SUPERIOR COURT OF JUSTICE – ONTARIO

COMMERCIAL LIST

COURT FILE NO.: CV-13-10280-00CL

DATE: 20131219

BETWEEN:

DBDC SPADINA LTD. and THOSE CORPORATIONS

LISTED ON SCHEDULE A HERETO,

Applicants

AND:

NORMA WALTON, RONAULD WALTON, THE ROSE & THISTLE GROUP LTD. and EGLINTON CASTLE INC,

Respondents

AND

THOSE CORPORATIONS LISTED ON SCHEDULE B HERETO, TO BE BOUND BY THE RESULT

BEFORE: Newbould J.

COUNSEL:
Peter H. Griffin and Shara N. Roy, for the applicants

John A. Campion, Emmeline Morse and Guillermo Schible, for the respondent Norma Walton

Howard C. Cohen, for the respondent Ronauld Walton

Brian Empey, for Schonfeld Inc., the inspector and manager

HEARD: December 18, 2013

ENDORSEMENT

[1] On October 4, 2013, Schonfeld Inc. was appointed as inspector of all of the corporations in schedule B on the application of Dr. Bernstein’s corporations listed in schedule A. On November 5, 2013, Schonfeld Inc. was appointed a manager over the property of all of those corporations in schedule B. In their motion heard on November 1, 2013, the applicants had requested the appointment of Schonfeld Inc. as manager, but in my endorsement I dealt with the motion as a motion to appoint a receiver/manager and said that Schonfeld Inc. was appointed as receiver/manager. The formal order taken out appointed Schonfeld Inc. as manager of all of the property of the schedule B companies. I believe that the use of the word manager rather than receiver was for appearances sake.

[2] The applicants have now moved for further relief. Ms. Walton has taken a preliminary point that I am functus officio and unable to hear the mater. At the conclusion of the argument I stated that I was dismissing this preliminary objection for reasons to follow. These are my reasons.

[3] The argument of Ms. Walton is essentially as follows. The appointment of the manager was made in an application. The appointment was not an interim appointment, which Mr. Campion says meant that the appointment was final, and the order taken out was a final order. Therefore by reason of cause of action estoppel, all relief that was sought or that could have been sought merged in the order or judgment and there is nothing left to decide. Therefore I am functus officio and some new application would need to be brought.

[4] There are a number of problems with this contention. The first has to do with the nature of an order appointing a manager or receiver.

[5] The order appointing Schonfeld Inc. as manager was taken from the standard order appointing a receiver adopted by the Commercial list Users Committee. It is used in every order appointing a receiver. The powers of Schonfeld Inc. were those normally given to a receiver.

[6] A receivership, or in this case, a “managership”, is not a static thing. As Mr. Empey, counsel for Schonfeld Inc. said in argument, the order is meant to be a living declaration. In all receiverships, matters are routinely brought back to the court by the receiver, who is an officer of the court, or by other interested parties. This case is no different. In the order appointing Schonfeld Inc. there is a come-back clause taken from the standard order which is meant to spell out that a party may return to the court. In this case, paragraph 32 of the order appointing Schonfeld Inc. provides:

THIS COURT ORDERS that any interested party may apply to this Court to seek the advice and direction of the Court in respect of this Order or the Manager’s activities on not less than seven (7) days’ notice to the Manager and to any other party likely to be affected by the order sought or upon such notice, if any, as this Court may direct.

[7] Mr. Campion in argument asserted that because the order was a final order, this provision was of no force and effect. This result would, if correct, turn the receivership practice in this court and other courts in this country upside down. Come-back motions are an everyday occurrence in receiverships. There would be stagnation in situations that are invariably fluid. The come-back clause is part of the order and cannot be said to be of no force and effect. The assertion that it is indicates a flaw in the argument that a court is functus once a receiver or manager is appointed.

[8] A number of mortgagees holding mortgages on some of the properties owned by the schedule B corporations have brought motions seeking to have the properties removed from the control of the manager. They were not given notice of the application to appoint a manager. Mr. Campion contended that these mortgagees had no right to come before me but rather had to go to the Court of Appeal. That is the logical extension of his argument that I am functus, but ignores not only the come-back clause but also rule 37.14. Mr. Grout on behalf of certain mortgagees rightly said that the come-back clause is there for a reason.

[9] If the argument were correct, there would be other results in this case that would have made the order meaningless in some respects. In paragraph 10 of the order, the respondents were ordered to forthwith provide a full accounting of all money received, disbursed, owed to and owed from the schedule B corporations and Rose & Thistle since September, 2010. This has not been done, and has been raised by the applicants in their current motion. If the court is functus, it would mean that there is no remedy for a refusal to comply with the order. But as Mr. Griffin said in argument, a full accounting is at the heart of the information the applicants seek.

[10] In this motion, the applicants seek the appointment of Schonfeld Inc. as a receiver over a property in which one of the applicant corporations is the mortgagee of a mortgage in default. This relief was sought on the motion of November 1, 2013. However, during argument that day, Mr. Campion said that his client would pay off the mortgage by November 30, 2013. As a result, I adjourned the application to appoint a receiver in order to give Ms. Walton time to retire the mortgage and said in my endorsement:

[54] The applicants have applied to have Schonfeld Inc. appointed as receiver over four properties mortgaged to Dr. Bernstein with expired mortgages that are not schedule B corporations. Ms. Walton has stated in her affidavit that funds are being raised that will see these mortgages paid in full by the end of November, 2013. In light of that statement, this application is adjourned sine die. It can be brought on after the end of November in the event that the mortgages have not been paid in full.

[11] In this motion, the applicants also seek a certificate of pending litigation over 44 Park Lane Circle. That was also sought on the motion on November 1, 2013 and again, Mr. Campion said that the money would be repaid that day. As a result I adjourned the application for a certificate of pending litigation and said in my endorsement:

[55] The applicants have also requested a certificate of pending litigation over 44 Park Lane Circle, the residence of the Waltons in light of the evidence that money from one of the 31 schedule Dr. Bernstein corporations was used to pay for renovations to the residence. I was advised by counsel for Ms. Walton during the hearing of the motion that the money would be repaid that day. Based on that statement, the request for a certificate of pending litigation is adjourned sine die and can be brought back on in the event that evidence of the payment is not provided to the applicants and Schonfeld Inc.

[12] The mortgage has not been repaid and the applicants claim that the money that went into 44 Park Lane Circle has not been repaid. The notice of application contained a prayer for relief for these matters. I fail to see how, after adjourning these applications, I am now functus to deal with them.

[13] The other relief sought by the applicants is (i) a blanket charge over the schedule B properties to secure the applicants’ interest in them, to rank behind the existing charges on the properties and (ii) a certificate of pending litigation and a blanket charge over a number of properties owned by the respondents’ corporations in which the applicants do not have an ownership interest. The applicants assert that this relief is appropriate because of information obtained by Schonfeld Inc. since it was appointed as manager.

[14] The applicants have had an amendment to the notice of application issued to request this relief now sought in the motion. Mr. Campion contends that the application cannot be amended because the application has been completed by reason of the final order and cause of action estoppel. I fail to understand this argument. Without in any way making comment on the merits of the relief claimed, it is based on a belief from information received that money advanced by Dr. Bernstein through one of the applicant corporations may have found its way into other properties. The fact that a manager has been appointed would not mean that proceedings could not be brought for this relief.

[15] There would be nothing to stop the applicants from commencing new proceedings to seek this relief. There would be no point in requiring a separate proceeding rather than amending the current one and it would ignore the requirement that the rules shall be used in a way to secure the most expeditious and least expensive determination of proceedings. One of the benefits of the Commercial List is that formalities are avoided if at all possible so that the matters can be determined as quickly and efficiently as possible. Forms of action should not rule us from the grave.

[16] In the circumstances, I do not accept that I am functus officio.

Newbould J.

Date: December 19, 2013