COURT FILE NO.: CV-19-633030
DATE: 20210507
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Devry Smith Frank LLP Applicant
AND:
David Bruce Fingold and Metropolitan Toronto Condominium Corporation No. 1100 Respondents
AND:
Metropolitan Toronto Condominium Corporation No. 1100 Applicants
AND:
David Bruce Fingold Respondent
AND:
Novex Insurance Company Applicants
AND:
Chubb Insurance Company of Canada Respondents
BEFORE: Pollak J.
COUNSEL: Michelle Cook, for the Applicant
Jake A. Fine, for the Respondent MTCC No. 1100
Nadia Condotta, for the Respondent David Bruce Fingold
HEARD: February 3, 2021
ENDORSEMENT
[1] There are two applications before the Court:
An Application by Devry Smith Frank LLP (“DSF”) for an Order for the funds held in trust by DSF to be paid into court pursuant to Rule 43.04(1); and
An Application brought by Metropolitan Toronto Condominium Corporation 1100 (“1100”), to have the funds held in trust by DSF, be paid to the City of Toronto for alleged tax arrears and to provide a certificate of tax clearance.
[2] A fire destroyed a house unit at 3 Chedington Place, Toronto, Ontario in October of 2009. An indemnity agreement was entered into between several insurers and David Bruce Fingold (“Mr. Fingold”) the house unit owner, which provided for the demolition of the burned-out shell of the house unit.
[3] Mr. Fingold paid all municipal property taxes on the house unit until the fire. When the fire destroyed the house unit, he applied to the City of Toronto for a reassessment of outstanding taxes from 2011-2012 (the “Reassessment”).
[4] On February 20, 2013, Mr. Fingold, and the parties’ respective insurers entered into a Standstill Agreement (the “Agreement”), which provided that Mr. Lorne Shapiro of Basman Smith LLP (“Basman”) would hold $47,040.70 in escrow pending the resolution of the Reassessment (or arguably as submitted by Mr. Fingold, for a period of one year). The Agreement provided that upon resolution of the Appeal, Mr. Shapiro would pay all taxes owing to the City of Toronto from the Escrow Amount and pay the remainder of the Escrow Amount, if any, to Mr. Fingold. Mr. Shapiro move to DSF and transferred Mr. Fingold’s file to DSF, with the Escrow Amount.
[5] The relevant provision of the Agreement provides as follows:
Mr. Fingold has appealed the property tax assessment of the subject property “Mr. Fingold’s Appeal”). If Mr. Fingold’s Appeal has not been settled by the time of this Closing, then Mr. Fingold shall direct Basman Smith LLP (“Escrow Agent”) to hold in the sum of $47,040.70 representing outstanding taxes of $39,865.00 plus interest of $7,175.70 calculated at 1.5% per month for one year (the “Escrow Amount”). The Escrow Amount shall be held in escrow by the Escrow Agent until Mr. Fingold’s Appeal has been resolved. This escrow shall dictate that at the resolution of Mr. Fingold’s Appeal, the Escrow Agent shall pay from the Escrow Amount all taxes owing to the City of Toronto up to the Escrow Amount, so advise MTCC 1100 and Fine & Deo, provide a clear tax certificate from the City of Toronto with respect to such taxes and pay the remainder of the Escrow Amount, if any, to Mr. Fingold. In the event that upon the resolution of Mr. Fingold’s Appeal no taxes are owing to the City of Toronto, the Escrow Amount shall to be paid to Mr. Fingold in full. In the event that Mr. Fingold’s Appeal is resolved on the basis that monies owing to the City of Toronto exceed the Escrow Amount there shall be no liability upon the Escrow Agent to pay any funds in excess of the Escrow Amount. Any amounts payable to the City of Toronto in accordance with the resolution of Mr. Fingold’s Appeal which are in excess of the Escrow Amount shall be the responsibility of Mr. Fingold.
[6] After the dismissal of Mr. Fingold’s Appeal, no amounts were paid to the City of Toronto.
[7] The most recent property tax account statement from the City of Toronto issued September 13, 2019, stating that there was $53,114.98 outstanding for taxes. Mr. Fingold denies that he owes $53,114.98 for outstanding taxes.
[8] DSF, as the moving party for the payment into court and a discharge of its duties, submits that it takes no position in terms of who the monies shall be paid out to. This, however, is not accurate. Rather, it submits that the Agreement should be honoured, but submits that Mr. Fingold should be paid the monies held in trust by DSF.
[9] After DSF and Mr. Shapiro’s refusal to pay the amount to the City of Toronto for the tax debt, 1100 brought this Application to require DSF to pay out the funds in accordance with the Agreement.
[10] 1100’s states that this Application is to enforce the terms of the Settlement Agreement and not to collect tax arrears on behalf of the City of Toronto.
[11] Specifically, in its Application, 1100 seeks:
a. an order requiring DSF to fulfil the terms of the Settlement Agreement, the undertaking on closing and the irrevocable direction and to pay the escrow amount to the City of Toronto to satisfy all taxes owing up to the Escrow Amount and to provide a clear tax certificate to 1100.
[12] The order requested is:
i. leave to amend its Notice of Application;
ii. Basman Smith (now Devry Smith Frank LLP) pay to the City of Toronto with respect to the City of Toronto’s Tax Account No. 19-08-08-1980-03700-0000-01, all moneys held in escrow pursuant to an agreement, dated February 20, 2013, plus interest, so advise Fine & Deo and provide a clear tax certificate for the City of Toronto up to the Escrow Amount.
iii. pursuant to the agreement, dated February 20, 2013, David Fingold, pay to the City of Toronto, any amounts owing to the City of Toronto over and above the amount to be paid pursuant to paragraph 1 above, with respect to the City of Toronto’s Tax Account No. 19-08-08-1980-03700-0000-01, so advise Fine & Deo and provide Fine & Deo with a clear tax certificate from the City of Toronto.
iv. the application brought by Devry Smith Frank LLP, being court file No. CV-19-00633030-0000, be and is hereby dismissed.
a. in the alternative, if this Court orders that the tax arrears are statute barred and that 1100 has no liability for the September 13, 2019 Property Tax Account Statement or otherwise, an order for DSF to provide a clear tax certificate to 1100.
[13] The parties describe the issues on these two Applications as:
a. whether the terms of the Settlement Agreement were breached by not paying the Escrow Amount;
b. whether the claim for tax arrears is statute barred;
c. whether 1100 has standing to enforce the Settlement Agreement; and,
d. whether Mr. Shapiro and DSF breached their fiduciary duties as escrow agent.
[14] 1100 submits that the terms of the Agreement with respect to the moneys being held in escrow are clear. If Mr. Finfgold’s Appeal was denied, DSF was obligated to pay from the Escrow Amount all taxes owing to the City of Toronto up to the Escrow Amount, to advise 1100 and Fine & Deo (lawyers for 1100), and to provide1100 with a clear tax certificate from the City of Toronto with respect to such taxes. By accepting the monies to be held in escrow, DSF was bound by the terms of the Agreement.
[15] Furthermore, on closing of the insurance settlement:
a. Mr. Shapiro undertook personally, on behalf of Basman to hold the Escrow Amount in escrow and to cause it to be dealt with in accordance with the Agreement; and,
b. Mr. Fingold executed an irrevocable direction directing Basman to pay out the Escrow Amount in accordance with the terms of the Settlement Agreement.
[16] Mr. Fingold’s tax appeal was resolved and denied, however, Mr. Shapiro and DSF refused to pay the taxes owing to the City of Toronto or to advise 1100 and Fine & Deo, and did not provide 1100 with a clear tax certificate. Rather, as it is now Mr. Shapiro’s opinion that the liability for taxes was remote and he acceded to Mr. Fingold’s counsel, (Mr. Himelfarb), request not to pay out the amounts to the City of Toronto.
[17] 1100 argues that Mr. Shapiro should not have opined on the likelihood of liability for enforcement of the outstanding tax arrears, as it was not within the purview of his duties as Escrow Agent, and was contrary to the Agreement, the undertaking on closing and the irrevocable direction. He should have not have agreed to Mr. Himelfarb’s request not to release the funds as he and DSF are bound by the Agreement, the undertaking on closing and the irrevocable direction.
[18] 1100 submits that the Escrow Amount should be paid to the City of Toronto to satisfy the outstanding tax bill and to obtain and provide a clear tax certificate to 1100.
[19] DSF seeks an interpleader order to pay the funds into court, submitting that:
a. Two or more other persons have made adverse claims in respect of the property; and
b. DSF
i. Claims no beneficial interest in the property, other than a lien for costs, fees or expenses, and
ii. Is willing to deposit the property with the court or dispose of it as the court directs.
[20] Rule 43.04 (1) provides that upon an application for an interpleader order this court may:
a. Order that the applicant pay the money into court to await the outcome of a specified proceeding;
b. Declare that, on compliance with an order under clause (a), the liability of the applicant in respect of the proceeds is extinguished; and
c. Order that the costs of the applicant be paid out of the property or its proceeds.
d. Order the trial of an issue between the claimants, define the issue to be tried and direct which claimant is to be plaintiffs and which defendant;
e. Where the question is one of law and the facts are not in dispute, decide the question without directing the trial of an issue;
f. On the request of a claimant, determine the rights of the claimants in a summary manner, if, having regard to the value of the property and the nature of the issues in dispute, it seems desirable to do so; and
g. Make such other order as is just.
[21] DSF challenges 1100’s standing in these Applications as 1100’s interest does not include an authority to decide who the money held in escrow ought to be paid out to. Mr. Fingold’s Reassessment did not involve 1100. DSF argues that the failure to pay out the Escrow Amount is a breach of contract and that Mr. Fingold is the only party who has suffered damages. I disagree. The Agreement does, at a minimum, provide an obligation to provide a clear tax certificate to 1100. 1100 is in receipt of a tax bill from the City of Toronto and is a party to the Agreement which provides benefits to 1100. I agree with these submissions of 1100 that DSF cannot use the interpleading rule in order to protect itself from the consequences of its own breach.
[22] The Agreement appears to provide that Mr. Fingold’s property tax appeal had not been settled by the time of closing (MTCC’s absorption of the House Unit), then he shall direct Basman (the Escrow Agent, now DSF) to hold in the sum of $47,040.70 representing outstanding taxes of $39,865.00 plus interest of $7,175.70 calculated at 1.5% per month for one year (the Escrow Amount). On the resolution of his tax appeal, the Escrow Agent was to pay from the Escrow Amount all taxes owing to the City of Toronto up to the Escrow Amount and “to advise MTCC 1100 and Fine & Deo, provide a clear tax certificate from the City of Toronto with respect to such taxes and pay the remainder of the Escrow Amount, if any, to Mr. Fingold. Further, if no taxes were owing to the City of Toronto, the Escrow Amount would be released to Mr. Fingold, in full.
[23] Mr. Fingold submits that because the tax arrears are statute barred pursuant to the Limitations Act, 2002, there are no taxes owing to the City of Toronto.
[24] The two-year limitation period provided under section 4 of the Limitations Act, 2002 (the “Limitations Act”) should apply in respect of alleged outstanding property taxes owing to the City of Toronto.
[25] The courts can then determine which competing claimants has legal entitlement. The applicant is released from the proceedings.
[26] 1100 submits that for this court to rule on whether the tax arrears are statute barred and that 1100 has no liability as per the September 13, 2019 Property Tax Account Statement of the City of Toronto, (as DSF urges the court to do), notice of these Applications must be given to the City of Toronto and provide an opportunity to make submissions. I agree that if such were the case, notice would have been provided, which has not been the case.
[27] The purpose of an interpleader application is to prevent a multiplicity of suits and double vexation, to assist applicants who want to discharge their legal obligations but do not know to whom they should pay the amounts to.
[28] In order to constitute a “competing claims” for interpleader relief:
a. The claims must be claims pertaining to the same subject matter;
b. Such claims must be mutually exclusive. In other words, a determination of the interpleader proceedings will extinguish the unsuccessful conflicting claims; and
c. The claims must be such that the applicant must face an actual dilemma as to how he should act.
[29] DSF submits that:
a. Both David and 1100 claim entitlement (although 1100 claims it should be released from potential liability for payment of property taxes to the City of Toronto) to the Escrow Funds;
b. A determination in the within interpleader proceedings will conclusively extinguish the conflicting claims, and
c. DSF faces a real dilemma between following its former client’s instructions and complying with the undertaking made as part of the settlement agreement.
[30] 1100 submits that the interpleader remedy was not intended to allow an escrow agent or trustee to absolve them of their contractual obligations.
[31] The court does not accept the argument of DSF or Mr. Fingold that the amounts do not have to be paid out in accordance with the undertaking because it is DSF’s view that there is no obligation for Mr. Fingold to pay the taxes as they are all statue barred or alternatively because the undertaking can be interpreted to require that the funds only be held for a maximum period of one year. The wording of the undertaking does not support such interpretation
[32] Further, I do not accept Mr. Fingold’s argument that the funds, now, ought to be paid from DSF to him, as the funds were only meant to be held for a period of one year after the parties entered into the standstill Agreement. I do not find that this is a reasonable interpretation of the Agreement. Rather, the reference to the one-year period was applicable only to the interest rate.
[33] The court cannot grant the interpleader order, as it does appear there may be an obligation of DSF to satisfy the undertaking. The fact that DSF believes it has an obligation to a former client does not override the fact that the undertaking was given and the former client gave an irrevocable direction for DSF to give and comply with the undertaking. The Court cannot award DSF the protection it seeks as the court finds, on the basis of the evidence before it, that it is possible that DSF may be in breach of its undertaking.
[34] However, the court asked 1100 to make submissions on the appropriateness of proceeding with this with this dispute by way of Application. The only submission made by 1100 was that there was not likely to be a material fact and dispute. Further, the court specifically requested that 1100 provide the legal basis for its desired remedy, a mandatory injunction forcing DSF to comply with its undertaking. 1100 did not address this issue in its factum or during its submissions. In response to the inquiry of the court with respect to the legal basis for the requested remedy, counsel referred to the fact that a party may request an injunction which is ancillary to the relief requested in an Application.
[35] I find that the Application of 1100 must be dismissed as 1100 has not demonstrated to the Court that it is entitled to the relief sought. The Court is of the view that it is not appropriate for the Claim of 1100 to proceed by way of Application, as there has been no proper legal submissions made to support the relief claimed. The Application is therefore dismissed, without prejudice to 1100 using the appropriate legal procedures to bring its claim.
[36] As a result, this court dismisses both the Applications before it. The parties have not taken the appropriate legal procedures in order to resolve this dispute.
Costs
[37] The parties have reached an agreement that the successful party will be given costs on a partial indemnity basis. However, as neither party was successful on these Applications, no costs are awarded.
Pollak J.
Date: May 7, 2021
COURT FILE NO.: CV-19-633030 CV-19-633016
DATE: 20210521
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Devry Smith Frank LLP Applicant
AND:
David Bruce Fingold and Metropolitan Toronto Condominium Corporation No. 1100 Respondents
AND:
Metropolitan Toronto Condominium Corporation No. 1100 Applicants
AND:
David Bruce Fingold Respondent
BEFORE: Pollak J.
COUNSEL: Michelle Cook, for the Applicant
Jake A. Fine, for the Respondent MTCC No. 1100
Nadia Condotta, for the Respondent David Bruce Fingold
HEARD: In-Writing
addendum
[38] An Endorsement was released in the above noted matters on May 7, 2021. The parties have requested Madam Justice Pollak to make the following corrections to the Endorsement.
[39] I agree that these corrections should be made to my Endorsement as follows:
Chubb Insurance Company of Canada and Novex Insurance Company be removed as parties to these Applications; and
The file number CV-19-633016 MTCC 1100 v. David Bruce Fingold be added to the citation.
Pollak J.
Date: May 21, 2021