Court File and Parties

Citation: Krizan v. Skurdelis, 2020 ONSC 451 Divisional Court File No.: 19/712 Date: 2020-01-23 Superior Court of Justice - Ontario (Divisional Court)

Re: Victor Krizan and Karen Krizan v. David John Thomas Skurdelis

Before: Justice Swinton

Counsel: Peter Kolla, for the Appellant (Moving Party) Hashim Syed, for the Respondents (Responding Parties)

Heard at Toronto: January 21, 2020

Endorsement

Swinton J.

[1] The appellant has brought a motion for the stay of an order of Scott J. dated June 27, 2019 pending the determination of an appeal. Pursuant to s. 2 of the Partition Act, R.S.O. 1990, c. P.4 (the “Act”), the application judge ordered the sale of a rental property that the parties co-own in Kingston, Ontario.

The test for a stay

[2] The test for a stay requires the court to determine whether there is a serious issue on the appeal, whether the moving party will suffer irreparable harm if the stay is not granted, and whether the balance of convenience favours the granting of a stay (R.J.R. MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311).

Serious issue to be determined on the appeal

[3] The application judge denied the appellant a request for an adjournment in order to retain counsel. The matter had been adjourned a number of times before. The application judge then proceeded to hear from the appellant and counsel for the respondents. He gave the order to sell the property, but he provided no reasons for his order.

[4] The major problem with this decision is the judge’s failure to acknowledge that he had a discretion under s. 2 of the Act when asked to order a sale. He instead speaks in the transcript of the respondents’ entitlement to a sale as co-owners. While co-owners have a prima facie right to seek an order for sale under the Act, the court has a discretion to refuse to order a sale if there are “sufficient reasons for not doing so.” As the Court of Appeal stated in Greenbanktree Power Corp. v. Coinamtic Canada Inc. (2004), 75 O.R. (3d) 478 (C.A.) at paras. 1-2, the discretion to refuse the sale should only be exercised in circumstances of malice, oppression or vexatious intent.

[5] In the present case, the parties entered a written co-ownership agreement in 2012. It deals with the division of proceeds if there is a sale of the property, but it does not mandate how a sale would occur. Importantly, paragraph G deals with termination of the agreement, allowing either party to give 180 days notice in writing of a desire to terminate the agreement. This gives the other party a right of first refusal to purchase the 50% share of the terminating party based on a formal appraisal.

[6] Cases have held that the existence of a co-tenancy or co-ownership agreement is a significant factor to consider in the exercise of discretion under the Act. These cases held that a party should not be permitted to escape contractual obligations with respect to sale of a property by resorting to the Act (for example, Shabinsky v. Cohen, 1983 CarswellOnt 3911 (Div. Ct.) at para. 5; 9997897 Ontario Inc. v. 926260 Ontario Ltd., 2001 CarswellOnt 3535 (S.C.J.) at para. 11; Capanelli v. Muroff, 2002 CarswellOnt 126 (C.A.) at para. 1).

[7] To be fair, this case law was not before the application judge, and it may be distinguishable on the facts of this case. This sale order was made in June 2019. The parties had already listed the property in the fall of 2018, months before the legal proceedings started in February 2019. The respondents commenced their application because they took issue with the way in which the appellant was conducting the sale.

[8] Nevertheless, the application judge made no reference to the fact that he had a discretion to exercise. Nor did he address the appellant’s argument that there was a co-ownership agreement with a termination provision that the appellant sought to rely on in order to avoid the capital gains that would come from an outright sale.

[9] The requirement that there be a “serious issue” does not create a high threshold. I am satisfied that there is a serious issue to be determined on the appeal with respect to the issue of procedural unfairness because of the denial of an adjournment to obtain counsel, and the failure to consider the co-ownership agreement.

Irreparable Harm

[10] The appellant argues that he will suffer irreparable harm if a stay is not granted. First, he submits that the denial of a stay will render his appeal moot if he is successful, but the property has already been sold. Second, he will incur capital gains tax liability that he could avoid if he bought the respondents’ share.

[11] I will deal with the mootness argument when I discuss the balance of convenience. With respect to the harm from the sale of this property, I note that there is nothing special about this particular property, a factor that influenced the court in Bank of Montreal v. Smith, 2009 CarswellOnt 688 (S.C.J.) at para. 11. It is an investment property for both parties, not a personal residence.

[12] The harm that the appellant will suffer by having to pay taxes on capital gains is financial, and it can probably be quantified in monetary terms. However, it is not clear that he can be compensated in damages for the taxes he might pay if the house is sold. Consequently, I conclude that he may suffer irreparable harm.

Balance of convenience

[13] The appellant argues that his appeal will be rendered moot if the stay is not granted. In Ontario Council of Hospital Unions v. Clement, 2006 CarswellOnt 2098 (C.A.), Epstein J.A. stated this is an important consideration in determining the balance of convenience (at para. 26).

[14] However, in determining the balance of convenience, the court must also consider harm to the respondent if the stay is granted. With respect to a stay pending appeal, “the court must consider that the matter has already been adjudicated and the order must be regarded as prima facie correct” (Pickering (City) v. Slade, 2015 CarswellOnt 10461 (C.A.) at para. 12).

[15] In this case, the balance of convenience does not favour the granting of a stay for a number of reasons. First, the responding parties have been successful in the application, and the order is to be treated as prima facie correct.

[16] Second, the appellant has not acted with diligence in pursuing this appeal or, more importantly, this motion for a stay. I note that this is not attributable to the conduct of his present counsel in this motion, who was only retained last week.

[17] The appellant commenced a motion for a stay and abandoned it in September 2019. He was late in perfecting the appeal (which was brought in error to the Court of Appeal). He then brought a motion for a stay at the Court of Appeal that was adjourned in October 2019 with the new date peremptory to him because of delay in the case. On December 4, 2019, the Court of Appeal held that the appeal fell within the jurisdiction of the Divisional Court and transferred it. No date for the appeal in the Divisional Court appears to have been sought until the day before this motion was heard. The proposed appeal date agreeable to both parties is in late May 2020.

[18] The appellant has effectively had a stay for many months without moving this appeal forward. The respondents meanwhile have an order for sale. Under that order, they are required to pay 50% of expenses for the property, which apparently is currently without tenants. The parties’ relationship is growing more and more difficult. I am satisfied that the respondents are suffering prejudice because of the delay in this proceeding.

[19] I am also influenced by the fact that the appellant agreed to put the property on the market in the fall of 2018. There is evidence that he was under financial pressure. The appellant suggests that the listing was only meant to test the waters with a high asking price, and there was no obligation to accept an offer. Mr. Krizan gave evidence that he expected the property would be sold. In my view, the fact that the appellant agreed to list undermines his argument of irreparable harm.

[20] Finally, this is a commercial dispute about money. In accordance with the order, the monies from a sale will be paid into court. If a sale proceeds prior to the determination of the appeal, the parties will still have an opportunity to resolve their disputes about their respective entitlements to the proceeds.

Conclusion

[21] Ultimately, it is not in the interests of justice to order a stay of the whole order. However, both parties consent to a stay of the last sentence of paragraph 8 of the order. That sentence states, “The Net Proceeds of sale, as defined herein, shall be paid to the Applicants on closing.” I order a stay of that sentence until the appeal has been determined.

[22] Otherwise, the motion is dismissed. Costs to the respondents are fixed at the agreed upon amount of $8,000.00, payable within 30 days.

Swinton J.

Date: January 23, 2020