COURT FILE NO.: 4628/11
DATE: 20130207
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
RESOLUTE DEVELOPMENT INC.
Raymond F. Leach and Barbara F. VanBunderen, for the Plaintiff
Plaintiff
(Moving Party)
- and -
CHARLES JURAVINSKI, CROOKS HOLLOW FARM CORPORATION and RESOLUTE LAND BANK LTD.
William P. Dermody, for the Defendants
Defendant
HEARD: October 5 and December 14, 2012
GRACE, J.
1. Overview
[1] One company within the Sieber/Michelbach group (Cyberaaag City Ltd.) owned land near Kincardine, Ontario. It ran into financial trouble. Another person – Charles Juravinski – agreed to help.
[2] As a result of a loan from a Juravinski company (Crooks Hollow Farm Corporation), another company within the Sieber/Michelbach group (Resolute Land Bank Ltd.) acquired the land. The purchase price Cyberaaag City Ltd. (“Cyberaaag”) received was used to satisfy amounts owing to its secured creditors.
[3] Crooks Hollow Farm Corporation (“Crooks Hollow”) took their place. A charge/mortgage of land was registered in its favour (the “Charge”). The loan was to be completely repaid when it matured twelve months later.
[4] So far, the fact situation is unremarkable. However, there is a twist. On closing, the Juravinski group also acquired control of Resolute Land Bank Ltd. (“Resolute”). Charles Juravinski became its sole shareholder, director and officer. Mr. Juravinski has controlled both the owner of the lands (Resolute) and the secured creditor (Crooks Hollow) ever since.
[5] Resolute Development Inc. (“RDI”) is the representative of the Sieber/Michelbach group in this action. It claims to be entitled to the return of the share Mr. Juravinski currently holds in Resolute. RDI maintains that it has done everything required to satisfy the Charge and to regain control of Resolute. RDI argues that it has proven its claims at the summary judgment stage and that the interests of justice do not require a trial.
[6] The defendants consist of three members of the Juravinski group. They are the landowner Resolute, the secured lender Crooks Hollow and Mr. Juravinski, the sole shareholder, officer and director of Resolute. They argue that they are the ones who should receive summary judgment because RDI’s claims are so clearly flawed.
[7] For the reasons that follow, I decline to grant either motion for summary judgment. I am of the view that the interests of justice require a trial. I am prepared, however, to make orders under rule 20.05. These reasons also explain their terms and why.
2. Background
[8] The underlying facts deserve a somewhat more detailed narrative. However, my version is abbreviated because aspects of the ongoing dispute have already been the subject of two lengthy endorsements of Ricchetti J. The first was released on November 9, 2010 (the “November, 2010 decision”)[^1] and the second on January 7, 2011 (the “January, 2011 decision”).[^2]
[9] The dispute involves a two hundred acre parcel of land near Kincardine, Ontario (the “Lands”).[^3]
[10] The Lands consist of two parts: about one hundred and seventy nine acres of proposed residential development and twenty acres of commercial development.[^4] There are a number of commercial tenants.
[11] Facing action by a secured lender, arrangements were made by Cyberaaag to borrow money from Crooks Hollow. As mentioned, Cyberaaag is part of the Sieber/Michelbach group. That group had caused Resolute to be incorporated on May 8, 2007.
[12] On July 18, 2007, closing occurred. On that day, the Lands were sold by Cyberaaag to Resolute for approximately $2.84 million.
[13] Crooks Hollow fully financed the transaction. It also advanced more money to Resolute which it used for other purposes.
[14] As security for the $3.2 million advanced (the “Crooks Hollow loan”), Crooks Hollow obtained the Charge. Monthly payments were required during its one year term. The balance was payable on maturity.
[15] Mr. Juravinski was already the sole shareholder, director and officer of Crooks Hollow.
[16] Helga Michelbach was the first officer and director of Resolute. On closing, she resigned. Mr. Juravinski ascended to those positions.
[17] On closing, Mr. Juravinski also became Resolute’s sole shareholder.
[18] The name Helmut Sieber hovers somewhere in the background. He is Ms. Michelbach’s brother and at least until his bankruptcy in 2005, seems to have led a corporate group that includes Cyberaaag, RDI and later Resolute. It seems to be common ground that Mr. Sieber continues to be an undischarged bankrupt.
[19] My reference to the “Sieber/Michelbach group” is intended for convenience only: to distinguish one group of interests from those controlled by Mr. Juravinski.
[20] It appears to be agreed that the Sieber/Michelbach group continued to be responsible to pay the Crooks Hollow loan notwithstanding the fact Mr. Juravinski controlled – and still controls – the borrower, Resolute.
[21] After completion of the transactions I have described, the Sieber/Michelbach group continued to manage the Lands. That meant it collected rent from the commercial tenants and paid instalments due under the Charge. At least one member of the Sieber/Michelbach group rented commercial space on the Lands.
[22] During the one year term, payments due under the Charge went into default. Soon afterward, the Charge matured.
[23] On April 27, 2010, Crooks Hollow commenced the first of four pieces of litigation involving members of the two groups. Crooks Hollow’s application asked the court to determine the amount owing under the Charge. Together with Resolute (as landlord), Crooks Hollow also sought an order dispossessing various members of the Sieber/Michelbach group – including RDI - from the Lands.
[24] The second proceeding was commenced on September 27, 2010. RDI’s statement of claim sought a declaration that it is the beneficial owner of the share Mr. Juravinksi holds in Resolute as well as injunctive and ancillary relief.
[25] Those proceedings were commenced in Walkerton, Ontario. Aspects of them were argued before Ricchetti J. on two occasions which led to the November, 2010 and January, 2011 decisions.[^5]
[26] In his first decision, Ricchetti J. concluded that Crooks Hollow was entitled to possession of the Lands but stayed the exercise of that right until the “proper amount owing under the Mortgage/Loan (including a per diem rate)” was determined.[^6]
[27] Commercial tenants were directed to pay into court amounts due under the leases they had signed.
[28] Ricchetti J. also tackled the parties’ disagreement with respect to the share of Resolute. RDI argued that it had been the sole shareholder of Resolute before closing and that the share was to be returned to RDI when the Crooks Hollow loan was repaid. Mr. Juravinski alleged that the share was not held as security for that loan at all.
[29] Ricchetti J. concluded that Mr. Juravinski received the share “solely as security” for the Crooks Hollow loan.[^7] Ricchetti J. was therefore of the view that upon satisfaction of the Crooks Hollow loan, the Juravinski group would be obligated to discharge the Charge and return the share.
[30] The parties attended before Ricchetti J. a few weeks later to make submissions with respect to the issues that remained. The amount owing to Crooks Hollow was in dispute.
[31] In his January, 2011 decision, Ricchetti J. conducted a detailed review of the amounts claimed by Crooks Hollow. The application judge concluded that Crooks Hollow was owed $4,900,300.11 under the Charge as of December 21, 2010. The endorsement contemplated two subsequent adjustments. First, the amount paid into court by the commercial tenants was to be released to Crooks Hollow’s lawyer and deducted.[^8] Second, “further reasonable expenses incurred by Mr. Juravinski” were to be added to the loan balance.[^9]
[32] A right to immediate possession of the Lands was given to Crooks Hollow.[^10]
[33] Each faction appealed aspects of Ricchetti J.’s decisions. Although the appeals had not been heard, the Sieber/Michelbach group communicated its desire to pay the amount Ricchetti J. had found to be due.
[34] A river of correspondence passed. On January 27, 2011, a lawyer for the Sieber/Michelbach group tendered a bank draft payable to Crooks Hollow in the amount of $4,955,517. In return, the Sieber/Michelbach group insisted that the lawyer for the Juravinski group deliver a number of documents including: a transfer of the Charge from Crooks Hollow to Huron Bio-Energy Inc. (“Huron”), a transfer of Mr. Juravinski’s share in Resolute to RDI[^11] and Mr. Juravinski’s resignation as Resolute’s officer and director.
[35] The lawyers for the Juravinski group challenged the amount tendered and the Sieber/Michelbach group’s entitlement to the requested documents delivered. The sufficiency of the tender is at the center of the competing motions for summary judgment.
[36] The appeals were argued June 9, 2011. The Court of Appeal released two short endorsements. The first related to the Juravinski group’s appeal. It read:
The appellants seek to set aside two aspects of the order of Ricchetti J. wherein he granted possession of the mortgaged property. Before Ricchetti J., the appellants did not seek to proceed with the application for a declaration of the amount due, nor did they raise the issue of the disposition of the share of Resolute Land Bank that was transferred to the appellants as part of the mortgage loan transaction. Counsel for the respondent fairly concedes that both these issues were not put before the application judge by the appellants, and in respect of the disposition of the share, he concedes that that order cannot stand.
The application judge ordered the parties to file further material on the quantum issue and to return in December 2010 to argue it. The parties complied with the order and had a full hearing wherein the amount owing on the mortgage was determined.
In our view, there is no basis to set aside that aspect of the order. Although the appellants did not ask for that issue to be determined, they made a strategic decision to participate in a full hearing on the issue without objection to the application judge in order to obtain the order for possession. On the appeal, they did not allege any error other than proceeding with the hearing, or any specific error in the quantum. In our view, there is no injustice in the result.
The appeal is allowed in part. Paragraph 98 of the reasons dated November 9, 2010 regarding the disposition of the Resolute Land Bank share (which finding was not part of the order of that date) is set aside.[^12] The appeal is otherwise dismissed. As success was divided, there will be no costs of the appeal.[^13]
[37] The other, a one paragraph endorsement, related to an appeal by the Sieber/Michelbach group. The Court of Appeal simply noted that the appeal “was not technically perfected but was listed and heard” with the Juravinski appeal and dismissed it without further reasons.[^14]
C. The Motions for Summary Judgment
[38] RDI seeks principally:
a. An order pursuant to rule 64.05 of the Rules of Civil Procedure that RDI is entitled to redeem the Charge and that the January 27, 2011 tender was effective and sufficient; and
b. An order requiring Mr. Juravinski to transfer the share to RDI or to deliver the share up to Resolute for cancellation.[^15]
[39] Mr. Juravinski, Crooks Hollow and Resolute seek summary judgment dismissing all or alternatively, a gradually declining number of claims asserted in this action. While they also seek – as a further alternative, security for costs, that item was not argued before me.
i. The Test for Summary Judgment
In Shukster v. Young, 2012 ONSC 4807 (S.C.J.), Leach J. neatly summarized the current state of the law concerning motions for summary judgments. After referring to Combined Air Mechanical Services Inc. v. Flesch, 2011 ONCA 764, [2011] O.J. No. 5431 (C.A.), Leach J. wrote at para. 12:
Emphasizing that the following categorization was general, non-exhaustive, not mutually exclusive, and not even necessary for proper analysis by a summary judgment motions judge, the Court of Appeal suggested there were three types of cases amenable to summary judgment:
Cases where the parties agree it would be appropriate to determine an action by way of a summary judgment motion, (although the court maintains an overriding discretion);
Cases where claims or defences are shown to be without merit, (possibly through use of the expanded powers provided by the amended rule); and
Cases where the motions judge is satisfied “that the issues can be fairly and justly resolved” by exercising the expanded powers provided by the amended rule.[^16]
[40] Later in the same paragraph, Leach J. added:
The expanded powers offered by the amended summary judgment rule, (to weigh evidence, evaluate credibility and draw reasonable inferences), may only be exercised in the “interest of justice”. The Court of Appeal regarded this as “limiting language” that “guides the determination” of when the powers should be exercised, and reflects the aim of the civil justice system to provide a “just result in disputed matters through a fair process”. Having regard to the inherent limitations of the summary judgment process compared to a full trial, the Court of Appeal held that, in deciding whether to exercise the expanded powers offered by the amended summary judgment rule, the motion judge must ask the following question: “Can the full appreciation of the evidence and issues that is required to make dispositive findings be achieved by way of summary judgment, or can this full appreciation only be achieved by way of a trial?”
In cases calling for “multiple findings of fact on the basis of conflicting evidence emanating from a number of witnesses and found in a voluminous record”, a summary judgment motion generally cannot serve as an adequate substitute for the trial process. The motion judge “simply cannot achieve the full appreciation of the evidence and issues that is required to make dispositive findings”, the “full appreciation test is not met”, and the “interest of justice” requires a trial.
Not surprisingly, satisfaction of the “full appreciation” test will be more likely in cases lacking the above complications; e.g., in “document-driven cases with limited testimonial evidence”, “cases with limited contentious factual issues”, and “cases where the record can be supplemented to the requisite degree at the motion judge’s direction by hearing oral evidence on discrete issues”.
[41] Those principles have been borne in mind in the analysis which follows.
ii. The Evidence Filed
[42] RDI filed a two volume motion record containing affidavits of its corporate solicitor Steven Gray sworn October 4, 2010, January 24 and 27, August 24 and September 8, 2011 and July 23, 2012. In an amended notice of motion filed shortly before argument commenced, RDI sought to include portions of the evidence that was before Ricchetti J. That material included affidavits of solicitor William Dermody (who had been retained earlier by the defendants to argue the motions for summary judgment) sworn March 31, August 5, October 8, November 30 and December 2, 2010, affidavits of Helmut Sieber sworn July 29 and November 30, 2010 and transcripts of various cross-examinations. Mr. Leach, counsel for RDI, acknowledged that he was not seeking to disqualify Mr. Dermody from arguing the motions. It was agreed that no one would place any reliance on those affidavits sworn at another time and in the context of an earlier contest.
[43] Mr. Leach did, however, maintain that the affidavits of Mr. Sieber were relevant to the issues being argued notwithstanding the fact they were signed in relation to the application argued before Ricchetti J. During argument, I expressed my dissatisfaction with the inclusion of that material as an afterthought. The parties were held to the material they had filed on the motions at the time special appointment dates were allocated to them.
[44] Mr. Juravinski, Crooks Hollow and Resolute filed a motion record containing affidavits of Mr. Juravinski sworn August 26, September 6 and December 13, 2011 and January 11 and August 8, 2012
[45] On consent, RDI also filed four volumes of transcripts and answers to undertakings relating to affidavits of Mr. Gray sworn August 24 and September 8, 2011, the just mentioned affidavits of Mr. Juravinski and affidavits of Ms. Michelbach sworn November 22, 2011 and January 23, 2012.
iii. RDI’s motion for summary judgment
[46] In their notice of motion, the defendants note that RDI’s Amended Fresh as Amended Statement of Claim (the “claim”), cites s. 248 of the Business Corporations Act (the “OBCA”) as the legal foundation for all of its claims including those relating to the share, the right of redemption and the January 27, 2011 tender.[^17]
[47] RDI takes the position that it is a “complainant” within the meaning of s. 245 of that statute. It seeks an oppression remedy, to exercise a right of redemption and to obtain the share in Resolute held by Mr. Juravinski. Each claim is based, in whole or in part, on the premise that RDI is the beneficial owner of that share.
[48] RDI submits it has proven the accuracy of the assertion at the summary judgment stage. I turn to that issue now.
[49] RDI relies on the evidence of Mr. Gray.
[50] In his September 8, 2011 affidavit, Mr. Gray deposed that he incorporated Resolute on May 8, 2007. He said Resolute was to be a subsidiary of RDI and that one hundred common shares were issued to RDI for $100.[^18]
[51] In support of that allegation, Mr. Gray deposed that RDI reported on its balance sheet:
…from its second taxation year ending May 31, 2007 (it was incorporated June 9, 2005) through its last reported year ending of May 31, 2010…under Assets “Investments” the 100 shares in Resolute…[^19]
[52] Mr. Gray appended the balance sheets to which he referred. In fact, the shares did not appear on the May 31, 2007 balance sheet. They first appeared the following year.
[53] Nonetheless, Mr. Gray’s assertion seems easy enough to prove. A copy of the share certificate issued in favour of RDI should be available. It wasn’t.
[54] Other corporate documents should be available. They weren’t. During Mr. Gray’s September 19, 2011 cross-examination he was asked to produce evidence of the instructions he received to issue 100 common shares to RDI. RDI’s counsel interjected and asked Mr. Dermody to explain the relevance of the question he had asked. This exchange followed:
MR. DERMODY: Well, the relevance is that there is an allegation or evidence, I should say, provided by Mr. Gray that 100 shares were issued in the capital – 100 common shares in the capital of Resolute Land Bank Ltd., and he documents that in his evidence, but there is not one stick of paper that says, here is where they are, here is what they look like, or who told me and when did they tell me? And that is what I am looking for, frankly.
THE DEPONENT: It was all destroyed.
MR. DERMODY: It was all destroyed?
THE DEPONENT: Correct.
MR. DERMODY: …You destroyed the 100 shares, you say?
THE DEPONENT: We were instructed to do so.
MR. DERMODY: That’s fine.
THE DEPONENT: By you.
[55] Toward the end of the cross-examination, Mr. Gray confirmed that he maintained a file that related to the incorporation of Resolute. A request for its production was taken under advisement and subsequently refused on the basis of privilege and relevance.[^20]
[56] Mr. Dermody asked that I draw an adverse inference. I agree it is appropriate to do so.[^21] The issue of whether Resolute ever issued shares in RDI’s favour is an important one. Documents that relate to that issue are clearly relevant. The basis of a claim to privilege was never provided and escapes me.
[57] The difficulties with RDI’s theory at this stage of the proceeding are even more deep rooted.
[58] Those contemporaneous documents that do exist never reference RDI or 100 shares. In a July 18, 2007 e-mail, a clerk employed by Mr. Gray’s office advised Mr. Dermody that:
Our understanding is that one common shares (sic) in the capital of Resolute is to be issued to your client at a consideration of $1.
[59] Mr. Dermody sent a lengthy response covering a number of issues. Under the heading “Corporate matters”, Mr. Dermody addressed Resolute. He wrote in part:
…it is our client’s understanding…that no shares or appointments have been made with respect to this corporation. Further it is our understanding that the corporation has not transacted any business since the date of incorporation. (It has sat on the shelf in your office so to speak). You are hereby authorized to issue one common share in the name of Charles Juravinski…
[60] I have seen nothing to contradict any aspect of that passage. In fact, Mr. Juravinski’s signature appears on a host of documents bearing Resolute’s May 8, 2007 incorporation date including the organizing by law. The share subscription and the share certificate (notably bearing number C-1) in favour of Mr. Juravinski are dated May 8, 2007. The corporate documents were executed by Mr. Juravinski on July 18, 2007 and returned to Mr. Gray that same day. There is not a shred of support for Mr. Gray’s assertion that he was instructed to destroy anything and I see no reason why any such instruction would have been given. All aspects of the dealings between the lawyers at that point were cordial and cooperative.
[61] Even if RDI had satisfied me at this stage that it was the beneficial owner of the share, it would be necessary to determine the basis on which Mr. Juravinski currently holds it.
[62] I turn to that issue. RDI’s counsel reminded me many times that Ricchetti J. had reached a conclusion on this point. In his November, 2010 decision, Ricchetti J. wrote at para. 43:
I am satisfied that there is no genuine issue to be tried; that the security received by Mr. Juravinski for the $3.2 million dollar Loan (including the share in Resolute Land Bank) was, at the time given, only security for the repayment of the Loan. Mr. Sieber never agreed to any change in this position. Mr. Juravinski holds the share in Resolute Land Bank as security for the Loan and does not hold the share in Resolute Land Bank as security to control the development or his 50% interest in the 179 acre development. To be clear, Mr. Sieber is entitled, upon payment of all amounts outstanding under the Loan, to a discharge or transfer of the Mortgage and a transfer of the sole share in Resolute Land Bank.
[63] I have read the paragraph with interest. However, three points should be made. First, counsel for RDI conceded before the Court of Appeal that the issue was not put before Ricchetti J. by the Juravinski group and that the decision on this issue could not stand. That is the finding the Court of Appeal overturned.
[64] Second, the evidence compiled for these motions is not identical to what was before Ricchetti J.
[65] Third, the November, 2010 decision was released prior to Combined Air. While the test for summary judgment was then uncertain, the test has now been clearly articulated by the Court of Appeal.
[66] The issue is one which must be addressed de novo.
[67] Once again, RDI relies on Mr. Gray who, at various times, has asserted that the share is simply held by Mr. Juravinski as additional security for the Crooks Hollow loan.[^22]
[68] I do not take that assertion at face value because the reason for the share transfer is not addressed in a single transactional document.
[69] Mr. Gray relies on two e-mails. On July 18, 2007, Mr. Sieber advised Mr. Dermody that he was agreeable to the issuance of a share in Resolute to Mr. Juravinski “for the time being”. This, Mr. Gray maintains, evidences the fact that Mr. Sieber did not intend to vest the share in Mr. Juravinski absolutely. That position ignores the fact Mr. Juravinski has never said he holds the share for all time. He submits that the share is held to ensure that Mr. Sieber recognizes and properly memorializes his enduring interest in any residential development on the Lands even if the Crooks Hollow loan is repaid. Mr. Sieber’s e-mail does not displace that possibility.
[70] Mr. Gray also points to a February 27, 2009 e-mail Mr. Dermody sent to three people including Messrs. Sieber and Juravinski. In it Mr. Dermody spoke of Crooks Hollow transferring or assigning the common share it held in Resolute “upon payment in full of all amounts owed to Crooks on August 19th, 2009”. If that wording appeared in isolation it would support RDI’s argument.
[71] However, Mr. Gray fairly acknowledged it was used in the context of a request by Mr. Sieber for “the inclusion of language” in an agreement. I am not aware that such an agreement was finalized. Furthermore, Mr. Dermody introduced the language in the context of “the post discharge of mortgage scenario” and the e-mail added, in recognition of the fact Crooks Hollow was to have a fifty percent interest in profits generated by the portion of the Lands designated for residential development. Once again, when read in its entirety, the e-mail appears to be consistent with Mr. Juravinski’s position.
[72] The e-mails suggest the distinct possibility that the terms of the arrangement with respect to the share remained unresolved.[^23]
[73] Support for that possibility is found in Mr. Gray’s own words. On October 29, 2007, Mr. Gray reported to Mr. Sieber with respect to the transactions completed more than three months earlier. With respect to Resolute, Mr. Gray advised Mr. Sieber:
You indicated that you intended to deal with the share structure at a later date, directly with Mr. Juraviasky (sic). We advised you as to the legal exposure by proceeding as aforesaid without adequate documentation. [Emphasis added]
[74] That passage and the absence of contemporaneous documentation may explain why the terms of an agreement were still being negotiated in February, 2009.
[75] Counsel for RDI made a half-hearted attempt to rely on a document entitled “Declaration of the Sole Shareholder” (the “Declaration”) in support of RDI’s position. Said to be “effective as of July 18, 2007”, RDI purported to confirm to another Sieber/Michelbach company, Canadian Agra Inc., that it had transferred shares in Resolute to Mr. Juravinski for an “interim period” and that once the Crooks Hollow loan had been repaid the “shares” were to be “unconditionally returned” to RDI.
[76] I place no reliance on the document. Mr. Gray has deposed that the subject of shares in Resolute was “an eleventh hour demand” by the Juravinski group and that Mr. Dermody delineated his requests “just hours before the closing was to take place”.[^24] Closing occurred on July 18, 2007 as scheduled.
[77] Exigent circumstances have been used by Mr. Gray to explain the failure of the parties to address the share issue in more detail prior to or on closing. Put simply, it is impossible to believe that the Declaration was created at a time or in circumstances which evidence the parties’ intention on closing.
[78] Unquestionably, the Declaration was backdated. It was not, as RDI alleges in its factum, “contemporaneous with the closing on July 18, 2007.”[^25] Furthermore, it is a completely self serving document. There is no evidence it was even shown to Mr. Juravinski or his advisers. It proves nothing.
[79] My review leads me to this conclusion. The evidence led by the parties is in conflict. Resolution of the competing claims with respect to the share will turn on an assessment of the credibility and reliability of the witnesses who testify. The share issues cannot be resolved based only on a review of affidavits, transcripts and the few documents that appear to bear on this topic. I do not have a full appreciation of the evidence and dispositive findings would not be in the interest of justice.
[80] I turn to the January 27, 2011 tender.
[81] To briefly summarize, Mr. Gray delivered the following items to the lawyer acting for Crooks Hollow, Resolute and Mr. Juravinski (Mr. Cimba):
a. A bank draft payable to Crooks Hollow in the amount of $4,955,517;
b. Corporate documents which would have seen Mr. Juravinski transfer the share in Resolute to RDI and resign as Resolute’s sole officer and director; and
c. An assignment of the Charge from Crooks Hollow to Huron.
[82] Late in the day on January 26, 2011, Mr. Gray informed Mr. Cimba by e-mail of the forthcoming tender. In part he wrote:
Due to your unwillingness to cooperate, we prepared and provided to you the documentation that we expect to receive from Crooks Hollow…and…Charles Juravinski, in exchange for the payment that we will make to you, all of which must be duly executed and delivered to us at the time of our payment of funds. We will also require that you hold the cheque and provide us with sufficient time to register the assignment on title to the Property, in accordance with standard legal practice. In addition, we will require the delivery of share certificate C-1 (issued May 8, 2007 (sic)) for the 1 common share in the capital of Resolute Land Bank Inc., duly endorsed in blank for transfer, which is in Mr. Juravinski’s possession.
[83] It is clear from the message that the tender was presented as a non-severable package. In other words, Crooks Hollow could not accept the bank draft and simply discharge the Charge. The terms Mr. Gray summarized were to be accepted in their entirety or not at all. That meant the transfer of the share to RDI was an inextricable part of the tender.
[84] In light of my conclusion that issues with respect to the share are ones requiring a trial, it follows that the issue with respect to the adequacy of the tender must also be determined there.
[85] In those circumstances, I have considered rule 20.05 (1). It states:
Where summary judgment is refused or is granted only in part, the court may make an order specifying what material facts are not in dispute and defining the issues to be tried, and order that the action proceed to trial expeditiously.
[86] In light of that subrule, I add these additional comments. First, the Juravinski group challenges RDI’s standing to redeem. On its face, the concern appears well founded. RDI does not own the Lands. As already noted, its claim to be the beneficial owner of a share in Resolute has not yet been proven. It has no contractual relationship with Crooks Hollow.
[87] Ricchetti J. addressed the issue of redemption in his November, 2010 decision. In para. 23, he wrote:
In this case it would make no sense that the right of redemption or sale vest with Resolute Land Bank. It must reside with the borrower – Mr. Sieber’s companies.
[88] At para. 50, the application judge noted:
Mr. Sieber started to make payments to Crooks Hollow directly commencing August 30, 2007. The last regular payment was made in February 2008. A further payment was made in May 2008.
[89] Those findings were not challenged on appeal. In fact, Mr. Juravinski acknowledged in a September 6, 2011 affidavit that “Mr. Sieber made payments under the mortgage totaling $144,595.92” in the preceding three years.[^26] No objection was made to the source of payment, only to their irregularity and to the sufficiency of the amount.
[90] Based on the foregoing, independent of ss. 245 and 248 of the OBCA, I am satisfied that Ricchetti J. has already found that a member of the Sieber/Michelbach group has standing to pursue the redemption issue. RDI is the person designated for that purpose.[^27] While complicated by the wording of the claim, if unfettered by that document, I would have thought the adequacy of RDI’s tender need not include an analysis of its standing.
[91] I turn to the quantum of the Crooks Hollow loan which is secured by the Charge.
[92] Extensive evidence was placed before Ricchetti J. with respect to the balance due under the Charge as at December 21, 2010. A detailed schedule was appended to Mr. Dermody’s November 30, 2010 affidavit setting forth the elements of the amount claimed by Crooks Hollow.
[93] As already noted, the application judge concluded the outstanding balance was $4,900,300.11 subject to a deduction on account of rents paid into court and an increase on account of reasonable costs incurred by Crooks Hollow after December 21, 2010.
[94] At para. 63, Ricchetti J. added:
In the event there is some mathematical error, I may be spoken to by counsel.
[95] No one did.
[96] I have already mentioned the Court of Appeal endorsements. The first made mention of the November, 2010 decision only. However, at paras. 2 and 3 the Court of Appeal addressed the mortgage quantification exercise. The Court said:
The application judge ordered the parties to file further material on the quantum issue and to return in December 2010 to argue it. The parties complied with the order and had a full hearing wherein the amount owing on the mortgage was determined.
In our view, there is no basis to set aside that aspect of the order. Although the appellants did not ask for that issue to be determined, they made a strategic decision to participate in a full hearing on the issue without objection to the application judge in order to obtain the order for possession. On the appeal, they did not allege any error other than proceeding with the hearing, or any specific error in the quantum. In our view, there is no injustice in the result.
[97] The tender occurred before that endorsement was released. Given the breadth of issues that were raised on appeal, disagreement was a virtual certainty.
[98] RDI tendered an amount calculated without the assistance it requested from Crooks Hollow. Despite multiple requests, Crooks Hollow did not provide an updated mortgage statement.
[99] RDI’s calculation included interest subsequent to December 21, 2010 at the required annual rate (15% per annum or $80,552.88) to January 29, 2011.[^28] RDI’s lawyers determined the balance paid into court by the commercial tenants[^29] ($24,336.75) and deducted it as the application judge instructed. While Mr. Cimba later alleged that RDI had miscalculated the amount owing on account of interest, one cannot quibble with RDI’s approach to this point.
[100] However, it does not appear that RDI added anything on account of “reasonable costs” incurred by Crooks Hollow subsequent to December 21, 2010. While no doubt impossible to estimate in a vacuum, some attempt should have been made particularly since the January, 2011 decision granted Crooks Hollow’s request for immediate possession of the Lands.
[101] Crooks Hollow alleged there were other errors. It argued that Ricchetti J. had made a mathematical/mechanical error “of at least $100,000”. More than two years have passed since Mr. Cimba communicated an intention to address the application judge on that issue. In the meantime, the Court of Appeal has confirmed the result of the application judge’s work. The time to raise a “mathematical/mechanical error” has passed.
[102] Furthermore, Mr. Dermody submitted Crooks Hollow has a claim to three months accelerated interest which Ricchetti J. did not recognize. Section 17 (1) of the Mortgages Act[^30] provides:
Despite any agreement to the contrary, where default has been made in the payment of any principal money secured by a mortgage…the mortgagor or person entitled to make such payment may at any time, upon payment of three months interest on the principal money so in arrear, pay the same…
[103] That claim was specifically mentioned in Mr. Dermody’s November 30, 2010 affidavit although it was not included in the detailed summary he attached.[^31] It should have been.
[104] At para. 61 of his January, 2011 decision, Ricchetti J. made the following observations.
Both counsel agreed that it was necessary to have a fixed amount as to what is owing under the Mortgage so that either may take whatever steps they consider appropriate (Mr. Sieber’s counsel indicated that Mr. Sieber has refinancing in place and Mr. Juravinski’s counsel needs to take enforcement steps which require determination of the amount owing). The Mortgage has admittedly been in default for a long time. It is necessary that the amount outstanding under the Mortgage be fixed today. Therefore, I will determine what the amount outstanding under the Mortgage is as of December 21, 2010 by using the information available in the Record.
[105] As already noted, the Court of Appeal observed that the “parties…had a full hearing wherein the amount owing on the mortgage was determined.”
[106] Any rights under s. 17 of the Mortgages Act had accrued long before December 21, 2010.[^32] The issue was not pursued by Crooks Hollow. It was an important substantive issue which should have been raised expressly. Completion of the quantification process forecloses Crooks Hollow’s attempt to raise it now.[^33]
[107] Given that the balance owing under the Charge on December 21, 2010 was $4,900,300.11, the issue is what credits and debits are appropriate thereafter on account of monies paid by the commercial tenants, interest and Crooks Hollow’s “reasonable costs”. Furthermore, it is for the trial judge to determine whether various other matters complained of on both sides have any effect on the rights or obligations of either party. For example, was Crooks Hollow obligated to produce a mortgage statement as RDI alleges? Did the offered payment affect the accumulation of interest as RDI maintains? These issues are incapable of determination on this record.
[108] Rule 20.04 (3) authorizes the court to grant judgment with a reference where the court is satisfied the only genuine issue is the amount to which the moving party is entitled. A reference is not appropriate here because of the existence of other issues requiring a trial.
[109] It is my hope, however, that my findings will delineate and narrow the scope of the inquiry that is left to be undertaken to bring the amount due under the Charge forward to a current date.
[110] Crooks Hollow also questions the ability of RDI to compel delivery of an assignment of the security it holds. As noted, RDI’s lawyer demanded an assignment of the Charge in favour of Huron. The request was made pursuant to section 2 (1) of the Mortgages Act. That subsection allows a mortgagor who redeems[^34] to require a mortgagee to assign the mortgage debt and convey the property to any third person the mortgagor requires. RDI’s requirements do not seem to fit neatly within its scope.
[111] In any event, Crooks Hollow maintains that section 2 (3) of the Mortgages Act is applicable. It provides:
This section does not apply if the mortgagee is or has been in possession.
[112] As noted, the January, 2011 decision granted Crooks Hollow immediate possession of the Lands. Mr. Juravinski addressed the issue of possession in these terms:
Since the recovery of possession of the Property of Resolute…in January 2011, Juravinski has ensured that the Property has been maintained and that the corporate, business and proprietary interests of Resolute…in the Property have been respected.
The Property has been leased to third parties and managed in a professional manner since the Defendant corporations took possession in January 2011.[^35]
[113] Unfortunately, I do not know whether the right was exercised pre- or post-January 27, 2011. If material and in dispute, that issue should also be determined at trial.[^36]
iv. The Juravinski Group’s motion for summary judgment
[114] The defendants challenge RDI’s ability to seek an oppression remedy or to redeem. They argue that RDI’s claims are procedurally[^37] and substantively flawed.
[115] As already noted, the defendants maintain that Mr. Juravinski holds a share in Resolute not as security for the Crooks Hollow loan but to ensure that he receives a fifty per cent interest in the portion of the Lands designated for residential development.
[116] I pause here to emphasize that Mr. Juravinski acknowledges that the share is not vested in him indefeasibly or for all time. The defendants’ factum quoted and relied on para. 21 of Mr. Juravinski’s December 13, 2011 affidavit. Mr. Juravinski deposed:
I was to be (and remain) the sole shareholder, officer and director of Resolute…unless the Crooks Hollow mortgage was repaid in full and a separate agreement was in place to recognize my separate 50% interest in the 179 acres of farmland.
[117] The issue for trial then is this: does Mr. Juravinski hold the share in Resolute on the terms I have just quoted or solely as additional security for repayment of the Crooks Hollow loan?
[118] Once that issue is resolved, determining whether the share is to be transferred to RDI, a nominee or to treasury for cancellation may well fall neatly into place.
[119] The defendants characterize the events of January 27, 2011 as a “purported tender” and say it was ineffective because the amount was insufficient and RDI attached conditions which were not legally permitted.
[120] I have already given my reasons for concluding this aspect of the matter cannot be determined without addressing the share issue first. Dispositive findings on that question will facilitate analysis of the events leading up to and occurring on January 27, 2011. A trial is required.
[121] Crooks Hollow, Resolute and Mr. Juravinski deny that anything oppressive, unfairly prejudicial to or that unfairly disregards the interests of RDI has occurred. They argue that the cooperative approach to the Lands adopted by Crooks Hollow and Resolute preserves the possibility of full development in the future.
[122] The factual record on this point – or at least the portion to which I was referred – is thin and simply does not allow for analysis let alone any conclusion.
[123] In my view, none of the claims of RDI should be dismissed at the summary judgment stage.
[124] I note that the defendants’ motion also sought summary judgment dismissing RDI’s claim to injunctive relief restraining the defendants from dealing with the share, the Charge or the Lands. RDI did not seek any portion of that relief in its motion. I should not be taken as expressing any view with respect to that aspect of the claim. As I understand it the defendants’ present intention is to maintain the status quo. In any event, the material assembled does not allow me to grant summary judgment in the defendants’ favour in respect of those subparagraphs.
D. Summary of the Issues to be Tried
[125] In summary, I am of the view the issues for trial are:
a. Is RDI a “complainant” within the meaning of s. 245 of the OBCA? This question seems to require a determination of whether RDI is the beneficial owner of the share Mr. Juravinski currently holds in Resolute;
b. Was the share in Resolute issued to Mr. Juravinski as additional security for the Crooks Hollow loan or to ensure that Mr. Juravinski obtained a fifty percent interest in any residential development on the Lands?
c. Was the January 27, 2011 tender effective? This question seems to require an analysis of the adequacy of the amount tendered ($4,955,517) and each of the conditions RDI imposed with respect to the transfer of the Charge and share;
d. If ineffective, what adjustments are required to the December 21, 2010 balance ($4,900,300.11) as determined by Ricchetti J.?
e. If RDI is a complainant within the meaning of the OBCA, is RDI entitled to a remedy under s. 248? I note RDI’s request for compensation is based on s. 248(3)(j);
f. Is RDI entitled to injunctive relief with respect to the Lands, the Charge or the share?
E. Is an order under rule 20.05 (2) appropriate?
[126] Rule 20.05 (2) allows the court to give such directions or impose such terms as are just if an action is ordered to proceed to trial. The non-exhaustive list that follows the introductory words specifically allows the court to order that affidavits filed on the motion and cross-examinations conducted on them be used at trial in the same manner as an examination for discovery.
[127] Given the lengthy procedural history and cross-examinations conducted to date, it is appropriate to make an order under that subrule. Earlier I identified the affidavits of Mr. Juravinski and Ms. Michelbach which were filed on the motion.[^38] Strictly speaking the affidavits of Mr. Sieber I have referenced were not properly “filed on the motion” as rule 20.05 (2) (f) requires. However, I note Mr. Sieber identified himself as an officer of RDI. While disqualified from being a director, his enduring bankruptcy does not prevent him from occupying such a role.[^39] The affidavits touch on the matters in issue. It is just that my order also include those affidavits and the cross-examinations undertaken on them. Further discovery shall be limited to matters not already covered in the affidavits and cross-examinations of those affiants.
[128] The parties should proceed to trial with dispatch. The parties are encouraged to finalize a timetable for completion of any remaining interlocutory steps forthwith.
F. Disposition and Costs
[129] For the reasons given, both motions for summary judgment are dismissed. The issues to be tried are summarized at paragraph 125 of these reasons and I have exercised the jurisdiction given to the court in rule 20.05 (2) to the extent set forth in paragraph 127.
[130] Based on the outcome of the motions, my preliminary view is that neither side is entitled to costs. If counsel are of the view there are other factors at play they are asked to advise their counterpart of their position within ten days. The parties may then deliver short written cost submissions not exceeding five typed pages excluding offers to settle, by 4:30 p.m. on March 8, 2013. Those submissions should be provided to me through Judges’ Administration in London.
“Justice A. D. Grace”
Justice A. D. Grace
Released: February 7, 2013
[^1]: 2010 ONSC 5977 (S.C.J.). An appeal by the Juravinski group was allowed in part. The endorsement of the Court of Appeal can be found at 2011 ONCA 459. An appeal by the Sieber/Michelbach group was dismissed. The short endorsement of the Court of Appeal can be found at 2011 ONCA 475.
[^2]: 2011 ONSC 46. This endorsement was not mentioned by the Court of Appeal in 2011 ONCA 459. It was mentioned at 2011 ONCA 475.
[^3]: It bears property identifier number 33293-0049 LT and is municipally described as 02091 Highway 21, Kincardine, Ontario.
[^4]: In its factum, RDI suggested the allocation was 170 and 30 acres. I have used the figures that featured more prominently in the materials.
[^5]: The second proceeding – this one – was transferred to London by order of Tausendfreund J. dated October 5, 2011. That endorsement also stayed the third proceeding – an action by RDI as trustee against Mr. Juravinski, Crooks Hollow and Resolute – seeking, among other things, a declaration that it is entitled to redeem the Charge. The fourth proceeding – an application initiated by Helga Michelbach, sought leave to commence a derivative action on behalf of Resolute against Crooks Hollow and Mr. Juravinski. It was the subject of my April 10, 2012 endorsement. For reasons given there, I dismissed the application in part and adjourned the balance pending the outcome of this proceeding.
[^6]: Supra, note 1 at para. 99.
[^7]: Ibid. at paras. 43 and 98.
[^8]: 2011 ONSC 46 at para. 63
[^9]: Ibid. at para. 67.
[^10]: While I have not seen their material, apparently aspects of both decisions of Ricchetti J. were appealed by the Sieber/Michelbach group.
[^11]: The original request was for a transfer to Huron. That was changed.
[^12]: The November 9, 2010 order failed to include anything to do with the Resolute share despite Ricchetti J.’s finding, the Juravinski group’s appeal and a January 24, 2011 letter from counsel for the Sieber/Michelbach group suggesting the order required correction.
[^13]: 2011 ONCA 459.
[^14]: 2011 ONCA 475.
[^15]: An order requiring Mr. Juravinski to relinquish his roles as officer and director is also sought.
[^16]: The quoted passage was based on Leach J.’s review of Combined Air Mechanical Services Inc. v. Flesch, 2011 ONCA 764, [2011] O.J. No. 5431 (C.A.) at paras. 40-44 and 72-75.
[^17]: R.S.O. 1990, c. B.16.
[^18]: That assertion is made in paragraph 12.
[^19]: This assertion is made in paragraph 20 (iv).
[^20]: This position was taken in item 29 of the answers to undertakings. Counsel for RDI did confirm however, that the paper file did not contain a memo advising staff of instructions to issue 100 shares of Resolute to RDI.
[^21]: Indcondo Building Corp. v. Steeles-Jane Properties Inc. (2001), 14 C.P.C. (5th) 117 (S.C.J.).
[^22]: See, for example, paragraph 10 of his October 4, 2010 affidavit and paragraph 20 of his September 8, 2011 affidavit.
[^23]: Ricchetti J. made a similar comment, although not in the context of the share, in paragraph 8 of his January, 2011 decision.
[^24]: These excerpts are drawn from paragraphs 15 and 16 of Mr. Gray’s affidavit sworn September 8, 2011.
[^25]: This excerpt is drawn from para. 17 of RDI’s factum.
[^26]: This excerpt is drawn from para. 7.
[^27]: See, too, para. 101 of the November, 2010 decision.
[^28]: Mr. Cimba maintained that the interest calculation was inaccurate in his January 27, 2011 letter. The basis for the statement was not explained.
[^29]: $24,336.75 was the figure used by RDI in its calculation leading up the January 27, 2011 letter. According to a Crooks Hollow produced “Net Cash Flow From Operations” for the period from January 7 to September 30, 2011, $43,433.97 was paid into court.
[^30]: R.S.O. 1990, c. M. 40.
[^31]: Paragraph 6 of Mr. Dermody’s affidavit seemed to suggest that the claim had not accrued because “notice of a date for the repayment of the Mortgage/Loan” had not been given.
[^32]: Crooks Hollow maintains the right doesn’t accrue until at least three months written notice of the intention to satisfy the Charge is given. That is one of the two scenarios s. 17 (1) addresses. The portion of the subsection I quoted addresses the other.
[^33]: In my view this situation is distinguishable from the one facing Pepall J. (as she then was) in Mintz (in Trust) v. Mademont Yonge Inc., 2010 ONSC 116 (S.C.J.) and in the authorities cited there.
[^34]: I recognize RDI is not the mortgagor.
[^35]: These excerpts are drawn from paras. 7 and 8 of Mr. Juravinski’s August 8, 2012.
[^36]: I recognize that in a January 27, 2011 e-mail to Mr. Cimba, Mr. Dermody asserted that the “mortgagee is in possession and is incurring costs to safeguard the security.”
[^37]: They allege that RDI has failed to join necessary parties. The defendants argued at length that Mr. Sieber’s trustee in bankruptcy should be part of the proceeding. Based on the material filed, I do not share that view.
[^38]: Some of those affidavits were also used in earlier skirmishes.
[^39]: OBCA, supra, note 17, s. 118 (1) 4.