Court File and Parties
DIVISIONAL COURT FILE NO.: 552/15
SUPERIOR COURT OF JUSTICE – ONTARIO
RE: Daniela Atzori and DAT Accounting Inc., Plaintiffs/Responding Parties
AND:
Beverley Janasz, Newsver Holdings Limited and Linstep Investments Inc., Defendants/Moving Parties
BEFORE: Thorburn J.
COUNSEL: Maureen Whelton, Counsel for the Plaintiffs/Responding Parties
Kevin Sherkin, Counsel for the Defendants/Moving Parties
HEARD: In writing
ENDORSEMENT
Introduction
1The Defendants/Moving Parties, Beverley Janasz, Newsver Holdings Limited and Linstep Investments Inc., seek leave to appeal from the order of the motion judge, Glustein J., dated October 16, 2015.
2In that order, the motion judge refused to dismiss the Plaintiffs’ claims for equitable relief in the form of an express trust, constructive trust, equitable lien and/or resulting trust and permitted the Plaintiffs to amend their pleading in accordance with the proposed Amended Statement of Claim at Appendix A to their factum on the motion. The motion judge expressed the view that it was not plain and obvious that any of the claims were certain to fail.
Test for Leave to Appeal
3Leave to appeal is not 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.
4Under the first branch of the test set out in 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 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.).
5Under the second branch of the test set out in Rule 62.02(4)(b), the moving party must establish that there is reason to doubt the correctness of the order in question and 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.); Ash v. Lloyd’s Corp. (1992), 8 O.R. (3d) 282 (Gen. Div.). 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.); Greslik v. Ontario Legal Aid Plan (1988), 65 O.R. (2d) 110 (Div. Ct.).
Issues Raised
6The Defendants/Moving Parties raise three issues in support of their motion for leave to appeal. They are as follows:
i. It was improper for the Plaintiffs to plead constructive trust where the Plaintiffs claim they have no knowledge of any of the facts pertaining to the advance of monies to the Lawrence Avenue property;
ii. The court cannot grant a party the right to amend its pleading unless that relief is sought by the party; and
iii. There is no direct link between the parties and the real property because the claim alleges that the loan was only to Janasz not to the entities who hold the real property.
Analysis
7As noted by Glustein J., the key allegations relied on by the Plaintiffs are as follows:
a. The Plaintiffs, Atzori (a person) and DAT (a corporation), lent money to the Defendant, Janasz, because Atzori and Janasz were friends.
b. Janasz owes Atzori and DAT significant sums that were lent over a period of years.
c. All of the loans are particularized by the Plaintiffs.
d. The outstanding debt includes an $183,500 second mortgage plus interest on a Lawrence Avenue property owned by Janasz. That property was sold by power of sale and the market value will be insufficient to cover the second mortgage.
e. Atzori demanded that Janasz repay the amounts outstanding.
f. The Defendant, Janasz, offered to repay the amounts owing by transferring the interest in Newsver Holdings Limited (that holds the commercial real estate interest in the Lawrence Avenue property) or the Lawrence Avenue property itself to the Plaintiffs. The Plaintiffs agreed to this amendment to the loan terms.
g. The Plaintiffs, Atzori and DAT, therefore continued to advance funds on the understanding that they would be repaid with Janasz’ interest in Newsver and/or the Lawrence Avenue property.
h. Some of the funds advanced by the Plaintiffs were used to pay for fees, expenses and/or improvements to the Lawrence Avenue property. Particulars of the payments are not within the knowledge of the Plaintiffs.
i. The Defendants, Janasz or Linstep (a company controlled by Janasz that owns a property in Florida), used part of the funds to pay mortgage installments, utilities, condo fees, maintenance fees and improvements on the Florida property.
j. Janasz has failed to repay the debt or to transfer the interest in the corporation and/or the Lawrence Avenue property to the Plaintiffs.
8Glustein J. held that the above facts establish a nexus between the Plaintiffs’ contribution and the two properties which are the subject of the trusts.
9He held that, “The facts as pleaded fall into a ‘grey zone’ in the law of constructive trust. Direct monetary contribution in the nature of a joint venture is not pleaded, but it cannot be said that the moneys advanced are unrelated to the properties. Further, if a term of the revised loan was the transfer of the Lawrence Property, this could serve as a further basis to establish equitable relief.”
10He concluded therefore that the allegation that the Plaintiffs advanced funds to improve the properties was not a bald allegation.
11Glustein J. held that it was not plain and obvious that the equitable claims advanced in the form of a constructive trust would fail. He allowed the Plaintiffs to amend their Claim to properly plead their express trust claim in the form of their proposed Amended Statement of Claim.
The First Ground: It was Improper to Plead Constructive Trust because the Plaintiffs have no Knowledge of the Facts pertaining to the Advance of Monies to the Properties
12The Moving Parties rely on the Supreme Court of Canada decision in Hunt v. T & N plc, [1990] 2 SCR 959 at para. 33 and the decision of Pattillo J. in Mitchell v. Lewis [2015] O.J. No. 11558 that followed, to support their claim that it is improper for the Plaintiffs to plead constructive trust where they have no knowledge of any of the facts of the advances into the Lawrence Property.
13Pattillo J. dismissed a claim of constructive trust where, “the pleading fails to plead sufficient facts to establish when the trust arose, what its terms were and the basis for Robert and Wendy being personally engaged as opposed to acting on behalf of GLGI. There are no material facts to support the alleged oral trust.”
14The Moving Parties claim that in this case, like the cases cited above, there were no facts pleaded to support the legal conclusions because the Plaintiffs have no knowledge of the facts pertaining to the advance of monies.
15I disagree. In this case:
a. There is documentation in support of the loan advances and payments made;
b. Monies belonging to the Plaintiffs were advanced to the two properties;
c. Some of the money advanced was in the form of a second mortgage on the Lawrence Avenue property;
d. Some of the money advanced was used to pay for fees, expenses and/or improvements to the Lawrence Avenue property;
e. Some of the money advanced was directed to the Florida property expenses;
f. Janasz promised to repay all loan advances by transferring her interest in the Lawrence Avenue property and/or the property itself; and
g. Monies were advanced in reliance on those promises but the debts to the Plaintiffs were not repaid.
16As such, contrary to the assertion by the Defendants, the Plaintiffs have knowledge of the facts pertaining to the advance of monies to the properties.
The Second Ground: The Court cannot grant a Party the Right to Amend a Pleading unless that Relief was sought
17The Moving Parties claim the Court cannot grant a party the right to amend their pleading when this relief was not sought.
18Whether or not that proposition is correct, the relief was sought in this case. In the Amended Notice of Motion, the Plaintiffs seek, “such further and other relief as counsel may advise and this Honourable Court permit.” The Plaintiffs also provided the Court with a proposed Amended Statement of Claim as noted in Glustein J.’s reasons.
19Glustein J. agreed to “permit the plaintiffs to file the proposed Amended Statement of Claim as set out in Appendix A of their factum”.
20As such there is no error of law.
The Third Ground: There is no Direct Link between the Parties and the Properties
21Contrary to the assertion raised by the Defendants, there are links between Janasz and the properties as evidenced by the following:
a. The outstanding debt to the Plaintiffs includes an $183,500 second mortgage plus interest on a Lawrence Avenue property owned by Janasz.
b. Janasz offered to repay the amounts owing by transferring her interest in Newsver Holdings Limited or the Lawrence Avenue property to the Plaintiffs.
c. The Plaintiffs continued to advance funds on the understanding that they would be repaid with Janasz’ interest in Newsver and/or the Lawrence Avenue property.
d. Some of the funds advanced to Janasz were used to pay for fees, expenses and/or improvements to the Lawrence Avenue property.
e. Janasz or a company controlled by her, used part of the funds to pay mortgage installments, utilities, condo fees, maintenance fees and improvements on the Florida property.
22I also note that the Supreme Court of Canada has held that indirect contributions of money may suffice provided that a connection is established between the plaintiff’s deprivation and the acquisition, reservation, maintenance or improvement of the property. (Kerr v. Baranow, 2011 SCC 10 at para 50.)
23The Statement of Claim outlines when and how the alleged trust arose, its terms and the involvement of the parties.
24As Glustein J. noted (and in so doing, he relied on the Kerr decision), “A constructive trust is a broad and flexible equitable tool and the categories of cases giving rise to them are not closed. The Plaintiff must demonstrate a sufficiently substantial and direct link, a causal connection or a nexus between the plaintiff’s contributions and the property which is the subject matter of the trust. The primary focus is whether the contributions have a clear proprietary relationship. Indirect contributions of money may suffice provided that a connection is established between the plaintiff’s deprivation and the acquisition, reservation, maintenance or improvement of the property.
Conclusion
25For the above reasons, I do not agree that there is a conflicting decision in respect of a matter of principle or that there is serious concern about the correctness of Glustein J.’s decision such that leave should be granted.
26Leave to appeal is denied.
27The Respondent is entitled to its substantial indemnity costs and disbursements in the amount of $3,581.50.
Thorburn J.
Date: January 27, 2016