Scicluna v. Solstice, 2017 ONSC 3674

CITATION: Scicluna v. Solstice, 2017 ONSC 3674

COURT FILE NO.: CV-16-556113

DATE: 20170620

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: VALERIA SCICLUNA, Applicant

AND:

SOLSTICE TWO LTD., NORTHBRIDGE GENERAL INSURANCE CORP. and KEVIN THATCHER and ASSOCIATES LTD., for the Respondents

BEFORE: Carole J. Brown J.

COUNSEL: Phillips B. and Kwan R, for the Applicant

Tingley E, for the Respondent, Solstice Two Ltd.

Page K, for the Respondent, Kevin Thatcher & Associates Ltd.

HEARD: May 10, 2017

endrosement

Background and Positions of the Parties

The Applicant

[1] The applicant, Valeria Scicluna (“the applicant”) seeks a declaration that she is entitled to the return of deposit monies which she advanced to Solstice Two Limited (“Solstice”) for the purchase of a condominium located at 223 Webb Ave., Suite 102, Mississauga, plus accrued interest; an order for an accounting to be conducted by Northbridge regarding the amount held for Solstice plus accrued interest; an accounting by Kevin Thatcher & Associates Ltd. (“KTA”) of the amount they seek for fees and disbursements; and an order that all costs and disbursements of the proceedings be paid by the defendants.

[2] The applicant entered into an Agreement of Purchase and Sale (“APS”) of the condominium with Solstice on April 2, 2008. Additional payments toward the final purchase price of $372,000, were made. As of September 2, 2010, the closing date, a total of $293,685, had been deposited by the applicant with Solstice. In addition, the applicant paid $33,482.40, for upgrades to the condominium. The final balance was to be paid on the Unit Transfer Date, fixed for May 5, 2011, which was not done.

[3] In the interim, the applicant had lost her employment. She explained to Solstice her financial circumstances and requested the return of the monies she had advanced to Solstice and ultimately executed a Resale Authorization Agreement on October 20, 2011, permitting Solstice to resell the property. The Resale Agreement provided that the applicant would be refunded her deposit monies in the amount of $293,685 and that Solstice would be permitted to deduct and retain $30,000, from that amount. Further, the parties were to execute a Mutual Release and Termination Agreement in Solstice’s standard form.

[4] On July 28, 2011, the applicant made an assignment in bankruptcy for the general benefit of her creditors. KTA was the Trustee In Bankruptcy. On February 12, 2014, the applicant was discharged from bankruptcy.

[5] The applicant maintains that when she made the assignment in bankruptcy, KTA was advised of the claim for deposit monies but elected not to initiate any proceedings to pursue the realization of the asset during the 2½ years of her bankruptcy or thereafter. At the time of her bankruptcy, the deposit funds, less $20,000, retained by Solstice and insured by Tarion Warranty Corporation, were held by Northbridge General Insurance Corporation on behalf of Solstice. The funds, plus interest, totaling $274,015.18, were paid into court pursuant to an interpleader order on January 20, 2017.

[6] The applicant submits that, as a discharged bankrupt, she is entitled to receive these funds, less the remaining $10,000 payment owed to Solstice pursuant to the Resale Agreement, making a total to be retained by them of $30,000. KTA seeks recovery of an undisclosed portion of those funds for distribution to outstanding creditors.

[7] It is the position of the applicant that she made full disclosure to the Trustee In Bankruptcy of the claim to the deposit monies at the time of her filing, that KTA did not pursue the claim and that, accordingly, these funds are “unrealizable property” pursuant to section 40(1) and (2) of the Bankruptcy and Insolvency Act (“BIA”), which must be returned to the discharged bankrupt.

[8] It is further the position of the applicant that she is entitled to rely on the Resale Agreement despite the fact that she did not sign the Release, as provided in the Agreement. It is her position that the Release included terms not originally agreed upon, namely that Solstice was to retain $60,000, not $30,000 as originally agreed.

[9] Finally, it is her position that the opposing parties are not entitled to claim previous costs of previous proceedings from the funds held in court, as there were no costs orders made at the time and the costs cannot now be awarded for previous proceedings in the context of this application.

The Respondent, Solstice

[10] It is the position of Solstice that this proceeding is statute-barred. Alternatively, Solstice contends that the deposits sought to be returned to the applicant were forfeited by reason of the applicant’s breach of contract, namely her failure to provide the balance of the purchase price on the Unit Transfer Date, as required. As regards the breach of contract, Solstice relies on section 26(a) of the APS, which provides that upon default by a purchaser, the vendor may, at its option, unilaterally declare the APS terminated and all deposit monies along with amounts paid for extras shall be retained by the vendor as liquidated damages and not a penalty. Solstice wrote to the applicant’s lawyer advising that it was willing to close by June 30, 2011, latest, upon payment of the balance of the purchase price owing, and thereafter would terminate the APS and retain the deposits. Despite the extension of the Unit Transfer Date, the applicant failed to close.

[11] Following execution of the Resale Authorization Agreement with the applicant, Solstice sold the property to a third party on March 1, 2012. The deposit was to be returned to the applicant upon signing of the Release. It is the position of Solstice that the reason raised by the applicant for failing to sign the Release was not correct and a proper reading of the Release indicates that $293,685 less $30,000 (not 60,000 as maintained by the applicant), was to be returned to the applicant.

[12] As regards the defaulting on an APS which results in forfeiting of the deposit to the vendor, Solstice relies on the cases of Baker v Wynter, 2006 CanLll 20 3144 (ONSC) at page 6, paragraphs 34-35; and Pleasant Developments Inc. v Iyer, 2006 CanLll 10 223 at pages 2 and 3, paragraphs 7 and 10.

[13] As regards the claim being statute-barred, it is the position of Solstice that, pursuant to subsections 5(1) and (2) of the Limitations Act, 2002, the applicant knew or should have known of her claim against Solstice by one of the following dates: as early as May 5, 2011, when the Agreement was breached; by June 30, 2011 when Solstice declared the Agreement void and retained the deposit; by February 2011 when the applicant moved out of the property; July 2011 when she indicated that she may have to sue Solstice for the return of monies; March 2012 when she learned of the resale of the property; February 11, 2013 when Solstice reiterated its willingness to pay the applicant the return of funds as agreed; February 19, 2013 when she commenced an action against Solstice to recover the deposit money; and February 12, 2014 when she was discharged from bankruptcy, and cites Re Edwards, 2010 ONSC 5718 at page 10, paragraph 69 for the proposition that knowledge of the fullest extent of the loss, all possible grounds of culpability, and whether or not the proceeding may be met with a defence are not required to be known to commence running of the limitation period. She failed to commence the application within the two-year limitation period, and her application should therefore be dismissed.

The Respondent Trustee in Bankruptcy, KTA

[14] It is the position of the Trustee In Bankruptcy, KTA, that the applicant failed to make complete disclosure regarding all assets on filing. Further, she never assigned the cause of action as regards the claim for deposits to the Trustee, as required to do pursuant to the BIA. The Trustee takes the position that once it learned of the deposits, it began communications with the builder regarding negotiations for return of the deposits to be administered pursuant to the BIA. It is the position of the Trustee that the funds should be dealt with pursuant to the BIA and any surplus returned to the applicant.

[15] Pursuant to the BIA, it is clear that, upon filing for bankruptcy, the applicant had no capacity to deal with her property, all of which vests in the Trustee (BIA, section 71). It is the statutory duty of the bankrupt to make discovery of and deliver all property in her possession or control to the Trustee for administration pursuant to the Act, which was not done (BIA, section 158(8)). Upon discharge, the Trustee returns any unrealizable property to the bankrupt pursuant to BIA, section 40 and the bankrupt is entitled to the surplus, after payment in full to the creditors plus payment of costs, charges and expenses (BIA, section 144).

[16] It is the position of the Trustee that they did not pursue the claim regarding deposits as the applicant did not provide the information necessary regarding the deposits upon filing for bankruptcy, such that the Trustee was unable to weigh the potential costs and benefits to commencing a lawsuit. Once advised of the deposits, the Trustee entered into negotiations concerning the return of funds, but Solstice would not release the funds due to the applicant’s objection to same.

[17] The Trustee distinguished the case of In re Shelton, relied upon by the applicant as, in that case, the Trustee had had full knowledge of the action prior to the filing in bankruptcy but took no steps until 4½ years after the Trustee’s discharge. Here, the Trustee maintains that it is not, to date, discharged, must complete its statutory duties, and was not aware of the deposits or the claim prior to the bankruptcy.

Analysis and Conclusions

[18] While it appears that the applicant did fail to provide the balance of the purchase price to Solstice on the Unit Transfer Date, as required and that she thereby breached the APS, such that they could retain the deposit, the evidence indicates that they treated her fairly and were willing to give her additional time to pay. Further, they reiterated their willingness to return the $263,685, retaining $30,000 with the applicant, if they were able to sell the unit and, in that regard, entered into a Resale Authorization Agreement. It is clear that the applicant should have signed the Release and obtained her monies at that time.

[19] As regards the applicant’s refusal to sign the Release because it contained provisions not agreed upon, namely that Solstice would retain from the funds to be released to the applicant $60,000 rather than $30,000, Solstice did not maintain that position, but rather submitted that the release, when read correctly, indicates the retention of $30,000 by Solstice. I have read the Release and it clearly states that Solstice would retain only $30,000 of the total funds. As they have already retained $20,000 prior to payment of the balance into court, they would be entitled to retain another $10,000 from the monies released. From February 11, 2013, Solstice reiterated its willingness to pay the $263,685 to the applicant.

[20] While Solstice maintains that because the applicant failed to close the initial APS and thereafter, after signing the Resale Agreement, failed to sign the Release, the applicant has forfeited her entitlement to any of the funds held and Solstice is entitled to retain all payments made to it by the applicant in the total amount of $263,685, I find this sum to be out of all proportion to the losses suffered and that it would be unconscionable for the vendor to retain the full amount of the money. The courts will award relief from forfeiture of the purchaser’s deposit in such circumstances.: See Perell and Engell, Remedies and the Sale of Land, 2nd ed. at p. 187, cited in Pleasant Developments Inc. v Shankar Iyre and Bala Ramachandran; Stockloser v Johnson [1954] 1Q. B. 476; Craig v Mohawk Metal Ltd. (1975), 1975 CanLII 1172 (ON SC), 61 D.L.R.(3d) 588. In this case, retention by Solstice of the entire amount paid into court, taking into account that the unit was resold for over $400,000, would represent an unjustifiable windfall to Solstice. Further, it would be out of all proportion to the losses suffered, which in the case of the vendor, due to the resale, were negligible, if any.

[21] In this case, absent other considerations, and based on the principle of forfeiture, the money held in court, plus accrued interest, should be paid out to the applicant, less the additional $10,000 comprising the deposit, which should be paid to Solstice, which had already retained $20,000, such that the entire amount represented the $30,000 deposit.

[22] In this case, however, matters are complicated by virtue of the involvement of the Trustee In Bankruptcy.

[23] The applicant made an assignment in bankruptcy on July 28, 2011. In her statement of affairs, adduced in evidence, she declared assets of $6,500 and liabilities of $47,306. She indicated that she had cashed $30,000 to paid debts and living expenses. She did not disclose the deposits as regards Solstice.

[24] The Trustee became aware of the applicant’s potential lawsuit with the builder, Solstice, in the fall of 2011 and on November 24, 2011, wrote to the applicant to inquire about the lawsuit. On January 4, 2012, the applicant advised that there was no lawsuit.

[25] The Trustee’s Report to the court, completed in April 2012, indicates that the property interest of the applicant had not been disclosed by her. In early 2013, the applicant commenced a proceeding to recover the deposits and the Trustee became aware of this lawsuit through the builder. The application was dismissed as a nullity on April 18, 2013.

[26] In March 2013, the Trustee filed a Supplementary Report to the court, which contained information regarding the deposits and the condominium. The Report indicated that the Trustee was unclear as to the status of said deposits. The Trustee attached a letter from the applicant to the builder which does not mention the bankruptcy and does not copy the Trustee. Nevertheless, on February 12, 2014, the applicant made application to the Master to obtain a discharge, which was granted. There were no reasons regarding the discharge before this Court.

[27] During that time, the Trustee had been in negotiations with the builder regarding the return of funds to be administered pursuant to the BIA. In March 2015, the applicant commenced a third lawsuit which was dismissed for failure to obtain leave pursuant to section 215 of the BIA.

[28] The Trustee maintains that the deposits are realizable assets to be distributed to the applicant’s creditors pursuant to the BIA, and that any surplus funds after payment to the creditors, interest, and costs are to be paid out to the bankrupt by the Trustee pursuant to section 40 of the BIA.

[29] Based on all of the evidence, I find that the applicant did not fully disclose to the Trustee in Bankruptcy her claim to deposits or the lawsuits she attempted to commence. Whether this was due to being unrepresented for a good part of the time, by inadvertence or otherwise cannot be determined on the evidence before this Court.

[30] However, as a result, given the lack of information regarding the deposits, the Trustee was unable to do a cost-benefit analysis in order to determine whether to commence a lawsuit. Once the applicant commenced the lawsuit, the Trustee commenced negotiations with the builder for the release of funds. However, in the end, the builder would not release the deposits due to the applicant’s opposition.

[31] While the Applicant was ultimately, on her own motion, discharged from bankruptcy over the objection of the Trustee, her creditors remained unpaid.

[32] Based on all of the evidence before me, and taking into consideration the case law relied upon by the parties, and in the interest of justice and the proper administration of justice, I find that the monies held in court are to be paid out to the Trustee In Bankruptcy, to be administered pursuant to the BIA, such that the creditors of the applicant can be paid. All surplus monies shall be paid out to the bankrupt after the creditors are paid, and all other payments are made pursuant to the BIA, section 40.

[33] While the Applicant stated in her affidavit that she had numerous medical conditions, there is no medical evidence nor any medical reports before this Court to support her claims. She does not require a litigation guardian. I have not considered her allegations in that regard in this decision.

Costs

[34] As regards costs, in my view, this matter should have been settled rather than proceeding to court. In all the circumstances, I make no award as to costs all parties are to bear their own costs. As regards the costs of previous proceedings sought to be paid by the defendants, this was not seriously argued at the motion. Nevertheless, for purposes of clarity and finality, I find that there were no costs orders made in those cases, such that the intention was that the parties bear their own costs in those cases as well.

Carole J. Brown, J.

Date: June 20, 2017