Court File and Parties

Court File No.: CV-14-10846-00CL Date: 2015-04-20 Superior Court of Justice - Ontario

Re: M & K CONSTRUCTION LIMITED, MARVYN JAY TURK, DEBRA FERN TURK, JOSIE NESPOLO, LUCIO NESPOLO, FIDENZIO SALVATORI, MARIA SALVATORI, EBGROW INVESTMENTS CORPORATION, THE BANK OF NOV A SCOTIA TRUST COMPANY AS TRUSTEE FOR THE BENEFIT OF SDRSP No. 494-03763-14 AND SDRST No. 491-02246-19, ANGELA TOCCI, DONATO TOCCI, GLENCLIFF CONSTRUCTION LIMITED, LILLIAN NOBLE, LISA NOBLE, BARRY NOBLE, RALCAP INVESTMENTS CORPORATION, MORRY ROTMAN, KAY ROTMAN, HARRY ROTSTEIN, 1351710 ONTARIO INC., MAFC MANAGEMENT INC., RITA ZEPPIERI, PROPELLING INVESTMENTS LIMITED, LARRY CONTE, PETER SILLERY, MARINA SILLERY, CHARLES ROTSTEIN, LORRAINE ROTSTEIN, RYAN TURK, ALIX TURK, ASHLEY TURK and 457351 ONTARIO INC., Applicants

And: KINGDOM COVENANT INTERNATIONAL, Respondent

Before: Mr. Justice T. McEwen

Counsel: David Preger and Michael Brzezinski, for the Applicants Mark Veneziano and Andrew Parley, for the Respondent

Heard: April 2, 2015

Endorsement

[1] The applicants bring this application for an order appointing M.N.P. Ltd. (the receiver) as receiver and manager over all of the assets, property and undertakings of the respondent pursuant to s. 243 of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 and s. 1 of the Courts of Justice Act, R.S.O. 1990, c. C.43. For the reasons below I dismiss the application.

[2] I do not intend to recite the disputed and undisputed facts of this matter in detail. Briefly, the applicants are members of a mortgage group that have loaned a large amount of money to the respondent. The respondent is a not for profit corporation which owns lands at Rakley Crescent in Toronto. The property generally consists of two parcels of vacant land comprising approximately 19 acres of frontage at Rakley Crescent and Eglington Avenue West. The respondent also operates a church and school.

[3] Initially, as is outlined in the motion materials, a loan was made in the amount of $7,500,000.00 from the Group A investors and a second loan was made in the amount of $1,500,000.00 by the Group B investors. The respondent has stopped paying on the loans which now have an outstanding balance of approximately $11,500,000.00.

[4] In September 2014, the respondent commenced an action against a number of defendants, including most of the applicants. In that action the respondent alleges a number of inappropriate dealings including a conspiracy, seeks a number of declarations and restitution. Admittedly, the action does not involve a claim for conspiracy concerning the Group A investors but other relief sought, including the declaratory relief, involves both the Group A and Group B investors.

[5] Notwithstanding the existence that action, which is in the early stages, the applicants move for the appointment of the receiver submitting, amongst other things, as follows:

• The totality of the respondent’s allegations in the action have little merit.
• The respondent’s claims for set off in the action could be dealt with within the receivership.
• The amounts claimed by the respondent pale in comparison to the amount of the loan.
• The respondent has no intention of repaying the loan.
• It is unlikely that the respondent can refinance its obligation to the applicants.
• The applicants are subrogated to the prior mortgages which were discharged with the loan proceeds.

[6] In all of the circumstances, however, I agree with the respondents that it is not just and convenient to appoint the receiver at this time for the following reasons:

• The respondent has raised a number of triable issues in the action that involve the totality of the loan and in particular a conspiracy with respect to the Group B investors.
• Appointing a receiver would effectively end the action as the property would be sold and the respondent, which also operates a church and school, would be negatively affected in a significant way.
• Based on the testimony provided by the parties at their cross-examinations the property does not constitute a diminishing asset and the value of the property greatly exceeds the outstanding indebtedness to the applicants. The applicants have adduced no other evidence that is to suggest the contrary.
• The appointment of the receiver would introduce expense, not of an insignificant nature, into the process.
• There does not seem to be urgency to have the land sold at this point in time and the asset will be available at the end of the day once the litigation is resolved.
• There are no other creditors.

[7] In my view, the foregoing makes this case distinguishable from the decision of Blair J. (as he then was) in Bank of Nova Scotia v. Freure Village on Clair Creek et al., 1996 CanLII 8258 (ON SC), 1996 CarswellOnt 2328, which is heavily relied upon by the applicants in this application. This case is more analogous to the case law relied on by the respondent in Royal Bank of Canada v. Chongsim Investment Ltd, 1997 CarswellOnt 988, Canadian Imperial Bank of Commerce v. Jack, 1990 CarswellOnt 3055 and Canadian Imperial Bank of Commerce v. John Taylor’s Truck Sales Ltd., [2003] O.J. No. 1377. In all of these cases the courts declined to appoint receivers in similar circumstances.

[8] As opposed to appointing the receiver, much would be gained by moving the underlying action to the trial stage as quickly as possible. There was some discussion with the parties at the conclusion of the motion, that if I were to dismiss the motion, as to whether I would be prepared to seize myself of the action and case manage it to the trial stage. I am prepared to do so and I would ask that the parties contact me to arrange a 9:30 appointment in this regard.

[9] The respondent was successful at the motion and is entitled to its partial indemnity costs. I have reviewed the costs outline and am satisfied that the amount sought of $35,025.01 is reasonable and shall be paid by the applicants.

Mr. Justice T. McEwen

Date: April 20, 2015