ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: 2332/11
DATE: 20120628
BETWEEN:
ROBERT ALEXANDER FOX
Plaintiff/Responding Party
-and-
ROBERT SANDS FOX and 869297 ONTARIO INC.
Defendants
Richard Campbell, for the Plaintiff/Responding Party
Elena Mamay, Counsel for the Defendants/Moving Parties
HEARD: June 27, 2012
REASONS FOR JUDGMENT
GRAY J.
[ 1 ] This is a motion for leave to appeal to the Divisional Court from an order of Snowie J. She refused to set aside a Certificate of Pending Litigation (CPL) that was granted, ex parte , by Kruzick J.
[ 2 ] Pursuant to Rule 62.02(7), if leave to appeal is granted, the judge granting leave must give brief reasons in writing. Since I am granting leave to appeal, my brief reasons follow.
Background
[ 3 ] For the purposes of this motion, it is not necessary to set out the background in detail. It is sufficient to say that the action involves two properties in Burlington that are adjacent to each other. They have been referred to in the proceedings as the “residential” property and the
“commercial” property. In the action, the plaintiff claims that he is the beneficial owner of the residential property, and he claims he is entitled to an equitable lien for the unpaid purchase price for the acquisition of the commercial property.
[ 4 ] The personal defendant is the plaintiff’s son, and he claims that he was at all times the beneficial owner of the residential property. He claims that the commercial property, at the time it was registered in the plaintiff’s name, was held in trust for the plaintiff’s children.
[ 5 ] On the ex parte motion before Kruzick J., there was filed a 32-paragraph affidavit sworn by the plaintiff, in which he deposed that he purchased the commercial property in 1976 for a purchase price of $112,500.00, and that the title was registered in his name.
[ 6 ] The plaintiff deposed that in 1987 he purchased the residential property for $139,500.00. That property is located immediately adjacent to the commercial property. He was advised by his solicitor not to place the title to the residential property in his own name, in order to avoid the effect of the Planning Act . Thus, he instructed his solicitor to register the title of the residential property in his son’s name. He swore that all mortgage payments on that property were made by him.
[ 7 ] The plaintiff swore that in 1998 his son requested that title to the commercial property be transferred to him. The plaintiff swears that it was agreed that he would be paid the sum of $300,000.00 for doing so. He swears that he actually received only $48,000.00. Subsequently, title to the property was transferred to the other defendant, a numbered company.
[ 8 ] On the motion to set aside the CPL, there was filed the affidavit of the personal defendant, in which he claims that he purchased the residential property and the plaintiff was merely the guarantor of a mortgage on the property.
[ 9 ] Of some significance, the personal defendant deposed that the plaintiff was involved in a lawsuit with the Toronto Dominion Bank in 1991. He swore as follows:
In 1991, the Plaintiff was involved in a lawsuit with the Toronto-Dominion Bank (Ontario Court of Justice (General Division), Court File No. C7141/91). As a part of that civil action, the Examination for Discovery was held on October 2, 1991 during which the Plaintiff gave evidence, under oath, with respect to the residential and commercial properties. Attached hereto and marked as Exhibit “E” is a true copy of the Transcript from Examination for Discovery dated October 2, 1991 (the “Transcript”).
During the deposition, the Plaintiff explicitly admitted that I, Robert Sands Fox, was the owner of the residential property. Specifically, he stated that:
a. It was my idea to purchase the residential property because I wanted to buy the house before I got married (page 19, paras. 127-129 of the transcript);
b. I provided a down payment of approximately $21,000.00 to purchase the property (page 20, para. 136; and page 21, paras. 140-141 of the transcript);
c. The only reason why the Plaintiff signed the mortgage as guarantor on the residential property is to help me out because it was “the father and son thing to help:”. (page 21, paras. 142-144 of the transcript);
d. The residential property was purchased for “the boy, for a home for himself”. (page 71. Para 414);
e. The Plaintiff never owned the residential property (page 55, paras. 326 and 328 of the transcript);
f. The Plaintiff fabricated his financial statements when he claimed he owned the residential property (page 55, para. 331 and page 54, para. 323 of the transcript). Instead, it was I who owned the residential property (page 60, para. 352); and
g. Finally, there was NO truth to the assertion that the reason for holding the residential property in my name was because the Plaintiff wanted to protect it from merging with the commercial property for the Planning Act purposes (page 70, para. 414).
- On October 2, 1991 during the Examination for Discovery, the Plaintiff stated the following about the commercial property:
a. The property was purchased in 1976 and that it was purchased for the Robert Fox in Trust for Uses, namely for the benefit of his children (pp. 21-23; paras. 148-158 of the transcript);
b. The Plaintiff never had any written documentation supporting the trust set-up (page 25, para. 173 of the transcript);
c. The Plaintiff made a Statutory Declaration of the Trust in 1984 (page 26, para. 178 of the transcript);
d. I, Robert Sands Fox, was and am the beneficiary of the Trust (page 28, para. 194; page 30, para. 203; page 34, para. 226 of the transcript);
e. The Plaintiff did not own the commercial property (page 55, paras. 326 and 328 of the transcript) instead the commercial property was held in Trust for my benefit (page 67, paras. 395-396 of the transcript);
f. The Plaintiff fabricated his financial statements when he claimed he owned the commercial property (page 55, para. 331 in conjunction with page 54, para. 324 and page 60, para. 354 of the transcript) in order to obtained [sic] financing from the bank.
[Emphasis in original]
[ 10 ] The personal defendant also disclosed that the deed to the commercial property, when it was purchased, disclosed that the purchaser was “Robert Fox In Trust”, and that subsequently there was created the Robert A. Fox Family Trust, which was to have control of the property. The beneficiaries of the trust were the plaintiff’s children. Subsequently, the commercial property was transferred to the other defendant, a numbered company, the shares of which are owned by the personal defendant.
[ 11 ] The problem is that none of this was disclosed on the ex parte motion before Kruzick J.
[ 12 ] In an affidavit filed on the motion before Snowie J., the plaintiff attempted to explain the omissions. In that affidavit, he acknowledged that he lied in his evidence during the lawsuit in 1991. He deposed as follows:
I made the decision to lie about the ownership of the residential property when the finances of the brokerage took a sharp turn for the worse, and Todd McGowan Bank started to call its security. I did this intending to deceive Todd McGowan Bank, so that I could hold on to the property (even though it was registered in my son’s name) and not have it foreclosed on.
I never told my lawyer (William Dunlop) that I was lying in 1991. I attempted that deception entirely on my own.
I regret deeply the decision to lie in order to try and protect my property from foreclosure. It was not in character for me to do such a thing. I make no excuses for my decision, but I would like to say by way of explanation that I was at a very difficult time in my life. I felt that I had been disproportionately penalized and financially liable in the breakup of my brokerage, and I was afraid that I would lose everything to the bank, and have nothing with which to provide for my family.
[ 13 ] The endorsement of Snowie J., dismissing the motion to set aside the ex parte order of Kruzick J., is quite brief. In its entirety, it reads as follows:
It is clear that the Pl. Mr. Fox Sr. failed to make full disclosure of information in his initial motion materials for the CPL. However, I do not find that this lack of full disclosure was material to the granting of the CPL nor is it fatal to the CPL.
I am content that the lack of this disclosure would not have made any difference to the granting of the CPL as there appears to be a genuine issue with respect to a beneficial and /or equitable interest in the said lands by the Pl. Mr. Fox, Sr. The Defs’ motion to set aside the CPL granted on an ex parte basis is hereby dismissed.
[ 14 ] Snowie J. awarded costs of the motion in the amount of $15,000.00.
Submissions
[ 15 ] Counsel for the defendants submits that Snowie J. applied the wrong test for the setting aside of the CPL. She decided that the lack of disclosure would not have made any difference to the granting of the CPL, and thus it was not material. Rather, she should have considered whether the plaintiff was obliged to disclose the fact that there were documents that tended to show that the plaintiff acquired the commercial property intending to hold it in trust for his children, and that he had given sworn testimony in 1991 that was diametrically opposite to the position he is now taking in this litigation. She applied a meaning to the word “material” that is too narrow. Something is material if it should have been disclosed, not whether it necessarily would have dictated a different result. In this case, the information should have been disclosed.
[ 16 ] Counsel for the defendants submits that leave to appeal should be granted on both branches of Rule 62.02(4). She submits that there are conflicting decisions on the matter. Further, there is good reason to doubt the correctness of Snowie J.’s order, and the proposed appeal involves matters of such importance that leave to appeal should be granted.
[ 17 ] Counsel for the plaintiff submits that the motion for leave to appeal should be dismissed. Mr. Campbell submits that Snowie J. properly found that the non-disclosure was not material, and that the CPL would have been granted in any event. Accordingly, she exercised her discretion to not set aside Kruzick J.’s order. He submits that, as Snowie J.’s decision simply reflects the exercise of her discretion, it cannot be said that her decision transcends the interests of the immediate parties. Accordingly, it cannot be said that there are any conflicting decisions, since they simply reflect the exercise of discretion by individual judges. The fact that Snowie J. has exercised her discretion in a particular way in this case means that even if there is some reason to doubt the correctness of her order, it does not involve a matter of such importance that leave to appeal should be granted.
Analysis
[ 18 ] Rule 62.02(4) provides as follows:
(4) Leave to appeal 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 involves matters of such importance that, in his or her opinion, leave to appeal should be granted.
[ 19 ] In order to grant leave to appeal, I must be satisfied that there is a conflicting decision on the matter involved in the proposed appeal, or that there is good reason to doubt the correctness of Snowie J.’s order and that the proposed appeal involves matters of such importance that leave to appeal should be granted.
[ 20 ] The issuance of a CPL is governed by s. 103 of the Courts of Justice Act , and by Rule 42. Rule 42.01(3) specifically provides that a motion for a CPL may be made without notice.
[ 21 ] Also of relevance is Rule 39.01(6), which provides:
(6) Where a motion or application is made without notice, the moving party or applicant shall make full and fair disclosure of all material facts, and failure to do so is in itself sufficient ground for setting aside any order obtained on the motion or application.
[ 22 ] Rule 39.01(6) simply reflects a principle that the courts have applied for many years without the necessity of a rule. The reason for such a principle is self-evident: on an ex parte motion, the judge does not have the normal advantage inherent in the adversary process. Only one side is being heard. Thus, it is important that the judge at least have an appreciation of the other side’s position. Fairness demands no less.
[ 23 ] The only real sanction for non-compliance with this obligation is to deny the moving party the relief it seeks, even if the motion would have been granted if the withheld information had been disclosed.
[ 24 ] It should be noted that while Rule 42.01(3) provides that a motion for a CPL may be made ex parte , it need not be. It may be made on notice, and if it is, the other party will have a chance to put its case forward. The judge will then be as fully informed as the parties choose. Where the moving party elects to move ex parte , however, it must be scrupulous in ensuring that the judge is fully informed.
[ 25 ] In this case, Kruzick J. was not advised that there were documents in existence that, arguably, could support the defendant’s position that the commercial property was intended to be held in trust for the plaintiff’s children. Furthermore, of greater significance, in my view, Kruzick J. was not told that the plaintiff had sworn under oath in 1991 to a state of affairs that was contrary to the position he now takes in this action, and that his sworn testimony in 1991 is very supportive of the defendant’s position.
[ 26 ] In my view, there is a strong argument that this material should have been disclosed to Kruzick J. It would have been important for him to know about it.
[ 27 ] That is not to say that Kruzick J. might not have granted the CPL even if he had known about this material. If the plaintiff had disclosed the existence of the deed designating him as the owner in trust, and the subsequent trust documents, and disclosed that he had sworn to a contrary state of affairs in 1991 and had given his explanation for it, the CPL might well have been granted. However, that is beside the point. In my view, Kruzick J. was entitled to have a full picture of the matter before he made his decision.
[ 28 ] The question then is whether the tests set out in Rule 62.02 have been met.
[ 29 ] I am not persuaded that there are any conflicting decisions on the matter. I agree with Mr. Campbell that any previous decisions setting aside CPLs on the basis of non-disclosure reflect the exercise of discretion by individual judges.
[ 30 ] I am persuaded, however, that leave to appeal should be granted on the basis of Rule 62.02(4)(b). In my view, there is good reason to doubt the correctness of Snowie J.’s order, and the proposed appeal involves matters of such importance that leave to appeal should be granted.
[ 31 ] Snowie J. appears to have approached the matter on the basis that if the withheld information had been disclosed, the CPL would have been granted in any event. With respect, in my view, there is considerable doubt as to whether that is the correct approach.
[ 32 ] As discussed earlier, I think the correct approach is to ascertain whether the judge hearing the ex parte motion was entitled to be made aware of the withheld information so that he or she would have a complete picture before making a decision. I think information is “material” if it is relevant to the position the other party would put forward if it were present. It is not necessary that it would have dictated a different result: see J & P Goldfluss Ltd. v. 306569 Ontario Ltd. (1977), 4 C.P.C. 296 (Ont. H.C.J.) .
[ 33 ] I think the issue here is of importance. This is particularly so because the withheld information was evidence given under oath that is directly contrary to the position now taken by the plaintiff in this litigation. While the plaintiff has an explanation for it, I think Kruzick J. was entitled to know, and indeed required to know, that sworn testimony was given in 1991, and that the plaintiff now says he perjured himself in giving that testimony. To the extent that Snowie J. held that this information was not material, I think it is important that the view of an appellate court be obtained on the matter.
Disposition
[ 34 ] For the foregoing reasons, leave to appeal to the Divisional Court from the order of Snowie J. is granted.
[ 35 ] Snowie J.’s costs order is stayed pending the disposition of the appeal.
[ 36 ] Costs of this motion are reserved to the panel of the Divisional Court hearing the appeal.
Gray J.
Released: June 28, 2012
COURT FILE NO.: 2332/11
DATE: 20120628
ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: ROBERT ALEXANDER FOX Plaintiff/Responding Party - and - ROBERT SANDS FOX and 869297 ONTARIO INC. Defendants REASONS FOR JUDGMENT GRAY J.
Released: June 28, 2012