SUPERIOR COURT OF JUSTICE – ONTARIO

COMMERCIAL LIST

RE: 1196303 Ontario Inc., Plaintiff

AND:

Glen Grove Suites Inc., Spendthrift Developments Limited, Firm Capital Mortgage Fund Inc., Nelly Zagdanski and Linda Darer, estate trustees of Sylvia Hyde, deceased, 1297475 Ontario Inc., Montreal Trust Company of Canada and Royal Trust Corporation of Canada, Defendants

BEFORE: D. M. Brown J.

COUNSEL: F. Tayar, for the Plaintiff

M. Simaan, for the Defendants, Nelly Zagdanski and Linda Darer, Estate Trustees of Sylvia Hyde, deceased, Glen Grove Suites Inc. and Spendthrift Developments Ltd.

HEARD: April 30, 2012

REASONS FOR DECISION

I. Overview of motions for summary judgment

[1] Two sets of motions are before me. First, the plaintiff, 1196303 Ontario Inc., moves pursuant to Rules 20 and 51.06 of the Rules of Civil Procedure for summary judgment against the defendants Glen Grove Suites Inc., Spendthrift Developments Limited and Nelly Zagdanski and Linda Darer, in their capacities as estate trustees of the estate of Sylvia Hyde, deceased. Within that motion for judgment the plaintiff also moves to strike out the affidavit of Sylvia Hyde sworn September 26, 2010. I heard the latter motion in late January, but reserved my decision until after hearing the main motion for judgment.[^1]

[2] The Estate Trustees of the estate of the late Sylvia Hyde, move for summary judgment dismissing the action against the estate.

[3] The plaintiff submitted that its action could be decided, one way or the other, on these motions for summary judgment because the written record was comprehensive. Sylvia’s Estate took the position that summary judgment could not be granted to the plaintiff, but the court could grant its summary judgment motion to dismiss the action.

[4] For the reasons set out below, I refuse to grant either of the summary judgment motions, and I give directions for the long-overdue trial of this action.

II. The events

A. Edwin Hyde’s debts and bankruptcy

[5] Edwin Hyde, the husband of the late Sylvia Hyde, was a lawyer and real estate developer. A large group of investors loaned several million dollars to companies owned by Edwin, secured by mortgages of various properties granted in 1990 and 1991.

[6] 1196303 Ontario Inc. was formed to represent the interests of several investors in three Hyde Mortgages. In 1996 this Court appointed the plaintiff, 1196303 Ontario Inc., as the receiver and manager of the investors’ interests in those Mortgages. The Receiver petitioned Edwin into bankruptcy in 1997, and the trustee admitted the Receiver’s proof of claim for over $10.9 million.

B. Efforts by Sylvia’s companies to purchase estate assets

[7] Sylvia owned all the shares of 1297475 Ontario Inc., Glen Grove Suites Inc. and Spendthrift Developments Limited. A handwritten agreement dated January, 1993 prepared by Edwin purported to transfer to Sylvia 100% of the shares in Glen Grove.

[8] Glen Grove and Spendthrift own short-term and long-term rental apartments and condominiums. One of the rental properties was located at 2837 Yonge Street, Toronto (the “Yonge St. Property”). Although the registered owner of that Property is Montreal Trust, Glen Grove and Spendthrift held long-term leases on the Property which were of value.

[9] In 1998 Glen Grove made three offers to Edwin’s Trustee to purchase the assets in his estate. In each case Sylvia signed the offer on behalf of Glen Grove. The Trustee did not accept the offers. Further offers were made between 1999 and 2002, but none were accepted.

C. Settlement between 129 and the Receiver

[10] Then, on May 3, 2002, 1297475 Ontario made a written offer to purchase the Receiver’s proof of claim in Edwin’s bankruptcy. The offer was communicated through a letter from 129’s counsel, Mr. Mel Solmon. In December, 2002 the Receiver accepted that offer, but changes had to be negotiated to some of the payment dates, and a new schedule of payments was agreed to and set out in letters from Mr. Solmon dated August 28 and October 3, 2003. In the result the Settlement was memorialized in those Three Letters. Prior to Mr. Solmon’s August 28, 2003 letter, Edwin had sent him an August 18, 2003 fax, on the letterhead of Glen Grove, stating that as part of the settlement, 129 would provide a mortgage on the Yonge St. Property to secure the settlement payment.

[11] Edwin was still alive at the time the Settlement was reached. He died, however, on May 27, 2004, before an order was obtained approving the Settlement; Edwin died an undischarged bankrupt.

[12] Farley J. approved the Settlement contained in the Three Letters by order made October 4, 2004. Paragraph 2 of his Order stated:

THIS COURT FURTHER ORDERS that the settlement agreement (“Settlement Agreement”) entered into by 1196303 with 1297475 the terms of which are contained in the letters dated May 3, 2002, August 28, 2003 and October 3, 2003 which are attached hereto as Schedule “A” be and is hereby approved.

[13] Under the Settlement 129 agreed to purchase all the debts of the Receiver relating to the personal guarantee of Ed Hyde for $527,408.50. That amount was to be paid in a series of installments running from the execution of Minutes of Settlement through to October 31, 2006. The Settlement also called for the provision of security for those payments, including a mortgage on the Yonge St. Property, but the meaning of those obligations is in dispute. The disputed settlement terms read as follows:

3. As security for payment, the purchaser [129] will provide:

a) If the owner of the Glengrove property is able to do so, using reasonable efforts, and acting in good faith, a mortgage, to be registered against the Glengrove property subsequent to $4,700,000.00 of debt in mortgages, which are presently registered against the property, which mortgage will be in the principal amount of $500,000.00, with interest at 7% per annum, payable in accordance with paragraph 2(b) above, provided that the mortgage given to the vendor will provide that it will be postponed to new or amended mortgages not to exceed $4,700,000.00 of debt;

b) A guarantee from the owner of the Glengrove property guaranteeing the $500,000.00 balance owed; and,

c) A consent to judgment from the owner of the Glengrove property to be held in escrow providing for the full amount of $500,000.00, plus 7% interest as referred to herein (less any part payments made including the $100,000.00, and each of the $200,000.00 payments). If there is default that is not cured within 10 days written notice to the owner of the Glengrove property and its solicitors, then your clients would be able to release the consent to judgment from escrow, commence an action, place the action number on the consent and obtain judgment.

[14] Mr. Solmon acted for 129 on the Settlement. On October 28, 2004 he informed plaintiff’s counsel that his retainer had ended.

[15] 129 did not perform its obligations under the Settlement. It made the first payment of some $27,400.00, but no others. The Receiver never received any security for 129’s obligations under the Settlement.

D. The commencement of this action

[16] On April 12, 2005, the Receiver commenced this action seeking judgment in accordance with the Settlement, damages of $500,000 for breach of that agreement, delivery of a mortgage against the leasehold interest of Glen Grove and Spendthrift in the Yonge St. Property, and related relief. The Statement of Claim alleged that the Settlement was binding on Sylvia, that she had defaulted on the agreement, she had caused the other defendants to default on the payments required under the Settlement, and she had prevented the delivery of the mortgage required under the Settlement.

[17] Sylvia, Glen Grove and Spendthrift defended the Action.

[18] 129 did not defend the Action and, on May 30, 2005, Ground J. granted Default Judgment against 129 requiring that defendant to (i) pay the plaintiff $619,383.56, (ii) cause Spendthrift and Glen Grove to deliver a mortgage against the Yonge St. Property in the principal amount of $500,000, containing certain terms, (iii) cause Spendthrift and Glen Grove to execute a $500,000 guarantee of 129’s indebtedness to the Receiver, and (iv) cause Spendthrift and Glen Grove to execute a consent to judgment for $500,000 at a stipulated rate of interest.

[19] 129 has not performed any of its obligations under the Default Judgment, and neither Spendthrift nor Glen Grove has delivered mortgages, guarantees or consents to judgment.

[20] On May 17, 2010 Master Short granted a certificate of pending litigation against the Yonge St. Property. His Reasons described many of the events which took place between the start of this action and the date of his decision:

[60] This action and the motion for a Certificate of Pending Litigation against the Property were initially brought in April 2005. The motion was adjourned at that time and subsequently removed from the list due to the parties not being ready for the motion. No efforts were made by 119 to bring this motion back on for more than 4 years.

[61] The defendants assert that there has been no reason provided for delay in bringing the motion on, nor has any evidence been tendered as to why the motion is required to be brought at this stage.

[62] My understanding is that upon commencing this action in 2005, the plaintiff served material in support of an application for the CPL.

[63] Mrs. Hyde asserts that on the initial return of the plaintiff’s application for a CPL, Justice Campbell refused to make the Order. The plaintiff’s explanation is that the only material originally before the court on the motion was the applicant's filed on April 15; and that Mr. Simaan on behalf of the defendants asked for an adjournment to file responding material.

[64] The disposition of the court on April 18, 2005 is set out in the handwritten endorsement of Campbell J.:

“Request for adjournment based on recent service of material.

Counsel for applicant content to have matter adjourned as long as status quo maintained.

Matter adjourned for time tabling and setting of new hearing date at a 9:30 am on Tuesday, April 26, 2005.

In the interim on a without prejudice basis & without consideration of the merits, the respondents Glen Grove & Sylvia Hyde & Spendthrift appearing undertake that no further encumbrances or steps to transfer will be undertaken without further court order. On the same terms existing encumbrances to be kept current.[^2]

[65] It seems to me this endorsement was succinct, clear and unambiguous.

[66] My reading is that the very purpose of the Order was to maintain the status quo on an interim basis, pending the return of the adjourned motion. The undertaking and Order were to remain in effect until the motion was decided.

[67] The motion was adjourned to June 15, 2005 and subsequently it was removed from the list as the parties were not ready to have the matter heard. No efforts appear to have been made by either side in the subsequent months and years to restore the CPL motion to the motions' list.

[68] I suspect that from the plaintiff’s viewpoint, so long as the status quo was maintained while pre-trial examinations etc. were undertaken, there may have been no incentive for either side to bring the CPL motion on for determination.

[69] Is this an adequate justification at this stage in the action?

[70] In 2008 the terms of the existing prior encumbrances on title were expiring. At the time, these expirations were neither raised by the plaintiff, nor addressed by the defendants with plaintiff’s counsel.

[71] It was only some months after a new Charge of Lease was registered against the title to the Property that counsel for the plaintiff discovered that a new $4.1 million mortgage had been registered on July 14, 2008. No order had been obtained dealing with the requirements of Justice Campbell’s 2005 endorsement, nor had any consent been sought nor notice given to the plaintiff receiver and manager.

[72] The registration details indicate that charge is granted by Glen Grove Suites Inc. and is guaranteed by Sylvia Hyde and Spendthrift Developments Limited.[^3]

[21] Master Short explained why he granted leave to issue a certificate of pending litigation:

[87] It is not for me to decide whether in fact the plaintiff’s case is made or not. I have considered the cases and the arguments put forward by the parties. I am satisfied the case ought to move towards an early trial and that the status quo of the Property ought to be preserved pending that hearing.

[101] I have concluded that balancing these and other considerations, and considering the case law referred to above and that discussed in my Livent decision that a case for the issuance of a Certificate of Pending Litigation has been made out. This view is supported by what I believe was the improper decision to refinance without addressing the terms of the previous adjournment. While the delay in proceeding might otherwise have been fatal to the plaintiff’s application it seems to me that pending either party bringing the matter back on the plaintiff had obtained the protection it sought on an informal basis and I regard its position as presenting a strong prima facie case. (emphasis added)

[22] The Receiver obviously did not concur that the case should move “towards an early trial” because in July, 2010 C. Campbell J. issued directions for the Receiver’s planned summary judgment motion to be heard that November. The Receiver filed its record. Sylvia previously had sworn an April 15, 2005 affidavit in the motion for a certificate of pending litigation on which she had been cross-examined. Sylvia then swore a September 26, 2010 affidavit which was included in her responding summary judgment materials.

[23] A dispute then arose between counsel over scheduling a further cross-examination of Sylvia. Having reviewed the exchanges between counsel, it is clear that Sylvia took the position that her personal travel plans and convenience trumped all, with the result that she would not attend for cross-examination on a date which would preserve the November hearing date and, as a result, that date was adjourned until early 2011. When the parties went back before C. Campbell J. in early February, 2011 to set a new schedule, Sylvia’s counsel took the position that she now suffered from dementia and could not be cross-examined, but that he intended to rely on Sylvia’s most recent 2010 affidavit in any event.

[24] By March, 2011 Sylvia’s counsel was taking the position that his client, now through her attornies, would continue to rely on her 2010 Affidavit and would oppose any motion to strike it.

[25] Sylvia’s “side” continued to delay and stall. On April 5, 2011 C. Campbell J. ordered “counsel for Sylvia Hyde to provide affidavit of daughter & further medical evidence”. That did not occur - more stalls and delays from Sylvia’s “side”, evidently stemming from her daughter attornies.

[26] As of August 28, 2011, when the Receiver’s representative swore an affidavit on this motion, Sylvia’s daughters had not sought appointments as litigation guardians nor had they provided the affidavit and medical evidence ordered by C. Campbell J.

[27] Sylvia died in the fall of 2011.

III. Claims against Sylvia, Glen Grove Suites and Spendthrift

[28] Neither Sylvia, Glen Grove nor Spendthrift were named as parties to the Settlement. As stated in the Approval Order of Farley J., the Settlement was between 119 and 129. The May 3, 2002 letter identified 129 as the “purchaser” under the proposed Settlement, as did the other letters of August 28 and October 3, 2003. On what legal basis, then, does the Receiver seek to attach liability to Sylvia, Glen Grove and Spendthrift for the obligations of 129 under the Settlement?

[29] In its Statement of Claim the Receiver advanced the following grounds upon which to attach such liability:

(i) 129, Glen Grove and Spendthrift are the “alter egos” of Sylvia (Statement of Claim, para. 8);

(ii) The settlement offer was “from Sylvia through 129” (para. 19);

(iii) “1297475 was the named party to the settlement. The settlement is binding on Sylvia, 1297475, Glen Grove and Spendthrift, as well.”

(iv) “Sylvia caused 1297475, Glen Grove Suites and Spendthrift to avoid their obligations under the settlement” by dismissing their solicitors and causing them to default on the payments under the settlement (para. 24);

(v) The defendants conspired to injure the Receiver, but the particulars of the conspiracy were not known to the plaintiff (para. 27);

(vi) The defendants tortiously interfered with the economic relations between the Receiver and 1297475 as determined by the Settlement (para. 28) or induced a breach of contract by procuring 129’s default under the settlement (para. 29).

[30] Although the Receiver made allegations that Sylvia caused Glen Grove to breach the Settlement by encumbering the Yonge St. Property, further evidence filed last month by the Receiver disclosed that on July 30, 2012 Glen Grove closed the sale of its interest in that Property to a third property. Accordingly, the plaintiff’s claim now relates to the balance of the $527,408.50 remaining due under the Settlement, plus interest, together with the guarantees and consents to judgment referred to in the Settlement.

[31] The Defendants have asserted several defences to the Receiver’s claims:

(i) They had no knowledge of the Settlement and had no dealings with 129 or the Receiver in respect thereof (Statement of Defence, paras. 4, 9);

(ii) Although the nominal owner of 129, Sylvia “had nothing whatsoever to do with the operations of this company, nor did she have any specific knowledge that this company even existed” (para. 7);

(iii) The Receiver’s assertion that “it accepted a settlement offer from Sylvia is a complete fabrication” (para. 8);

(iv) The Defendants were not a party to the Settlement, so therefore they did not default on the Settlement (para. 10);

(v) The Defendants denied that they had “interfered or caused the other Defendants…to default on their alleged obligations under the settlement agreement” (para. 10).

[32] Central to the Receiver’s claim against these three Defendants is the factual assertion that Sylvia knew of the Settlement, agreed that the Settlement would bind not only 129, but Glen Grove and Spendthrift, and then she worked to cause those three corporations to default on their obligations under the Settlement. For the purposes of determining whether a genuine issue requiring a trial exists in respect of the Receiver’s motion for summary judgment and Sylvia’s motion to dismiss, I turn to consider the state of the evidentiary record placed before me on this motion.

IV. Evidence

[33] The evidence adduced on these motions was identified in the Receiver’s August 23, 2010 notice of motion and Sylvia’s September 23, 2010 notice of motion. In light of my direction that there be a trial of this action before me, I shall set out the material evidence in some detail.

A. Sylvia’s role in 129, Glen Grove and Spendthrift

A.1 Plaintiff’s affidavit evidence

[34] The Corporation Profile Reports filed by the plaintiff listed Sylvia as a director and officer of 129, together with Edwin as an officer, as well as the sole director and officer of Glen Grove and Spendthrift.

[35] According to Mr. Franklin Bialystok, the President of 119, Edwin Hyde, as a bankrupt, was represented by two counsel: first, Mr. Emilio Bisceglia and later by Mr. Mel Solmon. Mr. Bialystok deposed that in the bankruptcy proceeding Edwin’s creditors learned that:

(i) Edwin, through Spendthrift, held a long-term lease on the Yonge St. Property. A 1993 document purported to transfer that interest in the Property to Sylvia; Edwin told the Official Receiver it was a gift;

(ii) On December 20, 1994 Edwin transferred his shares in Glen Grove to Sylvia.

Those transactions were regarded by the creditors as reviewable transactions in Edwin’s bankruptcy.

[36] Mr. Zeifman, in his March 10, 2009 affidavit, asserted that while Sylvia was “the principal and guiding mind” of 129, Glen Grove and Spendthrift, Mr. Robert Carberry, the President of Glen Grove, also was “a guiding mind” of them.[^4] He stated that through this action he had learned that Sylvia and Carberry “control Glen Grove and Spendthrift”. In another affidavit Mr. Zeifman stated that Mr. Carberry “runs Glen Grove”.

A.2 Sylvia’s 2005 Affidavit

[37] In her first affidavit Sylvia deposed that prior to his death Edwin had not involved her in the negotiations with his creditors nor did he advise her of the particulars of those negotiations. As a result, she stated:

[I[t came as quite a surprise to me to learn that my husband was planning upon securing a settlement which Ed made with the plaintiff through the use of the Glen Grove. Prior to his death, my husband never asked me to consent to same nor did he apparently take any steps to prepare documents for this mortgage for my signature.

[38] Sylvia admitted that she controlled Glen Grove, “technically” controlled Spendthrift, although it was not actively operating, but was “not sure of my exact relationship with” 129, although she acknowledged she was an officer and director. Sylvia contended that she had no knowledge of the settlement agreement between 129 and the Receiver “at the time it was made or at all prior to my husband’s death”.[^5] Moreover, “129 has no involvement in the Glen Grove and, accordingly, it cannot purport to bind it to a settlement”.

A.3 Sylvia’s 2006 and 2007 cross-examinations

[39] Initially on her January 31, 2006 cross-examination Sylvia testified that prior to his death Edwin did not discuss his business affairs with her. Later in her examination she acknowledged that Edwin had told her he was trying his best to settle with his creditors, and she had given him some of her personal funds to assist him in his affairs.

[40] She was aware she owned Glen Grove, but she was not involved in its management. She said that Edwin was running the business and that was fine with her. Sylvia did acknowledge her signature on 1997 resolutions of the company as its President. She testified that she could not stop Edwin from doing a deal in relation to Glen Grove nor did she ever stop him. According to Sylvia, following her husband’s death she began to sign cheques for Glen Grove which were prepared by Mr. Carberry, and she used Edwin’s old office.

[41] Sylvia stated that she had not been aware she was a director of Spendthrift until this action started, nor was she aware that she had been authorized to sign cheques for that company.

[42] Sylvia also testified that she was not aware of 129 until this lawsuit began; she was adamant in that position on her 2006 cross-examination. Sylvia stated that she only learned she was a shareholder of 129 during her cross-examination. When shown the Minute Book for 129, Sylvia acknowledged her signature as President of 129 on resolutions dating back to May, 1998. Sylvia testified that she had nothing to do with the business of 129.

[43] Sylvia stated that as of early 2006 there was no money in 129.[^6]

[44] Sylvia testified that her husband often asked her to sign documents, which she did. She never refused to sign a document he placed in front of her.

A.4 Sylvia’s 2010 affidavit

[45] Sylvia swore a September 26, 2010 affidavit. The plaintiff moved to strike the affidavit, primarily on the basis that Sylvia had delayed in permitting cross-examination on it and then became incompetent, rendering cross-examination impossible.

[46] I have reviewed the 2010 affidavit carefully. It obviously reflected lawyer’s language because it contained nice references to evidence elicited on the previous examinations of other witnesses. Sylvia’s 2010 affidavit largely repeated evidence which she gave in her prior affidavit and on her cross-examinations (paras. 1-7; 9-12; 22; 24); speculated about what she might have done had Edwin asked her to sign certain documents (paras. 8; 13-17); recited evidence obtained from other witnesses (paras. 18-21); repeated portions of her statement of defence (para. 25); and engaged in legal argument (paras. 26-27). Only paragraph 23 of her affidavit contained new evidence, and then only to a degree. It reads as follows:

Furthermore, while the Plaintiff has alleged that I knew about the Settlement and chose to ignore it, this is only a small part of the story. In reality, what I knew was that a company (which turned out to be 129) had made an offer to pay a substantial sum of money to another party, I did not even know what this money was for or who it was supposed to be paid to. It was explained to me that this company had agreed to have the Glen Grove guarantee its payment but, as I had never agreed to this, it didn’t seem to pertain to me. It was recommended to me by my brother-in-law, that as I did not know anything about nor did I ever agree to this settlement, that I should not get myself involved.

In her affidavit Sylvia did not put any date on these events. However, during her cross-examinations she gave similar evidence about advice she received from family members immediately following Edwin’s death.

[47] Sylvia’s daughter, Linda Darer, now one of her estate trustees, swore an affidavit on October 24, 2011 in which she deposed that at the time her mother swore her September, 2010 affidavit “she had been receiving treatment for cognitive issues that seemed to be causing her some short-term memory loss. I think it would be fair to say that she had her “good” days and she had her “bad” days, but generally it was not causing any significant difficulty with her day-to-day life. Beginning in October, 2010, this all began to change and my mother began a very steep decline from a cognitive standpoint.” Yet, a few paragraphs later in her affidavit, Ms. Darer deposed that in late September, 2010 she was speaking to her mother regularly “and I was not aware of any decline in her cognitive abilities.” I find it difficult to reconcile those two portions of Ms. Darer’s evidence.

[48] An October 11, 2010 clinical note from the Baycrest Centre for Geriatric Care stated that Sylvia had “a past medical history of dementia…” and “the patient likely has Alzheimer dementia”. A January 17, 2011 note stated: “Over the last several years however, there has been increasing memory difficulties and more recently, there has been acute confusion…her memory has been poor and deteriorating…”

[49] A lawyer, M. Colavecchia, commissioned Sylvia’s 2010 affidavit, but did not file an affidavit describing Sylvia’s cognitive abilities at the time she swore the affidavit.

[50] I will admit the 2010 affidavit for consideration, but in light of the conflicting evidence about Sylvia’s mental condition at the time she swore the affidavit, the obvious involvement of a lawyer in shaping her affidavit, and the repetitive and argumentative nature of most of the statements contained in the affidavit, I place little weight on it, save for paragraph 23 which appears to contain admissions against Sylvia’s interest.

A.5 Robert Carberry: Rule 39.03 examination

[51] On July 11, 2005, the Receiver conducted a Rule 39.03 examination of Robert Carberry, the President of the Glen Grove Group of Companies since 2001.

[52] He understood that Sylvia controlled Glen Grove. However, in respect of that company Mr. Carberry always received his instructions from Edwin up until his death. Prior to Edwin’s death Sylvia did not come to the Glen Grove office on a frequent basis. Following Edwin’s death Sylvia would come to the office about twice a week.

[53] Spendthrift was a shell company which had a long-term lease for the Yonge St. Property in its name, but otherwise was not active. Edwin controlled Spendthrift.

[54] Edwin had shown Mr. Carberry a by-law of 129, signed by Sylvia, which authorized Mr. Carberry to sign on behalf of the company. That made Mr. Carberry feel comfortable about signing documents for 129, and he was content to take instructions from Edwin. 129 did not have a bank account.

A.6 Emilio Bisceglia: Rule 39.03 examinations

[55] Mr. Emilio Bisceglia, a lawyer, acted for Edwin in his bankruptcy at one point, but he did not act for Glen Grove in this matter.

[56] During the course of Edwin’s bankruptcy Mr. Bisceglia acted for and met with Sylvia on some bankruptcy-related matters, including possible BIA s. 163 examinations.

[57] On matters concerning 129 Mr. Bisceglia received his instructions from Edwin or Mr. Carberry, and it was his understanding that Sylvia was comfortable with that state of affairs. His primary dealings were with Edwin.

[58] Based on his meetings with Sylvia, before and after Edwin’s death, Mr. Bisceglia thought that she would understand what a release was.

B. Sylvia’s role in the 129 offer to and settlement with the Receiver

B.1 Plaintiff’s affidavit evidence

[59] Glen Grove’s 1998 offer to purchase all the bankrupt’s assets was signed by Sylvia on behalf of the corporation; 129’s 1999 offer to purchase the bankrupt’s assets was not signed by Sylvia. The inspectors rejected that offer by 129. As a result of subsequent assignments of certain claims against the bankrupt, a further vote of creditors in August, 2001 overturned the initial rejection of the offer. Both sides initiated motions regarding the validity of that vote. I gather from the evidence that those motions were not argued. Instead, in May, 2002, 129 made an offer to purchase the proof of claim. As described above, the Three Letters resulted in the Settlement.

B.2 Sylvia’s 2005 Affidavit

[60] Sylvia denied any knowledge “of a settlement offer being made by 129 to the plaintiff. I did not cause 129 to default on its obligations. In fact, I do not believe that I have ever taken any steps in relation to 129.” She concluded: “All that I have done, and continue to do since my husband’s death, is assist in the running of the Glen Grove in attempt to make this business profitable again.”

B.3 Sylvia’s 2006 cross-examination

[61] Sylvia did not deny her signatures on some of the early offers made to the Trustee, but she denied any knowledge of the contents of the offers.

[62] Sylvia testified that she had only met Mr. Solmon once, following Edwin’s death. She denied that Mr. Solmon had ever acted as her lawyer, and she did not know whether he had acted as lawyer to any company she had controlled. Notwithstanding that position, Sylvia initially asserted privilege over any communications between herself and Mr. Solmon.[^7]

[63] She also took the position that Mr. Besceglia had only acted for Edwin, never for her.

[64] On her 2007 cross-examination Sylvia was shown a note dated August 31, 2004 from Mr. Solmon’s file in which he recorded points from a conversation with a mortgage institution. Mr. Solmon noted that a Mr. Dadouch told him that Sylvia had been taking $20,000 per month out of Glen Grove for the last years. When shown the note on her cross-examination Sylvia initially responded, “So what?”, then said that Mr. Solmon was lying.[^8]

B.4 Sylvia’s 2010 affidavit

[65] Sylvia repeated that she was not aware of the various offers made to settle claims against her husband’s bankruptcy estate and that she had no idea her husband was planning to secure the Settlement by involving Glen Grove.

[66] Sylvia went on to depose that had her husband approached her regarding the Settlement, she would not have agreed to it, in large part because she regarded the Yonge St. Property as the only asset left to her for the needs of her daughter and herself. She also conjectured why Edwin had inserted certain terms in the Settlement. Her evidence on these points was speculative and of little probative value.

B.4 Mel Solmon: Rule 39.03 examination

[67] On July 6, 2005, Mr. Solmon was examined as a witness under Rule 39.03. Although asked many questions about who instructed him on various matters, Mr. Solmon was reluctant to provide details because of privilege concerns.

[68] Mr. Solmon testified that he had acted for Edwin in his bankruptcy and was also retained by 129 around August, 2001. He had obtained a resolution of 129’s directors authorizing his retainer. Mr. Solmon stated that Sylvia had never retained or instructed him as her solicitor and she never instructed him on behalf of 129. Sylvia never had asked him to prepare an offer to settle the litigation with the Receiver. Mr. Carberry provided him with some instructions on behalf of 129, as did another person whom Mr. Solmon was reluctant to identify because of solicitor-client privilege concerns.

[69] Mr. Solmon stated that it was Mr. Carberry who signed on behalf of 129 and represented, orally, that he had authority to bind the company on the Settlement. It would have “surprised” Mr. Solmon had Sylvia been involved in negotiations concerning mortgages on the Yonge St. Property. Mr. Solmon was not prepared to answer whether Edwin provided him with any instructions on the Settlement until there had been a waiver of privilege by 129.

[70] Mr. Solmon testified that he had not represented Glen Grove.

[71] Mr. Solmon testified that the (unidentified) person who provided him with instructions concerning the Settlement informed him that Glen Grove was prepared to guarantee the Settlement.

[72] Mr. Solmon had written to Receiver’s counsel on February 9, 2004 regarding certain details about the Settlement. In his letter to Mr. Tayar he wrote:

[W]ith regard to paragraph 7, I advised you that the purchaser is not controlled by Mr. Hyde’s wife. It is controlled by Bob Carberry. A company controlled by Mr. Hyde’s wife has made a loan to the purchaser, but Mrs. Hyde has no control over the Purchaser.

[73] Mr. Solmon stated that by August, 2004, following Edwin’s death, he had discovered that a problem existed with respect to the funding of the Settlement, and he was trying to obtain instructions. Mr. Solmon received a separate retainer from Sylvia to give her advice and to deal with counsel for the Receiver. Sylvia had instructed Mr. Solmon to tell Receiver’s counsel that there was a problem in funding the Settlement.[^9]

[74] At some point following his Rule 39.03 examination Mr. Solmon must have produced his file. I assume some order was made to do so, although the particulars of the order were not made known to me. His file contained several records of conversations which he had had with Sylvia. Although the plaintiff relied heavily on those records on this motion, no evidence was filed from Mr. Solmon proving his notes or, more importantly, explaining what they meant. The plaintiff sought to ascribe certain meanings to entries Mr. Solmon made in his notes, but Mr. Solmon was not asked to confirm whether those ascribed meanings were accurate.

[75] Mr. Solmon’s file disclosed that on August 25, 2004 he called counsel for the Receiver to advise that there was a problem in funding the Settlement.

[76] Mr. Solmon noted a conversation with Sylvia on August 30, 2004, including a note stating “Sylvia will let the glengrove go”. His note of an August 31 conversation with her recorded “she has no money” and “the terrible financial state of the property”. Sylvia authorized Mr. Solmon to talk with Mr. Dadouch, an employee with the mortgagee of the Yonge St. Property. Mr. Solmon’s note of a conversation with Mr. Dadouch on August 31 painted a different picture, suggesting that there was some equity in Glen Grove– “standalone glengrove suites is fine” - and that Sylvia had been taking out $20,000 per month for the past few years.

[77] Mr. Solmon then noted a conversation with Sylvia on September 2, 2004, which stated “they will not go to court”. Later that day Mr. Solmon contacted Mr. Dadouch, and noted that Mr. Dadouch had been instructed not to discuss Glen Grove any longer with Mr. Solmon.

[78] On September 20, 2004, Mr. Solmon wrote Sylvia, in part regarding his conversation with her brother, Mr. Ernie Singer:

Mr. Ernie Singer advised me that he advised you that you should not use any lawyers whatsoever and, basically, see what happens. If they sue you or any company then you will get counsel…

As you know, there is presently a motion scheduled for October 4, 2004 in Commercial Court where approval is being sought of the agreement reached on behalf of the numbered company. Glengrove Suites is involved and is to give a guarantee and mortgage.

I believe it is important for your understand exactly what your legal position is and potential responsibilities in the circumstances.

There may be separate defences available to Glengrove Suites which I would like to talk to you about. (emphasis added)

[79] Sylvia testified that she read that letter, called her brother-in-law, and later spoke to Mr. Solmon who told her to hire a lawyer.

[80] On September 22, 2004, Sylvia wrote to Mr. Solmon stating, in part, that she knew Edwin “had the greatest respect for you and spoke so highly of you”.

[81] In a note of a telephone conversation he had with Sylvia on October 6, 2004, Mr. Solmon recorded: “Emilio sent 4 options, withdraw the offer, handle this, did not withdraw the offer”.

[82] By letter received by Mr. Solmon on October 28, 2004, Sylvia terminated his retainer.

B.5 Robert Carberry: Rule 39.03 examination

[83] Mr. Carberry did not see the Three Letters at the time they were sent; he had no pre-knowledge of the offers. While Edwin was alive Mr. Carberry did not know that 129 had made a deal with Edwin’s creditors. He did not give Mr. Solmon or Mr. Besceglia any instructions about the Settlement nor, to his knowledge, did Sylvia give any instructions to Mr. Solmon. Mr. Carberry understood that it was Edwin who had instructed Mr. Solmon. At the time Mr. Carberry did not know that a motion had been brought to approve the Settlement.

[84] From Sylvia’s reaction to seeing the motion record to enforce the Settlement, Mr. Carberry had the impression that she had not been aware of the Settlement.

[85] Based on his observation of the relationship between Edwin and Sylvia, Mr. Carberry would not have expected Edwin to consult with Sylvia before negotiating a corporate guarantee, mortgage or sale of property. He would have expected Edwin to have given a corporate guarantee by Glen Grove for an offer without consulting Sylvia.

[86] Mr. Carberry did not recall any discussion with Edwin about a guarantee from Glen Grove to support a settlement offer.

B.6 Emilio Bisceglia: Rule 39.03 examination

[87] Mr. Bisceglia could not recall any interaction with Sylvia relating to the various offers to settle which were made.

[88] In September, 2004, Mr. Bisceglia wrote to Sylvia advising her about her options in respect of the Settlement. At a certain point prior to the termination of his retainer in October, 2004, Mr. Bisceglia received documentation about the financial difficulties Glen Grove was encountering, but he was instructed not to forward it to the Receiver. He also received such information with instructions to pass it on to the Receiver, but his retainer was terminated before he could do so.

C. Sylvia’s role in respect of the obligations of 129 and the corporate defendants in the Settlement

C.1 Plaintiff’s affidavit evidence

[89] Following the Settlement, on July 14, 2008, Glen Grove granted a $4.1 million charge on its interest in the Yonge St. Property to The Equitable Trust Company; Sylvia guaranteed its obligations under that charge.

C.2 Sylvia’s 2006 and 2007 cross-examinations

[90] When shown the Default Judgment and asked why Glen Grove and Spendthrift did not do what the Default Judgment had contemplated, Sylvia replied that they had no money.[^10] Spendthrift, she testified, was a shell company which was not in business, and her counsel took the position that Glen Grove would refuse any request by 129 to provide a mortgage or guarantee for the Settlement.[^11]

[91] Sylvia testified that she did not intend to take steps to cause 129 to fulfill any of its obligations under the Settlement because she had never heard of the company and it was her husband’s responsibility.[^12]

C.3 Sylvia’s 2009 affidavit

[92] In an affidavit sworn April 23, 2009, Sylvia said little of substance about the merits of this action, save that the plaintiff’s claim was “meritless”.

C.4 Robert Carberry: Rule 39.03 examination

[93] Mr. Carberry recalled that following Edwin’s death Sylvia’s brothers-in-law were suggesting that she begin to use different professional advisors than Edwin had retained.

D. Post-hearing evidence

[94] On July 31, 2012, after the hearing of this motion, the plaintiff moved for leave to introduce evidence which was not known to it at the time of the hearing, specifically a March 2, 2012 Agreement of Purchase and Sale between Glen Grove and Timbercreek Asset Management Inc. under which the latter purchased Glen Grove’s interest in the Yonge St. Property. Sylvia’s Estate Trustees opposed the admission of the APS, but confirmed that the transaction had closed that day.

[95] I grant leave to the plaintiff to introduce that evidence. Clearly it was not known to the Receiver at the time of the hearing. Moreover, it is relevant to issues on the motion. The Receiver seeks judgment against Glen Grove and Spendthrift, including the delivery of a mortgage on the Yonge St. Property to secure 129’s performance of its obligations under the Settlement. The sale of those interests to Timbercreek renders moot that part of the plaintiff’s prayer for relief.

V. Analysis

A. Governing principles: The full appreciation test

[96] In Combined Air Mechanical Services Inc. v. Flesch[^13] the Court of Appeal observed that while the amendments to Rule 20 were meant to introduce significant changes in the manner in which summary judgment motions are to be decided,[^14] the purpose of the new rule was to eliminate unnecessary trials, not to eliminate all trials.[^15] The guiding consideration must be 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.[^16] The appropriateness of a summary judgment motion for the final determination of a claim on its merits, instead of proceeding to trial, 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.[^17]

[97] In deciding if the powers under Rule 20.04(2.1) 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?[^18]

[98] 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; 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.[^19] 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.[^20]

B. Assessment of the evidence

[99] Certain uncontroverted facts emerged from the evidence filed on the summary judgment motions:

(i) Although Sylvia was a director and shareholder of 129, Glen Grove and Spendthrift, prior to Edwin’s death he had operated and managed the companies. Sylvia played little role in the affairs of those companies, save to sign any documents which Edwin put in front of her. Sylvia was comfortable with Edwin running those companies. Mr. Carberry also played a significant operational role in the affairs of Glen Grove;

(ii) Sylvia did not play any role in the development or the making of the offer to settle made by 129 to the Receiver, the terms of which were set out in Mr. Solmon’s letters of May 3, 2002, August 28, 2003 and October 3, 2003 which were attached as Schedule “A” to the Settlement Approval Order made by Farley J. on October 4, 2004. Mr. Solmon’s evidence on this point was clear and uncontradicted;

(iii) Edwin died on May 27, 2004;

(iv) Following his death and before the granting of the Approval Order on October 4, 2004, Sylvia learned of the offer to settle made by 129 to the Receiver;

(v) The Approval Order was made on October 4, 2004;

(vi) Apart from making a small $27,400 payment, 129 did not perform the obligations set out in the Settlement. Specifically, 129 did not pay the full amount of $527,408.50 to the Receiver, and 129 did not provide the security for that payment specified in paragraph 3 of the May 3, 2002 letter;

(vii) The Receiver obtained default judgment against 129 on May 30, 2005 requiring it to pay the Receiver $619,383.56 and to cause Spendthrift and Glen Grove Suites (i) to deliver a mortgage against the Yonge St. Property in the principal amount of $500,000, (ii) to execute a guarantee of $500,000 of the indebtedness owed by 129 to the Receiver, and (iii) to execute a consent to judgment for $500,000, plus interest thereon;

(viii) 129 did not take any steps to set aside the Default Judgment;

(ix) 129 has not paid the Default Judgment nor caused Spendthrift or Glen Grove Suites to take any of the steps specified in the Default Judgment.

[100] Based on admissions made by Sylvia and her counsel during her June 11, 2007 cross-examination, the following facts are not in dispute:

(i) 129 had not made any efforts to cause Spendthrift or Glen Grove to undertake any of the steps specified in the Default Judgment;[^21]

(ii) Sylvia did not cause 129 to take any steps in respect of the Default Judgment because she did not recognize 129 as a corporation in respect of which she owed any obligations.[^22] Sylvia took the position that she previously had not known about 129, and therefore had no obligation or power to cause it to do anything.[^23] Sylvia did not intend to cause 129 to fulfill any of its obligations under the Default Judgment;[^24]

(iii) As of the date of Sylvia’s June 11, 2007 cross-examination, 129’s Minute Book listed her as the sole director and shareholder of the corporation. The Minute Book of 129 also contained a May 27, 1998 share subscription signed by Sylvia for the one share issued by the corporation and the share certificate issued to Sylvia, signed by her as President of 129. The 129 Minute Book contained a resolution dated May 27, 1998 by Sylvia, in her capacity as shareholder, electing herself as director of 129;

(iv) Sylvia acknowledged the authenticity of her signature where it appeared on corporate documents;

(v) Consequently, it lay fully within the control of Sylvia to direct and manage the affairs of 129;

(vi) Glen Grove Suites would refuse any request by 129 to perform the acts specified in the Default Judgment.[^25]

[101] The Receiver submitted that Sylvia was involved in the process leading up to the Settlement. The evidence about events concerning the Settlement which took place prior to Edwin’s death do not support that assertion. As noted, the evidence revealed that Sylvia did not participate in the making of the settlement offer through the Three Letters.

[102] However, there is evidence that Sylvia had some degree of participation in events concerning the Settlement from the time of Edwin’s death in late May, 2004, until the Approval Order of the Settlement made by Farley J. in early October, 2004. In its submissions about the extent of Sylvia’s knowledge and participation during that period of time, the Receiver relied heavily on inferences which it submitted should be drawn from typed notes which Mr. Solmon prepared of telephone conversations which he had had with Sylvia.[^26] The Receiver submitted that those notes entitled the court to conclude that “Sylvia made an informed decision not to appear before Justice Farley, and not to oppose approval of the Settlement”. The Receiver also submitted:

Sylvia made a conscious decision to let the Order of Justice Farley go on consent. She acquiesced in the Settlement, knowingly choosing to take no position against it. It does not lie in her mouth now to disavow it.[^27]

The Receiver pleaded that the 129 settlement offer was “from Sylvia” and “the settlement is binding on Sylvia…” The Receiver also pleaded that Sylvia interfered with the economic relations of the plaintiff under the Settlement and induced 129 to breach the settlement agreement.

[103] Although the Receiver submitted that the nature of the record in this case – a document-driven case with limited testimonial evidence – enabled the motion judge to gain a full appreciation of the evidence and the issues, I disagree. Before considering the legal arguments made by both sides in this action, it is necessary to make clear findings of fact about what Sylvia knew about the Settlement, when she knew it, and to what extent her actions were informed by her knowledge. The state of Sylvia’s knowledge and the instructions which she gave counsel from the time of Edwin’s death to the date of the Approval Order are important facts, including any knowledge of the draft charge and guarantee found at Tabs 103 and 104 of Volume 2 of the Book of Documents which pre-dated Edwin’s death.

[104] Although Sylvia gave her evidence on those issues, the examination of counsel for 129, Mr. Solmon, occurred at a time when Mr. Solmon, understandably, asserted privilege over communications which took place with Sylvia. Evidently privilege was waived at some point; there is no other explanation for the presence in the record of the notes made by Mr. Solmon of his conversations with Sylvia. However, no further examination was conducted of Mr. Solmon, and I am not prepared to draw inferences about who said what to whom in those conversations without hearing viva voce evidence from Mr. Solmon. Absent such viva voce evidence, I am unable to appreciate fully the evidence and the issues posed by this case.

VI. Conclusion

[105] Consequently, I am not prepared to grant the summary judgment requested by the Receiver against the defendants, nor can I grant the dismissal of the action sought by Sylvia’s estate trustees in their motion for summary judgment.

[106] Nor am I prepared to hold a “mini-trial” pursuant to Rule 20.04(2.2). This action has dragged on for far too long; a final determination must be made on the merits. A mini-trial is a tool to ascertain whether a genuine issue requiring a trial exists. The time has come for a trial; not a second-step in these motions.

[107] Although I refuse to grant the motions for summary judgment, I am prepared to make directions under Rule 20.05(2) with respect to the trial of the action. I will act as the trial judge. The parties must schedule the trial for a hearing before April 30, 2013. I do not see the trial taking more than one or 1.5 days. All affidavits can stand as the evidence-in-chief of the affiant, and the transcripts of the examinations and cross-examinations can serve as part of the cross-examination record at trial for that witness. The parties’ factums can serve as their opening statements. The viva voce evidence which I would need to hear is that of Mr. Solmon regarding his communications with Sylvia from the time of Edwin’s death to the date of the termination of his retainer. The parties should put together a “game plan” for the conduct of the trial, within the parameters which I have set, and appear before me on a 9:30 appointment by the middle of September, 2012, for final directions regarding the trial.

[108] Costs of these motions are reserved to the trial.

D. M. Brown J.

Date: August 9, 2012

[^1]: 2012 ONSC 758. [^2]: Emphasis in original. [^3]: 2010 ONSC 7258 [^4]: See also paragraph 10 of Mr. Zeifman’s May 12, 2009 affidavit. [^5]: Sylvia repeated this position in her 2010 affidavit. [^6]: January 31, 2006 Cross-Examination of Sylvia Hyde, Q. 317. [^7]: January 31, 2006 Cross-Examination of Sylvia Hyde, QQ. 304-310. [^8]: Sylvia 2007 Cross-examination, Q. 531. [^9]: Transcript of July 5, 2005 examination of Mel Solmon, QQ. 405-406. [^10]: January 31, 2006 Cross-Examination of Sylvia Hyde, QQ. 369-370. [^11]: June 11, 2007 Cross-Examination of Sylvia Hyde, Q. 485. [^12]: Ibid., Q. 486-7. [^13]: 2011 ONCA 764, paras. 1 and 2. [^14]: Ibid., para. 36. [^15]: Ibid., para. 38 [^16]: Ibid., para. 38 [^17]: Ibid., para. 39. [^18]: Ibid., para. 50. [^19]: Ibid., paras. 53-54 [^20]: Ibid., para. 55. [^21]: June 11, 2007 cross-examination of Sylvia, Q. 485. [^22]: Ibid., Q. 485, p. 98, ll. 12 to 27. [^23]: Ibid., Q. 486, p. 100, ll. 7 to 27. [^24]: Ibid., Q. 487. [^25]: Ibid., Q. 485, p. 97, ll. 13 to 17. [^26]: Plaintiff’s Factum, paras. 41 to 44. [^27]: Ibid., para. 66.