CITATION: Berar v. Dolson, 2016 ONSC 5700

COURT FILE NO.: CV-14-502625

DATE: 20160916

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

NIKOLA BERAR

Plaintiff

– and –

DAVID W. DOLSON, IRENA SACIROVIC AND SLAVKA ILIC

Defendants

AND BETWEEN:

SLAVKA ILIC

Plaintiff by Counterclaim

• and –

NIKOLA BERAR

Defendant by Counterclaim

Arie Gaertner, for the Plaintiff

Thomasina Dumonceau & Marko Djukic, for the Defendants

HEARD: September 12, 2016

V.R. CHIAPPETTA j.

Overview

1The evidentiary record for the plaintiff’s motion for summary judgment is replete with conflicting evidence and difficult questions of credibility. The plaintiff argues that the conflicting evidence and issues of credibility are not material to the summary determination of whether the defendant David W. Dolson (Dolson) was negligent when acting as a solicitor for the plaintiff in connection with the sale, by the plaintiff, of a residential property. For reasons set out below, I disagree. In my view, the interests of justice are not well served by isolating and examining Dolson’s role in the transaction, outside the context of determining the credibility of the main players to the transaction and rendering findings of fact significant to the nature of the transaction itself.

Background

2The plaintiff, Nikola Berar (Berar), seeks an Order granting summary judgment for $150K against Dolson, on the basis that Dolson was negligent when acting as solicitor for Berar in connection with the sale, by Berar, of a residential property, municipally known as 71 Ringley Avenue, Toronto (the property). Berar and his then girlfriend, the defendant Slavka Ilic (Ilic), agreed to purchase, renovate and sell the property. Dolson was the lawyer who assisted with both the purchase and the sale of the property. The defendant Irena Sacirovic (Sacirovic) is Ilic’s niece.

3Berar and Ilic purchased the property with an intention to renovate and sell it. The terms of their agreement to do so, however, were not put in writing. Berar and Ilic now disagree over the terms of their agreement. Berar’s evidence is that the parties agreed that they would split the sale proceeds after deducting the mortgage and outstanding debts to tradesmen and material suppliers. Ilic’s evidence is that they agreed that she and Berar would split the sale proceeds after deducting all of the items identified by Berar plus repayment of a CIBC home loan equity line of credit (HLOC) and a loan granted to her by her brother-in-law, Sacirovic’s father.

4The property was purchased on September 3, 2010, for $420K. Ilic provided the initial deposit of $10K as well as an additional amount of $70K toward the purchase of the property. The balance of the purchase price was financed by way of a first mortgage from the equitable trust company for the principal amount of $336K. Title to the property was taken in Berar’s name only. Dolson acted on Berar’s behalf in connection with the purchase of the property. Dolson was introduced to Berar by Ilic, who had been Dolson’s client in connection with several prior real estate transactions. Berar’s evidence is that Ilic told him that Dolson was a closer who would get the job done. There were two meetings at Dolson’s office. He was paid $791, including HST, for the purchase.

5Ilic’s evidence is that she agreed with Berar that she would make the down payment and make the mortgage payments, although the mortgage would be in Berar’s name. She further agreed to contribute approximately $100K to the renovations. Beyond that, Ilic states that the parties agreed that Berar would take out a HLOC to fund the remainder of the renovations.

6The renovations commenced immediately after purchase. They took more than a year. Ilic and Berar disagree on the budget for renovations, the costs for renovations and the ultimate profit from the renovations. Neither has provided a detailed cost or accounting of their positions.

7Ilic started to pay for the renovations but ran out of funds. The HLOC was arranged by Berar to complete the renovations. It is alleged that Berar may have misrepresented his income in order to qualify for financing. Ilic states that Berar lived off the funds from the second mortgage and used it to provide food, alcohol and cigarettes for his colleagues.

8Ilic made an assignment in bankruptcy on December 20, 2011. It is alleged that she may have misrepresented her assets and liabilities when she was examined under oath by the Office of the Superintendent in Bankruptcy, on February 22, 2012. She replied, “No”, when she was asked whether she was aware of anyone holding any assets for her in trust. Ilic did not disclose her interest in the property as an asset nor her alleged debt of $300K to Sacirovic’s father. Berar denies that he was aware of the assignment in bankruptcy. He regularly made payments, however, to Jeffrey Adiken of MSI Spergel Inc., from his personal bank account.

9The property was sold on January 9, 2012, for $950K. Dolson was again retained on behalf of Berar. He was paid $904 for the retainer, which included meeting with Berar and Ilic for the closing, and dealing with the discharge of the mortgage and the HLOC.

10One day before the closing, on April 26, 2012, Berar and Ilic attended Dolson’s office to sign the closing documents. Dolson states that he was instructed that $300K was to be paid from the net sale proceeds to Sacirovic as “a gift.” Dolson prepared an authorization and direction, documenting the $300K as a gift, which Berar signed. Berar deposed that he did not realize at the time he signed the direction that the payment was characterized as a gift. Berar states that he and Ilic agreed shortly before closing, to each loan Sacirovic $150K on an interest free basis. Dolson deposed that Berar signed the direction after it was explained to him that the payment was described as a gift. Berar admitted in discovery that Dolson explained every document but that he was not paying that much attention, as he trusted Ilic.

11Ilic’s position is that the $300K, although described as a gift to Sacirovic, was really the repayment of the loan to Sacirovic’s father, on her behalf.

12On April 28, 2012, one day after the closing of the sale of the property, Berar was provided with two cheques: one for $300K payable to Sacirovic and one for $127,274.84 payable to Berar. Dolson’s cover letter and the cheque confirm Berar’s instruction that the amount to Sacirovic was to be characterized as a gift. Sacirovic’s evidence is that Berar personally handed her the $300K cheque. When she asked him why the cheque was characterized as a gift, as she understood it to be the repayment of her father’s loan, Berar told her, “It doesn’t matter.”

13Berar states that after paying the tradesmen and material suppliers, to whom monies were still owed for the renovations, he was left with $94K, from which he paid Ilic $47K. Berar has provided no evidence of his payments to the tradesmen, and according to Ilic, there are still amounts owing to her from the $127,274.84.

14Berar has claimed against Dolson for damages for professional negligence in the amount of $150K. His claim against Sacirovic and Ilic includes a payment of $150K for unjust enrichment and damages in the amount of $150K for conspiracy to defraud. Ilic has counterclaimed against Berar for damages of $51,887.42 and has cross-claimed against Dolson for contribution and indemnity of any amounts she may be responsible to pay Berar.

15It is within this context that Berar moves for summary judgment as against Dolson.

16Berar’s claim against Ilic was stayed upon her assignment in bankruptcy. Berar also seeks summary dismissal of Ilic’s counterclaim, on the basis that she lacked legal capacity to assert her counterclaim by reason of having been an undischarged bankrupt at the time she asserted her counterclaim.

Law Respecting Summary Judgment

17It is now well established that on a motion for summary judgment, under Rule 20.04 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (the Rules), the judge should first determine if there is a genuine issue requiring a trial, based only on the evidence before her, without using the fact finding powers conferred upon the court in sub Rule 20.04(2.1) of the Rules: Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, at paras. 47-48. If there appears to be a genuine issue requiring a trial, a judge should then determine if the need for a trial can be avoided by using the new powers under sub Rules 20.04(2.1) and (2.2) of the Rules. The motion judge, at her discretion, may use those powers, provided that their use is not against the interests of justice: Hryniak, at para. 66.

Analysis

1. Summary Judgment

18The plaintiff recognizes that the record indicates issues of credibility with both himself and Ilic. He further recognizes that his evidence conflicts with Ilic’s on issues such as the terms of their agreement with respect to the property and the purpose of the payment of $300K to Sacirovic. The plaintiff submits, however, that the evidentiary deficiencies do not prevent me from summarily determining whether Dolson was negligent, considering Dolson’s own evidence.

19Dolson’s evidence is that Ilic told him that Berar wanted to gift $300K to Sacirovic. Berar and Ilic began speaking in Serbian and left his office for five to ten minutes. They returned to his office and Berar advised Dolson that he was going to gift $300K to Sacirovic. Dobson then prepared the relevant document. Dolson never asked to speak to Berar alone about the gift and never explained to Berar the risks or consequences of gifting. Dolson admits that it was his belief that the $300K was not really a gift but a way of returning whatever equity Ilic had indirectly pumped into the property and some share of the profits, considering Ilic’s “problems” with creditors. Accepting Dolson’s evidence, Mr. Rosenblatt, retained by the plaintiff to provide expert opinion, concludes that Dolson fell below the standard of care in not meeting with Berar alone and by not explaining the risks and consequences of making that $300K payment to Sacirovic. As these facts are uncontested, the plaintiff argues that he is entitled to summary judgment as against Dolson.

20In my view, however, the analysis is not so linear. Dolson’s liability cannot be analyzed fairly and justly in isolation. Rather, it is properly assessed within the factual matrix of his alleged acts or omissions. It is the context within which the gift direction was executed that remains a genuine issue for trial; what was the content of the conversation between Ilic and Berar outside Dolson’s office that prompted Berar to return and announce that he was going to gift Sacirovic $300K? Within this context, what was the scope of Dolson’s retainer?

21In my view, the need for a trial to resolve the contextual issue cannot be avoided by using the powers under sub Rules 20.04(2.1) and (2.2) of the Rules. There is reason to doubt the credibility of Berar as he has misrepresented his comprehension of the English language, his assertions that he was not aware of Ilic’s bankruptcy defy logic and he misrepresented his income to either the Canada Revenue Agency or CIBC. There is also good reason to doubt the credibility of Ilic as she misrepresented her assets and liabilities, under oath, to the Superintendent in Bankruptcy. Their respective credibility should be justly adjudicated in a trial setting wherein it can be fairly evaluated through cross-examination and tested against the evidence of Sacirovic and her father.

22It is also not in the interest of justice to use the fact finding powers to grant summary judgment, considering the plaintiff’s claim as against Sacirovic, which will continue in any event, within the same factual matrix. Partial summary judgment is, therefore, not the most proportionate and cost effective approach.

23Finally, the plaintiff argues that but for Dolson’s breach of duty, he would not have gifted $300K to Sacirovic. Accordingly, the reasonably foreseeable damages suffered by Berar total $150K, calculated as half of the aggregate value of his own labour and that of his Serbian friends and colleagues, or alternatively, one half of the amount gifted. The value of the plaintiff’s labour, however, and that of his colleagues, relies primarily on Berar’s bald statements. As noted, there is good reason to doubt his credibility. Further, it cannot be fairly and justly determined on the record before me that but for Dolson’s breach of duty, Berar would not have gifted $300K to Sacirovic. That conclusion requires the contextual analysis referred to above at paragraphs 20 and 21.

24It is for these reasons that the plaintiff’s motion for an order granting summary judgment against the defendant Dolson is dismissed.

2. Summary dismissal

25The plaintiff seeks an order dismissing, or in the alternative, staying the counterclaim of Ilic, dated June 24, 2014. Specifically, he argues that the counterclaim must be dismissed as Ilic is an undischarged bankrupt and therefore lacked the legal capacity to assert the counterclaim: Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, s. 71.

26Ilic made an assignment in bankruptcy on December 20, 2011. Jeffrey Adiken of MSI Spergel Inc. was appointed as the trustee of her estate (Trustee). Ilic would have been entitled to an automatic discharge on September 2012. The Trustee did not issue a certificate of discharge, due only to an administrative error. Ilic ought properly to have received a certificate of discharge long before she commenced her counterclaim. On August 12, 2016, the Trustee advised that it does not intend to pursue or intervene in Ilic’s counterclaim.

27Counsel for the Trustee penned a letter dated July 8, 2016, to counsel for Ilic. Therein he acknowledges that Ilic ought properly to have received a certificate of discharge long before she commenced her counterclaim. He goes on, however, to note:

Notwithstanding the above, the subject matter of the action and allegations set forth in the statement of claim and statement of defence and counterclaim, now raise concerns on the part of the Trustee.

Your client was examined under oath by the Office of the Superintendent of Bankruptcy (the “OSB”) on February 22, 2012, whereby she was asked amongst other questions, whether she was informed of her duties under the BIA, to which she answered in the affirmative. These duties include inter alia, assisting the Trustee in making an inventory of assets and doing the utmost in one’s power concerning the realization of his/her property for the benefit of creditors. A further question asked was whether your client was aware of anyone holding any assets for her in trust, to which the response was ‘No’.

Under s. 67.1 of the BIA, all ‘after-acquired’ property of the bankrupt, which is acquired from the date of bankruptcy before the bankrupt’s discharge, also vests in the Trustee. The allegations in the plaintiff’s claim suggest that Ms. Ilic both acquired and disposed of property after the date of her assignment in bankruptcy and before she would have been eligible for an automatic discharge. Your client’s defence and counterclaim at a minimum, suggests that your client received $14,000 from the sale of proceeds of the Ringley Property and looks to assert a claim for a further portion of the sale proceeds from the Ringley Property.

In situations where the Trustee determines that there was non-disclosure of property by the bankrupt, the Trustee not only will look to the bankrupt concerning any property which ought to have formed part of the bankruptcy estate, but also may seek to set aside the discharge of the bankrupt given the Trustee’s mandate concerning both property and conduct of the bankrupt. The Trustee itself has not been discharged from the estate at this time.

28I am not prepared to make an order nunc pro tunc, as sought by Ilic. This case is not limited to an administrative error. Rather, the Trustee has recently indicted a concern and restated Ilic’s status as one that has not been discharged.

29Although Lewis v. St. Paul Fire and Marine Insurance Company, [1966] M.J. No. 12 may stand for the proposition that an undischarged bankrupt is free to maintain an action with respect to after-acquired property, until the trustee intervenes, more recent case law has diverged on this point: Vetro v. Canadian National Exhibition Association, 2014 ONSC 4324, 17 C.B.R. (6th) 326; Vetro v. Canadian National Exhibition Association, 2015 ONCA 87, 23 C.B.R. (6th) 340; and Wallace v. United Grain Growers Ltd., 1997 332 (SCC), [1997] 3 S.C.R. 701.

30The issue need not be resolved in this case. Ilic’s counterclaim seeks $51,887.42 in damages, which she alleges is her portion of the net sale proceeds from the property. The property was purchased prior to the assignment in bankruptcy and sold afterwards. The issue, therefore, is whether the net sale proceeds represent after-acquired property. In my view, they do not. The contract by which Ilic argues entitlement was made between Ilic and Berar prior to the assignment. Similarly, Ilic’s interest in the property, from which the proceeds derive, was held prior to assignment.

31It is for these reasons that I conclude that Ilic did not have standing to bring the counterclaim at the time it was commenced. It is therefore dismissed.

Order to go

(1) The plaintiff’s motion for summary judgment against the defendant David W. Dolson is dismissed. I will receive costs submissions in writing of not more than two pages. The defendant Dolson shall submit them within 30 days, followed by the plaintiff, within 20 days thereafter.

(2) The counterclaim of the defendant Slavka Ilic, dated June 25, 2014, is dismissed without costs, as she lacked the capacity to bring the counterclaim as she was an undischarged bankrupt at the time the counterclaim was commenced.

(3) The parties are to arrange a case management meeting with me within the next 30 days at which time we shall determine a timetable through to trial.

V.R. Chiappetta J.