Kafouf v. Kafouf et al., 2017 ONSC 5093
CITATION: Kafouf v. Kafouf et al., 2017 ONSC 5093
COURT FILE NO.: 17-62091
DATE: 2017-09-05
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
Salti Kafouf
Applicant
- and -
Sameer Kafouf, Samadi Investments Inc., Kramerica Industries Ltd., and Sea Link Properties
Respondents
COUNSEL:
A. Douglas Burns and Sharoon J. Gill, for the Applicant
Brent Marshall for the Respondents, Sameer Kafouf and Samadi Investments Inc.
Matthew Karabus, for the Respondents, Kramerica Industries Ltd. and Sea Link Properties Ltd.
HEARD: in Hamilton August 21st, 2017
REASONS FOR JUDGMENT
The Honourable Mr. Justice T. R. Lofchik
[1] This is a motion for the granting of a certificate of pending litigation to be registered against the property owned by Samadi Investments Inc., located at 581 Concession Street in the City of Hamilton (“the subject property”).
[2] The applicant Salti Kafouf and respondent Sameer Kafouf are brothers and shareholders in Samadi Investments Inc. (“Samadi”) which is the registered owner of the subject property and operates an ethnic food market on the subject property.
[3] The brothers are involved in an application in which Salti is seeking an oppression remedy with respect to Sameer’s dealing with Samadi. Salti’s claims involve an allegation that he has been improperly removed as officer and director of Samadi, as well as a dispute over the degree of shareholdings of each of the brothers in Samadi. Salti alleges that he has been effectively excluded from the management of Samadi.
[4] On January 18th, 2017, Sameer on behalf of Samadi, accepted an offer to purchase the subject property from Kramerica Industries Ltd. (“Kramerica”). The transaction of purchase and sale also involved an offer to lease the property back to Samadi. Sea Link Properties Ltd. (“Sea Link”) is the assignee of Kramerica.
[5] Salti takes the position that the agreement of purchase and sale was improperly entered into, in contravention of ss. 182 and 184 of the Ontario Business Corporations Act and that it was not approved by way of a special resolution of the shareholders. Salti therefore seeks a certificate of pending litigation in respect of the subject property.
Issue
[6] The issue before me is a question as to whether Salti has made a claim for an interest in the subject property and whether he therefore has standing to seek a certificate of pending litigation.
[7] The respondents take the position that Salti does not have a reasonable claim to an interest in the subject land.
Law
[8] S. 103(1) of the Courts of Justice Act provides as follows:
The commencement of a proceeding in which an interest in land is in question is not notice of the proceeding to a person who is not a party until a certificate of pending litigation is issued by the court and the certificate is registered in the proper land registry office under subsection (2)...
(6) The court may make an order discharging a certificate,
(a) where the party at whose instance it was issued,
(i) claims a sum of money in place of or as an alternative to the interest in the land claimed,
(ii) does not have a reasonable claim to the interest in the land claimed, or
(iii) does not prosecute the proceeding with reasonable diligence;
Analysis
[9] In support of his claim, the applicant relies upon the Court of Appeal decision in Chilian v. Augdome Corp., 1991 CanLII 7335 (ON CA), 1991 2 OR (3d) 696 (Ont. C.A.). The court of Appeal in that case held that the entitlement to a certificate of pending litigation does not necessarily require that the interest in the land in question be claimed directly by the applicant for itself, but rather what is required is that “an interest in land be in question” in the proceeding.
[10] In the case of Gerger Mechanical Ltd. v. Salvarinas, 2012 ONSC 538, the court held that there needs to be sufficient evidence to establish a reasonable claim to an interest in land. Chilian v. Augdome Corp. is an unusual case which involves not ownership of land but rather mining claims related to the purchase of common shares in a company. The decision is rather hazy as to the basis upon which the shareholders in the company in question have an interest in land. This is recognized by Associate Chief Justice Morden where he says at paragraph 60 of the decision:
I must say that the nature of the appellants' action is an unusual one and I have some reservations about the standing of the appellants to assert for the corporation the claim made in this proceeding. The respondent, however, has not attacked the action on this particular basis, so I do not take these reservations into account in considering whether the certificate should be discharged.
[11] Counsel for the plaintiff argues that a certificate of pending litigation should be available to the applicant because an interest in land is at the centre of the main application. This to me does not appear to be the case. The central issue in this application is whether Sameer is entitled to in effect take over the corporation and run it as he sees fit, contrary to any shareholder rights of Salti. While the main asset of the corporation might be the subject property, the action is clearly a shareholder’s oppression remedy case.
[12] I am of the view that the Chilian v. Augdome Corporation decision is distinguishable from this case on the facts, as in this case the applicant is not claiming interest in the land. The primary issue decided in that case was that an entitlement to a certificate of pending litigation does not necessarily require that the interest in land in question be claimed directly by the plaintiff for itself. This is as exemplified in 829194 Ontario v. Garibotti, 2013 ONSC 5857, where the individual plaintiff brought action seeking an interest in the defendant’s land on behalf of the corporation.
[13] Chilian v. Augdome should be restricted to its facts as it appears to be an anomaly to the prevailing jurisprudence that shareholders of a company do not have “an interest in property” so as to allow them to obtain a certificate of pending litigation with respect to the property owned by the company in the case of a shareholders oppression case.
[14] Associate Chief Justice Morden in Chilian refers to two cases, Davidson v. Horvat, (1984), 45 CPC 203 and Moehring v. Ivankovic, (1981), 20 CPC 285, both cases where there was dispute over shareholder’s interest in a corporation which owned property. He expressed the view that “...in neither proceeding was "an interest in land ... in question" (Courts of Justice Act, 1984, s. 116(1)) in the sense that the corporate defendant's title to the land was challenged”. That is in fact the case here.
[15] Justice Himmel in Ferrostaal Metals Ltd. v. Cameron compared the standard for a motion for summary judgment to that of a motion for a certificate of pending litigation as follows: “The role of the motions judge is similar to the role of a motion for summary judgment who must determine whether there is a genuine issue at trial.” In Davidson v. Horvat [1984] OJ No. 454, 27 ACWS 2nd 163, a situation similar to the one before me arose in that the plaintiff was attempting to protect a claim for an interest in land which was held by a corporation. It was held that the court should not be piercing the corporate veil, in the circumstances, in order to give individuals an interest in land which they do not have directly. The court observed that if that was possible, then any action against company would entitle the plaintiff to put a lis pendens on any property owned by that company.
[16] A similar analysis is the case of Todd Family Trust v. Barefoot Science Technologies Inc., 2013 ONSC 523. In that case the plaintiffs sought an assortment of remedies that related to the conduct of the business and ownership of various patents. The statement of claim asked for damages and an order setting aside a lease between two of the principals of a company holding the patents and the owner of premises which had been leased to these individuals and was being used as corporate offices. The statement of claim asked for damages and an order setting aside a lease between the defendant parties. Counsel for the applicant for the certificate of pending litigation submitted that, “The interest in the property is gained by the oppression remedy”. This proposes that aborting an interest in land could be a way for the court to “rectify the matters complained of”. The court, in ordering the discharge of the certificate of pending litigation, found that there is nothing in the pleadings or the evidence that explains the basis upon which it could be argued that the rectification of whatever wrong is demonstrated by the parties complained of and in their selling the shares or running the property, would lead to a granting of an interest in land. The court pointed out that in the statement of claim the relief requested is damages, the removal of the two offending parties from the business, the review of the acts they undertook and the takeover of the operations by a receiver manager or appointees of the applicant and that, as a result, there is no claim to an interest in land.
[17] The court stated that the (Courts of Justice) Act constitutes a complete code for obtaining a certificate of pending litigation as well as for its subsequent discharge. It provides that a certificate of pending litigation can only issue in circumstances where an interest in land is in question and where the party at whose instance the certificate is issued has reasonable claim to that interest in land. The Divisional Court held that the original motions judge who refused to discharge the certificate of pending litigation erred in not considering whether the plaintiffs have a reasonable claim to an interest in the land.
[18] In the case of John v. Millar¸ 2011 ONSC 3861, the court found that the applicant for certificate of lis pendens had an interest in the corporation that owned the property but not the property itself. There was no compelling reason why the corporate veil should be pierced and the applicant did not establish a reasonable claim to an interest in land. The court dismissed the application for the issuance of a certificate of pending litigation. Morawetz J. in his reasons commented that:
In addition, as noted by Potts J. in Davidson v. Horwat, if the plaintiff could obtain leave to register a CPL on land owned by 142 (the corporation) simply because he is a shareholder of 142, then virtually any shareholder of a public company would be entitled to such relief in any dispute where the company in question owns land.
Mr. John has an interest in the corporation that owns the Property, not in the Property itself. Essentially, counsel to Mr. Millar submits that Mr. John is asking to pierce the corporate veil to give him a remedy that the law does not allow him as a shareholder.
[19] Salti Kafouf, in the case before me, does not claim an interest in land directly, nor can it be said that as a shareholder of Samadi, he has an interest in the lands owned by the company.
[20] Counsel for Salti argues that a certificate of pending litigation is the only remedy he has to protect his position with respect to preventing the closing of the sale of the subject property. This is an erroneous assessment of the situation. The appropriate available remedy would be to seek an injunction enjoining the closing of the sale of the subject property until the shareholder oppression issues are decided.
[21] The application for a certificate of pending litigation on the subject lands is therefore dismissed. I would stay the issuance of this order for 10 days in order to allow the applicant to decide whether he wishes to bring an application for an order to enjoin the sale of the subject premises until the shareholder oppression remedies have been dealt with.
[22] If the parties cannot agree on costs, I will entertain written submissions no longer than three pages, in the same font and spacing required for pleadings, not counting time records. The respondent shall deliver their submissions within 10 days and the applicant shall have 10 days to respond, with a further five days to the respondents to reply.
LOFCHIK J.
Released: September 5, 2017
CITATION: Kafouf v. Kafouf et al., 2017 ONSC 5093
COURT FILE NO.: 17-62091
DATE: 2017-09-05
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
Salti Kafouf
Applicant
- and -
Sameer Kafouf, Samadi Investments Inc., Kramerica Industries Ltd., and Sea Link Properties
Respondents
REASONS FOR JUDGMENT
TRL:co/jls
Released: September 5, 2017