Court File and Parties
COURT FILE NO.: CV-16-553042 DATE: 20160615 ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
MITCHELL COHEN Plaintiff – and – WOODCLIFFE CORPORATION, WESTDALE CONSTRUCTION CO. LIMITED, PRICE EQUITIES LIMITED, PRICE LEASEHOLDS LIMITED and ROSEDALE EQUITIES LIMITED Defendants
COUNSEL: Jamie VanWiechen, for the Plaintiff Colin P. Stevenson, for the Defendant, Woodcliffe Corporation
HEARD: June 14, 2016
M. D. FAIETA, J.
INTRODUCTION
1The Plaintiff, Mitchell Cohen (“Cohen”), states that the Defendant Woodcliffe Corporation (“Woodcliffe”) “… granted me a 5% interest in the profit from the development or sale of the Summerhill Condominium Project ….”. This development site, owned indirectly and equally by Woodcliffe and the Defendant, Westdale Construction Co. Limited, through their interest in the three other Defendants, is scheduled to be sold on June 16, 2016 for $43 million.
2Cohen brings this motion, pursuant to Rule 45.02 of the Rules of Civil Procedure, for an order that 5% of the purchase price be held in trust by counsel for the Defendant, Woodcliffe Corporation, pending the hearing of this motion on additional affidavit evidence on July 6, 2016.
3For the reasons described below, I have dismissed this motion.
ANALYSIS
4Rule 45.02 states:
Where the right of a party to a specific fund is in question, the court may order the fund to be paid into court or otherwise secured on such terms as are just
5In Sadie Moranis Realty Corp. v. 1667038 Ontario Inc., [2012] O.J. No. 3029, 2012 ONCA 475, at para. 17, the Ontario Court of Appeal stated that an order for the interim preservation of property pending litigation is “a limited exception to the law’s deep-seated aversion to providing a plaintiff with execution before trial” as it constitutes “… a serious interference with the defendant’s affairs”.
6The following three-part test, informed by the above policy considerations, governs the issuance of an order under Rule 45.02:
- Does the plaintiff claim a right to a specific fund?
- Is there a serious issue to be tried regarding the plaintiff’s claim to that fund?
- Does the balance of convenience favour granting the relief sought by the plaintiff? [1]
7The onus is on the plaintiff to establish the above criteria. [2]
ISSUE #1: DOES THE PLAINTIFF CLAIM A RIGHT TO A SPECIFIC FUND?
8In Sadie Moranis, at para. 19, the Ontario Court of Appeal explained that this requirement has two elements:
(a) There must be a specific fund readily identifiable when the order is sought; and (b) The plaintiff must assert a legal right to the specific fund as a claim in the litigation.
9First, Cohen has failed to establish that there is a specific fund that is readily identifiable today. The sale has not closed. Neither the proceeds of sale nor the “profits” of the sale of the Summerhill Condominium Project exist at this moment.
10Second, Cohen has failed to assert in the litigation a legal right to be paid out of a specific fund. As noted in Sadie Moranis, at para. 21, 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”. In other words, this aspect of the test will not be met where a plaintiff’s claim is for damages rather than a claim to a legal right. In Sadie Moranis, at para. 24, the Ontario Court of Appeal found that a listing agent was not entitled to be paid its commission out of the proceeds of sale held in trust following the closing of the sale of a property. It stated that:
I agree with the Divisional Court that the appellant's claim is for breach of contract because of the vendor's failure to pay the commission in accordance with the Listing Agreement. That agreement provides for the payment of the commission on closing and for the application of the deposit to that commission. Importantly, it does not provide for the commission to be paid out of the proceeds of the sale. [Emphasis added.]
11In this case, the Statement of Claim, at paragraphs 1 and 20, claims damages for breach of the above-noted oral agreement in an amount equal to 5% of the net proceeds of the sale of the Summerhill Condominium Project however it does not assert that Cohen has a legal right to be paid 5% of the profits of the sale out of the proceeds of sale. Accordingly, Cohen has failed to establish this aspect of the test as well.
ISSUE #2: IS THERE A SERIOUS ISSUE TO BE TRIED REGARDING THE PLAINTIFF’S CLAIM TO THE FUND?
12A plaintiff must establish that it has “a serious prospect of ultimate success”. [3]
13While Woodcliffe acknowledges that Cohen’s claim in damages raises a serious issue, I agree with its submission that it does not raise a serious issue to be tried regarding a claim to a fund because, as explained, the Statement of Claim makes no such allegation. Accordingly, I find that Cohen has failed to establish this element of the test.
ISSUE #3: DOES THE BALANCE OF CONVENIENCE FAVOUR GRANTING THE RELIEF SOUGHT BY THE PLAINTIFF?
14A plaintiff must establish that “…. there is something compelling on the plaintiff's side of the scales, such as a real concern that the defendant will dissipate the specific fund, that is sufficient to outweigh the defendant's freedom to deal with his or her property.” [4]
15Again, there is no “fund”, and thus there can be no dissipation of the fund.
16I also note that Cohen has led little evidence to support the view that there is any risk that Woodcliffe would be unable to satisfy his claim to 5% of the profits of the sale, which he suggests has a value of $1,761,500.00, in the event that his damages claim is successful. Cohen’s evidence that he is “… very concerned that the proceeds of sale will be dissipated prior to the resolution of this action …” is the only evidence on this issue. His mere concern, without more explanation for that concern, is an insufficient basis to find that balance of convenience favours granting the relief sought.
CONCLUSIONS
17I dismiss Cohen’s motion. He has not satisfied the three part test for the issuance of an interim preservation order under Rule 45.02. I encourage the parties to make best efforts to resolve the issue of costs. However, if the parties are unable to do so, Woodcliffe shall deliver its costs submissions and an outline of costs within seven days of today’s date. Cohen shall deliver his reply costs submissions and his outline of costs within fourteen days of today’s date. The costs submissions shall be no more than three pages long.
18I will hear the further motion for an interim preservation order on July 6, 2016.
Mr. Justice M. D. Faieta Released: June 15, 2016
REASONS FOR JUDGMENT
M. D. FAIETA, J. Released: June 15, 2016
Footnotes
[1] Sadie Moranis, para. 18 [2] Sadie Moranis, para. 18. [3] Sadie Moranis, para. 20. [4] Sadie Moranis, para. 20.