Florentine Financial Corporation, 2018 ONSC 2636
COURT FILE NO.: CV-17-4729
DATE: 20180511
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Peel Condominium Corporation No. 346, Plaintiff (Moving Party)
AND:
Florentine Financial Corporation, Shanawaz Khan, Salim Khan and A & H Asset Auction Inc., Defendants (Responding Parties)
BEFORE: FRAGOMENI J.
COUNSEL: Victor Yee, for the Plaintiff (Moving Party)
Rachel Smith, for the Defendants (Responding Parties)
HEARD: April 20, 2018
E N D O R S E M E N T
NATURE OF THE MOTION
[1] The Plaintiff, Peel Condominium Corporation No. 346 (Peel) commenced an action in the Small Claims Court in Brampton against the Defendants, seeking monetary damages for unpaid common expenses owed to Peel.
[2] The total damages sought were below the $25,000 ceiling for actions issued in Small Claims Court.
[3] Peel has now taken the position that there are further breaches of the Condominium Act, 1998, S.O. 1998, c. 19 (the Act) and the governing documents of Peel, and wishes to claim relief as a result of those alleged breaches. Further, Peel alleges that the monetary damages now sought exceeds the $25,000 ceiling.
[4] Peel seeks an order transferring this action to the Superior Court of Justice on the basis that this Court has the sole jurisdiction to deal with Peel’s claims for additional relief. The additional relief relates to the following:
an increase in the monetary damages;
non-compliance with the Act and/or the governing documents of Peel;
an oppression remedy; and
a declaration that Mr. Khan, as sole director and controlling mind of the corporate Defendants, is in breach of his duties as a Director.
PEEL’S POSITION
[5] Peel is a non-profit condominium corporation governed by the Act. It manages four units at 80 Devon Road, Brampton, Ontario.
[6] The Defendant, Florentine Financial Corporation (Florentine) is the owner of Unit 3. The Defendant, A & H Asset Auction Inc. (A & H), is the occupant of Unit 3.
[7] The Defendant, Mr. Shanawaz Khan, is the sole director and controlling mind of Florentine and A & H.
[8] The Defendant, Salim Khan, is the son of Ms. Khan and is a former member of the Board of Directors of Peel.
[9] In or around October of 2013, the former agent for the owner of Unit 4, Level 1 of Peel (“Unit 4”), Frank Merrill, resigned from his position as a member of the Board and his office as Peel’s General Manager, because the owner of Unit 4 was selling the unit. Mr. Khan was appointed by the Board and accepted the office of Managing Director on October 30^th^ 2013, as per the Board resolution dated October 30, 2013. Mr. Khan was also elected the President of Peel. From October 20, 2013, until his removal from the Board on March 30, 2016, Mr. Khan served as the sole Managing Director of Peel.
[10] As both the Managing Director and the President of Peel, Mr. Khan was responsible for overseeing the day-to-day affairs of Peel, including but not limited to the collection of Peel’s common expenses or in the very least, reporting any irregularities or issues with the condominium’s collection efforts to the Board, so that the Board may decide how to respond.
[11] During Mr. Khan’s time on the Board, he was exclusively in control of the financial records, bank accounts, and cheques of Peel. Up to March 30, 2016 Peel was managed by Mr. Khan.
[12] On March 30, 2016, the other three members of the Board voted to remove Mr. Khan from the office of President of the Board. Within 30 days, Mr. Khan was to deliver to the new President the records of Peel that he had in his possession.
[13] Following Mr. Khan’s removal and a review of Peel’s financial records, Peel became aware of the fact that all four units were in arrears of their common expenses. As a result, Peel demanded from all four units that they pay their outstanding arrears. This demand was made on May 12, 2016 and by May 27, 2016 all units except Unit 3 had paid their outstanding common expenses in full.
[14] Unit 3 was issued a written demand. The unit continues to be in arrears in the sum of $15,000 for the period January 1, 2014 to March 1, 2016. The governing documents of Peel set out that these arrears bear interest at a rate of 18%. In addition, Peel’s legal costs and expenses in connection with the collection or attempted collection are added to the amounts owing by the unit, on a solicitor-client basis.
[15] According to Peel, the unit’s total outstanding common expenses as of December 1, 2017 is $46,654.99 and continues to increase due to the mounting interest on the arrears and legal costs.
[16] With each failure by Unit 3 to pay its “regular” monthly common expenses on time, the Board and property management are required to expend considerable efforts in collecting or attempting to collect Unit 3’s shortfall in contributions – which, to date, still has not been fully rectified. Therefore, Peel now seeks to obtain a compliance order under Section 134 of the Act from the Court, requiring the Defendants to cease contravening the Act and to, going forward, pay its common expenses on time.
[17] In addition, the amount of outstanding arrears owed by the Unit to date is quite significant in the context of Peel’s relatively small size, given that there are only four units contributing to peel’s operating costs and reserve fund. With the Unit in default of its 25% share of the total common expenses, the other three units of Peel are forced to unfairly bear the burden of Unit 3’s shortfall. Peel is unable to perform its ongoing maintenance and repair obligations due to the shortfall in the common expenses collected from Unit 3, and/or Peel’s reserve fund is inadequately funded due to Unit 3’s failure to contribute its fair share.
[18] This is or threatens to be oppressive, unfairly prejudicial to Peel, and/or unfairly disregards Peel’s interest in being able to operate the non-profit condominium corporation. Accordingly, Peel now seeks to obtain an oppression remedy under Section 135 of the Act.
[19] Finally, Peel seeks to obtain a declaratory order from the Court that Mr. Khan acted in breach of his statutory standard of care under Section 37(1) of the Act, as the former President of the Board, in issuing the Unauthorized Payment to the third party and/or in failing to advise Peel to seek the collection of outstanding common expenses owed by Unit 3 in a timely manner when Unit 3’s arrears first arose.
POSITION OF THE DEFENDANTS
[20] The Defendants submit that this action represents a simple claim for monetary relief in an amount that is within the monetary jurisdiction of the Small Claims Court.
[21] The Defendants point out the following chronology of events which, they submit, should militate against a transfer of this action out of the Small Claims Court:
• The Plaintiff, who has been represented by counsel through the action, took the following steps in the action in Small Claims Court:
(a) Filing pleadings and amended pleadings;
(b) Attending the Settlement Conference;
(c) Preparing a document brief for trial;
(d) Participating in the Trial Management Conference Call; and
(e) Setting the Action down for trial.
• The trial of the action was scheduled for November 3, 2017 and was estimated to take one day. As noted in the Trial Management Conference Call Checklist, the Trial Management Conference Call confirmed that expert reports did not apply, all witnesses were available, any settlement conference orders had been complied with, and the parties were otherwise prepared for trial.
• On or around October 17, 2017, nearly 11 months after the Plaintiff commenced the Small Claims Court action and approximately two weeks prior to trial, the Plaintiff communicated its intention to bring the within Motion to transfer the action to Superior Court.
[22] The Defendants also submit that where there are no new facts or circumstances that change the original basis of the Plaintiff’s claim, the action should not be transferred.
[23] In the alternative, in the event that the Court finds that the Small Claims Court is the “wrong court” pursuant to section 110 of the Courts of Justice Act, the Court should decline to exercise any discretion it may have to transfer the action pursuant to that section, as the Plaintiff failed to act expeditiously to ensure that its claim was pursued in the appropriate forum. Further delay resulting from transferring the action to Superior Court would result in undue prejudice to the Defendants.
[24] In the further alternative, if this Court finds that this is an appropriate case to transfer the action to Superior Court, the Defendants submit that they are entitled to their costs thrown away from the start of this action to and including the date of the hearing of this Motion. Similarly, the Plaintiff is not entitled to claim, from any of the Defendants, any amount in respect of costs or interest allegedly accrued from the start of the action to date, which represents time wasted in what the Plaintiff now asserts to be the wrong forum.
[25] Further, the Defendants should be granted leave to serve and file fresh pleadings in response to any fresh pleadings served by the Plaintiff, including a counterclaim, cross-claim, or third party claim.
ANALYSIS & CONCLUSION
[26] In Jacob v. Westwood Mall Holdings Ltd. 2017 ONSC 1754, Price J. sets out the following at paras. 12 – 16:
- Section 110 of the Courts of Justice Act, R.S.O. 1990, c. C.43, (“CJA”) reads as follows:
110 (1) Where a proceeding or a step in a proceeding is brought or taken before the wrong court, judge or officer, it may be transferred or adjourned to the proper court, judge or officer.
Jurisprudence
- In Mrzlecki v. Kusztos, in 1987, the issue there was a transfer from the then District Court, with a monetary jurisdiction of $25,000, regarding a claim that was started in that court for $35,000 but for which the plaintiff was seeking to amend to $500,000. The court found that the request was premature as the amendments had not yet been done, and it dismissed the motion. However, it noted in obiter three principles, which can be summarized as follows:
(a) A plaintiff bringing an action that exceeds the monetary jurisdiction of the court does not make that court “the wrong court” for the purposes of a transfer under s. 110.
(b) However, there is a “very good argument” that the court has inherent jurisdiction to make the transfer “in the appropriate case”.
(c) The court would be reluctant to transfer a personal injury action if “[t]here is no new medical condition or fact that changes the original basis or complexion of the injury or claim”.
In Tawfik v. Baker, in 1992, this Court allowed a transfer from the Small Claims Court to the Superior Court. The motion judge noted at para. 5 that there did “not appear to have been a change in the original basis of the injury or its consequences (other than an accumulating loss of income) since the claim was instituted in Small Claims Court.” However, rather than applying that as the test and granting leave to appeal the transfer, the court still looked at whether it was an “appropriate case” for a transfer, in accordance with the second principle from Mrzlecki v. Kusztos. It noted that the transfer “would appear to be an appropriate instrument to make it possible for the claim to be presented in its allegedly full dimensions …” The court found that empowering the plaintiff “to pursue his claim in what the plaintiff avers are its real dimensions” was a sufficient reason for the transfer.
As in Tawfik, I find that this is an appropriate case for a transfer as it empowers the plaintiffs to pursue their claim in what they now maintain are its real dimensions.
I appreciate that the plaintiff has already made a mistake in selecting the wrong court, namely when they brought the action and when they were first asked whether they wished to claim a rescission. However, in my view, it would be a disproportionate penalty to now deny them the opportunity to pursue the full extent of their claim.
[27] In Drost v. CMH Automotive, 2014 ONSC 3408, Minnema J. noted the following at paras. 13 – 16:
However, a leading case relied on by both parties is Tawfik v. Baker (1992), 1992 CanLII 7724 (ON SC), 10 O.R. (3d) 569 (Gen.Div.). It was a motion for leave to appeal an interim order that allowed a transfer by the plaintiff of a personal injury case from the Small Claims Court to the Ontario Court (General Division). The plaintiff claimed that he was completely disabled for four months, and that his lost income for approximately two years after the accident was in the area of $40,000. The court noted “it would appear to have been utterly inappropriate for the solicitors then acting for the plaintiff to have commenced the action … in a court that had a maximum jurisdiction of $3,000”. Looking at (c) above, the court specifically noted at para. 5 that there did “not appear to have been a change in the original basis of the injury or its consequences (other than an accumulating loss of income) since the claim was instituted in Small Claims Court.” However, rather than applying that as the test and granting leave to appeal the transfer, the court still looked at whether it was an “appropriate case” for a transfer, per the second principle from Mrzlecki v. Kusztos. It noted that the transfer “would appear to be an appropriate instrument to make it possible for the claim to be presented in its allegedly full dimensions …” The court found that empowering the plaintiff “to pursue his claim in what the plaintiff avers are its real dimensions” was a sufficient reason for the transfer.
As an aside, the plaintiff here also sought to rely on Farlow v. Hospital for Sick Children (2009), 2009 CanLII 63602 (ON SC), 100 O.R. (3d) 213 (S.C.J.). However, that case stands for the general proposition that when it is not the plaintiff but rather the defendant who is seeking the transfer, the plaintiff’s choice of court should be given respect and the discretion to transfer should be rarely exercised given access to justice considerations.
Analysis
I find that the Tawfik v. Baker decision is the closest on its facts to this case. In some sense this is not a transfer motion. The reality is that the plaintiff is before the courts trying to amend his claim to allow him to seek a higher recovery, and he has run into the jurisdictional limits of the court he has chosen. If there were no ceiling, such amendments are routinely granted unless prejudice would result that could not be compensated for by costs. As in Tawfik, I find that this is an appropriate case for a transfer as it empowers the plaintiff to pursue his claim in what he now maintains are its real dimensions.
I appreciate that the plaintiff has already made the same mistake twice in selecting the wrong court, namely when he brought the action and when he obtained the first amendment. However, in my view it would be a disproportionate penalty to now deny him the opportunity to pursue the full extent of his claim.
[28] I agree with the position of the Plaintiff. There is no doubt that transferring this action to the Superior Court of Justice will create a delay, and the matter will not be adjudicated as quickly as the Defendants would like. However, [considering the circumstances of this case, the allegations being made, and the evidentiary record before me], the delay that may impact the Defendants does not supersede giving the Plaintiff an opportunity to present the full dimensions of its claim. Guided by the legal principles set out in the jurisprudence and applying those legal principles to the circumstances in this case, I am satisfied that an order transferring this action to the Superior Court of Justice is warranted.
[29] I am also satisfied that the Defendants are entitled to their costs thrown away from the start of the Small Claims Court action to the hearing of this motion.
[30] Order to issue as follows:
transferring the Small Claims Court action bearing Court File No. SC-16-7951-0000 to the Ontario Superior Court of Justice in Brampton, Ontario;
that the Plaintiff shall serve and file its Fresh as Amended Statement of claim within 30 days;
that the Defendants shall, within 30 days of receipt of the Plaintiff’s Fresh as Amended Statement of Claim, serve and file a Fresh as Amended Statement of Defence, counter-claims, cross-claims and third party claims;
that the Defendants shall serve and file their written submissions relating to costs thrown away within 10 days of this Order. The Plaintiff shall serve and file its response to the Defendant’s written submissions within 10 days of receipt of same;
that the Plaintiff is not entitled to costs from the start of the Small Claims Court action to the date of this Order; and
the parties shall file written submissions on costs of the Motion to transfer within 30 days.
FRAGOMENI J.
DATE: May 11, 2018
Florentine Financial Corporation, 2018 ONSC 2636
COURT FILE NO.: CV-17-4729
DATE: 20180511
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Peel Condominium
Corporation No. 346, Plaintiff (Moving Party)
Florentine Financial Corporation, Shanawaz Khan, Salim Khan and A & H Asset Auction Inc., Defendants (Responding Parties)
COUNSEL: Victor Yee, for the Plaintiff (Moving Party)
Rachel Smith, for the Defendants (Responding Parties)
ENDORSEMENT
FRAGOMENI J.
DATE: May 11, 2018