COURT FILE NO: 499/08

DATE: 20081027

SUPERIOR COURT OF JUSTICE - ONTARIO

DIVISIONAL COURT

RE: ABRAHAM ARONOWICZ and E. F.C. ENTERPRISES LTD.

Plaintiffs/Applicants

AND: EMTWO PROPERTIES INC., HARRY ARONOWICZ,

JOHN W. McCLURE, Trustee of AL TRUST,

1112825 ALBERTA LTD., INTERNVEST HOLDINGS LTD.

MENASHE GRINSHPAN,

2060227 ONTARIO INC., 1640156 ONTARIO INC. and

TERRMA GP I INC.,

Defendants/Respondent

BEFORE: KARAKATSANIS J.

COUNSEL: Gideon Forrest, for the Plaintiffs/Applicants

Mary Mckee, for the Defendants/Respondents, Harry Aronowicz, Emtwo Properties Inc. and Internvest Holdings Ltd.

Amy Salyzyn, for the Defendant/Respondent, John W. McClure, Trustee of Al Trust, 1112825 Alberta Ltd., Menashe Grinshpan,

2060227 Ontario Inc., 1640156 Ontario Inc. and Terrma GP I INC.

HEARD: October 16, 2008

E N D O R S E M E N T

[1] The plaintiffs/applicants seek leave to appeal the order of Morawetz J. dated September 11, 2008 in a refusals motion. Morawetz J. declined to order the respondents to answer certain questions either taken under advisement or refused by the defendants.

[2] Under Rule 62.02(4) (a) or (b), leave to appeal from an interlocutory order of a judge shall not be granted unless:

(a) there is a conflicting decision by another judge or court in Ontario or elsewhere on the matter involved in the proposed appeal and it is, in the opinion of the judge hearing the motion, desirable that leave to appeal be granted; or

(b) there appears to the judge hearing the motion good reason to doubt the correctness of the order in question and the proposed appeal involved matters of such importance that, in his or her opinion, leave to appeal should be granted.

[3] Under Rule 62.02(4), the applicants must show that either a) there is a conflicting decision by another judge or court in Ontario or elsewhere; or b) that there is good reason to doubt the correctness of the decision in question. In either case the applicant must also show that the issues are of importance beyond the interests of the parties, such that it is desirable that leave be granted.

[4] The applicants submit both that the Order is contrary to other decisions of the Ontario Court and there is good reason to doubt the correctness of the Order. In addition, while the applicants recognize that it is rare for leave to appeal to be granted in respect of a decision arising out of refusal on an examination for discovery or cross-examination, they submit that in this case the issues are of importance beyond the parties of the action.

[5] Abraham and Harry Aronowicz are brothers who each owned 50% of the shares in Emtwo Properties. Following an arbitration decision, Harry purchased Abraham’s shares under a shotgun buy/sell agreement in May 2006 with funds provided by Grinshpan and his companies. Emtwo then transferred property to Grinshpan and his companies pursuant to an agreement that pre-dated the share purchase. During arbitration relating to the buy/sell agreement Abraham asked Harry whether he was aware of any expressions of interest by third parties in acquiring some interest in the properties and Harry responded that he was not aware of any offers to purchase the properties. Abraham takes the position that the agreement was for the sale of the property and that Harry wrongfully entered into the agreement and lied during the arbitration process. Harry maintains that the transfer of the properties was to repay the loan pursuant to a loan agreement. The plaintiffs seek a wide array of remedies, including oppression remedies under the OBCA, discretionary orders setting aside the transfer of those properties and in the alternative, damages. The defendants are moving for summary judgment. The questions at issue relate to both discoveries and cross-examinations on affidavits in the motion for summary judgment.

[6] The plaintiffs submit that there is reason to doubt the correctness of the motions judge’s decision in ordering that the questions need not be answered in three discrete areas. First, the defendant Harry Aronowicz refused to answer questions relating to his assets or financial position at the time of the loan agreement that the plaintiffs say related to pleadings that he ‘required’ financing and the ‘only way’ he could repay the loan was by conveying the properties. Secondly, the defendants refused to answer questions relating to their dealings relating to the loan agreement subsequent to the purchase of shares under the shotgun agreement that the plaintiffs say may reflect on what the terms of the agreement actually had been, including questions regarding documents produced by the defendants. Finally, the defendants refused to answer questions that the plaintiffs say relate to the current values of the properties, and thus its request for an equitable remedy, including production of monthly management reports relating to management of the properties, any offers received and any plans for re-development.

[7] In determining whether there is ‘good reason to doubt the correctness’ of the decision in question under Rule 62.02(4)(b), it is not necessary for the court to disagree with the reasons of the judge below or to conclude that the decision is wrong or probably wrong. The applicant for leave to appeal need only show that it is debatable that another decision ought to have been made. Whether or not a question relates to matters with a semblance of relevance to the pleadings is a question of law in these circumstances and the standard of correctness applies to these decisions.

[8] It is not disputed that the motions judge correctly set out the test that the question must have some semblance of relevancy to the matters in issue as delineated by the pleadings. He also took into account comments expressed in Kay v Posluns to the effect that the test "semblance of relevance" is not to be interpreted as an open door to harass a party by exploring all dealings that he may be involved in. He noted that the focus of the action was the buy/sell agreement and events leading up to the closing in May 2006. The motions judge then dealt with a large number of specific questions in dispute in chart form. He found that some of the questions were relevant and ordered that they be answered. In brief reasons noted in the chart, the motions judge indicated that the questions outlined above were not relevant.

[9] With respect to the questions relating to Harry Aronowicz’s assets or financial position at the time of the loan agreement and thus his ability to finance the asset purchase, the defendants disagreed with the plaintiff’s interpretation of the pleadings and took the position that they were not relevant to the pleadings or statements made. The motions judge found those questions not relevant. He accepted the position of the defendants.

[10] With respect to questions relating to dealings between the defendants after the share purchase, the plaintiffs submit that the motions judge erred in holding the questions were not relevant or that relevance was dependant on when transactions closed. The motions judge ruled that the questions were not relevant. He accepted the position of the defendants that those questions were not relevant based upon the pleadings and issues raised in this case. In noting that the questions were ‘post closing’ or that ‘the focus of this action is the buy/sell agreement and events leading to the closing on May 26, 2006’, and finding that questions relating to certain events after the closing of the transaction were not relevant, he was not articulating a new test based upon when a transaction closes; he was noting the focus of the particular case before him that did not allege wrong-doing after that date and his finding with respect to semblance of relevance. There is no requirement that questions must be answered simply because a document was produced by the defendants.

[11] On the issue of the questions relating to damages, the motions judge noted that the questions were not relevant. With respect to the monthly reports of the property manager, which the plaintiff argued related to current value of the properties, the motions judge noted: “Not relevant. If damages are awarded they can be assessed by an accounting with appropriate evidence.” With respect to the other questions relating to receipt of offers, valuations or plans of re-development of the property, the motions judge also found that the questions were “not relevant.” He further noted that he accepted the position of the defendants.

[12] The position of the defendants included: the question was not relevant; damages crystallized on the date of the share transfer and anything after that was not relevant; no wrongdoing was alleged after the date of the closing; and, with respect to ‘equitable damages’, “if the plaintiffs are successful in establishing liability, ‘equitable damages’ can be assessed by an accounting as the plaintiff have requested in their claim.” In some instances the defendants argued that the evidence was too speculative with respect to value of the properties.

[13] The plaintiffs submit that the effect of the decision relating to the damages questions is that the issue of damages would have to be determined on an accounting after the trial, after liability was established and presumably with additional disclosure at that stage. The applicants characterize the order ‘as a bifurcation of liability and damages order and as such granting divided discovery’ and submit that as such, the decision conflicts with decisions regarding the bifurcation of liability and damages, as well as Rules 30.04(8) 31.06 (6) regarding divided discovery. Furthermore, the applicants submit that it is inconsistent with the cases holding that damages were directly relevant to whether the court should grant the discretionary remedy.

[14] I do not accept the plaintiffs’ characterization of the motions judge’s decision as an order bifurcating liability and damages and granting divided discovery. The motions judge clearly stated that he found the questions were not relevant. The only explicit additional comment referring to an ‘accounting’ for equitable damages was made following his finding the question was not relevant and in the context of the request for the property management reports, evidence that was clearly speculative and remote on the issue of value. The motions judge also noted that he accepted the defendant’s submissions with respect to other questions relating to the value of the properties after May 2006; the primary position in those submissions was that the questions were not relevant or that the evidence was too speculative on the issue of value; the submissions also included the submission that if the trial judge wished further evidence relating to ‘equitable damages’, they could be assessed by the accounting requested by the plaintiffs. In these circumstances, the comment that the motions judge accepted the submissions of the defendants, following a clear finding that the questions were not relevant, does not transform the decision on relevance into a de facto order for bifurcation or divided discovery.

[15] The motions judge made specific reference to the correct test with respect to relevance and noted as well that "semblance of relevance" is not to be interpreted as an open door to harass a party by exploring all dealings that he may be involved in. He articulated the correct test and determined that the questions were not relevant. In each case his decision was noted as: ‘Not relevant’. For some items he added additional comments accepting the position of the defendants. This was a refusal motion. There was no request for a bifurcated trial or for divided discovery. The main focus of the submissions related to relevance. In the context of the submissions and material in the motion before him, and on the basis of his decision read as a whole, I do not find that he applied any improper test and it is not reasonable to characterize this Order as effectively an order of bifurcation of this trial or de facto divided discoveries. As a result, the decisions cited by the plaintiff as inconsistent on the issue of bifurcation and divided discoveries are not applicable.

[16] I am not persuaded that there is good reason to doubt the correctness of the motions judge’s decision or that it is inconsistent with other decisions. However, even if it is debatable that a particular question ought to have been answered, this decision simply does not raise issues of importance beyond the parties. It does not raise issues of such importance that leave to appeal ought to be granted from an interlocutory motion.

[17] The requirement of ‘importance’ contemplates matters of public importance beyond the interests of the parties. Leave to appeal should be granted on questions that warrant consideration and resolution by an appellate court, on matters relevant to the development of the law and the administration of justice. This is not such a case. The motion involved the application of a settled area of law and did not determine a question of principle or establish any new proposition of law or practice.

[18] For these reasons, the motion is denied and leave to appeal is not granted.

[19] The defendants Harry Aronowicz, Emtwo Properties Inc. and Internvest Holdings Ltd. shall have their costs in the amount of $3,500 all inclusive, and the defendants John W. McClure, Trustee of Al Trust, 1112825 Alberta Ltd., Menashe Grinshpan, 2060227 Ontario Inc., 1640156 Ontario Inc. and Terrma GP I INC. shall have costs in the amount of $3,500 all inclusive, payable by the plaintiffs within 30 days.

A. KARAKATSANIS J.

Released: