SUPERIOR COURT OF JUSTICE – ONTARIO

COMMERCIAL LIST

RE: General Electric Canada Real Estate Financing Holding Company and General Electric Capital Canada Holdings Company, Applicants

AND:

Liberty Assisted Living Inc., 729285 Ontario Limited, Amir Kassam, Rahim Bhaloo and Meyers Norris Penny Limited in its capacity as Receiver and Trustee in Bankruptcy of the Estates of 2008777 Ontario Inc., 2004631 Ontario Inc., 912087 Ontario Limited and 2007383 Ontario Inc., Respondents

BEFORE: D. M. Brown J.

COUNSEL:
L. Brzezinski, for the Applicants in the GE Canada application

R. Trifts, for the Respondents, Liberty Assisted Living Inc., 729285 Ontario Limited and Rahim Bhaloo in the GE Canada application

C. Prophet and T. Rocca, for MNP Ltd., receiver of the Retirement Residences

S. Mitra, for Albert Gelman Inc.

HEARD: October 16, 2012

9:30 Appointment endorsement

[ 1 ] On September 4 and 12, 2012, I made two endorsements setting dates for two Commercial List hearings: (i) November 5, 2012 for the MNP application for a bankruptcy order against 729285 Ontario Limited and the appointment of a receiver, and (ii) November 14, 2012 for the hearing of the motion by AGI, a court-appointed receiver, to pass its accounts.

[ 2 ] I understand that Liberty Assisted Living Inc., 729285 Ontario Limited and Rahim Bhaloo (the “LAL Respondents”) have sought leave to appeal to the Divisional Court from those scheduling orders.

[ 3 ] Yesterday, at 5:12 p.m., I received an email from counsel for GE Canada requesting an urgent 9:30 appointment for this morning and attaching yesterday’s endorsement made by Lederer J. sitting in the Divisional Court. That endorsement read:

This is a motion for leave to appeal an order which set dates for 2 applications concerning (1) appointment of a receiver for Liberty Assisted Living Inc. and a bankruptcy proceeding in respect of 729285 and (2) a passing of accounts. Two separate dates were set by Mr. Justice Brown in his capacity as the case management judge.

This is a purely procedural matter. Mr. Trifts says the dates were set in circumstances where Justice Brown MAY have misapprehended some aspect of the background.

In the circumstances it would be better if the matter were taken back to Justice Brown. As the case management judge he has the knowledge of how this has proceeded.

An appointment has been set by counsel to see Brown J. tomorrow (Oct. 16, 2012).

This matter is adjourned to Wednesday, Oct. 17, 2012.

[ 4 ] Although I have not seen the materials filed before the Divisional Court, it is apparent that the LAL Respondents are seeking, in effect, to have a judge of the Divisional Court adjourn two matters set for hearing on the Commercial List by a Commercial List judge. In other words, the respondents seek to have the Divisional Court schedule Commercial List matters.

[ 5 ] These proceeding have a long history, dating back to the spring of 2011. I have case managed the proceedings since that time. As to the two specific matters scheduled for hearing, their history stretches back to my endorsement of November 22, 2011, and then proceeds through my endorsements of March 14 ( 2012 ONSC 1689 ), May 7, 18, June 6, July 23, August 8, 10, September 4 and 12, 2012. Long story short, as a result of the LAL Respondents changing counsel from the Brauti Thorning Zibarras LLP firm (“BTZ”) to their present counsel, I adjourned the two hearings, over the strenuous objections of the applicants, from May to September and now to November.

[ 6 ] In my May 18, 2012 endorsement I ordered GE Canada “to deliver to Mr. Flom within 10 days copies of all Reports filed by AGI, at no cost to Respondents”. Since that time the LAL Respondents have possessed the Reports in respect of which AGI spent the time for which it seeks to pass its accounts. To the same effect, on September 4, 2012 I wrote as follows:

[2] As matters now stand, the Brauti Thorning Zibarras LLP firm has not released their files to new counsel for Rahim Bhaloo, Liberty Assisted Living Inc. and 729285 Ontario Limited. I have delayed giving firm directions about the scheduled September 10 (bankruptcy application) and September 18 (AGI passing of accounts) hearings in the hope that the issue about the release of the clients’ files could be worked out. It has not. Consequently, I will vacate the September 10 and September 18 hearing dates, but on terms.

[3] In my view service of the materials upon which the applicants/moving parties intend to rely in those two hearing on new counsel for the respondents, when coupled with the materials available in the Court’s public files, will provide the respondents with the information which they require in order to participate in those hearings. At this point I see no need to delay the hearing of those matters further to await the determination of the dispute between the respondents and their former solicitor.

[4] I therefore make the following directions:

(i) I vacate the September 10 and September 18, 2012 hearing dates;

(ii) Counsel shall consult and select new hearing dates for each matter for some time during the first two weeks of November, 2012. Those dates will be peremptory to all parties, whether or not they are represented by counsel at the time. There will be no more adjournments of either matter. I am seized of the AGI passing of accounts hearing; I do not necessarily have to hear the bankruptcy application. One day will be assigned for each hearing;

(iii) In the AGI passing of accounts matter, counsel for AGI shall re-serve its motion materials on the respondents by serving their new counsel no later than Thursday, September 6, 2012. 285 shall serve and file a detailed notice of objections to the $403,024.78 for which approval is sought no later than October 5, 2012 (see my March 14, 2012 endorsement: 2012 ONSC 1689 );

(iv) In the bankruptcy application/limited receiver matter, counsel for the applicant shall re-serve its application/motion materials on the respondents by serving their new counsel no later than Thursday, September 6, 2012;

I made those orders in order to ensure that, notwithstanding their change of counsel and notwithstanding BTZ’s refusal to release their files without payment of its accounts, the LAL Respondents would possess the materials upon which the other parties intend to rely at the scheduled hearings.

[ 7 ] At today’s 9:30 hearing counsel for the LAL respondents requested that I re-consider my decisions of September 4 and 12, 2012 and adjourn the two hearings scheduled for November until such time as the Court of Appeal had disposed of the appeal by their former counsel, BTZ, from the “file delivery-up” order of Cumming J.

[ 8 ] I made three inquiries of counsel. First, I asked counsel for the LAL Respondents what aspect of the background to this matter I may have apprehended, as apparently represented to Lederer J. In response counsel for the LAL Respondents referred to the September 6 stay granted by the Court of Appeal of the order of Cumming J. in July requiring the BTZ firm to deliver up their files to the LAL respondents, on terms. Counsel re-iterated that no request was made of the Court of Appeal to stay any of my orders.

[ 9 ] I was aware of that information when I made my September 12 order. In a sense I anticipated the possibility of such an order when I made my September 4 order requiring the delivery of certain materials to the LAL respondents.

[ 10 ] I understand that the BTZ firm has not perfected its appeal to the Court of Appeal and, as a result, no date has been set for the hearing of its appeal. That leads me to believe that the appeal will not be heard this year.

[ 11 ] Second, in respect to the AGI passing of accounts hearing, I inquired whether the LAL Respondents had filed a detailed notice of objections to the receiver’s accounts by October 5 as stipulated in my September 4 order. I was informed they had not. This now is the third time the LAL Respondents have failed to meet a deadline for filing a notice of objections.

[ 12 ] Third, I asked counsel for the LAL Respondents why his clients had not filed any evidence at the various 9:30 appointments before me suggesting that without access to the files presently retained by their former, second set of counsel, they would be unable to prepare for the two hearings set for November. As I understood counsel’s response, he indicated that he did not think that the 9:30 process allowed for the filing of such evidence. That understanding is incorrect; it does when required. In the absence of concrete evidence from the LAL Respondents about why they require access to the files held by BZT in order to prepare for the two hearings, I cannot give much weight to submissions from their counsel that the LAL Respondents would be prejudiced without such access.

[ 13 ] I did not leave the matter there. Following today’s 9:30 attendance I retrieved the materials for the two November hearings from the Commercial List Office. As to the application for a bankruptcy order:

(i) The Application for Bankruptcy Order by MNP Ltd., the trustee in bankruptcy of 912087 Ontario Limited, against 729285 Ontario Limited (31-OR-207843-T) was dated September 28, 2011. The debt alleged was the amount of $218,656.00. Two acts of bankruptcy were alleged – ceasing to meet liabilities as they became due and making transfers that constituted fraudulent preferences. The Application was served on the respondent on September 30, 2011, over one year ago;

(ii) 729285 Ontario Limited filed a Notice Disputing Application for Bankruptcy Order dated October 17, 2011 denying the debt, denying it was insolvent and denying the alleged acts of bankrupty;

(iii) BTZ did not step down off the record until my order made April 20, 2012. From October 17, 2011 until April 20, 2012, the respondent did not attempt to conduct a cross-examination on the affidavit of verification. Following the retainer of the present solicitors of record in May, 2012, the respondent has not attempted to conduct a cross-examination on the affidavit of verification;

(iv) This past April the applicant delivered a witness statement of Jerry Henechowicz, an officer of MNP Ltd., whom it intends to call at the bankruptcy hearing. The witness statement provided the particulars and evidence supporting the alleged debt and acts of bankruptcy. I understand that the respondent has not sought to examine, or to compel the examination, of Mr. Henechowicz.

[ 14 ] I am satisfied that the applicant in the bankruptcy proceeding has disclosed to the respondent the major evidence upon which it intends to rely in support of its request for a bankruptcy order. Ample time (one year) has existed for the LAL Respondents to conduct a cross-examination on the affidavit of verification. In light of the disclosure order contained in paragraph 4(iv) of my September 4 reasons, I see no prejudice to the LAL Respondents in preserving the November 5, 2012 hearing date. I therefore do not grant the request by the LAL Respondents for an adjournment.

[ 15 ] As to the motion by the Receiver, AGI, for the passing of its accounts, the court file disclosed the following documents upon which AGI intends to rely:

(i) Motion record returnable November 22, 2011;

(ii) Two volume motion record dated February 10, 2012;

(iii) Supplementary report to the Receiver’s Fourth Report dated March 6, 2012; and,

(iv) Second supplementary report to the Receiver’s Fourth Report dated March 12, 2012.

[ 16 ] In my May 18, 2012 endorsement I ordered GE Canada to deliver to new counsel for the LAL Respondents copies of all reports filed by AGI. It did so. In my September 4 endorsement I ordered as follows:

In the AGI passing of accounts matter, counsel for AGI shall re-serve its motion materials on the respondents by serving their new counsel no later than Thursday, September 6, 2012. 285 shall serve and file a detailed notice of objections to the $403,024.78 for which approval is sought no later than October 5, 2012 (see my March 14, 2012 endorsement: 2012 ONSC 1689 ).

AGI did so.

[ 17 ] On the passing of accounts AGI bears the onus of demonstrating the reasonableness of its accounts. It has disclosed the evidence upon which it intends to rely to do so. AGI described the work it had performed in each of its reports filed with the Court. In those circumstances, the LAL Respondents should have no problem in preparing for and participating in the passing of accounts hearing, if that is their intention.

[ 18 ] The LAL Respondents did not file a notice of objections by October 5. This is the third time the LAL Respondents have failed to file a notice of objections by a court-ordered deadline. I will not set any further deadline. The LAL Respondents have had ample opportunity to file a notice of objections. Passing of accounts hearings are not conducted on a trial-by-ambush basis. The failure of the LAL Respondents to file a notice of account will limit the scope of permissible objections to the AGI accounts at the November hearing.

[ 19 ] I therefore will not adjourn the November 14 passing of accounts hearing as requested by the LAL Respondents.

[ 20 ] One final point. Counsel for the LAL Respondents submitted that earlier this summer my endorsements sought to make the files held by BZT available to the LAL Respondents for the two hearings. That is correct. However, when it became apparent that the dispute between BZT and the LAL Respondents would remain before the Court of Appeal for some time, it was necessary to re-consider the best way to balance the rights of both sides in these proceedings. My orders of September 4 and 12 were the result. A Court must design a process which is fair to both parties to a dispute. The bankruptcy application has been outstanding for over a year; the passing of accounts motion has its genesis back in November, 2011. The time has come for an adjudication of those matters on their merits.

[ 21 ] Since my hearing schedule today prevented the release of these reasons until this evening, and given that Lederer J. adjourned the matter until tomorrow morning, I have taken the liberty of copying Lederer J. on the email distributing this endorsement to counsel.

__________ (original signed by) ___________

D. M. Brown J.

Date : October 16, 2012