DATE: 20001122

DOCKET: C34942

M26575

COURT OF APPEAL FOR ONTARIO

(IN CHAMBERS)

BETWEEN:

PERRY, FARLEY & ONYSCHUK ) Lisa S. Corne for the appellant

) Perry, Farley & Onyschuk

Plaintiff (Appellant) )

) Miles D. O'Reilly, Q.C.

• and - ) For the respondent

) Outerbridge Management

) Limited

OUTERBRIDGE MANAGEMENT )

LIMITED and IAN W. OUTERBRIDGE ) Cynthia Sefton for the

) respondent Ian Outerbridge

Defendants (Respondents) )

) Heard: November 3, 2000

FELDMAN J.A.

[1] This motion involves the disposition pending appeal of certain funds now being held by counsel for the respondent, Ian Outerbridge, in trust, pursuant to the order of the motions judge, Ellen Macdonald J. The order allowed the appellants 60 days to move before this court in respect of the disposition of the funds pending the appeal. As the appellants had not moved and the time limit was approaching, the respondents brought this matter on before the court for an order releasing the funds. The appellants now cross-move for an order that the funds continue to be held pending the outcome of the appeal.

[2] The funds in question represent a portion of a damages award obtained in May, 2000 by the respondent, Ian Outerbridge, in an action arising out of the destruction by fire of certain goods in storage. The appellants claim to be entitled to those goods on one of two bases: either because they were transferred as a fraudulent conveyance to the respondent, Outerbridge Management Limited, or, because the appellants have a security interest in the goods which ranks ahead of that of the respondents.

[3] These claims were made by the appellants in an action commenced in March 2000. Once the judgment in the “fire action” was received, the appellants moved for summary judgment in their action for a declaration that the transfer of assets to the respondent, Outerbridge Management Ltd. in June, 1988 was a fraudulent conveyance and void and for a consequent order directing the respondents to deliver possession of the proceeds from those assets represented by the damages from the judgment in the fire action, to the appellants. They also sought summary judgment on the Personal Property Security Act claim in the alternative. The respondents cross-moved for summary judgment dismissing the action on the basis that it was statute barred by the Limitations Act.

[4] Ellen Macdonald J. determined that the appellant’s action was statute barred and that the appellants were guilty of laches. Consequently summary judgment was granted to the respondents, dismissing the action. It is from that judgment that the appellants appeal to this court.

[5] While the summary judgment motions were outstanding, the parties had agreed that the proceeds of the fire action would be held in trust by counsel for the respondent Ian Outerbridge. While waiting for the reasons of the motions judge, the parties sought to have her determine the issue of whether the proceeds must continue to be held. The issue was addressed upon the release of the reasons. At that time affidavit evidence was filed by Ian Outerbridge and was not contradicted, indicating that the value of the stored goods claimed by the appellants was $150,000. The balance of the stored goods were other goods of the respondents. The motions judge therefore released $300,000 of the $500,000 judgment (inclusive of interest) to the respondents and ordered that the remaining $200,000 be held for 60 days pending this motion.

[6] The appellants’ motion is made pursuant to rule 45.02 which provides:

Where the right of a party to a specific fund is in question, the court may order the fund to be paid into court or otherwise secured on such terms as are just.

[7] The respondents argue first that the damages from the fire action do not constitute a “specific fund” in this action, within the meaning of the rule. Counsel says that those damages are just monies that belong to the respondents that happen to have been generated by a lawsuit, but that the nature of the lawsuit does not make the damages a “specific fund.”

[8] I do not accept that argument. It was agreed that the amount of the judgment reflects the value of the goods destroyed by the fire. Those monies stand in the stead of the goods, arguably in the same way as an insurance payment, had the goods been insured by the respondents. In my view, the amount of the fire judgment that stands in the place of the goods claimed by the appellants constitutes a “specific fund” in question in this action, within the meaning of the rule.

[9] Counsel argues that $50,000 of the $200,000 represents prejudgment interest which cannot be considered part of the specific fund. I do not accept that submission for the purpose of the rule. The fund represents the value of the assets plus interest accruing for the time it has taken to recover that value. For the purposes of the “specific fund” analysis, any prejudgment interest accruing on the value of the goods claimed can be considered part of the fund and subject to being secured under the operation of the rule.

[10] It is agreed that the other tests to be applied when considering an order under Rule 45.02, as applied on an appeal, are (a) the strength of the appellant’s case on the merits; (b) the balance of convenience.

[11] The motions before Ellen Macdonald J. were cross-summary judgment motions on a full record. Significantly, she stated at par. 24 of her reasons that “As there is no dispute about the material facts which give rise to these motions, the court may determine questions of law, apply the law to the undisputed facts and render judgment accordingly…” Although the motions judge granted summary judgment to the respondents on the limitation issue, she made the following finding at par. 46: “There is no question in my mind that, had their claims not been barred by the operation of the Limitations Act, P.F.& O. would have been able to make out their claims under both the Fraudulent Conveyances Act and the Personal Property Security Act.”

[12] The respondents submit that there was in fact no argument on the main summary judgment motion and that therefore, had the limitations argument failed, the action would have been ordered on for trial. This may be an issue which may become important on the argument of the appeal. However, for the purposes of this motion, I propose to take at face value the statements of the motions judge that the facts were not in dispute and that on those facts the plaintiffs would have been able to make out their claims.

[13] The issues raised on appeal are the determination of the applicable limitation to the causes of action in question and the propriety of the finding of laches . It appears both from the reasons of Ellen Macdonald J. as well as from the material filed and the submissions of counsel, that the limitations issue is a complex issue of law and that neither issue can be said to be in any way frivolous. In my view that is sufficient in these circumstances for the purpose of the rule, to meet the requirement that there be apparent merit in the appeal.

[14] The final issue is the balance of convenience. The respondents have provided no material on this issue. They submit that the onus is on the appellants. The appellants rely on the history of the matter, wherein the firm was unable to be paid by the respondents and was not paid, in circumstances where assets held as security were transferred without the knowledge or concurrence of the appellants. The appellants say that there is no assurance that this fund which represents some of those assets, will remain available to pay any judgment they may achieve on appeal. The respondents make no assurances in that regard. Nor do they say that there is any particular need for the monies to be released to them before the appeal.

[15] I am satisfied that the balance of convenience favours the order for payment into court or for the monies to continue to be held in trust by counsel for the respondent Ian Outerbridge, as counsel may agree. The appeal has been perfected by the appellants and should be able to be heard early in the new year.

[16] The second order sought by the appellants is under Rule 45.01 for the preservation, pending the disposition of the appeal, of 77 items of property, having a value of approximately $148,000, and described in par. 6 of an affidavit of Ian Outerbridge of July 25, 2000. In that affidavit, he states that he can identify each of those assets and knows their present whereabouts and can produce them if required to do so, or explain their sale or prior destruction. These assets are part of the security claimed by the appellant firm. Furthermore, the amount of the appellant’s total claim in the statement of claim is $500,000 for the loss of the assets, so that there will be no double security if both the fund of $200,000 and the assets, to the extent they exist, are preserved.

[17] In the circumstances, I can see no reason to deny the order requested. The balance of convenience clearly favours the continued preservation of the items.

[18] The orders requested by the appellants are granted with costs to the appellants in the cause of the appeal.