Court File and Parties
COURT FILE NO.: CV-11-435021 DATE: 20170111 ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
FAIGIE ABRAHAMOVITZ and FRANCES SPIRO, Plaintiff
– and –
MARK BERENS, MEGAPRO PROPERTY MANAGEMENT LTD., 3030 DANFORTH LTD., T.W.M. CONSOLIDATED HOLDINGS INC. and LOIS KALCHMAN, Defendants
COUNSEL: David P. Jacobs, for the Plaintiff Sharon Sam, for the Defendants Samuel Marr, for the Proposed Defendant, the Estate of Gabriel Zimmerman
HEARD: August 26, 2016
BEFORE: Goldstein J.
1The Plaintiffs are co-owners through a holding company (with others) of a property on Danforth Avenue in Toronto. They are also related to the original property manager, Gabriel Zimmerman, who died in 2010: one Plaintiff was his sister, the other is married to his first cousin. When Zimmerman died in 2010 Mark Berens (who had been Zimmerman’s law partner) and his company, Megapro, took on management of the property.
2Shortly after Zimmerman’s death, the Plaintiffs (and subsequently the Defendants) became aware that Zimmerman’s estate was asserting an ownership interest in the holding company that held the property. Zimmerman, as property manager, had been making regular income payments from the rental proceeds – and, it appears, taking a fee that may not have been disclosed. Since late 2010 Berens and Megapro have made no payments. They say that they cannot do so until the issue with the estate is resolved. As of March 1, 2016, they had withheld $67,000.00. The Plaintiffs launched the action to recover the money.
3The Defendants now seek leave to add Zimmerman’s estate as a party. The Estate joins that request. The Defendants also seek an order directing payment into court and an order releasing them from liability.
4In my view, the motion cannot succeed because the limitation period applying to the Estate has long since passed. For the reasons that follow, the motion is dismissed.
BACKGROUND
53030 Danforth Inc. is a holding company. It was incorporated in 1982. 3030 Danforth issued 6 common shares as follows:
- T.W.M. Consolidated Holdings Inc: 2 common shares;
- Faigie Abrahamovitz: 2 common shares;
- Michael Berens: 1 common share; and,
- Frances Spiro: 1 common share.
63030 Danforth purchased the property municipally known as 3026-3032 Danforth Avenue in Toronto, which I will refer to as “the property”. 3030 Danforth still owns the property. The net rental income was distributed on a pro rated basis until March, 2011. It was at that point that Blanca Zimmerman, Gabriel Zimmerman’s widow and executrix, asserted a claim to part of the shares held by Frances Spiro and Faigie Abrahamowitz. None of the rental income has been distributed since then.
7Gabriel Zimmerman incorporated 3030 Danforth. He was a lawyer. His law partner was Mark Berens. The executrix of his estate is his wife, Blanca Zimmerman. Alex Abrahamowitz was Gabriel Zimmerman’s first cousin. They were close. Faigie Abrahamowitz is married to Alex Abrahamowitz. Frances Spiro was Gabriel Zimmerman’s sister. Gabriel handled the financial and legal affairs of Frances and Faigie. Frances and Faigie, the Plaintiffs, believe that T.W.M. is controlled by Mark Berens.
8Gabriel Zimmerman managed the property and took a “management fee” of 25%. Faigie Abrahamowitz and Frances Spiro say in their affidavits that they did not know that Zimmerman was taking the management fee. In November, 2009 Gabriel became ill. Megapro Property Management, Mark Berens’ company, took over management of the property at that point.
9According to Blanca Zimmerman, a short time after Gabriel’s death she communicated with Faige and Frances. She says that she told them that she was aware that they had promised him a share of the rental proceeds and a share of their ownership. Blanca produced documents signed by Faige and Frances. In her affidavit Blanca claims that Frances said that she recalled signing the document.
10There are two documents. Each is entitled “Acknowledgment and Direction”. They are both dated “as of the 1st day of February, 2002”. One bears the signature of Faigie. The second bears the signature of Frances. Each document indicates that as of April 1, 2002 Gabriel would be entitled to 25% of all distributions payable to Frances (or Faigie). Each document further provided that in the event of a sale Gabriel shall be entitled to purchase a 25% interest in each of Frances’s (or Faigie’s) share of the property for $1.00.
11Frances denies ever signing her “Acknowledgment and Direction”. Faigie also denies ever signing her “Acknowledgement and Direction”.
12On December 22, 2010 counsel retained by Faige wrote to Mark Berens. He indicated that he was aware that Gabriel’s estate was claiming continuation of the 25% payment. This appears to be the “management fee” that Frances and Faigie say in their affidavits that they were not aware of.
13On March 15, 2011 Mark Berens wrote an email to Francis Spiro, Faigie Abrahamowitz, and the Estate of Gabriel Zimmerman. The email noted the dispute between Francis, Faigie, and the Estate. The email also noted that Megapro would not distribute the income from the property until the dispute was resolved.
14The Statement of Claim was issued on September 4, 2011. The Defendants took the position that they wished to pay the money into court, add the estate, and be released from liability. In other words, the Defendants took the position that they were simply neutral parties.
15I pause to note that the Plaintiffs believe that Mark Berens is the driving force behind the move to add the estate for his own personal reasons. They believe that he is using the Estate as a proxy. That belief, whether founded or not, has contributed to the poisonous atmosphere that obviously has invaded what used to be a close relationship between the parties. That is not, however, something that I must decide one way or another in this motion.
16After the Statement of Claim was issued, the parties engaged in procedural maneuvers. Each blames the other for adding costs and delays. It is not necessary for me to determine who is at fault or make findings of fact in that regard.
ANALYSIS
17In their motion record, the Defendants seek to interplead the Estate as a necessary party. Their position is simply that the Estate is required to adjudicate the issues effectively and completely. The Plaintiffs take the position that the limitation period has expired, and, even if did not, the test for interpleader has not been met. The Estate’s position is very simple: it argues that the cause of action has not yet crystallized, since the property has not been sold and the proceeds have not yet been distributed. According to the Estate, the real question here is whether the Acknowledgments are valid.
18The first issue is, therefore, whether any claim by the Estate is statute-barred. If it is not, the second issue is whether the test for interpleader has been met.
(a) Are the Estate’s claims statute-barred?
19The Estate argues that the limitation period cannot apply because there is not yet a cause of action. The property has not been sold and no income has been distributed since 2010. The Estate argues that s. 38(1) of the Trustee Act applies. That section permits an executor or administrator of an estate to maintain an action for torts or injuries in the same manner and with the same rights as the deceased would have if he or she were alive. Section 38(3) of the Trustee Act provides a limitation period of two years after the death of the deceased. Even if not, the Doctrine of Special Circumstances may apply to grant relief.
20I disagree. The limitation period in the Limitations Act applies. The Trustee Act does not apply and there is no basis to apply the Doctrine of Special Circumstances.
21The Action is about the validity of two Acknowledgments and Directions signed by each of the Plaintiffs. The Acknowledgments purport to give Gabriel Zimmerman a share of the net rental proceeds and a share of the sale proceeds if the property is sold. The shares, according to the Acknowledgments and Directions, are to come out of the shares of the Plaintiffs. Under the terms of the Acknowledgment and Direction (if valid) the Estate has been entitled to distribution of the proceeds for at least six years – but has received none. Further, it is apparent on her own evidence that Blanca Zimmerman asserted the claim shortly after her husband’s death in August 2010. In any event, she was certainly on notice as of Mr. Berens’s email of March 15, 2011. In any event, the Plaintiffs made a distribution in late 2010 to the Plaintiffs and other – after the death of Gabriel Zimmerman – and Blanca Zimmerman was aware of that fact. Based on the Estate’s own position, pursuant to s. 4 of the Limitations Act the two-year limitation period crystallized at that moment, at least regarding the rental proceeds.
22I also disagree that because the property has not been sold the cause of action – at least in respect of the shares – has not crystallized. Either the Acknowledgment and Direction is valid in all respects on its face or it is not. A plain reading shows that it is not severable. It would be artificial to say that one part of that document gives rise to a cause of action but the other does not. There is no principled basis to divide the document in that way.
23The Estate relies on Lipson v. Cassels Brock & Blackwell, 2013 ONCA 165 as authority for the proposition that the cause of action has not yet crystallized. Lipson was a class action lawsuit. The proposed class were taxpayers who relied on a legal opinion. They sought tax deductions for certain property donated to charities in 2000-2003. The law firm had prepared an opinion that the Canada Revenue Agency was unlikely to disallow the deductions. In 2004 CRA notified the representative plaintiff (and other plaintiffs) that it was disallowing the deductions. The taxpayers contested and in 2008 a test case was settled with the CRA allowing some deductions and disallowing others. The representative plaintiff launched the suit against the lawyers in 2009, alleging negligent advice. The motion judge refused to certify the action on the basis that it was statute-barred. The Court of Appeal overturned. The motion judge erred in finding that the discovery of the potential negligence arose when the representative plaintiff received the notice of disallowance from CRA. Those notices did not determine crystallization because that did not finalize the process. Rather, whether the limitation period began to run would depend on what CRA told each individual taxpayer. Accordingly, the 2008 test case settlement may have been the moment of crystallization, not the 2004 notices.
24I disagree that Lipson assists the Estate. The 2004 notices in that case are not analogous to the information received by Blanca Zimmerman after the death of Gabriel Zimmerman. As the Court of Appeal found, the notices of disallowance did not necessarily indicate that the advice given by the law firm was negligent. That is entirely different from this case: here, the evidence is clear that Blanca Zimmerman knew that there was a potential claim and, in fact, asserted it to Mark Berens – which was the reason he stopped making distributions.
25Section 38(1) of the Trustee Act also does not assist the Estate. That section does not exist to create an extension of time. It allows a deceased’s personal representative to maintain an action in the same way that the deceased would have if he or she had not died. It does not act to toll a limitation period that is otherwise created by sections 4 and 5 of the Limitations Act: Camarata v. Morgan (2009), 2009 ONCA 38, 94 O.R. (3d) 496 (C.A.) at paras. 7-8. In other words, the effect of the Trustee Act is to simply pass on to an estate a right to commence or continue an action if the cause of action arose before death: Swain Estate v. Lake of the Woods District Hospital (1992), 9 O.R. (3d) 74 (C.A.).
26In this case, I simply do not understand how the cause of action could have arisen prior to the death of Gabriel Zimmerman. He was apparently paying himself, although I acknowledge that the payments were characterized as a management fee rather than a distribution (which may be a distinction without a difference). Even if I am wrong in that regard, the death of Gabriel Zimmerman was not the triggering action: Camarata v. Morgan at para. 7. The triggering action was the failure to pay the distributions, as I have found.
27Moreover, the injury appears to be to the Estate, not to the deceased. Under those circumstances, s. 38(3) cannot apply: Buik v. Canasia Power Corp., 2015 ONCA 352.
28The Estate relies on Bonaparte v. Attorney General of Canada (2003), 64 O.R. (3d) 1 as authority for the proposition that “injuries” should be treated broadly in the context of breaches of fiduciary duty in claims otherwise barred under s. 38 of the Trustee Act. The plaintiffs in that case were the children of aboriginal attendees of residential schools. They sued for, among other things, uncompensated forced labour performed by their parents. The Court of Appeal found that such claims could be pursued.
29I also do not see how this case assists the Estate. Here, there is no controversy about whether an estate can pursue a claim in relation to property in which it supposedly has an interest: Chaplin v. First Associates Investments Inc., 2016 ONSC 3774 at para. 18. There is nothing novel about that. Moreover, unlike in the Bonaparte case, there is no issue of fiduciary duty – if anyone owed a fiduciary duty (and I make no finding in that regard) it was probably owed by Gabriel Zimmerman to the Plaintiffs, and not the other way around.
30Finally, the Estate relies on the Doctrine of Special Circumstances. It is an open question as to whether the Doctrine still exists in Ontario: Canadian Imperial Bank of Commerce v. Green, 2015 SCC 60, [2015] 3 S.C.R. 801 at paras. 112-117; Elaiathamby v. State Farm Mutual Automobile Insurance Company, 2016 ONSC 2258. Assuming without deciding that the doctrine is available, I would not apply it here. I see no unfairness or prejudice to the Estate: the proposed claim has been known for years. There is certainly evidence that the Acknowledgment and Directions were brought to the attention of the Plaintiffs by Blanca Zimmerman. Furthermore, there has simply been no compelling explanation to justify the Estate’s decision not to pursue an action. Accordingly, I would not give effect to the doctrine: Bikur Cholim Jewish Volunteer Services v. Penna Estate, 2009 ONCA 196.
(b) Has the test for interpleader been met?
31Because the claim of the Estate is statute-barred, I do not need to determine whether the test has been met.
32If the limitation period had not applied, then it is likely that the Estate would have been added as a party. I respectfully adopt the following statement of Molloy J. in Ontario Federation of Anglers and Hunters v. Ontario, 2015 ONSC 7969 at paras. 10-11:
In determining whether a person is a "necessary party" the court must consider whether they are likely to be affected or prejudiced by the order being sought. If the order sought will determine the rights of a person who is not a party, that person is entitled to be added so that his voice will be heard before his rights are determined.
One of the main purposes underlying these Rules is to ensure that all parties are before the court when an order is made affecting their rights. This will avoid a multiplicity of proceedings and the risk of inconsistent results.
33In any event, s. 21(1) of the Limitations Act is clear on its face that a limitation period cannot be tolled simply by adding a party to an existing claim – which is, in effect, what the Defendants and the Estate seek to do.
DISPOSITION AND COSTS
34The motion is dismissed.
35Costs are within the discretion of the Court. Ordinarily, costs are payable to the winning party. In this case, I would encourage the parties to settle the outstanding issues, given that this ruling may have the effect of determining the action. If the parties are unable to agree on costs, then the Plaintiff will have 15 days from the release of this judgment to submit a costs outline and costs submissions of no more than two pages. The Defendants and the Estate will then have 15 days from the receipt of the Plaintiff’s costs outline and submissions to file their own costs outlines and submissions of no more than two pages.
Goldstein J.
Released: January 11, 2017