CITATION: Paglia v. Favot, 2014 ONSC 2382

DIVISIONAL COURT FILE NO.: 54/14

DATE: 20140415

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

BETWEEN:

ANTONIO PAGLIA

Applicant

– and –

DARIO FAVOT, DANNY VERRILLI and 2037125 ONTARIO INC.

Respondents

John P. Ormston, for the Plaintiff

James S.F. Wilson, for the Defendant

HEARD: April 14, 2014

PERELL, J.

REASONS FOR DECISION

A. INTRODUCTION

[1] Pursuant to the Partition Act,[^1] the Applicant, Antonio Paglia, applied for the sale of a property at 35 Nixon Road, Unit 11, Bolton, Ontario that was registered to 2037125 Ontario Inc. but owned by Mr. Paglia, Dario Favot, and Danny Verrilli, each having a one-third interest.

[2] The Respondents, Messrs. Favot and Verrilli and 2037125 Ontario Inc., opposed the sale because there is concurrent litigation which they say is inextricably tied to the question of whether a sale of the property should proceed and there are outstanding debts owing in relation to the property that make it inequitable to deal with the property in isolation from the other claims.

[3] Justice Stewart ordered the Partition Act application to be heard at the same time or immediately following the concurrent litigation without prejudice to Mr. Paglia's entitlement to re-launch his request for this relief should the actions not proceed with dispatch or should other circumstances so warrant.

[4] Mr. Paglia now seeks leave to appeal to the Divisional Court.

[5] For the reasons that follow, leave to appeal is refused.

B. FACTUAL AND PROCEDURAL BACKGROUND

[6] In 2004, Mr. Paglia and Messrs. Favot and Verrilli, along with John Di Costanzo, Denis Furlan, Vito Nardi and their respective corporations, formed the Verdi Alliance Group to conduct business together in the construction industry by forming companies, purchasing equipment, and coordinating their business activities in various combinations.

[7] Each participant drew a salary from his own business. The companies worked together and the revenue was distributed to the individuals as remuneration, dividends, and/or bonuses.

[8] In 2010, 2037125 Ontario Inc., which is controlled by Mr. Favot, purchased 35 Nixon Road, Unit 11, Bolton, Ontario. By agreement dated March 2, 2011, Messrs. Favot, Verrilli and Paglia agreed that they would each share a one-third interest in the Bolton property. Each of the individuals contributed $115,000 to the purchase of the property. Their plan was to use the property for storage of their recreational vehicles.

[9] In 2011, Mr. Paglia says that he was locked out of the Bolton property. This is denied by Messrs. Favot and Verrilli, who say that Mr. Paglia decided to withdraw from the property and that there should be an appropriate adjustment to the Verdi Alliance Group distributions.

[10] The Verdi Alliance Group was successful, and its profits doubled between 2007 and 2011. However, Messrs. Favot and Verrilli say that Mr. Paglia was not contributing to the success of the enterprise and that he was taking more than a fair share. They and Messrs. Di Costanzo, Furlan, and Nardi decided to end their business relationship with Mr. Paglia.

[11] In July 2012, Mr. Paglia initiated an oppression remedy application against the group and the companies in the Verdi Alliance Group under s. 248 of the Ontario Business Corporations Act.[^2] He alleged that, while he only owned shares in some of the corporations in the Verdi Alliance Group, he is actually a shareholder or the owner of an interest in all of them.

[12] Mr. Paglia’s application was replaced by two proceedings by action, and the parties agreed that the two actions would be heard together. The parties agreed to a schedule and the actions are progressing. It may be noted that 2037125 Ontario Inc. is not a party to the oppression actions.

[13] In the actions, Mr. Paglia’s claims under s. 248 of the Ontario Business Corporations Act are met with oppression remedy claims by the group that no longer wishes to have a business relationship with Mr. Paglia. They seek a declaration that Mr. Paglia's entitlements to shares and other compensation from the relevant corporations should be fixed at levels that reflect his alleged breaches of contract and failure to fulfill his duties as a director. They claim that Mr. Paglia has been unjustly enriched, and they claim disgorgement.

[14] In 2013, Mr. Paglia brought an application under the Partition Act for sale of the Bolton property. The application was heard by Justice Stewart on September 23, 2013.

[15] Justice Stewart did not decide the application, but, rather, she converted it into an action to be heard or consolidated with the extant proceedings between Mr. Paglia and his estranged business associates. This Order would bring 2037125 Ontario Inc. into the composite proceedings.

[16] Justice Stewart’s reasoning and the details of her Order are explained in paragraphs 20 to 26 of her Reasons for Decision as follows:

20. It is normally the case that where an applicant has an interest in property, he has a prima facie right to compel partition or sale in the absence of malice, oppression or vexatious intent (see: Greenbanktree Power Corp. v. Coinamatic Canada Inc., 2004 CarswellOnt 5407 (Ont.C. A.)).

21. However, a sale under the Partition Act should not be ordered where matters that are inextricably tied to whether the sale should proceed remain to be tried (see: Al-Ghabra v. Al-Ali, [2010] O.J. No. 301 (S.C.J.)).

22. The court has the discretion pursuant to Rule 6.01 of the Rules of Civil Procedure to consolidate proceedings and to give such directions as are just to avoid unnecessary costs or delay where it appears that:

(a) they have a question of law or fact in common;

(b) the relief claimed in them arises out of the same transaction or occurrence or series of transactions or occurrences; or

(c) for any other reason an order ought to be made.

23. The fundamental rule relating to consolidation is that, as far as possible, all matters in controversy between the parties should be determined in one proceeding (see: Clough v. Greyhound Leasing & Financial of Canada Ltd., [1979] O.J. No. 4430 (H.C.J)).

24. The issue underlying this application and the ongoing actions is who owes what to whom in connection with the business arrangements of the parties in which the Bolton property is involved. In my view, it would be inappropriate to sever the issue of whether Paglia is entitled to require a sale of the Bolton property to recoup a portion of his investment in the context of these disputes.

25. For the foregoing reasons, I am of the opinion that partition and sale should not be ordered at this time. Instead, the just and appropriate relief in this application is to order that Paglia's application be consolidated with the other ongoing actions in order that the issue of whether the Bolton property must be sold can be resolved along with the other issues relating to Paglia's entitlement to compensation, if any, from his former business associates.

26. I further order that the trial of these consolidated proceedings be expedited to the extent that can be reasonably achieved.

[17] Mr. Paglia seeks leave to appeal Justice Stewart’s Order to the Divisional Court.

C. THE TEST FOR LEAVE TO APPEAL

[18] The test for leave to appeal from the interlocutory orders of a motions judge to the Divisional Court is set out in rule 62.02(4) of the Rules of Civil Procedure,[^3] which reads:

62.02(4) Leave to appeal shall not be granted unless,

(a) there is a conflicting decision by another judge or court in Ontario or elsewhere on the matter involved in the proposed appeal and it is, in the opinion of the judge hearing the motion, desirable that leave to appeal be granted; or

(b) there appears to the judge hearing the motion good reason to doubt the correctness of the order in question and the proposed appeal involves matters of such importance that, in his or her opinion, leave to appeal should be granted.

[19] In order for leave to be granted under Rule 62.02 (4)(a), the moving party must show both: (a) a conflicting decision; and also (b) the desirability of leave to appeal being granted. A conflicting decision is one in which different legal principles are chosen to decide a comparable legal problem or to guide the exercise of the court's discretion.[^4] If leave to appeal is to be granted on the grounds of conflicting decisions, the court must be satisfied not only that there is a conflicting decision, but also that it is desirable that leave to appeal should be granted having regard to such factors as what is at stake in the order being challenged, the likelihood of the appeal being successful, the sufficiency of the record for the purposes of deciding the issues on the appeal, and the problems of expense and delay.[^5]

[20] In order for leave to be granted under rule 62.02(4)(b), the moving party must show both: (a) good reason to doubt the correctness of the order; and also (b) a matter of general importance. In order to show that that there is good reason to doubt the correctness of the order, the moving party need not show that the order is wrong or probably wrong, but rather, that the soundness of the order is open to very serious debate.[^6]

[21] In order to show that a matter is of general importance, the moving party must show that the matter is of importance to the public or to the development of the law or to the administration of justice and that the importance of the order transcends the importance of the matter to the particular parties.[^7]

D. DISCUSSION AND ANALYSIS

[22] In his factum, Mr. Paglia submits that Justice Stewart’s Order contradicts the settled jurisprudence that there is a prima facie right to partition and sale and the case law that holds that the court’s discretion to refuse a remedy under the Partition Act is only to be exercised where malicious, vexatious, or oppressive conduct has been demonstrated.[^8]

[23] Further, he submits that he was entitled to have his Partition Act claim proceed by application, which is a free-standing court proceeding. He relies on TKS Holdings Inc. v. Ottawa (City),[^9] where the court refused to consolidate an application with an action notwithstanding overlapping issues. He submits that the Bolton property was a personal investment outside of the Verdi Alliance Group even if the funds from the parties’ individual corporations were used to purchase the property.

[24] Mr. Paglia says that 2037125 Ontario Inc. is not a party to the actions and that the disputes in the two actions are not related to the Bolton property. He says that the consolidation order will prejudice and delay his partition application. He says that consolidation will seriously prejudice his capability of fighting the legal battles with equal arms.

[25] During oral argument, Mr. Paglia’s counsel refined the argument for leave to appeal to focus on whether there is good reason to doubt the correctness of the Order in question and not on whether there is a conflicting decision on the matter involved in the proposed appeal.

[26] Mr. Paglia conceded that Justice Stewart’s Order would be unobjectionable if there was a basis for connecting the Partition Act dispute, which he characterized as a non-business dispute between former business associates about a personal non-business use of property; however, he submitted that the disputes were unconnected and thus the consolidation of them was unwarranted.

[27] Mr. Paglia says that the law about the consolidation of applications and actions is of significant importance to the conduct of litigation and the interrelation of the court’s jurisdiction under rule 6.01 to consolidate with a litigant’s rights under the Partition Act are of such importance that leave to appeal ought to be granted.

[28] In my opinion, there is no reason to doubt the correctness of Justice Stewart’s decision and it is not contrary to established Ontario authorities about the operation of the Partition Act.

[29] In particular, Justice Stewart’s decision is consistent with and follows Al-Ghabra v. Al-Ali.[^10] Justice Stewart’s decision is also consistent with the policy of the Courts of Justice Act,[^11] that a multiplicity of proceedings should be avoided.

[30] A review of the evidentiary record establishes that there was some basis to connect what might in some respects be just a private dispute between estranged businessmen about a recreational use property with their larger dispute about their business and their business’s property.

[31] Conversely, this was not a case where it could be categorically said that the purchase of the Bolton property was irrelevant to the oppression remedy proceedings.

[32] There is no good reason to doubt the correctness of the Order and the proposed appeal does not involve matters of such importance that leave to appeal should be granted. The reality is that the appeal is only important to the immediate parties.

[33] The test for leave to appeal is not satisfied.

E. CONCLUSION

[34] For the above reasons, leave to appeal is refused with costs payable to the Respondents on a partial indemnity scale fixed at $4,000, all inclusive.

Perell, J.

Released: April 15, 2014

CITATION: Paglia v. Favot, 2014 ONSC 2382

DIVISIONAL COURT FILE NO.: 54/14

DATE: 20140415

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

BETWEEN:

ANTONIO PAGLIA

Applicant

– and –

DARIO FAVOT, DANNY VERRILLI and 2037125 ONTARIO INC.

Respondents

REASONS FOR DECISION

PERELL J.

Released: April 15, 2014

[^1]: R.S.O. 1990, c. P.4 as amended.

[^2]: R.S.O. 1990, c. B.16.

[^3]: R.R.O. 1990, Reg. 194.

[^4]: Benincasa v. Agostino, [2008] O.J. No. 4172 (S.C.J.) at para. 12; Comtrade Petroleum Inc. v. 490300 Ontario Ltd. (1992), 7 O.R. (3d) 542 (Div. Ct.).

[^5]: Minnema v. Archer Daniels Midland Co., [2000] O.J. No. 1685 (S.C.J.) at paras. 34-42.

[^6]: Ash v. Lloyd's Corp. (1992), 8 O.R. (3d) 282 (Gen. Div.) at pp. 284-5; Oberlander v. Canada (Attorney General), [2004] O.J. No. 1574 (S.C.J.) at paras. 8-9; Brownhall v. Canada (Ministry of Defence) (2006), 80 O.R. (3d) 91 (S.C.J.) at para. 30; Walker v. Woodstock District Chamber of Commerce, [2000] O.J. No. 1994 (S.C.J.); Judson v. Mitchele, 2011 ONSC 6004.

[^7]: Greslik v. Ontario Legal Aid Plan (1988), 65 O.R. (2d) 110 (Div. Ct.) at p. 112; Rankin v. McLeod, Young, Weir Ltd. et al. (1986), 57 O.R. (2d) 569 (H.C.J.) at p. 575; Brownhall v. Canada (Ministry of Defence) (2006), 80 O.R. (3d) 91 (S.C.J.) at para. 29.

[^8]: Garfella Apartments Inc. v. Chouduri, 2010 ONSC 3413; Greenbanktree Power Corp. v. Coinamatic Canada Inc., 2004 CarswellOnt 5407 (C.A.); Latcham v. Latcham, [2002] O.J. No. 2126 (C.A.); Silva v. Silva (1990), 1 O.R. (3d) 436 (C.A.).

[^9]: TKS Holdings Inc. v. Ottawa (City), 2009 CarswellOnt 2819 at para. 10.

[^10]: Al-Ghabra v. Al-Ali, [2010] O.J. No. 301 (S.C.J.). See also Ames v. Bond, [1992] O.J. No. 3614 (C.A.); Kavanagh v. Lajoie, [2011] O.J. No. 6022 (S.C.J.); Investissements Aperdev Inc. v. Gestions Remer Inc., [2006] O.J. No. 2632 (S.C.J.); Glass v. 618717 Ontario Inc., [2011] O.J. No. 331 (S.C.J.).

[^11]: R.S.O. 1990, c. C.43, s. 138.