Court File and Parties

CITATION: Korea Exchange Bank of Canada v. Her Majesty the Queen, 2016 ONSC 308 DIVISIONAL COURT FILE NO.: 379/15 DATE: 20160118

SUPERIOR COURT OF JUSTICE – ONTARIO DIVISIONAL COURT

RE: KOREA EXCHANGE BANK OF CANADA, Applicant/ Moving Party AND: Her Majesty the Queen in right of ontario ET AL, Respondents/Respondent

BEFORE: Stewart J.

COUNSEL: Martin Zatovkanuk, for the Applicant Ronald E. Carr, for the Respondent, Her Majesty the Queen in Right of Ontario

HEARD at Toronto: January 12, 2016

ENDORSEMENT

Introduction

[1] The Korea Exchange Bank of Canada (“the Bank”) seeks leave to appeal from the Order of Corbett J. dated June 29, 2015. In that Order, the motion judge awarded costs of $30,000 to Her Majesty the Queen in Right of Ontario (“Ontario”). The motion judge further ordered that this was without prejudice to the Bank’s claim to recover those costs against the respondent, 1590291 Ontario Limited, or its principal, John Lee.

[2] The only two parties directly affected by the Order are the Bank and Ontario. The Bank and Ontario have agreed not to seek costs against any of the other respondents, and those respondents have agreed not to seek costs and are not participating in this motion for leave to appeal. The Bank and Ontario have agreed between them that the successful party to this leave to appeal motion shall have its costs of $3000 payable in 30 days.

Background

[3] In 2007, the Bank advanced $400,000 to 1590291 Ontario Limited (“159”), secured by a mortgage on property at 124 Manse Road in Toronto. 159 had acquired the property on October 12, 2007 by transfer from Shougang Rose of Sharon Engineering Corporation (“Shougang”). 159 defaulted on the mortgage. When the Bank attempted to enforce its mortgage, it learned that Shougang had been dissolved by the Director under the Business Corporations Act on March 27, 2006.

[4] Ontario took the position that upon dissolution all of the assets of Shougang were forfeited to the Crown, by operation of law, with the result that Shougang did not have valid title when it purported to transfer 124 Manse Road to 159. Shougang and 159 are alleged to be related companies controlled by John Lee.

[5] In March 2013, the Bank commenced an Application in this Court naming as respondents Ontario, Shougang, 159, and two other related numbered companies. In the Application, the Bank seeks an Order ratifying its interest in the property in various alternative ways, including reviving Shougang for the purpose of rectifying the transfer and rectifying the title under the Land Titles Act to vest in the Bank all of its rights and interests under the mortgage. The Bank alternatively sought an equitable charge or a constructive trust on the property.

[6] Ontario responded to the Bank’s Application and took the position that the transfer from Shougang to 159 was void, there being no title to property to transfer, and that a proper title search by the Bank would have revealed this problem. Arguing that the Court has no power to rectify the title so as to recognize the Bank’s mortgage, Ontario took the position that the Application should be dismissed as against it.

[7] In February 2014, the Bank commenced a separate claim by way of action seeking damages for fraud in connection with this mortgage against John Lee, Shougang and 159.

[8] The Application was scheduled to be heard on October 31, 2014 before Corbett, J. On that date, Lee appeared in person and stated his intention to revive the subject corporations. Corbett J. adjourned the Application on several occasions to give Lee the opportunity to do that.

[9] As a result of these conferences before Corbett, J., Ontario agreed to deliver a “no-objection” letter from the Public Guardian and Trustee to revive Shougang, but without prejudice to Ontario’s right to seek costs incurred by it in responding to the Application.

[10] Once Shougang was revived, its transfer of property to 159 would be validated. Since 159 was in existence at the time of the mortgage to the Bank, the mortgage would also be validated. After the revival of Shougang, Ontario would have no further role in the Application of the action.

[11] In May 2015, the parties were notified that Corbett, J. intended to deal with the issue of costs before the end of June, 2015. The hearing by way of teleconference proceeded on June 29, 2015. This teleconference was held upon the aforesaid agreement by Ontario to consent to the revival of Shougang and to dispose of Ontario’s consequent request for costs.

[12] Following receipt of submissions from the parties, Corbett, J. dealt with the outstanding issue of Ontario’s costs by ordering that costs be paid to Ontario in the amount of $30,000.00 by the Bank. Corbett, J. further ordered that the Bank could seek to claim over in its proceedings against 159 or Lee for the costs awarded and he would remain seized of such claim.

Test for Leave to Appeal

[13] As this costs order is interlocutory, appeal lies to the Divisional Court pursuant to s. 19(1) (b) of the Courts of Justice Act, with leave, as provided for in Rule 62.02(4).

[14] The test for granting leave to appeal under Rule 62.02(4) is well-settled. It is recognized that leave should not be easily granted and the test to be met is a very strict one. There are two possible branches upon which leave may be granted. Both branches involve a two-part test and, in each case, both aspects of the two-part test must be met before leave may be granted.

[15] Under Rule 62.02(4)(a), the moving party must establish that there is a conflicting decision of another judge or court in Ontario or elsewhere (but not a lower level court) and that it is, in the opinion of the judge hearing the motion, “desirable that leave to appeal be granted.” A “conflicting decision” must be with respect to a matter of principle, not merely a situation in which a different result was reached in respect of particular facts: Comtrade Petroleum Inc. v. 490300 Ontario Ltd. (1992), 7 O.R. (3d) 542 (Div. Ct.).

[16] Under Rule 62.02(4)(b), the moving party must establish that there is reason to doubt the correctness of the order in question and that the proposed appeal involves matters of such importance that leave to appeal should be granted. It is not necessary that the judge granting leave be satisfied that the decision in question was actually wrong – that aspect of the test is satisfied if the judge granting leave finds that the correctness of the order is open to “very serious debate”: Nazari v. OTIP/RAEO Insurance Co., [2003] O.J. No. 3442 (S.C.J. per Then J.); Ash v. Lloyd’s Corp. (1992), 8 O.R.(3d) 282 (Gen. Div. per Farley J.). In addition, the moving party must demonstrate matters of importance that go beyond the interests of the immediate parties and involve questions of general or public importance relevant to the development of the law and administration of justice: Rankin v. McLeod, Young, Weir Ltd. (1986), 57 O.R. (2d) 569 (H.C.J. per Catzman J.); Greslik v. Ontario Legal Aid Plan (1988), 65 O.R. (2d) 110 (Div. Ct.).

Analysis

[17] An award of costs involves the motion judge’s exercise of discretion, which is entitled to a high degree of deference. Leave to appeal costs must be granted sparingly and only in obvious cases where the Court is satisfied that there are “strong grounds” upon which an appellate court could find that the motions judge exercised his discretion on a wrong principle or is plainly wrong: Hamilton v. Open Window Bakery Ltd., 2004 SCC 9, [2004] 1 S.C.R. 303; Adrian v. Napa Valley Plaza Inc., 2011 ONSC 2168.

[18] The attendance of the parties before Corbett, J. by teleconference June 29, 2015 followed a series of case conferences with a view to the resolution of some or all of the issues before the Court and/or the scheduling of the hearing of the Application. The conference was arranged following the agreement by Ontario that the Office of the Public Guardian and Trustee would issue a letter of “no-objection” to the revival of Shougang without prejudice to its right to seek costs of the proceeding.

[19] The Order of Corbett, J. of June 29, 2015 implicitly recognized the proper characterization of Ontario in these circumstances as a blameless party that was put to needless expense and one which, as a result, should receive its reasonable costs. Corbett, J. remained seized of the issue of possible recovery of those costs by the Bank as against 159 or Lee as he was familiar with the issues, and in the exercise of his discretion in the interest of judicial economy.

[20] In my view, neither test for the granting of leave to appeal has been met. No conflicting decision has been cited, nor is it desirable in this case that leave to appeal be granted. I am not satisfied that there is reason to doubt the correctness of the order in question, nor do I consider that matters of such importance are involved that leave to appeal should be granted.

Order

[21] The motion for leave to appeal is dismissed.

[22] As agreed, Ontario shall have its costs of the motion fixed at $3000.00 payable by the Bank within 30 days.

Stewart J.

Date: January 18, 2016