Wise Enterprises Inc. v. J. Weiss Investments Limited
CITATION: Wise Enterprises v. J. Weiss 2017 ONSC 5468
COURT FILE NO.: CV-17-568162
DATE: 20170914
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: WISE ENTERPRISES INC., Applicant
AND:
J. WEISS INVESTMENTS LIMITED, Respondent
COUNSEL: Jamie Spotswood, for the Applicant
Kevin Sherkin and Jeremy Sacks, for the Respondent
BEFORE: P. J. Monahan, J.
HEARD: September 11, 2017
ENDORSEMENT
[1] Wise Enterprises Inc. (the “Applicant”) and J. Weiss Investments Limited (the “Respondent”) (collectively “the Parties”) jointly own as tenants in common the property municipally known as 11 Ed Mirvish Way, formerly municipally known as 11 Duncan Street, Toronto (the “Property”). The Applicant holds title to an 80 percent legal interest in the Property while the Respondent holds the remaining 20 percent legal interest. The Applicant wishes to have the Property sold, pursuant to s.3 of the Partition Act, R.S.O. 1990, c. P-4 (the “Act”). The Respondent opposes the sale and also claims for a portion of certain rental payments collected by the Applicant from a commercial tenant which the Respondent claims not to have received.
Background Facts
[2] The principal of the Applicant is David Weiss (“DW”), while the principal of the Respondent is Jack Weiss (“JW”). JW is DW’s father. JW has held an interest in the Property, either personally or through a corporate vehicle, for many years. In 2010, the Applicant acquired a 30 percent interest in the property and subsequently acquired the interests of other owners, resulting in its current holding of an 80 percent legal interest. Notwithstanding the fact that the Respondent holds title to 20 percent of the Property, it is entitled to 25 percent of any rental income, pursuant to an agreement with a previous owner of the Property.
[3] DW indicates that his relationship with JW is strained and that he no longer wishes to share any investment interests with his father. DW seeks to have the Property marketed for sale and sold on the open market to a willing buyer for a fair market price.
[4] The Applicant argues that it has a prima facie right to partition or sale under the Act and that the Respondent bears the onus of demonstrating sufficient reasons for refusing the relief sought. In the Applicant’s submission, the Act has been interpreted to mean that the court has a very limited discretion to refuse an application for partition or sale and that this approach serves the commercial purpose of enhancing predictability. While the courts have recognized certain limited exceptions that would justify refusal to order partition or sale, the facts of the present case do not fall within any of these recognized exceptions. Accordingly, the Applicant submits that it is entitled to an order for the sale of the Property and asks that the matter be referred to a Master to direct and oversee an orderly sale process.
[5] The Respondent claims that prior to December 16, 2016, there had never been any dispute between the parties with respect to the ownership or management of the Property. However, in December 2016, DW became aware of the fact that JW intended to leave his share of the Property to other family members. Since that time, JW states that DW has stopped communicating with him and, subsequently, initiated the current proceeding seeking a sale of the Property. JW further alleges that following the conflict that arose with DW in December 2016, the Applicant ceased providing the Respondent with the 25 percent portion of the rental payments to which it was entitled.
[6] JW has used the rent received from the Property to support SW, who is DW’s daughter and JW’s granddaughter. SW lives in Israel and has three children of her own. JW utilizes his portion of the rental payment to provide financial support for SW and her three children, including significant medical costs incurred for treatment of one of SW’s children. JW indicates that he does not wish to sell his interest in the Property as he wants to be able to leave the Property to SW so that the continuing rental income will support her living expenses going forward. JW also indicates that he would like an opportunity to purchase the Applicant`s interest in the Property pursuant to a right of first refusal agreed to by previous owners of the Property, to which DW has agreed to be bound.
Right to Partition and Sale
[7] Section 2 of the Act states that a joint tenant or tenants in common may be compelled to make or suffer partition or sale. The general approach to determining when partition or sale should be granted was laid down in Davis v. Davis (1953), 1953 148 (ON CA), [1954], O.R. 23 (Ont. C.A.) where the Court of Appeal stated:
There continues to be a prima facie right of a joint tenant to partition or sale of lands. There is a corresponding obligation on a joint tenant to permit partition or sale, and finally the Court should compel such partition or sale if no sufficient reasons appear why such an order should not be made.
[8] The onus is on the party resisting partition or sale to demonstrate sufficient reasons for refusal. Only in exceptional circumstances will a joint tenant or tenant in common be denied his or her request that the Property be partitioned or sold. The court’s discretion to refuse partition or sale is narrow, such that there must be malicious, vexatious, or oppressive conduct to justify refusal to grant the request: see Silva v. Silva, [1990)] O.J. 2183 (Ont. C.A.); Gartree Investments Ltd. v. Cartree Enterprises Ltd., [2000] O.J. No. 2078 (Ont. S.C.J.).
[9] An illustration of how narrow the scope is for a court to refuse a request for partition and sale is provided by Greenbanktree Power Corp. v. Coinamatic Canada Inc. (2004), 2004 48652 (ON CA), 75 O.R. (3rd) 478 (Ont. C.A.). A co-owner with a small percentage ownership was held to be entitled to partition and sale despite the objections of the majority owner, who would be harmed by having to incur significant expenses and land transfer tax to re-acquire the property. The majority owner was unsuccessful in resisting the application because it could not show that the minority owner had acted vexatiously or maliciously in seeking the sale. The court stated that a narrow interpretation of the court`s discretion under the Act makes commercial sense by enhancing predictability.
[10] At the same time, parties who hold land jointly may agree to limit their rights under the Act and, in such event, the terms of the private agreement will govern. For example, parties may agree to waive their rights under the Act or otherwise provide for a mechanism to address a situation where one or the other no longer wishes to jointly own the property: Brienza v. Brienza, 2014 ONSC 6942, [2014] O.J. 5742 (Ont. S.C.J.) at paragraph 34.
Analysis
[11] The Respondent argues that the Applicant has acted vexatiously and with malice and that the application should therefore be denied. JW argues that DW never expressed any interest in selling the Property prior to discovering that JW intended to leave his interest in the Property to other family members. The Respondent argues that DW has initiated the application because of his anger over the terms of JW’s Will and to spite his father. JW also argues that DW is aware of the fact that the Respondent uses the rent to pay for the living expenses of DW’s daughter and that the Applicant has ceased forwarding the rent to the Respondent solely out of malice and to gain leverage in the litigation. Because the Respondent is entitled to 25 percent of the rent but only 20 percent of the proceeds of sale, it is more beneficial to the Respondent to keep the Property as a source of income rather than sell it.
[12] I do not believe that any of the grounds advanced by the Respondent meet the high threshold for demonstrating malicious or oppressive conduct as those terms have been defined for purposes of the Act. As noted, the discretion to deny the prima facie right of a co-owner to partition or sale is extremely narrow. Courts have ordered a sale even in circumstances where the sale would impose a significant financial burden on co-owners.
[13] In this case, while JW would prefer to continue joint ownership of the Property, the sale would not result in any hardship to him. On the contrary, given the value of the Property, the Respondent would receive a significant cash payment which could be used to provide continued support to SW and her children. The fact that the Respondent is entitled to 20 percent of the sale proceeds, as opposed to 25 percent of the rental payments, results from contractual terms previously agreed to by JW with a prior co-owner of the Property, and cannot be the basis for resisting a sale. Even assuming DW has caused this application to be commenced due to his concerns over the terms of JW’s Will, such a motive is not a sufficient basis to deny partition or sale in the absence of any demonstrated and real hardship to the Respondent.
[14] At the same time, the Respondent claims to have a contractual right to purchase DW’s interest in the Property and maintains that this right should take precedence over the Applicant’s right to partition and sale under the Act. When DW purchased an interest in the Property in 2010, he agreed to be bound by a provision in an agreement with a prior co-owner, which stated in relevant part that, in the event he wished to sell his share in the Property, he “shall be obligated to first offer to sell his or its share in the property to the other party for the acceptance or refusal of the other party.”
[15] The Applicant claims to have met his obligation in this regard by way of an offer made by his counsel to counsel for the Respondent on August 4, 2017. Counsel for DW offered to sell his interest in the Property or, alternatively, to purchase JW’s interest in the Property based on a valuation of the Property at $12,500,000. There is nothing on the record to indicate the basis for this valuation of the Property. The offer was to remain open until 5 p.m. on August 15, 2017.
[16] Counsel for JW indicates that his client was not in a position to respond to this offer on such short notice. He asks that the period for consideration of this offer be extended to permit JW to properly consider whether he wishes to act on it.
[17] In my view, DW is bound by his commitment to offer to sell his share in the Property to JW prior to offering it for sale to third parties. Moreover, I believe that this contractual commitment takes priority over DW’s prima facie right under the Act to sell the Property to others. Given the long history and relationship between the parties, the significant value of the Property, the fact that it would be appropriate to commission an independent valuation of the Property prior to any sale, and in order to give full effect to the contractual commitment between the parties, it seems reasonable and appropriate that DW’s offer of August 4, 2017 should remain open for a period sufficient to permit JW to fully consider his options.
[18] Based on submissions of counsel at the hearing, I believe this could be accomplished by providing that the offer of August 4, 2017 remain open for a period of an additional 60 days. There is nothing on the record that suggests any urgency to sell immediately, or prejudice that would result to either party by keeping the offer open for an additional 60 days. Further, this would permit the parties the opportunity, if they wish, to undertake good faith negotiations regarding ownership of the Property. Accordingly, I direct that the offer of August 4, 2017 remain open for consideration by JW for a period of 60 days from today’s date.
Rental Payments
[19] As indicated, the Respondent indicates that it has not been receiving its share of the rental payments paid by a commercial tenant of the Property. The Respondent claims that it has not received the H.S.T. portion of the rent dating back to March 2011 and, further, that it has not received any rental payments as of January 2017. The Respondent claims that the total rent owing is $113,913.00.
[20] Although it was not addressed directly, it does not appear that the Applicant disputes the Respondent’s entitlement to 25 percent of the rental payments. At the hearing, it was indicated that some portion of the disputed rental payments may already have been paid by the Applicant. The Respondent is entitled to 25 percent of the rental payments, including H.S.T., dating back to March 2011. I direct the Applicant to pay forthwith to the Respondent any amounts that may be outstanding.
Conclusion
[21] Based on the foregoing, I find as follows:
(i) The Applicant has a prima facie right to sale of the Property;
(ii) The conduct of DW and/or the Applicant does not amount to vexatious, oppressive or malicious conduct as that term has been defined for purposes of the Act. Accordingly, the Applicant has the right to sell the Property subject to any contractual rights of JW or the Respondent to the contrary;
(iii) DW is contractually bound to offer to sell his interest in the Property to JW prior to selling to third parties, pursuant to an agreement entered into at the time DW first acquired an interest in the Property;
(iv) Given the circumstances of the present case, the offer made by DW to sell his interest to JW or, alternatively, to purchase JW’s interest in the Property was not left open for a period of time sufficient to enable JW to fully consider his options in that regard;
(v) Accordingly, I direct that the August 4, 2017 offer made by DW to JW should remain open for the latter’s consideration for an additional 60 days from the date hereof;
(vi) In the event that the Parties do not agree on terms regarding ownership of Property following that 60 day period, DW shall be entitled to sell the Property to third parties, such sale to be supervised by a Master to ensure an orderly sale process; and
(vii) The Respondent is entitled to 25 percent of the H.S.T. portion of the rent accruing on the property dating back to March 2011, and to 25 percent of the total rent received from January 2017 to the present, and any amounts outstanding should be paid by the Applicant forthwith.
[22] As success on this motion has been divided, I do not believe this is an appropriate matter for a costs order.
P. J. Monahan J.
Date: September 14, 2017