COURT FILE AND PARTIES

COURT FILE NO.: 05-CL-6100
DATE: 20120705
SUPERIOR COURT OF JUSTICE – ONTARIO
(COMMERCIAL LIST)

RE: MIMARCO INVESTMENTS LTD., ROSLYN FINGOLD AND BRIAN ROWLEY, Applicants

AND:

EDGECASTLE HOLDINGS INC., Respondent

BEFORE: CUMMING J.

COUNSEL: Fred Tayar, for the Applicants

Brian Morris, for the Respondent, Edgecastle Holdings Inc.

Ken Hood, for Brecas Management Inc.

HEARD: JULY 4, 2012

ENDORSEMENT

The Motion

[ 1 ] On October 5, 2005, Mintz & Partners Limited was appointed Receiver in respect of proceeds payable to the Respondent, Edgecastle Holdings Inc. (“ Edgecastle”) by Brecas Management Inc. under a Construction Management Agreement. The Receiver has collected some $309,438.68 (the “Fund”) arising from this source.

[ 2 ] The Applicants seek an order directing payment of these monies to one or more of them.

[ 3 ] The current purported shareholder of Edgecastle, Joseph Morra, disputes the right of the Applicants to these monies.

[ 4 ] At the outset of the hearing, counsel for the Respondent, Edgecastle, i.e. for Mr. Morra as its purported shareholder, advised that the Respondent was no longer opposing the Applicants’ motion because he had reviewed a claim by Brecas that it had overpaid under its Construction Management Agreement. Brecas, represented by counsel at the hearing, stated it was a creditor of Edgecastle for more than the amount in the Fund because of this alleged overpayment. Edgecastle withdrew its opposition to the Applicants’ motion because it was of the view this meant there was, in all events, a creditor of Edgecastle with a claim to more than the amount on hand through the Fund and Mr. Morra was at most simply a shareholder of that company.

[ 5 ] (Counsel for Edgecastle also gave notice that an outstanding notice of motion by Mr. Morra dated June 6, 2106 relating to the payments by Brecas, was withdrawn.)

The Evidence

[ 6 ] The evidence of the Applicants was uncontradicted.

[ 7 ] The Applicant, Roslyn Fingold and her company, the Applicant, Mimarco Investments Ltd., loaned monies to Michael Katz, the son of Roslyn Fingold, and his companies. These advances included some $2 million loaned by Ms. Fingold to Ronedge Holdings Inc. (“Ronedge”), a company owned by Mr. Katz, on August 6, 2002.

[ 8 ] Edgecastle guaranteed repayment of the loan to Ronedge and granted a general security agreement over its assets in order to secure the guarantee.

[ 9 ] The purported shareholder of record for Edgecastle, Joseph Morra, as noted above, had resisted the motion of the Applicants until the morning of the hearing. He purchased the interest, if any, of Mr. Katz’s trustee in bankruptcy in Edgecastle’s shares on May 12, 2006 for some $6,500.

[ 10 ] The Applicants say that on October 11, 2001 Mr. Katz executed a trust agreement acknowledging that he placed the shares of Edgecastle in trust for 2005650 Ontario Inc. (“200”), a company controlled by Ms. Fingold. The issue as to the shareholder ownership is not before the Court and need not be decided in respect of the motion at hand. It is suffice to state that Mr. Morra’s relationship to Edgecastle is, at most, one of being a shareholder.

[ 11 ] It is not in dispute that Ms. Fingold is a creditor of Edgecastle for more than $1.2 million by virtue of the outstanding indebtedness in respect of the Ronedge loan and the guarantee by Edgecastle.

[ 12 ] The evidence establishes that the GSA was entered into and is enforceable. Even if the GSA was not in force, the record establishes that there is no dispute that, at the least, Ms. Fingold has an unsecured claim well in excess of the amount of the Fund.

[ 13 ] Any claim of Mr. Morra would be, at most, as a shareholder of Edgecastle, whereas Ms. Fingold’s claim is as a creditor. The right of a shareholder to participate in a share of the assets of a corporation on a liquidation is only after the creditors have been paid.

Disposition

[ 14 ] For the reasons given, the unopposed motion is granted. It is ordered that the Receiver pay $295,000 of the proceeds of the Fund to the Applicant, Roslyn Fingold. The Receiver shall hold back the balance of the monies on hand in the Fund until the Receiver has received Court approval for its fees and disbursements and a discharge whereupon any remaining surplus after payment of the Receiver’s fees and disbursements shall be paid out to Ms. Fingold.

[ 15 ] Submissions were made in respect of costs and a Bill of Costs was provided by counsel for Ms. Fingold. I fix the costs payable by Edgecastle to Ms. Fingold on a partial-indemnity basis at $20,000, inclusive of all fees, disbursements and applicable taxes.

[ 16 ] Counsel for Brecas requested that the amount payable to Ms. Fingold by virtue of her success on the motion at hand be paid into Court until Brecas has had the opportunity to commence and litigate an action on behalf of Brecas against Ms. Fingold.

[ 17 ] To accede to that request would be tantamount to having Ms. Fingold put up security before the Brecas action is even commenced, let alone litigated to conclusion. (I mention as an aside that Brecas was not prepared to put up security for costs which the Court suggested hypothetically might be a consideration under Rules 1.05 and 59.06 given the very exceptional nature of its request.)

[ 18 ] Accordingly, I dismissed this request by Brecas. Judgment shall issue in accordance with these reasons.

CUMMING J.

Date: July 5, 2012