



COURT OF APPEAL FOR ONTARIO

CITATION: Hilson v. 1336365 Alberta Ltd., 2019 ONCA 1000

DATE: 20191218

DOCKET: C65298

Doherty, Sharpe and Roberts JJ.A.

BETWEEN

Janet Louise Hilson

Respondent
(Plaintiff)

and

1336365 Alberta Ltd., 1336367 Alberta Ltd.,
1336364 Alberta Ltd., 1320950 Alberta Ltd.,
1336366 Alberta Ltd.,
Ross Charles Lightle

and Barbara Lightle

Appellants
(Defendants)

Jonathan L. Rosenstein, for the appellants

Howard W. Reininger, for the respondent

Heard: October 30, 2019

On appeal from the judgment of Justice Richard A. Lococo
    of the Superior Court of Justice, dated March 26, 2018, with reasons reported
    at 2018 ONSC 1836, 95 R.P.R. (5th) 279.

By the Court:

A.

INTRODUCTION

[1]

The panel that originally
    heard this appeal ordered that the appeal be re-heard by a differently
    constituted panel:
2019 ONCA 653.
That panel withdrew the reasons it had
    released in error after the original hearing. No submissions were made to us
    with respect to those reasons and this panel has not read or considered those
    reasons in coming to the following conclusions.

B.

background

[2]

The respondents claim against the appellants,
    Ross and Barbara Lightle, is based upon certain guarantees. The guarantees
    relate to 25 mortgage loans given by the respondent to the named corporate
    entities formed by the appellants to invest in 25 separate interests in a
    residential real estate development known as Godstone. The mortgages went
    into default and the respondent sued the appellants on their guarantees.

[3]

There were two types of guarantee. The mortgages
    themselves contained guarantees (the covenant guarantees) and the appellants
    executed five separate instruments by which they personally guaranteed the
    amounts owing on the 25 mortgages (the stand-alone guarantees).

[4]

The trial judge found the appellants liable on
    the five stand-alone guarantees, rejecting their argument that the claim was
    barred by the
Limitations Act
,
2002, S.O. 2002, c. 24. He found that as the evidence only proved
    that they had authorized the registration of the 1336367 Alberta Ltd. mortgages,
    they were only liable on the covenant guarantees for those mortgages.

[5]

The respondent had sued the lawyer who had acted
    for her on these and other transactions for negligence. The allegations of
    negligence included but were not limited to failure to obtain proper security
    for her mortgage investments. That action was settled for a global sum. The
    trial judge reduced the amount owing on the guarantees by 50% to account for
    the proceeds of the settlement and to avoid double recovery.

C.

iSSUES

[6]

The following issues arise on this appeal.

[7]

First, the appellants submit that the trial
    judge erred in finding that the applicable statutory limitation period for the
    claim on the stand-alone guarantees was ten years pursuant to the
Real
    Property Limitations Act
, R.S.O. 1990, c. L.15, and not
    the two-year period in the
Limitations

Act
.

[8]

Second, the appellants submit that the trial
    judge erred by reducing the amount owing by only 50% to account for the
    proceeds of the settlement and argue that the proper reduction is 100%.

[9]

Third, by cross-appeal, the respondent submits
    that the trial judge erred by reducing on account of the settlement the amount
    owing by as much as 50%. The respondent argues that there should no reduction
    on account of the settlement, or if there is a reduction, it should only be 28.8%.

[10]

Fourth, by cross-appeal, the
    respondent argues that the trial judge erred in dismissing the claims based
    upon four of the five covenant guarantees.

D.

ANALYSIS

(1)

Limitation Period

[11]

The appellants submit that the respondents
    claim is governed by the
Limitations Act

and, as the respondents claim was brought more than two years after
    the claims on the guarantees arose, her claim is statute barred.

[12]

The trial judge rejected that submission and
    found that the respondent had brought her claim within the applicable
    limitation period, namely ten years, as her claim was governed by the

Real
    Property Limitations Act
,
s. 43(1):

No action upon a covenant contained in an
    indenture of mortgage
or
any
    other instrument
made

on or after July 1, 1894
to repay the whole or part of any money secured by a mortgage
shall

be commenced
    after the later of,

(a) the expiry of 10 years after the day on which
    the cause of action arose; and

(b) the expiry of 10 years after the day on which
    the interest of the person liable on the covenant in the mortgaged lands was
    conveyed or transferred. [Emphasis added]

[13]

The crucial question is whether the stand-alone
    guarantees fall within the emphasized words: any other instrument  to repay
    the whole or part of any money secured by a mortgage.

[14]

Instrument is
    routinely used to describe a formal legal document in writing: P.G. Osborn,
A
    Concise Law Dictionary
, 5th ed. (London:
    Sweet and Maxwell, 1964), at p. 171; David M. Walker,
The Oxford
    Companion to Law
(Oxford: Clarendon
    Press, 1980), at pp. 626-27; Daphne A. Dukelow and Betsy Nuse,
The
    Dictionary of Canadian Law
(Toronto: Carswell, 1991), at p. 523. The word instrument is not defined in
    the
Real Property Limitations Act.

[15]

In support of their argument that instrument should
    be given a narrower meaning that does not embrace the stand-alone mortgage
    guarantees, the appellants make two submissions.

[16]

First, they submit that the language of s. 43(1)
    must be read in the light of the circumstances that existed at the time of its
    predecessors enactment in 1939 and that instrument should be narrowly
    interpreted to deal only with those specific circumstances.

[17]

Second, they argue that the interpretation of
    the word instrument in the
Real Property Limitations Act

should be governed by the definition of that same word in the
Registry

Act
, R.S.O. 1990, c. R.20, s. 1, limiting the
    meaning to instruments affecting title to land and executed with the requisite
    formalities to allow for registration.

[18]

In our view, the trial judge properly rejected
    both submissions.

[19]

We deal first with the historical argument.

[20]

Prior to 1893, the limitation period to enforce
    a mortgage was ten years. However, the limitation period to enforce the
    covenant to pay the mortgage was the 20-year period that applied to
    specialties. That was because the covenant was contained within a sealed
    document and a sealed document was a specialty.

[21]

The legislature removed that anomaly by amending
    the
Limitations Act
in 1893 to exclude
    covenants contained in a mortgage from the definition of specialty, with the
    result that both claims to enforce the mortgage and claims on the covenant were
    from that point governed by the same limitation period.

[22]

In 1939, the legislature amended the
Mortgages

Act
to make a new owner who purchased from the
    original mortgagor and was liable to indemnify the mortgagor for the mortgage
    debt directly liable to the mortgagee for the debt secured by mortgage.

[23]

A corresponding amendment in 1939 to what would
    become the
Real Property Limitations Act
, s.
    43(1) introduced the words or any other instrument that are at issue on this
    appeal. The appellants argue that as this language was used to accommodate the
    new provision in the
Mortgages

Act
making the new owner liable to the mortgagee, it can have no wider meaning
    today and therefore must be restricted to covenants contained within mortgages.

[24]

We are unable to accept that submission.

[25]

First, there is no legislative history to
    support the narrow meaning. At the time, there was no Hansard of the legislative
    debates. The appellants can point to no record of committee reports or
    background studies to explain the evolution or purpose of the amendment.

[26]

Second, even assuming that the appellants
    contention regarding the immediate purpose of adding the words any other
    instrument is plausible, the plain meaning of those words does not require or
    support such a narrow interpretation. If the legislature had truly intended to
    limit the meaning to covenants by subsequent purchasers, it could easily have
    said so. Instead the legislature used general language that can readily be
    interpreted to embrace stand-alone guarantees.

[27]

Third, we agree with the trial judge, at para.
    51, that there is no justification for having different limitation periods
    depending on whether the guarantee covenant is in the mortgage or in a separate
    document. Giving any other instrument the narrow reading sought by the
    appellants would introduce an anomalous distinction between identical
    guarantees. It would also create an awkward distinction between the limitation period
    to enforce a mortgage and the limitation period to enforce a closely related
    promise to pay the debt secured by the mortgage. The legislature removed a
    similar distinction that existed before 1893 and it is difficult to see why the
    legislature would want to create a similar distinction in 1939.

[28]

Fourth, we do not accept the submission that the
    appellants contention is supported by the principles of statutory
    interpretation. The argument that when interpreting the word instrument we
    should rigidly adhere to the specific problem that motivated its enactment
    would be contrary to the
Interpretation

Act
,
R.S.O. 1990,
c.
    I.11,
s. 4: 
The
    law shall be considered as always speaking and, where a matter or thing is
    expressed in the present tense, it is to be applied to the circumstances as
    they arise, so that effect may be given to each Act and every part of it
    according to its true intent and meaning.
This
    direction should be read together with s. 10 that all statutes 
shall be deemed to be remedial ... and shall accordingly
    receive such fair, large and liberal construction and interpretation as will
    best ensure the attainment of the object of the Act according to its true
    intent, meaning and spirit. See also Ruth Sullivan,
Statutory
    Interpretation
,
3rd ed. (Toronto: Irwin Law, 2016), at pp.
    120-1.
Unless the language of an enactment compels us
    to do so, we should avoid interpreting legislation in a way that produces
    impractical and unjust results.

[29]

We turn to the appellants submission that the
    meaning of instrument in the
Real Property Limitations Act
should be governed by the definition of instrument in the
Registry

Act
.

[30]

It is hardly surprising that the
Registry

Act
defines instrument as meaning instruments
    affecting title to land and executed with the requisite formalities to allow
    for registration. That is what the
Registry

Act
is all about  creating a public record of formal documents that
    affect interests in land to ensure the integrity of title to land and to allow
    third parties to investigate title. If an instrument does not affect title to
    land, there is no reason to clutter the public record by registering it. Section
    43(1) of the
Real Property Limitations Act
has
    a very different purpose, namely, to establish an appropriate limitation period
    for claims arising under and in relation to mortgages. That purpose does not
    engage the same concerns as those arising under the
Registry

Act
and it has no relationship to registrability
    of documents. The legislature did not incorporate the
Registry

Act
definition in relation to s. 43(1) as it did
    in another situation where incorporation made sense to do so: see the
Land
    Registration Reform Act
,
R.S.O. 1990, c. L.4, s. 1.

[31]

For these reasons, we reject the submission that
    the trial judge erred in concluding that the applicable limitation period for
    the claims on the stand-alone guarantees was ten and not two years.

[32]

This makes it
    unnecessary for us to deal with the respondents argument that the stand-alone
    guarantees did affect title because a guarantor who makes a payment to
    discharge to mortgage debt acquires an equitable right to redeem the mortgage.

(2)

Covenant Guarantees

[33]

As we have dismissed the appeal with respect to
    the stand-alone guarantees, it is unnecessary for us to consider the respondents
    cross-appeal, arguing that the trial judge erred in dismissing the claims based
    upon four of the five covenant guarantees.

(3)

Credit for the settlement proceeds

[34]

The respondent sued her solicitor and her
    investment advisor, claiming that as a result of their negligence, she suffered
    losses on the Godstone mortgages and other similar real estate investments. The
    total amount of the claims against the solicitor for the several investments on
    which the solicitor acted for the respondent was $4,156,799. The respondent claimed
    approximately $6 million against the investment advisor who had been involved
    in more investments than the solicitor. The respondents total claim against
    the solicitor was settled for $1.2 million net of legal fees. The settlement
    funds were not attributed to any particular transaction or acts of negligence. The
    claim against the investment advisor, who is now bankrupt, remains outstanding.

[35]

It was common ground before the trial judge that
    the respondents claim on the stand-alone guarantees had to be reduced on account
    of the settlement, to avoid double recovery. The appellants took the position
    that as the respondent had led no evidence to establish the validity of the
    claims in relation to the other investments, their claim on the stand-alone guarantees
    should be reduced by 100% of the settlement. The respondent took the position
    that since there was no attribution of the settlement funds to any particular
    transaction or act of negligence, the reduction should only be approximately 16%,
    derived by calculating the ratio between the amount owing on the guarantees and
    the total amount of the claims against both the solicitor and the claim against
    the investment advisor.

[36]

The trial judge rejected both positions and
    determined that 50% of the settlement should be allocated to reduce the amount
    owing on the guarantees.

[37]

On the cross-appeal, the respondent makes two
    arguments.

[38]

First, the respondent submits that there should
    be no reduction in the claim on the guarantees to account for the settlement. The
    trial judge erred in reducing the claim by 50% when there was no evidence or principled
    basis to allow such an allocation. Alternatively, if there is to be a reduction
    on account of the settlement, it should be for 28.8% rather than 50%, based on
    the ratio between the amount owing on the guarantees and the total amount of
    the claims against only the solicitor.

[39]

The respondents arguments essentially rest on
    the fact that the claim against the appellants is a claim under guarantees for
    a debt owing and yet to be collected, while the claim against the solicitor was
    for damages in negligence at large without any allocation to the respondents
    loss arising from unenforceable guarantees. The negligence alleged included the
    failure to ensure properly enforceable guarantees to secure the mortgages and
    the loss claimed included the amount secured by the guarantees. The respondent
    contends that the negligence claim cannot reduce the amount owing on the debt
    and the issue of double recovery only arises in relation to the negligence
    claim when and if the respondent actually recovers what she is owed on the
    guarantees.

[40]

Although the argument that there should be no reduction
    of the guarantee claim because of the settlement was advanced by the respondent
    late in the day, the issue of double recovery is advanced in the respondents
    factum (at paras. 62-74) and in oral argument. The argument that there should be
    no reduction of the judgment based on the settlement is open to the respondent
    based on the evidentiary record. It is therefore an argument with which we can properly
    deal on appeal.

[41]

In our respectful view, the trial judge was led
    astray by the trial submissions of the parties. The facts of this case do not
    at this point engage the double recovery or double satisfaction principle. The
    trial judges determination that a 50% reduction was appropriate was entirely
    speculative.

[42]

The appellants argument rests on the submission
    that as a matter of law the amount owed under the stand-alone guarantees can be
    reduced by the recovery in the settlement of the negligence claim against the
    respondents solicitor. Assuming, without deciding, that the appellants
    submission is sound in law, we are satisfied that it fails on the evidence in
    this case. It is the appellants burden to demonstrate that their liability under
    the guarantees has been reduced by satisfaction of the guaranteed debt. In our
    view, they have not met their burden in this case.

[43]

The rule against double recovery in negligence is a corollary of
    the fundamental principle of full and fair compensation. As McLachlin J.
    explained in
Cunningham v. Wheeler; Cooper v. Miller; Shanks v. McNee
,
    [1994] 1 S.C.R. 359, at pp. 368-69, [t]
he
    fundamental principle is that the plaintiff is entitled to damages in an amount
    which will return the plaintiff to the position the plaintiff would have been
    in had the accident not occurred, in so far as money is capable of doing this.
    The corollary is that the compensation must be fair to both the plaintiff and
    the defendant. The ideal is to achieve compensation that is full and fair  awarding
    damages for all the plaintiff's actual losses, and no more. The watchword is
    restoration; what is required to restore the plaintiff to his or her
    pre-accident position.
Double
    recovery is not permitted
 (emphasis
    added).

[44]

The rule against double recovery derives from
    both common law and equitable principles. At common law, recovery against one
    wrongdoer barred action against another while equity provided a remedy against
    unjust enrichment. The rule is commonly applied in tort actions where two
    wrongdoers are responsible to compensate the plaintiff for a loss. The plaintiff
    is entitled to pursue claims against both tortfeasors but cannot recover more
    than his or her loss: recovery against one wrongdoer will reduce the amount the
    plaintiff can recover from the other.

As explained in
Treaty Group Inc. v. Drake International
    Inc.
(2005)
,
36 C.C.L.T.
    (3d) 265 (ON SC), at para. 7, citing
Cuttell v. Bentz
(1985), 65 B.C.L.R. 273 (C.A.): 
The important point however is that it
    is clear that one cannot recover a loss twice. (at p. 277) This is because, as
    Lambert J.A. explained at p. 283, The rationale of the rule is that the
    claimant should not be permitted to receive in compensation a total amount greater
    than the loss he has suffered.

[45]

We agree with the respondents submission that
    her claim for the guaranteed debt owed to her by the appellants was neither
    barred nor diminished by reason of her claim in negligence against her
    solicitor and that the guaranteed debt should not be reduced on account of the
    settlement of the respondents claim against her solicitor.

[46]

The related point is that the rule is against
    double
recovery
. It does not preclude a
    plaintiff from pursuing different defendants for the same loss and only
    precludes a plaintiff from recovering more than he or she lost. Here, there is
    no basis in the evidence to conclude that the respondent has recovered anything
    on the debt guaranteed by the appellants. Indeed, the trial judges finding that
    the standalone guarantees are valid and enforceable is not consistent with his
    finding that 50% of the settlement should be attributed to the claim on the guarantees.

[47]

There is no dispute that the respondent has
    recovered nothing under the guarantees. Recovery against the appellants will
    depend not only upon the outcome of this appeal but also upon the solvency and
    means of the appellants to pay the debt they owe. Until the respondent actually
    achieves full or substantial satisfaction of the debt she is owed, there can be
    no question of double recovery.

[48]

Accordingly, we allow the cross-appeal on this
    issue and set aside that portion of the trial judges judgment reducing the
    amount owing to the respondent on account of the settlement with the solicitor.

E.

DISPOSITION

[49]

For these reasons, we dismiss the appeal, allow
    the cross-appeal on the double recovery issue and substitute for the judgment
    given below judgment in the respondents favour for the full amount owing under
    the stand-alone guarantees.

[50]

The respondent is entitled
    to her costs of the appeal, fixed at $25,000 inclusive of disbursements and H.S.T.

Released: December 18, 2019 (D.D.)

Doherty J.A.

Robert J. Sharpe
    J.A.

L.B. Roberts J.A.


