Buccilli et al v. Pillitteri et al, 2016 ONSC 1655
SUPERIOR COURT OF JUSTICE – ONTARIO
COMMERCIAL COURT
BETWEEN:
PATRICIA BUCCILLI and DRAPERY INTERIORS ETC. INC.
Plaintiffs
AND:
PASQUALE PILLITTERI, also known as PAT PILLITTERI, CHRISTINA PILLITTERI, PATRON CONTRACTING LIMITED, also known as CDC CONTRACTING, BIRCHLAND HOMES INC. and VENDRAIN INC.
Defendants
BEFORE: Newbould J.
COUNSEL: Michael R. Kestenberg and Thomas M. Slahta, for the plaintiffs
Linda Galessiere and Gustavo F. Camelino, for the defendants
HEARD: March 2 and 3, 2016
ENDORSEMENT
1The plaintiff Patricia Buccilli was married to Lorenzo (“Enzo”) Ventura who died tragically in a construction accident in September 1998. The defendant Christina Pillitteri was a sister of Enzo Ventura and thus is a sister-in-law of the plaintiff Patricia Buccilli. Christina is married to the defendant Pasquale (“Pat”) Pillitteri, who is thus a brother-in-law of Patricia Buccilli. A third Ventura sibling is Ron Ventura.
2Enzo Ventura, Pat Pillitteri and Ron Ventura operated the defendants CDC Contracting and Birchland Homes and were each one-third shareholders. Ms. Buccilli fell heir to those shares on her husband’s death. On June 27, 2001 Ms. Buccilli signed a Transfer Agreement in which she transferred all of her interest in her husband’s estate to Christina Pillitteri in trust, including her shares in CDC and Birchland. Later the one-third interest of CDC and Birchland that had been Enzo’s was transferred by Christina Pillitteri to Pat Pillitteri and Ron Ventura so that each of them then owned 50% of CDC and Birchland.
3In this action, Ms. Buccilli claimed relief under the oppression provisions of the OBCA as well as for relief under various causes of action, including undue influence, unconscionability involving the Transfer Agreement, misrepresentation and breach of fiduciary duty. On November 23, 2012 I held for all of those reasons that the Transfer Agreement should be set aside.
4One of the issues in the action related to land developments that were on the books of the defendant Vendrain Inc. Ms. Buccilli claimed that those land developments were properly owned by CDC. Vendrain was a one-third partner in a joint venture which owned seven properties referred to as of the Plex Group. I held that Ms. Buccilli was entitled to a one-third interest in all money, benefits and opportunities withdrawn or diverted by Christina or Pat Pillitteri either directly or directly from CDC and Birchland, including but not limited to the beneficial interest in the seven properties acquired in 1996 and 1998 by the Plex Group, and that all subsequent growth and profit derived therefrom were subject to a constructive trust in favour of Patricia.
5Although evidence was led at trial respecting money and property diverted to Pat Pillitteri and Vendrain, primarily from the Plex investments, the full extent of all money, benefits and opportunities withdrawn or diverted by Christina Pillitteri or Pat Pillitteri, either directly or indirectly, from CDC and Birchland remained to be determined. I did conclude, however, that it was clear that the interest of Enzo is the seven Plex group of properties would have been well in excess of $10 million.
6On April 9, 2013 I ordered that Ernst & Young Inc. be appointed as an expert to investigate and report on the full extent of Ms. Buccilli’s declared interest, along with the value of her interest. E&Y has issued seven interim reports. Its work is not done. I ordered the defendants to pay E&Y’s invoices but for a long time the invoices remained unpaid and it was necessary for several attendances and court directions before they were paid. There is still unpaid the last invoice from E&Y rendered in December, 2015 and E&Y understandably does not want to do further work unless paid.
7It is clear that the defendants were not forthcoming with documentation as requested at the outset from them. This was the subject of my endorsement of January 30, 2015 on a motion by the defendants to limit E&Y in its work. I do not accept that E&Y were not clear in what they were asking for. It was very clear. The E&Y costs have been enormous in large measure due to the failure of the defendants to properly and timely disclose all relevant information. It is noteworthy that during this process, the defendants mortgaged one of the previously unencumbered Plex properties and a property owned by a corporation in which Mr. Pillitteri had an interest at Bayview and Elgin Mills in Richmond Hills was sold for $3.1 million. This property was not disclosed by the Pillitteris to E&Y when it should have been and it was only when the plaintiff learned of the sale and enquiries were made that information was provided. The sale was made contrary to the order appointing E&Y and I ordered that the funds from the sale be held in trust by the defendants’ lawyers.
8In the circumstances, Ms. Buccilli has moved for payment on an interim basis of what she says is a minimum that can be established as owing to her under the judgment. In her notice of motion, reliance is placed on section 248 of the OBCA and rule 20.
9Under section 248(3) of the OBCA, a court has the power to make any interim order it thinks fit, including an order to compensate an aggrieved person. By relying on the summary judgment rule 20, the position of the plaintiff is that while the matter will require a trial on some issues, there is no genuine issue that at least a minimum amount is payable to the plaintiff.
10Under rule 20.02 (2) a responding party may not rest solely on the allegations or denials in the party’s pleadings, but must set out, in affidavit material or other evidence, specific facts showing that there is a genuine issue requiring a trial. Each side must put its best foot forward with respect to the existence or non-existence of material issues to be tried. The court is entitled to assume that the record contains all the evidence which the parties will present if there is a trial. See New Solutions Extrusion Corporation v. Gauthier, 2010 ONSC 1037 per Karakatsanis J. (as she then was). A self-serving affidavit is not sufficient in itself to create a triable issue in the absence of detailed facts and supporting evidence. See Guarantee Company of North America v. Gordon Capital Corporation, 1999 CanLII 664 (SCC), [1999] 3 S.C.R. 423 at para. 31.
11The plaintiff asserts that the onus should be reversed in the case and the burden of leading evidence to disprove the amount of the loss suffered by the plaintiff should shift to defendants where, as here, the defendants have been found to have breached their duties to the plaintiff, and the Court is satisfied that the plaintiff has made all reasonable efforts to establish its loss. I do not think it necessary to deal with this issue. The matter can be decided using the normal evidentiary rules regarding a motion for summary judgment and the powers of a court under section 248 of the OBCA.
12The defendants have relied on affidavits of Bobby Pillitteri, the son of the defendants Pat and Christina Pillitteri. In his affidavits, he describes himself as the secretary of Vendrain and a manager of CDC. He asserts that records have been provided to E&Y and that E&Y have failed to analyze them. Many allegations were made regarding E&Y in his January, 2015 affidavit in support of a motion, which I dismissed, requiring relief against E&Y. It was argued on behalf of the defendants that had E&Y analyzed documents obtained by it from the defendants and elsewhere, the answers to issues would have been clarified.
13The problem with this position of the defendants is that it is for the defendants to put their best foot forward in defending the motion. While documents were provided to E&Y, there is no suggestion that the defendants or its accountant did not keep copies of whatever was provided. So far as complaining about E&Y’s work, E&Y was not appointed to do an audit of expenses or to create accounting documents for the defendants. Moreover, as set out in E&Y’s seventh interim report, it has not been paid all of its accounts and it cannot be expected to continue work without timely payment of its accounts.
14The defendants argue that under the rule appointing an expert, the report of the expert is for the trial and that there can be cross-examination of the expert. A complaint is made that E&Y has not yet been cross-examined and that the reports, particularly the seventh interim report, should not be relied on on this motion. I am satisfied, however, that for the purposes of this motion reliance can be placed on the portion of the reports, particularly from the seventh, that the plaintiff relies on. For the most part, E&Y has made its statements based on documents it has identified in each case in its reports. There are also many statements in the reports that indicate that E&Y is unable to determine a number of issues regarding a number of properties.
15The defendants rely on the decision of Le Maitre Limited v. Segeren (2007), 2007 CanLII 18735 (ON SC), 33 B.L.R. (4th) 224, a decision of Pepall J. (as she then was), in which Justice Pepall discussed the test to be applied on a motion for interim relief under section 248(3) of the OBCA. In that case the applicant sought an interim order prohibiting the defendant from carrying out a proposed purchase and prohibiting the respondent from continuing to operate the business in question. Pepall J. reviewed conflicting decisions and held that the principles for the granting of interlocutory injunctive relief should be applicable to section 248(3) interim relief that is in the nature of an injunction unless the dictates of fairness are so overwhelming that it may be appropriate to forego compliance with all of the RJR tests. I do not see this case as being applicable. No injunction is sought by the plaintiff here. Payment of money is sought on the basis that there is no issue that the amounts sought are clearly owing under the judgment without the need for a further trial so far as these minimums are concerned.
16There are several discrete assets that are the subject of this motion. I will deal with each of them.
CDC
17The plaintiff claims the value of her interest in CDC as well as her interest in funds paid out of CDC by the defendants for their legal costs of defending this action.
18So far as the value of her interest in CDC is concerned, the retained earnings of CDC at the end of the 2015 fiscal year were $4,904,976. One-third of that is $1,635,042 which the plaintiff claims. I am reluctant at this stage to order that payment to be made. As a result of the Transfer Agreement being set aside, Ms. Buccilli is again the owner of one-third of the shares of CDC. I did not order that her interest in CDC be bought out as it was not claimed at the trial. The judgment ordered that Ms. Buccilli was entitled to her one-third interest in CDC and all money, benefits and opportunities withdrawn or diverted by the Pillitteris from CDC. While I agree with Mr. Kestenberg that there is no benefit in Ms. Buccilli “being put back in bed” with the Pillitteris, without evidence of oppression since the judgment was rendered, such as for example assets clearly belonging to CDC having been diverted from CDC, I would not order at this stage that the plaintiff is to be bought out1.
19The plaintiff asserts that the Pillitteris have utilized CDC to fund no less than $2.8 million for the Pillitteris’ legal expenses (approximately $1.1 million) and the costs associated with E&Y’s investigation (approximately $1.755 million) for which the Pillitteris are responsible.
20So far as the payment of the costs of E&Y is concerned, the order appointing E&Y dated April 9, 2013 provided for payment of its accounts as follows:
THIS COURT ORDERS that subject to Rule 52.03(11) and any further Court order the Defendants shall fund the costs of the Expert until further order of this Court and, absent further order of this Court, such costs shall be accounted solely against the Defendants’ interest in the assets, property and/or investment ventures to which Patricia Buccilli has an interest or claim further to the Reasons for Decision of Justice Newbould dated November 23, 2012. The Expert shall be at liberty to render accounts for services rendered or to be rendered by it or on its behalf pursuant to the terms of this Order to CDC, and CDC or one or more of the Defendants shall remit payment in accordance with the terms of such accounts, without the necessity of Court approval of such interim accounts.
21With respect to the legal expenses paid by CDC are concerned, there is no legitimate basis for such payments to have been made. CDC is a defendant to be bound by the judgment in favour of the plaintiff, but the legal expenses of the defendants should not be paid by CDC. The fight is between Ms. Buccilli and the Pillitteris. Paying out legal expenses for the benefit of the defendant shareholders is oppressive in this case to the interests of Ms. Buccilli. It is no answer to say that one day it will all be taken care of by an adjustment to the retained earnings of the company. Money is paid out of a corporation to shareholders either by way of a dividend, or if the shareholders are employees, by way of properly authorized wages. Shareholders have a right to be treated equally. In Reichmann v. Reichmann 2015 ONSC 5040 in which shareholder advances were paid by a controlling shareholders to some shareholders but not others, I stated:
37 Shareholders of a corporation have a right to expect to be treated equally so far as dividends are concerned. It is by way of dividends that shareholders are to receive income from the corporation. In Ralph's case, he is the President of Rada and is paid $1million annually. It is not clear whether any of the advances in 2013 or 2014 were for his salary or whether he received a salary in a different account. It is clear however that he has been paying himself advances over and above his salary. It is also clear that he has been paying cash advances to other shareholders according to his desires.
38 Based on the record before me, it would appear that there is a very strong case that the payment of cash advances by Rada at the direction of Ralph to himself and persons of his choosing are oppressive and unfairly disregard the interests of Abraham as a shareholder of Rada. Directing cash advances without a declaration of a dividend may be a way to provide funds to shareholders but it can be a way to oppress or disregard the interests of other shareholders. In my view, that is what appears to be the case in the way in which Ralph has directed the affairs of Rada.
22Regarding the E&Y accounts, it is said that it has not yet been determined who the ultimate party is that is to pay the accounts. That may be so, but the order appointing E&Y provided that the expenses of E&Y were to be funded in accordance with the order until further order. The order provides that “the Defendants shall fund the costs” and that “such costs shall be accounted solely against the Defendants’ interest in the assets, property and/or investment ventures to which Patricia Buccilli has an interest or claim further to the Reasons for Decision of Justice Newbould dated November 23, 2012.” The use of the word Defendants is problematic because it suggests that CDC was to pay the E&Y expenses, which would mean that Ms. Buccilli would indirectly be responsible for one-third of those costs. That was not the intent and it is not suggested otherwise. The costs were to be accounted solely against those defendants in opposition to Ms. Buccilli.
23The appropriate order to be made regarding the payments of legal expenses and the expenses of E&Y is as follows:
(i) Ms. Buccilli is to be paid her one-third proportionate share of the $1.1 million in legal fees paid out for the benefit of the other shareholders, i.e. she is to be paid $366,666.
(ii) The Pillitteris are to forthwith disclose any other legal expenses in defence of the litigation that have been paid by CDC or Birchland and Ms. Buccilli is to be paid her proportionate share of those legal expenses as well.
(iii) There are to be no further payments made by CDC or Birchland for legal expenses in connection with this action.
(iv) Ms. Buccilli is to be paid her one-third proportionate share of the $1.755 million paid for the E&Y expenses, i.e. she is to be paid $585,000.
(v) There are to be no payments made by CDC or Birchland for E&Y expenses in connection with this action.
(vi) There are to be no loans by CDC or Birchland to shareholders or to Vendrain. If any dividends are declared by CDC or Birchland, one-third is to be paid to Ms. Buccilli.
Birchland
24Birchland owned a lot at 43 Muzich Place in Vaughan, having acquired it in March 27, 1997 for $235,000. On October 25, 2002 the property was transferred to Christina Pillitteri for $2 dollars. This lot was not disclosed, either as an asset of Birchland or of Christina Pillitteri, in any of the interviews of the Pillitteris conducted by E&Y. Once the property was discovered, the explanations given to E&Y about this property were inconsistent. The former lawyers for the Pillitteris asserted that the property was being held by Christina Pillitteri in trust for Birchland, but the financial records of Birchland do not support that assertion. Later it was asserted that the property was now held by Christina Pillitteri in trust for Ron Venture. There is no trust agreement and he has paid no taxes on it. The fact is however that the property was transferred out of Birchland and has been held by Christina Pillitteri in trust. It is a diverted assets and Ms. Buccilli is entitled to be paid her one-third interest in the property.
25The plaintiff obtained an appraisal of $1,475,000 for the property. The defendants obtained an appraisal of $1,150,000. The plaintiff says the mid-point should be used. The defendants say their appraisal is superior and it should be used. On the basis that this is an interim request for relief, I think it better to use the defendants’ appraisal without deciding whether it is better. The difference can be dealt with at trial. The plaintiff’s one-third interest is $383,333.33
26The defendants say that if the plaintiff is to be paid her share of the value of this property, there should be taken into account property taxes that have been paid, maintenance costs, disposition costs and business income/capital gain taxes.
27So far as property taxes are concerned, the defendants have provided proof that taxes of $57,322.87 have been paid. It is said that payments for 2001-2003 and 2014 have not been located. The tax bill for 2004 was approximately $3,300. I will assume taxes for 2001-2003 totalling $10,000 were paid. Taxes for 2013 were approximately $7,000. I will assume taxes for 2014 of $7,500 were paid. Of the taxes that have been paid, the plaintiff’s one-third share is $24,940.
28It is said that grass cutting was paid for over the years at $500 per year. For thirteen years that would be $6,500. The plaintiff’s one-third share would be $2,166.67.
29It is said that it is likely that Christina/Pat paid insurance for the property but no payments have been located. This is a vacant lot. I would not allow any insurance payments.
30It is also claimed that “Chris/Pat and/or Ron” are entitled to management fees of $3000-$5000 annually for having managed the property. There is no evidence that any of those persons did anything to manage the property. It is a vacant lot. Nor is there any evidence of what management fees would be for such a vacant lot. I would not allow any management fees.
31The defendants also say that their accountant has advised that if the property were sold, the income would be subject to corporate taxes at the rate of 26.5%. However, the defendants’ position is that the property is held in trust for Ron Ventura. It has not been an asset of Birchland for years. Moreover, there is no evidence that there has been any intent to sale it. Bobby Pillitteri in his affidavit states that his father Pat Pillitteri says he is willing to list this property for sale and after the payment of all fees, taxes, amounts owing to shareholder and disbursements, to distribute the proceeds of sale equally to Patricia Buccilli, Ron Ventura and Pat Pillitteri. I do not understand why that was said. It has never been asserted that Pat Pillitteri has any interest in the property. So far as amounts owing to shareholders, even if the property were held by Birchland, which it is not, no evidence was led at all by the defendants as to what the shareholder loans, if any, were.
32With respect to the tax consequences and proceeds of disposition that the defendants say should be taken into account, there is authority in family law cases that an allowance should be made in the case where there is evidence that the disposition will involve a sale or transfer of property that attracts tax consequences, and it should not be made in the case where it is not clear when, if ever, a sale or transfer of property will be made and thus the tax consequences of such an occurrence are so speculative that they can safely be ignored. The object in those cases is the orderly and equitable settlement of the economic affairs of the spouses upon the breakdown of their relationship. See Starkman v. Starkman, (1990), 1990 CanLII 6793 (ON CA), 75 O.R. (2d) 19 (C.A.). That object is similar if not the same as in this case. In this case the statement that Pat Pillitteri is willing to list the property for sale, even if he had an interest, is at best a tactical position in this litigation.
33I find that this property was diverted and that the plaintiff is entitled to now be paid $356,226, being $383,333less $24,940 and $2,166.
Seasonal Treasures Inc. and 1013758 Ontario Inc.
34These are two of the seven properties that I held should not have been held by Vendrain but rather for CDC, and they are the subject of the judgment in this action. The plaintiff claims one-third of the value of these two properties.
35At the time of the trial, Vendrain owned 100% of these companies. However, a complicating factor is how Vendrain acquired its 100%. At the trial, there was a claim that three other properties in which Vendrain had an interest should also have been held in the name of CDC. However, there was no evidence as to where the funds came from to acquire these three other properties and it was not possible to come to any conclusion as to the rightful owner of them. Paragraph 3 of the judgment ordered that the issue of whether these three additional properties were the subject of the declaration of constructive trust is to be determined at the further trial.
36Vendrain was originally named as the owner of a one-third interest of Seasonal Treasures Inc. (Seasonal Treasures) and 1013758 Ontario Inc. (758). The DiCicco/Cioci Group owned the other two-thirds. After they were in litigation, they agreed to settle by dividing up a number of properties. It was agree that Vendrain would transfer to the DiCicco/Cioci Group their interest in the three other properties plus another property in return for the DiCicco/Cioci Group transferring to Vendrain their two-thirds interest in Seasonal Treasures and 758 and paying Vendrain $500,000.
37The defendants contend on this motion that as Vendrain acquired two-thirds of Seasonal Treasures and 758 by giving up their interest in the three other properties, and as the issue as to whether CDC is entitled to the interest of Vendrain in those three other properties remains to be determined, the plaintiff should be paid only one-third of one-third of the value of Seasonal Treasures and 758 until it is determined if CDC was entitled to be the owner of the other properties. If CDC was not entitled to be the owner of the other properties, the plaintiff has no right to claim any profits derived from the two-thirds of Seasonal Treasures and 758 acquired by Vendrain transferring the other properties to the DiCicco/Cioci Group.
38In reply, it was said that if it turned out that CDC was not entitled to the ownership of the other properties, the payment could be reversed, and that it was equitable to make such an order now because it was the deliberate failure of the defendants to produce documents at the trial that has caused the failure at the trial to be able to determine the ownership of the three other properties. There is much in that, but I do not think paragraph three of the judgment can be overlooked. If the plaintiff intends to pursue this issue before the trial, a further interim motion with appropriate material would need to be brought. Until that were to occur, the plaintiff’s claim with respect to Seasonal Treasures and 758 must be limited to a one-ninth interest.
Value of Seasonal Treasures
39Seasonal Treasures owns a pallet factor which is leased. The plaintiff claims her interest in the property diverted from CDC and in the last five year’s net operating income.
40The plaintiff’s appraisal values the property at $9 million. The defendants’ appraisal values it at $7.9 million. For this interim motion, I will use the defendants’ appraised value without deciding whether it is better. The difference can be dealt with at trial.
41Mr. Bobby Pillitteri has filed a statement of net operating income for the years 2010 to 2015. The plaintiff claims payment for this five year period. Why a claim was not made for the prior years was not explained.
42There is little by way of back-up to prove the numbers in the statement produced by Mr. Pillitteri. It states that the base rent for those five years was $3,410,715, common area maintenance was $921,756 and interest income was $4,470 for a total income of $4,336,898. The lease provides for base rent of $45,094 per month to March, 2011 and thereafter $54,113 to September 2018. For the years 2010 to 2015, that base rent would be $3,760,851. It is said that the rent was reduced. There is no admissible evidence of that and I will take the figure of $3,760,851 as base rent. The lease is a net net lease and so the tenant is to pay all expenses. Under the lease, the municipal taxes were to be paid to the landlord who was to then pay them. It is said on the chart that taxes for the five years were $753,778. Although there is no proof of that, I will assume that figure to be accurate. There are other expenses listed which are not proven in any way and I ignore them. Included is an expense of $414,662. It is said that while the DiCicco/Cioci Group owned two-thirds of the property they charged $1,836 per month for management services. What the basis for that charge was was not stated. There is no evidence that any management charges have been paid since 2009 when Vendrain acquired the two-thirds interest of the DiCicco/Cioci Group and I ignore the claim.
43In the result, I assume net operating income of $4,336,898 less $753,778 for taxes, or $3,583,120. The plaintiff’s interest in that, using one-ninth as her established interest to date, is $398,124.
44The defendants say that there would have to be deducted the fees and taxes that would need to be paid on the disposition of the property, the legal fees expended to ultimately obtain a settlement with the DiCicco/Cioci Group which led to the transfer of their interest in the properties to Vendrain. I do not agree. There is no evidence that the intention is to sell the property. The property was diverted and the plaintiff is entitled to the value of the diverted asset. The defendants also say that the claimed value fails to account for Pat Pillitteri’s contribution to the purchase of the properties and fails to take into account the fee that is payable to Pat Pillitteri for having given personal guarantees for several mortgages used to acquire and develop the Plex group. I do not agree. It was decided in the trial decision that the property was not owned by Pat Pillitteri or Vendrain for that matter and in any event no evidence was led by the defendants to establish any amounts owing to Pat Pillitteri. There is no basis established for Pat Pillitteri to be paid any fee for guaranteeing any mortgages of the Plex Group.
45There is no basis on the record before me to charge the plaintiff with one-third of the litigation expenses incurred by the Pillitteris in their dispute with the DiCicco/Cioci Group. The fact that the interest of the DiCicco/Cioci Group in Seasonal Treasures was transferred as part of the settlement is no indication that the litigation was in the normal course of business of Vendrain. The fight in the litigation was between the Pillitteris and the DiCicco/Cioci Group.
46For Seasonal Treasures, an interim payment of $333,333 is to be paid to Ms. Buccilli.
1013758 Ontario Inc.
47This property is leased to an auto repair shop at 5401 Steeles Ave. There is a net net lease requiring the tenant to pay all expenses. The same chart that was produced by Mr. Bobby Pillitteri sets out total revenue for the five years of $971,438 and reality taxes of $318,395. I reject all of the other claimed expenses or matters that are claimed by the defendants should be taken into account for the same reasons as with Seasonal Treasures. The resulting net operating income is $653,043. Ms. Buccilli's interest in that, using one-ninth as her established interest to date, is $72,560.33.
48I find that the Seasonal Treasures and 758 assets were diverted and that the plaintiff is entitled to now be paid $333,333 plus $72,560 for a total of $405,893.
588 Chrislea Road
49This is a parcel of vacant land of just over one acre. It was owned by CDC. On October 25, 2002 it was transferred to Christina Pillitteri. At the trial, Christina gave evidence that it was transferred to her in trust for Ron Venture and Pat Pillitteri to protect it from the bank.
50The plaintiff’s appraisal values the land at $1.3 million as of April, 2015. The defendants have not obtained any appraisal. I will assume a value of $1.3 million. The plaintiff claims one-third of that amount, being $433,333.
51The defendants assert that the plaintiff has failed to account for the taxes that would need to be paid by CDC on the disposition of the asset. I do not agree. The land is not held by CDC. It was diverted. It is held by Christina Pillitteri. The defendants also assert that the plaintiff has failed to take into account the costs to maintain the property during the past 13 years. It appears that realty taxes were charged, and paid for by Christina Pillitteri or someone. The final tax bill for 2015 showed past due of approximately $6,300. Taxes appear to have been around $5,000 per year in 2003 rising to around $10,000 per year in 2015. I will assume since 2002 taxes paid have been on average $7,500 per year for a total of $82,500, which would make Ms. Buccilli's share $27,500. It is claimed that Christina is also entitled to a management fee of $3000- $5000 annually for having managed the property. I do not agree. This is a vacant piece of land and there is no evidence that Christina has managed the property at all. It is further claimed that if the property were to be sold there would be taxes to be paid on it. However, there is no evidence at all that the property is intended to be sold and for the reasons discussed with respect to the Birchland property, I decline to make any deduction for a notional sale.
52I find that 588 Chrislea Road was diverted and that Ms. Buccilli is entitled to now be paid $405,833.
Westplex Centre and Lot 2N
53This property was sold by Vendrain in 2008 for $4,665,000. CDC received $1,450,000 and Vendrain received $3,215,000. The plaintiff’s one-third share of the amount paid to Vendrain is $1,071,666.67.
54For some reason, Mr. Bobby Pillitteri asserts in his affidavit that it has not been established that CDC had an interest in this property. That is not correct. The contrary was established at the trial and the property is listed in the judgment as one of the properties diverted from CDC.
55Appendix F to the seventh interim report of E&Y contains an analysis of the proceeds from the Westplex sale. The proceeds were co-mingled in a Vendrain account which had $612,445. From that account $400,000 was paid to Ron Ventura. $400,000 was also paid to Christina Pillitteri who used it to pay $396,900 to a DCMS (Realty) Limited Partnership. $2,415,000 was transferred to another Christina Pillitteri account from which $102,757.50 was wired for the purchase of a condo in Florida by Pat Pillitteri, $500,000 was wired to Pat Pillitteri on the day he closed his condo purchase in Florida and $1,650,000 was wired to a law firm in trust in Toronto which related to a cash call for a Starserra joint venture.
56A review by E&Y of the information provided to it regarding the Starserra joint venture in appendix H to the seventh interim report reveals more questions than answers as to the investors in the Starserra joint venture. The defendants have not provided banking records or other source documents regarding any investment by Vendrain in the joint venture and the banking records that were provided to E&Y indicated no payments by Vendrain, contrary to what was asserted by Bobby Pillitteri. E&Y concluded that without additional information, it is unable to identify the source of contributions to Starserra.
57Included in the expense listed in the cash flow chart is an entry “Investment in Starserra Joint Venture” of $2,305,604. A note says the investment was written off in 2013 “due to failure of the project.” No particulars of any kind were provided by Bobby Pillitteri and no supporting documents were attached. Who made the investment was not stated. The analysis by E&Y in appendix F states that the investment in the Starserra joint venture is not consistent with the banking records. Also, E&Y was advised by Mr. Yee, the accountant for the defendants, that he never received any financial reporting or information with respect to Starserra and that during the year-end procedures for 2013 he advised the defendants that Vendrain required financial reporting for Starserra, at which point the defendants advised him that it was “gone”. The investment was then written off.
58This amount written off is attributed to both Westplex and Humberplex on the cash flow chart. On the basis of the record and the lack of any supporting material from the defendants, I would not require that the plaintiff deduct from what is now to be paid any percentage of what losses there may have been on the Starserra joint venture.
59So far as the other expenses in the cash flow chart are concerned, there was no documentation supporting them. It is no answer to say that all documents “were provided and made available to E&Y”. What those documents were was not stated. It was the responsibility of the defendants to produce the records that supported the cash flow chart. The numbers presumably did not come out of thin air.
60E&Y did do an analysis as best it could from the information provided to it and stated certain entries were not consistent with banking records. E&Y stated in appendix G to its report regarding Humberplex that it was not able to identify, based on banking records obtained from BNS or the defendants, items described as professional fees, legal fees, corporate income taxes and payments to CDC in 2009 or 2010. E&Y also stated that it did not have sufficient information to determine whether or why such expenses and other payments made by Vendrain during 2009 and 2010 pertain to the Humberplex settlement.
61Regarding an entry said to be “payment of Westplex loans” of $800,000, the only payments of that amount that could be identified by E&Y were the two payments of $400,000 to each of Ron Venture and Christina Pillitteri, as already discussed.
62In the circumstances based on the state of the record, the defendants have not established that any expenses should be deducted from the proceeds of the Westplex sale. I find that the plaintiff is entitled to now be paid $1,071,666.
Humberplex
63Humberplex Development Inc. was a company in which Vendrain had a 22% interest. In 2008 Vendrain sold that interest to the DiCicco/Cioci Group for $8,221,400 in the settlement between those parties. The plaintiff claims payment of one-third of that amount.
64In 2000, Humberplex sold a group of lots to a third party purchaser. The plaintiff claims one-third of that sale as well. The defendant in argument said that the money from that sale went to Humberplex. There is no evidence one way or the other or what might have happened to the money if it did go into Humberplex. The evidence relied on by the plaintiff was imprecise evidence given by Tony DiCicco at the trial as to the sale and what the expenses might have been. He did not state that Humberplex did not receive the proceeds of the sale. He represented two-thirds of the shareholders of Humberplex at the time and his wife, who looked after the books, presumably took care that Humberplex did receive the sale proceeds. There is no evidence as to what happened to the funds after they were paid to Humberplex. In the circumstances I am not prepared to make any order now regarding this prior sale,
65Regarding the sale of Humberplex by Vendrain in 2008, Mr. Bobby Pillitteri asserts in his affidavit that CDC received $3,738,719 from the proceeds of $8,221,400 and that until such time as CDC’s interest in Humberplex is established, no further amounts are payable to the plaintiff. This last assertion is not correct. The contrary was established at the trial and the property is listed in the judgment as one of the properties diverted from CDC.
66Regarding the 2008 sale by Vendrain of its interest in Humberplex, E&Y has done an analysis of the available records. E&Y state that $8,021,400 was received from the sale which was deposited into a Vendrain investment account at BNS. I take it that to be a typo error as the amount was $8,221,400.
67The E&Y analysis states that from the money deposited into the BNS account, $1,425,000 was deposited into a Vendrain account on July 9, 2008 and on the same day the same amount was transferred to an account of Christina Pillitteri, from which account a bank draft of $1,422,060.57 was used to purchase a bank draft payable to CDC dated July 16, 2008. E&Y state that it does not have sufficient information to determine the bank account into which the draft was deposited or how the transaction was recorded in the books and records of CDC. The plaintiff says that from what happened to the other money from the transaction paid to Vendrain, it should be inferred that the $1,422,060.57 was recorded as a debt to Ron Ventura and/or the Pillitteris. I think this a reasonable inference to draw.
68E&Y further state that $551,957.18 was paid from the Vendrain account by way of a bank draft to CDC on December 11, 2008 but that it does not have sufficient information to determine the bank account into which the draft was deposited or how the transaction was recorded in the books and records of CDC. I think the same inference can be drawn that this amount was recorded as a debt to Ron Ventura and/or the Pillitteris.
69E&Y further state that $1,960,708 was paid to CDC as follows:
“(f) $1,960,708.80 was paid by way of a bank draft to CDC, and deposited into an account in the name of Patron at BNS (“CDC Account-1”) on January 30, 2009. The funds were transferred in their entirety on the same date from CDC Account-1 to a non-Registered Investment Account in the name of Patron at BNS (“CDC Investment Account”). On May 7, 2009, the CDC Investment Account transferred $1,905,000 of the funds back to CDC Account-1, which, on the same date purchased three bank drafts of $635,000 each payable to:
(i) 1796248 Ontario Inc. (“179648”), Ron Ventura’s holding company which owns 50% of CDC;
(ii) 1796234 Ontario Inc. (“1796234”), Pat Pillitteri’s holding company which owns 50% of CDC; and
(iii) 1796233 Ontario Inc. (“1796233”), a company wholly owned by Christina Pillitteri.
The May 7, 2009 payments above were recorded as dividends in the books and records of CDC as discussed below …
On May 7, 2009, as part of a corporate reorganization, CDC paid out $1,905,000 as dividends. The fund were paid by way of three bank drafts for $635,000 each payable to 1796248 (Ron’s holding company and 50% shareholder of CDC), 1796234 (Pat’s holding company and 50% shareholder of CDC), and 1796233, a company owned by Christina Pillitteri. Neither Christina nor 1796233 was a shareholder of CDC at the time of the payments.
On May 11, 2009, 1796248, 1796234 and 1796233 paid back $630,000 each (totaling $1,890,000 to CDC, which was recorded in the books of CDC as long term debt payable to 1796248 and 1796234 in the amount of $945,000 each ($630,000 plus the allocation (50% of $630,000) from 1796233). On April 27, 2010, CDC authorized the execution of a Personal Property Security Agreement among Pat and Ron’s personal holding companies, 1796234 and 1796248 and CDC granting 1796234 and 1796248 security of CDC’s assets.
70This circular transit of money was of course quite improper so far as the plaintiff’s interests in CDC are concerned. CDC did not receive the funds in the sense that the funds are for CDC’s account. The funds are secured debt to the holding companies for Ron Ventura and the Pillitteris.
71The defendants also assert through the affidavit of Bobby Pillitteri that the sale of Humberplex occurred in the midst of legal proceedings and significant legal fees were expended in litigating, negotiating and finalizing the settlement. In addition, he states, other professional fees were paid and corporate taxes were payable on the proceeds of sale. He attached a “cash flow charge summarizing the expenditures that must be accounted for before any distributions are made”. The cash flow chart was headed “Cash Flow from Westplex and Humberplex Settlements”. This is the same cash flow chart which I have discussed in dealing with the Westplex sale.
72For the same reason as with the Seasonal Treasures claim, there is no basis on the record before me to charge the plaintiff with one-third of the litigation expenses incurred by the Pillitteris in their dispute with the DiCicco/Cioci Group.
73So far as the other expenses in the cash flow chart are concerned, they suffer from the same lack of proof as discussed under the Westplex sale and for the same reason the defendants have not established that any expenses should be deducted from the proceeds of the Westplex sale.
74In my view, the plaintiff is entitled to be paid now for her one-third interest from the Humberplex sale, being one-third of $8,221,400 or $2,740,477.
Diverted and unaccounted cash
75There are three payments attacked by the plaintiff.
76The first is a payment of $800,000 on November 6, 1999 made to Vendrain by 1173452 Ontario Inc. (a Schedule “A” Plex investment) representing a portion of profits from the sale of Huntington farms. The plaintiff has not provided any evidence that the money improperly left Vendrain. Bobby Pillitteri asserts in his affidavit that amounts (not totalling the $800,000) were paid out for Vendrain purposes. The attachments do not make clear that the funds were used for Vendrain purposes. However, I would not order any payment to the plaintiff for this deposit to Vendrain.
77The second is a payment on or about July 20, 2000 of $500,000 to Pat Pillitteri by Seasonal Treasures Ltd. The evidence of this was given by Julie DiCicco at the trial. There is no explanation provided by the defendants regarding this payment. It is just argued that E&Y is reviewing the documentation to trace the funds and that it is unfair to demand that the defendants do the same work. I do not accept that. The defendants did that work in connection with the $800,000 just referred to and for other claims made in this motion. It is not open to the defendants to sit back and blame someone else for their failure to provide any evidence when it is they who have the records. It is also to be noted that E&Y are not doing work right now as their bills have been unpaid. The fact that this diversion took place before the Transfer Agreement that was set aside makes no difference. Enzo had died by this time and the plaintiff’s rights were affected by the payment to Pat Pillitteri. I find that the $500,000 was diverted and that the plaintiff is entitled to her one-third interest, being $166,666.
78The third is a payment in 2009 of $500,000 paid to Vendrain following the Transfer Agreement dated November 19, 2009. However, there is no evidence what Vendrain did with the money and I would not on this motion order any payment to be made to the plaintiff as a result of that payment.
Conclusion
79Ms. Buccilli is to be paid forthwith the amounts referred to in these reasons totalling $6,098,427 plus any amount to be paid to her under paragraph 23(ii) of these reasons. The defendants other than CDC and Birchland are to make these payments and they are to be jointly and severally liable for the payment of these amounts.
80Ms. Buccilli is entitled to her costs. If not agreed, brief written submissions along with a proper cost outline may be made within 10 days nd brief reply submissions may be made within a further 10 days.
Newbould J.
Date: March 9, 2016
