Court File and Parties

Court File No.: CV-16-552485-0000 Date: 2018-09-18 Superior Court of Justice – Ontario

Re: VICTOR SEABROOK and TIMOTHY SEABROOK, TRUSTEES OF THE AVENUE ROAD TRUST, Applicants/Responding Parties And: PANTRUST INTERNATIONAL, S.A., RICHARD WIGLEY and JAMES WIGLEY, Respondents/Moving Parties

Before: Justice S. Nakatsuru

Counsel: R. Chapman, for the Applicants/Responding Parties M. Matus, for the Respondents/Moving Parties

Heard: September 12, 2018

Endorsement

[1] The respondents move under Rules 14 and 38.10 for an order converting this application into an action. The essence of the application is that both litigants are trustees. The assets held by the respondents were to be transferred to the applicants by agreement. While there are other related issues, the subject of this application is loans made by the respondents in the United States (the “Dick loans”). It is the position of the respondents that the assets regarding the Dick loans have been extinguished by a judgment made by a court in Denver against Mr. Dick and the respondents. Thus, these assets are no longer capable of being transferred to the applicants.

[2] It was the respondents’ position that I can determine the application on the merits. They cite the case of Collins Barrow Toronto LLP v. Augusta Industries Inc., 2017 ONCA 883. I find that case is distinguishable. It appears that the parties in that case were prepared to argue both the merits of the application and the motion to convert the application into an action. The judge decided the application. This decision was upheld on appeal. Here, the history of the proceedings is not the same. The respondents are not prepared to respond to the application and claim prejudice if I decide this application on the hearing of the motion. I agree. The respondents were entitled to rely upon the order made by Justice Dow in this case which set out that their motion to convert should be heard on the original motion date. The only reasonable interpretation of the order is that the motion was to be heard before the application. As a result, I am not prepared to decide the application on the merits as the applicants urged me to do.

[3] On the other hand, I have not been persuaded by the respondents that this application should be dismissed as a summary judgment motion brought in an application. A motion for summary judgment under Rule 20 is not available to adjudicate issues raised on an application under Rule 14: Maurice v. Alles, 2016 ONCA 287. While I can understand why the respondents might contend this is a summary judgment motion given some of the phraseology and language employed by the applicants, when looked at as a whole, what the applicants want is not summary judgment as much as the success of their application. Whether it should proceed to that hearing depends upon consideration of the respondents’ motion to convert this into a trial. As I said at the hearing of this case, it is only if and when it is converted into a trial that a summary judgment motion could be considered.

[4] In Przysuski v. City Optical Holdings Inc., 2013 ONSC 5709 Firestone J. sets out a nice summary of the law:

General principles to consider in determining whether to convert an application into an action

5 It is a well-established general principle that an application should be used when there is no matter in dispute and when the issues to be determined do not go beyond the interpretation of a document: see Collins v. Canada (Attorney General) (2005), 76 O.R. (3d) 228 (S.C.), at para. 28; Marten Falls First Nation v. Ontario (1994), 31 C.P.C. (3d) 149 (Ont. C.J. (Gen. Div.)), at paras. 7, 17; Re City of Burlington v. Clairton Village (1979), 24 O.R. (2d) 586 (C.A.), at pp. 588-90; and Re Acumen Investments Ltd. v. Williams (1985), 53 O.R. (2d) 247 (H.C.), at p. 250. This is not an application concerning the interpretation of a document.

6 Where the legislature has stipulated that a proceeding may be brought by application, there is a prima facie right to proceed by application and the matter should not be converted into an action without good reason: see Sekhon v. Aerocar Limousine Services Co-Operative Ltd., 2013 ONSC 542, at paras. 48-49; and College of Opticians (Ontario) v. John Doe, [2006] O.J. No. 5113, at paras. 18-21.

7 A good reason to convert an application into an action is when the judge who will hear the matter cannot make a proper determination of the issues on the application record: see Collins, at para. 29.

8 When issues of credibility are involved the matter should proceed by way of action: see Gordon Glaves Holdings Ltd. v. Care Corp. of Canada (2000), 48 O.R. (3d) 737 (C.A.), at para. 30; and Cunningham v. Front of Yonge (Township) (2004), 73 O.R. (3d) 721 (C.A.), at para. 20.

9 A factual dispute simpliciter in itself is not sufficient to convert an application. The fact(s) in dispute must be material to the issues before the court: see Niagara Air Bus Inc. v. Camerman (1989), 69 O.R. (2d) 717 (H.C.), at pp. 725-26; and BPCO Inc. v. Imperial Oil Ltd. (1993), 17 C.P.C. (3d) 130 (Ont. C.J. (Gen. Div.)), at para. 13.

10 In determining whether to convert an application into an action, Collins sets out the following factors that are relevant at para. 5:

• Whether material facts are in dispute;
• The presence of complex issues that require expert evidence and/or a weighing of the evidence;
• Whether there is a need for pleadings and discoveries; and
• The importance and impact of the application and of the relief sought.

[5] In assessing the merits this motion, let me begin by saying that I recognize the law that states that if a proceeding is capable of being resolved as an application, it should be, as that is the most expeditious and least expensive determination of the proceeding on its merits.

[6] In order to do so, of course, I must have regard to rule 14.05(3) of the Rules of Civil Procedure, which limits the availability of applications, the issues raised by the application, the evidence led on this motion, and the positions of the parties.

[7] First of all, the applicants rely upon the law that sets out the duties of a trustee. While I cannot deny that this is relevant, the fundamental nature of this dispute is not regarding a trust relationship between a trustee and a beneficiary. The beneficiary of the trust that existed is not a party to this litigation. The essence of this application is really a contractual one. Another way of saying this is that on its surface, this application could fall under rule 14.05(3)(d) of the Rules of Civil Procedure, where the determination of rights depends on the interpretation of a contract or a document. The relevant provision relied upon by the applicants is:

5. Continuing Trusts

The parties hereby declare that the property comprised in the Trust Fund shall upon execution hereby covenants and undertakes to execute all documents and take all such other reasonable action as is necessary for the vesting of the Trust Fund in the New Trustees, following which the New Trustees shall hold the assets comprising the Trust Fund upon, with and subject to the trusts, power and provisions of the Settlement.

[8] However, this case is not so simplistic. As I see it, the resolution of this matter is not simply dependent upon the interpretation of this provision. The respondents take no issue with it. Rather, the respondents’ position is that it has fulfilled the terms of this provision. Because the Colorado order extinguished the Dick loans, the respondents are unable to transfer the assets as required and they have, to the best of their ability, explained and accounted for this. A complicating factor in this case is that the settlement in Colorado has been sealed. I understand that this is the practice of the State. The Dicks tried to unseal that settlement but were not successful. I note, as an aside, that the respondents have not tried to do the same.

[9] Looking at the nature of the claims set out in the application, it seems to me that not all of them have been properly thought out. The applicants are seeking much more than a declaration. Further, they are making serious allegations of misconduct. I appreciate that the applicants contend that the allegations can be made out on the admissions made in the Colorado proceedings but these allegations are very much disputed by the respondents.

[10] In dealing with one of the factors mentioned by Firestone J. above (the need for pleadings and discoveries) looking at the record and the history of the proceedings, including the original Notice of Application dated May 10, 2016 (which was later withdrawn on consent for pragmatic reasons) and the “Notice of Return of Application” dated March 30, 2017, it is not clear what the applicants are truly seeking. Originally, they were seeking a declaration that the respondents execute all documents and take other actions for the vesting of the Avenue Road Trust in the applicants. As indicated, the respondents take the position that these assets, the Dick loans, have been extinguished by settlement and the Colorado court order. Thus, they are unable to transfer them. Then, on the “Notice of Return of Application”, the applicants have added they were seeking judgment against the respondents in the amount of $525,000 and interest. The grounds for the motion were that the respondents lost their claim for payment by the Dicks held by the trusts by: being negligent by keeping no records in respect of the Dick loans; making false allegations under oath in the Colorado claims against the Dicks that there were documents evidencing such loans; and agreeing to a dismissal of the respondents’ claim for repayment of the applicants’ monies as against the Dicks which was caused by the respondents’ perjury. The respondents certainly have a point that on its face, it seems as if the applicants are seeking some form of damages arising out of a tort or a form of restitution based upon equitable relief. However, as pointed out here, the beneficiary of the trust and one of the persons who set up the trust, one Isobel Seabrook, is not an applicant.

[11] In looking at the factum and listening to the argument, the applicants’ position does not seem to get any clearer. They speak of the respondents having breached their “duty” as trustees by failing to properly explain or conduct themselves appropriately. However, the applicants are another trust entity to whom the respondents are contractually obligated to transfer the assets. They submit that it was due to the conduct of Richard Wigley and James Wigley that the monies were lost and they should be liable for payment. Again, in keeping with accusations of negligence and deliberate fraud in the Notice of Application, these allegations are akin to a claim in tort. To succeed in that the applicants would have to show a duty of care, breach of a standard of care, and loss flowing from the conduct. The respondents adamantly deny all of this. Alternatively, if the applicants’ claims are some form of equitable relief, this too would not fall readily into any recognized category that the applicants have presented. Rather, the basis set out originally seems to be contractual. Even assuming it is contractual, the nature of the damages and the cause of action do not appear to be well articulated.

[12] I am not saying here that there is no proper cause of action or relief being sought. Rather, I am finding that this case would benefit greatly from proper pleadings and discovery.

[13] Another important factor is that there are material facts in dispute. The allegations of negligence, perjury, and false statements are vehemently denied by the respondents. They submit that they conducted the Denver proceedings appropriately and sought to amend their claim as information came to light. Their interpretation of the Denver proceedings is very different from that of the applicants. It is submitted that no evidence has been led by the applicants to substantiate any of the allegations.

[14] I appreciate the point made by the applicants that there is an evidentiary onus on the respondents to show that there is a conflict of the evidence on material points. However, I am satisfied from the record adduced, the submissions of counsel, and the circumstances of the case that they have discharged this onus. In particular, the affidavit of Richard Wigley swears that it was the applicant, Victor Seabrook, who is himself a lawyer, who negotiated, authorized and approved the Dick loans. This is one piece of evidence that shows that there is a significant conflict as to any negligence or malfeasance on the part of the respondents; in other words, it could hardly be said that the respondents were at fault for failing to properly document the loans or protect the assets from default when it was the applicants who facilitated the loans. While I am not commenting on the validity of these assertions, I merely point it out to demonstrate that the respondents are not simply relying on their submissions or bare denials to prove a material conflict in the facts.

[15] I find this to be a substantial factor in support of the motion.

[16] Another factor argued by the respondents is the need for expert evidence. While I acknowledge that an expert in the law of Colorado might be required, I do not see this as a weighty factor in favour of a trial. I can readily foresee that if such expert is required, the evidence would be short and uncontroversial.

[17] In conclusion, I find that this application should be converted into an action. The application suffers from ambiguity and a lack of clarity. Some of the relief sought may not be obtainable. Some others such as a potential tort do not readily fall into the provisions of Rule 14. This case deserves proper delineation of what is really at issue, what facts are in dispute, and what remedies are being sought through proper pleadings in an action and the pre-trial discovery process. A significant sum of money is at stake. Serious allegations raised by the applicants are directed at the honesty and good faith of the respondents. There are very likely to be material facts disputed on central issues. I appreciate the need to provide timely and affordable access to civil justice, but in this case, I am of the view that the interests of justice and procedural fairness require that this application be converted into a trial. Like Firestone J., I too adopt the comments of Perell J. in Allied Systems (Canada) Company, 2012 ONSC 3142, at para. 21:

In a given case, an application might be suitable to resolve a matter of contract interpretation, but this case is not such a case. In particular, in my opinion, the determination of the arguments about the doctrine of good faith do raise both factual and legal questions that as a matter of procedural fairness and as a matter of substantive justice require the full evidentiary record of an action.

[18] Needless to say, my comments in this decision should not bear in any way on the merits of a summary judgment motion, if such a motion is brought by any of the parties. That will depend upon the issues raised in the pleadings and the evidence led at any such motion.

[19] Thus, I order that this application be converted into an action. The applicants shall be the plaintiffs and the respondents shall be the defendants. The plaintiffs shall deliver their Statement of Claim within 30 days of the date of this decision. Thereafter, the parties shall abide by the Rules governing actions as set out in the Rules of Civil Procedure.

[20] If the issues of costs cannot be resolved between the parties, I will entertain written submissions, each one limited to two pages excluding any attachments (any Bill of Costs, Costs Outline, and authorities). The Moving Parties shall file within 20 days of the release of these reasons. The Responding Parties shall file within 10 days thereafter. There will be no reply submissions without leave of the court.

Justice S. Nakatsuru Released: September 18, 2018