Court File and Parties
CITATION: The Polish Alliance of Canada. v. Polish Association of Toronto Limited, 2016 ONSC 5368
COURT FILE NO.: CV-08-361644
DATE: 20160824
SUPERIOR COURT OF JUSTICE - ONTARIO
BETWEEN:
THE POLISH ALLIANCE OF CANADA Plaintiff
AND:
POLISH ASSOCIATION OF TORONTO LIMITED, MAREK MIASIK aka MAREK ADAM MIASIK, MARIA MIASIK, JAN ARGYRIS aka LOUIS JOHN ELIE ARGYRIS aka LOUIS aka JOHN ARGYRIS, WLADYSLAW JASLAN aka WLADYSLAW JULIAN JASLAN, HELENA JASLAN, EUGENIUSZ SKIBICKI, CZESLAWA ERICKSEN, STANISLAW ROGOZ aka STAN ROGOZ, ALBERT JOSEPH FLIS and RICHARD RUSEK Defendants
AND:
POLISH ASSOCIATION OF TORONTO LIMITED, MAREK MIASIK aka MAREK ADAM MIASIK, MARIA MIASIK, JAN ARGYRIS aka LOUIS JOHN ELIE ARGYRIS aka LOUIS JOHN ARGYRIS aka JOHN ARGYRIS, WLADYSLAW JASLAN aka WLADYSLAW JULIAN JASLAN, HELENA JASLAN, EUGENIUSZ SKIBICKI, CZESLAWA ERICKSEN, STANISLAW ROGOZ aka STAN ROGOZ, and ALBERT JOSEPH FLIS Plaintiffs by Counterclaim
AND:
THE POLISH ALLIANCE OF CANADA, ROBERT ZAWIERUCHA, TADEUSZ MAZIARZ, ELIZABETH BETOWSKI, DANUTA ZAWIERUCHA, TERESA SZRAMEK, ANDRZEJ SZUBA, ADAM SIKORA, ELZBIETA GAZDA, STANISLAW GIDZINSKI, STANISLAW IWANICKI and TADEUSZ SMIETANA Defendants by Counterclaim
BEFORE: F.L. Myers J.
COUNSEL: E. Patrick Shea, for Collins Barrow Toronto Limited, Receiver and Manager B.A. Kaminsky, for the Plaintiff Bernie Romano, for the Defendants/Respondents, except for Richard Rusek
HEARD: August 24, 2016
ENDORSEMENT
[1] Counsel agreed on a number of matters to move this case towards its end.
[2] On consent all remaining claims in the statement of claim against all defendants other than Mr. Rusek and all claims remaining in the counterclaim are dismissed without costs.
[3] Counsel for the Plaintiff is to forward a copy of this Endorsement to Ms. Edwards and arrange a case conference with Ms. Edwards and me by telephone before November 1, 2016 to discuss the scheduling of any claims that may remain against Mr. Rusek.
[4] The Receiver is to take no more steps other than preparing a report including its final account and final statement of receipts and disbursements for its discharge. The Receiver shall forward its report to counsel and the court before September 30, 2016. The parties may deliver up to five (5) pages of written submissions by October 15, 2016 if either or both of them object to the discharge of the Receiver on the terms it proposes. With or without objection, the court will fix the terms of the Receiver’s discharge shortly after October 15, 2016.
[5] On consent, the Certificate of Pending Litigation issued pursuant to the order of Master Peterson dated September 5, 2008, is discharged.
[6] On consent, Mr. Romano is discharged from his undertaking to preserve the original share certificates of Polish Alliance of Toronto Limited (“PATL”) and the Branch 1, Directors’ Ledger/Shareholders Ledger. The court thanks Mr. Romano for his cooperation in the best traditions of the bar in fulfilling this undertaking to the court.
[7] On consent, the court orders the plaintiff to pay PATL costs of $202,960.86 plus interest under the Court of Justice Act from May 6, 2016 in respect of outstanding receivership costs including a costs ordered by the Court of Appeal on January 26, 2016. The Receiver will account for the $25,000 paid to it by the plaintiff and a further $30,000 it is holding from the sale of land in its final R&D.
[8] PATL seeks additional costs as a result of the order of the Court of Appeal dated June 8, 2016. The Court of Appeal made two changes to the order of this court dated May 27, 2014. First, it deleted para. 3 of the order thereby clarifying legal title to the shares of PATL. It also deleted wording from paras. 1 and 2 of the order which specified how members of Branch 1-7 of the Polish Alliance of Canada other than the individual defendants were to be identified going forward. The Court of Appeal held that the all member of Branch 1-7 as at August 2006, including the individual defendants, remained members in good standing of Branch 1-7 without any need for them to re-apply. I should also note that for new members of the branch, the Court of Appeal reiterated that the plaintiff should process any membership applications in good faith and reasonably quickly.
[9] The effect of these two changes, the defendants[^1] argue, is to have made them much more successful in the trial and to have made much or all of the receivership unnecessary. Therefore, they seek costs of the trial, costs of the receivership, and indemnity for the Receiver’s costs of the appeal. The Court of Appeal’s order allows for this reassessment of costs at paras. 4 through 6.
[10] I initially ordered that there be no costs of the trial. There were two main issues at the trial: First, the plaintiff claimed that it owned the shares of PATL and thereby owned the Branch 1-7 clubhouse that sits on a $50 million development site. Second, the plaintiff claimed that the effort by Branch 1-7 to leave the plaintiff and to take its clubhouse land with it was void.
[11] I determined that the shares of PATL are held in trust for the members of Branch 1-7. The plaintiff’s claim to own the shares beneficially or to own the land under its constitution was unsuccessful. I also held that defendants were not successful in having Branch 1-7 leave the plaintiff so that the branch still exists. But, I held, the individual defendants had resigned from Branch 1-7.
[12] In assessing costs in the trial decision, I held:
[93] I do not regard either side as having been successful in this proceeding. The plaintiff’s success is that it holds paper title to a corporation that is itself a trustee. That has no practical value. The plaintiff did not win equitable title to the properties. Moreover, its claim to own the branches’ properties was not reasonable in light of its history and its own witnesses’ testimony. The defendants had good reason to suspect the plaintiff’s bona fides. The defendants, by contrast, failed in their efforts to secede from the PAC with the properties of Branch 1-7. They proved that the members of Branch 1-7 hold equitable title to their properties, but the defendants themselves are not among those members/owners. Their days in the PAC are over due to their own choices. Moreover their acts, however motivated, may have seriously jeopardized the interests of the PAC as a whole and their own members’ status and insurance.
[94] This litigation has been typified by tactics and a lack of cooperation. The 2007 effort by the PAC to repeal the amendment to Article 8 of its constitution and the 2013 shareholders’ meeting of PATL are both examples of legally-driven, transparent, and ultimately invalid tactics. Both sides played production of documents games procedurally. There was little or no cooperation among counsel in preparation for the trial. There were surprises during the trial. Instead of a joint book of documents and cooperation as ordered at the pre-trial conference, hundreds of documents were filed unnecessarily with no prior agreement on admissibility. The testimony of the lead witnesses on both sides was repeatedly and successfully impeached. In all, neither side behaved like transparent and accountable fiduciaries fulfilling their duties of care, honesty and good faith as the members of the PAC are entitled to expect. I order that there be no costs of this trial of the issues.
[13] In upholding the court’s determination that the branch had not validly seceded from the plaintiff, the Court of Appeal noted expressly that I had not determined that any future attempt by the branch to leave with its land would be invalid or ineffective. In then finding that the individual defendants remain members of the branch, the Court of Appeal was painting a roadmap to the eventual resumption of efforts by the defendants to try to secede validly. What that path might look like under the plaintiff’s constitution, its incorporating statute, or at common law (i.e. whose consent is required) will be determined in a new application that will be heard in November. The point now is that the defendants’ days in the plaintiff are not over as I had found. They were unsuccessful in seceding based on the procedures that they adopted in 2006. The plaintiff remained successful on that issue. But its success is now properly viewed as temporal and procedural rather than substantive. It has not put the defendants out of their organization nor freed itself from the branch’s efforts to depart.
[14] As also discussed in my trial decision above, I was critical of the conduct of both sides at trial. However, this only affected the cost and efficiency of the trial to a modest extent. My discretion was most influenced by what I thought was a clear, equal division of success on the two main issues.
[15] As a result of the Court of Appeal’s decision, in my view, the defendants fared better substantively than I originally found. Their process remained ineffective and to that extent the plaintiff properly challenged it. But now, the defendants remain among the beneficial owners free to try again. That is a far different and substantively better outcome for them. In my view, taking into account the defendants’ continued procedural loss and its conduct of the case, the defendants are entitled to one-half of their costs of the trial on a partial indemnity basis.
[16] The possible need for a receivership application was predicted in my initial trial decision. The branch purported to secede in 2006. The trial was held in 2014 and I held that the branch continued to exist throughout the interregnum. But its membership was not known. The executive had to be reconstituted through a membership vote. The parties could have cooperated in that effort or not. The defendants took the position that the membership as at 2014 included anyone who had joined them since 2006. But, they had not been functioning as the official branch of the plaintiff since 2006. They had no entitlement to add members to the plaintiff’s branch organization from 2006 to 2014. On the other hand, the plaintiff argued that there were no members remaining in its Branch 1-7 despite commitments it made at the trial to recognize the exiting members as of 2006 (other than the individual defendants). As a result of this dispute, the Receiver’s first and principal goal was to recreate the membership list as at 2006 to allow for a vote for a new executive.
[17] The defendants argue that since the Court of Appeal has now overruled my decision excluding the defendants from Branch 1-7, they remained as the executive and no new vote was required. The receivership was unnecessary they claim.
[18] Even assuming that the individual defendants remained in place as an over holding executive, there still remained a need for an annual members’ vote for 2014-2015 once the branch was recognized as continuing to exist. The branch had breached its agreement to provide a membership list to the plaintiff at the 2005 annual general meeting. The defendants then overreached by trying to claim that the members who joined their titular organization post-2006 were properly members of the Plaintiff’s Branch 1-7. The plaintiff overreached in claiming that there were no members of Branch 1-7 remaining in 2014. A standoff ensued calling for independent stewardship of the branch and its members’ valuable property pending a restoration of the legal order.
[19] I have previously held that the costs of the receivership ought to be divided 50/50 in the main with a specific 80/20 division of a particular small piece of costs. I do not think that the Court of Appeal’s decision, even had it been known in May, 2014, would have changed this outcome. Even if the individual defendants had remained as the executive, there still had to be members recognized in 2014 and the defendants’ were as much to blame as the plaintiff for the membership standoff that ensued.
[20] As to the costs of the Receiver in the appeal, it seems quite apparent to me that the plaintiff ought to be solely responsible for those costs and disbursements of the Receiver. Especially in light other plaintiff’s default at the Court of Appeal, the Receiver’s presence was necessary to ensure that the issues in which it was involved at least were fairly put before the Court. The defendants’ success at the Court of Appeal was recognized by a costs award from the Court. I see no reason why the defendants’ 50% portion of the Receiver’s fees and disbursements in connection with preparation and attendance through the entire appeal process should not properly be included as an assessable disbursement for which the successful defendants should be indemnified in full.
[21] The defendants may deliver no more than 10 pages of submissions by September 9, 2016 concerning the costs of this motion (including quantum) and the quantum of costs that they seek for the trial. The plaintiff may deliver no more than 10 pages of submissions in response by September 23, 2016. Both sides shall also provide Costs Outlines for the motion and for the trial in addition to their 10 pages of submissions. All documents shall be delivered to my Assistant as attachments to an email in searchable pdf format.
________________________________ F.L. Myers J.
Date: August 24, 2016
[^1]: In this Endorsement the term “defendants” always excludes Mr. Rusek.