Albert became one-half owners of the residence
    as tenants in common, which, he said, speaks volumes about the nature of the
    relationship between Helen and Albert and the desire of Albert to take care of
    Helen for the rest of her life via providing her with a home to occupy. He
    added that, in his view, article 7(f)(i) also supported the logical inference
    that Albert wanted to care for Helen for the rest of her life, provided she
    paid the Estate $140,000.

[25]

The
    trial judges finding that it was Alberts intention to take care of Helen in
    this way governed his interpretation of the cohabitation agreement.

(ii)

Capital expenses

[26]

While
    the trial judge characterized McKelvey J.s discussion that the Estate should
    be responsible for the capital costs of the residence after the expiry of three
    years as
obiter
, he set out independent reasons for concluding that the Estate
    was responsible for all capital costs and capital repairs commencing April 10,
    2010, the third anniversary of Alberts death. This conclusion would give
    effect to Alberts intention to take care of Helen for the rest of her life.

[27]

The
    trial judge granted Helen judgment to cover the cost of a list of specified
    capital repairs. These included replacement of the exterior windows and doors
    at an estimated cost of $58,000 plus HST, replacement of the garage doors at an
    estimated cost of $16,274 plus HST, replacement of the HVAC system at the cost
    of $19,246 plus HST, and replacement of the eavestroughs and downpipes in the
    amount of $5,797. He also ordered compensation for the remediation of mould
    damage, resultant painting, and repairs to toilets that could not be fixed by simply
    inserting new plumbing gear but did not quantify the amount of compensation for
    these items. He also declared that repairs to the porch and various walkways were
    capital repairs.

[28]

The
    trial judge found that certain matters, such as the replacement of carpeting, the
    sanding, the painting of wooden floor areas, and the replacement of the oven
    were not recoverable capital expenses, but were part of the ordinary
    maintenance for which Helen was responsible. He also refused Helens claims for
    the installation of new leaf guards on the eavestroughs and for upgraded
    toilets.

[29]

The
    trial judge refused Helens request for a declaration that the Estate was bound
    to pay future capital expenses. He declined to do so because he had no doubt
    that the estate trustees and Helen would not be able to agree on whether an
    expense was capital or non-capital. Therefore he ordered that if the parties
    could not agree in the future, they should bring a succinct application to
    court to determine the issue.

(iii)

The mortgage

[30]

The
    trial judge found that Albert had failed to insure the mortgage and his failure
    rested with the Estate to rectify. He ordered that the Estate pay the
    outstanding balance of the mortgage.

(iv)

Realty taxes and insurance

[31]

The
    trial judge did not think that it would be fair or reasonable to hold the Estate
    100% liable [for the realty taxes], given that Helen and the Estate are tenants
    in common in equal shares and because Helen is the occupier enjoying exclusive
    use of the premises and land. He apportioned the insurance premiums on the
    home on a 50/50 basis to reflect the equity apportionment in the home. He
    said that he saw no reason why this division of payment is unfair, nor why it
    should be borne exclusively by Helen.

[32]

He
    made clear that the apportionment of these expenses on a 50/50 basis applied
    starting on the third anniversary of Alberts death.

(v)

Counterclaim

[33]

The
    trial judge found the Estate was entitled to recoup one half of the realty
    taxes and any maintenance costs it had paid after the third anniversary of the
    death of Albert. He dismissed the remainder of the counterclaim.

(vi)

Bad faith and personal liability of the trustees

[34]

The
    trial judge found bad faith on behalf of Shannon and Tanya on the basis that
    they adopted hardball tactics by trying to force Helen to sell the home. He
    characterized their conduct in denying Helen access to funds to pay the
    mortgage and to make the capital repairs so desperately needed to be high handed
    and reprehensible. He found the use of funds from the sale of Alberts cottage
    to pay legal counsel and to make a distribution to the beneficiaries improper.
    He further found that the disbursements from Alberts holding company, 778910
    Ontario Ltd., breached the interlocutory order dated October 22, 2009
    restricting disbursements without a court order. He ordered Shannon and Tanya
    to reimburse the Estate for money distributed to the beneficiaries and for the
    payments the Estate had made to legal counsel.

[35]

Having
    found bad faith by Shannon and Tanya, he awarded punitive damages against them
    in the amount of $20,000 on a joint and several basis to sanction their conduct.
    He indicated he would consider staying the punitive damages if they paid off
    the mortgage within 90 days. He also held Shannon and Tanya to be jointly and
    severally liable for the funds that they are required to pay pursuant to this
    judgment.

[36]

Finally,
    the trial judge awarded costs to Helen in the amount of $85,000 on a
    substantial indemnity scale to be paid by Shannon and Tanya personally, not by
    the Estate.

E.

ANALYSIS

(i)

Standard of review

[37]

The
    cohabitation agreement in this case is an individually negotiated contract. The
    Supreme Court in
Sattva
set out the standard of review to be applied to
    contract interpretation at para. 50: Contractual interpretation involves
    issues of mixed fact and law as it is an exercise in which the principles of
    contractual interpretation are applied to the words of the written contract,
    considered in light of the factual matrix. Determining the factual matrix or
    surrounding circumstances is a question of fact. Interpreting the contract in
    the context of the factual matrix is a question of mixed fact and law. The
    findings of the trial judge in these areas are accorded deference and an appeal
    court can intervene only where there is palpable and overriding error.

[38]

An
    appeal court can also intervene where there is a question of law. Questions of
    law include the application of an incorrect principle, the failure to consider
    a required element of the legal test, or the failure to consider a relevant
    factor.

(ii)

The trial judge erred in his determination and use of the factual matrix

[39]

The
    trial judge erred in his determination of the factual matrix and in the use that
    he made of it to interpret the cohabitation agreement.

(a)

The factual matrix consists of the surrounding circumstances at the time
    of contracting

[40]

The
    factual matrix consists only of objective evidence of the facts of which the
    parties were aware or ought to have been aware at the time of contracting. The
    trial judge cited but failed to apply this legal principle. He erred in law in
    considering Helens financial circumstances at the time of Alberts death in
    2007 to construe the agreement, which was negotiated in 2004 and executed in
    2005.

(b)

The factual matrix cannot overwhelm the contract

[41]

The
    trial judge committed a more fundamental error. While the factual matrix plays
    a significant role by deepening the courts understanding of the words of a
    contract, the Supreme Court cautioned in
Sattva

that it must
    never be allowed to overwhelm the words of the contract. Contract
    interpretation must always be rooted in the words of the contract itself. The
    trial judge committed an extricable error of law by ignoring this principle. He
    allowed his view of the factual matrix to overwhelm and even contradict the
    words of the contract.

[42]

In
    this case, the trial judge noted that the cohabitation agreement included a
    very wide, sweeping release in relation to support, maintenance and property
    transfer issues. However, he did not review or make any reference to the
    provisions that contained the release. I do so now as article 7(f)(i) must be
    read in light of the whole agreement.

[43]

The
    preamble to the agreement states that the parties intended that their rights
    and obligations with respect to support or maintenance from or for the other be
    determined by the agreement. Article 18 stipulates that the agreement is the
    entire and only agreement between them relating to the matters referred to in this
    Agreement and that there are no written or oral collateral agreements between
    them.

[44]

The
    parties covenanted in article 5.2 that at all times during their relationship
    or upon the death of the first of them to die  each shall be and continue to
    be completely separate and independent from the other as regards the ownership,
    use, enjoyment and disposal of all property of every nature and kind.

[45]

In
    article 6.1 the parties covenanted that they shall each remain financially
    independent of the other and that neither shall have any obligation to support
    the other under any present or future circumstance, statute or rule of law or
    equity in any jurisdiction.

[46]

In
    article 6.2 they acknowledged that each of them may suffer or enjoy drastic
    changes in their respective income, assets and debts, in the cost of living or
    in their health, or changes of fortune by reason of unforeseen factors. In
    light of this acknowledgement they agreed that under no circumstance will any
    change, direct or indirect, foreseen or unforeseen, in their circumstances give
    either of them the right to claim any alteration or variation of any of the
    terms of this Agreement or the terms in any other agreement between them.

[47]

Article
    6.2 also provides the parties acknowledgement that each may be called upon
    during the rest of his or her life to use, either wholly or in part, his or
    her capital for his or her own support and each agrees to do so without any
    recourse to the other at any time.

[48]

In
    article 6.3 the parties each released any rights they had or may acquire to
    maintenance, support, alimony, corollary relief, or any other payment of money
    or transfer of property.

[49]

Article
    7, a portion of which is set out above, dealt with the residence. It provided
    that Albert and Helen intended to live in the residence and that title to the
    property would be held in both their names as tenants in common. Article 7(a)
    provided that their individual household goods and chattels would remain their
    individual property, but that each would include in their will a provision
    granting a life interest over the others household goods and chattels prior to
    distribution to their respective children. Article 7(d) specified that Albert
    had made the $140,000 down payment and that the balance of the purchase price had
    been financed by a first mortgage, which Albert undertook to continue to be
    life insured until the year 2012. It also stipulated that if the property were
    sold as a result of the parties separation or for any other reason, Albert
    would receive $140,000 from the net proceeds notwithstanding title to the
    property, before the remaining net equity would be divided equally between the
    parties.

[50]

The
    next articles, 7(e) and (f), which are the provisions at issue in this case,
    are set out above.

[51]

The
    last provision of article 7, article 7(g), allowed Albert to require Helen to
    vacate the residence forthwith but on doing so he would have to pay her
    entitlement under article 7(d) within 60 days.

[52]

The
    parties in article 8 released all rights each had or may acquire in the estate
    of the other, including any allowance or payment as a dependent from the estate
    of the other under the
Succession Law Reform Act or Family Law Act
,
    R.S.O. 1990, c. F.3.

[53]

Article
    9 provided that if the parties were married at the death of the first spouse,
    the surviving spouse would accept the terms of the will of the deceased spouse
    and would advance no claims against the estate of the deceased spouse.

[54]

Article
    10.1 provided that the present or future debts of Helen would be her
    responsibility alone and that she would repay them in the ordinary course.

[55]

Article
    12 contains a broad and sweeping release by which the parties each released,
    disclaimed and waived all claims and rights he or she may have or may acquire with
    respect to the property of the other.

[56]

Consideration
    of these provisions leaves no doubt that a dominant theme of the agreement is
    that each party would remain financially independent of the other and that
    neither shall have any obligation to support the other under any present or
    future circumstance. Given this dominant theme, emphasized explicitly and
    repeatedly throughout the agreement, it was not open to the trial judge to make
    the inference that Albert wanted to care for Helen for the rest of her life,
    and use that inference to drive his interpretation of the agreement. The
    inference he made stands in stark contrast to the agreement read as a whole.

(iii)

Realty taxes and insurance

[57]

The
    trial judge made a further legal error by interpreting some provisions of the
    contract according to what he considered fair, rather than seeking to give
    the words of the contract their ordinary and grammatical meaning in the context
    of the contract as a whole. Specifically, he apportioned realty taxes in
    accordance with what he thought fair or reasonable and apportioned insurance
    premiums to reflect the equity apportionment in the home. He said he saw no
    reason why this division of payment was unfair. However, it was an error of law
    to fail to apportion these expenses according to the ordinary grammatical
    meaning of the words of the contract.

[58]

Article
    7(f)(i) requires Helen to pay the ordinary and reasonable costs of maintaining
    the said residence from her own resources upon the expiry of three years. In article
    7(e) realty taxes and insurance are included in the ordinary and reasonable
    costs of maintaining the said residence". The phrase ordinary and
    reasonable costs of maintaining the said residence must be given the same meaning
    in articles 7(e) and (f) of the agreement.

[59]

The
    realty taxes and cost of insurance had to be borne by Helen after the expiry of
    three years because the words of the contract, in their ordinary and
    grammatical sense, say so. The trial judge erred by deviating from the clear
    text of the agreement and finding otherwise on the basis of what he considered
    fair.

(iv)

Capital expenses

[60]

The
    trial judge, construing the cohabitation agreement on the basis that Albert
    wanted to look after Helen for the rest of her life, found the Estate was
    responsible for all repair costs he characterized as capital repairs. This led
    to his distinguishing between the various claimed repair costs by classifying
    them as either capital or non-capital in nature. It also led to his inability
    to finally dispose of one of Helens main claims  that the Estate had a
    continuing obligation to pay for capital improvements and capital expenses
    related to the residence as long as she lived there.

[61]

The
    trial judges analysis of Helens claim for capital repairs is flawed. First, the
    trial judge erred by entertaining Helen's claims for repairs that arose in the
    first three years after Alberts death. McKelvey J. had finally adjudicated
    these claims. He had already granted Helen judgment for expenses arising during
    the first three years that she had already paid, as well as for the anticipated
    cost of replacing the windows and roof based on estimates Helen had introduced
    in the trial before him. Moreover, when Helen sought to introduce further
    evidence to update the costs estimates given at trial and to claim new expenses
    that were not raised at trial, McKelvey J. dismissed her motion because she did
    not satisfy him that these matters could not have been raised at trial.
    Accordingly, the trial judge erred by failing to find Helen was foreclosed by
res
    judicata
from renewing in her new action claims for expenses and repairs
    that arose during the three years following Alberts death.

[62]

Second,
    in regard to repairs that arose after three years, the trial judge erred by excluding
    from ordinary and reasonable maintenance what he termed capital repairs. Article
    7(f)(i) makes no mention of capital repairs. Moreover, it is difficult to
    discern the basis upon which he identified repairs as capital or non-capital in
    nature. He explained that the replacement of the garage doors and the repair of
    the walkways and porch were capital items because they were not day to day
    maintenance. Replacement of the carpet and the sanding and painting of floors
    were ordinary maintenance rather than capital expenses because [n]ormal wear
    and tear of occupants degrades carpet, and the wooden floor area was
    notorious for wear and tear. Replacing the oven was also ordinary maintenance,
    but for a different reason: the oven was used exclusively by Helen.

[63]

Having
    provided the parties with no basis for determining who would be responsible for
    future repairs, the trial judge left the main dispute between the parties unresolved,
    requiring them to re-attend on a succinct application every time they
    disagreed about the nature of a repair.

[64]

The
    trial judge arrived at this unsatisfactory result because he commenced his analysis
    on the basis that Albert intended to look after Helen for the rest of her life.
    The agreement, as reviewed above, repeatedly emphasizes that the parties
    intended to remain financially independent of the other and that neither shall
    have any obligation to support the other under any present or future
    circumstance.

[65]

The
    trial judge lost sight of the legal principle emphasized by Rothstein J. at
    para. 57 of
Sattva
:

The interpretation of a written contractual provision must
    always be grounded in the text and read in light of the entire contract. While
    the surrounding circumstances are relied upon in the interpretive process,
    courts cannot use them to deviate from the text such that the court effectively
    creates a new agreement. [Citations omitted.]

[66]

The
    trial judge erred by allowing a faulty factual matrix to overwhelm the words of
    the agreement. He relied on the faulty factual matrix to interpret article
    7(f)(i), ignoring the context of the whole of the agreement, and the whole of
    article 7 in particular. In doing so, he in effect created a new agreement.

[67]

The
    context of the whole agreement and the other parts of article 7 indicate that Alberts
    objective intention was to make only a limited provision for Helen. Albert, in
    the cohabitation agreement, did not give Helen a survivor interest in the
    residence. Albert and Helen were tenants in common. The agreement ensures that
    Albert or his estate would recoup the down payment he had made. The agreement also
    gave Albert the right to require Helen to vacate the residence forthwith, reserving
    to Albert the option to remain in the residence by buying Helen out. Even Alberts
    individual household goods and chattels would ultimately be distributed to his
    children. The agreement, when read as a whole, repeatedly emphasizes the
    parties intentions to remain financially independent with no claims of any
    nature on each others estates. It is in this light that the phrase ordinary
    and reasonable costs of maintaining the said residence must be construed.

[68]

As
    noted above, the phrase the ordinary and reasonable costs of maintaining the
    said residence appears in both articles 7(e) and (f) of the agreement. Article
    7(d), which deals with Alberts obligation to pay the expenses while both were
    living in the house, requires Albert to pay the everyday ordinary and
    reasonable costs of maintaining the residence. The modifier everyday that appears
    in article 7(d) does not appear in articles 7(e) and (f). The logical inference
    is that the ordinary and reasonable costs in articles 7(e) and (f) are not
    limited to everyday costs as they are in article 7(d). Further, the parties
    agreed before McKelvey J. that under article 7(e) the Estate was responsible
    for all repairs to maintain the residence in the first three years without any
    distinction for repairs of a capital nature. The same phrase ordinary and
    reasonable costs of maintenance in article 7(f) has the same meaning.

[69]

The
    language of the agreement states that Helen, if she elects to remain in the residence,
    is responsible for paying from her own resources all the ordinary and
    reasonable costs of maintaining the residence. The words ordinary and
    reasonable protect Helen from demands of the estate trustees that she carry
    out repairs beyond those ordinarily and reasonably required. Although article
    7(f) does not include the costs of any additions or renovations that improve the
    residence, major repairs are required in the ordinary course of maintaining a
    residence. In the ordinary course, furnaces, ovens, and garage doors wear out
    and have to be replaced. These may not be everyday costs, but they are
    readily differentiated from the costs of building an addition to the house or
    performing renovations that improve the residence and go beyond simply maintaining
    it. The trial judge quite correctly decided the Estate did not have to pay for
    the installation of leaf guards on the eavestroughs and for new upgraded
    toilets. These would have been improvements. The agreement does not address who
    would be responsible for capital improvements. In the unlikely event the
    parties agree to effect capital improvements to the residence, they, as tenants
    in common, would share the cost equally.

[70]

Article
    7(f)(i) provides for two conditions precedent to Helens entitlement to remain
    in the residence. To remain in the residence, Helen must pay the Estate
    $140,000 and she must pay the ordinary and reasonable costs of maintaining the
    residence. Should Helen not wish to incur the cost of a major repair reasonably
    required to maintain the residence, she may choose not to do so. But in that
    event, according to the terms of the agreement, she would no longer have the
    right to remain in the residence. Should Helen vacate the residence, all costs
    would be borne equally by the tenants in common until the house is sold
    pursuant to article 7(f).

(v)

Bad faith

[71]

McKelvey
    J. rejected the submission that Shannon and Tanya had acted in bad faith in
    their administration of the Estate. He explained that the circumstances facing
    the Estate provided a compelling explanation why events unfolded as they did.
    Initially, there were limited funds available to the Estate following Alberts
    death. This was complicated by the fact that the business operated by Albert
    failed and went into bankruptcy. There were further problems when Helen
    objected to Shannon and Tanya being appointed as executors of the Estate. The
    court appointed an independent estate trustee and, up to the time of McKelvey
    J.s judgment, the disbursement of funds by the estate trustee was controlled
    by the court. McKelvey J. concluded:

In these circumstances it would be unfair to characterize any
    breach by the Estate of its responsibilities under the cohabitation agreement
    as being egregious or motivated by ill will towards Ms. Kilitzoglou.

[72]

McKelvey
    J.s finding applies to conduct up to the time of the trial before him. After
    the trial before McKelvey J., Shannon and Tanya still had no control over the Estate
    until the removal of the court-appointed estate trustee. The trial judge could
    base his finding of bad faith only on the actions of Shannon and Tanya after the
    removal of the court-ordered estate trustee.

[73]

Part
    of the basis for the trial judges finding of bad faith was the failure of
    Shannon and Tanya to make the capital repairs he had identified and which were so
    desperately needed. As explained above, all the costs of maintenance that
    arose in the first three years had already been adjudicated by McKelvey J., and
    Helen had received funds to repair the roof and windows. Helen is responsible
    for ordinary and reasonable costs of maintenance that arose or do arise after the
    third anniversary of Alberts death. Shannon and Tanyas failure to pay such
    costs could not form part of the basis for finding them to have acted in bad
    faith.

[74]

The
    trial judge also supported his finding of bad faith by relying on the fact that
    Shannon and Tanya disbursed funds from Alberts holding company contrary to Lauwers
    J.s order dated October 22, 2009 and paid out money from the Estate to the
    beneficiaries. Lauwers J.s order was an interlocutory order preventing
    dissipation of the companys funds pending the trial of Helens claim for damages 
    from
the Estate and others arising
    out of their alleged fraud, conspiracy and creating an artificial dividend.
    That interlocutory non-dissipation order ceased to have effect when McKelvey J.
    dismissed Helens claims. T
he disbursement of funds from Alberts
    holding company following the judgment of McKelvey J. cannot support the trial
    judges finding of bad faith.

[75]

The
    main basis for the trial judges finding of bad faith was his view that Shannon
    and Tanya tried to force Helen to sell the residence. He reasoned that Helen
    was not obliged to sell the residence given her payment of the $140,000.00 to
    secure her right to stay as per the agreement. However, article 7(f)(i) provided
    two conditions precedent for Helens right to stay in the residence. Not only
    did Helen have to pay $140,000 to the Estate, she also had to pay the ordinary
    and reasonable costs of maintaining the residence. Given that Helen was not
    paying all of the costs of maintaining the residence, Shannon and Tanya could reasonably
    take the position that she had not fully complied with article 7(f)(i) and that
    the residence should be sold. Their position that the residence should be sold
    could not support a finding of bad faith.

[76]

The
    trial judges finding of bad faith is set aside. Consequently, the trial
    judges orders based on that finding, including the award of punitive damages
    against Shannon and Tanya and the orders making Shannon and Tanya personally
    liable for various matters, fall away.

(vi)

Insurance on the mortgage

[77]

Article
    7(d) required Albert to maintain insurance on the mortgage, stated to have a
    balance of $325,000 at the time the agreement was drafted, until 2012. Albert
    maintained a life insurance policy for $600,000 on which he designated the CIBC,
    as there (sic) interest may appear, and Tanya as the beneficiaries. Helen
    challenged the beneficiary designation of the insurance policy in the first
    action and, prior to the matter being heard, the court ordered the disputed
    life insurance proceeds to be held in trust by a firm of solicitors, after
    which it was entirely paid out by the court-appointed estate trustee pursuant
    to court orders. At the time of the trustees discharge, there remained a
    balance on the mortgage.

[78]

While
    Albert designated the CIBC as a beneficiary on his life insurance policy, he did
    not specifically have a policy of mortgage insurance. If he had arranged mortgage
    insurance, the mortgage would have been discharged. The trial judge quite
    properly found Albert was in violation of the cohabitation agreement and that
    the Estate was duty-bound to pay the mortgage together with any arrears. His
    declaration to that effect is upheld. Further, while the insurance monies were
    exhausted, other monies in the Estate were paid out to the beneficiaries while
    the mortgage remained outstanding. The trial judges order that Shannon and Tanya
    reimburse the Estate for the funds to pay off the mortgage is also upheld.

(vii)

Counterclaim

[79]

It
    follows from the foregoing analysis that the appellants counterclaim must be
    allowed. Helen is liable to compensate the Estate for all ordinary and
    reasonable costs the Estate has paid to maintain the residence after the third
    anniversary of Alberts death, other than payment of the outstanding mortgage.

(viii)

Costs appeal

[80]

Given
    the success of the appellants appeal, their appeal of the trial judges costs
    order against them is moot.

F.

Conclusion

[81]

The
    appeal is allowed. The trial judgment is set aside and replaced with an order
    that:

(i) the appellants, Tanya Curé
    and Shannon Curé, personally and as estate trustees for the estate of Albert
    Curé, are responsible for the payment and discharge of the outstanding mortgage
    on the residence;

(ii) from the third anniversary
    of Albert Curés death for as long as Helen Kilitzoglou remains in the residence
    or until her death, Helen Kilitzoglou is responsible for all ordinary and
    reasonable costs of maintaining the residence, including all costs of realty
    taxes and property insurance, with no exclusion for any ordinary and reasonable
    costs of maintenance on the basis that they are purportedly capital in
    nature;

(iii) Helen Kilitzoglou is liable
    to the appellants, Tanya Curé and Shannon Curé, as estate trustees for the
    estate of Albert Curé, for all ordinary and reasonable costs of maintaining the
    residence paid by the estate of Albert Curé after the third anniversary of the
    death of Albert Curé, other than payment of the outstanding mortgage.

[82]

The
    appellants are entitled to their costs of the appeal fixed in the amount of
    $25,000 inclusive of disbursements and taxes. The appellants are entitled to
    their costs at trial in the amount of $25,478.16, as reflected in the Bill of
    Costs submitted at trial.

Released: DMB NOV 08 2018

R.G. Juriansz J.A.

I agree. Grant Huscroft J.A.

I agree. David Brown J.A.


