SUPERIOR COURT OF JUSTICE – ONTARIO
COMMERCIAL LIST
Court File No. 10-CL-8871-00CL
RE: Nina Di Felice and Italo Di Felice, Applicants
AND:
1095195 Ontario Limited and Carmela Battista, Respondents
Court File No. 11-9193-00CL
AND RE: Nina Di Felice and Italo Di Felice, Applicants
AND:
721362 Ontario Limited and Aldo Di Felice, in his capacity as nominee of 721362 Ontario Limited, Carolina Di Felice, Aldo Di Felice and David Di Felice, Respondents
BEFORE: D. M. Brown J.
COUNSEL: S. Schwartz, for the Applicants
N. Searles, for the Respondent, Carmela Battista
A. Di Felice, for himself, and Carolina Di Felice and David Di Felice
HEARD: June 19, 2013
REASONS FOR DECISION
I. Further directions on the sale of properties stalled by family discord
[1] By Reasons dated January 4, 2013 (2013 ONSC 1), I ordered the sale of the Yonge/Elmwood, Yonge/Cummer and Sheppard Properties. In paragraph 158 of those Reasons I gave detailed directions about the sale process, including the selection of a national, real estate brokerage firm to market and sell the Properties. I also ordered that (i) “the bidding process must proceed with reasonable dispatch and should be concluded within the first half of this year” and (ii) “no party shall enjoy a right of first refusal or right of first offer in connection with the sale of any of the properties”.
[2] The parties selected Colliers Macaulay Nicolls (Ontario) Inc. as the independent, national, real estate brokerage firm to market and sell the properties. Discussions between Colliers and the parties on the terms of the listing agreement for the sales, marketing and bidding processes bogged down as a result of disputes amongst family members. The areas of agreement and disagreement were summarized in a March 22, 2013 email from Mr. Stephen Ho of Colliers to the parties.
[3] As a result of the impasse amongst family members on the appropriate terms for the listing agreement, no such agreement has been entered into and Colliers has not yet started its sales and marketing process, let alone the bidding process. As Italo Di Felice stated in his affidavit:
The parties are unable to agree on the outstanding terms of the listing process for the Properties…As a result, the Properties have not yet been listed for sale.
Consequently, no reasonable prospect now exists that the bidding process will be concluded in the first half of this year, as I had ordered.
[4] The parties have breached my January 4, 2013 Order.
[5] Although that breach was caused by the volitional conduct of the parties – their incessant bickering – my review of the evidence adduced at last year’s trial, coupled with the evidence filed on this motion, lead me to conclude that in a certain sense the parties cannot help themselves from bickering and disagreeing. By this point of time, such conduct is hard-wired into the dynamics of this family. Based on my review of the evidence and the findings which I made this past January, I see no reasonable prospect that the family members will change their ways and work together co-operatively and reasonably to give Colliers any directions which it might require to market and sell the Properties. As much as they want the sales of the Properties to proceed with dispatch and to fetch the highest prices, the parties seemingly cannot keep themselves from fighting.
II. The issues on this motion
[6] The applicants, Nina and Italo Di Felice, now move for directions on four issues in dispute amongst the parties:
(i) What the listing price of the Properties should be;
(ii) If the sale and marketing of the Properties should be conducted by a two-stage process as recommended by the listing broker whereby in Stage One prospective purchasers are to submit offers to purchase. In Stage Two, a short list of prospective purchasers will be requested to submit a second offer to purchase;
(iii) In the event of a two-stage process, whether an owner of a Property who submitted a bid for that Property is entitled to be present when the Stage One bids for the Property are opened; and,
(iv) The selection of the firm to conduct a Phase One Environmental Assessment of the Properties.
[7] Colliers, in its February 22, 2103 report entitled, “Listing Process – Outstanding Issues & Recommendation”, laid out the positions of the parties on these issues, as did Mr. Ho in his March 22, 2013 email.
[8] Aldo Di Felice, in his May 28, 2013 affidavit filed on this motion, repeated the positions which he had taken on behalf of his mother, brother and himself, but made the following additional observation:
In my view, it is apparent from the conduct of the parties over the past four years and since the decision, that the parties will likely raise and dispute further issues beyond those identified in this motion, which will inevitably arise in the complicated process of finalizing the marketing and bid submission materials and engaging in the actual process of selling these properties, settling the corporate obligations of the vendor companies involved and winding up and distributing the proceeds of sale.
It is my belief that the interests of justice and fairness at this stage would be best served by an independent third party, be it the court or an appointed liquidator, taking full control of the sale process out of the hands of the parties to this litigation…
[9] As a result of that evidence, I canvassed with the parties at the hearing their positions on the appointment of a receiver to conduct the sale of the Properties with the assistance of Colliers. “Canvassed” might be too soft a word. More accurately, I somewhat vigorously asked counsel why, in light of the parties’ breach of my January 4, 2013 Order, I should not appoint a receiver to aid in the execution of that order. Counsel for the applicants opposed such an appointment on two grounds: (i) no such relief formally had been requested by the parties, and (ii) the directions sought on this motion would solve the major problems. Counsel for the Battista family received instructions during the hearing to agree to the appointment of a receiver. As I said, Aldo Di Felice made such a request in his affidavit.
III. Analysis
[10] Of the directions sought, I will give three: Items (ii), (iii) and (iv).
[11] Item (iv): One environmental firm recommended by Colliers was Soil Engineers Ltd. The applicants proposed its selection. No party opposed that suggestion. I approve its selection.
[12] Item (ii): Before selecting Colliers, the parties had elicited listing proposals from two other firms – DTZ and Cushman & Wakefield. Each firm recommended the use of a multi-round bidding process. Accordingly, those most familiar with selling commercial properties in the local market agreed that a multi-stage bidding process seemed most likely to fetch the highest returns on the sale of the Properties. I approve the two-stage bidding process proposed by Colliers.
[13] Item (iii): When a two-stage process is run, of course an owner of a Property who submitted a bid for that Property would NOT be entitled to be present when the Stage One bids for the Property are opened. The presence of such a bidding owner would pollute the entire bidding process and undermine its integrity. Also, it would stand directly contrary to my order that no party would enjoy a right of first refusal or right of first offer in connection with the sale of any of the Properties. I must confess that I am amazed that in light of the extensive Reasons I released on January 4, 2013, including the findings of fact set out in paragraph 126 of those Reasons, that any party would take the position that it should be entitled to know what other persons are bidding for the Properties before he or she made a final bid. True, in paragraph 158(x) of my Reasons I stated that “all parties should be entitled to attend the opening of the offers”. However, that order was made in the context of a one-round bidding process. Common sense would dictate that should a two-round bidding process be used, then a bidding party could not be privy to the other first round bids without tainting the bidding process.
[14] Unfortunately, the poisoned state of relations amongst these families members means that they do not bring common sense approaches to solving problems which arise. A bidding process which should have been completed by now runs the risk of being strung out for months, if not years, while family members find in the terms and conditions of the sales, marketing and bidding process new targets for their bickering. As matters now stand, I have ordered the parties to sell the Properties in accordance with the terms of my January Order. Colliers is an agent of the parties; Collier has not been appointed as an officer of this court. Consequently, if the families are allowed to continue to participate directly in the design and execution of the sales process, I foresee numerous re-attendances before the court and a strong probability that the performance of my January 4, 2013 Order will be frustrated.
[15] I find considerable merit in the position taken by Aldo Di Felice that the court should appoint an officer to supervise the sale of the Properties. Although the moving parties did not request such relief, and although Aldo Di Felice did not file a notice of cross-motion, I conclude that in order to ensure that the parties do not frustrate the performance of my January Order, I must appoint a receiver over the Properties who will aid in the execution of the sale order which I made at the start of this year.
[16] That Receiver need not take possession of the Properties, but the Receiver will possess the power to market and sell the Properties, with the assistance of Colliers, and to convey title, under court-supervision. Colliers will act as the listing agent. The Receiver will be versed in the Royal Bank of Canada v. Soundair[^1] paradigm which governs the court-supervised sale of assets in this province, and in the Receiver the parties will have the comfort that the process is under the control of an officer of the court who must consider the interests of all parties. As matters now stand, my January Reasons determined the legal rights of the parties in the Properties, so all that is left to do is to maximize the proceeds on the realization of those assets. A Receiver possesses the expertise to perform that role.
[17] The combination of a Receiver experienced in the sale and marketing of real estate assets, together with an experienced broker such as Colliers, will enable the Properties to be sold in such a way as to reasonably ensure that they fetch the highest prices possible in the market. Such a combination will also reduce the transaction delays which have resulted from the bickering between the parties, and it will allow the routine details of a sales, marketing and bidding process to be handled by experienced professionals. With such a combination in place, I would foresee the need for only two more court attendances – of course, on notice to the parties - before the Properties are sold: (i) the approval of a sales and marketing process, if required in light of the extensive directions which I have already given; and, (ii) requests for approval and vesting orders in respect of the sale of each Property.
[18] Although the appointment of a receiver to aid in the execution of my January Order will add some costs to the process, the costs would be proportionate in the circumstances: the parties agree that the Properties are worth in the neighbourhood of $20 million. Against the costs of a receiver one must weigh the costs of further attendances by the parties were I to permit them continued direct participation in the sales and marketing process. When I asked at the hearing whether, in the event that I made the directions requested by the applicants, the parties could guarantee that they would not be back before me again, quite understandably counsel stated that no such guarantee could be given. Also, by placing the direct supervision of the sales, marketing and bidding process in the hands of an experienced professional, one increases the prospects of enhancing the prices fetched for the properties.
[19] Granting the directions sought by the applicants would not settle all possible issues which might arise before the Properties are sold. Just to give one example: Colliers recommended that Phase I environmental reports should be commissioned for all properties. If an environmental problem is discovered, then some basic questions will arise: How material is the issue? Must it be remediated before listing the property? Should it be remediated before listing the property? To what extent, if at all, should the problem be taken into account in setting the listing price? These are all issues upon which family members could disagree, even further delaying the sales and potentially dragging this Court into an inappropriate degree of supervision over the details of the sales, marketing and bidding process.
[20] Finally, and frankly, I have run out of patience with this family. Their interminable family dispute has consumed a disproportionate amount of this Court’s resources, with no reasonable prospect that common sense will characterize their dealings until the Properties are sold. My January Order afforded the parties the opportunity to participate in the shaping of the sales and marketing process, subject to the directions which I had given. The parties have been unable to move that process along. Indeed, it was apparent by late March that the parties had reached an impasse over the terms and conditions of listing. The consequence of their disagreement was described by applicants’ counsel in the following way in his April 10, 2013 email to the parties:
It appears that we are at an impasse. Colliers cannot proceed given the disagreement concerning the terms of the listing process.
Parties disagree = Colliers cannot proceed = sales process grinds to a halt. Notwithstanding that state of affairs, it still took the parties until mid-June to appear before the Court to seek directions. Accordingly, in my view the most reasonable next step is to place supervisory control in the hands of an officer of the court.
[21] Therefore, I order that the parties re-attend before me on July 9, 2013, with a proposal, or proposals, for the appointment of a named receiver, with the powers I have described above, together with a draft, or drafts, of an appointment order. I will appoint a receiver and settle the terms of the appointment order.
[22] In order to provide directions to the receiver, Colliers and the parties, I order that the entire bidding process and the selection of the successful purchasers of the Properties be completed no later than December 31, 2013. The directions contained in paragraph 158 of my January 4, 2013 Reasons remain in effect.
[23] There will be no costs of this motion.
D. M. Brown J.
Date: June 19, 2013
[^1]: (1991), 1991 2727 (ON CA), 4 O.R. (3d) 1 (C.A.)