SUPERIOR COURT OF JUSTICE – ONTARIO

COMMERCIAL LIST

RE: Alexander Josipovicz, Applicant

AND:

Hippo Properties Inc. and Kenneth Whyte, Respondents

BEFORE: D. M. Brown J.

COUNSEL: B. Cohen, for the Liquidator, Schonfeld Inc.

F. Myers, for the Respondent, Kenneth Whyte

J. Spiegelman and D. Levangie, for Milosh Pavlovicz, DeCerigo Properties Inc. and Studio Pyramid Inc. (the “Pavlovicz Parties”)

C. O’Hare, for Alexander Josipovicz, a bankrupt

HEARD: May 23, 2012

9:30 appointment endorsement

I. Issues raised and directions sought at the 9:30 appointment

[1] Much of the history of this liquidation is set out in the Reasons of Hoy J. (as she then was) dated May 19, 2010 (2010 ONSC 2962). Alexander Josipovicz and Kenneth Whyte are 50% shareholders in Hippo Properties Inc., a company now in court-ordered liquidation.

[2] The Liquidator has filed a First Report dated April 30, 2012 and seeks a date for a motion for an order:

(i) approving its activities and fees and disbursements;

(ii) approving its determination of the financial records, shareholders loans and money owed to Hippo, together with an order that any person or entity found to owe money to Hippo shall pay the same forthwith;

(iii) determining the validity, quantum and priority of claims for set off and indemnity and whether any shareholder or other party can “pool” funds owed/owing in determining the amount it is owed or owes to Hippo;

(iv) requiring DeCerigo Properties Inc. and Studio Pyramid Inc. provide evidence of the legal and beneficial ownership of each corporation to ascertain their legal relationship to each other, Mr. Josipovicz and Hippo; and,

(v) authorizing certain further steps in the administration of this liquidation.

[3] The First Report consists of some 5 volumes. The Liquidator reports that Hippo has no cash or liquid assets but, according to its determination, is owed a total of $154,667.22 from several parties. Section 5.1 of the Report sets out the Liquidator’s calculations of the obligations to and from Hippo. According to the Liquidator the following persons or entities owe Hippo money: (i) Mr. Josipovicz - $367,124.99, (ii) Mr. Whyte - $513,311. 66, and (iii) DeCerigo - $473,356.25. The following persons or entities are owed money by Hippo: (i) Mr. Pavlovicz - $19,469.12, (ii) Studio Pyramid - $787,904.92, and (iii) Hippo Publishing - $391,751.64.

[4] The Appointment Order was made January 29, 2010.

[5] On April 26, 2011 Mr. Josipovicz filed an assignment in bankruptcy. His discharge is opposed. In his Statement of Affairs the bankrupt recorded a liability to Hippo of $350,000. The Trustee did not attend the 9:30 appointment.

[6] This matter first came before me as an “add-on” to my May 17 list. At that time counsel for the Pavlovicz Parties advised they had retained Mr. Rosen to conduct a review of the First Report. Evidently those parties take issue with the Liquidator’s determination of the amount due to Mr. Pavlovicz, as well as other aspects of the First Report. At the May 23 appointment Mr. Rosen indicated he would need until late September or early October to complete his review. The Pavlovicz Parties submitted the Liquidator’s motion should not be heard until they have the opportunity to secure a report from Mr. Rosen. They also seek certain information from the Liquidator to enable a review of its Report, including information about how the Liquidator “may have reached” any particular number in his report.

[7] Mr. Myers, on behalf of Mr. Whyte, asked for production of the following: (i) from Mr. Josipovicz and the Pavlovicz Parties, to produce their tax returns and notices of assessment for the past 7 years, (ii) from DeCerigo and Studio Pyramid, disclosure of their ownership, and (iii) from Mr. Josipovicz, a copy of the complaint he filed against Mr. Whyte and others to the Ontario Human Rights Commission and the Law Society of Upper Canada. From the Liquidator’s Report it is apparent that an issue exists about who owns DeCerigo and Studio Pyramid – Mr. Josipovicz or Mr. Pavlovicz. I understand from Mr. Myers that his client’s request relates to that issue and any representation which Mr. Josipovicz made in the complaints about the nature of his legal relationship with Mr. Pavlovicz.

[8] Mr. O’Hare submitted that before any consideration could be given to the Liquidator’s request that the court determine any amount owed by Mr. Josipovicz to Hippo and make any order of payment in respect of any liability found, a motion would have to be brought to lift the stay of proceedings against Mr. Josipovicz. Although I heard out Mr. O’Hare, I queried his standing to make submissions given the assignment made by Mr. Josipovicz.

II. Directions

[9] Given that the Liquidator’s motion seeks orders in respect of amounts owing to or owed by Hippo, affected parties are entitled to file responding materials. The Pavlovicz Parties wish to do so in part through a report prepared by Mr. Rosen. Since Hippo, in essence, is a “dead company”, there is no particular urgency to the motion. I am prepared to give the Pavlovicz parties (indeed any other affected party) until Friday, September 28, 2012 to file their responding materials.

[10] In section 7 of its First Report the Liquidator reported that it re-built Hippo’s general ledger and provided all parties with a copy of that work product on July 13, 2011. Paragraph 6 of the January 29, 2010 Appointment Order defined “Records”; paragraph 7 of that order gave the two shareholders access to the Records, with the ability to request copies provided that “the reasonable costs associated with such access and copies to be determined by the Liquidator, and invoiced to and paid by the requesting person to the Liquidator forthwith”. I understand that the Pavlovicz Parties wish Mr. Rose to have access to the Records if required to prepare his report. They also want to be able to make inquiries of the Liquidator about how it arrived at certain conclusions.

[11] A court-appointed receiver must respond to reasonable information requests by affected parties, so too must a liquidator. This Liquidator has no money at its disposal. I will grant the Pavlovicz Parties reasonable access to the “Records”, as defined in paragraph 6 of the Appointment Order, and permit them to submit an initial set of information requests to the Liquidator no later than July 15, 2012 and a follow-up set of information requests no later than August 15, 2012, but subject to the following conditions:

(i) Requests for Records or requests for information must relate only to issues concerning any entitlement or obligation of the Pavlovicz Parties identified by the Liquidator in its First Report – i.e. no fishing expedition, direct or indirect, is permissible;

(ii) Any initial request for information or for access to Records by the Pavlovicz Parties must be accompanied by a deposit in the form of a certified cheque in the amount of $10,000. Upon negotiation of the cheque the Liquidator will provide the Pavlovicz Parties with an estimate of its costs associated with their request. If the estimated costs will exceed $10,000, the Pavlovicz Parties must provide the Liquidator, in advance of it commencing any work on the requests or granting access, with the full amount of the estimated costs. Only upon receipt of the full estimated amount will the Liquidator be required to respond to any request or provide access. Subsequent requests, if any, by the Pavlovicz Parties will be subject to a similar “pay as you play” costs-paid-in-advance regime. I suspect that such a regime will provide an element of self-regulation on the volume and materiality of the requests made to the Liquidator. Of course, upon receipt of any request and proper payment in advance, the Liquidator must work to provide timely responses to the Pavlovicz Parties so that they can meet their September 28 filing deadline; and,

(iii) It is clear from the First Report that a dispute exists about the legal and beneficial ownership of DeCerigo and Studio Pyramid as at the date of liquidation (January 29, 2010), the date of Mr. Josipovicz’s assignment in bankruptcy (April 26, 2011) and today. If Mr. Josipovicz owns either company, in whole or in part, that will affect entitlements and liabilities reported by the Liquidator. Consequently, as a condition of providing the Pavlovicz Parties with access to Records and information, I require DeCerigo and Studio Pyramid to provide to the Liquidator, no later than June 29, 2012, evidence to establish their ownership as at January 29, 2010, April 26, 2011 and today.

[12] As to the request by Mr. Whyte that I direct Mr. Josipovicz to produce his tax returns and notices of assessment for the past 7 years, as well as a copy of the complaint he filed against Mr. Whyte and others to the Ontario Human Rights Commission and the Law Society of Upper Canada, in light of the bankruptcy of Mr. Josipovicz, those are inquires which should be directed to his Trustee.

[13] Finally, I do point out to the Liquidator that if it intends to seek an order that Mr. Josipovicz pay Hippo any sum of money, the Liquidator must address the stay of proceedings in effect as a result of his assignment in bankruptcy.

[14] The parties shall consult and provide to me, no later than next Friday, June 1, three dates in the period October 22 to November 9, 2012 when they would be available for a full day hearing. I will direct the Commercial List Office to book one of those dates once received. I am not seized of that hearing.

[15] The parties shall book a 9:30 appointment before me for the week of September 10, 2012 to provide me with an update of the status of preparation for that hearing. I am seizing myself of all pre-hearing case management matters in this proceeding.

D. M. Brown J.

Date: May 25, 2012