COURT FILE NO.: CV-17-576862
DATE: 2022-06-21
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
SUNG WOO LEE and ME YOUNG LEE Plaintiffs
- and –
964988 ONTARIO INC., WON DO KIM, MOK JA KIM and CHAN YEUNG KANG Defendants
COUNSEL: Nancy Tourgis and Rajiv Joshi for the Plaintiffs Gordon Vance for the Defendants 964988 Ontario Inc., Won Do Kim, and Mok Ja Kim
HEARD: June 10, 2022
PERELL, J.
REASONS FOR DECISION
A. Introduction
[1] In 2017, Sung Woo Lee (“Mr. Lee”) and Me Young Lee (“Mrs. Lee”) sued 964988 Ontario Inc., Won Do Kim (“Mr. Kim”), Mok Ja Kim (“Mrs. Kim”), and Chang Yeung Kang (“Mr. Kang”).
[2] The action against Mr. Kang was for solicitor’s negligence, but the Statement of Claim was never served on him, and now it is too late to serve Mr. Kang.
[3] The Lees’ action against the Kims is for a declaration that a conveyance of shares of a 50% interest in 964988 Ontario Inc. is null and void and for a declaration that the Kims hold 50% of the shares of 964988 Ontario Inc. in trust for Mr. Lee.
[4] Now before the court is a motion by the Lees for the following relief against Mr. Kim, Mrs. Kim and 964988 Ontario Inc.:
(s) An Order granting an interim injunction preventing the sale of 120 Clark Ave, Thornhill, the subject property at issue in this action and with the following legal description:
LT 63 PL 2368, MARKHAM; S/T MA48809 ASSIGNED BY R742633; ST R585550; MARKHAM, PIN 03022-0148 LT and municipally known as 120 Clark Avenue, Markham, Ontario L3T 1S0; (“120 Clark Ave”);
(b) In the alternative, an Order that in the event of a sale, an interim order that fifty (50) percent of the net proceeds of any such sale be held in the trust account of the lawyers for the Defendants or with the Accountant for the Superior Court of Justice pending further Order of this Honourable Court or the consent of the parties
(c) An Order that the parties conduct mediation by August 30, 2022;
(d) Costs of this motion; and,
(e) Such further and other relief as to this Honourable Court may advise and this Honourable Court may deem just.
[5] With respect to the motion now before the court, since Mr. Kim died on April 9, 2019 and since the Lees have not yet obtained an order to continue, pursuant to rule 11.01 of the Rules of Civil Procedure the action as against Mr. Kim is stayed until an order to continue the proceeding has been obtained. The Lees’ motion continues against Mrs. Kim and 964988 Ontario Inc. The Kims’ son Tae Yun Kim was the spokesperson for the Kims.
[6] For the reasons that follow, the motion is dismissed.
B. Facts
[7] In the mid-1970s, Mr. and Mrs. Lee emigrated from Korea to Canada along with Mr. Lee’s mother and his two brothers. Around the same time, in 1975, Mr. and Mrs. Kim emigrated from Korea to Canada with their two young sons.
[8] In Canada, the Lees and the Kims attended the same church. They became acquaintances. They became close family friends. Mr. Lee and Mr. Kim were involved in several businesses together, including a bowling alley in Barrie with other partners.
[9] In 1979, the Lees purchased a variety store business at 120 Clark Ave, Thornhill, Ontario. 120 Clark Ave was a small strip plaza with retail on the first floor and apartments on the second floor of the building. In addition to the variety store, there was a dry cleaner, a window-blinds store, and a pizza restaurant in the strip plaza. The Lees, Mr. Lee’s mother, and his two younger brothers rented a two-room apartment on the second floor of the strip plaza building. The Lees’ son, Philip, now deceased, was born there in 1979. The Lees’ daughter Diana was born there in 1981.
[10] In 1986, Mr. Lee purchased the strip plaza for $550,000. He paid $225,000 in cash and he financed the balance of the purchase price by a mortgage from the TD Bank and a take-back mortgage from the vendor. Mr. Kang was Mr. Lee’s conveyancing lawyer.
[11] In 1987, while Mr. Lee was the owner of the strip plaza, he sold his variety store business in the strip plaza to Mr. and Mrs. Kim for $250,000 plus the value of the stock. There are no surviving documents from this transaction. Mrs. Kim recalls paying $350,000 to buy the variety store, which price included the store’s inventory. The Kims paid with a mix of cash and a bank loan from TD Bank.
[12] On his examination discovery before his death, Mr. Kim said that the Kims paid $400,000.
[13] After the purchase of the variety store, Mr. Kim and his family moved into the apartment that the Lees had been occupying, and the Lees moved to their first home at 198 Olive Avenue.
[14] In 1990, Mr. Lee refinanced the strip plaza with a $900,000 mortgage loan from the Banca Commerciale Italiana of Canada. Mr. Kang again was Mr. Lee’s conveyancing lawyer.
[15] In 1991, Mr. Lee sold the Kims a half of his interest in the strip plaza for $620,000. The Kims paid about $150,000 in cash. Mrs. Kim says that the balance was paid by Mr. Kim forgiving loans he had made to Mr. Lee through their business ventures together for which Mr. Lee had accumulated a significant debt to the Kims over the years.
[16] Mr. Kang acted on the 1991 transaction, which took place in November 1991.
[17] After 1991, Mr. Lee remained responsible for managing the strip plaza. The Kims submit, however, that Mr. Lee never accounted for the income from the plaza’s residential (eight units) or business tenants. The Kims asked for an accounting from Mr. Lee for the revenues and expenses, but he did not provide one.
[18] In 1995, on the advice of Mr. Kang, 964988 Ontario Inc. was incorporated to hold the strip plaza property. The Lees would have a 50% shareholder’s interest and Mr. and Mrs. Kim would each own 25% of 964988 Ontario Inc.’s shares. The material terms and conditions of the proposed share purchase were set out in a Memorandum of Agreement prepared by Mr. Kang.
[19] I make no finding of fact, but it may be that the 1995 incorporation of 964988 Ontario Inc. may have been designed to take advantage of the limited liability of shareholders for the liabilities of the corporation.
[20] In 1997, the transaction that is the subject matter of this litigation took place. It is an understatement to say that the evidence of the parties diverges about this transaction. It would not be an overstatement to say that the evidence of the parties is contentious and irreconcilable.
[21] The parties gave conflicting evidence as to the background circumstances to the 1997 transaction. It is Mr. Lee’s evidence that by 1996, the strip plaza had a market value of around $1.5 million and that he and the Kims respectively had approximately $300,000.00 in equity in the property. It is Mr. Lee’s evidence that between 1991 and 1996, he managed the strip plaza by collecting all rents from both residential and commercial units, paying for all mortgages, and related expenses such as utilities and property taxes. Mr. Lee says that the strip plaza was operating either at a loss or breaking even. Mr. Lee says that the Kims, under financial stress, did not always pay their rent for their units in the plaza. Mr. Lee says that from time to time, he borrowed funds from his wife’s restaurant businesses to cover the expenses. This caused friction between the spouses that he says contributed to the eventual breakdown of their marriage and separation and matrimonial proceedings two decades later.
[22] It is, however, the Kims’ evidence that in late 1996, Mr. Lee confessed that he had not been paying the expenses of the strip plaza and that he had been using the strip plaza’s revenue to pay his personal indebtedness. The strip plaza was heavily in debt. It is the Kims’ evidence that in these circumstances, Mr. Lee proposed that Mr. Kim take over the plaza in exchange for assuming its indebtedness. It is the Kims’ evidence that they took ownership of Mr. Lee’s 50% interest in 964988 Ontario Inc. and that they agreed to assume all of the plaza’s debts and to release Mr. Lee from responsibility for any of its liabilities, past or future. The Kims say that they also agreed not to insist on an accounting of the plaza’s rental income going back to 1991. The Kims deny that Mr. Lee asked them to hold his 50% interest in trust. In other words, the Kims’ version of the 1997 transaction is that they purchased the Lees’ interest in the strip plaza in a bona fide transaction in which they paid good consideration for the transfer of shares.
[23] Mr. Lee’s evidence is that he transferred his shares on the understanding that the Kims would hold the shares in trust until Mr. Lee asked for them back. It is Mr. Lee’s evidence that in late 1996, he was experiencing financial difficulties with a number of his investments and had cash flow issues. He says that his financial woes were made worse because Mr. Kim was not making his rent payments. Mr. Lee says that he told Mr. Kim that there was a chance of them losing the strip plaza and that the Kims would lose their variety store business and their apartment. Mr. Lee says that it was the Kims who asked Mr. Lee to transfer his 50% percent to be held in trust for him so that they could manage the plaza and rescue it from the creditors. Mr. Lee says that he spoke to Mr. Kang and agreed to convey his 50% equity share interest to the Kims so that they could prevent the loss of their sole source of income, their equity in the strip plaza and their apartment. Mr. Lee says that his agreement to transfer 50% of his shares was contingent on the Kims holding his shares in trust for him to be returned on request. He says that the Kims also agreed not to obtain any additional mortgage or to sell the strip plaza. Mr. Lee says that he required and that the Kims agree to a release so that he not be held responsible for any outstanding liabilities and or future liabilities.
[24] It is not disputed that Mr. Kang was again retained to document the transaction. It is also not disputed that Mr. Kim and Mr. Lee prepared two handwritten documents, in Korean, to confirm their instructions to Mr. Kang. The first document was signed by Mr. Lee. It says that there is one mortgage on the property and that “I transfer the rights of the building to Won Do Kim and Mok Ja Kim without any objection.” There is no mention of the “rights” being held in trust, or that they were to be returned at any point. The second document was signed by Mr. Kim. It says that “Sung Woo Lee will not be liable for any issue which may arise with respect to the building at 120 Clark Avenue.” What is disputed is what meaning is to be taken from these two documents.
[25] Pausing here in the narrative, it may be observed that Mr. Lee’s version of the nature of the transaction with an undocumented promise by the Kims to hold Mr. Lee’s 50% interest in 964988 Ontario Inc. in trust raises the suspicion that Mr. Lee perhaps with the assistance of the Kims was engaged in a fraudulent conveyance to protect his assets, including his shares in the strip plaza corporation, from pressing creditors. For present purposes, I cannot and need not decide this matter about fraudulent conveyances, but I point it out, because the Kims argued that in the resolution of the interlocutory injunction, Mr. Lee did not have clean hands and that the equities favoured the Kims. This takes the ultimate merits of the Lees’ case into interesting territory of the principle of in pari delicto, but as I say, now is not the time to decide this point.
[26] In any event, Mr. Kang prepared and the Lees and the Kims signed a share transfer agreement. Although the documents were signed in 1997, the documents were backdated to January 1, 1995. The Kims say that they do not know why Mr. Kang dated the documents in this way, but at the time they did not think anything of it; they signed the documents that the lawyer asked them to sign. Mr. Kang prepared a release, signed by Mr. Lee, Mr. Kim, and Mrs. Kim. The release states that, in consideration for the sale of Mr. Lee’s shares, the Kims would release Mr. Lee from all debts and liabilities and would indemnify him from any future liabilities.
[27] The tenants of the strip plaza were informed by Mr. Kang that Mr. Lee had sold his interest in the plaza to the Kims and that, moving forward, Mr. and Mrs. Kim would be their only managers and landlords. Mr. Kang wrote in a letter dated December 11, 1998 that “Mr. Sung Woo Lee sold all his interests in the corporation” to Mr. and Mrs. Kim.
[28] After 1998, the Kims say that their family had almost nothing to do with Mr. Lee. They say that Mr. Lee stopped coming by the strip plaza and no longer had anything to do with the management or operations of the plaza. The Kims say that Mr. Lee did not so much as talk to the Kims about the plaza apart from occasional demands to Mr. Kim that his shares be returned, all of which were rebuffed. Mr. Lee’s evidence is irreconcilably different. He says that after the share transfer, between 2000 and 2015, he often discussed the operation of the strip plaza with the variety store with Mr. Kim. He says that he loaned $25,000 in four cheques and one cash payment to assist Mr. Kim paying mortgage interest and the property taxes. Mrs. Kim says that she has no knowledge with respect to these payments. Mr. Lee says that Mr. Kim said that there had to be an accounting before there could be a retransfer of Mr. Lee’s shares, but he never made the documents available for the accounting to occur.
[29] In January 1999, Mr. and Mrs. Kim renewed the mortgage on the strip plaza with Banca Commerciale Italiana of Canada. They provided unlimited personal guarantees. There is no mention at all of Mr. Lee.
[30] In 2013, Mr. and Mrs. Lee separated, and in the summer of 2015, they commenced matrimonial proceedings. In the claims for an equalization of property, Mrs. Lee asserted an interest in Mr. Lee’s shares in 964988 Ontario Inc., the strip plaza. Mrs. Lee sought and was granted a preservation order with respect to all of Mr. Lee’s properties and investments. On June 30, 2015, Justice Kiteley granted a preservation Order that included the strip plaza.
[31] In 2015, Mr. Lee asked again that the Kims transfer his shares to him, but they refused. Mr. Lee contacted Mr. Kang, but he refused to mediate the dispute. Given the Kims’ refusal, Mr. Lee retained Aryan Kamyab and gave him instructions to commence an action.
[32] On June 9, 2017, the Lees issued a Statement of Claim against the Kims, 964988 Ontario Inc. and Mr. Kang.
[33] The Statement of Claim was never served on Mr. Kang, and the time for service expired.
[34] On November 10, 2017, the Kims and 964988 Ontario Inc. delivered their Statement of Defence.
[35] On December 6, 2017, the dying Mr. Kim was examined pursuant to Rule 36 by video for the purpose of having his testimony available to be tendered as evidence at the trial.
[36] On January 10, 2017, Mrs. Lee was examined for discovery.
[37] On January 11, 2017, Mr. Lee was examined for discovery.
[38] Nothing appears to have occurred in the litigation for the next 16 months.
[39] On April 9, 2019, Mr. Kim died. In his Will, he left all of his assets, including his shares in 964988 Ontario Inc. to Mrs. Kim.
[40] An order to continue has not been taken out.
[41] In 2021, the Kims brought a motion in the family proceedings to remove the preservation Order insofar as it related to the strip plaza. The Order was granted by Justice Lococo on January 11, 2022. The preservation order on the strip plaza was terminated without prejudice to the Lees bringing a motion in the immediate action for an interlocutory injunction, which is what they did.
[42] On April 15, 2022, the Lees with their present lawyers of record brought a motion for an interlocutory injunction. The motion was supported by the affidavit dated April 15, 2022 of Mr. Lee.
[43] Mrs. Kim, who is 79 years old is undergoing treatment for cancer. She does not read or write English, and she did not deliver a responding affidavit to the Lees’ motion. She asked her son Tae Yun Kim to deliver an affidavit which he did. The affidavit is dated May 5, 2022.
[44] On May 19, 2022, Mr. Tae Yun Kim was cross-examined. He testified that his family does not intend to sell the strip plaza.
[45] On May 24, 2022, Mr. and Mrs. Lee were cross-examined.
[46] The Kims have operated 120 Clark for 25 years, without any assistance from Mr. Lee. They intend to continue doing so. Mrs. Kim’s second son, Min Soo Kim, is returning to Canada from South Korea this summer to assist the family in running the plaza.
C. Analysis and Discussion
1. The Court’s Jurisdiction to Grant an Interlocutory Injunction
[47] Section 101 of the Courts of Justice Act[^1] provides the court with the jurisdiction to grant interlocutory injunctions. Section 101 states:
Injunctions and receivers
101 (1) In the Superior Court of Justice, an interlocutory injunction or mandatory Order may be granted or a receiver or receiver and manager may be appointed by an interlocutory Order, where it appears to a judge of the court to be just or convenient to do so.
Terms
(2) An Order under subsection (1) may include such terms as are considered just.
[48] In RJR-MacDonald Inc. v. Canada (Attorney General),[^2] the Supreme Court set out the test used for granting or refusing to grant an interlocutory injunction. Under the RJR-MacDonald test for an interlocutory injunction, the court considers three factors: (1) whether the plaintiff has presented a serious issue to be tried or, in a narrow band of cases, a strong prima facie case; (2) whether the plaintiff would suffer irreparable harm if the remedy for the defendant's misconduct were left to be granted at trial; and (3) where does the balance of convenience or inconvenience lie in the granting or the refusing to grant an interlocutory injunction.
[49] Under the RJR-MacDonald test, the court considers whether the plaintiff has shown that there is a serious issue to be tried in the sense that the plaintiff has a viable claim. For most cases, this factor sets a low threshold, and this approach negates the need of any intensive review of the merits at the preliminary phase of the proceedings. However, if its consideration of the other elements of the test is inconclusive, the court may revisit the question of the strength or merits of the plaintiff's case as an aspect of the balance of convenience factor.[^3]
[50] The irreparable harm analysis means the court will consider whether damages awarded after a trial will provide the plaintiff with an adequate remedy without the need for an interlocutory remedy.[^4] The onus is on the party seeking an injunction to place sufficient financial and other evidence before the court showing that irreparable harm will result.[^5] The onus is on the plaintiff to show that if made to wait for a hearing where damages are awarded, then he or she will suffer irreparable harm. If damages or some other trial remedy would come too late or be inadequate to repair the harm or be insufficient to do justice, then the harm may be said to be irreparable. Evidence of irreparable harm must be clear and not speculative.[^6]
[51] The balance of convenience analysis considers what is the effect on the parties and sometimes on third parties of the court granting or not granting the interlocutory injunction.[^7] This analysis involves a determination of which of the two parties will suffer the greater harm from the granting or the refusal to grant an interlocutory injunction pending a decision on the merits. In this context, the court will need to compare and contrast the harm that the plaintiff may suffer if the interlocutory injunction is refused with the harm that the defendant would suffer that would not be reparable by the plaintiff's undertaking as to damages if the interlocutory injunction is granted. The factors that the court may consider in assessing the balance of convenience and the weight to be given to them are indeterminate and will vary from case to case.[^8]
[52] If the plaintiff's case seems weak, then the undoubted convenience of an injunction may not balance the inconvenience of the defendant suffering the interference with his or her rights based on a doubtful claim. Conversely, if the merits of the plaintiff's case seem quite strong then the plaintiff's inconvenience of being denied an interlocutory remedy may seem to outbalance the inconvenience of the defendant having to suffer a restraint on his or her rights.[^9]
2. Discussion and Analysis
[53] In my opinion, the Lees fail the second and third branch of the RJR-MacDonald Inc. v. Canada (Attorney General) test used for granting or refusing to grant an interlocutory injunction.
[54] The Lees undoubtedly are going to confront some very stiff headwinds in making out their case that the Kims are holding Mr. Lee’s shares in 964998 Ontario in trust, but the Lees have presented a serious issue to try, which satisfies the low threshold of the first branch of the test.
[55] However, there is no showing of irreparable harm. The strip plaza is not up for sale and the Kims have no intention of selling. Mr. Lee has not been involved in the operation of the strip plaza for 20 years, and apparently was not a particularly good manager when he was at the helm. The Lees’ ultimate purpose would appear to be to have 9644998 Ontario liquidated and the strip plaza sold to add to the money to be distributed as part of their matrimonial proceedings. In other words, the Lees are ultimately just seeking money and not a proprietary interest and thus there would be no irreparable harm even if the strip plaza was sold now or later. The Kims are not disposing of assets. They are not making themselves judgment proof, and they are not leaving the jurisdiction. This is a text-book example of where damages awarded after a trial will provide the plaintiff with an adequate remedy without the need for an interlocutory remedy, which is an extraordinary not an ordinary remedy.
[56] The balance of convenience favours the Kims.
[57] The Lees have been dilatory, to say the least, in advancing this litigation against the Kims. The Lees seem to have become animated only after the Kims in 2022 successfully had the 2015 preservation order set aside. The Lees obtained the preservation order in their matrimonial proceedings, which circumvented the need for them to bring a motion in the immediate case in 2017. If I treat the preservation order as having been granted at the outset of the immediate case, then the immediate action has been dormant for over four years. Notions of equity underly the balance of convenience test and equity does not favour litigants who are indolent. The Lees’ delay in prosecuting this action is reason alone not to grant them an interlocutory injunction.
[58] As noted above, where the consideration of the other elements of the RJR-MacDonald test is inconclusive, the court may revisit the question of the strength or merits of the plaintiff's case as an aspect of the balance of convenience factor. Assuming that the Lees had demonstrated irreparable harm, I would have revisited the strength of their case as an aspect of the balance of convenience test and given the Lees’ cases’ difficulties, I would have held that the balance of convenience favours the Kims.
[59] However, I need not make this assumption about irreparable harm in my assessment of the balance of convenience, because the Kims are more inconvenienced by the granting of the injunction than the Lees are inconvenienced by the refusal of injunctive relief. In other words, even assuming that the Lees satisfy the first two branches of the RJR-MacDonald test, they fail the third critical and determinative branch of the test.
D. Conclusion
[60] For the above reasons, the motion is dismissed. If the parties cannot agree about the matter of costs, they may make submissions in writing beginning with the Kims’ submissions within twenty days of the release of these Reasons for Decision, followed by the Lees’ submissions with a further twenty days.
Perell, J.
Released: June 21, 2022
COURT FILE NO.: CV-17-576862
DATE: 2022-06-21
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
SUNG WOO LEE and ME YOUNG LEE Plaintiffs
- and –
964988 ONTARIO INC., WON DO KIM, MOK JA KIM and CHAN YEUNG KANG Defendants
REASONS FOR DECISION
PERELL J.
Released: June 21, 2022
[^1]: R.S.O. 1990, c. 43. [^2]: [1994] 1 S.C.R. 311. [^3]: Omega Digital Data Inc. v. Air’s Technology Inc. (1996), 32 O.R. (3d) 21; Empire Stevedores (1973) Ltd. v. Sparringa (1978), 19 O.R. (2d) 610 (H.C.J.); American Cyanamid Co. v. Ethicon Ltd., [1975] A.C. 396 (H.L.). [^4]: Traynor v. Unum Life Insurance Co. of America (2003), 65 O.R. (3d) 7 (Div. Ct.); Paddington Press Ltd. v. Champ, [1979] O.J. No. 796 (H.C.J.). [^5]: 2158124 Ontario Inc. v. Pitton, 2017 ONSC 411 at para. 48; Ciba-Geigy Canada Ltd. v. Novopharm Ltd., [1994] F.C.J. No. 1120 at paras. 117-118 (T.D.). [^6]: 2158124 Ontario Inc. v. Pitton, 2017 ONSC 411 at paras. 49-51; Downtown Kids Academy Inc. v. Zakrzewski, 2017 ONSC 5045; Ontario v. Shehrazad Non-Profit Housing Inc. (2007), 2007 ONCA 267, 85 O.R. (3d) 81 at para. 26 (C.A.); Kanda Tsushin Kogyo Co. v. Coveley, [1997] O.J. No. 56 at para. 14 (Div. Ct.); 754223 Ontario Ltd v. R-M Trust Co, [1997] O.J. No. 282 at para. 40 (Gen. Div.); RJR-MacDonald Inc. v. Canada (Attorney General) [1994] 1 S.C.R. 311 at paras. 57-59. [^7]: Synergism Arithmetically Compounded Inc. v. 1130163 Ontario Inc., [1997] O.J. No. 4271 (Gen. Div.); American Cyanamid Co. v. Ethicon Ltd., [1975] A.C. 396 (H.L.). [^8]: RJR-MacDonald Inc. v. Canada (Attorney General) [1994] 1 S.C.R. 311. [^9]: Bell Canada v. Rogers Communications Inc., [2009] O.J. No. 3161 at para. 38 (S.C.J.); Quizno's Canada Restaurant Corp. v. 1450987 Ontario Corp., [2009] O.J. No. 1743 at para. 46 (S.C.J.); Omega Digital Data Inc. v. Airos Technology Inc. (1996), 32 O.R. (3d) 21 (Gen. Div.); Empire Stevedores (1973) Ltd. v. Sparringa (1978), 19 O.R. (2d) 610 (H.C.J.); American Cyanamid Co. v. Ethicon Ltd., [1975] A.C. 396 (H.L.).