CITATION: York University v. Markicevic, 2014 ONSC 3227
DIVISIONAL COURT FILE NO.: 320/13
DATE: 20140529
SUPERIOR COURT OF JUSTICE - ONTARIO
(DIVISIONAL COURT)
RE: York University (appellant) v. Mima Markicevic (respondent)
BEFORE: Justices Dambrot, Swinton and Toscano Roccamo
COUNSEL: William McDowell and Brian Kolenda, for the Plaintiff/Appellant
Lincoln Caylor and Michael Paris, for the Defendant/Respondent Mima Markicevic
HEARD AT TORONTO: May 26, 2014
E N D O R S E M E N T
Swinton J.
[1] The appellant York University appeals, with leave, from the order of D. Brown J. dated June 25, 2013, in which he discharged a Certificate of Pending Litigation (“CPL”) and a limited proprietary injunction on terms. His order allows the defendant/respondent Mima Markicevic (“Mima”) to sell or encumber 124 Woodville, a home in Vaughan, so that she can obtain funds for her future legal defence costs and those of her parents Janet Fleming (“Janet”) and Michael Markicevic (“Michael”) in the present action.
[2] The motions judge has been case managing this action, and the CPL order that he varied was one that he had granted in earlier proceedings in which he had refused the appellant’s request for a Mareva injunction.
[3] The appellant argues, first, that the motions judge made an error of law or mixed fact and law in concluding that the appellant did not establish a reasonable claim to an interest in land beyond its constructive trust claim based on residence improvements. Second, the appellant argues that the motions judge improperly exercised his discretion to allow for the payment of legal fees for Michael out of the proceeds of sale or financing, since Michael has taken the position that he is not the owner of the property.
[4] The standard of review is correctness with respect to questions of law and palpable and overriding error with respect to findings of fact. With respect to questions of mixed law and fact, the standard is palpable and overriding error unless there is an extricable legal principle. In such cases, the standard is correctness (Housen v. Nikolaisen, 2002 SCC 33 at paras. 8, 10, 36-37).
[5] The motions judge correctly set out the legal principles governing the discharge of a CPL and the variance of a proprietary injunction (see paragraphs 19 to 22 of his reasons).
[6] The test for the discharge of a CPL is two-pronged. First, the court must determine whether the claimant has a reasonable claim to an interest in the land. Second, even if the claimant has a reasonable claim to an interest in land, the court considers the equities of the case, including the nature of the claims and the harm to each party if the CPL is or is not removed.
[7] The appellant argues that the motions judge erred in law when he stated that the new claims advanced in the amended statement of claim are not proprietary in nature (see para. 48 of his reasons). Those claims allege a fraudulent conveyance of the property from Michael to Mima and a resulting trust whereby Mima holds the title to the property in trust for Michael.
[8] Cases such as Bank of Montreal v. Ewing (1982), 1982 1794 (ON SC), 35 O.R. (2d) 225 (Div. Ct.) and Transmaris Farms Ltd. v. Sieber, [1999] O.J. No. 300 (Gen. Div.) show that a CPL is available when a claim of fraudulent conveyance is made by a creditor, provided that the creditor shows that there is a triable issue respecting the fraudulent nature of the conveyance. Indeed, the motions judge had granted a CPL on Janet’s property based on claims of constructive trust and fraudulent conveyance.
[9] The appellant argues that the motions judge ignored the nature of its fraudulent conveyance claim and applied too high an evidentiary standard. He also failed to consider the resulting trust claim.
[10] In my view, the motions judge made no legal error. When he states in para. 48 that the fraudulent conveyance claim is not proprietary in nature, he is making a statement about the nature of the appellant’s claims. He is not saying that there is no right to a CPL because the claim is not proprietary.
[11] The motions judge went on to consider the strength of the appellant’s new claims and concluded that the evidence in support of those claims does not support a finding that there is a “strong indication” that the conveyance to Mima may have been fraudulent. Ultimately, he concluded that the two new claims added “little additional weight” to York’s claim for a reasonable interest in the property. In my view, this indicates that he has considered the first stage of the test with respect to the two new claims.
[12] The motions judge also considered that Mima had agreed to pay $142,330 from the proceeds into court as security for York’s proprietary claim based on constructive trust, and that was an adequate security for the proprietary claims.
[13] The motions judge then considered the equities, as he was required to do, even if the appellant has a reasonable claim to an interest in the land. He discussed the changed financial circumstances of the Markicevic family based on the new evidence before him. In his view, this action can be resolved only with a trial, where the outcome will turn on an assessment of the credibility of Michael and other witnesses respecting the alleged fraudulent activities.
[14] The appellant argues that the motions judge erred in ordering that Mima could have access to the equity in the property to support her father’s legal defence costs.
[15] The motions judge gave two reasons for allowing the funds from the property to be used for Michael’s future legal costs. First, he observed that the defence of Janet and Mima was derivative of the defence of Michael. Without access to further funds, Michael would be unrepresented in the trial, yet Michael required access to legal representation in order to make a real defence to the appellant’s claims (reasons at para. 57). Second, he took into consideration Mima’s expressed wish that the funds be used for the family members’ legal defence. Ultimately, the motions judge concluded (at para. 59): “In a complex case such as this, justice requires that both sides to the dispute have some semblance of equal access to legal representation to make it a ‘fair fight’ ”.
[16] The motions judge imposed terms to protect the proprietary claim of the appellant through the requirement for payment of funds into court. Consistently with the legal principles governing access to property subject to a proprietary injunction set out in Canadian Imperial Bank of Commerce v. Credit Valley Institute of Business and Technology, 2003 12916 (ON SC), [2003] O.J. No. 40 (S.C.J.), he refused to allow Mima to have access to the funds for personal expenses, limiting access to the funds for future legal fees. He ensured that limited use by ordering the funds paid into her lawyers’ trust account. He also required that her lawyers provide an undertaking that they would continue to represent the defendants through the trial.
[17] The motions judge has been case managing this action. As a result, he is very familiar with the evidence and pleadings. He considered the equities, including the strength of the appellant’s claims against Mima, as well as the concerns for access to justice by the Markicevic defendants. There is no basis for this Court to interfere with his exercise of discretion, as there has been no palpable or overriding error demonstrated, nor any error of legal principle.
[18] Accordingly, the appeal is dismissed. Costs to the respondent are fixed at $10,000 all inclusive, an amount agreed upon by the parties.
Swinton J.
Dambrot J.
Toscano Roccamo J.
Released: May , 2014