Superior Court of Justice
COURT FILE NO.: CV-11-0017-00, CV-11-0018-00, CV-11-0019-00, CV-11-0020-00, CV-11-0021-00
DATE: 2012-07-05
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
L-JALCO HOLDINGS INC.
Plaintiff
– and –
JEHUDA JULIUS KAMINER
Defendant
William P. H. Procter, for the Plaintiff L‑Jalco Holdings Inc.
Jehuda Julius Kaminer, unrepresented
AND BETWEEN:
L-JALCO HOLDINGS INC.
Plaintiff
- and –
6639828 CANADA INC.
Defendant
AND BETWEEN:
L-JALCO HOLDINGS INC.
Plaintiff
- and –
873047 ONTARIO LTD.
Defendant
AND BETWEEN:
L-JALCO HOLDINGS INC.
Plaintiff
- and –
JOSEPH MURANO and MARJORIE BABCOCK
Defendants
AND BETWEEN:
L-JALCO HOLDINGS INC.
Plaintiff
- and –
1652632 ONTARIO LTD.
Defendant
William P. H. Procter, for the Plaintiff L‑Jalco Holdings Inc.
6639828 Canada Inc., unrepresented
William P. H. Procter, for the Plaintiff L‑Jalco Holdings Inc.
Amandeep S. Dhillon, for 873047 Ontario Ltd.
William P. H. Procter, for the Plaintiff L‑Jalco Holdings Inc.
Amandeep S. Dhillon, for Marjorie Babcock
Joseph Murano, unrepresented
William P. H. Procter, for the Plaintiff L‑Jalco Holdings Inc.
1652632 Ontario Ltd., unrepresented
HEARD: April 30, 2012
DECISION ON SUMMARY JUDGMENT MOTION
JUSTICE POLOWIN
Reasons for Decision
[1] This is a Motion for Summary Judgment involving five court actions and six properties. The Plaintiff has instituted these five actions based on mortgages between the Plaintiff and the Defendants Joseph Murano (“Murano”), Marjorie Babcock (“Babcock”), Jehuda Kaminer (“Kaminer”), 1652632 Ontario Ltd. (a company controlled by Mr. Kaminer), 6639828 Canada Inc. (also controlled by Mr. Kaminer) and 873047 Ontario Ltd. (a company controlled by Mr. Murano). The Plaintiff has brought this Motion for Summary Judgement for possession of these properties which are the subject matter of the mortgages and for Judgement on the covenants on the mortgages. The properties include the residence of Mr. Kaminer, the residence of Mr. Murano and four commercial properties. The mortgages are all collateral to each other.
[2] Mr. Murano is the owner of a restaurant franchise known as Dixie Lee Chicken which operates across Canada, overseas in several countries and which aspires to operate in the United States as a publicly traded company. Mr. Kaminer has been Mr. Murano’s lawyer in the past although it is denied that Mr. Kaminer represented him with respect to this mortgage transaction.
[3] In 2008, Mr. Murano became aware that another franchise company was for sale. Double Double Pizza was selling four corporate stores, its franchise network and its commissary. Mr. Murano determined that its purchase would substantially enhance Dixie Lee’s operations and profitability. He was introduced to Calin Lawrynowicz (“Lawrynowicz” or “Calin”), a lawyer in Toronto, by Daniel Serruya (“Serruya”). Mr. Serruya worked as an independent consultant in Mr. Lawrynowicz’s law firm, Lawrynowicz and Associates, and had also done work for Mr. Murano. Calin was involved in a number of joint venture projects in addition to his law practice. Calin would also invest through a company called Your Legal Business Partners. Calin is the son of John Lawrynowicz (“John”) who is the sole shareholder, director and officer of the Plaintiff, L-Jalco Holding Inc. (“L-Jalco”).
[4] Mr. Murano stated that he met Calin Lawrynowicz with a view to borrowing between $250,000.00 to $300,000.00 to be secured by a second mortgage on two properties (the Bath and Weller Street properties), so that he would have funds available to complete the regulatory and reporting issues for his U.S. publicly traded company. As well, Mr. Kaminer required $60,000.00 at that time.
[5] During discussions with Calin Lawrynowicz, he was given disclosure of the six properties owned by Mr. Kaminer and Mr. Murano both personally and through their companies. According to Mr. Murano, Calin indicated that he wanted to participate in Dixie Lee’s business opportunities, both in the U.S. and in the purchase of Double Double Pizza. Mr. Murano stated that Calin told him that they would do this as a joint venture, and that he would invest in Dixie Lee with his own money, act as their lawyer and provide financing based on a single blanket mortgage of $1,100,000.00. According to Mr. Murano, $750,000.00 would be used to replace existing mortgages on his Division Street and Manor Road properties and $60,000.00 would be advanced to Mr. Kaminer to retire his debt to the Royal Bank. The rest was to come to Mr. Murano as operating funds.
[6] In addition, according to Mr. Murano, it was agreed that there would be a total of $2,500,000.00 invested by Calin, these further sums representing the funds required to pay for Double Double Pizza, to complete the filings required for the publicly traded company, and a line of credit of $500,000.00. Calin was to be granted five million shares in Dixie Lee USA, a 12.4 percent equity position.
[7] Mr. Murano stated that at all material times, Calin represented that the funds to be borrowed (the $1,100,000.00) were his own. According to Mr. Murano, Calin stipulated that because this was his own money, he required very full security at a high rate (12%), but that he was in a position to provide a takeout mortgage within three months at 3% interest for the $1,100,000.00 and he undertook to do so. Mr. Murano gave Calin a retainer of $10,000.00. Mr. Murano stated that he and Mr. Kaminer would not have entered into the loan without this assurance and Mr. Murano was not prepared to proceed without the balance of the funding to buy Double Double Pizza and proceed with going public.
[8] Mr. Serruya was examined in these proceedings. He gave evidence that a meeting took place between Calin, Murano and himself in May 2008, where the parties discussed Calin lending $250,000.00 to $300,000.00 to Murano to allow him to complete the U.S. regulatory and filing requirements of Dixie Lee USA, but when information on the properties owned by the Defendants was brought to Calin’s attention, he restructured the deal to be more along the lines of a one million dollar loan to put himself in a stronger position in terms of security.
[9] According to the Plaintiff, as a result of the urgency of the requirement that funds be advanced, the sum of $30,000.00 was advanced on June 12, 2008 against security by way of mortgage against 104 Manor Road. Subsequently, on June 20, 2008, the Plaintiff advanced $202,261.15 and on June 30, 2008 a further $20,000.00. A mortgage commitment letter was sent to the Defendants dated July 7, 2008. The substantive terms of the commitment were that $1,100,000.00 was to be loaned at 12% per annum compounded monthly with a term of one year. The monthly payments were $11,000.00. The closing date was to be on or before July 3, 2008. The commitment included a lenders fee of $33,000.00 and additional terms.
[10] The commitment was never signed but the Defendants did execute an Acknowledgement and Direction for each of the five mortgages herein concerned on July 17, 2008. They each provided as follows:
Principal $1,100,000.00 Calculation Period Monthly Balance Due Date 2009/07/03 Interest Rate 12% Payments $11,000.00 Interest Adjustment Date 3rd of each and every month First Payment Date 2008/08/03 Last Payment Date 2009/09/03 Standard Charge Terms 9320
[11] The mortgagee was shown to be L-Jalco Holdings Inc. It is the position of the Murano Defendants that it was at the time of the advance of $202, 261.15 on June 20, 2008, that Murano Defendants first learned that the lender would be L-Jalco. Mr. Murano also stated that Calin advised him that he and L-Jalco were one and the same and that the Murano Defendants executed the mortgage documentation based on this representation.
[12] The five mortgages were registered with the above noted terms on September 3, 2008, The August, September and October, 2008 $11,000.00 monthly interest payments were taken from holdback. The November and December payments were made by Mr. Murano on December 12, 2008. The January payment was made by Mr. Murano on January 12, 2009. On February 12, 2009 Mr. Murano paid $8538.86 and 1652632 Ontario Ltd. paid $2461.14, for a total of $11,000.00. Post dated cheques were given by 1652632 Ontario Ltd. dated March 12, April 12, May 12, June 12, July 12 and August 12, 2009, all which were NSF. All these cheques bear the signature of Jehuda Kaminer. The amounts for these NSF cheques were taken from holdback. The principal was never repaid and interest continues to accrue to this date.
[13] Other advances were made pursuant to these mortgages. On September 5, 2008 a payment was made by L-Jalco to Peter L. May in Trust with respect to the Powell Mortgage in the amount of $463,662.97. On September 22, 2012, $62,000.00 was paid to the Royal Bank of Canada on behalf of Mr. Kaminer. On October 8, 2009, $19,295.20 was paid to Mr. Murano. These amounts are all indicated in the Advance Summary which was given to Mr. Murano in April 2009, (Exhibit A to the Affidavit of Joseph Murano dated August 9, 2011). The Advance Summary also referred to the lenders fee of $33,000.00, payment for accounts from Lawrynowicz and Associates and payments for property tax arrears, all these amounts shown to have come from holdback. According to the Advance Summary, by October 8, 2008, the full $1,100,000.00 had been advanced.
[14] The commercial transaction with respect to Mr. Lawrynowicz’s potential investment in Mr. Murano’s business ventures also went “south”. It will be referred to in these Reasons as the “failed business transaction”. While it is the position of Mr. Murano that an agreement in principle was made between Mr. Lawrynowicz and Mr. Murano that Mr. Lawrynowicz would invest $2,500,000.00 into Dixie Lee and in return would receive a 12.4% shareholding interest in Dixie Lee USA, there were negotiations between the parties over many months and the “agreement” appears to have been ever changing. This is evidenced by a number of Letters of Intent. The first Letter of Intent dated August 22, 2008 was between Joseph Murano, Dixie Lee Food Systems Ltd. and Calin Lawrynowicz. It was not signed. A second Letter of Intent, dated November 24, 2008 between Calin Lawrynowicz, Joseph Murano and Dixie Lee Capital Corporation was also not signed. There was a third Letter of Intent dated November 24, 2008 between Calin Lawrynowicz, Joseph Murano and Dixie Lee Capital Corporation unsigned as well. There was a Letter of Intent dated December 19, 2008 between Calin Lawrynowicz, Joseph Murano, the Dixie Lee Capital Corporation and the DL Group of Companies which was signed on December 22, 2008, but only by Mr. Murano. Finally, there was another Letter of Intent dated December 19, 2008 but this was not delivered to Mr. Murano until March 2009. It was never signed.
[15] A review of these Letters of Intent indicates that the terms were ever changing. However, while an executed agreement did not ever materialize, it appears that some funds were advanced by Lawrynowicz to Murano during this time with respect to the failed business transaction. (Exhibit B to the Affidavit of Joseph Murano dated August 9, 2011). The Parties appear to have still been negotiating in March 2009.
[16] An action has been commenced in Toronto by Calin Lawrynowicz (Your Legal Business Partners Inc.) with respect to the failed business transaction against Mr. Murano and Dixie Lee Capital Corporation. Mr. Murano has counterclaimed in that action for $10,000,000.00 in damages. Mr. Murano has also brought a Third Party claim against Calin Lawrynowicz and Your Legal Business Partners Inc. in the mortgage actions herein. He seeks, among other things, indemnification by the Third Parties of such sum as found to be due and payable pursuant to the mortgage in the main party action with interest at a rate of 12% per year compounded monthly from January 19, 2011 until judgment.
[17] A number of concerns have been raised by the Defendants in their Affidavits. Firstly, they allege that they were charged a standby fee from May to August 2008 without their knowledge or agreement and without receiving particulars thereof until well after the fact. It is alleged that they were waiting to close the deal in September 2008, but were advised later that interest was to accrue from June on unadvanced portions of the loan without their knowledge and approval. Further, legal fees for Lawrynowicz and Associates were deducted from the mortgage holdback without accounting for same until this litigation began and it is alleged that accounts have been backdated. The Defendants state that they never agreed to a lenders fee of $33,000.00 and they have no idea who received those funds. The Defendants referred to the lack of a commitment letter, that there was no clear accounting on these mortgages, that there was nothing resembling a Trust Ledger Statement or any disclosure statement respecting the mortgage funds. The forms required by the Law Society in a private lending arrangement were never prepared.
[18] In his Affidavit dated August 9, 2011, Mr. Murano also pointed to the Advance Summary with respect to the mortgages (Exhibit A to the Affidavit of Joseph Murano dated August 9, 2011) and the Mortgage Advance Schedule (Exhibit B to the same Affidavit concerning the failed business transaction). According to Exhibit A, there is a sum of $30,000.00 being advanced on June 12, 2008 to Dixie Lee Capital Corporation. The $33,000.00 lenders fee is shown on June 12, 2008 on Exhibit A and that same amount is shown on Exhibit B on October 8, 2008. It is stated by Murano that the $20,000.00 shown paid to Joseph Murano on June 30, 2008 was actually advanced to Dixie Lee Capital Corporation and that the $252,261.15 allegedly advanced to Murano on June 30, 2009 was actually part of the $2,400,000 package which was offered to Mr. Murano as an incentive to let Calin Lawrynowicz into the Double Double Pizza deal, advanced before the mortgage went on.
Submissions of the Defendants
[19] The Murano Defendants oppose this motion for Summary Judgment on two main grounds:
There is no mortgage as between L-Jalco and the Murano Defendants; and
L-Jalco did not advance and the Murano Defendants did not receive the $1,100,000.00 from L-Jalco.
[20] It is the position of the Murano Defendants that the transaction at issue was not a conventional mortgage between L-Jalco and the Murano Defendants but rather was a part of a business transaction in which L-Jalco’s solicitor, Calin Lawrynowicz was investing monies and becoming a partner with the Murano Defendants and his companies. Further, it is submitted that L-Jalco has failed to put its best foot forward by failing to produce the back-up documentation which would support the alleged advances of $1,100,000.00.
[21] The Murano Defendants state that there is a genuine issue as to the true nature of the transaction and the parties to the transaction. It is stated that at all material times Calin Lawrynowicz represented that the $2,500,000.00 he was going to invest and the $1,100,000.00 he was going to loan were his own funds. According to Murano, Lawrynowicz stipulated that because he was loaning $1,100,000.00 of his own money, he would require very full security. Further, to induce Murano into the agreement, Lawrynowicz advised that he would be in a position to refiance the mortgage in three months to provide an interest rate of 3%. While Lawrynowicz has denied that there were discussions between him and Murano that he was providing the $1,100,000.00 from his personal funds and that he was investing his own money into Dixie Lee and while Lawrynowicz stated that in late July he expressed to Murano, for the first time, an interest in having his wife’s company, Your Legal Business Partners Inc. invest the money into the Dixie Lee companies, the Murano Defendants submit that Lawrynowicz is contradicted by the evidence of Daniel Serruya on these points.
[22] The Murano Defendants submit that they were never advised of the true lender. It was only at the time of the advance of the $202,261.15, on June 20, 2009, that the Murano Defendants learned that the lender would be L-Jalco. According to Murano, Lawrynowicz advised him that he and L-Jalco were one and the same.
[23] The Murano Defendants submit that while Lawrynowicz has claimed that either he or Mr. Serruya advised the Murano Defendants that L-Jalco was his father’s company in June/July 2008, there was nothing produced in writing which evidences that he so advised the Murano Defendants. They point the evidence of Mr. Serruya that he had no knowledge that L-Jalco was involved and assumed it was going to be Calin. Further, it is noted that during cross-examination, John Lawrynowicz acknowledged that he had very little or no knowledge or involvement with the Murano Defendants or the mortgage. It is the position of the Murano Defendants that Calin gave inconsistent, incomplete, contradictory and unreliable evidence with respect to his claim that the Murano Defendants were well aware that they were obtaining a mortgage from his father’s company.
[24] The Murano Defendants state that there is a genuine issue as to the advance of the mortgage funds and dispute L-Jalco’s claim that it advanced $1,100,000.00. It is submitted that L-Jalco is attempting to obtain summary judgment by relying on Schedule “A” to its Statement of Claim prepared by L-Jalco’s counsel, based on information provided by Lawrynowicz and Associates, without producing the back-up documentation that was relied upon to create the Schedule “A” Statement. It is noted that on cross-examination John Lawrynowicz did not know how, when and to whom the $1,100,000.00 was advanced but believed it was given to Calin and his firm. While Calin stated in examinations that L-Jalco advised him in June, 2008 that they were prepared to advance $1,100,000.00 he could point to nothing in writing evidencing same or evidencing requests made in writing by his firm for mortgage funds under the mortgage.
[25] The Murano Defendants point to the fact that a large portion of L-Jalco’s claim is for funds it did not advance but were advanced by other parties. The monies for the advance of $62,000.00 to the Royal Bank of Canada with respect to satisfying the indebtedness of Mr. Kaminer came from Your Legal Business Partner Inc. The $30,000.00 advance on June 12, 2008 and the $202,261.15 advance on June 20, 2008 came from Cory Lawrynowicz (Calin’s brother and John’s son). Further, L-Jalco’s Schedule “A” Advance Statement indicates that $718,000.00 was advanced from L‑Jalco to Lawrynowicz and Associates but Calin refused an undertaking to produce documentation that shows that his firm received and held that $718,000.00 under the mortgage on behalf of L-Jalco.
[26] In addition, the Murano Defendants deny that they agreed that all funds advanced prior to the registration of the mortgage would be secured by the mortgage. It is noted that L-Jalco did not produce any evidence to substantiate that agreement.
[27] Finally, the Murano Defendants state that there is a double recording of funds with respect to the L-Jalco mortgage and funds advanced by Your Legal Business Partners Inc. with respect to Lawrynowicz’s $2,500,000.00 investment in Dixie Lee. The Murano Defendants refer in this regard to the June 12, 2008 advance of $30,000.00 which is shown in Schedule “A” to the Statement of Claim as advanced to Murano and in Exhibit A to the Affidavit of Joseph Murano sworn August 9, 2011 as advanced to Dixie Lee. Reference is also made to the $33,000.00 lenders fee which is referred to on both Exhibit A and Exhibit B of the Affidavit albeit on different dates.
[28] According to the Defendants the facts in this case are analogous to the facts in Aghael v. Ghods, 2011 ONSC 4308 (“Ghods”). It is submitted that in Ghods the motions judge refused to grant summary judgement on the ground that there were genuine issues for trial with respect to whether the plaintiff advanced the funds and what, if any funds were advanced under the mortgage.
Decision
[29] The amendments to Rule 20, the Rule which governs summary judgement motions, came into effect January 1, 2010. Rule 20 provides in part:
20.04(2) The court shall grant summary judgment if,
(a) the court is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence; or
(b) the parties agree to have all or part of the claim determined by a summary judgment and the court is satisfied that it is appropriate to grant summary judgment. O. Reg. 284/01, s. 6; O. Reg. 438/08, s. 13 (2).
(2.1) In determining under clause (2) (a) whether there is a genuine issue requiring a trial, the court shall consider the evidence submitted by the parties and, if the determination is being made by a judge, the judge may exercise any of the following powers for the purpose, unless it is in the interest of justice for such powers to be exercised only at a trial:
Weighing the evidence.
Evaluating the credibility of a deponent.
Drawing any reasonable inference from the evidence.
(2.2) A judge may, for the purposes of exercising any of the powers set out in subrule (2.1), order that oral evidence be presented by one or more parties, with or without time limits on its presentation.
[30] The Ontario Court of Appeal recently reviewed the law with respect to Rule 20, and summary judgment in Combined Air Mechanical Services Inc. v. Flesch, 2011 ONCA 764, (“Combined Air”). The Court stated the following at paragraph 38 and 39:
However, we emphasize that the purpose of the new rule is to eliminate unnecessary trials, not to eliminate all trials. The guiding consideration is whether the summary judgment process, in the circumstances of a given case, will provide an appropriate means for effecting a fair and just resolution of the dispute before the court.
Although both the summary judgment motion and a full trial are processes by which actions may be adjudicated in the "interest of justice", the procedural fairness of each of these two processes depends on the nature of the issues posed and the evidence led by the parties. In some cases, it is safe to determine the matter on a motion for summary judgment because the motion record is sufficient to ensure that a just result can be achieved without the need for a full trial. In other cases, the record will not be adequate for this purpose, nor can it be made so regardless of the specific tools that are now available to the motion judge. In such cases, a just result can only be achieved through the trial process. This pivotal determination must be made on a case-by-case basis.
[31] The Court of Appeal laid out three types of cases that are amenable to summary judgment:
Where the parties agree that summary judgment should be used, although the court still has the discretion to refuse summary judgment where the test for summary judgment is not met.
Where the claim or defences are shown to be without merit.
Where there is no chance of success.
[32] The Court of Appeal stated that Rule 20 as amended, that is, from whether there was a “genuine issue for trial” to a “genuine issue requiring a trial,” coupled with the enhanced powers under Rules 20.04 (2.1) and (2.2) permit the motion judge to dispose of cases on the merits where the trial process is not required in the “interest of justice.” The Court of Appeal stated at paragraph 45:
The threshold issue in understanding the application of the powers granted to the motion judge by rule 20.04(2.1) is the meaning to be attributed to the phrase “interest of justice”. This phrase operates as the limiting language that guides the determination whether a motion judge should exercise the powers to weigh evidence, evaluate credibility, and draw reasonable inferences from the evidence on a motion for summary judgment, or if these powers should be exercised only at a trial. The phrase reflects that the aim of the civil justice system is to provide a just result in disputed matters through a fair process. The amended rule recognizes that while there is a role for an expanded summary judgment procedure, a trial is essential in certain circumstances if the "interest of justice" is to be served.
[33] The Court of Appeal went on to refer to the “full appreciation test”. It stated as follows at paragraphs 50-58:
We find that the passages set out above from Housen, at paras. 14 and 18, such as "total familiarity with the evidence", "extensive exposure to the evidence", and "familiarity with the case as a whole", provide guidance as to when it is appropriate for the motion judge to exercise the powers in rule 20.04(2.1). In deciding if these powers should be used to weed out a claim as having no chance of success or be used to resolve all or part of an action, the motion judge must ask the following question: can the full appreciation of the evidence and issues that is required to make dispositive findings be achieved by way of summary judgment, or can this full appreciation only be achieved by way of a trial?
We think this "full appreciation test" provides a useful benchmark for deciding whether or not a trial is required in the interest of justice. In cases that call for multiple findings of fact on the basis of conflicting evidence emanating from a number of witnesses and found in a voluminous record, a summary judgment motion cannot serve as an adequate substitute for the trial process. Generally speaking, in those cases, the motion judge simply cannot achieve the full appreciation of the evidence and issues that is required to make dispositive findings. Accordingly, the full appreciation test is not met and the "interest of justice" requires a trial.
In contrast, in document-driven cases with limited testimonial evidence, a motion judge would be able to achieve the full appreciation of the evidence and issues that is required to make dispositive findings. Similarly, the full appreciation test may be met in cases with limited contentious factual issues. The full appreciation test may also be met in cases where the record can be supplemented to the requisite degree at the motion judge's direction by hearing oral evidence on discrete issues.
We wish to emphasize the very important distinction between "full appreciation" in the sense we intend here, and achieving familiarity with the total body of evidence in the motion record. Simply being knowledgeable about the entire content of the motion record is not the same as fully appreciating the evidence and issues in a way that permits a fair and just adjudication of the dispute. The full appreciation test requires motion judges to do more than simply assess if they are capable of reading and interpreting all of the evidence that has been put before them.
The point we are making is that a motion judge is required to assess whether the attributes of the trial process are necessary to enable him or her to fully appreciate the evidence and the issues posed by the case. In making this determination, the motion judge is to consider, for example, whether he or she can accurately weigh and draw inferences from the evidence without the benefit of the trial narrative, without the ability to hear the witnesses speak in their own words, and without the assistance of counsel as the judge examines the record in chambers.
Thus, in deciding whether to use the powers in rule 20.04(2.1), the motion judge must consider if this is a case where meeting the full appreciation test requires an opportunity to hear and observe witnesses, to have the evidence presented by way of a trial narrative, and to experience the fact-finding process first-hand. Unless full appreciation of the evidence and issues that is required to make dispositive findings is attainable on the motion record - as may be supplemented by the presentation of oral evidence under rule 20.04(2.2) - the judge cannot be "satisfied" that the issues are appropriately resolved on a motion for summary judgment.
By adopting the full appreciation test, we continue to recognize the established principles regarding the evidentiary obligations on a summary judgment motion. The Supreme Court of Canada addressed this point in Lameman, at para. 11, where the court cited Sharpe J.'s reasons in Transamerica Life Insurance Co. of Canada v. Canada Life Assurance Co. (1996), 1996 7979 (ON SC), 28 O.R. (3d) 423 (Gen. Div.), at p. 434, in support of the proposition that "[e]ach side must 'put its best foot forward' with respect to the existence or non-existence of material issues to be tried." This obligation continues to apply under the amended Rule 20. On a motion for summary judgment, a party is not "entitled to sit back and rely on the possibility that more favourable facts may develop at trial": Transamerica, at p. 434.
However, we add an important caveat to the "best foot forward" principle in cases where a motion for summary judgment is brought early in the litigation process. It will not be in the interest of justice to exercise rule 20.04(2.1) powers in cases where the nature and complexity of the issues demand that the normal process of production of documents and oral discovery be completed before a party is required to respond to a summary judgment motion. In such a case, forcing a responding party to build a record through affidavits and cross-examinations will only anticipate and replicate what should happen in a more orderly and efficient way through the usual discovery process.
Moreover, the record built through affidavits and cross-examinations at an early stage may offer a less complete picture of the case than the responding party could present at trial. As we point out below, at para. 68, counsel have an obligation to ensure that they are adopting an appropriate litigation strategy. A party faced with a premature or inappropriate summary judgment motion should have the option of moving to stay or dismiss the motion where the most efficient means of developing a record capable of satisfying the full appreciation test is to proceed through the normal route of discovery. This option is available by way of a motion for directions pursuant to rules 1.04(1), (1.1), (2) and 1.05.
[34] The Court of Appeal concluded at paragraph 75:
Finally, we observe that it is not necessary for a motion judge to try to categorize the type of case in question. In particular, the latter two classes of cases we described are not to be viewed as discrete compartments. For example, a statement of claim may include a cause of action that the motion judge finds has no chance of success with or without using the powers in rule 20.04(2.1). And the same claim may assert another cause of action that the motion judge is satisfied raises issues that can safely be decided using the rule 20.04(2.1) powers because the full appreciation test is met. The important element of the analysis under the amended Rule 20 is that, before using the powers in rule 20.04(2.1) to weigh evidence, evaluate credibility, and draw reasonable inferences, the motion judge must apply the full appreciation test in order to be satisfied that the interest of justice does not require that these powers be exercised only at a trial.
[35] The Murano Defendants submit that the evidence supports the position that the transaction at issue was not a conventional mortgage between them and L-Jalco but rather was part of a business transaction in which L-Jalco’s solicitor (the son of the principal of L-Jalco) was investing monies and becoming a partner with Murano in his companies. It is submitted that there is a genuine factual dispute as to whether there is a mortgage between L-Jalco and the Murano Defendants, who claim that the funds that were to be advanced were part of a joint venture business arrangement between Murano and Calin, and not his father’s company. In essence, it is the position of the Murano Defendants that there was one “deal”, a joint venture, with Calin loaning $1,100,000.00 on a single blanket mortgage and a further $2,500,000.00 invested by Calin which would pay for the purchase of Double Double Pizza, complete the filing for Dixie Lee USA and provide a $500,000.00 line of credit. Calin Lawrynowicz was to be granted a 12.49% equity position in Dixie Lee USA.
[36] As a result of this above noted position, there was significant dispute at the hearing of the motion before me as to whether an agreement had been reached on the business deal whereby Calin and Murano would be “partners” in the Dixie Lee companies (what I have been referring to in these Reasons as the failed business transaction). Counsel parsed the words of Mr. Serruya in his examinations and asked the Court to carefully review his evidence. I have done so.
[37] It is not for this Court to finally determine whether there ever was a legal and binding agreement with respect to the failed business transaction. I suspect that the court in the civil action brought in Toronto by Your Legal Business Partners Inc. against Mr. Murano and Dixie Capital Corporation may well be required to determine that issue. However, on the evidence before me it appears that advances on the collateral mortgages began in June 2008 and that the business deal was ever changing from the first Letter of Intent dated August 22, 2008 and the last Letter of Intent dated December 19, 2008, but only delivered to Mr. Murano in March 2009.
[38] Mr. Serruya was asked whether there was an agreement in principal between Calin and Mr. Murano that Calin would invest $2,500,000.00 in Dixie Lee. He said “Ultimately, yes, it went to that extent.” He was then asked when he thought that agreement was made in principle and he replied “Maybe August, September 2008.” (questions 162-164 of the Examinations of Serruya). He then said the following at question 241:
Q. And when did that agreement in principle – when was that agreement reached?
A. Well, unfortunately it was an ever changing agreement. It was never really reached. It had started almost from the onset. There were, as I said before, meetings in late August, but – but it – it – it was almost instantaneous that there was an interest to – to – to this – to an investment and which grew into a – a partnership between the two. So over the course of the months the – the negotiations between Calin Lawrynowicz and Joe Murano evolved and changed numerous times, but they were never – other than funds being advanced, they never really materialized into a – into a completed transaction.
[39] The content of the above noted Letters of Intent referred to in paragraph 14 above fully supports that it was an ever changing “agreement”.
[40] However, and in any event, the Defendants executed an Acknowledgement and Direction for each of the five mortgages herein concern on July 17, 2008. This was well before the first Letter of Intent dated August 22, 2008. The last advance under the mortgages to the Defendants was October 8, 2008, while the negotiations on the business transaction were clearly still ongoing and would continue for quite some time. Further, it is important to note that none of the five Letters of Intent made any reference to the $1,100,000.00 loan which was allegedly to have been made by Calin Lawrynowicz as part of business transaction to acquire an interest in Dixie Lee. The evidence, including Exhibit A and Exhibit B to the Affidavit of Joseph Murano dated August 9, 2011, supports that the mortgage transaction and the failed business transaction were separate and proceeded independently of one another.
[41] I turn now to the first ground raised by the Murano Defendants that there is no mortgage as between L-Jalco and the Murano Defendants. I do not so find. Mr. Kaminer is a lawyer with many years of experience. Mr. Murano is a businessman who controls a franchise network of many restaurants. Both are knowledgeable and sophisticated. They each executed the respective Acknowledgements and Directions. L-Jalco was the named mortgagee. Both would understand that they signed a debt document with L-Jalco. Money was advanced to them or on their behalf. They allege they believed that L-Jalco was Calin Lawrynowicz’s company. But the effect of that is of no legal consequence and has no impact on the validity of the mortgage. They have pointed to no case law that would support such a proposition.
[42] The Murano Defendants raised a number of problems with the mortgage at paragraphs 58 of its Factum:
(a) The Lender, L-Jalco had little or no knowledge of lending $1,100,000.00, how this mortgage was arranged and registered, did not meet the borrowers and did not know how this money was advanced;
(b) John and Calin gave contradictory evidence as to what information was given to L-Jalco prior to this mortgage being entered into;
(c) There is no executed mortgage commitment;
(d) L-Jalco and Calin failed and refused to produce any evidence to show that the conditions and requirements that a borrower must meet to qualify for a mortgage were satisfied in this case;
(e) L-Jalco and Calin failed and refused to produce any evidence that Calin was retained by L-Jalco for the purposes of a mortgage with the Murano Defendants;
(f) The lawyer who is identified as the individual who registered the mortgage on the title to the properties was on maternity leave at all material times and Lawrynowicz and Associates objected to her examination for this motion.
[43] I fail to see how any of the above “problems” would have any effect on the legality or validity of this mortgage. This is a private mortgage transaction. The documents were prepared by the mortgagee’s solicitor and returned to the mortgagee’s solicitor. While there was no commitment letter there is no legal requirement for same. The Acknowledgements and Directions were executed. The mortgages were properly registered. A lender can choose to simply hand over money to a lawyer and mortgage broker to invest without getting involved in or having knowledge of every particular aspect of the mortgage transaction. John Lawrynowicz stated that prior to entering the mortgage, he did not require nor was he provided any information and that he relied completely on his son, Calin, who was a mortgage broker and lawyer. Surely this is not unusual and in any event would be of no consequence with respect to the validity of this mortgage. To use the words of counsel for the Plaintiff in responding to these “problems” – “so what”.
[44] The Murano Defendants have also raised that there is a genuine factual issue in dispute, which requires a trial as to whether L-Jalco advanced $1,100,000.00 to the Murano Defendants. While there were no trust statements or other such contemporaneous paperwork, cheques have been produced with respect to the amounts advanced. Further there is no question that Mr. Murano received Exhibit A to the Affidavit of Joseph Murano dated August 9, 2011, the Advance Summary, in April 2009. Yet no complaint was ever made with respect to this accounting until the commencement of these enforcement proceedings in 2011.
[45] In Falconbridge on Mortgages, Firth Edition, Release No. 8, May 2011 Canada Law Book at 31-30 the following is stated:
If the making of the loan is disputed, the mortgagee must prove that the money was in fact paid to the mortgagor, or to some other person upon the order of the mortgagor.
[46] The Murano Defendants have raised a number of concerns with respect to the amounts set out in the Advance Summary (Exhibit A) and Schedule A to the Statement of Claim. I will deal with each of the amounts claimed respectively below. All the cheques were drawn from the trust bank account of Calin A. Lawrynowicz, Barrister and Solicitor.
1) The $30,000.00 advance dated June 12, 2008
[47] The cheque for this amount is to Dixie Lee Capital Corporation. The Advance Summary also indicates that this cheque was advanced to Dixie Lee Capital Corporation. This corporation is under the control and direction of Mr. Murano and he would have been well aware that the monies were paid to his corporation. Moreover, while in receipt of the Advance Summary in April 2009, he never raised an objection that this advance was contained therein and covered by the mortgages herein concerned until the commencement of the enforcement proceedings in 2011. Further, this amount is not included in Exhibit B to the Affidavit of Joseph Murano, the Mortgage Advance Summary PL 144 (the Lawrynowicz and Associates file number for the failed business transaction) and there is no cogent evidence before the Court that this $30,000.00 related to the failed business transaction.
[48] Calin stated that a direction was given to him to advance $30,000.00 under the mortgage to Dixie Lee. He was asked to produce a copy of a Direction and Authorization from Murano to that effect. Counsel for Mr. Murano noted that in response to that undertaking he produced a fax transmittal cover sheet dated July 12, 2008 from Lawrynowicz and Associates to Mr. Kaminer where the re line is Murano and Babcock Mortgage to Your Legal Business Partner Inc. Our file No. PL 114. However, attached to the fax transmittal sheet is a Direction dated June 12, 2008 signed by Ms. Babcock and Mr. Murano authorizing the law firm to make the cheque payable to Mr. Kaminer in trust, or as he may further direct.
[49] The Murano Defendants have raised that this $30,000.00 amount, as well as the $20,000.00 advanced to Mr. Murano on June 30, 2008 and the $202,261.15 advanced to Lou Valada in Trust were all advanced prior to the signing of Acknowledgements and Directions dated July 17, 2008 and prior to registration of the mortgages. It is submitted that while L-Jalco claims that the Murano Defendants agreed that all funds advanced prior to the registration of the mortgage would be secured by the mortgage, no document was produced to substantiate this agreement.
[50] There is little doubt that this mortgage debt transaction was very poorly papered. There were no trust statements or other documentation provided to the Defendants with each advance made. However, the Advance Summary delivered April 2009, clearly indicates that these amounts were covered by the mortgages and no objection was made thereto. A sophisticated entrepreneur like Mr. Murano would have been quick to raise a concern with respect to $252,261.15 being included in the Advance Summary, if such concern existed in fact.
[51] I also note that the cheque to Lou Valada in Trust, dated June 20, 2008, in the amount of $202,261.15, indicated that it was for the discharge (of the mortgage) on 104 Manor Road. In fact, in his Affidavit dated August 2, 2011, Mr. Murano indicated that there was to be a blanket mortgage of $1,100,000.00, approximately $750,000.00 of this to be used to replace the existing first mortgages on his home on Manor Road and on a commercial property on Division Street and $60,000.00 would be advanced to Mr. Kaminer to retire his debt to the Royal Bank of Canada. This is precisely what happened. On September 5, 2008 an advance was made to Peter May In Trust in the amount of $463,662.97 to repay the Powell mortgage on Division Street. Further, $62,000.00 was paid to the Royal Bank of Canada on September 22, 2008 with respect to the execution held by the bank against Mr. Kaminer. I do not accept the evidence of Mr. Murano in his Affidavit dated August 9, 2011 at paragraph 13 that the $252,261.15 allegedly advanced to him June 30, 2008 was actually part of the $2,400,000.00 package which was offered to him as an incentive to let Mr. Lawrynowicz into the Double Double Pizza deal. The evidence before the Court in no way supports this assertion.
[52] Thus, on the totality of the evidence and for the reasons given, I find that the $30,000.00 advance dated June 12, 2008 to have been advanced under the L-Jalco mortgage.
[53] The Murano Defendants have also raised that a large portion of the funds the Plaintiff is seeking Judgment upon was not advanced by L-Jalco. The funds for the $30,000.00 June 12, 2008 advance and the $202,261.15 June 20, 2008 advance to Lou Vadala in Trust came from Cory Lawrynowicz (the son of John and the brother of Calin). The funds for the $62,000.00 advance to the Royal Bank September 22, 2008 came from Your Legal Business Partners Inc. In support of their assertion that L-Jalco cannot recover these amounts, the Murano Defendants have relied on Ghods, supra.
[54] It is submitted by the Plaintiff that the source of the funds is of no issue and if the Plaintiff and third parties are borrowing back and forth, it is irrelevant to this proceeding. Aside from saying “so what”, the Plaintiff submits that the third parties would be statute barred from going after the Defendants for these funds in any event.
[55] I too question the legal relevance of this issue. The cheques prove the monies were advanced. The Advance Summary reflects the advances. The Defendants received the benefit therefrom but now seem to be saying that since the funds came from Cory Lawrynowicz and Your Legal Business Partner Inc. they don’t need to be repaid.
[56] The great flaw in the submissions of the Murano Defendants on this issue it that they provide no theory to the Court as to why Cory Lawrynowicz would provide over $232,000.00 to the Murano Defendants. There is not theory as to why Your Legal Partners Inc. would provide $62,000.00 to satisfy the Royal Bank execution with respect to Mr. Kaminer (which, as an aside, I note Mr. Murano referred to as being covered by the $1,100,000.00 blanket mortgage, along with the repayment of the first mortgage on Manor Road, in his Affidavit dated August 2, 2009 at paragraph 22). The Murano Defendants showed no legal connection, contract or obligation with respect to the third parties and these monies.
[57] The Murano Defendants have provided only one case to the Court to support the proposition that the actual source of the funds is relevant in mortgage collection proceedings. However, Ghods, supra, can be distinguished from the case at hand and is of limited application. It involved a family law proceeding where property and equalization issues were at play. A father-in-law (the husband’s father) brought a summary judgment motion attempting to collect on an alleged mortgage debt. There were issues as to whether any funds were actually advanced under the mortgage. It was the wife’s evidence that she was told that the mortgage was to be registered to protect against potential lien claimants. Further, most of the money purported to be advances on the mortgage by the plaintiff came from a bank account of a company that was owned 24% by the husband, 24% by his brother and the balance his sister. While refusing to grant summary judgment on the particular facts of the case, Justice Czutrin noted that it remained a legal issue whether the plaintiff had to establish that he personally advanced the funds in the amount of the mortgage. He stated the following at paragraphs 58-60:
This mortgage action must be viewed in the context of a family dispute and the competing allegations within both actions.
The competing versions of the mortgage, funds advanced and sources of funds cannot be compared to a conventional arms-length mortgage between an institution and an individual. By not granting the motion for summary judgment I am hardly suggesting that the source of funds for mortgages will now need to be established in every case or that institutions such as banks will need to involve their depositors in mortgage enforcement proceedings.
This case is about why a company owned by the husband and his siblings paid a contractor to build a matrimonial home and yet the monies so paid are now the advances made to support an indebtedness to the husband's father.
[58] In summary, I do not accept the position of the Murano Defendants that the $30,000.00 advance need not be repaid under the mortgages.
2) The $33,000.00 lenders fee
[59] This is referred to on the Advance Summary as an entry dated June 12, 2009 (“bonus 3%”) and on Schedule “A” to the Statement of Claim as an entry dated July 3, 2009 (“Lender’s fee”) (“Bonus 3% principal”). While this was included in the Advance Summary provided to the Murano Defendants in April 2009, there is no documentation provided which supports that the Defendants agreed to pay a lenders fee. The mortgage commitment letter dated July 7, 2009 contained a lenders fee of $33,000.00 but it was never signed. A lenders fee was not included in the Acknowledgement and Direction for each of the five mortgages or in the mortgages themselves. Moreover, there is no evidence before the Court that a lenders fee was ever in fact paid to, or received by, L-Jalco. I am not prepared, in these circumstances, to grant summary judgment with respect to this amount. This of course, would not preclude it being pursued should the parties proceed to trial.
3) The June 20, 2008 payment of $202,261.15 to Lou Vadala in Trust
[60] The Court has been provided with the cheque which evidences this payment. It was advanced to discharge the mortgage on Mr. Murano’s home on Manor Road as was intended. For the reasons set out above, I find this amount to have been advanced under the mortgages.
4) The June 30, 2008 advance of $20,000.00 to Joseph Murano
[61] The Court has been provided with the cheque which evidences this payment. Again, for the reasons set out above, I find this amount to have been advanced under the mortgages.
5) The Invoices from Lawrynowicz and Associates dated July 30, 2008 and August 31, 2008
[62] The Plaintiff’s counsel advised in his submissions that these amounts are not now being claimed. This is reflected in the Amended Schedule provided to the Court by the Plaintiff, on April 30, 2012, during the hearing of this matter.
6) Interest Payments
[63] The Defendants have submitted that they never agreed to a “standby fee” to be charged from May to August, 2008. They state that they never agreed to pay interest on amounts not yet advanced. However, the Acknowledgement and Direction signed by the Defendants with respect to each mortgage provided a 12% interest rate, an interest adjustment date of July 3, 2012, a payment date of the 3rd of every month (I note that the payment date actually used by the parties was the 12th of each month) a first payment date of August 3, 2008, a last payment date of August 3, 2009 and monthly payments of $11,000.00. This is the document they signed and by which they are bound. In fact, Mr. Murano wrote a cheque for $11,000.00 dated January 1, 2009. Mr. Murano wrote a cheque dated February 10, 2009 for $8,538.86 and Mr. Kaminer wrote a cheque dated February 10, 2009 for $2,461.14 (totalling $11,000.00). Further, Mr. Kaminer provided a series of cheques on a Bank of Montreal account for 1652632 Ontario Ltd. dated March 12, April 12, May 12, June 12, July 12, and August 12, 2009, all in the amount of $11,000.00 per month (all returned NSF). The Defendants understood that interest was due on the whole amount of the principal, whether advanced to the mortgagors or not and that their interest obligation was to be $11,000.00 per month, commencing in August 2008 with an interest adjustment date of July 3, 2008. The interest calculations to be made in this matter are to accord with the above.
7) Tax Advances
[64] The Defendants have failed to keep their property taxes current. The primary responsibility for payment of taxes is on a mortgagor. Any delay in payment is not a mortgagee’s responsibility. A mortgagor is responsible for any interest, fees or charges with respect to the late payment of property taxes. The Plaintiff has, as mortgagee, stepped in and ensured that the property taxes were paid. Such payments are covered by the mortgage and the Plaintiff is entitled to include such payments in the Amended Schedule as set out.
8) The September 5, 2008 advance of $463,662.97 to Peter May in Trust
[65] The Court has been provided with the cheque which evidenced this payment. It was advanced to discharge the Powell mortgage on Division Street. I find this amount to have been advanced under the mortgages.
9) The September 22, 2008 $62,000.00 advance to the Royal Bank of Canada with respect to the execution against Mr. Kaminer
[66] For the reasons set out above I find this amount to have been advanced under the mortgages.
10) The October 8, 2008 $19,295.20 advance to Mr. Murano
[67] On the evidence before the Court, it appears that Mr. Murano received a cheque in the amount of $52,295.00 on October 8, 2008 of which $19,295.20 is allocated to the Mortgage file (PL 125) and $33,000.00 is allocated to the failed business transaction file (PL 144). I find $19,295.20 to have been advanced under the mortgages.
[68] The Plaintiff seeks recovery of the legal accounts of Mr. Proctor with respect to the enforcement of the mortgages. I am not inclined to include these accounts at this time. On the evidence presently before the Court, it is not clear that Mr. Murano or Mr. Kaminer received a copy of Standard Charge Term 9320 and signed the Acknowledgment of having received same. Mr. Proctor can of course, seek to recover these costs at trial. However, costs with respect to the Summary Judgment Motion itself will be deal with by me after the release of these Reasons.
[69] For completeness, I turn to the allegations of the Defendants that they were induced to enter into these mortgages as a result of representations made by Colin Lawrynowicz that he was in a position to provide a takeout mortgage within three months at 3% interest for $1,100,000.00 and undertook to do so. I was provided with no written documentation evidencing this nor was it referred to by Mr. Serruya in his examinations. Further, the Defendants provided cheques in the amount of $11,000.00 from January to August 2009 several months after they signed the July 17, 2008 Acknowledgment and Directions.
[70] In addition, while Mr. Kaminer made a brief comment in his submissions that John Lawrynowicz is bound by his son’s representations on agency principles, it does not appear that either the Murano Defendants or Mr. Kaminer pleaded in their Statements of Defence that Calin Lawrynowicz acted as the agent of his father or relied on the law of agency. Agency principles were not referred to in the Factum of the Murano Defendants (Mr. Kaminer did not provide a Factum) and facts were not set out in the Factum to support such a claim.
[71] In coming to the above determination in this Summary Judgment Motion, I am mindful of the test set out by the Court of Appeal in Combined Air, supra. The Court was provided with several volumes of examinations in the case at hand. Mr. Murano, Ms. Babcock, John Lawrynowicz, Calin Lawrynowicz and Mr. Serruya were all examined. The Court was also provided with four volumes of documents emanating from these examinations. I am satisfied, but for the few exceptions noted above, applying the full appreciation test, that a trial is not required in this matter in the interest of justice.
[72] Summary Judgment is granted in this matter in accordance with the determinations set out above. I do not intent to do the mathematical calculations involved. I have determined that amounts for the lender’s fee ($33,000.00) and Mr. Proctor’s accounts are not to be included in these calculations but may be pursued if a trial in this matter is ultimately held. Mr. Proctor is to prepare a revised Schedule. If the parties are unable to agree on the revised Schedule the matter can be returned before me to determine. The Plaintiff will be entitled to Summary Judgment in the amount as agreed or so determined. The Plaintiff is also entitled to post judgment interest in accordance with the mortgage, being 12% compounded monthly.
[73] Further, the Plaintiff is entitled to possession in actions CV-11-0017-00, CV-11-0018-00, and CV-11-0019-00, CV-11-0020-00, CV-11-0021-00.
[74] If the parties are unable to resolve the issue of costs for this motion they are to provide brief written submissions to the court. The Plaintiff is to provide its submissions by July 20, 2012. The Defendants shall respond by August 3, 2012.
The Hon. Madam Justice Heidi Polowin
Released: July 5, 2012
COURT FILE NO.: CV-11-0017-00, CV-11-0018-00, CV-11-0019-00, CV-11-0020-00, CV-11-0021-00
DATE: 20120705
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
L-JALCO HOLDINGS INC.
Plaintiff
– and –
JEHUDA JULIUS KAMINER
Defendant
AND BETWEEN:
L-JALCO HOLDINGS INC.
Plaintiff
- and –
6639828 CANADA INC.
Defendant
AND BETWEEN:
L-JALCO HOLDINGS INC.
Plaintiff
- and –
873047 ONTARIO LTD.
Defendant
AND BETWEEN:
L-JALCO HOLDINGS INC.
Plaintiff
- and –
JOSEPH MURANO and MARJORIE BABCOCK
Defendants
AND BETWEEN:
L-JALCO HOLDINGS INC.
Plaintiff
- and –
1652632 ONTARIO LTD.
Defendant
DECISION ON SUMMARY JUDGMENT MOTION
Polowin J.
Released: July 5, 2012