Helen Kilitzoglou et al. v. Shannon Cure et al.

COURT FILE NOS.: CV-07-086409, CV-08-088632, CV-09-094857 and 2802/09

DATE: 20140214

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Helen Kilitzoglou and Life Line Manufacturing Inc.

Plaintiffs

– and –

Shannon Cure and Tanya Cure personally and as Estate Trustees of the Estate of Al Cure, Deceased, Anthony DiLena personally and as Estate Trustee of the Estate of Al Cure, Deceased, Marvin Rotenberg, Segal & Partners Inc., Martin Sole and Vykunthavasam Sambasivan and 2142638 Ontario Inc. o/a Sam’s Brothers Furniture MFG

Defendants

COUNSEL:

Leo Klug, for the Plaintiffs

M. Rintoul, for the Defendants Shannon Cure and Tanya Cure

B. Jaeger, for the Defendants Segal & Partners Inc. and Martin Sole

M. Girard, for the Defendant Marvin Rotenberg

V. Sambasivan, In Person

AND BETWEEN:

Rayon White and 1570929 Ontario Ltd. c.o.b. as Innovative Laminate (2003)

Plaintiffs

– and –

Shannon Cure, Tanya Cure and the Estate of Albert Cure

Defendants

AND BETWEEN:

Tanya Cure

Applicant

• and -

TransAmerica

Defendant

AND BETWEEN:

Helen Kilitzoglou

Applicant

• and -

Tanya Cure and Shannon Cure, Estate Trustees for the Estate of Albert Cure

Defendants

Heard: May 21, 22, 23, 24, 25, 28, 29, 2012; June 1, 4, 5, 6, 7, 8, 11, 12, 13, 14, 15, 2012; November 20, 21, 22, 23, 26, 27, 28, 29, 30; December 3, 2012; February 4, 5, 6, 7, 8, 2013 and July 23, 25, 25, 26, 2013.

REASONS FOR Judgment

mckelvey j.:

Background

[1] Albert Cure was a successful businessman who controlled a number of corporations. Through these corporations Mr. Cure operated his business which manufactured furniture. Primarily Mr. Cure was involved in the production and sale of wood laminate bedroom furniture. Unfortunately, Mr. Cure died suddenly on the night of Easter Monday, April 9/10, 2007. Following his death a variety of legal proceedings were commenced and which were ordered to be tried together.

Main parties in the litigation and other important players

[2] The following is a listing of the main parties in the various legal proceedings which have been commenced, as well as other persons and corporations who played an important role in the context of the issues before the court:

Alca Designs Ltd.

[3] Alca Designs Ltd. (“Alca”) is the corporation which carried out the manufacture of wood laminate furniture. It appears that virtually all of the products related to the manufacture and sale of bedroom furniture sets. The business operated out of two locations. The main manufacturing location and principal office of the business was at 720 Bartor Road in Toronto. Subsequently, it opened another manufacturing facility which was located close by on Clayson Road. According to a report prepared for the creditors of Alca dated July10, 2007, Alca started to have financial losses for several years prior to Mr. Cure’s death. The losses were attributed to competition from China, and the rising Canadian dollar, since Alca’s customer base was located primarily in the United States.

Kural Industries Inc.

[4] Kural Industries Inc. (“Kural”) held the lease on the Clayson premises. Alca was therefore a subtenant of Kural in its occupation of the Clayson premises. Kural did not have any other assets other than holding the lease on the Clayson premises.

778910 Ontario Limited

[5] 778910 Ontario Limited (“778”) was the holding company used by Mr. Cure. 778 owned all of the shares of Alca and Kural. In turn, Mr. Cure owned all of the shares and controlled 778.

Minuk Construction and Engineering Company

[6] Minuk Construction and Engineering Company (“Minuk”) was the owner of the premises at Clayson. It leased the premises to Kural. Mr. Steven Picov was the individual at Minuk responsible for dealing with Kural in connection with its lease of the premises at Clayson.

Helen Kilitzoglou

[7] Helen Kilitzoglou was the common-law spouse of Al Cure. They met in October, 1994 and subsequently became a couple in February of 1995. Ms. Kilitzoglou was employed by Alca in a variety of capacities. At the time of Mr. Cure’s death, Ms. Kilitzoglou was responsible for operating the Clayson Road manufacturing facility for Alca.

Life Line Manufacturing Inc.

[8] Life Line Manufacturing Inc. (“Life Line”) is a company that was incorporated by Ms. Kilitzoglou on October 30, 2006. It started operation on January 1, 2007. Similar to Alca, Life Line manufactured wood laminate bedroom furniture out of the Alca premises on Clayson Road. Ms. Kilitzoglou was solely responsible for operating Life Line. She set up the business to produce and sell her own line of bedroom furniture.

1570929 Ontario Ltd.

[9] 1570929 Ontario Ltd. (“157”) was a business which was operated under the name “Innovative Laminate”. The business was owned by Raymond White and Al Cure. Al Cure held some of the shares of 157 in trust for Helen. Innovative Laminate manufactured wood laminate products which were in turn purchased by Alca to make its bedroom furniture. Ray White was Mr. Cure’s partner in the venture, and the business operated out of the Clayson Road premises.

Shannon and Tanya Cure

[10] Shannon and Tanya Cure are Al Cure’s daughters from his first marriage. Following Mr. Cure’s death, Shannon and Tanya Cure became two of the estate trustees of Mr. Cure’s estate and were required to operate the Alca business until it went into bankruptcy.

Anthony DiLena

[11] Mr. DiLena was Al Cure’s lawyer. He acted as well for the corporations controlled by Mr. Cure. He was also named as an estate trustee for Mr. Cure’s estate.

Marvin Rotenberg

[12] Mr. Rotenberg was Mr. Cure’s accountant. He also acted as accountant for the corporations controlled by Mr. Cure.

Martin Sole

[13] Mr. Sole is a licensed trustee in bankruptcy and has practiced with Segal and Partners since 2007. Segal and Partners were retained with respect to insolvency issues relating to Alca, Kural and 778.

Isaac Singer

[14] Mr. Singer was Helen Kilitzoglou’s lawyer. He advised her with respect to a cohabitation agreement entered into between Ms. Kilitzoglou and Mr. Cure. He also acted for Ms. Kilitzoglou with respect to matters arising out of the Life Line business and the insolvency of Alca.

Vykunthavasam Sambasivan and 2142638 Ontario Inc. o/a Sam’s Brothers’ Furniture Mfg.

[15] Mr. Sambasivan (“Sam”) was employed by Alca. Following the closure of the Clayson Road premises, Sam purchased the manufacturing equipment located at the Clayson premises. He purchased the equipment from a company called DeRonde Sales which had previously purchased it from Alca. This equipment was then used in another business which was owned by Sam’s brother and which began to manufacture bedroom furniture.

Chronology

[16] In order to consider the issues which have been raised in the various lawsuits commenced, I found it helpful to prepare a chronology of the main events which are relevant to an understanding of the issues in the various actions.

October – 1994

[17] Helen Kilitzoglou and Al Cure initially met in October, 1994. Both were previously married and had children from their previous relationships. Ms. Kilitzoglou was a waitress at the time when Mr. Cure first met her.

February – 1995

[18] Helen Kilitzoglou and Al Cure became a couple at this point. Ms. Kilitzoglou testified that they became engaged, but never married.

December – 1996

[19] At this time Mr. Cure and Ms. Kilitzoglou purchased a house which was located on Westridge Drive in the City of Vaughan. The purchase price for the house was $540,000.00. Mr. Cure initially paid the down payment of $140,000.00. The balance of $400,000.00 was financed through a mortgage. Ms. Kilitzoglou testified that she paid for the extras, which were incorporated into the construction of the home.

1996

[20] At some point in 1996 Helen sold her interest in a restaurant and went to work for Mr. Cure at Alca. She was never, however, a shareholder, director or officer of Alca. Her status was that of an employee.

September – 1997

[21] At this time Mr. Cure and Ms. Kilitzoglou moved into the new house in Vaughan. Initially, the house was registered only in Mr. Cure’s name.

April 18, 2002

[22] Mr. Cure signed a new will dated April 18, 2002. As part of the will, Mr. Cure made a bequest to Ms. Kilitzoglou as follows:

It is my wish that my friend, Helen Kilitzoglou, shall be entitled to the full and exclusive use and occupation of the premises known as 180 Westridge Drive, Kleinburg, Ontario, for up to five (5) years. Provided that for all the first two (2) years of such use, I hereby direct and authorize my trustees to pay the usual costs of maintaining the said premises, including utility costs, mortgage payments, if any, realty taxes and general maintenance. Thereafter, should my friend, Helen Kilitzoglou, choose to continue to use the premises, she shall be responsible for all of the above-mentioned costs of maintaining the said premises. In the event my said friend chooses not to use the said premises or upon expiry of the aforementioned five (5) years, I direct my trustees to sell the subject premises and divide the net proceeds as follows (net proceeds shall be the sum remaining net of mortgage(s), legal fees, and realty commissions):

The sum of $280,000.00 shall be paid into the residue of my estate;

The balance thereafter shall be divided equally between my friend Helen Kilitzoglou and the residue of my estate.

September 23, 2002

[23] On this date Mr. Cure took out an insurance policy with TransAmerica Life Canada for the sum of $600,000.00. The beneficiaries listed in the application are:

(a) Royal Bank for the sum of $250,000.00;

(b) Helen Kilitzoglou, identified as his common-law spouse; and,

(c) Both of the beneficiary designations were designated as revocable.

February – 2003

[24] Following discussions with Mr. Rotenberg, Mr. Cure decided to declare a dividend by Alca in favour of 778 in the amount of $800,000.00. The dividend payment was made effective November 29, 2002. No cash was actually exchanged between Alca and 778 relating to the dividend. However, these entries were entered into the books of both companies. The transaction resulted in a debt being owed by Alca to 778 for $800,000.00.

February 13, 2003

[25] A general security agreement was entered into between 778 and Alca Designs. Under this general security agreement Alca granted to 778 a security interest in any personal property of Alca, including its inventory, accounts receivable, and equipment. The general security agreement was registered with the Ministry of Consumer and Business Services pursuant to the Personal Property Security Act, R.S.O. 1990, Chapter P.10.

April – 2003

[26] 1570929 Ontario Ltd. was incorporated to carry on the business of Innovative Laminate. The shares of the corporation were held by Mr. Cure (both personally and in trust for Ms. Kilitzoglou) and Ray White. The business supplied laminate products to Alca and operated out of the Clayson premises.

December 16, 2003

[27] A change of beneficiary form dated December 16, 2003 was signed by Mr. Cure. The new beneficiary designation for the TransAmerica policy was changed to “CIBC as there (sic) interest may appear” and to Tanya Cure. Subsequent to this form being sent to the insurer by the broker, the broker wrote to Mr. Cure on January 9, 2004 as follows:

We are in receipt of your change of beneficiary form in which you listed two beneficiaries (copy enclosed). We have been advised by TransAmerica Life that they cannot accept the change in this form. They require:

(1) A percentage amount designated by you to each of the beneficiaries; or

(2) A copy of your current will which will give the executor full responsibility for disbursing funds.

If you prefer option (1) you can simply call us and let us know what the percentages should be. If you would like to forward your will to us, we have provided a self-addressed stamped envelope for your convenience.

[28] There is no evidence that Mr. Cure ever followed up to respond to this correspondence.

April 26, 2004

[29] Ms. Kilitzoglou and Mr. Cure signed a cohabitation agreement dated April 26, 2004. The agreement was not signed, however, until September and October, 2005 by the parties. The agreement contained provisions with respect to the residence on Westridge. It required title to the property to be transferred to Albert cure and Helen Kilitzoglou as tenants in common. It also contained provisions which required a sale of the property or a payout to Ms. Kilitzoglou if the parties separated. In addition the agreement contained provisions dealing with Ms. Kilitzglou’s right to live in the property and to purchase Mr. Cure’s interest following his death.

August, 2005

[30] Mr. Cure transferred ownership of the Westridge Drive home to himself and Ms. Kilitzoglou in accordance with the terms of the cohabitation agreement.

October 4, 2005

[31] Ms. Kilitzoglou testified that she had a fight with Mr. Cure at a wedding they were attending on this date. As a result of this incident, she went to live with her children for several weeks. She stated that Mr. Cure subsequently apologized and she went back to live with him in Vaughan.

February 27, 2006

[32] In a letter dated February 27, 2006 Ms. Kilitzoglou’s lawyer, Isaac Singer, wrote to Mr. DiLena, Mr. Cure’s counsel. In this letter Mr. Singer requests compliance with the cohabitation agreement based on the separation between the parties. Ms. Kilitzoglou testified that this issue was not pursued as she and Mr. Cure reconciled.

October 30, 2006

[33] Ms. Kilitzoglou incorporated Life Line at this time. She continued, however, to work as an employee of Alca.

November – 2006

[34] Mr. Cure obtained a report dated November 20, 2006 from Danbury Appraisal. The stated purpose for the appraisal was to provide an objective value of Alca’s assets based on forced liquidation value.

December 30, 2006

[35] A handwritten agreement was entered into and signed by Mr. Cure and Ms. Kilitzoglou on December 30, 2006. The terms of the agreement provided as follows:

As per January 3, 2007, Mr. Albert Cure will be sublease (sic) 3,500 square feet at 719 Clayson for the amount of $2,000.00 per month all inclusive. It is 1 year lease with option for renewal. In case Albert Cure do not wish to renew the lease, he has to give 4 months written notice. Mr. Albert Cure is offering Helen Kilitzoglou the use of all machinery within the premise for 6 months at no extra cost (rent covers everything).

After the 6 month period is over Helen can buy the machines if both parties agree on the price or lease for a price that both parties agree.

January – 2007

[36] Life Line starts operations at this time using the same premises and equipment as Alca at the Clayson premises. Ms. Kilitzoglou remains employed with Alca.

March 16, 2007

[37] On March 16, 2007 Mr. Cure met with Martin Sole of Segal about the possibility of Alca winding down its operations and filing a Notice of Intention to make a proposal under the Bankruptcy and Insolvency Act (B.I.A.), R.S.C., 1985, c.B-3. Mr. Sole follows up with a proposal to Mr. Cure dated March 16, 2007. There is no evidence that Mr. Cure pursued the issue of a proposal in bankruptcy subsequent to receipt of this letter.

April 9/10, 2007

[38] Mr. Cure died suddenly at age 65 on the Easter long weekend. Under the terms of his will, Mr. DiLena, as well as his daughters Tanya and Shannon Cure, were identified as the estate trustees.

April 27, 2007

[39] On this date Royal Bank of Canada extended credit to Alca through Tanya and Shannon Cure, who were going to try and continue the Alca business.

May 16, 2007

[40] Mr. Sole at Segal met with Mr. DiLena, Shannon and Tanya Cure, and submitted a proposal to file a Notice of Intention to make a proposal under the B.I.A.

May 17, 2007

[41] In a letter dated May 17, 2007 Mr. Picov at Minuk writes to Kural Industries, advising that Kural is in arrears of rent for the Clayson premises in the sum of $20,712.48.

May 29, 2007

[42] On this date there is a meeting between Ms. Kilitzoglou, Mr. Rotenberg, as well as Tanya and Shannon Cure. It is apparent that this was a very acrimonious meeting. Ms. Kilitzoglou is advised that the Clayson Road premises are going to be shut down by Alca. There is also discussion about the sale of the equipment at Clayson Road to Ms. Kilitzoglou. In a letter from her lawyer dated May 29, 2007, Mr. Singer on behalf of Ms. Kilitzoglou states as follows:

I confirm my client’s advice that she was informed today that your operation at 719 Clayson will be shut down in the very near future. I also confirm that you have offered to sell her the equipment at this location, provided she confirm her willingness to purchase same by 5:00 p.m. tomorrow.

May 31, 2007

[43] In a letter dated May 31, 2007 from Mr. DiLena to Mr. Singer, Mr. DiLena advises that Ms. Kilitzoglou’s employment with Alca will terminate effective June 1, 2007.

June 1, 2007

[44] In a letter from Mr. Singer dated June 1, 2007 to Mr. DiLena, Mr. Singer on behalf of Ms. Kilitzoglou references the intention of Ms. Kilitzoglou to remain in the Clayson premises. A copy of the December 30, 2006 agreement is attached to this letter. Mr. Singer further advises that Ms. Kilitzoglou had been advised by Mr. Cure’s daughters that the machinery at the Clayson premises was about to be auctioned off.

June 4, 2007

[45] On June 4, 2007 Mr. Picov of Minuk sends a further letter reminding Kural that it is behind in rent in the sum of $21,401.48.

June 5, 2007

[46] Ms. Kilitzoglou tenders a rent cheque for rent on the Clayson premises to Alca, but her tendered payment was refused.

June 7, 2007

[47] On this date Alca filed a Notice of Intention to file a proposal under the B.I.A.

June 14, 2007

[48] On June 14, 2007 Mr. Singer wrote to a company called M.M.L.S. Machinery Inc. He references his understanding that this company had been instructed to remove the production equipment at Clayson belonging to Alca. Mr. Singer references the agreement dated December 30, 2006 and states:

It is our intention to enforce our client’s rights under this agreement to the continued use of this equipment. Should same be removed from the premises prior to June 30, 2007, we will institute legal proceedings for damages arising from such illegal act.

June 15, 2007

[49] Minuk distrains on the Clayson premises pursuant to a Notice of Distress dated June 15, 2007. Minuk’s representatives take possession of the Clayson Road premises and change the locks.

June 18, 2007

[50] In the afternoon of June 18, Kural files in bankruptcy under the B.I.A. and the trustee (Segal) takes possession of the Clayson premises.

June 20, 2007

[51] Alca’s equipment at the Clayson Road premises is sold to Justin DeRonde of DeRonde Sales pursuant to an invoice dated June 20, 2007. It appears the agreement to sell the equipment was reached several days earlier.

[52] Also on June 20, 2007 the machinery and equipment at the Clayson premises is removed.

[53] Also on June 20, 2007 Mr. Sole writes a letter to Mr. Singer in his capacity as trustee for Kural in which he advises that the trustee intends to vacate the premises of Kural in a matter of days.

June 20, 2007

[54] There is a serious incident which occurred at the Clayson premises on June 20, 2007. Ms. Kilitzoglou, who has not been allowed to come into the Clayson premises since Segal took possession of the premises, goes to the back entrance and gains access to the premises. Over the objections of the Segal representative, Mr. Oliver, as well as Tanya and Shannon Cure, Ms. Kilitzoglou removes a computer from her office. She then puts the computer into the trunk of her daughter’s car and sends her daughter away in the vehicle. The police are called. They demand that Ms. Kilitzoglou either return the computer or go to jail. Ms. Kilitzoglou refuses and is subsequently arrested by the police and criminal charges are laid. These criminal charges are subsequently dropped once Ms. Kilitzoglou is able to prove that the computer was her property. It is apparent that this incident further contributed to the deteriorating relationship between Ms. Kilitzoglou and Mr. Cure’s daughters.

June 21, 2007

[55] Segal, as trustee in bankruptcy for Kural, turns the Clayson premises back to the landlord (Minuk). Life Line then resumes occupancy of the premises after Ms. Kilitzglou negotiates an agreement with Minuk.

[56] Alca files in bankruptcy and subsequently on the same date 778 appoints Segal as receiver under the general security agreement.

June 28, 2007

[57] On this date Mr. DeRonde sells the Clayson equipment purchased to Sam, who in turn provides it to his brother who starts to manufacture and sell bedroom furniture.

July 10, 2007

[58] This is the date of the first meeting of creditors for Alca. At this meeting it is agreed that the trustee (Segal) will obtain a second opinion on the validity of the security held by 778.

July 16, 2007

[59] A second opinion dated July 16, 2007 is prepared by MacDonald Sager Manis LLP, confirming that in their opinion,

The general security agreement given by the debtor to the secured party dated February 13, 2003 has been validly perfected under the P.P.S.A. and constitutes a valid and binding obligation of the debtor in favour of the secured party, and is enforceable by the secured party in accordance with its terms.

August 24, 2007

[60] Segal forwards the sum of $250,000.00 to 778 as initial payment on account of their security. In total, approximately $300,000.00 is paid to 778 pursuant to the general security agreement.

December 5, 2007

[61] On this date Madam Justice Maddalena grants an order that TransAmerica Life Canada may pay the proceeds of the TransAmerica life insurance policy in the sum of $600,000.00 to Fluxgold Izsak Jaeger LLP in trust. The court order provides that the proceeds are to be held in a joint trust account and will not be disbursed without either the written consent of the parties or further order of the court.

February 16, 2010

[62] In an order dated February 16, 2010 Justice Lauwers grants an order permitting Ms. Kilitzoglou to pay the sum of $140,000.00 into court. Once paid into court the funds are not to be disbursed until further order of the court.

Legal actions commenced

[63] Following the events described in the chronology above, a number of legal actions have been commenced and have been addressed in the evidence heard at trial. A summary of the various actions is set out below:

(a) Application dated November 8, 2007 (court file CV-07-086409-00)

Tanya Cure commenced an application on November 8, 2007 seeking a declaration that she and the CIBC were the beneficiaries under the TransAmerica life insurance policy. TransAmerica, Helen Kilitzoglou, and the Royal Bank of Canada are named as respondents in that application.

(b) Application dated April 2, 2008 (court file CV-08-088632-00)

On April 2, 2008 Helen Kilitzoglou commenced an application seeking financial remedies under the Succession Law Reform Act and other relief relating to her common-law relationship with Mr. Cure. Numerous heads of relief are claimed in the application including: support, an order transferring Mr. Cure’s interest in the property in Vaughan to Ms. Kilitzoglou or alternatively the right to partition and sell the property, an order that the proceeds of the TransAmerica life insurance policy be paid to Ms. Kilitzoglou, an order to determine the validity of the deceased’s last will, an order removing Tanya and Shannon Cure as estate trustees of Mr. Cure, a declaration that the cohabitation agreement was void, as well as a number of other claims.

[64] I am advised by counsel that prior to the trial in this matter that Ms. Kilitzoglou withdrew any claims for support or a declaration that the cohabitation is not legally binding. As a result the only issues to be decided pursuant to this application relate primarily to the family home including:

(i) Does Ms. Kilitzoglou have the right to purchase the home;

(ii) In the alternative does Ms. Kilitzoglou have the right to continue living in the home; and

(iii) Who is responsible for certain expenses associated with the home.

Ray White action (court file 2802/09)

On April 9, 2009 Ray White and 157 commenced an action naming Shannon and Tanya Cure and the Estate of Albert Cure as defendants. This action related to claims arising out of a shareholder’s agreement. This action was settled on May 23, 2012, and therefore did not proceed to trial.

Claim by Helen Kilitzoglou and Life Line (court file CV-09-094857-00)

This action was commenced by Helen Kilitzoglou and Life Line by way of Notice of Action on June 4, 2009. The defendants are Shannon and Tanya Cure personally and as estate trustees of the Estate of Al Cure, Anthony DiLena personally and as estate trustee of the Estate of Al Cure, Marvin Rotenberg, Segal and Partners Inc., Martin Sole and Vykunthavasam Sambasivan.

Anthony DiLena did not defend the action and has been noted in default by the plaintiffs. At the conclusion of the evidence on November 30, 2012 the parties agreed to a consent order dismissing the action against Vykunthavasam Sambasivan and 2142638 Ontario Inc. operating as Sam’s Brothers’ Furniture.

[65] In the Kilitzoglou action, the plaintiffs claim damages in the sum of $7,500,000.00 for trespass, conversion and loss of profits arising out of “the defendant’s actions in attempting to destroy and shutting down the business of Life Line Manufacutring Inc.” as well as damages for “civil conspiracy arising out of their actions, jointly and closing down and intentionally harming the plaintiffs in their business, Life Line Manufacturing Inc.” The plaintiffs also claim damages against the defendants Tanya Cure, Shannon Cure, and Anthony DiLena (both personally and as estate trustees of the Estate of Mr. Cure) arising out of their alleged breach of contract and agreement between Mr. Cure and Ms. Kilitzoglou dated December 30, 2006 in connection with the leasing of the premises on Clayson Road together with the use of the equipment at those premises.

[66] In November, 2010, Ms. Kilitzoglou brought a motion dated November 23, 2010 seeking to add additional claims in her action. The proposed amendments claimed that the dividend in the sum of $800,000.00 declared by the Board of Directors of Alca on November 29, 2002 contravened Section 38(3) of the Business Corporations Act of Ontario, R.S.O. 1990, Chapter B.16, and that as a result the general security agreement made in favour of 778 was null and void, and should be expunged from registration under the Personal Properties Securities Act. In addition, damages in the sum of $800,000.00 against the Estate of Mr. Cure, Anthony DiLena and Marvin Rosenberg arising out of their alleged “fraud, conspiracy and creating an artificial dividend”. Further, damages in the sum of $800,000.00 against Marvin Rotenberg and Shannon Cure, Tanya Cure, Segal and Partners and Martin Sole were sought for alleged “fraud and conspiracy arising out of the improper appointment of the receiver manager in June of 2007 and consequential improper realization of assets arising out of that appointment.”

[67] The motion to amend the plaintiff’s statement of claim was heard by Justice Lauwers on January 28, 2011. Justice Lauwers granted leave to amend the pleadings without prejudice to the right of the defendants to plead and rely on a limitation defence.

[68] Also in the action by Helen Kilitzoglou a counterclaim has been brought by the defendant Shannon Cure and Tanya Cure against the plaintiffs. It is alleged in the counterclaim that the actions of Helen Kilitzoglou interfered with the ability of the Estate as well as 778 and Alca to collect receivables, thereby reducing the overall value of the Estate.

[69] In reasons dated May 12, 2010, Justice Lauwers ordered that all of the actions be tried together. Consequently, all of the above-noted actions were tried before me.

The relationship between Al Cure and Helen Kilitzoglou

[70] It is apparent that in considering the various issues which are outstanding, the relationship between Al Cure and Helen Kilitzoglou, as well as their respective families, has a significant bearing on what took place. In addition, I have concluded that the relationships which developed between the various parties have had a very significant impact on the nature of the litigation which emerged. It was apparent that by the time of trial (and probably much earlier) there was a high degree of conflict between the various parties. This limited the ability of the parties to reach agreement on outstanding issues or to narrow the issues which needed to be adjudicated.

[71] The evidence would suggest that initially Mr. Cure and Ms. Kilitzoglou had a close, loving relationship. It is apparent, however, that over time difficulties surfaced in the relationship. In her evidence, Ms. Kilitzoglou made reference to difficulties which emerged in the negotiation of the cohabitation agreement. She stated that the final version of the agreement was given to her by Mr. Cure, and she went to see her lawyer, Mr. Singer. Mr. Singer told her not to sign the agreement without financial disclosure. Ms. Kilitzoglou then went back to Mr. Cure and spoke to him about this. He told Ms. Kilitzoglou that there would be no financial disclosure, and that if she did not sign the agreement, she would have to move out of the house.

[72] Ms. Kilitzoglou also described the events leading up to her separation from Mr. Cure in October, 2005. She and Mr. Cure attended a wedding of Mr. Cure’s nephew. Both Ms. Kilitzoglou and Mr. Cure went to the wedding with their children. All four children were put in the same hotel room. A fight developed amongst the daughters. Ms. Kilitzoglou stated that her children had expensive watches and Mr. Cure thought she must be making too much money. Ms. Kilitzoglou told Mr. Cure that she wasn’t going to work for him anymore and went to live with her children for several weeks. She testified that Mr. Cure subsequently apologized and she went back with him. I have concluded, however, that the evidence of Ms. Kilitzoglou underestimates the degree of conflict that was developing between her and Mr. Cure.

[73] On February 27, 2006 Mr. Singer, on behalf of Ms. Kilitzoglou, wrote to Mr. Cure’s counsel to demand compliance with the cohabitation agreement based on the separation between the parties. This would certainly suggest that there was not a quick resolution to the separation as suggested by Ms. Kilitzoglou in her evidence, and instead the matter was escalating to the point where legal counsel were involved. It is significant to note that this letter was written almost four months after the incident which occurred on October 5, 2005, which led to the separation.

[74] In the evidence of Mr. Rotenberg, he described the relationship between Mr. Cure and Ms. Kilitzoglou as a “love/hate” relationship. He stated that Ms. Kilitzoglou often attributed any problems or losses to Mr. Cure, while at the same time she took credit for all the successes.

[75] Shannon Cure was questioned on cross examination about the relationship between her father and Ms. Kilitzoglou. She described that it was sometimes tense, although there were some displays of caring from time to time. Shannon Cure noted that she did not have a lot of contact with Ms. Kilitzoglou as she never lived at the home in Vaughan. While Shannon described her relationship with Helen as “okay”, it is apparent that the two were not close.

[76] In her evidence, Tanya Cure testified that she was about 15 or 16 years old when her father first met Ms. Kilitzoglou. At that time she was living with her father on The Kingsway in Toronto. She subsequently went to live with her mother, but later in around 1998 moved into the Westridge home with her father, Ms. Kilitzoglou, and Ms. Kilitzoglou’s two daughters.

[77] Ms. Cure also stated that following the separation between her father and Ms. Kilitzoglou, Ms. Kilitzoglou made it a condition that she would only move back into the house in Vaughan when she had moved out of the house. Her father therefore bought a house for her in Woodbridge, Ontario.

[78] Tanya Cure testified that after Ms. Kilitzoglou moved back into the home with her father there were problems in the relationship between her father and Ms. Kilitzoglou. Ms. Cure felt that Ms. Kilitzoglou was making a lot of demands, and Ms. Kilitzoglou told her that her father did not keep up the house the way she wanted it.

[79] In her evidence about the preparation of the handwritten agreement dated December 30, 2006, Ms. Kilitzoglou stated that the document was in her handwriting. The document was preceded by a meeting with herself, Mr. Cure, and Mr. Rosenberg. She stated that she prepared the handwritten agreement because she didn’t trust Mr. Cure.

[80] My conclusion from the evidence is that for some time before Mr. Cure’s death, the relationship between Ms. Kilitzoglou and Mr. Cure was strained. I have also concluded that the children were well aware of the conflict and started to align themselves with their respective parent. This is reflected in the fact that Mr. Cure went out and purchased a house for his daughter, Tanya.

Was the change of beneficiary form signed by Mr. Cure dated December 16, 2003 valid and binding on TransAmerica Life Canada?

[81] The validity of the change of beneficiary form signed by Mr. Cure is an issue in the two applications which have been commenced. In the November 8, 2007 application commenced by Tanya Cure, TransAmerica Life Canada and Royal Bank of Canada are named as respondents, in addition to Helen Kilitzoglou. In the April 2, 2008 application by Helen Kilitzoglou, Tanya Cure and Shannon Cure are named as respondents as estate trustees for the Estate of Albert Cure. No one attended at trial to represent the interests of TransAmerica Life Canada, the Royal Bank of Canada or CIBC. It is apparent, however, that TransAmerica Life Canada is well aware of the litigation and one of their representatives was a witness at trial testifying on the issue of the validity of the change of beneficiary form. Prior to the trial in the action, TransAmerica obtained an order allowing it to pay the proceeds from the policy into court. It is apparent that having paid the money into court TransAmerica did not intend to participate further in the litigation. There was evidence at trial that RBC did not have an interest in the proceeds from the insurance policy because Mr. Cure’s debt with RBC was life insured. CIBC would appear to have an interest in the determination as to who is entitled to the life insurance proceeds as the mortgage debt to CIBC by Mr. Cure was not life insured. In the November 8, 2007 application, however, it is stated that Tanya Cure is bringing the application both on her behalf and CIBC jointly. This is referenced in the declaration sought in the application. In order to clarify that both CIBC and RBC were aware of the fact that the validity of the beneficiary designation was being litigated, I asked counsel to confirm with both CIBC and RBC that they were aware that this matter was being litigated before me. Counsel for the estate of Mr. Cure confirmed that both RBC and CIBC were served with the notice of application. Both were advised of the current status of the litigation. Neither CIBC nor RBC indicated any intention to appear and no representative of RBC or CIBC attended to take a position during trial. I therefore proceeded to deal with the issue in the absence of any representation from CIBC or RBC.

[82] Ms. Kilitzoglou takes the position that the change of beneficiary form is not valid and that she should be entitled to the proceeds from the TransAmerica policy as the original beneficiary who was named at the time the policy was issued. She relies on the following factors in support of her position in this regard:

(a) The original signed copy of the change of beneficiary form has not been produced. It is suggested that there are suspicious circumstances surrounding the signing of the beneficiary change form. In particular, Ms. Kilitzoglou asserts that when Mr. Cure signed the form, it was a blank form without any designation of the new beneficiary;

(b) TransAmerica did not accept the change of beneficiary form because it did not precisely set out the percentage proceeds which were payable to CIBC and Ms. Cure; and,

(c) As Mr. Cure did not respond to requests from the insurer’s agent to amend the change of beneficiary form, the proper inference to drawn is that he changed his mind about wishing to move forward with the change of beneficiary designation.

[83] The validity of a beneficiary change is governed by the Insurance Act, R.S.O. 1990, Chapter I.8. Section 190 of this Act provides that:

(1) An insured may in a contract or by a declaration designate the insured’s personal representative or a beneficiary to receive insurance money;

(2) Subject to section 191, the insured may from time to time alter or revoke the designation by a declaration.

[84] Counsel for Tanya Cure has referred to the Ontario case of RBC Life Insurance Company v. Monaco, 2012 ONSC 75. In that case there was a change of beneficiary designation signed by the deceased. However, at the date of the deceased’s death, the change of beneficiary forms were not on record with RBC. There was an issue as to whether the change of beneficiary form had been forged. However, the judge found on the evidence that the signature on the form was that of the deceased. The court held that only an irrevocable designation of beneficiary was required to be filed with the insurer during the lifetime of the insured. The court states, “It is clear from the authorities that the designation does not have to be made with any formality other than it must be in writing.” The court therefore upheld the validity of the change of beneficiary designation.

[85] In Sosna v. Rickards, [1994] I.L. R. 1-3111, the court dealt with a situation where the deceased signed a beneficiary change form. The court held that the designation of a life insurance beneficiary may be made without any formality other than it must be in writing and signed by the insured.

[86] In Crown Life Insurance Co. v. Fell (1971), 20 D.L.R. (3d) 480, [1971] 4 W.W.W. R. 1, the court held that there is no requirement under the B.C. legislation that a beneficiary designation must be filed with the insurer.

[87] In the plaintiff’s submissions it is noted that the original change of beneficiary form has never been produced. Ms. Kilitzoglou takes the position that when Mr. Cure signed the beneficiary change form, the new beneficiary designation was blank. It is suggested that this information was added later, probably after Mr. Cure died. The change of beneficiary form was witnessed by the insurance broker who sold Mr. Cure the policy, William Susands.

[88] Ms. Kilitzoglou was not given a copy of the TransAmerica insurance policy by Mr. Cure and did not get a copy until after the death of Mr. Cure. She does not have any direct evidence or personal knowledge with respect to the circumstances surrounding the change of beneficiary document or its execution.

[89] Shannon Cure gave evidence about a conversation between herself and her father. At the time of the discussion her father told her that he had a life insurance policy and that he had changed the life insurance beneficiary designation to CIBC and the remainder to her. Her father asked Tanya not to tell Ms. Kilitzoglou about this. Ms. Cure identified in her evidence the copy of the change of beneficiary form that her father gave to her that evening. The form itself was unsigned by her father. However, her father told Tanya that he had a signed copy in his possession. The signed copy of the beneficiary designation form was found in a locked drawer in her father’s office after his death.

[90] William Susands was called as a witness by Tanya Cure. He is a financial advisor and has his own firm called Susands and Associates. He sells life insurance and investments. Mr. Susands was introduced to Mr. Cure by Mr. Johnstone who took care of Mr. Cure’s general insurance needs, but who did not have a life insurance licence. Mr. Susands initially sold to Mr. Cure the TransAmerica life insurance policy for $600,000.00

[91] Mr. Susands was also responsible for handling the later request for a change in beneficiary. He described Mr. Cure as a man who knew what he wanted to do. He did not ask Mr. Cure why he wanted to make the change and noted that Mr. Cure, “wasn’t a man for conversation”. Mr. Cure just, “told me what to do and I did it, and that was the end of it”.

[92] Mr. Susands testified that he witnessed Mr. Cure’s signature on the form. He could not identify the writing on the form which set out the names of the new beneficiaries. He further testified that the original form would have been given to his assistant to be processed through an agency known as HUB which acted as the administrator for the insurer and which processed the paperwork for this policy. Later, his assistant came back to him and advised that TransAmerica wanted to have the form show specific percentages as to what amount was to go to CIBC and what amount to Tanya Cure. Mr. Susands explained that insurance companies do not want to have to take responsibility for deciding who gets what after a policy holder dies. The language on the beneficiary change forms suggests that CIBC was to receive an amount as their interest might appear. The language on the form was familiar to Mr. Susands and he suggested he may have even recommended this language to Mr. Cure. However, the language was not acceptable to TransAmerica because it did not set out an exact calculation as to how the funds were to be paid. Thus, TransAmerica would not record the new beneficiary change without a specified percentage amount being allocated to each beneficiary.

[93] On January 9, 2004, Mr. Susands’ assistant sent a letter to Mr. Cure advising him that TransAmerica Life could not accept the change form. There was no response to this letter. Subsequently, Mr. Susands called Mr. Cure on January 22nd and left a message for him to call back, but there was no response. The original beneficiary change form was never returned to him. Mr. Susands thought it must still be at TransAmerica Life.

[94] The plaintiff called Steven Clutchey as a witness. Mr. Clutchey is employed by TransAmerica. Mr. Clutchey stated that there was no information in the file to suggest that TransAmerica received a copy of any change of beneficiary form prior to Mr. Cure’s death. Mr. Clutchey stated that before a beneficiary designation is accepted by TransAmerica they require the percentage of proceeds from the policy to be designated where there is more than one beneficiary. That information is needed so that the claim can be adjudicated quickly when necessary.

[95] I accept the evidence of Mr. Susands regarding the circumstances surrounding the execution of the change of beneficiary form. Mr. Susands is a licensed insurance professional. He has no financial interest in the outcome of the litigation and his evidence was supported by other documentary evidence. We have, for example, documentation between his office and HUB which confirms the terms of the new beneficiary designation and the position being taken by TransAmerica that they required a specified percentage amount to be payable to each beneficiary. I, therefore, conclude that Mr. Cure signed the beneficiary change form in the presence of Mr. Susands, that the original copy of the form was sent to the insurer’s agent and that the original copy of this form has been lost or destroyed by the insurer or its agent after receiving it and requesting changes regarding the new beneficiary designation.

[96] While Mr. Cure did not make the necessary changes to the form requested by TransAmerica, this does not, in my view, affect the validity of the change of beneficiary information.

[97] I reject the suggestion that the identities of the new beneficiaries were added after Mr. Cure signed the change of beneficiary form. Tanya Cure produced the unsigned beneficiary change form, which she stated her father had given her. This unsigned form contains exactly the same wording in identical form as the signed version in the file. This suggests to me that when Mr. Cure signed the change form the wording on the form was already in place. In addition, Mr. Cure’s instructions were confirmed by Mr. Susands in his evidence. Further, Mr. Susands gave the signed form to his assistant to be processed through TransAmerica. Email documentation confirms that TransAmerica was not prepared to accept the form because exact percentages were not set out on the form. This would certainly suggest that the beneficiary designations were on the forms when they were sent in to TransAmerica. The suggestion that the identity of the new beneficiaries was added after Mr. Cure signed the form is no more than speculation on the part of Ms. Kilitzoglou. I conclude that the change of beneficiary form did properly identify the names of the new beneficiaries at the time it was signed by Mr. Cure.

[98] Ms. Kilitzoglou suggests that the failure of Mr. Cure to send in a revised version of the change of beneficiary form as requested by the insurer supports a conclusion that Mr. Cure changed his mind about wanting to change the beneficiary designation.

[99] In my view, this assertion is also no more than speculation given that Ms. Kilitzglou was not aware of Mr. Cure’s plan to change the beneficiary designation or his submission of the documentation to the insurer until after his death. Mr. Cure’s intention to change the beneficiary designation is supported by the discussion he had with the broker, Mr. Susands, at the time the beneficiary change form was executed. It is also consistent with my conclusion that there was a significant deterioration in the relationship between Mr. Cure and Ms. Kilitzoglou in the time frame leading up to his death. The fact that Mr. Cure kept the form in a locked drawer with his personal papers (where it was found after his death) satisfies me that on a balance of probabilities Mr. Cure did not change his mind about the change of beneficiary prior to his death.

[100] I therefore conclude in the circumstances that the change of beneficiary form signed by Mr. Cure meets the requirements of the Insurance Act and is a valid and binding document.

Was the declaration of a dividend by Alca a contravention of section 38(3) of the Ontario Business Corporations Act and did 778 hold a valid security?

[101] In the amended statement of claim it is asserted that the dividend in the sum of $800,000.00, which was declared by the Board of Directors of Alca on November 29, 2002, contravened Section 38(3) was null and void. Damages in the sum of $800,000.00 are claimed against the Estate of Al Cure, Anthony DiLena and Marvin Rotenberg arising out of their alleged fraud, conspiracy and creating an artificial dividend. Damages are further claimed in the amount of $800,000.00 against Martin Rotenberg, Shannon Cure, Tanya Cure, Segal and Partners, and Martin Sole for alleged fraud and conspiracy arising out of the improper appointment of the receiver manager in June of 2007, and the alleged improper realization of assets arising out of that appointment.

[102] All of these allegations depend on a finding that the declaration of the dividend and the registration of the general security agreement were void and unlawful.

[103] Section 38(3) of the Ontario Business Corporations Act provides as follows:

The director shall not declare and the corporation shall not pay a dividend if there are reasonable grounds for believing that,

(a) the corporation is or, after the payment, would be unable to pay its liabilities as they become due; or

(b) the realizable value of the corporation’s assets would thereby be less than the aggregate of,

(i) its liabilities; and

(ii) its stated capital of all classes.

[104] In support of its position the plaintiffs called Mr. Jeff Brown as an expert witness at trial. Mr. Brown is a chartered accountant. Mr. Brown testified that he could not identify any business reason for the declaration of the dividend. He concluded that the dividend was an attempt to get rid of retained earnings in Alca. The only reason for such a move, in Mr. Brown’s view, was to creditor-proof the company. The purpose of such a move, therefore, is so that creditors would be the last persons paid in an insolvency.

[105] In his evidence, Mr. Brown focused on the question of whether the second test under Section 38(3) was satisfied, that is whether the corporation’s assets after payment of the dividend would be less than the aggregate of its liabilities and stated capital. Mr. Brown stated that he was satisfied that the company’s inventory was valued fairly on the balance sheet at the time of the dividend. With respect to pre-paid expenses, he had no reason to dispute the value of these items in the financial statements.

[106] Mr. Brown did have a concern, however, about the value attributed to the fixed assets of the company, which included machinery, automobiles, and office equipment. He stated that the depreciated value reflected in the books and records of the corporation does not necessarily reflect a proper valuation. The fair market value of a depreciated asset is usually less than the book value. In order to assess what the realizable value of the capital assets were at the time of the dividend Mr. Brown looked at the disposal values after the corporation went into bankruptcy. In June, 2006 the capital assets of Alca were valued at $208,337.00 in the records of Alca. On May 15, 2007, just prior to the bankruptcy, they were listed at a value of $180,000.00. However, the receiver only realized a value of $90,084.62. Mr. Brown agreed that this is not a definitive assessment of value, as the value in a forced liquidation may well be lower than if the equipment is sold in a non-insolvency situation.

[107] Mr. Brown stated that some consideration should have been given to the fair market value of the fixed assets before the dividend was declared. In particular he stated that the director should have been given some assurance about the value of the fixed assets; otherwise Mr. Brown testified that he would not have proceeded with the dividend.

[108] There are two significant points with respect to Mr. Brown’s evidence. First, the allegations with respect to the payment of the dividend are not based on a claim in negligence. Thus, the issue before the court is not whether the accountant or Mr. Cure were negligent in declaring a dividend, but only whether the dividend breached the provisions of Section 38(3) and if so, whether there is sufficient evidence for a finding of fraud or conspiracy.

[109] Second, at no point in his evidence did Mr. Brown give an opinion that the dividend made by Alca was in breach of the Ontario Business Corporations Act. This is because at no point did Mr. Brown come to a conclusion as to what the value of the fixed assets were and whether they were different from that recorded on the books of the corporation at the time this dividend was declared. Without this information it would not be possible to arrive at a conclusion as to whether the assets of Alca after payment of the dividend exceeded its liabilities and rendered it potentially insolvent.

[110] Taken at its highest, Mr. Brown’s evidence simply raised an issue as to whether the corporation’s fixed assets had been properly valued in the books of the company. As he did not have sufficient information with respect to the values of the fixed assets, he was not in a position to conclude one way or the other as to whether the section had been breached. No evidence was led at trial as to the value of the equipment in issue at the time the dividend was declared. Based on the depreciated values in the financial records of Alca there was no breach of Section 38(3).

[111] The onus was on the plaintiffs to prove that the dividend transaction contravened the provisions of section 38(3). In my view they have failed in their onus to adduce evidence to support such a conclusion.

[112] With respect to the evidence of Mr. Brown that the declaration of the dividend was an attempt to “creditor proof” Alca’s assets, I accept the defence position that people are entitled to arrange their financial affairs to protect their assets so long as they do not breach any laws or duties which are owed at the time the arrangements are made. Asset protection, in and of itself, is not illegal. The Ontario Business Corporations Act sets out certain limits on the declaration of dividends. So long as these requirements and any other applicable legal requirements are met there is no prohibition against a business owner such as Mr. Cure from taking steps to protect assets which have built up in his operating company.

[113] The plaintiffs have also taken issue with the declaration of the dividend because no funds were in fact advanced by Alca to 778. This was an issue that was raised at the time of Alca’s bankruptcy. The trustee for Alca obtained two legal opinions with respect to this issue. Both of these opinions were from the law firm of Macdonald Sager Manis LLP. In their initial report dated June 18, 2007 they provided an opinion as to the validity and enforceability of the security interest of 778. In their report they state as an assumption that monies were in fact advanced by the secured party to the debtor. The accuracy of that assumption was raised in the first meeting of creditors of the Alca bankruptcy on July 10, 2007. As a result, the trustee requested a further report from legal counsel. A report dated July 16, 2007 from Macdonald Sager Manis LLP was prepared. In that correspondence the law firm notes the nature of the request for a second report.

[114] The report states:

You have requested that we confirm our opinion as it relates to the security interests and charges granted by the debtor to and in favour of 778910 Ontario Limited (“the secured party”) as a result of the secured party having loaned an unfunded dividend from the debtor in the sum of $800,000.00 as the loan receivable upon which it seeks to enforce its security.

The facts as we understand them are that the secured party is the sole shareholder of the debtor and, in late 2002 or early 2003, the debtor issued dividends to the secured party in the amount of $800,000.00. The secured party then loaned the sum of $800,000.00 back to the debtor as a loan to its wholly owned subsidiary and obtained a general security agreement as security for the repayment of the indebtedness owed to it. Both the secured party and the debtor reported the issue of dividends and the advance and obligation for the loan on its tax filings with Canada Revenue Agency and its financial statements. However, it is apparent that no money changed hands during the course of these transactions.

It is the fact that no money was actually exchanged that causes concern to the trustee and upon which it seeks clarification of our previous security opinion.

[115] In their second report legal counsel goes on to conclude once again that the general security agreement given by the debtor to the secured party dated February 13, 2003:

…has been validly perfected under the P.P.S.A. and constitutes a valid and binding obligation of the debtor in favour of the secured party, and is enforceable by the secured party in accordance with its terms.

[116] No expert opinion was tendered by the plaintiff that the method of recording the transaction in the books of the companies involved in the dividend transaction was inappropriate or that the dividend and loan back were somehow invalid because cash or cheques were not exchanged. I accept the defence position that the fact that money did not change hands did not change the fact that funds were advanced by way of book entries. Funds can be advanced without money changing hands and the book entries in my view adequately documented the transaction.

[117] As noted above, the onus of proof was on the plaintiffs to establish the invalidity of the dividend payment and the general security agreement. As they have failed to meet their onus in this regard, there is no basis for a finding that this transaction was void or fraudulent as alleged.

[118] The defence has also raised a limitation period argument with respect to the dividend transaction. This issue was raised by way of a notice of motion dated November 23, 2010. In their written submissions the plaintiffs argue that the loss or injury that occurred was on or about June 20, 2007 when there was the appointment of a receiver manager under the general security agreement. They submit that is when the cause of action arises. No evidence was led at trial to suggest that Ms. Kilitzoglou was not aware of her cause of action by June 20, 2007. It is apparent that this cause of action was not advanced within two years, even based on the plaintiff’s own analysis. I therefore conclude that this claim is statute-barred.

[119] In any event it is apparent that the claim for $800,000.00 is a gross exaggeration of any damages which would have been suffered by Ms. Kilitzoglou had the retained earnings remained with Alca. Alca went into bankruptcy and there were a large number of unsecured creditors who were left with very substantial debts unpaid. As it turned out 778 only realized about $300,000 on their security. Had the retained funds remained in Alca the creditors were not likely to recover the full amount owing. The claims of the unsecured creditors totalled approximately $387,000. The proof of claim which was filed by Ms. Kilitzoglou in the Alca bankruptcy was for the sum of $9,100.00. Ms. Kilitzoglou’s net recovery, had the retained earnings been kept in Alca, would likely have been significantly less than $9,100.00.

Breach of Contract

[120] Both Mr. Cure and Ms. Kilitzoglou signed the handwritten agreement dated December 30, 2006. Mr. DiLena, when he was provided with a copy of the agreement, took the position that it was not binding because it was not signed on behalf of the corporations controlled by the two parties. At trial, the Estate of Mr. Cure took the position that there was no personal liability on the part of the Estate of Mr. Cure because both parties signing the agreement knew they were dealing with corporations. In the case of Ms. Kilitzoglou she knew that the premises were occupied by Alca and that the equipment which was referenced in the agreement was also owned by Alca. In the case of Mr. Cure he was aware that the premises and equipment were going to be used by Ms. Kilitzoglou’s company, Life Line. The Estate argues that both parties were well aware that they were signing as agents of their respective corporations. In these circumstances it is asserted that the principals of the corporation did not incur any personal liability in relation to the contract. It is noted in this regard that Ms. Kilitzoglou submitted a number of rent cheques which were issued by Life Line to Alca on account of the rent.

[121] The Estate of Mr. Cure further takes the position that it would be inappropriate to pierce the corporate veil and impose liability on the Estate. They referred, for example, to the case of Burns v. Sohi, 2012 ONSC 2414, where it is suggested that officers and employees of a corporation are not liable for acts done within their authority and on behalf of the corporation unless there is some conduct on their part that is either tortious in itself or is independent misconduct from that of the corporation.

[122] However, even if one accepts that the parties were signing the agreement on behalf of their respective corporations there is still an issue as to whether they incurred personal liability as agents. In Canadian Agency Law by Fridman (2nd edition) it is noted that an agent who enters into a written contract, not under seal, on behalf of a principal, will be personally liable on such contract unless it is indicated to the other party that he or she is in fact only acting as agent for another. The onus is on the agent to indicate he or she is contracting as an agent.

[123] I have concluded on the facts of this case that the agreement was a binding, personal commitment of both Ms. Kilitzoglou and Mr. Cure. The agreement itself is handwritten and signed personally by both Ms. Kilitzoglou and Mr. Cure. There is no indication on the agreement that they are signing in anything other than their personal capacity. Furthermore, the agreement in its preamble states, “This is an agreement between Albert Cure and Helen Kilitzoglou”. In my view, this supports a conclusion that the parties intended to be bound personally as opposed to this being an agreement which is entered into on behalf of their respective corporations. Finally, there is no reference to the individual corporations or anything in the agreement which would support a conclusion that this contract was being entered into by Mr. Cure on behalf of Alca Designs.

[124] I conclude in the circumstances that the agreement was a personal commitment by both Mr. Cure and Ms. Kilitzglou. Both understood at the time that the performance of the agreement would be carried out through the corporations which each of them controlled. Both intended personal responsibility as well as corporate responsibility in connection with the obligations required by the agreement.

[125] The agreement dealt with three main issues. The first part related to the use of the Clayson Road premises for Life Line. It is clear that the Estate of Mr. Cure and Alca gave up all rights to use of the Clayson premises following the landlord’s distraint. Fortunately, however, Ms. Kilitzoglou was able to negotiate arrangements to continue using the Clayson premises with Minuk. As a result, Life Line’s occupation of the Clayson Road premises was only interrupted for a short period between June 15, 2007 until around June 21, 2007. It is apparent that Ms. Kilitzoglou had some limited advance notice of Alca’s intention to close down its occupation of the Clayson Road premises. This is referenced, for example, in Mr. Singer’s letter of May 29, 2007 to Alca Design. Mr. Singer’s evidence was that he was aware as early as June 20th that Ms. Kilitzoglou was negotiating the terms of a tenancy with Minuk. The evidence indicates, however, that the rental payments required by Minuk were significantly higher than the rental negotiated with Alca. In dealing with Minuk, the rent on the Clayson premises increased to $7,420.00 a month plus utilities as compared to the $2,000.00 per month which had been payable to Alca. Given that the rental period under the handwritten agreement was for a period of 12 months, it would appear that the plaintiffs were exposed to the higher rent for a period of 6 months between July to December, 2007.

[126] I conclude that the plaintiffs are entitled to a judgment in the sum of $32,520.00 from the Estate of Mr. Cure on account of the increased rental payments. In addition, the plaintiffs are entitled to damages relating to the interruption in Life Line’s business caused by the breach of the lease arrangement. The issue of those damages will be considered later in these reasons.

[127] The second obligation of Mr. Cure under the handwritten agreement of December 30, 2006 was to provide the use of the machinery at the Clayson premises for a period of six months, after which Ms. Kilitzoglou had the option to buy the equipment, if “both parties agree on the price”. It is apparent that Ms. Kilitzoglou’s use of the equipment at the Clayson site was cut short by approximately two weeks, given that the six-month period would have expired at the beginning of July. This would constitute a further breach of the December 30, 2006 agreement. Again, damages relating to this breach will be considered later in these reasons.

[128] The plaintiffs maintain that there was also a breach of the agreement by failing to allow Ms. Kilitzoglou to buy the equipment at the Clayson Road premises. I do not find any breach of the agreement in this regard.

[129] The portion of the agreement dealing with a possible sale of the equipment provides as follows,

After the six month period is over Helen can buy the machines if both

parties agree on the price or lease for a price that both parties agree.

It is apparent that there are a number of critical terms of the proposed purchase which are not included. For example there is no reference to the purchase price or lease rate which will apply nor are there any terms to define the time period during which Ms. Kilitzoglou may exercise her right under the agreement. In the Law of Contract in Canada by Fridman (6th Edition, Toronto: Carswell, 2011) it is noted that a document which omits essential terms will not constitute an enforceable contract. It is noted that a test would be whether the terms in question relate to essential aspects of the alleged contract. A failure to settle the purchase price for goods has been held in some cases to be an essential term of an alleged contract according to the text.

[130] It is also noted that in some cases parties may only have, “agreed to agree”. This will be the case where important aspects of the intended contract are left to be determined by the parties at a later date. It is noted further that an agreement which leaves the price to be negotiated may create an obligation to negotiate in good faith and not to withhold agreement unreasonably.

[131] I have concluded that the portion of this agreement dealing with the purchase of the equipment did not create an enforceable agreement because the essential terms relating to the proposed purchase or lease had not been agreed to. The terms included in the document really amounted to no more than a stated intention by the parties to negotiate a contract possibly in the future for the sale or lease of the equipment. It is significant that there was no agreement on price on a process to follow as to how a price would be arrived at. There was not even an agreement as to whether any transaction would take the form of a purchase or a lease. This is not sufficient in my view to create an enforceable obligation. This conclusion is supported by the wording of the relevant provision which states that Ms. Kilitzglou can buy the equipment, “if” both parties agree on the price. It is contemplated, therefore, that any sale of the equipment is conditional on a subsequent agreement being reached between the parties. In any event I have concluded that any obligation owed to Ms. Kilitzoglou was satisfied by an offer made by Shannon and Tanya Cure at the meeting on May 29th.

[132] In her evidence, Helen Kilitzoglou testified that at the meeting on May 29, 2007 there was an agreement that she would buy the Clayson equipment for $39,000.00. I do not accept her evidence in this regard. In his letter dated May 29, 2007 addressed to Shannon Cure at Alca following the meeting on May 29th, Mr. Singer on behalf of Ms. Kilitzglou states:

I also confirm that you have offered to sell her the equipment at this location, provided she confirm her willingness to purchase same by 5:00 p.m. tomorrow.

[133] This statement is inconsistent with any agreement having been arrived at to purchase the equipment at the meeting on May 29th. In addition, when questioned about this issue at trial, Mr. Singer testified that Ms. Kilitzoglou was unwilling to confirm a purchase of the Clayson equipment until she knew that the rent on the Clayson premises had been paid. The clear inference is that unless Ms. Kilitzoglou received this confirmation, she was not prepared to proceed with the purchase of the machinery. The evidence is also clear that Ms. Kilitzoglou did not respond to the offer at any point in time prior to the eventual sale to De Ronde Sales which occurred a few days before June 20th. Nor did Ms. Kilitzoglou ever request an extension of time to respond to the offer.

[134] Even if Ms. Kilitzoglou had been advised about the status of the premises on Clayson as requested in Mr. Singer’s letter of May 29, 2007, there was never a firm commitment by Ms. Kilitzoglou to purchase the equipment. This is reflected in Mr. Singer’s letter of May 29, 2007 where he demands confirmation that the rent had been paid for the Clayson premises for May, 2007:

before my client can make any decision with regard to the purchase of the equipment, or any other leasing issues arising out of the aforesaid agreement.

[135] I conclude in the circumstances that Ms. Kilitzoglou gave no firm commitment to purchase the equipment and was attempting to delay having to respond to the offer. She was, in essence, trying to “hedge her bets”. This put Shannon and Tanya Cure in a very difficult position given that they had already made a decision to shut down the Clayson Road premises, were behind in the rent at Clayson, and faced a rapidly deteriorating financial situation for Alca.

[136] In my view, any obligation to sell the equipment to Ms. Kilitzoglou was satisfied by the offer which was extended to Ms. Kilitzoglou to purchase the equipment at the meeting on May 29, 2007 when the issue of Ms. Kilitzglou’s right to purchase the equipment under the agreement was raised and discussed by the parties. Ms. Kilitzoglou did not respond to this offer, even though she was aware that Alca was making alternate arrangements to sell the equipment as part of its plan to close down the Clayson premises. This is reflected in the correspondence of Mr. Singer dated June 1, 2007 where he advises that Ms. Kilitzoglou has been advised by Mr. Cure’s daughters that the machinery which she was currently using in accordance with the provisions of the agreement was about to be auctioned off. Shannon and Tanya Cure were entitled to conclude, in my view, that Ms. Kilitzoglou was not interested in exercising any option to purchase the equipment at the time it was sold to De Ronde Sales a few days before June 20, 2007.

[137] I therefore conclude that there was no breach of the agreement of December 30, 2006 with respect to any option to purchase the equipment at the Clayson Street premises.

Was there a conspiracy by the defendants to destroy and shut down the business of Life Line?

[138] The plaintiffs allege a conspiracy by the defendants to destroy the Life Line business. Although not pleaded, the plaintiffs in their written submissions have also included a claim based on intentional interference with economic relations. Although the claim for intentional interference with economic relations was not specifically pleaded, all defence counsel at the time of oral argument agreed to permit the plaintiffs to amend their statement of claim to assert this allegation. I have therefore considered this allegation in the context of the evidence which was adduced at trial.

[139] The law with respect to conspiracy is summarized in the Ontario Court of Appeal decision in Agribrands Purina Canada Inc. v. Kasamekas (2011) 2011 ONCA 460, 106 O.R. (3d) 427. In that case the court refers to the fact that the seminal case in Canada on the tort of civil conspiracy is the Supreme Court of Canada decision in Canada Cement LaFarge Ltd. v. British Columbia Light Weight Aggregate Ltd., [1983] 1 S.C.R. 452.

[140] There are two categories of conspiracy which are recognized by Canadian law. The first requires the plaintiffs to show that the conspirators acted in combination, by agreement, and that the predominant purpose of the defence conduct is to cause injury to the plaintiff. If the sole or predominant purpose of those acting in concert is to advance a personal interest rather than to cause injury to the plaintiff, then the conduct is not actionable.

[141] The second type of conspiracy is the unlawful conduct conspiracy. In order to establish an unlawful conduct conspiracy the plaintiffs are required to prove that:

(a) The defendants acted in combination, that is, in concert, by agreement or with a common design;

(b) Their conduct is unlawful;

(c) Their conduct is directed towards the respondents;

(d) The defendants knew that in the circumstances injury to the defendants is likely to result; and,

(e) Their conduct causes injury to the respondents.

[142] In the present case the plaintiffs rely on both types of conspiracy to support their claim against the defendants.

[143] The plaintiffs maintain that the defendants had an intention to harm Ms. Kilitzoglou and her Life Line business. They maintain that Mr. Rotenberg, Mr. Sole, and Shannon and Tanya Cure acted in concert to close the Clayson premises down, pull out the equipment and sell it. It is asserted that this conduct was directed to Ms. Kilitzoglou and the Life Line business.

[144] I have concluded that the plaintiffs have failed to meet the onus of establishing that the defendants either acted with the predominant purpose of causing injury to the plaintiffs or alternatively acted unlawfully and in concert with a common design directed to the plaintiffs.

[145] It is beyond doubt that Alca as a business had been suffering financially for several years prior to Mr. Cure’s death. The financial records for Alca were reviewed in the evidence of Mr. Rotenberg. For 2004 Alca had an operating loss before tax of approximately $141,000.00. For 2005 the statements show an operating loss before tax of approximately $138,000.00. For 2006 there was an operating loss of approximately $114,000.00.

[146] Mr. Rotenberg testified on the effect of the U.S. dollar on Alca’s business. In 2002 the U.S. dollar was worth about $1.50 CAN. By 2003 it had dropped to around $1.47 CAN. By 2006 it had dropped further to about $1.15 CAN, and by June of 2007 it was about $1.06 CAN. Because Alca was selling primarily into the U.S. its business was affected substantially by the U.S. dollar. Mr. Rotenberg testified that Mr. Cure tried to increase prices with some limited success. However, as the value of the American dollar continued to fall, it fell faster than Mr. Cure could increase prices. This was a major factor in the falling profit levels for Alca.

[147] There was also evidence at trial that cheaper Chinese imports to the U.S. had an adverse impact on Alca’s business.

[148] It is apparent that Mr. Cure was very concerned about the financial viability of his business. This is supported by his consultation with Danbury Appraisal in November of 2006 and his consultation with Mr. Sole at Segal Partners on March 16, 2007.

[149] While it is apparent that Mr. Cure was not prepared to shut down the business prior to his death, I conclude that the business itself prior to his death was in serious trouble, and was probably going to fail.

[150] The death of Al Cure on April 10th, in my view, sealed the fate for Alca. Mr. Cure was the driving force behind Alca. I accept the evidence of Shannon and Tanya Cure with respect to the reasons surrounding their management of Alca and Kural businesses and the decisions which were taken in connection with the bankruptcies of those two corporations. They testified that they tried to carry on the business. However, it soon became apparent that the Alca business was declining. It was hoped that they might be able to downsize and operate Alca on a smaller scale. That was the reason for the plan to close the Clayson site.

[151] Shannon Cure testified that after May 29th Alca still wasn’t doing well. The business was on a downhill slope. Orders were not coming in. The accounts receivable were not getting paid. Shannon got on the phone trying to make sales, but was not having any success. This in turn led to the decision to retain Mr. Sole at Segal and Partners. Initially the advice received was to file a Notice of Intention to File a Proposal in Bankruptcy. This was done around June 7th. It was hoped to continue the business and preserve as much of Alca as possible. However, there was no interest expressed with respect to a possible liquidation of Alca’s assets, which in turn led to the decision to file in bankruptcy.

[152] The evidence of Shannon and Tanya Cure was supported by the evidence of Ms. Elvira Kucuqi. Ms. Kucuqi was a former employee of Alca between January of 2004 and August of 2007. She had no involvement in the litigation, and her evidence was not seriously called into question on cross examination. Ms. Kucuqi testified that prior to Mr. Cure’s death she was responsible for entering orders. She would document when the orders were shipped. She would also follow up with the clients for payment. Ms. Kucuqi also explained that Mr. Cure had developed cost figures for each of the various products. When an invoice was delivered she would calculate the difference between invoice price and the cost of manufacture. After these calculations were made she would show the figures to Mr. Cure.

[153] Ms. Kucuqi recalled that at one point she spoke to Mr. Cure. It was apparent they were not making any money on a large customer account based in Chicago. Later the client asked for even lower prices, but Mr. Cure would not agree to this. They therefore lost a substantial amount of business from this client as a result. At one point Ms. Kucuqi recalled that Mr. Cure became angry because his sales were dropping.

[154] After Mr. Cure’s death Ms. Kucuqi continued her employment with Alca. She recalled that Shannon Cure introduced herself to major customers of Alca and was able to obtain some orders. However, problems developed because clients stopped paying Alca for their account receivables. Alca had insurance on the receivables. However, a number of accounts stopped paying and claimed the goods were damaged which left Alco without the benefit of insurance. She also noted a drop in the number of orders coming in to Alca after Mr. Cure’s death.

[155] I accept Ms. Kucuqi’s evidence that the business was declining prior to Mr. Cure’s death and that after his death the business suffered from even fewer orders together with a major accounts receivable problem.

[156] Based on the evidence before me, I conclude that the decision to shut down the Clayson premises and subsequently to take bankruptcy proceedings for Alca were the only viable options available to Shannon and Tanya Cure. They took these actions after having received professional advice from their co-defendants. These actions were not motivated by a desire to harm Ms. Kilitzoglou or Life Line, nor was the conduct directed towards them. The actions were a reasonable response to Alca’s deteriorating financial condition. The actions did have negative effects on the Life Line business. However, I have concluded that it was not directed towards the Life Line business and in fact many other businesses were adversely impacted by these decisions. Ultimately, many creditors of Alca were adversely affected and left with virtually no recovery in the bankruptcy proceeding.

[157] The decision to sell the Clayson equipment to Mr. DeRonde was also a reasonable response in the circumstances. As noted above, the evidence is clear that Ms. Kilitzoglou was offered the equipment at the meeting on May 29, 2007. She was given a reasonable opportunity to purchase the equipment and did not do so.

[158] The fact that Ms. Kilitzoglou was invited to a meeting on May 29th and was advised about the plan to close the Clayson premises, as well as being offered the equipment at Clayson, flies directly in the face of the plaintiff’s theory that there was a conspiracy to destroy her business. There is simply no explanation to account for why Ms. Kilitzoglou would be advised about the closure and offered the equipment if the intent was to destroy her business.

[159] The plaintiffs also rely on the evidence that Ms. Kilitzoglou was not allowed into the Clayson Road premises after the trustee in bankruptcy for Kural took possession of the premises. In addition, there is the incident leading to the arrest of Ms. Kilitzoglou on June 20th after she removed the computer from her office.

[160] The evidence of Mr. Sole of Segal Partners is that the reason why Kural was put into bankruptcy was to open the doors for retrieval of the Alca equipment at the Clayson premises. Once the landlord distrained on the Clayson premises there was concern that getting the equipment out of those premises might be problematic.

[161] When cross-examined about the decision not to let Ms. Kilitzoglou on to the Clayson premises, Mr. Sole stated that he gave general instructions to Mr. Oliver, his representative, not to let anyone into the Clayson premises until the inventory of assets was completed. This explanation does not necessarily explain why another tenant of the premises, Ray White, was able to gain access to the premises. However, I do take note of the fact that by June 18, 2007, Mr. Singer on behalf of Ms. Kilitzoglou was writing correspondence to Mr. Sole inferring that there would be litigation against Alca, and that his firm might be made a party to the proceedings. This may have influenced Mr. Sole in being more cautious in dealings with Ms. Kilitzoglou. In any event, I do not accept, based on the evidence before me, that Mr. Sole, in keeping Ms. Kilitzoglou out of the premises at this time, was acting with a view to harming the Life Line business or that his conduct was unlawful. As trustee for Kural, Mr. Sole had the authority to control access to the premises. The Life Line business was operated from the same part of the premises used by Alca in contrast to Innovative Laminate which operated from a separate portion of the premises and which had its own separate access. In light of the conflicts which were emerging in relation to the Life Line business Mr. Sole’s actions in limiting Ms. Kilitzglou’s access to the premises were reasonable.

[162] With respect to the incident on June 20th, the evidence of Mr. Sole is that conflicting property claim forms were received regarding the ownership of the computer. This evidence is confirmed in reviewing the property claim forms which were submitted. In his evidence Mr. Sole stated that on the morning of June 20th Mr. Oliver, his representative, called him from the Clayson premises. He advised him that there had been an incident at the Clayson premises. Mr. Oliver reported that Ms. Kilitzoglou had barged through the back doors of the Clayson premises and ripped the computer off the wall. She then put the computer in the back of her daughter’s car, who drove off. Mr. Oliver further reported that the police were called, but did not intervene. Mr. Sole understood that there were competing claims to the computer. Mr. Oliver said that he would be calling the police, and Mr. Sole agreed with this suggestion.

[163] The arrest of Ms. Kilitzoglou was a very unfortunate incident, and had clearer heads prevailed this unfortunate result could easily have been avoided. Having said that, Ms. Kilitzoglou has some responsibility as to what occurred. It is apparent that she understood she was not to enter the Clayson premises. Nevertheless she decided to take matters into her own hands. There is no dispute on the evidence before me that she walked to the back of the building where she found that the doors were open. She went into the premises and went towards her office. She grabbed the computer and Mr. Oliver told her that she was committing a crime. Ms. Kilitzoglou told Mr. Oliver that she was taking the computer. She then took the computer out to her daughter’s car and told her to leave. Mr. Oliver did not make any attempt to physically prevent Ms. Kilitzglou from leaving with the computer. To the contrary, the evidence is clear that he held the door to the premises open for Ms. Kilitzglou as she exited the building.

[164] Ms. Kilitzoglou testified that two sets of police came to the factory. The first police officer came in response to her call, and then later police who were called by Shannon Cure arrived and went into the building. Later a police officer came out and told her to return the computer or else she would go to jail. She refused to give back the computer and the police then put her in handcuffs and took her to the police station.

[165] Mr. Oliver gave evidence at trial as well. He testified that Ms. Kilitzoglou had a conversation with him about a computer. She was concerned about the contents of the computer. He communicated that information to Mr. Sole, who gave instructions that she was not allowed to remove the computer from the premises. Subsequently, Ms. Kilitzoglou came to the back door of the premises and told him she was going to take the computer. He told her that this was unwise. She disregarded his advice and took the computer. Mr. Oliver advised Mr. Sole that Ms. Kilitzoglou had taken the computer and was directed by Mr. Sole to call the police.

[166] I am satisfied that with more diligence the proper ownership of the computer could have been identified quite promptly. However, the actions of Ms. Kilitzoglou in essentially taking matters into her own hands created a situation in which both parties acted precipitously. The police were called in by both Ms. Kilitzoglou and Mr. Oliver and/or Shannon and Tanya Cure. The net result is that Ms. Kilitzoglou was arrested on a charge which was later dropped. While all of this was unnecessary, I do not accept that it resulted from any malicious intent on the part of the defendants nor do I find that their conduct was unlawful. Segal and Partners had lawful control of the premises at this time. In the circumstances, it would be reasonable to conclude that if there was any unlawful act it was the conduct of Ms. Kilitzoglou who entered the premises to remove the computer without authorization.

Conclusions with respect to claim of conspiracy against Shannon Cure and Tanya Cure personally and as estate trustees of the estate of Al Cure

[167] For the reasons described above I accept the evidence of Shannon and Tanya Cure that their actions in connection with the Alca business were taken based on professional advice they received and with a view to trying to continue the business. When it became apparent that the business was not viable their actions were taken to preserve as much of the value of Alca as possible. I find that their actions were not motivated by a desire to destroy the Life Line business operated by Ms. Kilitzoglou.

[168] The plaintiffs further assert that these defendants acted unlawfully and in concert with other defendants with a common design directed to the plaintiffs. With respect to the unlawful activity the plaintiffs assert that Tanya and Shannon Cure breached the agreement relating to the sale of the production equipment located on the Clayson premises. However, for the reasons described above I find there was no breach in this regard of the agreement.

[169] The plaintiffs further argue that these defendants breached the agreement which permitted Ms. Kilitzoglou and her Life Line business to occupy the premises on Clayson Road. It is to be noted, however, that neither Tanya nor Shannon Cure took any direct steps to prevent Ms. Kilitzoglou from continuing to occupy the premises. It was the action of the landlord in distraining for non-payment of rent which led to the interruption in Life Line’s occupation of the premises for a very brief period of time at the end of June. It might be argued that Alca Designs, by failing to pay the arrears of rent, was indirectly the cause of the landlord’s distraint. However, it is to be noted that Alca is not a named defendant in the action. Further to the extent that Tanya and Shannon Cure were managing the operations of Alca, their decision to close the Clayson Road premises was a reasonable one in the circumstances. The decision to close the premises was well-known to Ms. Kilitzoglou. I conclude that the actions taken by Tanya and Shannon Cure in their management of Alca were directed to try and preserve the remaining value and the economic viability of Alca. These actions were not directed to Ms. Kilitzoglou and the Life Line business.

[170] Finally the plaintiffs assert that these defendants were in breach of their agreement to permit Ms. Kilitzoglou and her Life Line business to use the production equipment which was removed from the Clayson Road premises on June 20th. As noted above I have found that this constituted a breach of the handwritten agreement between Mr. Cure and Ms. Kilitzoglou. However, the claim in conspiracy fails for the following reasons:

(a) The equipment was sold and removed by Alca Designs which is not a named defendant in the action. To the extent that Shannon and Tanya Cure were involved in the decision either as the estate trustees for Mr. Cure or as the operating directors of Alca Designs I accept that their actions were made based on the desperate financial circumstances facing Alca at the time and that there was not a common design with other defendants directed to depriving Ms. Kilitzoglou and her Life Line business from having access to the equipment.

(b) Ms. Kilitzoglou had been presented with an offer to purchase the equipment and declined this offer. As a result steps were taken to sell the equipment in the Clayson Road premises to another purchaser. The equipment therefore needed to be moved out of the Clayson Road premises in order to complete the sale of the equipment. The actions taken were, therefore, not directed at Ms. Kilitzoglou or her Life Line business but rather to taking reasonable steps to protect Alca’s assets.

(c) Under the agreement Ms. Kilitzglou only had the right to use the equipment until July 2nd. Ms. Kilitzglou’s use of the equipment was cut short by less than two weeks. While this constitutes a breach of the handwritten agreement by the estate of Albert Cure, it is not sufficient in my view to support a claim of unlawful conspiracy by the Trustees who had to make difficult decisions in the operations of Alca which at that point was not in a position to meet its financial and other obligations.

[171] For the above reasons the claim in conspiracy against Shannon Cure and Tanya Cure personally and as estate trustees of the estate of Al Cure is dismissed.

Claim in conspiracy against the defendant Marvin Rotenberg

[172] Ms. Kilitzoglou and Life Line have asserted a claim against Mr. Rotenberg in connection with his involvement in the declaration of the dividend in favour of 778. This issue has been addressed earlier in these reasons and does not have any relationship to the claim in conspiracy. The dividend was declared in November, 2002 five years prior to the creation of the Life Line business.

[173] However, the plaintiff also asserts that Mr. Rotenberg was part of a conspiracy based on allegations relating to his conduct at the meeting on May 29, 2007. In Ms. Kilitzoglou’s evidence she testified that in connection with the discussion about the sale of the production equipment she asked for proof that the rent on the Clayson premises was being paid. She stated that she was told by Mr. Rotenberg that she was not entitled to know this information and was not even entitled to know who the landlord was.

[174] In his evidence Mr. Rotenberg could not recall any conversation with Ms. Kilitzoglou about her continued occupation of the Clayson Road premises in connection with the purchase of the equipment. He could not either confirm or deny that such a conversation occurred. He stated that he did not recall ever telling Ms. Kilitzoglou that the name of the landlord was none of her business.

[175] Tanya Cure was cross-examined as to whether she told Ms. Kilitzoglou that the issue of whether the landlord had been paid was none of her business. She had no recollection of saying this to Ms. Kilitzoglou.

[176] Shannon Cure could not recall in her evidence whether Ms. Kilitzoglou asked at the meeting on May 29th who the landlord was. She also had no recollection of Ms. Kilitzoglou asking for the name of the landlord.

[177] An important piece of evidence is the letter written by Mr. Singer, counsel for Ms. Kilitzoglou on May 29, 2007. Ms. Kilitzoglou consulted with her lawyer immediately after the meeting and wrote a letter to Shannon Cure. With respect to the alleged discussion in question Mr. Singer states,

Further, Ms. Kilitzoglou has paid to Alca Design the rent required pursuant to this agreement, namely $2,000, as at May 5, 2007, but when she attempted to ascertain from you whether the rent was paid to the head landlord for this month, she was told that this was none of her business.

[178] It is significant to note from this letter that there is no suggestion that Mr. Rotenberg told Ms. Kilitzoglou that the name of the landlord was none of her business. Had this been an issue of major concern to Ms. Kilitzoglou at the time I am satisfied that there would have been a reference to this in the correspondence.

[179] I therefore conclude that the major area of interest to Ms. Kilitzoglou at the meeting on May 29th was whether the landlord had been paid. I further accept that she was told at this meeting that this was none of her business. It also appears that the exchange may not have been with Mr. Rotenberg because according to Mr. Singer’s letter the question had been posed to Shannon Cure at the meeting.

[180] Regardless of who responded to Ms. Kilitzoglou as to whether the rent had been paid I do not find the alleged discussion to be evidence sufficient to make a finding of conspiracy. First there was no legal obligation on either Mr. Rotenberg or Mr. Cure to disclose this information to Ms. Kilitzoglou. The failure, therefore, cannot support any finding for an unlawful conspiracy.

[181] Second, this discussion in context does not support a conclusion that Mr. Rotenberg or any of the other defendants was conspiring to destroy Ms. Kilitzoglou’s business. As noted previously Ms. Kilitzoglou was invited to attend the meeting on May 29th. She was advised about the plan to close the Clayson premises as well as being offered the equipment at Clayson. All of this flies directly in the face of the suggestion that there was a conspiracy to destroy her business.

[182] It is also apparent that there were legitimate business reasons why there might have been some hesitancy on the part of Mr. Rotenberg or Tanya and Shannon Cure to disclose details of the financial situation for Alca. Providing these details to Ms. Kilitzoglou who was not a shareholder, director or officer of the company and who had her own interest in a competing business would be highly unusual. I have concluded it is not evidence which would support a conclusion that there was an attempt to destroy the Life Line business of Ms. Kilitzoglou.

[183] For the above reasons the claim in conspiracy against Mr. Rotenberg is dismissed.

Conclusions re claim of conspiracy against Martin Sole and Segal & Partners Inc.

[184] Martin Sole is a licenced trustee in bankruptcy and has practiced with Segal & Partners since 2007. He obtained his chartered accountant designation in 1985.

[185] In his evidence Mr. Sole confirmed that in March, 2007 he was introduced to Albert Cure who informed him that Alca was losing money. There was discussion at the meeting about the possibility of Alca entering into a proposal under the BIA. This would allow the company to wind down its operation and would pay out the secured creditors as well as paying the trades on a pro rata basis. Following this meeting Mr. Sole delivered a proposal for Mr. Cure’s consideration. However, he understood that Mr. Cure subsequently decided that he did not wish to wind down Alca at that point.

[186] Following Mr. Cure’s death Mr. Sole was contacted by Shannon Cure. He met with Shannon Cure and Tanya Cure as well as their lawyer Mr. Dilena on May 16, 2007. He was advised by Tanya and Shannon Cure about the problems in the Alca business. Mr. Sole was retained at this time to provide his services.

[187] Initially Mr. Sole filed a notice of intention to file a proposal for Alca. This occurred on June 7, 2007. The purpose for filing a notice of intention to file a proposal was to provide an opportunity to liquidate the company. Mr. Sole understood that Shannon and Tanya Cure wanted the opportunity to see if they could sell the business as a going concern. Unfortunately there was no positive response from a prospective purchaser for the business.

[188] On June 15, 2007 the landlord distrained and took possession of the Clayson Road premises for non-payment of rent. Shannon Cure called Mr. Sole on June 15th. She advised him that a separate company, Kural, held the lease on the premises. She also confirmed that she and her sister were the directors of Kural. Mr. Sole suggested that Kural be assigned into bankruptcy which would in turn allow Alca to remove the equipment. Mr. Sole was subsequently retained to put Kural into bankruptcy and the necessary filing was made on June 18, 2007.

[189] On June 21, 2007 Alca made a filing in bankruptcy and subsequently on the same date 778 appointed Segal & Partners as its receiver under the general security agreement.

[190] In his evidence Mr. Sole described in detail the steps which were taken in the various insolvency proceedings and the reasons why these steps were taken. In addition, Mr. Uwe Manski was called as an expert by Mr. Sole to provide an expert opinion on the conduct of Mr. Sole. Mr. Manski is also a chartered accountant and has been a licenced trustee in bankruptcy since 1976. He has worked as an insolvency practitioner and restructuring specialist with BDO Canada LLP.

[191] Mr. Sole struck me as an intelligent and knowledgeable professional in his practice as a bankruptcy trustee. His evidence was not seriously undermined on cross-examination. He also candidly acknowledged areas where there were technical deficiencies in his handling of this file. For example Mr. Sole acknowledged that he did not require Alca to file a sworn property proof of claim form before the Clayson Road production equipment was removed and given back to Alca from the Clayson premises. He agreed that this was a requirement under the legislation. In this case, however, there is no issue about the fact that the production equipment at Clayson belonged to Alca.

[192] I was also impressed with the evidence of Mr. Manski. He appeared balanced in his evidence and his evidence on cross-examination appeared to be consistent with his evidence in-chief. He acknowledged in a forthright way that he would have done some things differently than Mr. Sole.

[193] Apart from Mr. Manski no other expert witnesses were called to comment on the conduct of Mr. Sole. In the absence of any conflicting opinion I have concluded that the evidence given by Mr. Manski is generally credible and reliable.

[194] As noted above it was acknowledged that there were some deficiencies in Mr. Sole’s handling of the insolvency files. With respect to the Kural bankruptcy Mr. Sole relied on a proof of claim form signed by Shannon Cure as Executor of the Estate of Al Cure. However, this document was not sworn as required. Mr. Manski explained that the failure to have the document sworn is a technical deficiency. The result of such a deficiency would be that if the trustee gave out property to the wrong person he might face a claim by the correct owner. That problem does not arise in the facts of this case.

[195] The plaintiffs also took serious issue with Mr. Sole’s role in the incident which occurred on June 20th when Ms. Kilitizglou was arrested by the police after she had removed her computer from the Clayson Road premises. In his evidence Mr. Sole explained that he received a report from his agent Mr. Oliver about the removal by Ms. Kilitizglou of the computer. He was concerned that there were competing claims for the computer and this is supported by the claims forms that were filed by Ms. Kilitizglou on behalf of Life Line and Ms. Cure on behalf of the estate of her father. In his evidence Mr. Manski stated that generally third parties are not allowed on the premises after a company has entered into bankruptcy. The reason is that the trustee needs to verify ownership of all assets on the property. Permission with respect to entry on the premises would be at the discretion of the trustee. Until the trustees know what is happening they would not normally let third parties, “get in the middle of it”. I therefore conclude that Mr. Sole’s actions with respect to the removal of the computer by Ms. Kilitzglou were lawful and appropriate.

[196] The plaintiffs took issue with Mr. Sole permitting the production equipment to be removed from the Clayson Road premises while acting in his capacity as trustee in the Kural bankruptcy. In this regard the plaintiffs rely on the fact that in filing a property proof of claim form in that bankruptcy Ms. Kilitzglou attached a copy of the handwritten lease agreement dated December 30, 2006. Under paragraph 1 of Schedule A on the proof of claim form it is stated, “Helen Kilitzglou entered into a lease agreement with Al Cure, the president of the bankrupt and Alca Designs Ltd for the use of the premises. Life Line has paid rent to Alca pursuant to the direction of Mr. Cure. Attached is a copy of the lease agreement”.

[197] The plaintiffs take the position that Mr. Sole as the trustee in bankruptcy did not utilize the procedure set forth in Section 81(2) of the BIA. This section requires the trustee to issue a notice of disallowance where a person claims any property or interest in the possession of a bankrupt.

[198] In his evidence Mr. Sole stated that he first became aware of the handwritten agreement on June 18th after he received a letter from Mr. Singer also dated June 18th which attached a copy of the agreement. Following receipt of the letter he called Mr. Dilena who was Mr. Cure’s former lawyer who told him that he did not feel the agreement was valid because the corporations were not parties to the agreement. Mr. Dilena provided him with a copy of correspondence to this effect which he had previously sent to Mr. Singer.

[199] In cross-examination Mr. Sole was questioned about his decision to return the production equipment to Alca. His evidence was that he did not feel the handwritten agreement affected the issue as to who owned the production equipment and that it properly belonged to Alca. The agreement therefore did not sway him from his view that the equipment should be returned to Alca. He was specifically referred to Section 81(2) of the BIA. He acknowledged that he did not deliver a notice of disallowance.

[200] In his evidence Mr. Manski suggested that Mr. Sole likely concluded that Ms. Kilitzglou’s concerns had been resolved and this may explain why a notice of disallowance was not issued by the trustee. Mr. Manski referred to a letter from Ms. Kilitzglou’s counsel to Mr. Sole on June 20, 2007. In this letter Mr. Singer confirms that Ms. Kilitizglou had confirmed with the landlord that her property would not be moved from the Clayson Road location and that the landlord had allowed his clients’ property to remain in the premises. The timestamp on the fax is 5:26 p.m. after the production equipment had been removed from the Clayson premises earlier on that date. It is significant to note that there is nothing in the letter to Mr. Sole from Mr. Singer which in any way raises an issue about the removal of the Clayson Road production equipment.

[201] It is apparent to me that the trustee in looking at the proof of claim form would properly conclude that the issue of the production equipment at the Clayson Road premises was not an issue he needed to respond to in light of the note in Schedule A that the agreement was being attached relating to the “use of the premises”. There was nothing to indicate in the explanatory note that a claim was being made for the equipment. In addition, subsequent correspondence received from Mr. Singer on June 20th would support Mr. Manski’s conclusion that if there were any concerns remaining about the proof of claim form which had been filed by Ms. Kilitizglou they would have been raised in that letter. The letter of June 20th focuses on the agreement of the landlord to allow Ms. Kilitzglou to have continued use of the Clayson premises, which is consistent with the claim as advanced by Ms. Kilitzglou in her claim form. It is not surprising in these circumstances that Mr. Sole did not respond with a notice of disallowance for the production equipment.

[202] I accept Mr. Manski’s evidence that Mr. Sole acted reasonably and appropriately in his management of the various insolvency proceedings. The plaintiffs have failed in their burden to establish that Mr. Sole and Segal & Partners conspired with others with the predominant purpose of causing injury to the plaintiff or alternatively that he engaged in unlawful conduct which was directed towards Ms. Kilitizglou or her Life Line business. The conspiracy claim against these defendants is therefore dismissed.

Unlawful interference with economic relations

[203] For the requirements of the tort of unlawful interference with economic relations the plaintiff’s refer to the decision of 671122 Ontario Ltd v. Sagaz Industries Canada Inc. (1998), 40 O.R. (3d) 229 (Ont. C.A.). Those requirements are as follows:

(a) The existence of a valid business relationship or business expectancy between the plaintiff and another party.

(b) Knowledge by the defendant of that business relationship or expectancy.

(c) Intentional interference which induces or causes a termination of the business relationship or expectancy.

(d) The interference is by way of unlawful means.

(e) The interference by the defendant must be the proximate cause of the termination of the business relationship or expectancy.

(f) There is a resultant loss to the plaintiff.

[204] It is apparent that the requirements for unlawful interference with economic relations have been further refined since the Sagaz decision in 1998. In the Ontario Court of Appeal decision in Alleslev-Krofchak v. Valcom Limited, 2010 ONCA 557, 322 D.L.R. (4th) 193, the Ontario Court of Appeal held that to qualify as “unlawful means” the defendants’ actions (i) cannot be actionable directly by the plaintiff and (ii) must be directed at a third party, which then becomes the vehicle through which harm is caused to the plaintiff.

[205] The essence of a claim for unlawful interference with economic relations is that the defendant commits an unlawful act against a third party which intentionally causes economic harm to the plaintiff.

[206] In its written factum the plaintiffs assert that the co-defendants counselled Shannon and Tanya Cure to sell and remove the production equipment from the Clayson Road premises knowing that Ms. Kilitzglou had an agreement and was paying rent. In oral argument Ms. Kilitzglou relied on the allegation that Mr. Rotenberg refused to tell her the name of the landlord.

[207] As noted above I have not found any unlawful activity by the defendants. I have noted that there was no legal requirement which obliged Alca Designs to disclose the name of the landlord of the Clayson Road premises. In addition, however, the plaintiff is not able to point to any existing business relationship which existed and which was harmed by the conduct of the defendants. For example at the time the alleged comment was made by Mr. Rotenberg, Ms. Kilitzglou did not have any agreement, or anticipated agreement, with the landlord for the occupation of the Clayson Road premises. She successfully negotiated such an agreement at a later time.

[208] With respect to the removal of the production equipment there is no evidence that Mr. Rotenberg had any involvement in this transaction. With respect to Mr. Sole the evidence confirms that he facilitated the removal through the bankruptcy of Kural. However, the bankruptcy of Kural was not an unlawful act and the equipment itself belonged to Alca. The facts in this situation are that Mr. Cure and Ms. Kilitzoglou had an agreement which allowed Ms. Kilitzoglou to use the production equipment for six months. This agreement was breached when the equipment was removed two weeks early. The estate of Mr. Cure is liable for this breach but in the absence of any unlawful act by the co-defendants there is no basis to find liability for unlawful interference with economic relations. In this case, I have not found that any of the defendants committed an unlawful act against a third party to intentionally cause harm to the plaintiffs.

[209] As a result the plaintiffs’ claim for unlawful interference with economic relations is dismissed.

The plaintiffs’ claims for trespass and conversion

[210] The plaintiffs’ claim also includes a claim for damages for trespass and conversion. These claims did not appear to be seriously pursued in the plaintiffs’ written submissions or oral argument. There would not appear to be any basis for a finding of conversion or trespass against any of the defendants in this action.

[211] In the Statement of Claim it is asserted that a number of the defendants gained access to Ms. Kilitzglou’s private office at the Clayson Road premises and took confidential customer lists, sales records, orders and other documentation in connection with running the Life Line business. It is to be noted, however, that while Ms. Kilitzglou had the use of an office at the Clayson Road premises she was also an employee of Alca. The premises at Clayson Road were properly occupied by Alca. As a result Shannon and Tanya Cure had a lawful right to be on the premises. Their presence on the premises as well as any other individuals authorized by them would not constitute a trespass.

[212] There was also no evidence led at trial to suggest that any of the property of Ms. Kilitzglou was taken without her consent. The main issue relating to Ms. Kilitzglou’s property related to the computer incident which occurred on June 20th which has been canvassed above. The computer was kept in an office occupied by both Ms. Kilitzglou as part of her employment with Alca and her work with Life Line. She removed the computer from the office on June 20th over the objection of Mr. Sole who was properly conducting an audit of the property located on the Alca premises.

[213] To the extent that any allegation of conversion relates to the production equipment located at the Clayson Road premises there is no issue about the fact that the equipment in question belonged to Alca.

[214] In her evidence Ms. Kilitzglou referred to photos of the locks on her office door which had been drilled at some point. No evidence was led as to who drilled those locks. One possibility is that the landlord’s bailiffs may have drilled the locks when the premises were taken over by the landlord on June 15th. However, no evidence was led by any of the parties to clarify who was responsible for this.

[215] For the above reasons the plaintiffs’ claims for trespass and conversion are dismissed.

Counterclaim by the defendants Shannon and Tanya Cure

[216] In their statement of defence Tanya and Shannon Cure assert a counterclaim personally and as estate trustees for Mr. Cure. Two causes of action were pleaded. The first is a claim relating to damages for income tax liability assessed against the estate of Mr. Cure as well as Shannon and Tanya personally in their capacity as directors of 778 for unpaid income tax remittances. This claim was abandoned in final argument.

[217] The second claim is for damages relating to alleged interference by Ms. Kilitzoglou which resulted in the inability of the Estate as well as 778 and Alca to collect its receivables and an alleged reduction in the overall value of the Estate itself.

[218] In final argument, the Estate argued that this claim is based on the fact that following Mr. Cure’s death word quickly spread about his death to suppliers and customers of Alca Designs. It then became harder to collect the company’s receivables. In their evidence, Tanya and Shannon Cure testified that they delayed in announcing their father’s death because they didn’t want to alert customers and suppliers. However, the staff was told about three days later of Mr. Cure’s death. The Estate believes that Ms. Kilitzoglou must have been circulating information to suppliers and customers as information about his death was circulating even before the staff were told about it.

[219] I have concluded that the Estate has failed to prove that Ms. Kilitzoglou was responsible for spreading information about Mr. Cure’s death. On this basis alone the counterclaim must be dismissed. No evidence was called which would support an inference that Ms. Kilitzoglou was telling customers or clients of Alca about her husband’s death. For example, the Estate did not call any evidence from suppliers or customers of Alca to testify where they received information about Mr. Cure’s death. It is apparent that even before staff were notified three days after his death that there would be a significant number of people who would have known about the death. This would include family members and professional advisors as well as individuals involved in the burial arrangements. Within days all of the staff at Alca knew of the death and would likely have been communicating with customers and suppliers on a regular basis. Other than a suspicion by Tanya and Shannon Cure that Ms. Kilitzoglou might have been in touch with suppliers and customers of Alca, no evidence was called by the Estate which would support an inference that Ms. Kilitzoglou was spreading information about Mr. Cure’s death to customers or suppliers of Alca Designs. The estate has, therefore, failed to meet its burden of proof relating to this allegation. In addition, it is apparent that once the staff were told about Mr. Cure’s death customers and suppliers of the company would promptly learn of this development. The estate has not called any evidence which would support a conclusion that notification of customers and suppliers three days earlier than expected had any significant impact on the value of the estate. For the above reasons the counterclaim is therefore dismissed.

Plaintiff’s Damages

[220] I have previously found that Mr. Cure was in breach of the handwritten agreement dated December 30, 2006 on the basis that the production equipment was removed approximately two weeks prior to the six month commitment, as referenced in the agreement. In addition, the plaintiffs’ occupation of the Clayson Road premises was interrupted when the landlord distrained on June 15, 2007. Ms. Kilitzoglou made her own arrangements with the owner of the property to continue occupying the Clayson Road premises. She was able to re-enter the premises on June 21, 2007 but for the final six months of the agreement her rent obligation increased from $2,000 per month to $7,420 a month. Thus, I have previously concluded that the plaintiffs are entitled to a judgment against the estate of Mr. Cure for the sum of $32,520 on account of the increased rental payments for the period between July to December, 2007.

[221] In addition, the plaintiffs have claimed substantial damages for lost profit in the Life Line business. In support of this of this claim the plaintiffs called Mr. Ronald Smith who is a chartered accountant. The defence called Mr. Nick Angellotti who is also a chartered account. Mr. Angellotti, in his evidence, did not give an opinion with respect to the loss of profit claim but commented on the opinions expressed by Mr. Ronald Smith. In her evidence, Ms. Kilitzoglou testified that in around 1997 or 1998 she came up with the idea of the “Helen” bedroom set. This was a relatively low end unit which she designed herself and which she thought had good prospects for sales. She recalled that initially Mr. Cure was not supportive of her project. However, she started to put together some production units and it turned out there was a large demand for the Helen bedroom sets. In order to accommodate the production requirements for the Helen bedroom, Mr. Cure found a location on Clayson Road. Ms. Kilitzoglou was asked by Mr. Cure to take charge of the production at the Clayson Road site for Alca. Mr. Cure, in addition to leasing the premises at Clayson also arranged for the purchase by Alca of the production equipment at the Clayson Road site.

[222] By the latter part of 2006, Ms. Kilitzoglou was moving forward with her plan to set up her own business. Life Line was incorporated and the handwritten agreement of December 30, 2006 was entered into between Mr. Cure and Ms. Kilitzoglou. By virtue of another handwritten agreement dated July 19, 2006, it was agreed that Mr. Cure could sell any of the Helen bedroom designs in the United States (except for Florida). Ms. Kilitzoglou was to sell the Helen bedroom designs in Canada.

[223] Life Line commenced operation in January, 2007.

[224] Ms. Kilitzoglou testified that she planned to keep the existing production equipment at the Clayson site until sometime around 2008. At that point she planned to purchase new production equipment which would substantially increase production volumes and quality. She also gave evidence that she planned to “franchise” factories for the Helen bedroom sets. She also planned to introduce higher-end bedroom units. Over time she hoped to shift more production to the higher-end units in order to increase the profitability of her business.

[225] Prior to Mr. Cure’s death Ms. Kilitzoglou continued to work for Alca and was in charge of Alca’s production at the Clayson Road premises. She also started to produce her Life Line products at the Clayson Road premises.

[226] After Ms. Kilitzoglou moved back into the Clayson Road premises following the distraint by the landlord she purchased some used production equipment at a cost of $33,000. However, she still had to retain an electrical contractor to do all the necessary wiring. This took about two to three months in order to set up the machinery. She also stated that the used equipment she purchased was not as good as the Alca production equipment which was sold by Alca and removed from the Clayson Road premises on June 20, 2007.

[227] While Life Line has continued in operation from the Clayson Road premises up to the present date it has incurred substantial losses. The new mass production equipment has never been purchased. However, the company has moved to producing higher-end bedroom furniture over the years.

[228] Ronald Smith was retained by the plaintiffs to quantify the economic losses that resulted from the disturbance in the Life Line business. Mr. Smith obtained his C.A. designation in 1977. He is also designated as an expert by the C.I.C.A. in investigative and forensic accounting. He has specialized in forensic accounting for over 30 years and started his own practice about 25 years ago.

[229] Mr. Smith initially calculated income loss figures based on an expectation that the trial would take place in 2011. He estimated the past loss of income to May 15, 2011 at $3,578,700. His estimate of future income loss from May 16, 2011 to December 31, 2014 at $4,020,500. The total for past and future claims therefore was $7,599,200.

[230] The trial in this action did not take place as expected in May, 2011. In giving his evidence Mr. Smith updated the plaintiffs’ losses to May 21, 2012. His updated figure for past income loss to May 21, 2012 was $5,549,000. His estimate for future income loss from May 22, 2012 to December 31, 2015 was $4,017,100. The total income losses were estimated at $9,566,100. The reason for the increase in Mr. Smith’s estimate was due to the assumption he made that it would take, approximately, three years after purchase of the mass production equipment for Life Line to reach its expected sales volume. In his initial estimate he assumed that the proceeds from an award would have been received by the end 2011 which would have allowed Life Line to purchase the required equipment and reach its expected sales volume by 2015. The delay of the trial, however, meant that the period of loss was extended by one year to December 31, 2015 reflecting a one-year delay in Life Line being able to implement its plans for the purchase of the new mass production equipment.

[231] Mr. Smith’s estimates are based on an assumption that Life Line would produce 800 units per month until the purchase of the new mass production equipment. This was expected by the end of 2008. Mr. Smith accepted Ms. Kilitzoglou’s assumption that while the new equipment was being installed the production would probably drop by 50 per cent to 400 units per month. However, once the new equipment was installed it is assumed that the production would increase to 1200 units per month.

[232] It was also assumed that initially 80 per cent of the Life Line production would be of the Helen bedroom units with 20 per cent of the production going to the higher-end products. Over a number of years, however, it is estimated that an increased percentage of the production would go to the higher-end products so that by 2011 it was assumed that 10 per cent of the production would go to the Helen units and 90 per cent would go to the other high-end units. It was assumed that this split would have remained at this level from 2011 forward.

[233] I have concluded that the estimates and opinions given by Mr. Smith with respect to the lost income claim must be rejected for the following reasons:

(a) Many of the assumptions underlying Mr. Smith’s calculations were not proved at trial. When questioned on cross-examination for his definition of the “event” which resulted in the plaintiffs losses Mr. Smith referred to the fact that the Alca equipment at the Clayson premises was sold to someone else in June, 2007 as well as the fact that Ms. Kilitzoglou had to rent directly from the landlord for the Clayson premises after Alca’s bankruptcy. In addition, Mr. Smith stated that he understood there were other significant factors as well. He stated that he was advised about the emotional toll on Helen after her arrest. He made reference to a casket which was deposited on the front lawn of her factory, the fact that Sam set up a company as a competitor, as well as the fact that Ms. Kilitzoglou was not able to go out and buy the mass production equipment. He also made reference to an allegation that Ms. Kilitzoglou’s clients did not know if her business would survive. I have previously determined that the sale of the Alca equipment in June, 2007 did not constitute a breach of contract. The breach of contract claim relating to the equipment is the failure of the estate of Mr. Cure to make the production equipment available at the Clayson Road premises for a two-week period leading up to the beginning of July. The evidence does not support a conclusion that the business suffered long term consequences as a result. With respect to the occupation of the Clayson Road premises, the evidence is clear that Life Line operations were only suspended for a very short period of time between June 15 and 21, 2007. By June 21st Life Line, once again, gained full access to the Clayson premises although at an increased rental. The increased rental cost has previously been accounted for in these reasons and there was no evidence to suggest a conclusion that the business of the company on a long term basis was affected. There was also no evidence at trial which would support a conclusion that Ms. Kilitzoglou had to take any significant time off due to health issues. While it is reasonable to conclude that this was a very emotional time for Ms. Kilitzoglou, to a large extent these issues are likely related to the death of Mr. Cure. In her evidence at trial, Ms. Kilitzoglou testified that she felt “overwhelmed” following Mr. Cure’s death. There was also no reference in the evidence at trial to an incident involving a casket which was deposited on the front of the Clayson Road premises. Further, there was no evidence presented at trial to support an assertion that Life Line’s clients did not know if her business would survive. Ms. Kilitzoglou, in her evidence, did not appear to suggest this was a problem and no clients were called at trial to support such a conclusion. Finally, the issue of competition by Sam as well as numerous other competitors in the bedroom furniture business would appear to be a given in this industry and there was no evidence that Sam’s business competed unlawfully. Indeed, the action against Sam was dropped during the course of trial.

(b) In large measure, Mr. Smith’s calculations are based on assumptions which were given to him by Ms. Kilitzoglou and which were not subject to any critical analysis or investigation by Mr. Smith. For example, Mr. Smith acknowledged that he relied on Ms. Kilitzoglou to provide estimates as to what she believed she could sell into the marketplace. Mr. Smith felt it was reasonable to rely on Ms. Kilitzoglou who had credibility in the industry. However, it is apparent that the sales estimates were a very important determining factor in Mr. Smith’s estimate of the losses. Given that the Helen bedroom sets had been manufactured by Alca for quite a few years prior to the commencement of Life Line Operations it seems surprising that a more detailed analysis of the projected sales volumes were not performed by Mr. Smith based on data from Alca. In his evidence Mr. Angellotti referred to Industry Canada data for Canadian exports to the United States of wooden furniture for bedroom use. This data is significant because it was anticipated that at least 50 per cent of Life Line’s products would be sold in the United States. The data shows that in 2001 and 2002 Canadian exports of wooden bedroom furniture were above $600 million. However, there was a steady decline in exports so that by 2009 to 2010 those exports to the United States were only slightly more than $100 million. Mr. Smith’s response on this issue was that he did not think it would have affected Life Line’s business because it was only looking to capture a small percentage of the total United States market. Nevertheless, it seems unrealistic to ignore industry trends that show a dramatically shrinking market where 50 per cent of the Life Line products are being sold. I accept the evidence of Mr. Angellotti that the recession in the United States started some time in around 2006, but the real effects were felt starting in around 2008. I further accept his opinion that in light of the fact that 50 per cent of the Life Line goods were sold in the United States this was a significant factor which Mr. Smith should have taken into account in projecting the increases in sales which are contemplated in his analysis.

(c) For purposes of revenue generation, Mr. Smith used $500 as the average price for the high-end units that Life Line manufactured. The actual figure based on Life Line data, however, was $414. Mr. Smith relied on information received from Ms. Kilitzoglou that she was going to aggressively market the high-end units and was not going to use distributors which would increase her selling price to an average of $500. No evidence was adduced by Ms. Kilitzoglou to justify such a significant increase in the expected revenue generation from the high-end units. I conclude that the most reliable estimate for the average sales price of the upper-end units would be based on the actual Life Line data.

(d) Mr. Smith confirmed in his evidence that he did not do any analysis to identify the failure rate for furniture manufacturing business at around this time. He was also aware that after 2007 there was a major recession. He did not take this factor into consideration either. He relied on the fact that Life Line was surviving “against all odds”. He stated that he did not consider the possibility of bankruptcy or the effect of recession because he believed in Ms. Kilitzoglou. In my view, however, these are serious contingencies which should have been considered in his analysis.

(e) Mr. Angellotti, in his evidence, stated that gross margin is the difference between sales less direct costs for labour and materials. He noted that Mr. Smith for purposes of analysis assumed that Life Line’s gross profit margin would increase from 14 per cent to 43.9 per cent within five years from 2007 to 2011. This is in contrast to Alca’s gross profit margin which had been decreasing from 2003 to 2007.

(f) Mr. Smith testified that he did not rely on the Alca data to consider the estimated profits for Life Line because Life Line was a well run company and there was an assumption that it would be operating with the best equipment. He, therefore, did not feel that Alca data was relevant to his analysis. He acknowledged, however, that he did not have any information to suggest that the profit margin of 42 per cent, which was used for his analysis, was normal for this industry. He did not do any market data research to support his assumption in this regard.

(g) Mr. Angellotti gave his opinion that the proposed increases in gross profit for Life Line were speculative. He further stated that Alca was in a similar business and the data from Alca and the trend would be relevant for the analysis of gross profit margins. I accept Mr. Angellotti’s opinion that the proposed increases in gross profit margins are speculative and ignore the downward pressures on margins which would occur due to recessionary factors and the Canadian dollar.

[234] Having rejected the estimates of Mr. Smith, I must still assess the plaintiff’s damages based on the evidence presented at trial and the causes of action which have been proven at trial. I have reviewed the income statements for Life Line which were introduced in evidence at trial. These statements show a pattern of increasing sales over time. However, despite the increasing sales Life Line continues to incur significant losses, although the losses recently have been much smaller. Set out below is a summary of the sales revenue and net losses for Life Line for the period between 2007 to 2012.

Year	Sales Revenue	Net Loss
2007	$124,559.56	$70,424.41
2008	$145,102.11	$150,039.32
2009	$231,526.46	$166,423.65
2010	$541,980.00	$204,700.00
2011	$356,816.00	$25,547.00
2012	$119,940.00	$10,410.00

[235] The evidence at trial indicated that Ms. Kilitzoglou has not taken a salary from Life Line. She has borrowed over one million dollars from family and friends to keep the business in operation and to cover the losses. Ms. Kilitzoglou’s determination to keep the Life Line business in operation and her dedication to the business is admirable. Nevertheless, I have concluded that the major challenges facing this business are substantially similar to those which faced Alca and which, ultimately, lead to its bankruptcy. They are not the result of the unlawful actions by the defendants.

[236] It is reasonable to conclude, however, that the breaches of the December 30, 2006 agreement did cause some significant interruption in Life Line’s business for a short period of time. The business itself was totally closed down as a result of the landlord’s distraint for several days in June. In addition, following this period of time there were approximately two further weeks when the production equipment was removed contrary to the obligation under the December 30, 2006 agreement.

[237] In her evidence, Ms. Kilitzoglou testified that after purchasing the replacement equipment it took about two to three months to set up the machinery. It is hard to reconcile this evidence with the income records for Life Line which shows continuing sales activity for Life Line between July to September, 2007. Nevertheless, I am prepared to accept that the contractual breaches interfered with the normal operation of Life Line for approximately three months. The 2007 sales data for Life Line show the monthly sales figures for Life Line in 2007 as follows:

Month	Sales
January	$1,528.57
February	$3,687.55
March	$7,973.43
April	$3,970.39
May	$12,850.86
June	$6,265.46
July	$6,736.96
August	$9,357.07
September	$35,996.95
October	$23,093.96
November	$8,551.24
December	$2,865.84
Total	$122,878.28

[238] In reviewing this data, I note that the sales in early 2007 were quite modest but started to build significantly by March. In April there was a significant drop which I attribute to the death of Mr. Cure. However, by May sales had increased to just under $13,000. There was a significant drop in sales for Life Line in June, July and August of 2007. This would be consistent with the circumstances which are in issue in this litigation, namely, the distraint by the landlord, the negotiations with the landlord to continue occupation of the Clayson Road premises, and the early removal of the Life Line equipment. By September 2007 the sales have dramatically increased which would be consistent with Life Line starting back in full operation. By my calculation Life Line had sales of $70,507.99 for the period between September to December, 2007 which represents an average monthly sales of $17,626.

[239] For the period of June, July and August 2007 Life Line had actual sales of $22,359.49 or an average of $7,453.16. By my calculation, therefore, there would appear to be approximately a $10,000 per month decrease in sales for the three months between June to August, 2007. On this basis I conclude that there was a loss of income to Life Line of approximately $30,000 during this period of time. In addition, Life Line was responsible for not only the increased payments of rent for the balance of 2007 but also payment of the utilities as well. We do not have a breakdown of the additional utilities paid by Life Line for 2007. To account for the additional utilities and other contingencies I conclude that a reasonable assessment of lost income for Life Line plus the payment for additional utilities is $40,000 which I award in addition to the award for increased rental payments. Together with the claim of $32,520 for increased rental payments, I therefore conclude that the plaintiffs are entitled to judgment against the defendant estate of Albert Cure for the sum of $72,520.

Issues relating to the application dated April 2, 2008 (Court file CV-08-088632-00)

[240] Helen Kilitzoglou commenced this application seeking financial remedies under the Succession Law Reform Act, R.S.O. 1990, Chapter S.26 and other relief relating to her common-law relationship with Mr. Cure. At trial it became apparent that the relief sought in this application was quite different than what was contemplated and sought in the original application. For example, the original application sought a declaration that the cohabitation agreement was null and void. In addition, the original application sought an order for support, a constructive trust in Mr. Cure’s estate including his business interests, and an order granting the applicant the right to partition and sell the property.

[241] By the time of trial, however, most of the issues in this application had been resolved or abandoned. For the issues that remained the applicant was taking a position contrary to that which was set out in her application. At trial the applicant asserted that the cohabitation agreement was valid and binding on the Estate of Mr. Cure and that she was entitled to purchase the property. During the course of oral submissions the applicant brought a motion to amend the relief sought in the application. An order was granted allowing Ms. Kilitzoglou to amend the relief sought in the application to conform with the position she had taken during the course of the trial. Subsequently, the parties to the application reached a formal agreement on the issues to be determined, which was marked as Exhibit 38.

[242] Pursuant to the agreement between the parties the following issues are to be determined on the application:

(i) An order defining the terms on which the applicant, Helen Kilitzoglou, may remain in the residence or in the alternative, the terms under which the applicant may purchase the residence, or in the alternative, if the property should be sold pursuant to the Partition and Sale Act;

(ii) An order as to the validity of a change of beneficiary form dated December 16, 2003, regarding TransAmerica Life Canada policy number 080314258 relating to the designation of Tanya Cure and CIBC as beneficiaries;

(iii) In the alternative, an order that the applicant, Helen Kilitzoglou, is the designated beneficiary of a policy of life insurance issued by TransAmerica Life Canada policy number 080314258;

(iv) An order to determine who is responsible for payment of the expenses referenced in tabs 115 and 116 of exhibit 1(c) from the trial of this action; and,

(v) An order as to the disposition of the sum of $140,000.00 paid to the accountant of the Superior Court of Justice by the applicant.

[243] The issue relating to the validity of the change of beneficiary designation under the TransAmerica policy has previously been dealt with in my decision on the other application dated November 8, 2007. This leaves the issues numbered (i), (iv) and (v) on this application to be addressed. The relevant terms relating to the family residence are found in paragraph 7 of the cohabitation agreement.

[244] Paragraph 7 provides as follows:

7. Family Residence

(a) CURE and KILITZOGLOU intend to live in the family residence, known as 180 Westridge Drive, in the City of Vaughan, in the Regional Municipality of York;

(b) Title to the property will be held in the name of ALBERT CURE and HELEN KILITZOGLOU, as tenants in common;

(c) CURE and KILITZOGLOU intend that their individual household goods and chattels as set out in a written memorandum attached hereto shall remain their individual property and, together with any household goods and chattels acquired together, shall remain in the family residence until same is sold. Each of the parties agrees to include in their Will a provision granting a life interest over the other’s household goods and chattels prior to distribution of same to their respective children.

(d) At the time of execution of this Agreement it is intended specifically that the family residence shall be 180 Westridge Drive, in the City of Vaughan, in the Regional Municipality of York which home shall be held by CURE and KILITZOGLOU, as tenants in common, and jointly occupied by the parties. It is acknowledged by the parties hereto that the purchase price of said property was $540,000.00 and that CURE contributed $140,000.00 to the purchase and the balance has been financed by a first mortgage of which there remains, as at the date hereof, a principal balance of approximately $325,000.00, which mortgage is and shall remain life insured by CURE under a policy of insurance expiring in the year 2012. There is no other charge or mortgage registered against the said family residence as at the date hereof. The parties agree that in the event of a sale of the property as a result of the separation of the parties or for any other reason, CURE shall receive $140,000.00 from the net proceeds of such sale and, notwithstanding title to the said property, after any outstanding mortgage, the net equity, if any, shall be divided equally between the parties. Further, notwithstanding the foregoing, CURE shall continue to pay the everyday ordinary living expenses of the parties together with the everyday ordinary and reasonable costs of maintaining the residence.

(e) If, at the time of CURE’s death, KILITZOGLOU and CURE are cohabiting, KILITZOGLOU shall be entitled to continue to reside in the residence for up to three (3) years. CURE agrees to include in his will a provision to authorize and direct his Trustees to pay the ordinary and reasonable costs of maintaining the said residence including mortgage payments if any, realty taxes and insurance for the said three (3) years and until the home is sold. KILITZOGLOU may choose to purchase the residence at any time prior to the expiry of the three (3) years.

(f) (i) In the event KITLITZOGLOU chooses not to purchase the said residence, upon the expiry of the three (3) years, KILITZOGLOU may remain in the said residence provided that she pays the sum of ONE HUNDRED AND FORTY THOUSAND ($140,000.00) to the residue of CURE’s estate and thereafter pays the ordinary and reasonable costs of maintaining the said residence from her own resources.

(ii) Should KILITZOGLOU choose not to reside in the said residence, or upon vacating the said residence, it shall be sold and the proceeds shall be divided as follows:

(a) The sum of (140,000.00) ONE HUNDRED AND FORTY THOUSAND DOLLARS shall be paid to the residue of CURE’s estate if not already paid;

(b) The balance of said proceeds of sale shall be divided equally between KILITZOGLOU and the residue of CURE’s estate.

(g) In the event that the parties separate, or CURE requires that KILITZOGLOU vacate the residence forthwith, CURE shall pay KILITZOGLOU her entitlement pursuant to Article 7(d) within 60 days if he chooses not to sell the residence.

[245] At trial both parties agreed that the terms of the cohabitation agreement were valid and binding on the parties. In addition, it is apparent that the terms of the cohabitation agreement contemplated that the provisions of paragraph 7 would require appropriate amendments to Mr. Cure’s will. However, Mr. Cure’s will, which originally was signed on April 18, 2002, was never revised to conform with the terms of the cohabitation agreement. Both parties agreed, however, that Ms. Kilitzoglou’s entitlement should be based on the terms of the cohabitation agreement as opposed to the terms which are set out in Mr. Cure’s will.

[246] In addition, the evidence at trial confirmed that the mortgage taken out on the residence was not life insured. Under paragraph 7(d) Mr. Cure was to ensure that the mortgage would be life insured up until the end of 2012.

[247] The fact that the mortgage was not life insured would appear to be a clear breach of the cohabitation agreement. As a result I conclude that the sole responsibility for payment on the mortgage lies with Mr. Cure’s estate. The home itself was jointly owned by Mr. Cure and Ms. Kilitzoglou. If the home is sold the proceeds from the sale would be split evenly between Mr. Cure’s estate and Ms. Kilitzoglou (assuming that Ms. Kilitzoglou has paid the sum of $140,000 to the Estate). To the extent that any amount is owing on the mortgage at the time the property is sold I further conclude that any amount required to discharge the mortgage is to be deducted from the share of the proceeds owing to the Estate

Principles of interpretation

[248] Both parties agree that the drafting of the cohabitation agreement left a lot to be desired. There are a number of ambiguities or gaps in the drafting of the agreement. The agreement itself was prepared by Mr. Cure’s lawyer and Ms. Kilitzoglou takes the position that the doctrine of contra proferentem applies so that any ambiguity should be construed against the Estate of Mr. Cure. However, as noted by Fridman in Law of Contract in Canada, supra, this doctrine only applies where the other party had no meaningful opportunity to participate in the negotiation of the contract and where, in effect, there is an inequality of bargaining power. The doctrine therefore has little application where the parties are more or less of equal bargaining strength and where they have had an opportunity to obtain independent legal advice.

[249] In her evidence Ms. Kilitzoglou stated that there were several versions of the cohabitation agreement which were given to her by Mr. Cure. The final version was given to her by Mr. Cure and she went to see her lawyer, Isaac Singer. The lawyer told Ms. Kilitzoglou not to sign the agreement without financial disclosure. She then went back to Mr. Cure and spoke to him about this. He told her there would be no financial disclosure. If she did not sign the agreement she would have to move out of the house. She then proceeded to sign the agreement.

[250] The evidence of Mr. Singer is that Ms. Kilitzoglou contacted him in December, 2003 at around Christmas time. She told him that she needed independent legal advice regarding a cohabitation agreement. Mr. Singer met her on December 29, 2003, which is well prior to the signing of the agreement. Ms. Kilitzoglou told Mr. Singer that the issue of the cohabitation agreement had been going on for a while. She was only concerned about one particular paragraph in the draft agreement relating to the matrimonial home. She wanted to make sure that her interest in the matrimonial home was protected. Mr. Singer testified that he had discussions with Ms. Kilitzoglou in December, 2003 about the lack of financial disclosure. He told Ms. Kilitzoglou that it would be difficult to challenge the cohabitation agreement if there was no financial disclosure provided for in the document. Mr. Singer reported that Ms. Kilitzoglou responded by telling him that she was just concerned about the matrimonial home.

[251] There was also discussion about the fact that Ms. Kilitzoglou might have an interest in Mr. Cure’s business. Again, Ms. Kilitzoglou told him that she was not concerned about that issue, only the matrimonial home.

[252] Following his meeting with Ms. Kilitzoglou Mr. Singer had a number of discussions with Mr. Cure’s lawyer about possible changes to the agreement. The two changes he was seeking were to have title to the matrimonial home changed from Mr. Cure to Mr. Cure and Ms. Kilitzoglou as tenants in common. He also wanted what is now paragraph 7(g) of the agreement added to provide for the sale of the matrimonial home. It does appear that both of these changes were incorporated into the agreement.

[253] Mr. Singer’s evidence appears to supplement in much greater detail the recollection of Ms. Kilitzoglou about the steps leading up to the signing of the agreement. I accept Mr. Singer’s evidence as referred to above. Based on this evidence it appears that the cohabitation agreement was the subject of legitimate and serious negotiation between the parties. Changes were incorporated into the agreement at the request of Ms. Kilitzoglou and she had legal advice at the time the agreement was signed. In those circumstances I conclude that the doctrine of contra proferentum has no application to the facts of this case.

[254] As also noted in the Fridman text the object of contractual interpretation is to identify the true intent of the parties at the time they entered into the contract. That intention must be ascertained by reference to the meaning of the words used by the contracting parties. A basic principle is that the words in the contract should be given their plain, literal and ordinary meaning unless this would result in an absurdity. In considering the intention of the parties it is appropriate to consider the surrounding circumstances at the time the contract is signed.

[255] The Fridman text summarizes basic rules for interpretation of a written contract to include the following:

(1) Where there is no ambiguity in a written contract it must be given its literal meaning;

(2) Words must be given their plain, ordinary meaning, at least unless to do so would result in an absurdity; and

(3) The contract should be construed as a whole, giving effect to everything in it if at all possible.

Is Helen Kilitzoglou entitled to remain in the residence or in the alternative under what terms may she purchase the residence, or in the alternative should the property be sold pursuant to the Partition Act?

[256] The evidence at trial confirmed that Mr. Cure and Ms. Kilitzoglou were living together at the time of Mr. Cure’s death. Thus, paragraphs 7(e) and (f) govern the parties’ rights and responsibilities. The evidence at trial suggests that the residence has been allowed to fall into disrepair to a significant extent following the death of Mr. Cure. Ms. Kilitzoglou testified that there are a number of leaks in the roof. This evidence tends to be supported by estimates obtained by both Ms. Kilitzoglou and the Estate relating to the cost of replacing the roof. While some temporary repairs had been made to the roof over time the replacement of the roof has not yet occurred and I accept the evidence of Ms. Kilitzoglou that there continue to be problems with leaking in the roof.

[257] In addition, I accept the evidence of Ms. Kilitzoglou that there are serious problems with the windows which appear to be rotting as demonstrated by photographs which were introduced into evidence during the trial.

[258] Ms. Kilitzoglou takes the position that the failure by the Estate to maintain the residence constitutes a massive breach of the cohabitation agreement. However, the circumstances facing the Estate do provide a compelling explanation for why events unfolded as they did. Initially, following Mr. Cure’s death there were limited funds available to the Estate. This was complicated by the fact that the business operated by Mr. Cure was failing and eventually went into bankruptcy. In addition, there were further problems when Ms. Kilitzoglou filed an objection to Shannon and Tanya Cure being appointed as executors of Mr. Cure’s estate. Eventually this was resolved when an independent third party was appointed as the estate trustee. However, the amounts disbursed by the estate trustee have been controlled by court orders up to the present time pending a determination of the responsibilities of the Estate. In these circumstances it would be unfair to characterize any breach by the Estate of its responsibilities under the cohabitation agreement as being egregious or motivated by ill will towards Ms. Kilitzoglou.

[259] The Estate takes the position that the residence should be sold pursuant to the Partition Act, R.S.O. Chapter P.4. However, the cohabitation agreement provides for a sale of the property only in the situation when Ms. Kilitzoglou chooses no longer to reside there. As Ms. Kilitzoglou continues to reside in the residence I conclude that under the terms of the cohabitation agreement the Estate is not entitled to an order for partition and sale at the present time.

[260] Ms. Kilitzoglou takes the position that she should be entitled to purchase the residence from the Estate. Paragraph 7(e) of the cohabitation provides this option to Ms. Kilitzoglou. However, this option is limited to a period of three years from the date of Mr. Cure’s death.

[261] It is acknowledged by Ms. Kilitzoglou that she did not exercise her right to purchase the residence within three years of Mr. Cure’s death. I therefore conclude that her option to purchase the residence has expired.

[262] Ms. Kilitzoglou is left with her entitlement to remain in the residence as provided for under paragraph 7(f) of the cohabitation agreement. This right was conditional upon Ms. Kilitzoglou paying the sum of $140,000.00 to Mr. Cure’s estate. Pursuant to a court order dated February 16, 2010 Ms. Kilitzoglou was permitted to pay the sum of $140,000.00 into court. The parties are agreed that this sum was paid into court within three years of Mr. Cure’s death. I am satisfied that this payment reflects Ms. Kilitzoglou’s compliance with the requirement that she pay the sum of $140,000.00 to Mr. Cure’s estate. It was paid into court to reflect the fact there is no agreement as to how the funds should be dispersed given the competing claims by Ms. Kilitzoglou and the Estate. Given that the payment has been made I conclude that Ms. Kilitzoglou has complied with the requirement for payment so as to give her the right to continue her remaining in the residence.

[263] In summary, I conclude that at present the Estate of Mr. Cure is not entitled to an order for partition and sale of the residence. Ms. Kilitzoglou’s remaining in the residence at the present time is lawful and in accordance with the terms of the cohabitation agreement.

Who is responsible for payment of the expenses referred to in tabs 115 and 116 of Exhibit 1(c) filed at the trial of this action?

[264] Ms. Kilitzoglou’s counsel prepared a list of expenses which have been paid by his client and which are claimed against the Estate. These expenses are as follows:

(a) Enbridge $ 1,309.41

(b) Glen Echo Landscaping $15,749.90

(c) Capital Group (Landscaping) $ 3,150.00

(d) Weed Man $ 620.00

(e) Landscaping $ 2,275.00

(f) Power steam $ 2,499.71

(g) Pappas Home Inspection $ 530.00

(h) Cemetery plot $ 7,441.20

(i) Rogers Cable $ 4,399.84

(j) Bell $ 1,994.73

(k) Tasco

(refrigerator replacement) $16,738.48

Total: $56,708.28

[265] In addition, the following amounts are claimed for work which has not yet been performed, but for which estimates were obtained within the first three years after Mr. Cure’s death:

(a) Decora, January 22, 2010

for window replacement $27,218.00

(b) Estimate from Avenue Road

Roofing dated November 24, 2009

for roof replacement $32,401.14

Total $59,619.14

[266] Combining both the expenses paid and the estimates, the total claimed by Ms. Kilitzoglou against the Estate is $116,327.42.

[267] During argument Ms. Kilitzoglou agreed that the Pappas Home Inspections for $530.00 did not relate to the maintenance of the property and therefore this claim was withdrawn.

[268] The Estate took issue with the claim for the cemetery plot. This is clearly not an item which is related to the maintenance of the residence. However, the Estate acknowledges that it is responsible for the burial expenses of Mr. Cure. Their refusal to pay this expense is based on the fact that it is a double plot and Ms. Kilitzoglou purchased the double plot with the intention that she would be buried in the plot upon her death. During the course of argument it was agreed between the parties that the Estate would reimburse Ms. Kilitzoglou for this expense upon her transferring ownership of the burial plots to the Estate. An order will issue in accordance with this agreement.

[269] The Estate further takes issue with its responsibility for paying the Rogers cable and Bell telephone bills. Their position is these are personal expenses unrelated to the maintenance of the home. I agree with this position and these items are therefore deleted from the list of expenses which the Estate is responsible for.

[270] With respect to the estimates for the work to be done on the house the Estate objects to the estimate from Avenue Road Roofing for the sum of $32,401.14. It is noted that this estimate was obtained by the Estate and represents the highest estimate for replacement of the roof. The applicant obtained an estimate from another company, Guaranteed Roofing. This estimate, which is dated December, 2009, estimates the total cost for replacement of the roof at $14,545.75. There is no evidence before me which would suggest that the Guaranteed Roofing estimate is not adequate in the circumstances, and I therefore conclude that this estimate should be used in calculating any amount owed by the Estate.

[271] There was only one estimate obtained for a replacement of the windows, and I therefore accept this estimate as being reasonable in the circumstances.

[272] The Estate acknowledged in argument that it is responsible for all capital and maintenance of the residence for the first three years following Mr. Cure’s death. All of the above-noted expenses would fall within this timeframe. Therefore, having removed the claim for the Poppas home inspection, the cemetery plot, which has been dealt with separately, as well as the Rogers and Bell accounts, I calculate that the amount owing by the Estate to Ms. Kilitzoglou on account of the paid items is $42,342.50. The amount owing on account of the windows and roof is $41,763.75. The grand total owing under both headings is $84,106.25. Ms. Kilitzoglou shall have judgment against the Estate for this amount subject to my comments below.

[273] There is one issue that none of the parties raised during the course of the trial. That concerns the claim against the estate for the cost of replacing the roof and the windows. These repairs have not yet been carried out by either Ms. Kilitzoglou or the estate. If Ms. Kilitzoglou is to receive an award to cover the cost of these repairs, there may be an issue as to whether the estate is entitled to any assurance that the repairs are actually carried out in light of the fact that the estate is entitled to share in the proceeds of the home once it is sold. I am assuming that the parties will be able to sort out these issues between themselves. However, in the event that the parties are not able to do so counsel may arrange a further attendance to address any issues which arise out of this portion of my judgment.

[274] There was considerable argument before me as to what financial obligations Ms. Kilitzoglou has to the Estate following the expiry of three years from the death of Mr. Cure. While the Estate acknowledges its responsibility for payment of all expenses for the first three years after Mr. Cure’s death it takes the position that Ms. Kilitzoglou is responsible for all expenses after the expiry of three years. The agreement itself was clear that upon the expiry of three years Ms. Kilitzoglou was responsible for payment of maintenance of the premises. The question is whose responsibility it is to pay for any capital expenses required. While this issue is not something I am required to decide, in light of the acknowledgment by the Estate that the expenses before me relate to the first three years following Mr. Cure’s death and that they are payable by the Estate I am providing my analysis of the proper interpretation of the agreement in the hope that it may be of some assistance to the parties at a later time.

[275] The cohabitation agreement does not specifically identify who is responsible for payment of capital expenses.

[276] The Estate makes reference to paragraph 7(e) which provides that Mr. Cure will include in his will a provision to direct his trustees to pay the ordinary reasonable costs of maintaining the residence for a period of three years and until the home is sold. The Estate argues that this provision contemplates the capital expenses will be paid by Ms. Kilitzoglou.

[277] Ms. Kilitzoglou on the other hand relies on paragraph 7(f)(i) which provides that she is entitled to remain in the residence at the end of three years provided that she pays the sum of $140,000.00 to the Estate and, “…thereafter pays the ordinary and reasonable costs of maintaining the said residence from her own resources”.

[278] I have concluded that the contract should be interpreted so as to limit Ms. Kilitzoglou’s contribution at the end of three years to the ordinary and reasonable costs of maintaining the residence and that she is not required to make contributions to capital improvements for the following reasons:

(a) At the time the cohabitation agreement was entered into there was no dispute about the fact that Mr. Cure was paying both the capital expenses and all the maintenance expenses. This, therefore, would appear to be the status quo which the parties were working with at the time the agreement was signed. The clause in paragraph 7(f)(i) would appear to represent a change to the status quo, but is limited to a requirement that Ms. Kilitzoglou pay the reasonable maintenance costs.

(b) It is appropriate in my view to view the cohabitation agreement in the context of Mr. Cure wanting to make a provision for Ms. Kilitzoglou to reside in the family home after his death. The cohabitation agreement contains a provision that each of them releases any other rights that they may have for maintenance or support. Mr. Cure would reasonably conclude that the resources of Ms. Kilitzoglou would be somewhat limited following his death. In those circumstances if Mr. Cure had any expectation that Ms. Kilitzoglou would pay anything other than the maintenance costs for the home this would have been specified in the agreement.

(c) The Estate argues that imposing an obligation on it for capital expenses would lead to an absurdity in that it would create an indefinite financial obligation on the Estate for capital expenses which was never anticipated. I do not agree that obliging the Estate to take responsibility for capital expenses would lead to an absurdity. The Estate does own 50 percent of the equity in the home and will benefit to that extent from any capital improvements which are made when the home is eventually sold.

(d) The fact that Mr. Cure agreed to maintain life insurance on the mortgage of the property appears to reflect an intention on his part to enhance the capital benefit for Ms. Kilitzoglou on his death. To then require Ms. Kilitzoglou to contribute to the capital expenses appears to run contrary to an apparent intention by Mr. Cure to give an enhanced capital benefit to Ms. Kilitzoglou.

[279] In summary, had I been required to decide who was responsible for payment of capital expenses on the home at the expiry of three years from the death of Mr. Cure I would have concluded that the capital expenses are the responsibility of the Estate and that Ms. Kilitzoglou is responsible for the ordinary and reasonable costs of maintaining the residence from her own resources. For the reasons noted above I would also have concluded that any mortgage payments would also continue to be the responsibility of the Estate as Mr. Cure failed to arrange for mortgage insurance as required under the cohabitation agreement.

How should the sum of $140,000.00 be paid out from the funds which have been paid into court by the applicant?

[280] Ms. Kilitzoglou argues that she should be entitled to a set-off for the money owed to her by the estate relating to the expenses paid by her and for which the Estate is required to provide reimbursement. In addition, Ms. Kilitzoglou argues that the balance of the sum of $140,000.00 should be held in trust to ensure future payment by the Estate of its ongoing financial obligations to her relating to the house. In support of her position Ms. Kilitzoglou relies upon the Supreme Court of Canada decision in Holt v. Telford, [1987] 2 SCR 193. In that case the Supreme Court held that an equitable set-off was available where the money in question was closely connected with the same contract or inter-related contracts.

[281] The Estate does not take issue with the applicant’s right to set-off the amount currently owing by the Estate. However, the Estate argues that there should be no holding of the $140,000.00 in trust to cover future expenses. The Estate further argues that it should be able to set-off any amounts owed to it by Ms. Kilitzoglou. At trial the Estate filed a list of expenses which it has paid for the home and which it may take the position that reimbursement is owed by the applicant. No evidence was called at the trial by the Estate to provide any further details with respect to those expenses.

[282] I agree with the Estate’s position that any set-off should be limited to amounts which are owing to Ms. Kilitzoglou in accordance with this judgment. The Estate is not required to hold the funds in trust to account for future expenses it may be obligated to pay. There is nothing in the Telford decision which would support a conclusion that a court should impose a trust arrangement on expenses which are payable in the future. In addition, the specific wording of the cohabitation agreement provides that the $140,000.00 is to be paid to the Estate. There is no requirement in the cohabitation agreement for the Estate to hold these funds in any type of trust arrangement to ensure compliance with its obligations under the agreement.

[283] In principle, I also agree that the Estate should be entitled as part of the set-off to claim any amounts owing to it by Ms. Kilitzoglou pursuant to the cohabitation agreement. If the parties are not able to agree on those amounts I may be spoken to further. However, if there is insufficient evidence before me to determine whether the amount is owing by Ms. Kilitzoglou it would not be appropriate to include such an expense for purposes of the set-off.

[284] The funds which have been paid into court should be paid out to the Estate subject to the set off which is to be paid to the applicant, Helen Kilitzoglou. If there is an issue regarding the amounts owed to the respective parties in accordance with these reasons I may be spoken to.

Summary and Conclusion

[285] Judgment will issue in the various actions in accordance with these reasons. If there is any mathematical or clerical error which I have made in the calculations or if there is an issue in any of the proceedings which has not been addressed in these reasons counsel may make arrangements to bring this matter back before me. Pre-judgment interest is payable on any of the amounts awarded. If the parties are not able to agree on costs then counsel should take out an appointment within 30 days of the release of these reasons to schedule an appointment before me to deal with the issue of costs. At least three days before this appointment, counsel will deliver written submissions on the question of costs including their cost guidelines.

Justice M.K. McKelvey

Released: February 14, 2014