The Ontario Court of Appeal’s decision in Metropolitan Toronto Condominium Corporation No. 1067 v. 1388020 Ontario Corp. provides important guidance on three key litigation issues: the proper use of summary judgment where credibility is contested, the requirement to plead limitation defences, and the limits of a court’s remedial authority under the oppression provisions of the Condominium Act.

In particular, the Court clarified that while judges have broad powers to resolve disputes efficiently, those powers are not unlimited, especially where statutory frameworks impose clear boundaries.

Dispute Over Common Expense Arrears

The appellant, 1388020 Ontario Corp. (“BSA”), owned eight units in a commercial condominium governed by Metropolitan Toronto Condominium Corporation No. 1067 (“MTCC 1067”). As a unit owner, BSA was required to pay its proportionate share of common expenses pursuant to the Condominium Act and the corporation’s governing documents.

This was not the first dispute between the parties. Earlier litigation in 2016 had resulted in a partial settlement in which BSA acknowledged arrears exceeding $114,000. However, further issues arose when MTCC 1067 alleged that BSA had again failed to pay common expenses beginning in 2021.

In response, MTCC 1067 registered a lien under section 85 of the Condominium Act and commenced legal proceedings seeking recovery of arrears, relief under the oppression remedy, and vacant possession of the units.

BSA defended the claim by asserting that it had entered into agreements with the condominium corporation allowing it to pay at a 25 percent discount if payments were made in cash, payments it claimed to have made.

Summary Judgment Granted at First Instance

The motion judge granted summary judgment in favour of MTCC 1067 in the amount of approximately $495,000, including both secured and unsecured arrears. The judge rejected BSA’s evidence entirely, finding it not credible and unsupported.

Importantly, the judge exercised the enhanced fact-finding powers under Rule 20.04(2.1) of the Rules of Civil Procedure, concluding that the case could be fairly resolved on the written record despite conflicting evidence.

The judge also made two significant additional orders:

• Granting vacant possession of the units; and
• Expanding the condominium lien to secure the entire judgment, including amounts that would otherwise have been unsecured.

These findings formed the basis of the appeal.

When Can Courts Resolve Credibility on Summary Judgment?

On appeal, BSA argued that the motion judge erred in granting summary judgment where credibility was central to the dispute. The Court of Appeal rejected this argument.

Relying on the Supreme Court’s decision in Hryniak v. Mauldin, the Court reiterated that judges may use their enhanced powers to weigh evidence, evaluate credibility, and draw inferences where it is in the interest of justice to do so.

The Court emphasized that these powers are “presumptively available” and that a trial is not required simply because credibility is in issue.

Deference to the Motion Judge

The Court found no error in the motion judge’s decision to resolve the matter on a paper record. The judge had acknowledged the challenges of assessing credibility without viva voce evidence but determined that the record was sufficient.

Appellate courts owe deference to such discretionary decisions. Absent palpable and overriding error, they will not interfere.

This aspect of the decision reinforces a continued trend in Ontario litigation: summary judgment is a robust and flexible tool. Even in cases involving sharply conflicting evidence, courts may proceed without a trial where the evidentiary record permits a fair determination.

Failure to Plead a Limitation Defence

BSA also argued that part of MTCC 1067’s claim was statute-barred under the two-year limitation period in the Limitations Act. However, the Court of Appeal rejected this argument on procedural grounds.

The Court reaffirmed a fundamental principle: limitation periods are a defence, not a jurisdictional bar. As such, they must be expressly pleaded in the statement of defence. BSA had failed to do so.

Raising New Issues on Appeal

Although BSA made a brief reference to limitations in its written submissions, it did not properly advance the argument before the motion judge. Nor did it present evidence or argument addressing discoverability.

As a result, the Court refused to entertain the issue for the first time on appeal, citing the general rule that appellate courts do not consider new issues absent exceptional circumstances.

Fairness Considerations

The Court emphasized that allowing the argument at the appellate stage would be unfair to MTCC 1067, which might have led evidence on discoverability had the issue been properly raised.

This portion of the decision serves as a cautionary reminder: litigants must plead and fully advance all available defences at the earliest opportunity. Failure to do so may result in the permanent loss of potentially dispositive arguments.

Limits of the Oppression Remedy in Expanding Liens

The most significant aspect of the decision concerns the scope of condominium liens under section 85 of the Condominium Act.

Under the statute:

• A lien arises for unpaid common expenses;
• It must be registered within three months; and
• Once registered, it secures only amounts owing within that timeframe and future defaults.

In this case, MTCC 1067 registered its lien in May 2024, meaning it secured only arrears from February 2024 onward.

Motion Judge’s Expansion of the Lien

Despite this limitation, the motion judge used the oppression remedy under sections 135 and 136 of the Condominium Act to extend the lien to cover older, unsecured arrears.

The rationale was that BSA’s failure to pay common expenses unfairly prejudiced other unit owners.

Court of Appeal Rejects Expansion

The Court of Appeal found that this was an error.

While acknowledging the broad and equitable nature of the oppression remedy, the Court emphasized that it must be exercised within the broader statutory scheme. The remedy cannot be used to circumvent clear legislative limits.

Impact on Third Parties

A key concern was the effect on third-party creditors. Expanding the lien effectively elevated MTCC 1067’s claim above other creditors, potentially undermining their rights.

The Court held that it was inappropriate to grant such priority through the oppression remedy, particularly where other parties may have relied on the statutory framework governing liens.

Preservation of Statutory Coherence

The Court also noted that allowing such an expansion would undermine the internal coherence of the Condominium Act, particularly the carefully defined timelines and priority rules for liens.

The oppression remedy, while powerful, is not a tool to override statutory limitations. Courts must balance equitable considerations with legislative intent and the rights of third parties.

Final Outcome of the Appeal

The Court of Appeal allowed the appeal in part.

While it upheld the motion judge’s findings on liability and summary judgment, it set aside the order expanding the lien. Only the portion of the debt properly secured under the statute remained subject to the lien.

All other aspects of the decision were affirmed, and MTCC 1067 was awarded costs as the more successful party.

Practical Implications for Litigants and Condominium Corporations

This decision highlights the importance of strict compliance with statutory lien requirements. Corporations must:

• Register liens within the prescribed timeframe;
• Understand the limits of what those liens secure; and
• Avoid relying on equitable remedies to cure procedural deficiencies.

For Unit Owners

Unit owners facing claims for arrears should:

• Carefully review the timing and scope of any registered lien;
• Raise all applicable defences, including limitation arguments, at the earliest stage; and
• Be cautious about relying on undocumented agreements or informal payment arrangements.

Milosevic & Associates: Toronto Commercial Real Estate Litigation Lawyers Serving the GTA

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Contact the firm online or call (416) 916-1387 today to discuss your situation and navigate Ontario’s evolving litigation landscape with confidence.