Court File and Parties

COURT FILE NO.: 5235/18 DATE: 2019 03 11 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

RUMANEK & COMPANY LTD. (Equitable Receiver for Xuan Luu) Applicant – and – MOHAMED ABUOMAR also known as MOHAMED ABU-OMAR also known as MOHAMED A.R. ABUOMAR also known as MOHAMED A. ABU-OMAR and HORYA EL-RAKEB Respondents

COUNSEL: Timothy Morgan, for the Applicant Fay Hassaan, for the Respondents

HEARD: February 26, 2019

Gray J.

[1] This matter has a long history. Xuan Luu has a number of costs orders against the respondent, Mohamed Abuomar. She has spent several years trying to collect them. At every turn, she has been frustrated. Much of that background has been reviewed in the first of my earlier decisions, Luu v. Abuomar, 2016 ONSC 4299.

[2] It appears that the only significant asset Mr. Abuomar owns is his undivided one-half interest in the matrimonial home, owned by himself and his wife, the respondent Horya El-Rakeb.

[3] In the application that gave rise to my earlier decision, counsel for Ms. Luu requested that I order judicial sale of the matrimonial home, analogizing the procedure to the appointment of an equitable receiver. I expressed some reservations, indicating that I was unaware of any authority that would allow a receiver to adversely affect the rights of a third party, in this case, Mr. Abuomar’s wife.

[4] After I rendered my first decision, several attempts were made by Ms. Luu to sell Mr. Abuomar’s undivided one-half interest in the matrimonial home, all to no avail. In addition, an examination of Mr. Abuomar in aid of execution was unsuccessful in providing any useful information.

[5] Ultimately, Ms. Luu applied for the appointment of an equitable receiver in aid of execution: Luu v. Abuomar, 2017 ONSC 6658, 21 C.P.C. (8th) 196. In my endorsement, while I appointed Rumanek & Company Ltd. as an equitable receiver, and authorized the receiver to bring an application under the Partition Act, I noted that the question of the status of the receiver to commence such proceedings would be determined if and when the receiver commenced them.

[6] The receiver has now commenced proceedings under the Partition Act, and it is necessary for me to determine whether it is open to the receiver to do so.

[7] For the reasons that follow, I hold that the receiver is entitled to commence proceedings under the Partition Act, and I grant judgment for sale as requested by the receiver.

Submissions

[8] Before outlining the parties’ submissions on the merits of the matter, I should note that Ms. Hassaan, counsel for the respondents, has raised a preliminary issue as to whether the receiver is entitled to use the same counsel that has been used by Ms. Luu. Ms. Hassaan submits that the receiver must be independent of the parties, and must maintain an even hand between them. It would be inconsistent with that principle for the receiver to use counsel who has acted for one of the parties, in this case the applicant.

[9] I agree with Ms. Hassaan that generally speaking a receiver ought to have independent counsel. As stated in Bennett on Receiverships (3d Ed.) at page 213, the author states: “In a court appointment, the receiver ought to have independent counsel in order to avoid any bias, conflict, or prejudice.” However, in a footnote, the author states:

However in a court-appointed receivership by way of equitable execution, counsel for the creditor ought to be able to continue to act for the receiver since the receivership is creditor-driven and the creditor is unlikely to change counsel at this stage to pursue other actions. If a conflict arises, the court-appointed receiver can then retain independent counsel.

[10] I agree with the author. In this case, the receiver has been appointed essentially for one purpose: namely, to assist in collecting the costs orders held by Ms. Luu. There is no conflict of interest between Ms. Luu and the receiver, and I see no reason why Mr. Morgan ought not to be able to act for the receiver.

[11] On the merits of the application, Mr. Morgan submits that an equitable receiver is perfectly entitled to pursue an application under the Partition Act, provided the receiver is authorized to do so by the court. He points out that in at least one case, an equitable receiver has been authorized by the court to pursue an application under the Partition Act: Weig v. Weig, 2013 ONSC 2325. In that case, Justice David Brown (as he then was) granted a request by an equitable receiver for an order selling a matrimonial home under the Partition Act. In his decision, Justice Brown referred to caselaw in which it is recognized that the court retains discretion to refuse relief under the Partition Act: Garfella Apartments Inc. v. Chouduri, 2010 ONSC 3413, 102 O.R. (3d) 624 (Div. Ct.); and Greenbanktree Power Corp. v. Coinamatic Canada Inc., 2004 ONCA 48652, 75 O.R. (3d) 478 (C.A.).

[12] Mr. Morgan submits that the interest of Mr. Abuomar’s wife, Horya El-Rakeb, will not be overlooked. The court has discretion to decline to grant judgment for partition or sale where it would be vexatious or oppressive. Such discretion was recognized by the Court of Appeal in Davis v. Davis, 1953 ONCA 148, [1954] O.R. 23 (C.A.), and in subsequent cases including Silva v. Silva, (1990), 1990 ONCA 6718, 1 O.R. (3d) 436 (C.A.); Gartree Investments Ltd. v. Cartree Enterprises Ltd. (2000), 33 R.P.R. (3d) 85 (Ont. S.C.J.); Greenbanktree, supra; and Garfella, supra.

[13] Mr. Morgan submits that the discretion of the court should be exercised, in this case, in favour of ordering a sale. Mr. Morgan points out that there are no mortgages or other encumbrances registered against the property, and it is conservatively estimated to be worth between $1.4 and $1.6 million. Accordingly, Ms. El-Rakeb’s share of the proceeds of sale will likely be between $700,000 and $800,000. That, combined with Mr. Abuomar’s share (out of which the costs orders and any other costs and expenses will be paid) will be more than enough to provide them with sufficient funds to purchase a new home. Any inconvenience to Ms. El-Rakeb pales in comparison to the inability of Ms. Luu to collect on her costs orders that have been outstanding for many years.

[14] Ms. Hassaan, counsel for the respondents, submits that the receiver does not have status to pursue an application under the Partition Act.

[15] Ms. Hassaan submits that the Court of Appeal has made it clear, in Ferrier v. Civiero (2001), 2001 ONCA 5158, 147 O.A.C. 196 (C.A.), that an execution creditor does not have status to pursue an application under the Partition Act. Ms. Hassaan submits that to permit an equitable receiver to pursue such an application is simply an indirect way around the decision of the Court of Appeal in Ferrier, and cannot be permitted.

[16] Ms. Hassaan submits that in any event it would be oppressive to grant this application under the Partition Act. Ms. Hassaan points out that Ms. El-Rakeb is an innocent party, and is not subject to the writs of execution held by Ms. Luu. It is not suggested that Ms. El-Rakeb has done anything to frustrate Ms. Luu’s collection of her costs orders, and it would be unjust to deprive Ms. El-Rakeb of her interest in the matrimonial home. Ms. Hassaan submits that Ms. El-Rakeb is elderly, and it would be very disruptive to uproot her from the only home she has.

Analysis

[17] As noted, in my first decision I expressed some reservations as to whether an equitable receiver could pursue the sale of jointly-owned property. Having considered the matter more thoroughly, I no longer have any reservations. The receiver may pursue an application under the Partition Act, if authorized to do so by the court, but the application is governed by the usual discretion the court has to refuse to grant the application in proper circumstances.

[18] Sections 2 and 3(1) of the Partition Act provide as follows:

2 All joint tenants, tenants in common, and coparceners, all doweresses, and parties entitled to dower, tenants by the curtesy, mortgagees or other creditors having liens on, and all parties interested in, to or out of, any land in Ontario, may be compelled to make or suffer partition or sale of the land, or any part thereof, whether the estate is legal and equitable or equitable only.

3 (1) Any person interested in land in Ontario, or the guardian of a minor entitled to the immediate possession of an estate therein, may bring an action or make an application for the partition of such land or for the sale thereof under the directions of the court if such sale is considered by the court to be more advantageous to the parties interested.

[19] Pursuant to these provisions, a person “interested in land” has a right to apply under the Partition Act for partition or sale. In Ferrier v. Civiero, supra, the Court of Appeal held, at para. 8, that the sheriff, acting on behalf of an execution creditor, has “neither a legal interest nor a right to possession”, and thus has no status to make an application under the Partition Act. A receiver, by contrast, has both a legal interest in the property of the debtor and a right to possession.

[20] Subject to the specific orders of the court, the general duty of a receiver is described in Kerr & Hunter on Receivers and Administrators (18th Ed.) at page 174, as follows:

The general duty of a receiver is to take possession of the estate, or other property, the subject-matter of dispute in the action, in the room or place of the owner thereof; and, under the sanction of the court, to do, as and when necessary, all such acts of ownership, in relation to the receipts of rents, compelling payment of them, management, letting lands and houses, and otherwise making the property productive, or collecting and realising it, for the benefit of the parties to be ultimately declared to be entitled thereto, as the owner himself could do if he were in possession.

[Emphasis added]

[21] The Court of Appeal has described the status of a court-appointed receiver as one who “stands in the shoes of the debtor, and is furthermore acting as an officer of the court”: GMAC Commercial Credit Corp.-Canada v. TCT Logistics Inc. (2005), 2005 ONCA 3584, 74 O.R. (3d) 382 (C.A.), at para. 36; and Re Norame Inc., 2008 ONCA 319, 90 O.R. (3d) 303, at para. 10. See also Textron Financial Canada Ltd. v. Beta Limitee/Beta Brands Ltd. (2007), 2007 ONSC 43908, 37 C.B.R. (5th) 107 (Ont. S.C.J.); and Mickelson v. Kill-Em-Quick Co. Ltd. (1919), 1919 MBCA 552, 46 D.L.R. 622 (Man. C.A.). In that case, Perdue, C.J.M. stated “The receiver, to the extent of the debtor’s interest in the property, has been held to stand in the shoes of the debtor. A sale and disposition of property in the hands of a receiver may be made with the approval of the court.”

[22] In a case such as this, the property in the hands of the receiver is Mr. Abuomar’s undivided one-half interest in the matrimonial home. The receiver stands in the shoes of Mr. Abuomar and, if authorized by the court, can effect a sale of the property through an application under the Partition Act, to the same extent that Mr. Abuomar himself could. Ms. El-Rakeb’s interest is protected through the exercise of the court’s discretion to decline to grant the application in proper circumstances.

[23] In Davis v. Davis, supra, Laidlaw J.A. stated:

In my opinion the change made in the legislation in 1913, whereby the court obtained discretionary power to allow or refuse an application for partition or sale of lands, did not alter the policy of the law theretofore existing or the fundamental considerations which ought to prevail in reaching a decision in the matter. 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 reason appears why such an order should not be made. I do not attempt to enumerate or describe what reasons would be sufficient to justify a refusal of an order for partition or sale. I am content to say that each case must be considered in the light of the particular facts and circumstances and the court must then exercise the discretion vested in it in a judicial manner having due regard to those particular facts and circumstances as well as to the matters which I have said are, in my opinion, fundamental.

[24] In the next paragraph, Laidlaw J.A. noted that the reasons advanced by the respondent in opposition to the application for partition or sale were in the nature of personal inconvenience or hardship. He held that those reasons were insufficient to justify the exercise of discretion against allowing an order for partition or sale.

[25] In Silva, supra, Finlayson J.A. noted, at para. 15, that it had been determined in cases subsequent to Davis that an order for partition and sale under s.2 of the Partition Act is as of right, provided that the applicant acts without vexation or oppression and comes to court with clean hands.

[26] In Gartree, supra, Nordheimer J. (as he then was) cited the decisions of the Court of Appeal in Davis and Silva, and the decision of Wilkins J. in Canadian Imperial Bank of Commerce v. Mulholland Construction Inc. (1998), 1998 ONSC 14653, 37 O.R. (3d) 759 (Gen. Div.), and stated, at p.761:

An analysis of the case-law makes it clear that the court, in fact, has the discretion to refuse to grant an order for partition and sale, but that the discretion to refuse such an order is only exercised in limited or narrow circumstances.

[27] In the case before me, I do not think the inconvenience that will be suffered by Ms. El-Rakeb is sufficient to overcome the right of Ms. Luu to collect on her outstanding costs orders. To refuse the application would mean that, for practical purposes, Ms. Luu will never be able to collect on her costs orders. On the other hand, to grant the application will mean that Ms. El-Rakeb will obtain between $700,000 and $800,000 as a result of the sale, and she and her husband will be able to purchase an alternative property with the proceeds that she and her husband will collect. In my view, there is nothing vexatious or oppressive about the application for partition and sale, and Ms. Luu clearly comes to court with clean hands.

[28] Before closing, I note that in England it seems clear that an equitable receiver has the power to pursue an application to sell jointly-owned property: Levermore v. Levermore, [1979] 1 W.L.R. 1277.

Disposition

[29] For the foregoing reasons, judgment will issue in form 66A for the sale of the matrimonial home. Pursuant to Rule 66.03, all proceeds of sale shall be paid into court and shall be distributed in accordance with an order of the court. The matter will be referred to the Master at Milton to conduct the sale, and an appointment with the Master can be obtained through the trial coordinator at Milton. If there is any difficulty with the form of the order, I will entertain written submissions.

[30] I will entertain written submissions as to costs, not to exceed three pages together with a costs outline. Mr. Morgan will have five days, and Ms. Hassaan will have five days to respond. Mr. Morgan will have three days to reply.

Gray J.

Released: March 11, 2019