Gubert v. 1536320 Ontario Limited, 2015 ONSC 3294
COURT FILE NO.: CV-14-498625
DATE: 20150525
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Denis Gubert
Plaintiff
– and –
1536320 Ontario Limited, palmont Corp. and Barry Godfrey
Defendants
Matt W. Mulholland for the Plaintiff
Wolfgang Kaufmann for the Defendants
HEARD: May 13, 2015
PERELL, J.
REASONS FOR DECISION
[1] The Defendants 1536320 Ontario Limited, Palmont Corp., and Barry Godfrey bring a motion for summary judgment in which they submit that the Plaintiff Denis Gubert’s action should be dismissed because: (a) it is answered by an Asset Allocation Agreement dated April 23, 2009; or (b) it is statute-barred pursuant to the Limitations Act, 2002, S.O. 2002, c. 24, Sch. B.
[2] In Hryniak v. Mauldin, 2014 SCC 7, although the Supreme Court of Canada commanded a very robust summary judgment procedure, it did not foreclose lower courts from simply dismissing the summary judgment motion and ordering that the action be tried in the normal course. Indeed, where there are genuine issues for trial and the lower court concludes that employing the enhanced forensic tools of the summary judgment procedure would not lead to a fair and just determination of the merits, the court should not decide the matter summarily: Mitusev v. General Motors Corp., 2014 ONSC 2342 at para. 79; Gon (Litigation Guardian of) v. Bianco, 2014 ONSC 65 at paras. 41-47.
[3] In my opinion, in the case at bar, upon analysis of the factual background, the Defendants’ summary judgment motion is a failed attempt to unscramble the scrambled egg of the business relationship between Messrs. Godfrey and Gubert, a relationship that involves the action at bar and several other pending actions. The case at bar is not an appropriate case for a summary judgment.
[4] Because I think the case at bar is not appropriate for a summary judgment and because I think that the parties should think about consolidating some or all of their outstanding actions or perhaps bringing an omnibus proceeding to dissolve what may be a partnership, in dismissing the Defendants’ motion, I shall make no binding findings of fact, and, rather, I shall discuss the factual background only so far as necessary to explain why I am dismissing the motion.
[5] Between 2001 and 2009, Mr. Gubert and Mr. Godfrey were in business together developing commercial real estate properties, mainly shopping centres, throughout Ontario. They apparently had many holdings across the province, which they held using various corporations.
[6] One of the properties developed by Messrs. Gubert and Godfrey was a 3.4 acre property in Nepean, Ontario known as the Merivale Property.
[7] On January 28, 2003, 1536320 Ontario Limited, which is owned 50-50 by Mr. Gubert and Mr. Godfrey, and Sabra Estates Holdings (Ottawa) Inc. signed a joint venture agreement for the development of the Merivale Property, which was to be held by Palmont Corp. as bare trustee.
[8] Messrs. Godfrey and Gubert, as they did for their other ventures, signed personal guarantees to secure project loans.
[9] By the spring of 2009, Messrs. Godfrey and Gubert were under a great deal of financial pressure. In particular, Trez Capital Corporation and its related companies were owed over $23 million and the Trez corporations were threatening enforcement action.
[10] In March 2009, Messrs. Godfrey and Gubert discussed a plan to allocate some of their developed properties between themselves. On April 1st, Mr. Godfrey wrote an email to Rick Angelson, a lawyer at Cassels Brock, and advised him that he and Mr. Gubert had agreed to transfer their interests in certain properties. Mr. Godfrey asked Mr. Angelson to prepare an agreement reflecting the allocation of assets.
[11] Mr. Angelson advised Mr. Godfrey, however, that transferring the ownership interests in the companies that owned the properties might result in defaults on loan agreements. It also appears that the consent of the lenders was required for any transfer of ownership interests.
[12] Nevertheless, on April 23, 2009, Messrs. Gubert and Godfrey met and signed an Asset Allocation Agreement. The agreement, which was called an Acknowledgement, provided that for purposes of allocating income, expenses and liability as between the parties, it was intended that Mr. Gubert would have the beneficial ownership of: (1) 1858 Avenue Road, Toronto; (2) 3350 Fallowfield Road, Ottawa; (3) 2930 Carling Avenue, Ottawa; (4) St. Clair & Runnymede, Toronto; and (5) QEW & Brant, Burlington. The Asset Allocation Agreement provided that for purposes of allocating income, expenses and liability as between the parties, it was intended that Mr. Godfrey would have the beneficial ownership of: (1) Merivale Road, Ottawa (Merivale Property); and (2) Hazledean Road, Ottawa.
[13] Following the signing of the Asset Allocation Agreement, Messrs. Gubert and Godfrey still owned other development sites in common, many of which were heavily indebted and not producing income.
[14] The action now before the court concerns the Merivale Property in Ottawa, which was allocated to Mr. Godfrey.
[15] After the Asset Allocation Agreement was signed, no formal change was made in the ownership of the Merivale Property. Mr. Godfrey submits that this non-change was in accord with the design of the Asset Allocation Agreement that envisioned a non-transparent but nevertheless real transfer of beneficial ownership. Thus, after April 2009, Mr. Godfrey did not share any income from the Merivale Property with Mr. Gubert.
[16] Mr. Gubert has various different explanations for what occurred after the Asset Allocation Agreement was signed. These explanations emerged in the affidavits and cross-examinations for the summary judgment motion. Mr. Gubert says that the Asset Allocation Agreement was frustrated or abandoned or breached by the subsequent events so that the legal consequence was that the Asset Allocation Agreement was rescinded ab initio.
[17] In his explanations leading to rescission, Mr. Gubert relies on the fact that of the seven properties that were the subject matter of the Asset Allocation Agreement five properties (four of his and one of Mr. Godfrey’s) were sold to third parties or transferred to lenders to repay the various loans on the properties.
[18] These divestitures left Mr. Gubert and Mr. Godfrey to fight over the Merivale Property. In a separate action, not before me, they are also squabbling over the QEW & Brant, Burlington, property which was allocated to Mr. Gubert under the Asset Allocation Agreement. Mr. Gubert says that there was no such allocation because of the rescission of the Asset Allocation Agreement. He alleges that Mr. Godfrey misappropriated funds from the sale of this property.
[19] The nature of Mr. Gubert’s position is revealed by the following exchange from his cross-examination:
Q.170. We will get to that in a minute. That's what you say in paragraph 4 of your affidavit. You never intended it...if you want to look at paragraph 4, to make sure I am getting it right. You never intended the asset allocation agreement from April 2009 to be binding or it was 6 rescinded, so my question is, which one is it? Was it rescinded, or was it never intended to be binding?
A. When we signed the asset allocation agreement, we had intended it to be binding, but things changed after the fact.
Q.171. So it was binding when you signed it in April 2009... April 23, 2009?
A. No, sorry, I will have to change that
Q.172. Oh.
A. That was what we intended to use as a framework for us going forward, how we were going to transfer and deal with some particular assets. But the whole thing is based on all the assets being available and dealing with...and some of those things...so, that was the intent.
Q173. Okay.
A. He wanted to deal with particular assets, we were involved 50/50 with them, and that was our intent on a framework for going forward.
Q174. Right, so you intended this to be the division of the assets listed in that agreement going forward?
A. We intended that.
Q175. Okay, and then what changed?
A. The company was put into receivership.
[20] Mr. Godfrey submits, however, that the receivership relied on by Mr. Gubert was anticipated and is not an event giving rise to rescission on the grounds of frustration. Similarly, he contends that the events concerning the other properties do not negate the Asset Allocation Agreement.
[21] Pausing here in the narrative, a not insignificant problem in determining whether to grant a summary judgment (or a trial judgment for that matter) is that Mr. Gubert’s various allegations explaining why the Asset Allocation Agreement was rescinded have never been properly pleaded. Mr. Gubert did not deliver a Reply to Mr. Godfrey’s Statement of Defence.
[22] Another not insignificant problem related to this pleadings problem is that the evidentiary record is filled with evidence about the unpleaded allegations that support Mr. Gubert’s rescission argument. This evidence creates a plethora of genuine issues for trial, which, as best as I can ascertain, Mr. Godfrey attempted to circumvent by ignoring them. He simply insisted that there was no factual basis for the Asset Allocation Agreement having been rescinded.
[23] Returning briefly to the narrative, Mr. Gubert insured the QEW & Brant property and received all of the income from it after he and Mr. Godfrey signed the Asset Allocation Agreement. It is unclear how much he received. In September 2010, after he stopped paying the debts on the project, Mr. Gubert received $150,000 from the Brant Project. A month later, in October 2010, the QEW & Brant property was sold by the second mortgagee. As noted above, there is ongoing litigation between the parties about the QEW & Brant property.
[24] I was told there are at least three other pending actions involving Mr. Gubert and Mr. Godfrey. As noted above, they continue to have other holdings, and I understand that because they are no longer doing business together, they have not reached any settlement about what to do with these properties. In their commercial divorce, it seems that more actions are likely. I see nothing other than trials with proper pleadings, disclosure of documents, and examinations for discovery as the fair and just means to resolve the case at bar and these other interrelated disputes.
[25] Quite simply, the case at bar is not appropriate for a summary judgment and is far beyond the robust approach mandated by Hryniak v. Mauldin, supra.
[26] If the parties cannot agree about the matter of costs, they may make submissions in writing beginning with Mr. Gubert’s submissions within 20 days of the release of these Reasons for Decision followed by Mr. Godfrey’s submissions within a further 20 days.
[27] I alert the parties that my present intention is to award no costs for the summary judgment motion to either party. Although Mr. Gubert was successful in resisting the summary judgment motion, he provoked it by not properly replying to Mr. Godfrey’s Statement of Defence.
Perell, J.
Released: May 25, 2015
CITATION: Gubert v. 1536320 Ontario Limited, 2015 ONSC 3294
COURT FILE NO.: CV-14-498625
DATE: 20150525
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Denis Gubert
Plaintiff
– and –
1536320 Ontario Limited, palmont Corp. and Barry Godfrey
Defendants
REASONS FOR DECISION
PERELL J.
Released: May 25, 2015