SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: CV-09-27

DATE: 2013-02-07

RE: The Corporation of Norfolk County, Applicant

AND:

1313567 Ontario Inc, Russel Hayes also known as Russell Hayes also known as Russell Claire Hayes also known as Russel Clare Hayes and Clare Hayes also known as Claire Hayes

Respondent

BEFORE: Turnbull, J.

COUNSEL: Renata Kis, Counsel, for the Applicant

Cornelius Brennan, Counsel, for the Respondent

HEARD: February 7, 2013

ENDORSEMENT

Overview of this Motion

[1] The applicant has brought a motion to have itself appointed as a Receiver of the respondent’s property and building to give it the jurisdiction to evict residential tenants living in apartments located in the building. This rather unusual and extreme remedy is sought because of Mr. Hayes’ extended refusal to comply with earlier court orders.

Overview of the Facts

[2] The early history of this matter is detailed in paras. 2 to 15 of my endorsement released June 30, 2011 and cited as Norfolk v 1313567 Ontario Inc., 2011 ONSC 4156. In summary, 1313567 Ontario Inc. (hereinafter 131) is owned by the respondent Russell Claire Hayes who is the sole director and shareholder. 131 owns a building in Waterford Ontario which houses a number of commercial tenants on the ground floor. The second floor contains 9 or 10 residential units which the applicant has proven were built without a building permit and are not in compliance with the provisions of the Building Code Act.

[3] History of Proceedings and the Order

[4] On February 27, 2009, the Respondents were served with an Application Record. In which, the County sought, among other things, an Order requiring the Respondents to comply with the necessary provisions of the Building Code Act and to make the changes required thereunder as set out by the County with regard to the property described as Part 1, Plan 37R-8547, Lots 1 & 2 and part of Lots 3 & 4., Blk 24, Plan 19-B, which is municipally known as 80 Alice St., Waterford, ON N0E 1Y0 (the “subject property”).

[5] The Respondents retained counsel and served responding materials. Generally, their position in the Application was that they were not required to comply with the Building Code Act given the nature of the subject property and the work completed on same.

[6] On November 26, 2009, the Application was heard by Ramsay J. Counsel for the County and counsel for the Respondents filed facta and made arguments to the Court. After hearing argument from counsel, His Honour ordered the Respondents were to:

a. vacate the building;

b. evict all non-residential tenants;

c. stop collecting rent from the residents;

d. not to rent out any of the apartments that are or will become vacant; and,

e. pay costs to the County in the amount of $10,000.

[7] The Respondents did not comply with the Order, but served a Notice of Appeal which was eventually dismissed for delay by the Divisional Court.

[8] On December 23, 2010, after a visit to the Subject Property by representatives of the Building Department, the Respondents were observed continuing to permit commercial tenants to occupy the Subject Property. It was also observed that the Respondents commenced additional construction on the Subject Property without obtaining the proper and required permits.

[9] On June 30, 2011, as noted above, I issued a written endorsement which held as follows:

a. the Respondents were in contempt of the November 26th, 2009 order of Ramsay J.,

b. the Respondents were ordered to bring an application or applications to the Landlord and Tenant Board to terminate all of the residential tenancies so that the required renovations could take place;

c. the Respondents were ordered to serve and file the applications on or before July 15, 2011; and,

d. the Respondents were ordered to take all necessary steps to have the matters expedited for hearing.

[10] The Respondents were given many chances over 16 months to purge their contempt:

a. October 7, 2011 – matter adjourned to December 2, 2011 to provide the Respondents additional time to purge their contempt and obtain funding for the renovations from a preferred source; costs were ordered in the amount of $1,000 payable to the County;

b. December 2, 2011 – matter adjourned on consent to February 27, 2012 to permit the Respondents additional time to complete the work necessary to obtain the drawings required to acquire the Building Permit; costs were ordered in the amount of $500 payable to the County;

c. February 3, 2012 - adjourned to April 27, 2012 to permit the Respondents additional time to complete and submit their drawings and complete the necessary work; costs were ordered in the amount of $1,000 payable to the County;

d. April 27, 2012 – adjourned to June 20, 2012 to permit the Respondents additional time to purge their contempt – the Respondents had finally completed the drawings, paid the necessary fee and obtained the building permit to complete the work; costs were ordered in the amount of $1,000 payable to the County;

e. June 20, 2012 – the parties attended to speak to this matter by teleconference; the matter was adjourned to permit the Respondents time to complete the work required to bring the Subject Property into compliance and to give the County time to file evidence regarding the health and safety issues regarding the Subject Property; costs were reserved;

f. July 19, 2012 – adjournment to August 23 at the County’s request to permit the County to file additional materials regarding the safety of the tenants and their continued occupation of the units notwithstanding building permit obtained in April, 2012; no costs were ordered or requested; and,

g. August 23, 2012 – adjournment to October 17, 2012 deal with the issues of contempt and outstanding work required to be completed; at this time, and for the first time, the Respondents sought leave to not comply with Justice Turnbull’s decision regarding the eviction of the tenants made June 30, 2012; costs were reserved.

h. October 17, 2017-the matter was adjourned to December 13, 2013 for argument with respect to the appropriate punishment for contempt and for submissions of the Applicant to have it appointed as a Receiver of the subject property to permit it to effect the residential evictions.

[11] Notwithstanding the 16 months of adjournments given mostly to accommodate the Respondents, it is clear from the affidavit of Fritz Enzlin sworn the 3rd day of October, 2012 that the Subject Property continues to be in violation of the Building Code and that the Chief Building Official continues to have concerns regarding health and safety of the residential tenants.

[12] It took the Respondents 10 months to finally obtain the building permit for the work originally completed by the Respondents on the Subject Property. Since obtaining the building permit, the Respondents did not bring the application to evict the residential tenants before the Landlord and Tenant Board.

Progress since Building Permit Obtained

[13] On or about August 10, 2012, the Respondent Russell Hayes arranged for his engineer to meet with a Building Inspector for the County to discuss the outstanding issues and noncompliance which the Respondents had to address on the Subject Property (the “August Meeting”). A formal written report by the Applicant was generated and provided to the Respondents confirming that meeting and the items which were discussed and which had to be addressed (“August Inspection Report”).

[14] On October 1, 2012 the Chief Building Official attended at the Subject Property to meet with Russell Hayes, his counsel and his engineer on the Subject Property (the “October Meeting”). The October Meeting lasted approximately 2 hours. A report generated at the October Meeting was delivered afterwards to the Respondents (the “October Inspection Report”).

[15] While the Respondents had completed some work since the August Meeting, the major issues which remained outstanding and which were specifically set out for the Respondents in the County’s October Inspection Report were largely those identified at the August Meeting. The same issues were also identified by the County when the within Application was initially returned and are also the issues which were identified by the County when construction first began.

[16] In his affidavit sworn October 3, 2012, Mr. Fritz Enzlin listed at para. 17 the issues of concern that were outstanding at that time:

• integrity of emergency exits are still at issue (ie. EXIT signs need to be completed) – this was an issue identified during the August Meeting;

• Incomplete fire separations (floor/ceiling, dwelling units, corridor and exits); since the August Meeting, Russell Hayes’ engineer confirmed that the second floor is constructed in accordance with the fire requirements under the Building Code Act in that it requires an additional layer of gypsum;

• Fire Resistance Rating (FRR) for existing structural columns were to be confirmed to ensure they meet Code;

• Fire-stopping requirements have not been installed at all penetrations through fire separations or between floors. These were issues identified during the August Meeting;

• Verification of the Fire Alarm System has not been completed. The repair or replacement of inoperative smoke alarms has not been completed and the Respondents have not provided evidence that they have ensured that the smoke alarms have permanent electrical connections. These were issues identified during the August Meeting;

• the interior and exterior stairwells still do not conform to the Building Code because they lack fire separation and/or do not have adequate handrails. These were issues identified during the August Meeting;

• fire protection from openings adjacent to the exterior emergency exit staircase do not comply with the Building Code. This was an issue identified during the August Meeting;

• The enclosures and framing on the Subject Property continue to lack adequate FRR (doors, frames, hardware. This was an issue identified during the August Meeting; and,

• no guard has yet been installed to protect the second floor door which leads to the exterior of the building where there is no balcony. This was an issue identified during the August Meeting.

[17] Mr. Enzlin swore that these issues are serious in nature and require extensive renovation of the Subject Property. Since the August Meeting some progress was made to remedy the identified issues, but most of the items remain outstanding notwithstanding the 6 weeks the Respondents were given between the August attendance and the October Meeting.

Aggravating Factors and Further Contempt

Additional Unit

[18] During the October Meeting the County discovered that an additional tenth unit was added to the upstairs apartments of the Subject Property. The new unit was marked 9A. The 9A unit was not present during the initial construction on the Subject Property and it was not present during the first inspections of the Subject Property earlier in these proceedings. It also was not depicted on the drawings filed to obtain the building permit for the Subject Property in 2012.

[19] Based on Mr. Enzlin’s affidavit, I am satisfied that notwithstanding these proceedings, the orders of this Honourable Court, and the requirements of the Building Code Act, the Respondents have once again carried out construction at the Subject Property without a proper building permit.

[20] Counsel for the applicant has submitted that the newly constructed unit is an aggravating factor for the Court to consider in assessing what remedies and penalties will be ordered against the Respondents for their contempt. I concur.

Tenants on Property

[21] In his affidavit sworn September 7, 2011, the Respondent Russell Hayes swore that three tenants from two units had vacated the Subject Property in response to the eviction notices filed by the Respondents. However, during the October Meeting, Mr. Enzlin noted that all of the units were rented. Accordingly, the units which had been vacated were re-let by the Respondents which is a direct contravention of the Order of Ramsay J.

[22] That order has been further contravened in that the Respondents are letting and collecting rent from all of the units and are not taking any steps to expedite the hearings before the Landlord and Tenant Board.

Costs

[23] After the April 2012 court attendance, the Court ordered that the Respondents make $500 monthly instalments until all of the costs are paid. To date the Respondents have only made payments in April, May and June for a total of $2,000. There have earlier been costs awards totalling $13,000 made in favour of the County in these proceedings. Mr. Enzlin swore in his affidavit of October 3, 2012 that the County has not received cost payments from the Respondents in July, August or September, 2012.

[24] Ms. Kis has submitted that the failure to make costs payments as agreed and the failure of the Respondents to communicate a reason to the County why costs have not been paid as ordered is an aggravating factor in considering what remedies and penalties will be ordered against the Respondents for their contempt. Again, I concur.

The Issues

What is the appropriate remedy to effect the order that the Respondents evict the residential tenants from the building until all work is done in compliance with the Building Code Act?

What is the appropriate penalty to be imposed on the Respondents upon a finding of contempt?

Analysis

[25] It is clear from the foregoing, the Respondents simply have decided to do what they want when they want, regardless of the law and orders of the court. This court has given the Respondents ample time and numerous opportunities to purge their contempt. While some efforts have been made, as evidenced by the numerous affidavits filed by Mr. Hayes each time the parties have appeared before the court, usually at the last moment. However, the work to bring the building into compliance with the Building Code Act has not yet been completed despite the passage of so much time.

[26] In my view, the safety of the residents and compliance with the law must “trump” the wishes of Mr. Hayes to continue to do things his way.

[27] In circumstances where there is no reasonable basis to believe that compliance with outstanding orders is possible, appointing a receiver may prevent further breaches of court orders and protect the public from potential harm. Ontario College of Optometrists v. SHS Optical Ltd. [2010] O.J. 3049 at para. 220.

[28] As a result, I am going to accede to the request of the applicant to name the Corporation of Norfolk County as a Receiver of the property for the limited purpose of bringing the appropriate applications before the Landlord and Tenant Board to evict the residential tenants from the Respondent’s business. Section 101 of the Courts of Justice Act gives the court jurisdiction to make this order on such terms and conditions as it deems just. In my view, this is one of those exceptional cases where this remedy must be invoked for the reasons articulated above.

[29] The Respondents are ordered to fully co-operate with the Receiver in its efforts to effect the evictions and any evidence of interference or non-cooperation will be taken into account at the time that the Respondents are sentenced for their civil contempt of court. On the other hand, the co-operation of the Respondents with the Receiver is something the court can also take into consideration in assessing the appropriate penalty for the Respondents’ contempt of court.

[30] The courts cannot allow their orders to be ignored with impunity because the administration of justice is compromised and respect is lost when court orders are ignored. Without sanctions being imposed in a case such as this, the public’s respect for the administration of justice will be tarnished and our system of justice will correspondingly be weakened.

Conclusion:

[31] It is ordered that the Corporation of Norfolk County be appointed as the Receiver of the Respondents for the purpose of bringing about the evictions of the residential tenants at the respondents’ property described as Part 1, Plan 37R-8547, Lots 1 & 2 and part of Lots 3 & 4., Blk 24, Plan 19-B, which is municipally known as 80 Alice St., Waterford, ON N0E 1Y0 (the “Subject Property”).

[32] It is ordered that the Receiver shall not take possession or control of the property other than to evict residential tenants from the second floor of the property and the Receiver shall not carry on, manage or operate the business of the Respondents at the subject property.

[33] It is ordered that the Respondents are to fully co-operate with the Receiver and its employees, agents or counsel in performing the duties ordered by this court.

[34] It is ordered that the Respondents shall not lease or permit anyone to occupy the residential units on the second floor of the subject property until the Applicant is satisfied that the work required to take place has in fact been completed in compliance with the Building Code Act and to the satisfaction of the representatives of the Applicant’s Chief Building Official.

[35] It is ordered that the Respondents shall fully co-operate with the Applicant and its employees, agents and/or counsel in all matters pertaining to this matter.

[36] It is ordered that the Respondents shall forthwith, within 7 days of this order, provide to the Receiver through its legal counsel, a list of the names of the occupants of each residential unit at the subject property, the unit number, contact information such as a telephone number and/or email address of each occupant of each unit and a copy of any written lease in effect between the respondent(s) and the tenant and any other information relevant to the duty of the Receiver to have the tenants evicted or peacefully removed from the residential units.

[37] It is ordered that the Applicant shall have its costs of this motion on a substantial indemnity basis and the reasonable costs of effecting the orders made hereunder payable by the Respondents on a substantial indemnity basis.

[38] It is ordered that the Receiver may engage consultants, appraisers, experts and such other experts as it deems necessary to carry out the duties imposed on it by this order.

[39] It is ordered that the Receiver may take any steps reasonably incidental to the exercise of the powers granted hereunder or the performance of any statutory obligations.

[40] It is ordered that save and except for any proceeding already instituted, no proceeding or enforcement of process in any court or tribunal (each, a “Proceeding”), shall be commenced or continued against the Receiver or persons engaged by the Receiver pursuant to this Order except with the written consent of the Receiver or with leave of this Court.

[41] It is ordered that no person shall discontinue, fail to honour, alter, interfere with, repudiate, terminate or cease to perform any contract or agreement in favour of or held by the Respondents, including any lease obligations, as a consequence of the making of this Order or any action taken pursuant to this Order, without the written consent of the Receiver or leave of this Court.

[42] It is ordered that a copy of this order shall be provided to the tenants identified on the list of tenants provided to the Receiver by the Respondents.

[43] It is ordered that the Receiver shall incur no liability or obligation as a result of its appointment or the carrying out of the provisions of this Order, save and except for any gross negligence or wilful misconduct on its part.

[44] It is ordered that counsel to the Receiver shall be paid their reasonable fees and disbursements at their regular rates and charges, and the Receiver shall be entitled to and hereby granted a charge (the Receiver’s Charge) on the subject property as security for such fees and disbursements and for any other costs orders made in favour of the applicant in these proceedings which have not been paid as of the date of this Order.

[45] It is ordered that the Respondents shall not mortgage, sell, lease or otherwise deal with the subject property without an Order of this court.

[46] It is ordered that the Receiver report to this court with respect to this matter on Wednesday May 15, 2013 at 2:30pm or at such earlier date as arranged with the Trial Co-ordinator at Simcoe. A copy of the Receiver’s report shall be provided to the Respondents on or before that date or the other return of this matter before the court.

[47] It is ordered that the sentencing of the Respondents for their contempt of the order of this court shall be adjourned to May 15th, 2013 at 2:30pm or such earlier date as arranged with the Trial Co-ordinator at Simcoe.

[48] The parties may bring a motion for directions with respect to this matter at any time before that date by contacting the Trial Co-ordinator at Simcoe and arranging a date convenient to the court and to counsel.

[49] This Court hereby requests the aid and recognition of any court or tribunal or regulatory or administrative body having jurisdiction in Ontario to give effect to this Order and to assist the Receiver and its agents in carrying out the terms of the Order. All courts, tribunals, regulatory and administrative bodies are hereby respectfully requested to make such orders and to provide such assistance to the Receiver, as an officer of this Court, as may be necessary or desirable to give effect to this Order or to assist the Receiver and its agents in carrying out the terms of this Order.

Turnbull, J.

Date: February 7, 2013