COURT FILE NO.: CV-12-462802
DATE: 20140328
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: 2329131 Ontario Ltd, Plaintiff
AND:
Carlyle Development Corp. and Carlyle Consolidated Holdings Inc., Defendants
BEFORE: Carole J Brown J
COUNSEL:
Jonathan Kulathungam, for the Plaintiff
Malcolm Ruby for the defendants
HEARD: March 27, 2014
ENDORSEMENT
[1] The plaintiff brought a motion for partial summary judgment seeking specific performance of an agreement of purchase and sale of commercial property which was granted by Swinton J. on October 21, 2013 and upheld on appeal on February 19, 2014. The closing is scheduled for April 2, 2014.
[2] In the context of the summary judgment, the plaintiff also sought other relief, namely damages for failure to close, which included an abatement of the purchase price and damages for loss of income suffered as a result of a failure to close and for other consequential damages. As regards this other relief, which was not addressed in oral argument, Swinton J stated in the
reasons for decision, that she was not prepared to make such an order for damages without proper submissions, such that these issues remain outstanding.
[3] The plaintiff brings a motion before this Court, on an urgent basis, seeking an order pursuant to rule 45.02 for payment of a specific fund into court, namely the net proceeds of disposition of the sale of the property, which is scheduled to close on April 2, 2014, or for a portion thereof, which the plaintiff suggests should be $800,000, calculated on the basis of a potential damages award regarding the claims mentioned at para. 2, supra.
[4] As regards these claims for damages, there has been no determination on the merits as regards the issues of liability for payment of an abatement of the purchase price, i.e. whether there should be an abatement of the said purchase price, nor any determination on the merits as regards liability for damages for loss of income or other damages flowing from the original failure to close, nor quantum thereof.
Rule 45.02: Interim Preservation of a Specific Fund
[5] Rule 45.02 provides that where the right of a party to a specific fund is in question, the court may order the funds to be paid into court or otherwise secured on such terms as are just.
[6] The tests to be met pursuant to rule 45.02 are as follows:
The plaintiff claims a right to a specific fund;
There is a serious issue to be tried regarding the plaintiff's claim to that fund;
The balance of convenience favours granting the relief sought by the plaintiff.
Sadie Moranis Realty Corporation v 1667038 Ontario Inc. (2012), 2012 ONCA 475, 111 O.R. (3d) 401
[7] Thus, in order to obtain an order pursuant to rule 45.02, the moving party must establish that he or she has a right to a specific fund; there is a prima facie case and that the balance of convenience requires the court to inquire into the potential harm that would be incurred by the moving party if the relief were not granted.
[8] As has been elaborated by D.J. Brown J in Deol v Morcan Financial Inc. [2011] O.J. No. 5371 at para.10, the plaintiff must claim a right to a specific fund, defined as "a reasonably identifiable fund earmarked to the litigation in issue", and that claim must be proprietary in nature and, as regards the second part of the test, there must be a serious issue to be tried respecting the proprietary claim. He further cited Morden & Perell, in The Law of Civil Procedure in Ontario, who write that "the purpose of the motion under rule 45.02 is to protect before trial a claimant who is asserting a proprietary claim to or proprietary interest in a specific asset". They further state that rule 45.02 is an exception to the general rule that a plaintiff cannot obtain execution before judgment, and it is not to be used just as a means to obtain security for a debt or potential indebtedness of the defendant.
[9] As stated by Wilton-Siegel J in Asante Financial Management Limited v Dixon [2004]. O.J. No. 2237 at paras. 27 and 28 as regards a "specific fund",
To meet the test in rule 45.02, the plaintiff must demonstrate there is a reasonably identifiable fund related to the litigation. In the present case, there is simply an amount yet to be determined which may be payable to the plaintiff if its view of the contractual relationship is upheld…
Secondly, the plaintiff has not established a right to the fund which it alleges exists. There is a subtle but important difference between an amount that may be owing to the plaintiff and a "right" of the plaintiff to a fund.… I am not satisfied that the plaintiff has established that he has a right to any fund. It has only established a possible claim for payment of damages based on an alleged breach of contract…
[10] The Court of Appeal, in Sadie Moranis Realty Corporation v 1667038 Ontario Inc, supra observed, as regards a specific fund, that rule 45.02 requires a specific fund readily identifiable when the order is sought. Further, it requires that the plaintiff assert a legal right to the specific fund as a claim in the litigation. The Court of Appeal further stated, at paras. 21 and 22, as follows:
Framed in this way, the test will not be met where a plaintiff's claim is for damages. That is so even if a specific fund is identifiable in the factual matrix of the litigation, because a claim for damages is not a claim to a legal right to that fund. In Asante Financial Management Limited v Dixon (2004), 8 C.P.C. (6th) 57, Wilton Siegel J. put it this way, at para. 28:
There is a subtle but important difference between an amount that may be owing to the plaintiff and a right of the plaintiff to a fund.
Where the test is met, the order secures the specific fund claimed by the plaintiff pending the outcome of litigation. The order is distinguishable from a Mareva injunction (with its even stricter test), where the defendant is restrained from dealing with its own assets pending trial even though the plaintiff is not asserting a legal right to any of those assets.
[11] As regards the first part of the test, I am not satisfied that the plaintiff has established a legal right to the proceeds of disposition or a portion thereof, such as to justify a rule 45.02 order preserving the funds. There is only a disputed amount of damages for an as yet unproven damage claim, including entitlement to an abatement and lost profits. Based on the evidence and the jurisprudence reviewed above, this does not establish entitlement to an order pursuant to rule 45.02.
[12] I do not find that the plaintiff has established a proprietary right to any of the money in question. Preservation of the specific fund is not to be used to ensure that any potential damage award which may be granted in a future proceeding is secured by an attachment of assets before the determination of a plaintiff's entitlement to the claimed damages. As a general rule, a plaintiff cannot obtain execution before judgment.
[13] I have considered the plaintiff's submissions that it has, indeed, pled entitlement to a specific fund as regards the abatement of purchase price and that such constitutes an interest in the proceeds of disposition. I do not agree. I do not find that the statement of claim sets forth a claim for proprietary interest or right to the proceeds of disposition or a portion thereof. It claims for relief, including an abatement of the purchase price and damages for lost profits, entitlement to which has not been determined, nor any quantum thereof.
[14] Further, to succeed on a motion pursuant to rule 45.02, a specific fund must be in existence. While the plaintiff argues that the specific fund is in existence, namely monies to be paid on April 2, 2014 as proceeds of disposition for purchase of the property, some or all of which the plaintiff seeks to attach, I do not find those monies to satisfy the test for a specific fund, as it has been defined in the jurisprudence.
[15] Based on the foregoing, I do not find that the plaintiff has established a right to a specific fund, as defined in the jurisprudence set forth above and, accordingly, find that the plaintiff has failed to establish part one of the test.
[16] I do not analyze the second and third parts of the test, as the plaintiff has failed to establish the first part.
[17] Based on all of the foregoing, the plaintiff's motion as regards Rule 45.02 is dismissed.
Costs
[18] I would urge the parties to agree upon costs, failing which I would invite the parties to provide any costs submissions in writing, to be limited to three pages, including the costs outline. The submissions may be forwarded to my attention, through Judges’ Administration at 361 University Avenue, within thirty days of the release of this Endorsement.
Carole J. Brown J.
Date: March 28, 2014