SUPERIOR COURT OF JUSTICE – ONTARIO
CITATION: ADAMS-SIMMS v. KOWALSKI, 2017 ONSC 4747
COURT FILE NO.: CV-14-499012
MOTIONS HEARD: JULY 26, 2017
RE: Jody Adams-Simms d.b.a. JMASS Ventures, plaintiff
v.
Anna Jadwiga Kowalski, John F. Kowalski, 2006777 Ontario Limited and 360 Indoor Air Solutions Ltd., defendants
-and-
Al Shuman aka Al Marsh aka Al Shurer, third party
BEFORE: MASTER R. A. MUIR
COUNSEL: Doug Letto and David Mills for the defendants Alnaz Jiwa for the plaintiff and third party
REASONS FOR DECISION
Master R. A. Muir -
[1] There are two motions before the court. The defendants bring a motion seeking an order that the sum of $50,000.00 be released from trust. The $50,000.00 is being held in trust by the defendants’ lawyers as security for a portion of the plaintiff’s claims in this action pursuant to an order I made on January 14, 2015. I made that order in connection with an urgent motion brought by the plaintiff pursuant to section 103 of the Courts of Justice Act, RSO 1990, c C.43 and Rule 42.01 of the Rules of Civil Procedure, RRO 1990, Reg. 194. The plaintiff sought leave to issue a certificate of pending litigation (“CPL”) in respect of a property located in Oakville, Ontario (the “Oakville Property”) and owned at the time by the defendant Anna Kowalski (“Ms. Kowalski”).
[2] The Oakville Property was subsequently sold and $50,000.00 from the proceeds of sale was paid into the Mills & Mills LLP trust account to stand in place of the land. The defendants take the position that the plaintiff was never entitled to a CPL in respect of the Oakville Property and the $50,000.00 should be released to Ms. Kowalski.
[3] The second motion is brought by the plaintiff and seeks an order granting her leave to issue CPLs against title to two other properties owned or controlled by the defendants 360 Indoor Air Solutions Ltd. (“360”) and Ms. Kowalski. The property owned by 360 is located in Tecumseh, Ontario (the “Tecumseh Property”). The property owned by Ms. Kowalski is located in Halton Hills, Ontario (the “Halton Hills Property”).
[4] The plaintiff also seeks leave to further amend her statement of claim and various other discovery related relief. The defendants are not opposed to the amendments to the statement of claim. The parties are working to resolve the discovery related issues and hope to agree on a timetable for the future conduct of this action.
[5] This is a dispute among parties to a commercial joint venture. The plaintiff claims, among other things, an accounting from the defendants who she says were responsible for the financial aspects of the joint venture. The plaintiff claims the defendants have diverted funds owing to her from the joint venture to their own benefit and specifically to improve and/or purchase the subject properties.
[6] The defendants take the position that the plaintiff was not even involved in a joint venture with the defendants. The defendant John F. Kowalski (“Mr. Kowalski”) has given evidence that he entered into a joint venture with the plaintiff’s boyfriend, Al Shuman (“Mr. Shuman”). Mr. Shuman is a third party to this proceeding. Mr. Kowalski’s evidence is that the plaintiff’s business, JMASS Ventures (“JMASS”) was operated and managed by Mr. Shuman. The defendants take the position that Mr. Kowalski entered into a joint venture agreement with Mr. Shuman to dismantle and scrap an old factory owned by Unilever Canada. It appears that the net profits from the joint venture were to be divided equally between Mr. Kowalski and Mr. Shuman and/or the plaintiff and JMASS. The joint venture was to be carried out using the defendant 2006777 Ontario Limited (“200”), a corporation controlled by Ms. Kowalski.
[7] In simple terms, the plaintiff takes the position that she is entitled to a CPL in respect of each of the subject properties because money belonging to her and/or JMASS was diverted from the joint venture and into properties owned or controlled by the defendants. The court should therefore grant leave to issue CPLs in respect of the Tecumseh Property and the Halton Hills Property and the $50,000.00 should remain in trust pending the outcome of this proceeding.
[8] The defendants argue that even if the plaintiff has an interest in the joint venture, the plaintiff has not established a triable interest in the subject lands. At best, they submit that the plaintiff has a claim in damages and is unable to demonstrate any interest in the properties in issue on these motions.
[9] The parties agree on the test to be applied. The applicable principles on a motion for leave to issue a CPL brought on notice are the same as on a motion to discharge a CPL.
[10] In Perruzza v. Spatone, 2010 ONSC 841 (Master), Master Glustein concisely set out the factors the court is to apply when deciding a motion to discharge a CPL. At paragraph 20 of Perruzza, Master Glustein identified those considerations as follows:
(ii) The threshold in respect of the "interest in land" issue in a motion respecting a CPL (as that factor is set out at section 103(6) of the Courts of Justice Act, R.S.O. 1990, c. C.43) is whether there is a triable issue as to such interest, not whether the plaintiff will likely succeed (1152939 Ontario Ltd. v. 2055835 Ontario Ltd., 2007 CarswellOnt 756 (S.C.J.), as per van Rensburg J., citing Transmaris Farms Ltd. v. Sieber, [1999] O.J. No. 300 (Gen. Div. - Comm. List) at para. 62);
(iii) The onus is on the party opposing the CPL to demonstrate that there is no triable issue in respect to whether the party seeking the CPL has "a reasonable claim to the interest in the land claimed" (G.P.I. Greenfield Pioneer Inc. v. Moore, 2002 CanLII 6832 (ON CA), 2002 CarswellOnt 219 (C.A.) at para. 20);
(iv) Factors the court can consider on a motion to discharge a CPL include (i) whether the plaintiff is a shell corporation, (ii) whether the land is unique, (iii) the intent of the parties in acquiring the land, (iv) whether there is an alternative claim for damages, (v) the ease or difficulty in calculating damages, (vi) whether damages would be a satisfactory remedy, (vii) the presence or absence of a willing purchaser, and (viii) the harm to each party if the CPL is or is not removed with or without security (572383 Ontario Inc. v. Dhunna, 1987 CarswellOnt 551 (S.C. - Mast.) at paras. 10-18); and
(v) The governing test is that the court must exercise its discretion in equity and look at all relevant matters between the parties in determining whether a CPL should be granted or vacated (931473 Ontario Ltd. v. Coldwell Banker Canada Inc., 1991 CarswellOnt 460 (Gen. Div.); Clock Investments Ltd. v. Hardwood Estates Ltd., 1977 CanLII 1414 (ON SC), 1977 CarswellOnt 1026 (Div. Ct.) at para. 9).
[11] These are the factors and principles I have considered and applied in determining the issues on these motions.
[12] There may be some dispute with respect to the personal plaintiff’s participation in the joint venture. However, it is clear from the evidence that JMASS was involved in the joint venture and JMASS is a sole proprietorship registered to Ms. Adams-Simms. The precise nature of her involvement is a matter for trial. For the purposes of this motion, I am satisfied that Ms. Adams-Simms has raised a triable issue with respect to her claim for a portion of the profits from the joint venture.
[13] However, it is my view that the plaintiff has failed to establish a triable issue with respect to her claim to an interest in the subject properties.
[14] I agree with the plaintiff that where there is evidence that a defendant has taken money belonging to a plaintiff and used that money to improve or purchase real property, a plaintiff may be able to make a claim for an interest in land and may be entitled to a CPL. However, the evidence on these motions falls well short of demonstrating a triable issue to a reasonable claim by the plaintiff to an interest in land.
[15] There is simply no direct connection between payments made by the joint venture to the defendants and the purchase or improvement of the subject properties. The Oakville Property was purchased by Ms. Kowalski in 2002. The joint venture was not formed until 2010. The evidence shows that minor renovations to the Oakville Property were carried out after 2010 but those improvements amounted to less than $10,000.00. Moreover, there is no evidence showing a connection between the joint venture funds and those improvements. The plaintiff’s evidence that Mr. Shuman observed certain renovations to the Oakville Property at the relevant time is not a sufficient basis to establish an interest in land on the part of the plaintiff.
[16] The Tecumseh Property was purchased by 360 on November 30, 2010. The total consideration paid was $260,000.00. The plaintiff points to various payments made by the joint venture, through 200, to 360. However, the evidence shows that 360 advanced a loan of $230,000.00 to 200 on July 26, 2010 to finance the initial costs of the joint venture. This loan was paid back to 360 over the course of the project. Again, there is no direct connection between the payments to 360 and the purchase or improvement of the Tecumseh Property.
[17] The Halton Hills Property was purchased by Ms. Kowalski on March 3, 2014. The evidence shows that nearly all of the funds used to purchase the Halton Hills Property came from Ms. Kowalski’s personal line of credit. While there is evidence that certain renovations were carried out, once again there is no evidence of a direct link between the money from the joint venture project and the improvements to the Halton Hills Property.
[18] The defendants have provided a relatively detailed accounting of the joint venture project. That accounting shows what appears to be a net profit of approximately $940,000.00. The accounting also shows payments to JMASS and Mr. Shuman of approximately $480,000.00. This amount would appear to be greater than the plaintiff’s 50% entitlement.
[19] With respect to all of the properties in issue on these motions, there is simply no direct evidence of the improper use of joint venture funds to purchase or improve the properties. It is hardly surprising that joint venture funds found their way to the defendants. Mr. Kowalski was, after all, entitled to 50% of the profits from the joint venture. That fact alone, however, does not give rise to a triable issue with respect to an interest in the subject properties.
[20] In my view, the plaintiff’s request for leave to issue the CPLs is simply an attempt to obtain execution before judgment on what appears to be, at best, a claim for damages, which would be a perfectly adequate remedy in the circumstances of this claim.
[21] Securing a potential claim for an award of damages is not a proper basis upon which to grant CPL relief. See McBean v. Amsen, [2009] OJ No. 19 (SCJ – Master) at paragraphs 142 and 143. The plaintiff relies on the decision of Master Glustein in Perruzza where the court granted leave to issue a CPL in respect of a claim for monies allegedly owing in connection with a joint venture project. However, it is important to note that the property in issue in Perruzza was the very property that was the subject of the joint venture. Here, the plaintiff simply seeks to tie up other properties unrelated to the joint venture simply because those properties happen to be owned by the plaintiff’s joint venture partner, his spouse or corporations they control. This is not a proper basis to obtain a CPL.
[22] Finally, there is no suggestion in the evidence that the defendants are planning to leave the jurisdiction or otherwise attempt to hinder the plaintiff’s claims. They own property and businesses in Ontario. Ms. Kowalski purchased the Halton Hills Property in her own name after the plaintiff had commenced a previous action against the defendants seeking similar relief. There is no evidence of any improper dealings with the defendants’ property. If the plaintiff had any such concerns, I doubt she would have waited for nearly two years to bring this motion for these additional CPL orders and then only after the defendants had served their notice of motion seeking the release of the $50,000.00 from trust.
[23] I have therefore concluded that it is not just or equitable in the circumstances of this action to grant leave to issue the CPLs as requested by the plaintiff. The plaintiff’s motion for leave to issue CPLs in respect of the Tecumseh Property and the Halton Hills Property is dismissed.
[24] The plaintiff shall have leave to amend her amended statement of claim in accordance with the draft amended amended statement of claim marked as Exhibit P to the affidavit of Mr. Shuman sworn December 22, 2016.
[25] The defendants’ motion for an order that Mills & Mills LLP be permitted to release to Ms. Kowalski the $50,000.00 it is holding in trust from the sale of the Oakville Property is granted. Those funds shall not be released by Mills & Mills LLP before September 6, 2017.
[26] If the parties are unable to agree on the outstanding discovery and timetable issues, or on the issue of the costs of these motions, they shall provide the court with brief written submissions. The defendants’ submissions shall be filed by September 5, 2017. The plaintiff’s responding submissions shall be filed by September 15, 2017. Any reply from the defendants shall be filed by September 20, 2017.
August 4, 2017
Master R.A. Muir