COURT FILE NO.: CV-20-00646129-00CL
DATE: 20210513
ONTARIO SUPERIOR COURT OF JUSTICE
(COMMERCIAL LIST)
IN THE MATTER OF the Ontario Business Corporations Act, R.S.O. 1990, c. B.16
BETWEEN:
MORGAN KENNETH SNOOK
Plaintiff
– and –
ROYAL STONE INTERLOCKING CONCRETE LTD., 1548166 ONTARIO LTD., ROYAL STONE CONSTRUCTION LTD., AQUASPA POOLS AND LANDSCAPE DESIGN LTD., G & G PROPERTIES INC., ROYAL STONE LANDSCAPING & DESIGN LTD., TESMA WAY HOLDINGS INC., ROYAL KING VALLEY HOLDINGS INC., GARAGE ROYALTY INC., UNIQUE LIFTS INC., BELLWORKS MANAGEMENT LTD., GARAGE ROYALTY PRODUCTS INC. and GIUSEPPE PRIZZI also known as PINO PRIZZI
Defendants
Counsel:
Jeffrey Radnoff and Charles Haworh, for the Plaintiff
Matthew Kersten, for the Defendants
HEARD at Toronto: May 10, 2021
Reasons for judgment
S.F. Dunphy J.
[1] This is an application for a Certificate of Pending Litigation brought by the plaintiff. This CPL motion arises in the context of a statement of claim that alleges that the plaintiff was an equal partner in a landscaping business that has purchased or arranged to purchase through nominee corporations a number of properties over the years and from which business he has recently found himself excluded.
[2] The defendants requested an adjournment of the hearing of this motion at the outset. I refused that request and heard the motion. These are my reasons for rejecting that adjournment request and for granting the requested Certificate of Pending Litigation.
Background facts
[3] On August 25, 2020, the plaintiff began this proceeding by way of a statement of claim. The allegations made therein may be summarized as follows:
a. In 2002, the plaintiff Snook and the defendant Prizzi decided to go into business together as 50:50 partners in the business and splitting any shares, assets or profits on the same basis;
b. The had become fasts friends and started working together in the landscaping business six years earlier when they were just sixteen;
c. The two worked together for the next 17 years on this basis, the resulting business (known as “Royal Stone”) growing and using its profits to buy real estate for business and investment purposes;
d. The two partners met regularly and decided how much of their profits to be distributed and how much to be reinvested in the growing business, the defendant Prizzi attending to matters such as dealing with lawyers and incorporation;
e. In 2020, the plaintiff asked for his shares in the business to be issued in his own name for estate planning reasons;
f. The relationship between the two deteriorated rapidly after this request;
g. In fact, the plaintiff has now discovered that numerous other companies had been incorporated under the control of Mr. Prizzi some of which hold real estate assets paid for by reinvested profits from the partnership and that Mr. Prizzi had withdrawn significantly more in profits from the business than had been agreed;
h. In some cases, the plaintiff alleges that he invested in some of the real estate purchases directly rather than through reinvested profits;
i. The plaintiff has now been excluded from the business;
j. The plaintiff’s claim is based on breach of their partnership agreement, oppression and unjust enrichment;
k. The remedies sought include tracing and a constructive trust over 50% of all of the assets of the business or wrongfully removed from the business; a transfer of 50% of the shares of all of the companies, the purchase of his 50% interest and other similar relief.
[4] The defendants delivered a statement of defence on October 8, 2020. That statement of defence contains a blanket denial of all allegations in the statement of claim. It contains not a single substantive allegation beyond that bare denial. There is no “concise statement of the material facts on which the party relies” as required by rule 25.06 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.
[5] Instead, the succeeding ten paragraphs of the statement of defence complained of the plaintiff insisting on receiving a statement of defence despite the pandemic emergency (6 paragraphs), pleaded that a substantive statement of defence could not be delivered until a motion to remove the plaintiff’s solicitor of record had been heard (1 paragraph), pleaded that a substantive defence would also have to await a demand for particulars and a response to this after the removal motion is dealt with (2 paragraphs) and reserved the right to amend the statement of defence thereafter (1 paragraph).
[6] In short, the statement of defence delivered was little more than a placeholder to avoid being noted in default.
[7] The plaintiff then delivered its materials for the motion for a CPL on November 11, 2020 including an affidavit of the plaintiff sworn the prior day. The plaintiff’s affidavit attested to the basis for the claimed CPL and affirms substantially all of the allegations contained in the statement of claim.
[8] The defendants did not deliver the motion to remove the plaintiff’s counsel as foreshadowed in the statement of defence. Instead, a notice of motion without any accompanying affidavit dated December 11, 2020 was prepared prior to the December 14, 2020 scheduling case conference before Dietrich J.
[9] On December 14. 2021 Dietrich J. scheduled both motions for a hearing on April 7, 2021 with the following short endorsement:
The plaintiff seeks to schedule a motion for an order for a Certificate of Pending Litigation, which will be opposed by the defendants. The defendants seek to schedule a motion for an order removing Mr. Valitutti as counsel of record for the plaintiff, which they submit must be heard first.
As an interim measure, until the motions can be heard and decided, the parties agree that the defendants will not sell or encumber any of the lands that are covered in the plaintiff's motion materials without giving the plaintiff notice of such sale or encumbrance at least three (3) weeks prior to any such sale or encumbrance.
The defen[d]ants' motion for an order removing counsel of record will be heard first, followed by the plaintiff's motion for the Certificate Pending Litigation.
[10] The plaintiff suggested a case timetable for the hearing of these two motions to the defendants later that same day. No reply was received.
[11] By early January Mr. Radnoff had realized that the selected hearing date conflicted with his calendar and a further attendance before Dietrich J. was arranged to secure a different date. This was done on January 14, 2021 and the hearing of both motions was adjourned to the next available date being May 10, 2021. The following was her brief endorsement at that time:
My endorsement of December 14, 2020 in this matter sets a hearing date for two motions in this matter to be heard on April 7, 2020. That date is no longer convenient for the plaintiff.
The April 7, 2021 date is vacated and the motions will now be heard on May 10, 2021 for a full day. This hearing date in peremptory on the plaintiff. All other terms of my December 14, 2020 endorsement remain unchanged.
[12] What happened next is, well, nothing. The plaintiff had already filed its motion material on the CPL motion. It was ready and anxious to proceed and sent numerous emails requesting a response to the December 14 letter and the timetable proposed with a view to having the matter ready. These letters were left without substantive answer until late March. Letters or emails were sent on January 19, February 8, February 9, February 25 and March 22, 2021.
[13] During this period of inertia by the defendants, no motion materials were served regarding the defendants’ announced motion to remove counsel nor were any materials served in response to the plaintiff’s CPL motion served on November 11, 2020.
[14] On March 23, 2021 the defendants elected to break their silence and respond to the growing pile of letters sent from Mr. Radnoff’s office. The letter sent that day by Mr. Kersten referenced Mr. Radnoff having confirmed that he would appear on both of the scheduled motions during their appearance before Dietrich J. on January 14, 2021. Mr. Kersten took the position on behalf of the defendants that this placed Mr. Radnoff in a position of conflict and he could not act further for the plaintiff due to the risk that he may learn something subject to privilege from Mr. Valitutti. Mr. Kersten took the position that the conflict/removal motion could not be heard together with the plaintiff’s CPL motion and indicated that he would be taking steps to request a further case conference to address the conflicts issue and obtain a revised hearing date for the CPL motion.
[15] That same day, the defendants served the plaintiff with an amended notice of motion seeking the removal of both Mr. Radnoff and Mr. Valitutti as counsel for the plaintiff returnable on May 10, 2021. Once again, no motion materials were served.
[16] Mr. Kersten took no steps to schedule the case conference mentioned in his letter of March 23, 2021 nor to file any material in respect of either of the motions scheduled for May 10, 2021 pursuant to the endorsement of Dietrich J. on January 14, 2021.
[17] On May 4, 2021, Mr. Kersten sent a letter to Mr. Radnoff indicated that “neither” party had taken steps to schedule the case conference that he said he would schedule on March 23, 2021 and concluded that the motion of May 10, 2021 “cannot proceed and ought to be adjourned”. Mr. Radnoff rejected this proposal immediately.
[18] While the court was advised of this simmering dispute, no steps were taken to obtain an urgent 9:30 appointment to deal with it. Mr. Radnoff did not consent to the adjournment request.
[19] Although two motions were scheduled to be heard on May 10, 2021 by Dietrich J. on January 14, 2021, the defendant filed precisely no evidence in support of its own motion to remove counsel for the plaintiff and filed no evidence in reply to the plaintiff’s motion.
Issues to be decided
[20] The following issues are raised:
a. Ought the defendants’ request for an adjournment be granted?
b. If not, has the plaintiff raised a triable issue regarding an interest in the land which is the subject-matter of the intended CPL?
c. If so, is it in the interests of justice that a CPL shall issue having regard to the interests to be balanced?
Analysis and discussion
(a) Ought the defendants’ request for an adjournment be granted?
[21] The defendants raised the following points in asking for the adjournment:
a. The December 14, 2020 “standstill” order of Dietrich J. adequately protects the plaintiff such that there is “no prejudice” to the plaintiff from an adjournment.
b. By contrast, the defendants would be greatly prejudiced by allowing the CPL motion to proceed as scheduled without full answer and defence by the defendants.
c. Motions to remove counsel ought to proceed prior to any other motions in the proceeding that such counsel are involved in.
d. The scheduled motions were made peremptory to the plaintiff but not to the defendants when Dietrich J. made her endorsement of January 14, 2021.
e. This is the defendants’ first adjournment request; and
f. Mr. Radnoff filed his factum on the CPL motion late (it was filed on May 5, 2021 for a May 10 motion).
[22] I find no merit to any of these arguments.
[23] The CPL order sought by the plaintiff is not the same as the limited stand-still ordered by Dietrich J. on December 14, 2020 and re-confirmed on January 14, 2021 nor does it afford the same level of protection.
[24] Furthermore, the prejudice in further delay is not restricted to the CPL motion itself. The CPL motion was simply the first step in the plaintiff seeking to vindicate what he alleges were serious violations of his rights as a full partner in a business he founded. The defendants have taken not a single substantive step to permit this case to move anywhere beyond the starting blocks in almost nine months. While one month of the delay since the action was commenced – April 7 to May 10 – can be laid at the plaintiff’s feet due to Mr. Radnoff’s scheduling contretemps, the defendants’ state of near total hibernation indicates an almost epic disregard for their obligations as parties to a proceeding pending before the Commercial List.
[25] The defendants take the position that their announced motion to remove the plaintiff’s counsel must take absolute priority over any progress whatsoever being made in moving the action forward but have taken precisely no concrete steps to bring their motion forward. No evidence has been filed. Nothing.
[26] It may be true that a properly grounded motion to remove counsel ought to be proceed before another substantive motion that counsel intends to appear on. However, I have no such motion before me.
[27] There is no evidentiary foundation for a single allegation advanced in the bare amended notice of motion that was served on Mr. Radnoff. I cannot simply infer from the ether that a solicitor-client relationship existed between plaintiff’s counsel and some or all of the defendants nor can I infer that Mr. Valituti is or may be the repository of any confidences of the defendants connected in some way to this action arising from any such relationship. There is simply nothing in the record to validate any part of what the defendants assert.
[28] The defendants respond that they could not file their motion material because some or all of their evidence would betray solicitor-client privilege and must be filed under seal. No steps to obtain such a sealing order were taken over the last five months. The issue was not raised on December 14, 2020 when the conflict/removal motion was first booked. There is no suggestion that Mr. Kersten raised the issue of walling Mr. Valituti off from Mr. Radnoff at that time and his assumption that Mr. Radnoff would take no part in the removal motion was just that – an untested assumption on his part. At all events, Mr. Kersten was set straight on January 14, 2021 when Mr. Radnoff’s intended role on both motions was made quite clear to him. Dietrich J. ordered the two motions to be heard together with full knowledge of Mr. Radnoff’s intended role and no steps were taken to cause Mr. Radnoff to be removed from the record then or for the next two months.
[29] The defendants ask me to consider the prejudice to them in proceeding with this motion on the merits on a nearly ex parte basis. Here is the problem with that argument. Not only are they the authors of their own misfortune but I have no evidence short of pure speculation that any such prejudice actually exists. Prejudice does not presume itself. A foundation must be laid.
[30] The defendants plead that this is their first adjournment request as if there were some adjournment bank available to be drawn upon at will during the course of litigation. As is well known, the Commercial Court only works when counsel adhere to the “Three C’s”. The logistics of responding to the pandemic and switching to virtual hearings have stretched the capacity of the court to its limit. Motion bookings are a precious commodity – this half-day motion reserved for these two motions precluded other parties from obtaining that time even if they were ready willing and able to co-operate, communicate and apply common sense.
[31] Mr. Radnoff’s factum was indeed filed late but I readily accept his reason for doing so. He was holding off filing it until he saw what evidence if any the defendants filed. The objection is a hollow one and I readily grant leave to the plaintiff to file the factum late in these circumstances.
[32] For the foregoing reasons, I rejected the defendants’ request for an adjournment and proceeded to hear argument on the plaintiff’s CPL motion.
[33] The defendants’ removal motion, although ordered to be argued first before me, was never perfected and did not proceed. There was no evidence, no motion record and no factum. There was nothing for me to hear. Should the defendants seek to resurrect the motion that was effectively abandoned by non-prosecution before me, the judge hearing that motion can decide what impact if any the circumstances described here may have upon that future motion. I was not asked to make any order regarding the defendants’ scheduled motion beyond the request for an adjournment and accordingly am not making one without hearing any argument on the point.
(b) Has the plaintiff raised a triable issue regarding an interest in the land which is the subject-matter of the intended CPL?
[34] What then are the requirements for issuing a CPL in this case?
[35] Section 103 of the Courts of Justice Act, R.S.O. 1990, c. C.43 and rule 42.01(2) of the Rules of Civil Procedure require that the originating process (in this case the statement of claim) must include a claim for the CPL and that the proceeding be one in which “an interest in land is in question”.
[36] Both of those conditions are satisfied here. The statement of claim contains a specific request for a CPL over the land described in Schedule A thereto. The statement of claim also is one in which an interest in those same lands is in question. It seeks, among other relief,
a. “an order directed a detailed accounting and tracing of benefits received and taken from the corporate defendants…a tracing order in respect of such benefits and an order declaring that any assets purchased by such benefits be held in a constructive/resulting trust” in favour of the plaintiff;
b. “an order declaring that any property purchased by such benefits, assets and funds be held in a constructive/resulting trust in favour of” the plaintiff;
c. An order that certain named corporate defendants hold the listed real property “in trust for Royal Stone Interlocking Concrete Ltd. and/or 1548166 Ontario Ltd. or such other corporate defendants as determined … and/or, alternatively, in trust for [the plaintiff] in accordance with” his percentage share.
[37] Master Glustein (as he then was) reviewed and summarized the jurisprudence governing the issuance of certificates of pending litigation in his usual through and helpful manner in Perruzza v. Spatone, 2010 ONSC 841. The simplest thing for me to do is reproduce the summary he prepared (at para. 20) here leaving the reader to consult the original for the case citations he provided:
(i) The test on a motion for leave to issue a CPL made on notice to the defendants is the same as the test on a motion to discharge a CPL …;
(ii) The threshold in respect of the “interest in land” issue in a motion respecting a CPL (as that factor is set out at section 103(6) of the Courts of Justice Act, R.S.O. 1990, c. C. 43) is whether there is a triable issue as to such interest, not whether the plaintiff will likely succeed …;
(iii) The onus is on the party opposing the CPL to demonstrate that there is no triable issue in respect to whether the party seeking the CPL has “a reasonable claim to the interest in the land claimed” …;
(iv) Factors the court can consider on a motion to discharge a CPL include (i) whether the plaintiff is a shell corporation, (ii) whether the land is unique, (iii) the intent of the parties in acquiring the land, (iv) whether there is an alternative claim for damages, (v) the ease or difficulty in calculating damages, (vi) whether damages would be a satisfactory remedy, (vii) the presence or absence of a willing purchaser, and (viii) the harm to each party if the CPL is or is not removed with or without security …; and
(v) The governing test is that the court must exercise its discretion in equity and look at all relevant matters between the parties in determining whether a CPL should be granted or vacated ….
[38] The factors listed in point (iv) above are derived from the case of 572383 Ontario Inc. v. Dhunna, 1987 CarswellOnt 551 (S.C. – Mast.) (at paras. 10-18) and have been cited on hundreds of occasions by our courts. They are not intended to be exhaustive nor is any one determinative. Rather, they guide the overall exercise of discretion by calling to mind relevant factors to consider. None of the foregoing summary of the law in relation to the issuance (or discharge) of a CPL is controversial nor was it seriously contested by the respondents.
[39] Saving the issue of standing that I shall refer to below, there can be no serious issue taken with regard to the existence of a triable issue with respect to an interest in land. The principal allegations made in the statement of claim are affirmed in the plaintiff’s affidavit filed in support of the motion. The claim and the affidavit recite circumstances that, if proved, would amount to breach of an agreement to act as partners in the business as well as oppressive conduct and may justify the application of tracing remedies or the imposition of a resulting or constructive trust over the lands over which a CPL is sought. While I am not required to find that the plaintiff will succeed in demonstrating any of these allegations at trial, I am required to assess whether the allegations raise a triable issue regarding an interest in land. They plainly do and the defendants have led no evidence whatsoever to undermine that conclusion.
[40] The defendants focussed the bulk of their argument on the alleged lack of standing of the plaintiff to advance any of the claims in relation to the land. It was suggested that in reality the plaintiff was seeking only to have a share of the corporations who in turn owned the land and as such amounts to no more than an equity claim in the landowner but does not amount to “an interest in land” as required by s. 103(1) of the COJA.
[41] The answer to this objection is two-fold. First, the claim to shares in the corporations who own the land is only one of the claims advanced by the plaintiff. Direct claims to trace profits of the partnership into the land in question are advanced in the statement of claim for which the remedy sought is a constructive or resulting trust.
[42] Second, even the plaintiff’s alternative claims to cause the lands in question to be transferred from the title holder to another corporate defendant (in which he also claims an equity interest) is sufficient to satisfy the requirements of s. 103(1). Morden J.A. in Chilian v. Augdome Corp., 1991 CanLII 7335 (ON CA), 2 O.R. (3d) 696 (C.A.) at para 55 held:
I do not think that the entitlement to a certificate of pending litigation necessarily requires that the interest in land in question be claimed directly by the plaintiff for itself. This was the conclusion in Bank of Montreal v. Ewing, supra. What is required is that "an interest in land [be] in question" in the proceeding. Almost invariably, I would think, this would be in the form of a claim of some kind, which, if substantiated, would adversely affect the defendant's interest in the land. We have such a claim in this case -- that the respondent's option is of no force or effect.
[43] The defendants sought to persuade me that the decision of the Court of Appeal was per incuriam or so suspect as to warrant being confined to its “particular facts”. I shall leave such bravery to others situated at a different level of our courts than I. At all events, there is nothing in the logic of the decision that suggests to me the need for any such hostile reception of it.
[44] I find that the claim before me raises a triable issue regarding an interest in the lands over which a CPL is sought.
(c) Is it in the interests of justice that a CPL shall issue having regard to the interests to be balanced?
[45] In phrasing this issue as I have done, my intent is to capture the Dhunna criteria that were the fourth point in the summary prepared by Master Glustein in Peruzza as well as the fifth being the overall review of the relevant circumstances to exercise discretion in equity.
[46] As I noted earlier, the Dhunna criteria have been cited so often and for so long as to have acquired a great deal of authority even if formulated by a lower court. They are not, however, intended to be viewed as exhaustive nor determinative.
[47] The following points appear relevant to me in conducting this review:
a. The plaintiff is not a shell corporation but is suing in his own name and thereby placing his entire patrimony at stake;
b. Most but not all of the subject land is unique in the sense of having been acquired for and used in the Royal Stone business that the plaintiff alleges he is a co-founder of;
c. The profits claimed by the plaintiff for tracing and damages purposes arise from the business conducted then and now on those same lands;
d. While there are alternative claims for damages in the claim, this factor is almost invariably present in all claims and is not by itself determinative;
e. The thrust of the claims advanced – oppression and breach of a long-standing partnership agreement – are often most commonly addressed through tracing and similar equitable remedies; and
f. There is no evidence before me from which I may infer material prejudice to the defendants, nor any reason to expect such harm if it existed would not be compensable;
g. The existing undertakings provide only for notice of future dispositions or encumbrances affecting the land creating significantly more risk of the plaintiff’s interests being adversely impacted by future transactions entered into without his consent than would be the case with a registered CPL; and
h. The plaintiff has been excluded entirely from a business that he has claimed on sworn evidence to have founded and devoted eighteen years of his life to building – the balance of the equities favours protecting his vulnerable position as against parties who have control over all of the assets and information relating to them.
[48] I conclude that on balance the equities favour the issuance of the requested CPL.
Disposition
[49] For the foregoing reasons, I have concluded that the plaintiff has satisfied the conditions for the issuance of a CPL over the lands listed in Schedule A to the Notice of Motion. A CPL shall issue in respect of such lands and the plaintiff shall be authorized to register same in the proper land titles office.
[50] The plaintiff has been entirely successful on this motion and is entitled to its costs. Unresolved are (i) the scale of costs to be applied and (ii) the amount. I am directing the following procedure to determine these issues:
a. The parties shall each exchange their respective outlines of costs of these motions with each other and do so by May 21, 2021;
b. The plaintiff shall deliver its written submissions on the issue of scale and amount of costs by May 28, 2021, such submissions to be limited to seven pages exclusive of the outline of costs, any relevant offer to settle and any cases referenced. Cases may simply be listed in a hyperlinked index;
c. The defendants shall deliver their responding submissions by June 7, 2021 with the same size limits; and
d. The plaintiff shall deliver any necessary and proper reply by June 10, 2021 and shall collect and deliver the combined submissions of both sides to me by the same deadline (June 10, 2021), such delivery to be via email to my assistant with a copy to the defendants.
___________________________ S.F. Dunphy J.
Released: May 13, 2021
COURT FILE NO.: CV-20-00646129-00CL
DATE: 20210513
IN THE MATTER OF the Ontario Business Corporations Act, R.S.O. 1990, c. B.16
ONTARIO
SUPERIOR COURT OF JUSTICE
(COMMERCIAL LIST)
BETWEEN:
MORGAN KENNETH SNOOK
Plaintiff
– and –
ROYAL STONE INTERLOCKING CONCRETE LTD., 1548166 ONTARIO LTD., ROYAL STONE CONSTRUCTION LTD., AQUASPA POOLS AND LANDSCAPE DESIGN LTD., G & G PROPERTIES INC., ROYAL STONE LANDSCAPING & DESIGN LTD., TESMA WAY HOLDINGS INC., ROYAL KING VALLEY HOLDINGS INC., GARAGE ROYALTY INC., UNIQUE LIFTS INC., BELLWORKS MANAGEMENT LTD., GARAGE ROYALTY PRODUCTS INC. and GIUSEPPE PRIZZI also known as PINO PRIZZI
Defendants
REASONS FOR JUDGMENT
S.F. Dunphy J.
Released: May 13, 2021