ONTARIO SUPERIOR COURT OF JUSTICE

Court File No.: CV-11-9415-00CL
Date: 20120830

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

GOLDEN BULL ESTATES LTD. Plaintiff – and – GENEREX BIOTECHNOLOGY CORP., 1097345 ONTARIO INC., AND GENEREX PHARMACEUTICALS INC. Defendants

Darren Smith , for the Plaintiff

Jeffrey Levine , for the Defendants,

Heard: August 23, 2012

NEWBOULD J.:

[ 1 ] The plaintiff moves for an order for leave to issue certificates of pending litigation against two properties, one being Suite 202, 33 Harbour Square and the other at 1-17 Carlaw Avenue, Toronto.

[ 2 ] The tests for a CPL can be found in Perruzza v. Spatone , 2010 ONSC 841 and Rosenglen Village for Seniors v. Noble , 2010 ONSC 3239, 100 C.P.C. (6 th ) 176 . The test for granting a CPL is the same as the test in a motion to discharge a CPL. It is no part of a judge’s function to assess the credibility of deponents or decide disputed issues of fact. See Waxman v. Waxman , [1991] O.J. No. 89 , per Lane J.

[ 3 ] Harbour Square has been sold and it closes on September 5, 2012. The evidence is that the proceeds will not be sufficient to pay off the mortgage. Any claim for a constructive trust would rank after the mortgage. There is no purpose, therefore, in registering a CPL against Harbour Square. As well, if the sale does not close, Generex will be forced to pay rent on a new premise on Richmond Street West. In the circumstances, leave to issue a CPL against the Harbour Square property is denied.

[ 4 ] The claim of Golden Bull is that it paid mortgages and fees on behalf of one or more of the defendants at a time when Golden Bull and the defendants were controlled and run by Mark Perri, the husband of Rose Perri, who died in 2002. Everything was done informally. It is claimed that the mortgages and fees paid were benefited the Harbour Square and Carlaw properties. Golden Bull claims it has not been reimbursed for all of these payments and that the defendants have been unjustly enriched, entitling Golden Bull to the remedy of a constructive trust.

[ 5 ] The defendants assert that the rents collected by Golden Bull exceeded the payments made by it on behalf of the defendants, and thus there has been no unjust enrichment. It claims that the excess overall is greater than the management fees of 15 percent to which Golden Bull was entitled, and there is a net amount owing to the defendants.

[ 6 ] The evidence filed by the defendants commenced with the quarter ending October 31, 2008 and not from 2002 when Mr. Perri died or from 1997 when the arrangement in question began. Thus the plaintiff asserts that the defendants have not proven that the plaintiff has been fully paid, and that there should be full documentary production by the defendants on this issue.

[ 7 ] The defendants rely, however, upon evidence obtained in an examination of the former comptroller of Generex, a Mr. Jarnitskie, that what Golden Bull collected was accounted for each quarter in a reconciliation process with Generex through executive compensation.

[ 8 ] I do not view that general statement of Mr. Jarnitskie as decisive evidence that reconciliations were done that way back to 1977. He did not say what period of time the reconciliations were done, and he obviously had no access to any company records. The company records for the period have not yet been produced.

[ 9 ] The documents produced by the plaintiffs are not complete and on their fact raise issues on which there is no evidence. Taking into account the evidence of Mrs. Perri, which I do not weigh for credibility (she has not admitted in cross-examination that the defendants are correct), and the various accounting documents relied on by the defendants, I cannot find that there is no triable issue. Or put the other way, I think the plaintiff has established a triable issue as to whether it has been fully compensated for payments made on behalf of the defendants and whether there has been an unjust enrichment of the defendants.

[ 10 ] The claim for a constructive trust for unjust enrichment is fully described in Soulos v. Korkontzilas , 1997 SCC 346 , [1997] 2 S.C.R. 217. Mr. Levine asserted that on the facts of this case a constructive trust should not be granted. I do not think it is the role of a judge on a motion for leave to issue a CPL to undertake an analysis of whether a constructive trust would be imposed by a trial judge unless it can be said that the plaintiff has not established a prima facie case or triable issue that the remedy of a constructive trust is available.

[ 11 ] In my view on the facts before me, the plaintiff has established that a constructive trust is a possible remedy sufficient to constitute a prima facie case. The role of equity as discussed by McLachlin J. in Soulos is a broad one. The arrangements were carried out at a time when Mr. Perri operated all of the companies on a very informal basis. I do not view the fact that no claim for a constructive trust remedy was ever filed in various corporate filings or other documents is conclusive.

[ 12 ] In my view, the plaintiff has established a reasonable claim to an interest in land on south Harbour Square and Carlaw. It is entitled to a CPL on the Carlaw property, but for the reasons given, not to a CPL on the Harbour Square property.

[ 13 ] Success being divided, no order as to costs.

NEWBOULD J.

Released: August 30, 2012

COURT FILE NO.: CV-11-9415-00CL

DATE: 20120830

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

GENERAL BULL ESTATES Plaintiff – and – GENEREX BIOTECHNOLOGY CORP., 1097345 ONTARIO INC., AND GENEREX PHARMACEUTICALS INC. Defendants

ENDORSEMENT

NEWBOULD J.

Released: August 30, 2012