COURT OF APPEAL FOR ONTARIO

CITATION: Montor Business Corporation v. Goldfinger, 2016 ONCA 407

DATE: 20160530

DOCKET: C57898

Cronk, Pepall and Lauwers JJ.A.

In the Matter of the Bankruptcy of Summit Glen Waterloo/2000 Developments Inc., of the City of Toronto, in the Province of Ontario

BETWEEN

A. Farber & Partners Inc., the Trustee of the Bankruptcy Estate of Montor Business Corporation, Annopol Holdings Limited and Summit Glen Brantford Holdings Inc.

Applicant (Appellant/Respondent by way of cross-appeal)

and

Morris Goldfinger, Goldfinger Jazrawy Diagnostic Services Ltd., Summit Glen Bridge Street Inc., Mahvash Lechcier-Kimel, Annopol Holdings Limited and Summit Glen Brantford Inc.

Respondents

Patrick Shea and Brent Arnold, for the appellant/respondent by way of cross-appeal

Maurice J. Neirinck and Michael McQuade, for the respondent/appellant by way of cross-appeal 1830994 Ontario Ltd.

Heard: October 14 and 15, 2015

On appeal from the judgment of Justice David M. Brown of the Superior Court of Justice, dated October 28, 2013, with reasons reported at 2013 ONSC 6635, 8 C.B.R. (6th) 200.

Pepall J.A.:

Introduction

[1] This is the second of three companion appeals, the other appeals bearing file numbers C57879 and C58356. This court’s decisions in the three appeals are being released contemporaneously. The background to the three appeals is described in detail in this court’s reasons in C57879.

[2] On December 1, 2008, Summit Glen Waterloo/2000 Developments Inc. (“SG Waterloo”) was placed in receivership and on June 28, 2010, it was adjudged bankrupt. A. Farber & Partners Inc. (“Farber”) was appointed as Trustee in bankruptcy of SG Waterloo. The principal of SG Waterloo was Jack Lechcier-Kimel.

[3] SG Waterloo owned property located at 105 University Avenue, Waterloo. It was sold by Farber on November 22, 2010, and the proceeds were paid into court pending the disposition of this litigation.

[4] 1830994 Ontario Ltd. (“183”), a company incorporated, owned, and controlled by Dr. Morris Goldfinger, asserted claims in SG Waterloo’s bankruptcy proceedings. The Trustee objected. 183 and Goldfinger then brought a motion seeking to have 183’s claims against SG Waterloo valued under s. 135 of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B.3, and to require that SG Waterloo’s estate satisfy those claims. The trial judge decided that the claims should be addressed in a hybrid trial together with the subject matter of Court File Nos. C58356 and C57879.

[5] In this appeal, Farber appeals from the trial judge’s allowance of the claims made by 183. It appeals in its capacity as Trustee in bankruptcy of Annopol Holdings Limited, Montor Business Corporation and Summit Glen Group of Companies Inc. Its primary submission is that 183’s claims were caught by the terms of a full and final release Goldfinger and Kimel signed in 2009.

[6] For the reasons that follow, I would allow the appeal.

Background

[7] In 2001, SG Waterloo granted two charges over 105 University Avenue to the Community Trust Company (“CTC”). The first charge secured $50,000 that SG Waterloo borrowed from CTC. The second charge, in the amount of $500,000, secured guarantees provided by SG Waterloo in support of two promissory notes in favour of CTC. Each of these promissory notes was in the amount of $250,000 – one from Goldfinger and one from Kimel. Goldfinger and Kimel also each guaranteed the other’s borrowing from CTC. Most of the money from the CTC financing went to SG Waterloo.

[8] On December 1, 2008, at Goldfinger’s request, Zeifman & Partners Inc. was appointed interim receiver over SG Waterloo and other Kimel companies. The appointment order was followed by defaults in payment on the CTC loans by SG Waterloo, Goldfinger and Kimel.

[9] CTC then commenced an action against Goldfinger and Kimel on the $250,000 personal loans and a separate action against SG Waterloo. It obtained default judgment against SG Waterloo on May 22, 2009 in the amount of $573,506. It also obtained default judgment against Kimel, but not against Goldfinger, who defended and asserted a counterclaim against CTC. Goldfinger and Kimel also cross-claimed against each other.

[10] CTC commenced its action against SG Waterloo and obtained judgment notwithstanding the stay of proceedings imposed by the receivership order and without having obtained leave of the court.

[11] On December 16, 2009, Goldfinger, Kimel, Mahvash (Kimel’s then-wife) and a number of Kimel’s companies, including SG Waterloo, entered into a settlement agreement to settle an action Goldfinger brought after he determined that Kimel had breached their First Settlement (discussed in detail in C57879) (the “2009 Settlement”). In the 2009 Settlement, Goldfinger was referred to as the “Plaintiff” and Kimel and his companies, including SG Waterloo, were the “Defendants”.

[12] As part of the 2009 Settlement, the parties agreed to enter into a mutual release (the “Release”). Paragraph 14 of the 2009 Settlement stated that:

The parties agree that the aforementioned releases are intended to release the Plaintiff and the Defendants from any claims they may have between each other arising from Community Trust Company’s action against [Kimel] and [Goldfinger] (Hamilton Court file #09-8872) and also from any claims relating to any possible flow of funds out of the defendant companies.

[13] Paragraph 20 of the 2009 Settlement provided, in part, that:

Nothing in this agreement or in the release shall restrict the Plaintiff’s ability to attempt to recover proceeds from sale of properties that were the subject of the receivership, to the extent that these proceeds are presently held by the Receiver and relate to properties sold prior to the execution of these Minutes of Settlement.

[14] The Release was entitled “Full and Final Mutual Release” and stated:

IN CONSIDERATION of the payment to Morris Goldfinger, of the sum of $2.00 of lawful money of Canada and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged the undersigned,

MORRIS GOLDFINGER

On behalf of and including himself, his heirs, administrators, executors, assigns, successors corporations under his control and on behalf of any party or parties who claim a right or interest through him,

(hereinafter referred to as “Goldfinger”)

– and –

JACK LECHCIER-KIMEL SUMMIT GLEN TRAYVAN HOLDINGS INC., SUMMIT GLEN WATERLOO/2000 DEVELOPMENTS INC., SUMMIT GLEN BRANTFORD HOLDINGS INC., RALEIGH STREET INVESTMENTS INC., SUMMIT GLEN BRIDGE STREET INC., SUMMIT GLEN FAIRWAY HOLDINGS INC., ANNOPOL HOLDINGS LTD. and MAHVASH LECHCIER KIMEL

on behalf of and including themselves, their heirs, administrators, executors, assigns, successors, corporations under their control (including Summit Glen Group of Companies Inc., Summit Glen Cambridge Holdings Inc., Summit Glen (SH) Inc., Summit Glen Woolwich Holdings Inc., Summit Glen Developments Inc. and Bridge Darling Brantford Holdings Inc.), and on behalf of any party or parties who claim a right or interest through them

(hereinafter collectively referred to as “the Kimel Parties”)

SAVE AND EXCEPT AS NOTED BELOW, HEREBY RELEASE, ACQUIT AND FOREVER DISCHARGE, EACH OTHER WITHOUT QUALIFICATION OR LIMITATION:

from all manner of actions, causes of action, suits, debts, dues, accounts, bonds, covenants, contract, complaints, claims and demands for damages, monies, losses, indemnity, costs, interest in loss, or injuries howsoever arising which hereto may have been or may hereafter be sustained by Goldfinger or the Kimel Parties directly, or indirectly, as a consequence of any agreement between the parties and from any and all actions, causes of action, claims or demands of whatsoever nature, whether in contract or in tort or arising as a result of a fiduciary duty or by virtue of any statute or upon or by reason of any damage, loss or injury arising out of the matters set forth above and, without limiting the generality of the foregoing, from any and all matters that were pleaded in, or could have been pleaded, in Ontario Superior Court of Ontario Action 00007823-00CL (herein referred to as the “Action”).

WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, the parties hereto declare that the intent of this Full and Final Mutual Release subject to the specific exclusions set out herein, is to conclude all issues arising from the matters set forth above and from the Action and it is understood and agreed that this Release is intended to cover, and does cover, not only all known injuries, losses and damages, but also injuries, losses and damages not now known or anticipated but which may later develop or be discovered, including all the effects and consequences thereof.

AND FOR THE SAID CONSIDERATION it is agreed and understood that Goldfinger and the Kimel Parties will not make any claim or take any proceedings against any other person or corporation who might claim, in any manner or forum, contribution or indemnity in common law or in equity, or under the provisions of any statute or regulation … from each of Goldfinger and The Kimel Parties discharged by this Full and Final Mutual Release, in connection with the matters outlined above and in the Action. IT IS AGREED AND UNDERSTOOD that if either Goldfinger and the Kimel Parties commences such an action, or takes such proceedings, and Goldfinger and the Kimel Parties (or any of them) are added to such proceeding in any manner whatsoever, whether justified in law or not, Goldfinger and the Kimel Parties will immediately discontinue the proceedings and/or claims, and Goldfinger and the Kimel Parties will be liable to each of them for the legal costs incurred in any such proceeding, on a solicitor and his own client scale. This Full and Final Release shall operate conclusively as an estoppel in the event of any claim, action, complaint or proceeding which might be brought in the future by Goldfinger or the Kimel Parties with respect to the matters covered by this Full and Final Mutual Release. This Full and Final Mutual Release may be pleaded in the event any such claim, action, complaint or proceeding is brought, as a complete defence and reply, and may be relied upon in any proceeding to dismiss the claim, action, complaint or proceeding on a summary basis and no objection will be raised by Goldfinger and the Kimel Parties in any subsequent action that the other parties in the subsequent action were not privy to formation of this Release. [Underlining added; all caps and bold in original.][^1]

[15] After entering into the 2009 Settlement, Goldfinger negotiated a settlement of CTC’s action against him. On July 27, 2010, Goldfinger incorporated 183. The invoice to Goldfinger from his lawyer refers to 183 as a nominee company.

[16] On August 4, 2010, CTC assigned its two charges on SG Waterloo’s property and the default judgment to 183 for valuable consideration. While Farber disputes the precise amount Goldfinger claims to have paid CTC, nothing turns on the difference for the purposes of my analysis.

[17] In summary, Goldfinger incorporated 183 and had 183 purchase the assignments from CTC. As a result, 183 became a creditor of Goldfinger, and of SG Waterloo and Kimel as well. As Farber put it, at para. 26 of its factum:

It is unusual to have a debtor who is financially able to pay his debts (Goldfinger): (a) incorporate a nominee company (183); (b) pay the amount owing to the creditor (CTC) to have that nominee company take an assignment of a guarantee rather than pay the debt; and (c) cause the nominee company to pursue a surety (SG [Waterloo]) to recover under a guarantee.

[18] Subsequent to the assignment of the charges to 183, SG Waterloo was adjudged bankrupt. 183 filed a proof of claim in SG Waterloo’s bankruptcy. It was dated September 17, 2010 and claimed $765,792.38, which reflected the two charges.

Trial Judge’s Decision

[19] The trial judge allowed 183’s claim, as assignee, for the principal amount of CTC’s $50,000 charge, together with interest until the date of payment, along with $450 representing NSF and charge renewal fees. He allowed 183’s claim in respect of CTC’s $500,000 charge with interest until the date of payment.

[20] In reaching his conclusion on the $50,000 and $500,000 principal claims, the trial judge rejected Farber’s submission that the Release applied to bar 183’s claims as assignee. He gave four reasons. First, the trial judge held that, while the Release included in its definition of “Goldfinger” any “successors [sic] corporations under his control”, that term, when read in the context of the entire definition, referred to any successor corporation that claimed “a right or interest through him” in respect of the matters released (trial judge’s emphasis). He held that 183 took assignments of the CTC charges in its own right and was not claiming a right or interest through Goldfinger. Second, the assignments were made well after Goldfinger and the Kimel Parties had entered into the Release. Third, they were made for valuable consideration given at the time of the assignments. Finally, the assignment of the charges was not captured by the matters released. The Release described these as matters:

[W]hich hereto may have been or may hereafter be sustained by Goldfinger or the Kimel Parties directly, or indirectly, as a consequence of any agreement between the parties and from any and all actions, causes of action, claims or demands of whatsoever nature, whether in contract or in tort or arising as a result of a fiduciary duty or by virtue of any statute.…

Farber’s Appeal

[21] Farber appeals from this decision. It advances numerous grounds of appeal, the first of which is that the trial judge erred in concluding that the Release did not extinguish 183’s claims. Farber acknowledges that if this court finds in its favour on this ground of appeal, there is no need to address the remaining grounds. I agree and given my conclusion, I will simply address the issue of the Release.

Parties’ Positions

(a) Farber

[22] Farber argues that the trial judge did not give effect to the purpose of the Release, which was to end all disputes relating to the sale proceeds from 105 University Avenue and to CTC’s action. The definition of “Goldfinger” in the Release should have been interpreted so as to bar claims by any corporations under Goldfinger’s control, including 183. It spoke of Goldfinger as including “successors corporations under his control and on behalf of any party or parties who claim a right or interest through him”. Farber submits that the trial judge should have read a comma into this definition between the words “successors” and “corporations”; instead, he read out the “s” in “successor”.

[23] Farber goes on to argue that even if the Release did not apply to 183, the trial judge should have “looked through 183” to Goldfinger. 183 was incorporated only to get around the Release, an improper purpose that justifies ignoring its separate identity.

[24] In addition, Farber submits that the Release applies to subsequent claims and the trial judge improperly narrowed the scope of the Release. When properly interpreted, 183’s claims fall squarely within the terms of the Release. The fact that 183 paid value for the assignment was irrelevant.

(b) 183

[25] 183 responds by submitting that it was not a party to the Release and was not even incorporated when the Release was entered into. The Release was restricted to certain matters that did not extend to 183 or to the secured claims of 183 based on the assignments from CTC.

Analysis

[26] The first issue to consider is the applicable standard of review. The Supreme Court has held that contractual interpretation involves questions of mixed fact and law, and as such, should be reviewed for palpable and overriding error: Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633, at para. 50; Heritage Capital Corp. v. Equitable Trust Co., 2016 SCC 19, 2016 S.C.J. No. 19, at para. 21.

[27] However, the Supreme Court recognized that it may be possible to identify an extricable question of law, which would be reviewed on a correctness standard: Sattva, at para. 53. The Court went on to state that appellate courts should be cautious about identifying extricable questions of law when engaged in a review of contractual interpretation.

[28] Extricable questions of law include legal errors involving “the application of an incorrect principle, the failure to consider a required element of a legal test, or the failure to consider a relevant factor”: Sattva, at para. 53.

[29] Here, the language and wording of the Release had to be reviewed, construed, and assigned meaning. The Release had to be considered as a whole: Deslaurier Custom Cabinets Inc. v. 1728106 Ontario Inc., 2016 ONCA 246, [2016] O.J. No. 1705, at paras. 31, 54 and 59. Such an exercise or review is not evident from the reasons advanced by the trial judge for rejecting Farber’s position. This was in error. When considered as a whole, the Release applies to companies controlled by Goldfinger, including 183, and to the subject matter of 183’s claims.

[30] The Release defined the releasor, “Goldfinger”, as: “[O]n behalf of and including himself, his heirs, administrators, executors, assigns, successors corporations under his control and on behalf of any party or parties who claim a right or interest through him” (emphasis added).

[31] The Release went on to define Kimel, his companies and wife. The definition of those parties stated: “[O]n behalf of and including themselves, their heirs, administrators, executors, assigns, successors, corporations under their control (including…), and on behalf of any party or parties who claim a right or interest through them” (emphasis added). The only material differences between these definitions is that there is no comma separating the words “successors” and “corporations” in the Goldfinger definition and no comma preceding the words “and on behalf of any party or parties who claim a right or interest”; there are commas between these words in the Kimel definition. Arguably, this was no more than a drafting error.

[32] The trial judge had to give effect to all of the words of the Release, which he did not do. If one considers all of the words of the Release, certain conclusions are manifest:

(i) The definition of “Goldfinger” is ambiguous.

(ii) The definition of “Kimel Parties” in the Release provides a guide to interpretation of the definition of “Goldfinger”, and makes both grammatical and commercial sense.

(iii) Read as a whole, it is an error to read out the “s” in the word “successors” and to exclude commas after the words “successors” and “control”.

(iv) The definition of “Goldfinger” is not limited to successor corporations who claim a right or interest through Goldfinger.

(v) The construction of the definition, in the context of the Release read as a whole, should state: “successors, corporations under his control, and on behalf of any party or parties who claim a right or interest through him” (emphasis added).

[33] 183 concedes that it is a company under Goldfinger’s control. When properly construed, 183 was captured by the definition of the parties encompassed by the Release.

[34] This result also makes practical and commercial sense. It would be bizarre if a person could circumvent the ambit of a release simply by establishing a nominee company in his or her stead. It is also consistent with the purpose underlying the 2009 Settlement, which was to bring an end to the underlying litigation and the relationship between Goldfinger and Kimel.

[35] It is noteworthy, by way of comparison, that paragraph 21 of the 2009 Settlement expressly states that nothing prevents Goldfinger from pursuing his dispute with another third party, HSBC. In contrast, the 2009 Settlement does not specifically exclude the CTC dispute.

[36] Second, turning to the subject matter of the Release, the parties to the 2009 Settlement (and such parties should be read to include 183) gave up their claims to proceeds generated by SG Waterloo.

[37] Again, to repeat, paragraph 14 of the 2009 Settlement stated:

The parties agree that the aforementioned releases are intended to release the Plaintiff and the Defendants from any claims they may have between each other arising from Community Trust Company’s action against Jack Lechcier-Kimel and Morris Goldfinger (Hamilton Court file #09-8872) and also from any claims relating to any possible flow of funds out of the defendant companies.

[38] In addition, paragraph 17 provided:

The Plaintiff will refrain from providing cooperation to any creditor or potential creditor of the defendants, directly or indirectly with respect to any proceedings against the defendants, except to the extent required by law.

[39] As mentioned, the “Plaintiff” is defined as Goldfinger and the “Defendants” include SG Waterloo.

[40] Furthermore, paragraph 20, quoted above, expressly permitted Goldfinger to attempt to recover proceeds from the sale of properties sold prior to the execution of the 2009 Settlement. As I have said, 105 University was sold on November 22, 2010, eleven months after the date of the 2009 Settlement.

[41] Goldfinger described the 2009 Settlement as being “comprehensive” and he entered it to minimize significant legal costs and losses. He stated he made a compromise as he was entitled to no further repayment of the debt that was owed to him. He also stated that he had lost his desire to litigate as a result of his family circumstances.

[42] These surrounding circumstances lend support to the conclusion that the 2009 Settlement, including the mutual Release, was designed to result in finality and to release any future claim Goldfinger, and by extension 183, had against SG Waterloo. In return, Goldfinger accepted $5 million that was secured against property located on Park Lane in Toronto and owned by Kimel’s wife.[^2]

[43] The Release was drafted in the broadest of language and applies to:

[A]ll manner of actions, causes of action, suits, debts, dues, accounts, bonds, covenants, contract, complaints, claims and demands for damages, monies, losses, indemnity, costs, interest in loss or injuries howsoever arising which hereto may have been or may hereafter be sustained by Goldfinger or the Kimel Parties directly, or indirectly, as a consequence of any agreement between the parties and from any and all actions, causes of action, claims or demands of whatsoever nature, whether in contract or in tort or arising as a result of a fiduciary duty or by virtue of any statute or upon or by reason of any damage, loss or injury arising out of the matters set forth above and, without limiting the generality of the foregoing, from any and all matters that were pleaded in, or could have been pleaded, in Ontario Superior Court of Ontario Action 00007823-00CL (herein referred to as the “Action”).

[44] The “matters set forth above” could only refer to the broad language which preceded that statement.

[45] In addition, later the Release stated:

WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, the parties hereto declare that the intent of this Full and Final Mutual Release subject to the specific exclusions set out herein, is to conclude all issues arising from the matters set forth above and from the Action and it is understood and agreed that this Release is intended to cover, and does cover, not only all known injuries, losses and damages, but also injuries, losses and damages not now known or anticipated but which may later develop or be discovered, including all the effects and consequences thereof.

[46] It also provided that Goldfinger and the Kimel Parties would not make any claim or take any proceedings against another person or corporation who might claim against either of them.

[47] In summary, the Release included 183, and SG Waterloo was a beneficiary of the Release. Under the 2009 Settlement, Goldfinger had both released SG Waterloo and given up any claim to the proceeds from the sale of 105 University Avenue. It is not now open to him, through the guise of 183, to circumvent those commitments. The fact that he paid CTC in part to avoid personal liability should not now enable him to recoup that amount from a source he covenanted to release.

[48] In my view, the trial judge erred in not considering the entire contract when interpreting its proper meaning and scope. Had he done so, he would have reached a different conclusion.

[49] In light of this determination, there is no need to consider the remaining grounds of appeal.

Disposition

[50] For these reasons, the appeal is allowed and the October 28, 2013 judgment is varied to delete paragraphs 8 and 9, and to substitute the following:

8. THIS COURT ORDERS that the secured claim of 1830994 Ontario Limited (“183 Ontario”) against SGW in respect of the Community Trust Company (“CTC”) $50,000.00 Charge is disallowed.

9. THIS COURT ORDERS that the secured claim of 183 Ontario against SGW in respect of the CTC $500,000.00 Charge is disallowed.

[51] As agreed by the parties, I would order 183 to pay Farber $25,000 for the costs of this appeal, inclusive of disbursements and HST.

Released:

“MAY 30 2016” “S.E. Pepall J.A.”

“EAC” “I agree E.A. Cronk J.A.”

“I agree P. Lauwers J.A.”

[^1]: The Release contained apparent typographical errors which have not been corrected in these reasons.

[^2]: Kimel and his wife, Mahvash, separated in January 2009 and divorced in November 2010. Mahvash married Goldfinger shortly thereafter, on November 18, 2010.