ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: CV-10-101277

DATE: 20130909

BETWEEN:

Teddy Wyszatko

Plaintiff

– and –

The Estate of Nadia Wyszatko, Irene Winter, Albert’s Marina, Richard Wyszatko, and Edmund James

Defendants

Darryl T. Mann, for the Plaintiff

David Shiller, for the Defendants, The Estate of Nadia Wyszatko and Irene Winter

Fred A. Platt, for the Defendant, Richard Wyszatko

Peter Auvinen, for SF Partners Inc.

HEARD: August 7, 2013

REASONS FOR DECISION

EDWARDS J.:

Overview

[1] When this matter last came before me some three or four months ago as the case management judge, I took time to speak directly to the parties who were all assembled in court to hear argument on a motion to strike parts or all of the Statement of Claim. I suggested to the parties that if they did not seriously consider their respective positions in an effort to reach an out of court settlement, that by the time this matter was ultimately concluded at trial and likely disposed of on appeal, that the family marina business that is at the root of the litigation would be worthless once all legal fees and receiver’s fees had been accounted for.

[2] This matter has been the subject matter of a contested motion before Eberhard J. where the successful party sought costs in excess of $100,000. As it turned out, Eberhard J. awarded $30,000 in costs.

[3] A few months after Eberhard J. dealt with the motion before her, the parties assembled in court before me to deal with the question of whether a receiver should be appointed to deal with the marina business that has been a family-run business sustaining the Wyszatko family for many years in the past. A consent order ultimately was agreed upon appointing SF Partners Inc. as the receiver of Albert’s Marina (the “Marina”).

[4] Anyone who has been remotely involved in litigation where a receiver has been appointed will quickly appreciate that a receivership adds tremendous costs and expense to the litigation. The parties involved in this litigation to this point do not seem to have appreciated just how expensive the litigation they are involved in has been and will continue to be if they do not take stock of their respective positions in an effort to reach an out of court settlement.

[5] The motion before this court at the present time is a further procedural motion. The receiver seeks an order approving the receiver’s interim reports, interim receiver’s fees, and interim receiver’s legal fees. The motion, not surprisingly given the history of this matter, is opposed. As well, there is a motion by the estate requesting an order that the receiver be required to release $17,000 to The Estate of Nadia Wyszatko (the “Estate”).

The Receiver’s Motion for Approval of its Interim Reports

[6] The receiver’s motion seeking approval of its interim reports is vigorously opposed by the defendants. Mr. Platt, counsel for Richard Wyszatko (“Richard”), who took the lead in argument with respect to this issue, argues that the receiver has been favouring the position of the plaintiff, Teddy Wyszatko (“Teddy”) and that this is reflected in the body of the various interim reports that are before this court for approval. It is argued by Mr. Platt that there is no need at this point to approve the receiver’s reports and that the receiver’s motion, both with respect to the approval of the interim reports and the receiver’s motion for fees, should be left to a point in time after the trial in this matter has taken place. The trial is scheduled to proceed in November of this year.

[7] Dealing with the question of whether or not the receiver’s interim reports demonstrate favouritism on the part of the receiver, Mr. Platt directed me to various references in the reports concerning unauthorized interference in the business of the Marina. A careful reading, however, of the various interim reports submitted to this court, for the most part, makes clear that where allegations of improper conduct is levelled by the receiver against one or other of the various defendants, that the receiver has either independently verified the conduct, or has made clear in its report those situations where the receiver was not able to independently verify improper conduct. To the extent that any of the reports do refer to unauthorized interference or improper conduct that might suggest favouritism on the part of the receiver, I am satisfied that those instances are few in number and not sufficient to cause this court to come to the conclusion that the receiver has favoured one party over the other. The receiver, based on my review of the evidence, has not demonstrated conduct that in any way approaches conduct by a receiver that should call into question the independence of the receiver.

[8] Mr. Platt also argues that the receiver cannot justify its conduct and what it has done throughout the course of its receivership since being appointed by this court. Mr. Platt argues that the receiver did not fully respond to a lengthy series of questions that were posed by him to the receiver and that his cross-examination of the receiver makes clear that the receiver has not properly documented any discussions that it might have had with Teddy. Mr. Platt argues that the receiver has not demonstrated that it has put in place controls to deal with the Marina’s business, specifically, no controls with respect to supplies, equipment and labour nor anything with respect to repairs that would be required by the Marina. Essentially, Mr. Platt argues that a review of the receiver’s interim reports; the answers the receiver gave to questions posed by Mr. Platt; and the cross-examination of the receiver leaves one with the sense that the defendants do not know what responsibilities have been assumed and acted upon by the receiver and what the results have been.

[9] While it may very well be that the receiver did not document every discussion or, for that matter, any discussion that it might have had with Teddy, the fact remains that the receiver’s interim report does make clear to this court the various responsibilities that have been assumed by the receiver and that have been acted upon throughout the course of the receivership since my order of October 5, 2012. While the luxury of preparing memoranda to file documenting various discussions might, in the best possible world, be the preferable course of action for a receiver in circumstances similar to this case I am not prepared to infer from my review of the evidence that the receiver has not gone about its duties in a manner consistent with the responsibilities of a receiver appointed by this court. I am, therefore, approving the interim reports of the receiver.

Receiver’s Fees and Legal Fees Incurred by Counsel for the Receiver

[10] The receiver seeks payment of the interim fees that have been incurred by the receiver up to June 3, 2013 in the amount of $72,807.50. In support of its motion the receiver has provided a breakdown of the hours incurred by the various individuals involved in the receivership.

[11] Counsel for the receiver seeks approval of the legal fees that have been incurred on behalf of the receiver totalling $27,273.58 covering the time period November 12, 2012 through April 26, 2013. Counsel for the receiver has provided a breakdown of the hours and hourly rates in connection with the request for payment of its legal fees.

[12] The defendants oppose the payment of the receiver’s costs and counsel’s legal fees largely on the basis that my order of October 5, 2012 only contemplated payment of the receiver’s fees from the proceeds of sale of the Marina. As the Marina has not been sold it follows that there is no jurisdiction to order interim payment of fees from some other source.

[13] Mr. Platt argues that the receiver knew full well when it undertook its responsibilities as the receiver in this matter that the only source for payment of its fees would be the proceeds of sale of the Marina. It is argued that the receiver had the opportunity to review a draft of the order that ultimately became my order of October 5, 2012 and that the receiver should not now be entitled to effectively seek a change in the order. Finally, it is argued that there is no jurisdiction to change my order and that what is described as the “comeback” portion of my order at paragraph 13, does not allow the receiver to come back and change material portions of the order. In that regard, Mr. Platt relies on the decision of Morawetz J. in York (Regional Municipality) v. Thornhill Green Co-operative Homes Inc. (2009) Carswell Ont 4236, where, at paragraph 22, Morawetz J. stated:

I agree with the submission of the Region that this is language of appeal – not a comeback motion. Further, a motion to vary is not a substitute for an appeal. See: Textron Financial Canada Ltd. v. Beta Brands Limited; [2007] O.J. No. 2998 and Canadian Commercial Bank v. Pilum Investments Ltd. [1987] O.J. No. 29. I also agree with the submission of counsel to the receiver to the effect that the jurisdiction to vary an order must be exercised sparingly and comeback provisions are intended to apply in situations where parties impacted by an order are not provided with notice of the hearing giving rise to the order.

[14] Mr. Shiller, on behalf of the Estate, joins in the submissions made by Mr. Platt and suggests that when the receiver took on its responsibility as the receiver pursuant to the terms of my order that it did so on the basis of a contingency, i.e., that the receiver would only get paid out of the proceeds of sale of the Marina. It is argued that the lands on which the Marina is located is the matter of a legal dispute between the parties that has yet to be resolved. The fact that the lands were the subject matter of that legal dispute was well known to the receiver prior to accepting its responsibility as a receiver pursuant to my order and as such the receiver assumed the risk, again, that it might not get paid.

[15] Mr. Shiller notes that the receiver, in its motion seeking a change to the receivership order, not only is seeking an order that would allow for the receiver to be paid now on an interim basis, but also would provide for a charge over the property of the Marina. It is again argued that because the receiver knew from the beginning that the land on which the Marina is located was the subject matter of a legal dispute between the parties, there is no basis to grant the amendments now sought. Finally, it is argued that from a policy perspective it would be inappropriate to allow a receiver in the middle of a receivership, where it was fully aware of all of the facts, to seek a material change to the receivership order.

[16] The receiver argues, contrary to the position advanced by counsel for the defendants, that, in fact, my order does give this court the jurisdiction to allow for the approval and payment of the receiver’s interim fees and legal fees as well as to amend the order to provide the receiver with security over the Marina property. The defendants are now opposed to the sale of the Marina and as such it is argued that in so doing the receiver is entitled to come before this court on the basis of a material change in circumstances since the making of my order. I agree.

[17] While I agree with the comments of Morawetz J. that the general comeback terms of a receivership order should be sparingly resorted to on a motion to vary a receivership order, I accept that paragraphs 13 and 14 of my order give this court jurisdiction to vary the order given the significant and material change of circumstances arising out of the opposition by the defendants to the sale of the Marina.

[18] As to the quantum of the receiver’s fees and the legal fees of its counsel I have taken into account the comments of the Court of Appeal in Bakemates International Inc., 2002 45059 (ON CA), [2002] O.J. No. 3569, where, at paragraph 37, Borins J.A. stated:

…the accounts must disclose in detail the name of each person who rendered services, the dates on which the services were rendered, the time expended each day, the rate charged and the total charges for each of the categories of services rendered…the accounts should be in a form that can be easily understood by those affected by the receivership (or by the judicial officer required to assess the accounts), so that such person can determine the amount of time spent by the receiver’s employees (and others that the receiver may have hired) in respect to the various discreet aspects of the receivership.

[19] I have also considered and agree with the following comments of Lax J. in Enernorth Industries Inc. [2007] O.J. No. 4391 where, at paragraph 13, Lax J. stated:

The general standard of review of the accounts of a court-appointed receiver is whether the amount claimed for remuneration and disbursements in carrying out the receivership are fair and reasonable…

[20] I also agree with the comments of Lax J. in Enernorth at paragraph 15 where she stated:

While the court determines the reasonableness of fees, courts are ill-equipped and should be reluctant to second-guess the considered business decisions made by the receiver, whose conduct is to be reviewed in the light of the specific mandate given to the receiver by the court…

[21] It was suggested in argument by counsel by the defendants that the question of the receiver’s fees and legal fees should be left to a point in time after the trial scheduled for later this year. I disagree. I am the case management judge and I have a full appreciation of the dynamics that are taking place between the various Wyszatko family members in their fight over the family Marina business. I am satisfied based on my review of the breakdown of the receiver’s fees as well as the legal fees of the receiver’s counsel that this court is in as good a position as anyone else in arriving at the conclusion that given the history of these legal proceedings that the amounts incurred by the receiver and its counsel are reasonable. The receiver’s fees and legal expenses are also, to a large extent, a reflection of the apparent intransigence of all of the Wyszatko family members. In my view it was not within the contemplation of any of the parties or their counsel that the receiver would be put in a position that it would have to wait until after a trial of this matter, and possibly even an appeal, before it would be paid for its services in a situation where anyone looking at the history of this matter would have realized that this would be anything other than a difficult receivership given the intransigence of the parties. I am, therefore, approving without amendment the claim by the receiver for its interim fees as well as the interim fees of its counsel.

[22] I do not, however, view it appropriate to provide the receiver with a first charge as requested in its motion. Paragraph 1 of my order states that the receiver was appointed “without security”. While there has been undoubtedly a material change in circumstance that has allowed this court to provide for the approval of an interim payment of the receiver’s legal fees and receiver’s fees I am not satisfied that it would be appropriate to go so far as to provide for security in a situation where my original order made it quite clear that no such security was being granted. That portion of the receiver’s motion is, therefore, dismissed.

[23] As for the motion by the Estate for an order compelling SF Partners Inc. to release the sum of $17,000, I am prepared to make that order once there has been compliance with Rule 9 of the Rules of Civil Procedure which requires the formal appointment of an estate trustee or administrator. With such compliance, the receiver shall then release the $17,000 which it has in its possession to the estate trustee or administrator.

[24] As to the question of costs, given the positions advanced by counsel at the completion of argument I am making no order as to costs of this motion.

Justice M.L. Edwards

Released: September 9, 2013