COURT FILE NO.: CV-17-570060

DATE: July 28, 2021

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: New Generation Woodworking Corp. v. Adam Arviv and Canadian Imperial Bank of Commerce;

BEFORE: MASTER C. WIEBE

COUNSEL: Charles Skipper for New Generation Woodworking Corp.;

Robert Stellick for Adam Arviv;

HEARD: July 26, 2021.

REASONS FOR DECISION

[1] New Generation Woodworking Corp. (“NGW”) brings a motion seeking an order preserving the proceeds of any sale of Mr. Arviv’s residential condominium, Unit 604, 118 Yorkville Avenue, Toronto (“the Unit”), in the amount contained in my report until the disposition of the pending motion by Mr. Arviv opposing confirmation of my report. NGW relies on both Rules 45.01 and 45.02 in this regard. Mr. Arviv opposes this motion.

[2] There are some background facts that need to be born in mind with this motion:

• On January 27, 2017 NGW registered a claim for lien in the amount of $73,767 on the title to the Unit concerning certain millwork it provided to Mr. Arviv in relation to the Unit. The lien was perfected. Mr. Arviv defended and raised a $486,000 counterclaim. A judgment of reference was obtained. I became seized of the reference and made various trial management directions including the one on September 15, 2020 wherein I scheduled an 8-day virtual summary trial starting January 12, 2021. At this time I scheduled the preparation and exchange of affidavits for evidence in chief.

• NGW delivered all of its affidavits for evidence in chief as directed. Mr. Arviv did not deliver any of his seven fact witness affidavits. With my leave, his lawyer brought a motion in mid-December, 2020 returnable January 7, 2021 for an order removing the lawyer from the record. NGW brought its own motion on January 7, 2021 seeking an order striking Mr Arviv’s pleadings due to Mr. Arviv’s noncompliance with my directions concerning the delivery of his affidavits. Mr. Arviv verbally moved to adjourn the trial to allow him to retain new counsel. I granted the removal motion which was unopposed; I granted the NGW motion to the extent of striking the Arviv set-off and counterclaim, thereby allowing Mr. Arviv to participate in the trial hearing; I refused Mr. Arviv’s motion to adjourn the trial hearing as I found that Mr. Arviv did not respect the court process and was just delaying. In my reasons dated January 11, 2021, I stated that given his behavior, “Mr. Arviv left me with no confidence that he would abide by any future trial directions I may give should I adjourn the trial.”

• The trial hearing proceeded on January 13, 14, 15 and 19, 2021. The evidence was that of NGW. Mr. Arviv participated sporadically. I reserved my decision. On February 15, 2021 I rendered my decision. I found that NGW had proven the entirely of its claim for lien, $73,767.26. I ordered written submissions on costs. After receiving these, on March 22, 2021 I issued my decision on costs and interest ordering inter alia that Mr. Arviv pay NGW costs in the amount of $135,000.

• I drafted a report as required by the judgment of reference. I signed and distributed it on March 29, 2021. This report embodied my decision about the NGW claim for lien, my costs award, and my decision on prejudgment and post-judgment interest. Paragraphs 8, 9 and 10 of the report required that Mr. Arviv pay into court within 30 days the full amount of the NGW lien, $73,767.26, plus 25% of same, $18,441.82, for a total of $92,209.08, failing which the property would be sold and the net proceeds of this sale would be paid into court to be applied to the outstanding amounts on the lien, costs award and interest order.

[3] In this motion, NGW filed the affidavit of lawyer Marko Petrovic, as associate of Mr. Skipper. In this affidavit, the following evidence came to light:

• Mr. Arviv has retained new counsel and has moved to oppose confirmation of my report. This motion is returnable August 10, 2021. Material has been filed for that motion.

• On July 16, 2021 Mr. Petrovic was browsing the internet when he came across a listing for sale of the Unit. Mr. Petrovic dug further and determined that on March 29, 2021, the day of my report, Mr. Arviv had listed the Unit for sale at a price of $12,500,000. This listing was terminated on or about May 30, 2021.

• Mr. Petrovic deposed that he found a second listing of the Unit dated June 14, 2021 for sale at a price of $10,500,000. He stated that at the time he swore his affidavit, July 20, 2021, the listing was open and there was no sale.

• Mr. Petrovic deposed further that on July 19, 2021 he participated in a call Mr. Skipper had with counsel for Mr. Arviv, Victoria Wicks, wherein Ms. Wicks stated that she was not aware that the Unit was being sold.

[4] NGW relies upon two rules concerning the interim preservation of property, Rule 45.01 and 45.02. Rule 45.01(1) states that “the court may make an interim order for the custody or preservation of any property in question in a proceeding or relevant to an issue in a proceeding . . .” The present leading case on the interpretation of Rule 45.01(1) is the Court of Appeal decision in BMW Canada Inc. v. Autoport Limited 2021 ONCA 42. BMW Canada Inc., an automaker, was suing Autoport Limited for damages for allegedly having allowed cars to be exposed to the weather causing damage to the cars. BMW had served notice that, having conducted tests on the cars, it intended to either turn the cars over to Autoport for storage or destroy them, given the high cost of storage. Autoport brought a motion under Rule 45.01(1) for an order requiring that BMW continue to store the cars.

[5] The traditional test, as set out in Taribo Holdings Ltd. v. Storage Access Technologies Inc., [2002] O.J.No. 3886 (Ont. S.C.J.) was a three pronged test: (1) the asset sought to be preserved constitutes the very subject matter of the dispute; (2) there is a serious issue to be tried regarding the plaintiff’s claim to that asset; and (3) the balance of convenience favours the relief sought.

[6] In BMW the Court of Appeal addressed the first test. It stated in paragraph 40 that it is inappropriate to confine Rule 45.01(1) in the way that was done by the Taribo test, as the rule is broadly worded. The only constrain is the wording of the rule itself, namely “any property in question in a proceeding or relevant to an issue in a proceeding.” The Court underlined the fact that the authority is discretionary. It found that the narrower Taribo test might be appropriate where the moving party is claiming an interest in the property. However, where that is not the case, the Court said that other factors should be brought to bear. It held in paragraph 40 that the court “should make the order that best responds to the circumstances.” It held in the end pursuant to Rule 45.01(1) that the cars had to be stored by BMW to avoid spoliation and insure a fair trial.

[7] Mr. Stellick stated verbally at the outset of his oral argument that Mr. Arviv had offered to consent to an order that requires that the amount of the NGW lien plus 25% of same, totalling $92,209.08, be paid into court from the proceeds of a future sale “within five days of the sale.” This $92,209.08 is the amount I required in paragraph 8 of my report be paid into court by Mr. Arviv to avoid a sale of the Unit. It was not clear when this offer was made, but it appears to be recently.

[8] Mr. Stellick argued that the amounts in the remainder of my report other than the $92,209.08, namely the $116,558.18 in awarded costs, the prejudgment interest of $3,116.42 and the ongoing post-judgment interest at 2% per annum, is what is really being addressed by this motion. These other amounts at present total around $120,000. The $92,209.08 is secured by the registered NGW lien and my report. On this point I agree with Mr. Stellick. It is this approximately $120,000 in awarded costs and interest that is the real issue of this motion.

[9] Mr. Stellick went on to argue that there is no connection between the Unit and the above noted costs and interest I awarded, at least no connection that would justify an order under Rule 45.01 even under the test as outlined in BMW. He referred me, however, to cases that concern Rule 45.02, which is a different rule, namely one that concerns a “specific fund.” He did refer to the statement made in American Axle & Manufacturing Inc. v. Durable Release Coaters Ltd. 2007 CarswellOnt 3444 at paragraph 32 by Justice Pattillo cautioning the court against using Rule 45.02 to provide a form of execution before judgment when there is no present and identifiable fund. Mr. Stellick argued that the same caution should apply to Rule 45.01.

[10] Having considered the submissions of counsel, I conclude that Rule 45.01(1) does apply and that there should be a preservation order under that rule concerning any proceeds of any sale of the Unit to the extent of the lien, costs and interest that I ordered in the report be paid by Mr. Arviv. This preservation order must remain in effect until the final determination of the motion to oppose confirmation of my report. I reach this conclusion for the following reasons:

• Concerning the first aspect of the Rule 45.01 test, there is a connection between the costs and interest I awarded and any proceeds of sale of the Unit. These proceeds are “property in question in [the] proceeding or relevant to an issue in [the] proceeding” as stated in Rule 45.01(1). This connection is created by my report. In my report, I ordered that, if Mr. Arviv did not pay the lien amount plus 25% of same, $92,209.08, into court in 30 days, the Unit that was improved by NGW was to be sold and the proceeds of sale be paid into court where they would be applied to pay any outstanding lien amount, costs award and interest judgment.

• There is no evidence that Mr. Arviv will in fact pay the $92,209.08 into court in 30 days to avoid a sale, as I ordered. What he has apparently offered is to consent to an order requiring that the $92,209.08 be paid into court from any Unit sale proceeds and then only “within five days” of the sale. As Mr. Skipper pointed out, Mr. Arviv could have at any time moved under Construction Act, R.S.O. 1990 (“CA”), section 44(1) to post security using $92,209.08 of his own money and obtained a vacating order. He did not do so. Therefore, there is a real probability that paragraphs 9 and 10 of my report, namely the paragraphs requiring a sale and the payment of proceeds into court, will be required.

• There is also evidence on this motion that Mr. Arviv is taking steps to make the proceeds of sale of the Unit unavailable to pay the ordered costs and interest, thereby thwarting the implementation of a significant part of my report before the motion opposing confirmation of my report. Mr. Arviv commenced the motion to oppose confirmation of my report. That is his right, but it also made it impossible for NGW to obtain writs of execution during the pendency of that motion. In the meantime, Mr. Arviv commenced listing the Unit for sale. He did so on the very day I released my report. He then kept the listings silent from his own lawyers. A sale before the determination of the motion to oppose confirmation of the report would mean the loss of the sale proceeds not used to vacate the NGW lien.

• Concerning the second aspect of the Rule 45.01 test, I find that there is a serious issue to be tried concerning the NGW claim to the subject proceeds of sale. Again, this is created by my report. In my report, I determined what costs and interest Mr. Arviv should pay and that those costs and interest are to be paid from the sale of the Unit if Mr. Arviv does not post the requisite funds. The motion to oppose confirmation of my report is like an appeal. The onus on the motion will rest with Mr. Arviv.

• Concerning the third aspect of the Rule 45.01 test, I find that that balance of convenience favours the relief sought. The impact on Mr. Arviv should be minor. My order will be limited to the pendency of the motion to oppose confirmation of my report, including any appeal. It will be limited to the lien, costs and interest I ordered be paid from the sale proceeds should Mr. Arviv not post the requisite funds. It should not interfere with any sale. Should Mr. Arviv succeed in overturning my ruling, the money will be these in court accruing interest. On the other hand, as stated above, NGW could be significantly prejudiced if any sale happened during the pendency of the motion to oppose confirmation of my report.

[11] There was argument about the application of Rule 45.02. This is the rule that says the following: “where the right of a party to a specific fund is in question, the court may order the fund to be paid into court or otherwise secured on such terms as are just.” Having reviewed the proffered authorities, I am not prepared to use this rule in this case.

[12] As stated by the Court of Appeal in Sadie Moranis Realty Corp. v. 1667038 Ontario Inc. 2012 ONCA 475 at paragraph 18, the test under Rule 45.02 has three parts. The last two parts are the same as the last two parts of the test under Rule 45.01. The distinguishing test is the first part which Justice Goudge described as follows: “the plaintiff claims a right to a specific fund.”

[13] As stated by Justice Goudge in Sadie Moranis, there is not a requirement that the plaintiff have a proprietary claim to the specific fund. The Court suggested in paragraph 30 that a contractual right to be paid from the specific fund may be enough to justify the use of Rule 45.02. That point may justify the use of the rule in the case before me as my report created a right in favour of NGW to be paid costs and interest from the proceeds of the sale of the Unit.

[14] But Justice Goudge went on to say this about the first part of the test under Rule 45.02: “It [Rule 45.02] requires that there be a specific fund readily identifiable when the order is sought.” The evidence on this motion is that there is no such readily identifiable specific fund at this time. There is no sale and therefore no proceeds of sale. No one is holding money, as was the case in Sadie Moranis where a lawyer was holding the proceeds of a sale of land and the dispute was whether the commission claimed by the plaintiff realtor justified having the money paid into court.

[15] I, therefore, have concluded pursuant to Rule 45.01(1) that pending the final determination of the pending motion to oppose confirmation of my report (including any appeal), $220,000 of the proceeds of any sale of the Unit must be paid into court to be dealt with in accordance with my report or order of the court. I so order. The $220,000 is enough to cover the ordered lien, costs and interest.

[16] Concerning costs, I directed counsel to file costs outlines by the end of July 27, 2021. That was done. The costs outline of NGW shows $8,348.44 in actual costs, $7,537.67 in substantial indemnity costs and $5,105.34 in partial indemnity costs. The costs outline of Mr. Arviv shows $5,610.45 in actual costs, $5,049.41 in substantial indemnity costs and $3,366.27 in partial indemnity costs. NGW is the successful party on this motion. If the parties cannot agree on costs, NGW must deliver written submissions of no more than one page on or before August 4, 2021. Mr. Arviv must deliver responding written submissions on costs of no more than one page on or before August 11, 2021. Any reply written submissions of no more than half a page must be delivered on or before August 13, 2021.

DATE: July 28, 2021 __________________________

MASTER C. WIEBE