SUPERIOR COURT OF JUSTICE - ONTARIO

Court File No.: 07-CV-330228PD1
Date: 20130116

RE: MINTZ & PARTNERS LIMITED, in its capacity as receiver and manager of the property known municipally as 7 Bellwoods Avenue, Toronto, Ontario

Applicant

• and -

KERRY WINTER

Respondent

BEFORE: Justice S. M. Stevenson

COUNSEL:
John Polyzogopoulos, for Bernard Sherman

Maurice Neirinck, for the Respondent

DATE HEARD: November 1, 2012
Written submissions of the Respondent made November 9, 2012
Written reply submissions of the Applicant made November 16, 2012
Responding written submissions of the Respondent made November 22, 2012

E N D O R S E M E N T

Introduction

[1] The applicant, Mintz & Partners Limited ("Mintz") was appointed by Bernard Sherman ("Sherman") as receiver over property known municipally as 7 Bellwoods Avenue, Toronto Ontario ("Bellwoods") pursuant to a mortgage granted by the respondent, Kerry Winter ("Winter") to Sherman with respect to Bellwoods.

[2] On or about August 18, 2004, Winter granted Sherman a mortgage in the amount of $1 million over Bellwoods. The mortgage secured a portion of Winter's indebtedness to Sherman with respect to a promissory note in the amount of $7,944,145, plus interest. Winter subsequently defaulted under the promissory note and mortgage. On December 14, 2007, Mintz obtained a judgment for possession of Bellwoods for the benefit of Sherman. Winter appealed the judgment and by way of Minutes of Settlement dated March 5, 2008 (the "Minutes") the parties settled the matters including the appeal. Sherman brings this motion for an order for leave to issue a Writ of Possession of Bellwoods as he alleges that Winter has breached the terms of the Minutes.

The Positions of the Parties

[3] Sherman contends that pursuant to the Minutes, Winter consented to judgment in the amount of $8,480,615, plus prejudgment interest in favour of Sherman. Sherman submits that Winter was to remain in possession of Bellwoods, meaning Winter had to occupy Bellwoods, as a term of the Minutes and while Winter was in possession of Bellwoods, Sherman was not permitted to issue a Writ of Possession and take possession of Bellwoods. Sherman contends that Winter has not been in possession of Bellwoods for years as he rents out Bellwoods, and therefore, Sherman is entitled to take possession of Bellwoods, to sell it and apply the proceeds towards the consent judgment.

[4] Winter opposes the motion on the grounds that pursuant to paragraph 3 of the Minutes, Winter was given a right to possession of Bellwoods and there was no duty imposed upon Winter pursuant to paragraph 3 of the Minutes. He submits that there is no other interpretation possible as possession of Bellwoods is the only consideration given to Winter for entering into the Minutes. Further, Winter contends that the Minutes did not require that he had to reside at Bellwoods.

[5] The main point of contention between the parties is with respect to the meaning of the phrase "Winter will remain in possession of…" in paragraph 3 of the Minutes and whether there was a requirement that Winter reside at Bellwoods. Both parties contend that the wording of the Minutes is clear and unambiguous.

[6] Procedurally, Winter argues that Sherman's motion is a Rule 20 motion for summary judgment under the Rules of Civil Procedure, R.R.O. Reg. 194; however, he concedes that if the Court deems that the motion is, in fact, a Rule 20 motion for summary judgment, he does not object to the motion proceeding on that basis. Alternatively, Winter submits that Mintz's claim is time barred given that if Winter had to reside at Bellwoods as a term of the Minutes, Sherman knew that Winter had physically stopped living at Bellwoods by September 2008. Winter submits that Sherman admitted in his cross-examination that he did not make any inquiries after March of 2009 up to February of 2012 as to where Winter was residing during that three-year period. He therefore submits that this alleged breach by Winter was known to Sherman by September 2008 and that a two-year limitation applies.

Issues

[7] The issues to be considered are:

i) Has Winter breached the Minutes of Settlement by not living at 7 Bellwoods? If Winter has breached the Minutes of Settlement, is Sherman entitled to an order granting him leave to issue a writ of possession over 7 Bellwoods?

ii) Is the claim brought by Sherman time barred?

iii) Is Sherman's motion, brought by Mintz & Partners, a Rule 20 motion?

The Minutes of Settlement

[8] The Minutes read as follows:

The parties Mintz & Partners Limited, in its capacity as Receiver and Manager of the property known municipally as 7 Bellwoods Avenue, Toronto Ontario and Kerry J.D. Winter and Bernard C. Sherman by their respective solicitors hereby settle court file number 07-CV-330228PD1 and Court of Appeal Number C47739 and court file number 07-CV-3266673PD3 between Bernard C. Sherman and Kerry J.D. Winter, in consideration of the mutual covenants herein contained, agree to settle the above referred to proceedings on the following terms:

1. Winter will consent to Sherman obtaining Judgment for the money debt in the amount of $8,048,615 plus prejudgment interest from 15 January 2007 at a rate equal to the Bank of Montréal commercial prime lending rate set from time to time, calculated and compounded monthly in arrears. The Judgment will bear interest at the statutory rate of 5% per annum. The enforcement of the Judgment will be stayed and no Writ of Seizure of Sale or any other public registration of the Judgment will take place until final disposition of either the Winter v. Sherman action or the Winter v. Royal Trust action, whichever occurs first.

2. Winter will surrender possession of the properties known as 75 Eden Vale Drive in King, 5 Reimar Gardens in Toronto and 1480 County Road 8, RR #3 in Fenelon Falls and will consent to Writs of Possession and enforcement of Writs of Possession upon request, and Sherman may dispose of these properties and will account to Winter for the proceeds. At Sherman's option, Winter will surrender title to the foregoing properties to Sherman or his nominee, in which case Sherman shall credit Winter for their fair market value in reduction of the Judgment.

3. Winter will remain in possession of 7 Bellwoods Avenue in Toronto and will commence paying the sum of $2,500 per month to Sherman from April 1, 2008. Winter will also pay property taxes when due, home insurance (with Sherman as mortgagee named as a loss payee), and utilities while in possession of the home and maintain the home in good condition.

4. Within thirty (30) days of the final disposition of the action of Winter v. Royal Trust or Winter v. Sherman, whichever is earlier:

(a) Winter will pay to Sherman $600,000 in reduction of the Judgment and Sherman will discharge his security over 7 Bellwoods Avenue in Toronto to Winter and, the property will not be the subject of enforcement or collection with regard to the balance of the Judgment owed to Sherman; or

(b) Winter will surrender possession of 7 Bellwoods Avenue in Toronto to Sherman, in which event Sherman may dispose of 7 Bellwoods Avenue in Toronto and will account to Winter for the net proceeds in reduction of the Judgment.

5. Winter will consent to Judgment for possession and consent to a Writ of Possession with regard to 7 Bellwoods Avenue in Toronto, which Judgment and Writ of Possession will be held in escrow and will not be enforced until after thirty (30) days of the final disposition of the action of Winter v. Royal Trust or Winter v. Sherman, whichever is earlier, or unless Winter defaults on any of the terms of these Minutes of Settlement.

6. The appeal will dismissed without costs in the Judgment and Orders taken out with regard to the debt and possession will be without costs.

7. The Parties confirm that they are not under disability and have obtained independent legal advice.

i) Has Winter breached the Minutes of Settlement by not living at 7 Bellwoods? If Winter has breached the Minutes of Settlement, is Sherman entitled to an order granting him leave to issue a Writ of Possession over 7 Bellwoods?

Contract Interpretation

[9] Horkins J. succinctly summarized the rules of contract interpretation in Wright v. United Parcel Service Canada Ltd., 2011 ONSC 5044, [2011] O.J. No. 3936 (S.C.J.), at paragraphs 439-45:

¶439 I start with a review of the basic rules of contract interpretation that guide my analysis.

¶440 The primary goal of contractual interpretation is to give effect to the intentions of the parties as expressed in their written agreement by applying normal rules of construction to search for an interpretation which, from the whole of the contract, would appear to promote or advance the true intent of the parties at the time of entry into the contract.

¶441 While the court strives to interpret a contract in a manner consistent with the intent of the parties, the parties are presumed to intend the legal consequences of their words. The court must read and consider the contract as a whole.

¶442 The court will consider the context or what courts have called the surrounding circumstances or factual matrix in which the contract was drafted, to understand what the parties intended. However, evidence of the subjective intent of the parties is not a relevant inquiry. The factual matrix includes the background and context of the contract that would affect the way in which the "language of the document would have been understood by a reasonable man". (Investors Compensation Scheme v. West Bromwich Building Society, [1998] 1 W.L.R. 896 at pp. 912-913.) Citing Investors Compensation Scheme, Doherty J.A. said in Dumbrell v. Regional Group of Companies Inc., 2007 ONCA 59, [2007] O.J. No. 298 that this approach instructs Courts to look at the environmental circumstances to assist in interpreting the syntax of the contract, although the subjective intent of the parties has no place in contract interpretation.

¶443 In assessing the commercial reasonableness of a contract, a court cannot lose sight of the language chosen by the parties. So while a court will not adopt an interpretation that is 'clearly' commercially absurd, at the same time where a contract is not ambiguous, the interpretation that produces a sensible commercial result is not determinative - the parties are presumed to intend the legal consequences of their words.

¶444 A contract provision is ambiguous if it is reasonably susceptible of more than one meaning. In the absence of such ambiguity, it is improper to resort to extrinsic evidence to determine the meaning of the provision.

¶445 Lastly, the doctrine of contra proferentem is the rule of last resort and applies only when all other rules of construction fail. If applicable, the meaning least favourable to the author of the document prevails.

[10] Applying these rules of contract interpretation, reading and considering the Minutes as a whole, and taking into consideration that evidence of the subjective intent of the parties is not a relevant inquiry in this analysis, I find that the intention of the parties as set out in the Minutes was not that it be a requirement that Winter reside at Bellwoods and this was not what was meant by the word "possession" in paragraph 3 of the Minutes. I also find that the words in the Minutes are clear and unambiguous.

[11] In paragraph 2 of the Minutes, Winter agreed to "surrender possession" of his three other properties, allowing for Sherman to dispose of those properties. Winter did not reside in any of those properties with the exception that he spent some time with his family at the County Road property. Sherman also gained possession of the three properties pursuant to the Minutes and he did not reside at any of the properties prior to the sale of those properties. It is clear that the parties intended that the use of the word "possession" in paragraph 2 would mean that Winter had some control over these properties and to ascribe a different meaning to the word "possession" in paragraph 3 of the Minutes, effectively turning the meaning of the word "possession" into residency, does not make logical sense.

[12] There is no specific wording in the Minutes and in reading the Minutes as a whole, to suggest that residency by Winter at Bellwoods was a requirement or an obligation under the terms of settlement. I agree with the submission of counsel for Winter that Winter was given a right under the terms of the Minutes to retain possession of Bellwoods as long as he complied with certain requirements, being the payment of $2,500 per month commencing April 1, 2008, the payment of property taxes when due, home insurance and utilities while in possession of the home and to maintain the home in good condition. There is no evidence that any of those conditions have been breached and, in fact, attached as an exhibit to Sherman's Reply Affidavit, there is a statement evidencing that payments have been made by Winter as per the Minutes.

[13] Sherman contends that the $2,500 represents rental payments or occupancy rent as is reflected on the statement attached to his Affidavit. He also submits that Winter's spouse, who signs the monthly cheques for $2,500, and Winter's previous counsel, both referred to the cheques as rent or occupancy rent. However, in the Minutes the $2,500 is not stated as being for rent or occupancy rent. There is also nothing in the Minutes that prohibits Winter from renting out the premises. If residing at Bellwoods had been a condition to Winter's possession of Bellwoods or he was to be precluded from renting out the premises, those words would have been inserted into the Minutes giving effect to the intention of the parties. Absent those words, that intention is not evident. Additionally, the $2,500 per month payments, represent payments on the judgment owing to Sherman.

[14] Counsel for Sherman submits that the primary method to determine the intent of the parties, is to review the wording of the contract itself. He states that the Minutes are clear and unambiguous and further submits that the plain, ordinary, popular or natural meaning of "possession" is what was intended by the parties and not a legal meaning. He relies upon the decisions of HW Leibig & Company Limited v. Leading Investments Limited, 1986 45 (SCC), [1986] S.C.J. No. 6, para. 28 and Petek v. Powell, [2011] O.J. No. 336 (S.C.J.), para. 9 in support of his position. Sherman also relies upon the meaning of "possession" as defined in Oxford's Canadian dictionary (Canadian Oxford Dictionary, 2d ed.) sub verbo "possession" which is as follows:

1 the act or state of possessing or being possessed.

2 the thing possessed.

3 the act or state of actual holding or occupancy.

[15] He further relies upon the definition of "possession" in the Shorter Oxford English Dictionary (Shorter Oxford English Dictionary, 6th ed.), sub verbo "possession" which defines possession as:

1 the action or fact of possessing something; the holding or having something as one's own or in one's control; actual holding or occupancy as distinct from ownership.

[16] Counsel for Winter also submits that the Minutes are clear and unambiguous. He further contends that the definition of "possession" in paragraph 3 of the Minutes is consistent with the legal definition of "possession" and what the parties intended, which is "having control over a thing with the intent to have and to exercise such control". Winter relies upon the definition of "possession" in Black's Law Dictionary, 6th ed., West Publishing Co., 1990 at p. 1163. I agree that upon reading the Minutes as a whole, this is what the parties intended.

[17] Counsel for Sherman submits that there were no tenants living at the other three properties owned by Winter and that Winter, as the owner of those properties, was in control of those properties, with access to them and therefore could be said to be in possession of them. There was no evidence before me upon which to conclude that Winter is still not in control of Bellwoods as no signed lease was tendered into evidence and as such, I did not have the terms of the lease before me. I was only handed up, by Sherman's counsel, an unsigned house lease dated October 22, 2010 between Kathryn Walker (Winter's spouse) and Mario Cavallucci which is of little assistance. The fact that Winter has rented out Bellwoods does not remove the control from him nor his access to the premises as he can access the premises upon proper notice to the tenants.

[18] Considering the context or the surrounding circumstances in which the contract was drafted, counsel for Sherman submits that the Minutes were negotiated in the context of the familial relationship between the parties (they are cousins) and the mutual desire to ensure that Winter and his family had a place to stay pending the ongoing legal disputes between the parties. Sherman contends that this is supported by the conditions in paragraph 4 of the Minutes which allowed Winter 30 days from the final disposition of the two other actions to either pay Sherman $600,000 in reduction of the debt owing, in which case he could retain Bellwoods, or surrender Bellwoods to Sherman at that time. He deposes in his Affidavit sworn May 14, 2012, at paragraph 15: "I believe that Winter's refusal to surrender possession of 7 Bellwoods stemmed largely from the fact that he lived there." I note that Sherman does not state that this was the sole reason.

[19] Sherman contends that at the time of signing the Minutes, the surrounding circumstances were that Winter and his family were residing at Bellwoods, Winter's construction business was failing, he was unable to pay his entire debt to Sherman and if Sherman moved forward with respect to obtaining a Writ of Possession, Winter and his family would have nowhere to live. Sherman asserts that the only logical and commercially reasonable meaning of the word “possession” in paragraph 3 of the Minutes, meant that Winter had to reside at Bellwoods as the circumstances were that he and his family needed a home. Sherman contends that it would have been absurd for him to allow Winter to retain Bellwoods as a profit-making rental unit and Sherman would have enforced the judgment had he known Winter's true intentions.

[20] While Winter and his family's need of a home may have been one of the factors and circumstances at the time, it appears from a reading of the entire Minutes and reviewing the surrounding circumstances, that the two other outstanding legal actions ‑ one involving Winter against Sherman and one involving Winter against Royal Trust ‑ also factored into the negotiations with Sherman allowing in the Minutes for Winter to pay $600,000 to retain Bellwoods within 30 days of the final disposition of the two other actions. From a reading of the Minutes, it appears that the settlement was also based on Sherman agreeing to stay his Application for possession of Bellwoods pending the outcome of the action brought by Winter against Sherman. In effect, Sherman was agreeing to allow Winter to retain control of Bellwoods as long as Winter paid certain costs and the $2,500 per month to Sherman.

[21] Sherman further asserts that if there is any ambiguity in the Minutes (which I have not found), the Court can look at the facts leading up to the making of the agreement; the circumstances existing at the time the agreement was made, including statements made prior to the written agreement; and evidence of the subsequent conduct of the parties to the agreement after the agreement was put in writing in order to adopt the meaning which most fairly and objectively advances the objectives of the parties. He relies upon General Refractories Co. of Canada v. Venturedyne Ltd., [2002] O.J. No. 54 (S.C.J.), paras. 60-65, citing Consolidated Bathurst Export Ltd. v. Mutual Boiler and Machinery Insurance Co., 1979 10 (SCC), [1980] 1 S.C.R. 888 in support of his position. Sherman contends that correspondence from his counsel during the negotiations of the Minutes shows that residency at Bellwoods was a consideration. He attaches to his Affidavit correspondence between counsel, including a letter from his lawyer, Mr. Kay, dated June 18, 2007 to Mr. Kronby, Winter's lawyer, wherein the $2,500 is referred to as “rent”. I note that in Mr. Kronby's letter in response, Winter did not agree to pay rent.

[22] In a further e-mail from Mr. Kronby to Mr. Kay dated February 28, 2008, another offer is made to have Winter remain in possession of Bellwoods and no mention of rent is made; however, Winter agrees to maintain taxes, insurance and "the good condition of it". Mr. Kay responded by e-mail on February 29, 2008 inquiring as to whether Winter was prepared to pay interest of $2,500 to stay in Bellwoods pending the outcome of the two outstanding litigation matters referenced ultimately in the Minutes. This request for interest payments was denied and five days later the parties entered into the Minutes. Even upon reviewing these facts, if I had found ambiguity in the Minutes, there is no conclusive evidence through this correspondence between counsel that it was the intention of both parties that Winter reside at Bellwoods and that was the basis of the use of the word “possession” in paragraph 3 of the Minutes. The Minutes do not designate the $2,500 monthly payments as rent or interest as put forward in the correspondence of Sherman's counsel prior to the signing of the Minutes.

[23] Counsel for Sherman sought leave in his written submissions (which written submissions I allowed with respect to the issues of the Rule 20 motion and limitation period brought up by counsel for Winter during oral submissions) to introduce an Affidavit of Winter dated May 16, 2007 if I found that there was ambiguity in the Minutes. Counsel for Sherman submitted an Affidavit from one of the partners at his law firm who deposed that this May 2007 Affidavit of Winter’s had only become available after the hearing of the motion given that Sherman's previous counsel had just sent additional parts of the file to current counsel. Counsel for Sherman submits that this is "new evidence" that would assist the Court as it shows what Winter's intentions were at the time with respect to remaining at Bellwoods and contradicts his evidence on this motion.

[24] Even if I had found ambiguity in the Minutes, I note that the timing of the Affidavit was approximately 10 months prior to the signing of the Minutes and Winter's circumstances in May 2007 may not have been relevant to his circumstances in March of 2008 when the Minutes were signed. Also, this Affidavit would have been available to counsel for Sherman previously and it was incumbent upon counsel to have the best evidence available prior to bringing the motion. This Affidavit was previously filed with the Court and counsel could have obtained copies of any of Winter's Affidavits through the Court office. As such, I decline to grant leave to file Winter's May 2007 Affidavit for this motion and I have not taken this extrinsic evidence into consideration in my decision.

[25] Sherman does not have a right to possession of Bellwoods unless there is a default in the obligations as set out in paragraph 5 of the Minutes. As I find that there has been no default, as nothing precludes Winter from residing elsewhere and renting out Bellwoods, there is no right to possession by Sherman and the motion is dismissed.

ii) Is the claim brought by Sherman time barred? and iii) Is Sherman's motion, brought by Mintz & Partners, a Rule 20 motion?

[26] Having dismissed the motion on the basis of contract interpretation and the fact that the Minutes did not require Winter to reside at Bellwoods, I do not need to consider the issues brought forward by Winter, including whether the motion should have properly been a Rule 20 summary judgment motion or whether Sherman's claim was time barred.

Order

[27] I order the following:

i) The motion brought by the Applicant, Mintz & Partners on behalf of Bernard Sherman, for leave to issue a Writ of Possession in relation to lands municipally known as 7 Bellwoods Avenue, Toronto, Ontario, is dismissed;

ii) I urge the parties to agree on costs but if they are unable to do so, the respondent, Kerry Winter shall serve and file written costs submissions, no longer than two double-spaced pages, along with a costs outline, within 20 days. The applicant, Mintz & Partners, shall serve and file written costs submissions, no longer than two double-spaced pages, along with a costs outline, 20 days thereafter.

Stevenson J.

DATE: January 16, 2013