COURT FILE NO.: 08-15/15 DATE: 20160725 ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
Mizrachi Organization of Canada, Kurt Rothschild in his capacity as Trustee for Torah V’Avodah Congregation, Jack Kahn, in his capacity as Trustee for Torah V’Avodah Congregation and Joseph Rosenfield in his capacity as Trustee for Torah V’Avodah Congregation Applicants – and – Harry Bernstein, Yisroel Zlotnick, James Beliak, George Vitriol, David Yunger, Binyamin Zlotnick and Torah V’Avodah Congregation Respondents
Counsel: Gregory M. Sidlofsky for the Applicants Fred Tayar for the Respondents
HEARD: July 13, 2016 Penny J.
ENDORSEMENT
Overview
[1] This application involves a struggle over the control and assets of a religious organization, Torah V’Avodah, between the founders of TVA and its current congregation.
[2] The application seeks a wide range of relief but, at the return of the hearing, the applicants sought the disposition of only one issue; that is, the validity of a meeting of purported members of TVA held on November 16, 2013. At that meeting, the current congregation, among other things, voted to oust the existing trustees of TVA (who were all members of the founding Mizrachi group) and replace them with trustees selected from the current congregation. The applicants all say they were keenly affected by and had a demonstrable interest in the subject matter of the meeting but that they were given no notice of either the meeting or the proposed business to be conducted at that meeting. The applicants, therefore, argue that they were denied even the most fundamental procedural fairness, in violation of the principle of audi alteram partem, such that the meeting, and any steps taken at the meeting, should be declared invalid.
[3] There are a number of other issues having to do with who owns certain property on Wilson Avenue at which the TVA religious services are conducted, whether Mizrachi has trust or unjust enrichment claims, who are the members of TVA, who has the right to elect trustees of TVA and who are the rightful trustees of TVA. The applicants concede that these are contested issues of fact requiring a trial.
[4] The respondents take the position that the November 16, 2013 meeting was validly conducted in accordance with the relevant provisions of the Religious Organizations’ Lands Act, R.S.O. 1990 c. R. 23. The respondents also argue that the record is clear that TVA (or, more properly, its trustees) owns the Wilson property and seek a declaration to that effect.
[5] The issues for determination, therefore, are:
(1) whether the meeting held on November 16, 2013, and the vote at the meeting, purporting to remove the applicants as trustees of TVA (and purporting to conduct other business, such as closing the membership of TVA) were valid; and
(2) whether, on the present record, a declaration of ownership of the Wilson property can be made and, if so, in whose favour.
Background
[6] Mizrachi is a well-known registered charity promoting Jewish cultural and religious causes. TVA is a Jewish religious organization which conducts religious services at the Wilson property. Mizrachi members and trustees established TVA many years ago. It appears Mizrachi members raised the money to acquire the Wilson property. One room at the Wilson property is devoted to TVA religious services. Mizrachi itself, and other organizations, occupy the remainder of the building. Title to the Wilson property is held by the trustees of TVA.
[7] The applicants take the position that, historically, all TVA members were required to be Mizrachi members and that TVA trustees were also required to be Mizrachi members and trustees. The applicants also take the position that Mizrachi has always supported and administered TVA financially and has been responsible for most of the expenses associated with the Wilson property. These assertions do not appear to be in serious dispute although their relevance to the current situation is challenged by the respondents.
[8] In August 2013 the trustees of TVA were:
Kurt Rothschild Jack Kahn Moshe Bessin Howard Langer; and Joseph Rosenfield.
The trustees were all Mizrachi members, holding office as TVA trustees since at least July 2001. At a special meeting (the respondents dispute the propriety and validity of this meeting) held on August 8, 2013, the trustees decided that, due to the need for costly repairs, the Wilson property would be sold.
[9] Binyamin Zlotnick, a leader of the TVA congregation, was advised of this decision the following day. He conveyed this information to others within the congregation. The congregation was outraged by the trustees’ decision. They organized a meeting of the congregation on November 13, 2013. Relying on s. 18 of the Religious Organizations’ Lands Act [^1], Mr. B. Zlotnick stood up at TVA religious services on November 2 and 9 and announced a special meeting of the TVA “members” to be held on November 13, 2013 to elect a new slate of trustees.
[10] On November 13, 2013, the respondents say, all the “members” of the TVA were present, either in person or by proxy. Neither the existing trustees nor Mizrachi had notice of the meeting or its intended purpose. None of the existing trustees were present at the meeting.
[11] At the meeting, the congregation voted to remove the existing trustees and to replace them with the respondents. The congregation also voted to “close” membership of TVA to those present (in person or by proxy) at the meeting. Following the meeting, title to the Wilson property was changed to the new trustees. One of the respondents, David Yunger, took a mortgage on the Wilson property.
Validity of the November 13, 2013 Meeting
[12] Audi alteram partem, or the right to notice and to be heard, is a longstanding principle of procedural fairness applying to organizations such as TVA. In order to qualify as a person entitled to notice and to be heard, it is sufficient that the person have an “interest’ in the subject matter of the proceedings.
[13] Here, the incumbent trustees clearly had an interest in the business proposed to be transacted at the meeting; personally, because they were the very trustees proposed to be removed and replaced, and institutionally, since, as trustees, they were charged with the due administration of the organization of which they were trustees, the TVA.
[14] Mizrachi, I find, by virtue of its unique role in the history of the TVA and the acquisition and administration of the Wilson property, also had an interest in the subject matter of the meeting.
[15] The respondents argue that they were entitled to rely on subs. 18(2) of the ROLA and that they complied with its provisions by announcing the meeting to remove and replace the existing trustees in each of the two weeks prior to the meeting.
[16] I am unable to agree with this submission. The applicants’ evidence is that there was, historically, a “practice or custom” of involving Mizrachi members and trustees directly in the business and affairs of TVA. This evidence was not directly challenged but the TVA evidence was that the current congregation knew nothing of any such practice or custom. Although there seems to be prima facie evidence of this historical practice, standing alone, I probably would not have found that evidence to be sufficient to overturn the validity of the meeting.
[17] I do agree with the submission of the applicants’, however, that to be valid notice, the notice must be “effective.” In other words, formal compliance with the provisions of subs. 18(2) of the ROLA is not sufficient where there is evidence that the “notice” did not reach parties with an interest.
[18] Here, it is admitted by the respondents that they purposely chose a method of giving notice which they knew would not reach the applicants. None of the applicants were regular attendees at TVA religious services. The respondents knew who the applicants were, and how to communicate with them, but chose not to give them notice personally. There was a public bulletin board at the Wilson property. While the respondents posted the resolution passed at the meeting, removing and replacing the incumbent trustees, they chose not to post advance notice of the meeting on that same bulletin board. As one of the respondents put it on cross examination, they were “pissed off” at the incumbent trustees for purporting to decide to sell the Wilson property (without notice to the congregation) and decided to fight fire with fire. As is so often said, however, “two wrongs don’t make a right.”
[19] Further, it is admitted that the resolution “closing” TVA membership was not mentioned in the announcements made at the religious services in advance of the meeting. Counsel for the respondents conceded in oral argument that that aspect of the meeting, at the very least, could not stand.
[20] I conclude that the applicants were persons or entities with an interest in the subject matter of the November 13, 2013 meeting. I further conclude that the applicants were, by conscious act of the respondents, not given any notice of the meeting or its purpose. In the circumstances, I grant the declaration sought by the applicants; the meeting, as a result of the complete lack of notice, was invalid and the results of that meeting must be set aside. This means, among other things, that the removal and replacement of TVA trustees is set aside. It also means that the change in registration of title to the Wilson property must be reversed. Also, subject only to bona fide advances for value without notice, the mortgage granted to David Yunger on the Wilson property must also be reversed.
Ownership of the Wilson Property
[21] There is certainly a good deal of evidence to support the conclusion that legal title to the Wilson property resides with TVA in the person of its trustees. That said, I do not think this is a case where a declaration of ownership should be made at this early stage, effectively on a summary basis. I say this for two reasons.
[22] First, there is a clear conflict between the Mizrachi faction and the TVA faction about who the trustees are or should be and, even more fundamentally, who the members of TVA are or should be. These disputes, it is admitted, will require document production, discovery and possibly a trial to resolve. The issues of membership, trusteeship and ownership are bound together. I find it would not be appropriate to decide one without the others.
[23] Second, and in any event, Mizrachi has advanced claims, in the nature of constructive and resulting trusts, to beneficial ownership of the Wilson property. Again, it is conceded that the resolution of these claims will require document production, discovery and possibly a trial.
[24] For these reasons, making a declaration of ownership at this stage would be premature.
Other Matters
[25] It is clear that there is a bona fide dispute over ownership and control of TVA and the Wilson property. In the circumstances, it is appropriate that the status quo be preserved, to the extent consistent with public safety and asset value preservation, pending the outcome of this litigation. The applicant trustees are fiduciaries. They shall continue to administer TVA and the Wilson property in the ordinary course of business, consistent with their fiduciary obligations. However, no transactions may be taken outside the ordinary course of business (such as a sale or mortgage of the property) without prior notice to all parties and the appropriate sanction of the court.
[26] There is no need for this dispute to become protracted. Once full document production is made and focussed discovery is conducted, the issues of true disputed fact will become apparent and are likely to be few. This is a perfect case for a hybrid application/trial of issues at which brief viva voce evidence can be taken on the narrow issues involving conflicting evidence and the remainder of the issues argued from a paper record. I also order that, once the evidence is in, the parties make serious efforts towards an out of court resolution through private or judicial mediation.
[27] If a case conference is required to move this matter along expeditiously, I may be spoken to at a 9:30 appointment.
Costs
[27] Counsel asked that costs be reserved to follow the release of my reasons. I encourage the parties to seek an agreement on costs. Failing agreement, anyone seeking costs shall do so by filing a brief submission, not to exceed two typed, double-spaced pages, together with a Bill of Costs, within seven days. Anyone wishing to respond to a request for costs shall do so by filing a brief submission, subject to the same page limit, within a further seven days.
Penny J.
Released: July 25, 2016