COURT FILE NO.: CV-18-0061130
DATE: 20231208
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
RAYMAN TIGER INC.
Applicant
– and –
UNGER TIGER INC., GRIESBAUM TIGER INC., BOAKE TIGER INC., HALL TIGER INC., MONETA TIGER INC., and LINDY TIGER INC
Respondent
Brian Illion, for the Applicant
Andrew Lewis, for the Respondent
HEARD: December 7, 2023
Papageorgiou J.
Overview
[1] The Applicant seeks the appointment of an arbitrator pursuant to an arbitration agreement that formed a part of a Co-Ownership agreement (the “COA”).
[2] Section 13 of the COA provides that all disputes among the Co-Owners shall be settled by way of arbitration in accordance with the Arbitration Act, S.O. 1991, c. 17.
[3] On or about November 13, 2017, the Applicant formally demanded access to the books and records of the Co-Ownership pursuant to s. 5.10 of the COA.
[4] The Respondents did not produce the records.
[5] On July 28, 2018, the Applicant served the Arbitration Notice pursuant to s. 2 of the COA.
[6] The Arbitration Notice stated that the Applicant sought to arbitrate a dispute pursuant to its rights under the COA and claiming production of the books and records of the Co-Ownership.
[7] The Respondents refused to proceed with the steps required to appoint an arbitrator.
[8] Section 10 of the Arbitration Act provides that the Court may appoint an arbitrator where a person with the power to appoint the arbitral tribunal has not done so after a party has given the person seven days-notice.
[9] The Respondents argue that the Application must fail because: i) the Applicant is no longer a party to the COA; ii) the Applicant’s claims on the merits are statute-barred and/or that the doctrine of laches should apply; and iii) this Application is an abuse of process.
Decision
[10] For the reasons that follow, I am granting the Application.
[11] By way of overview, the Respondents treated this Application for the appointment of an Arbitrator as though it were a motion for summary judgment, but without filing sufficient evidence that would have entitled it to summary judgment, if the matter had been argued on the merits.
[12] All the Respondents have done is raise issues that should be considered by an Arbitrator in accordance with the arbitration agreement.
[13] As well, it is not the situation that the Respondents are seeking to have the underlying merits determined in a court proceeding as opposed to by way of an arbitration. In response to this Application, they have sought a declaration that the Applicant is no longer a Co-Owner and has no claim to any further involvement in the Co-Ownership. The materials simply do not permit this Court to make the kind of final Order that they seek.
Issues:
• Issue 1: Have the Respondents demonstrated that the Applicant is no longer a party to the COA, such that it can have no recourse to the arbitration provision in the COA?
• Issue 2: Have the Respondents demonstrated that the Applicant’s claim is statute barred and/or that the doctrine of laches should apply?
• Issue 3: Have the Respondents demonstrated that the Application is an abuse of process?
Analysis
Issue 1: Have the Respondents demonstrated that the Applicant is no longer a party to the COA, such that it can have no recourse to the arbitration provision?
[14] The starting point for the analysis is s. 6 of the Arbitration Act that directs that Court intervention in matters governed by the Act is to be limited.
[15] Section 17 provides that an arbitral tribunal may rule on its own jurisdiction to conduct an arbitration and may in that connection rule on objections with respect to the existence or validity of an arbitration agreement.
[16] In OMA v. Willis, 2013 ONCA 745 the Court of Appeal considered an appeal of an order granting a stay of an action to permit the arbitrator to determine whether the arbitration was subject to an arbitration clause. The Ontario Medical Association (the “OMA”) argued that it was not a party to the agreement in question and therefore not bound by the arbitration clause. The motions judge who heard the stay motion determined that since there was an arguable case that the OMA and its claim were governed by the arbitration clause, the proper order was to defer the issue of jurisdiction to the arbitrator.
[17] The Court of Appeal dismissed the appeal citing well established authority that arbitrators should be allowed to exercise their power to rule first on their own jurisdiction:
[22] Deschamps J. elaborated on the competence-competence principle, at paras. 84-86. She laid down as "a general rule that in any case involving an arbitration clause, a challenge to the arbitrator's jurisdiction must be resolved first by the arbitrator". That general rule should be departed from "only if the challenge to the arbitrator's jurisdiction is based solely on a question of law", an exception based upon the combination of the courts' expertise on matters of law and the efficiency to be achieved by having the issue dealt with when the request for a stay and referral is made.
[18] If the matter requires the analysis of factual evidence, the court should normally refer the case to arbitration unless the issues require only superficial analysis of the evidence.
[19] The Respondents make reference to the Court of Appeal’s decision in Dalimpex Ltd. v. Janicki (2003), 64 O.R. (3d) at para 21 where it adopted the views of the British Columbia Court of Appeal in Gulf Canada Resources Ltd. v. Arochem International Ltd. (1992), 1992 CanLII 4033 (BC CA), 66 B.C.L.R. (2d) 113. The Respondents emphasize the following passage:
Only where it is clear that the dispute is outside the terms of the arbitration agreement or that a party is not a party to the arbitration agreement or that the application is out of time should the court reach any final determination in respect of such matters on a motion for a stay of proceedings.
[20] However, immediately following this passage, the Court in that case also said:
Where it is arguable that the dispute falls within the terms of the arbitration agreement or where it is arguable that a party to the legal proceedings is a party to the arbitration agreement then, in my view, the stay should be granted and those matters left to be determined by the arbitral tribunal.
[21] For the following reasons, I reject the Respondents’ argument that the materials filed conclusively demonstrate that the Applicant is no longer a party to the COA, such that this matter cannot be referred to an Arbitrator. There is at least an arguable case that the Applicant is still a party to the COA. The issue should be decided at first instance by the Arbitrator.
[22] The following are the facts set out in the materials which support this finding.
[23] In 2006 the Applicant and the Respondents entered into the COA in respect of investment property in Cambridge Ontario (the “Property”).
[24] Section 2.01 of the COA provided that the Applicant and the Respondents were tenants in common with each of the Co-owners being a beneficial owner of a proportionate undivided interest in the lands and the other Co-Ownership Assets as tenants in common.
[25] The Corporation Lancer Tiger Lofts Corporation, holds title to the Lands, pursuant to s. 4.01 (a) and (b) of the COA, as a nominee corporation with no ownership interest in the Co-Ownership Assets which belong to the Co-owners (the “Nominee”).
[26] Pursuant to s. 2.01 of the COA, the Applicant held a 15 % undivided interest in the Lands and other Co-Ownership Assets. The definition of Co-Ownership Assets in s. 1.01(h) included the Lands or any part thereof or any other assets and property whether real or personal now or at any time acquired during the continuation of the Co-Ownership.
Event of Insolvency?
[27] On May 28, 2012, the certificate of incorporation of the Applicant was cancelled by the Corporation Tax Branch of the Government of Ontario. As will be seen, it was ultimately revived.
[28] In 2013 the Respondents discovered this cancellation. They considered this to be an Event of Insolvency under the COA and issued a default notice on December 2, 2013.
[29] Then, because the Event of Insolvency was not cured within 30 days, the Respondents say that they took steps to divest the Applicant of its interest in the Co-Ownership in accordance with the COA.
[30] There is an arguable issue as to whether the cancellation of the certificate of incorporation constituted an Event of Default.
[31] S. 1.01(o) defined an “Event of Insolvency” as a Co-Owner “consenting to any resolution or action for or in respect of its liquidation, dissolution, or winding up, whether by extra judicial means or under any statute” and also included the situation where there had been the appointment of a receiver, or petitions or other proceedings related to insolvency or liquidation.
[32] The alleged Event of Insolvency related to a conditional dissolution of the Applicant. This was an administrative reversible conditional dissolution. The Applicant was then revived on April 23, 2014. I agree that when interpreting the COA within the factual matrix, it is arguable that the definition of Event of Insolvency intended to capture dissolution in respect of actual insolvency and not administrative reversible conditional dissolution.
Procedures in respect of divestiture followed?
[33] When a Default under the COA occurs, there are procedures pursuant to which the other Co-Owners may purchase the defaulting Co-Owner’s (the “Defaulter’s”) interest.
[34] The procedure is as follows:
[35] A Notice of Default is given to the Defaulter and the other Co-Owners.
[36] If the default is not cured within 30 days, pursuant to s. 11.03 of the COA a Co-Owner can deliver an Option Notice to purchase the Defaulting Co-Owner’s interest at Fair Market Value. Pursuant to s. 11.04, the Fair Market Value must be determined by one or more Appraisers. Section 11.05 defines the Fair Market Value as comprising “the Co-Ownership Assets, as an entirety, being the cash price that a ready willing and able purchaser would pay to purchase the entire Co-Ownership free and clear of this Agreement, multiplied by the Proportionate Share of the Defaulter.”
[37] S. 1.01(b) defines an “Appraiser” as being a “disinterested” party who is “an accredited appraiser of the Appraisal Institute of Canada or a senior real estate appraiser of the Society of Real Estate Appraisers.”
[38] Pursuant to s. 11.08(a), the closing date is 15 days following the delivery of the Appraiser’s Report.
[39] The Respondents did deliver a Notice of Default on December 3, 2013 on behalf of “four Non-Defaulter Co-Owners” Unger Tiger Inc. Griesbaum Tiger Inc., Boake Tiger Inc., and Hall Tiger Inc (the “Purported Purchasers”). The Purported Purchasers are all Respondents to this Application. The Notice of Default claimed that the Applicant was in default as a result of an “Event of Insolvency” and that it had 30 days to remedy this Default.
[40] However, it is arguable based upon the record before me, that the Purported Purchasers failed to take the necessary steps required pursuant to the COA to divest the Applicant of its ownership interest in the Co-Ownership Assets,:
• They failed to obtain an appraisal of the Applicant’s Co-Ownership interest as required by s. 11.04 and 11.05. This arguably prevented the completion of any purported sale pursuant to s. 11 and 12 of the COA.
• They then purported to purchase only the Applicant’s shares in the Nominee pursuant to an Option Notice dated January 27, 2014 which was sent to the Applicant by way of an unsigned email from Martin Unger on behalf of the four Purported Purchasers. The Option Notice purported to set the Fair Market Value as “nil” without the required Appraisal pursuant to 11.04, or even based upon the definition of Fair Market Value as defined in s. 11.05.
The Respondents based their valuation upon the fact that the owners of the Applicant had made a proposal under the Bankruptcy and Insolvency Act, RSC, 1985 c. B-3 in 2011 and in that proceeding had valued their shares in the Applicant as “zero” in their respective declarations dated February 23, 2012. The principals of the Applicant are not parties to this proceeding, nor are they parties to the COA. It is arguable that their submissions in a different proceeding do not change the fact that the COA required an Appraisal.
I add that the financial statements for the year ending 2012 with respect to the Co-Ownership shows that the Co-Owner’s equity as of that time was valued at $5,581,970.
The Purported Purchasers say they also based their calculation of “Nil” value, by taking into account their position that the Applicant had an unpaid debt to the Nominee and had failed to make contributions required by the COA. This is a disputed fact which cannot be resolved on this record.
• The Purported Purchasers then sent a document entitled “Transfer of Shares”, also dated January 27, 2014 regarding the transfer of 15 “Class A Common” shares in “the capital stock of [the Nominee]” from the Applicant to the Purported Purchasers.
It is arguable that even if this Transfer was effective, it was a transfer only of the Applicant’s shares in the Nominee, not the Applicant’s beneficial interest in the Co-Ownership assets. Section 4.01(a) and (b) of the COA clearly states that the Nominee has no interest in the Co-Ownership assets.
• The Transfer was not even signed by the Applicant but by Martin Unger purportedly acting as attorney for Unger Tiger Inc. Neither Martin Unger nor Unger Tiger Inc. were the Applicant’s power of attorney or otherwise its attorney with authority to execute this document on its behalf.
Pursuant to s. 2.09, none of the Co-Owners have the authority to act for the others except as specifically set out in the COA.
The COA does contemplate the appointment of a power of attorney for the purpose of signing a transfer pursuant to s. 12.05, if the Defaulting party fails to deliver the required documents to complete a purchase and sale on the date of closing. However, a condition precedent to the grant of this power is that the Defaulting Party fails to deliver to the purchaser the required documents to complete the purchase pursuant to s. 11.08(a). There is no evidence of closing documents having been delivered to the Applicant for execution which would trigger the right of Mr. Unger to sign on behalf of the Applicant. Furthermore, the date of closing pursuant to the COA is specified to be 15 days after delivery of the Appraisal in accordance with the COA. There is an argument that without the Appraisal, there could be no closing date, and no power of attorney could be appointed pursuant to the COA to sign the Transfer. Indeed, there is no evidence of any closing having taken place.
[41] There are other issues related to the Respondent’s arguments that the Applicant was divested of its Co-Ownership interest.
[42] The COA only permits non-defaulting Co-Owners to deliver a Notice of Default. The Applicant filed evidence that the Purported Purchasers were also in default. This is a disputed issue, but the Applicant’s evidence raises an arguable case.
[43] It is also arguable that because the COA gives the Applicant a 15 % interest in the Co-Ownership assets, which comprise Lands and Buildings pursuant to s. 2.01 of the COA, the Statute of Frauds applies. Pursuant to the requirements of the Statute of Frauds, a conveyance of a Co-Ownership interest, being an interest in land, requires a written instrument signed by the transferor/vendor/assignor.
[44] There is no such instrument before me. There is only the Transfer which is not signed by the Applicant but by Mr. Unger who purported to act as power of attorney. As I have found, there is an arguable case that he was not entitled to do so.
Issue 2: Have the Respondents demonstrated that the Applicant’s claim is statute barred and/or that the doctrine of laches should apply?
[45] The limitation period relevant to this Application is whether the Application to appoint the Arbitrator is statute barred. The Applicant served the Application within 2 years of seeking the appointment of an Arbitrator and so this Application is within the period established by the Limitations Act, 2002, S.O. 2002, c. 24.
[46] Therefore, the Application to appoint an Arbitrator is not statute barred.
[47] If the Transfer dated January 27, 2014 constituted a valid transfer of the Applicant’s Co-Ownership interest in lands, it is arguable that the applicable limitation period is 10 years pursuant to s. 4 of the Real Property Limitations Act, RSO 1990, c. L.15, and not the two year limitation period set out in the Limitations Act.
[48] Therefore, it is arguable that even issues relating to the underlying merits of whether the Applicant has been divested of its Co-Ownership interest is not statute barred.
[49] With respect to the doctrine of laches, or acquiescence, in Zurich Insurance v. TD General Insurance, 2015 ONCA 764 the Court held that “the absence of a laches-saving provision from the Limitations Act, 2002 suggests that the equitable defence of laches is not available to bar a claim that is brought within the basic limitation period”: para 42. While s. 2 of the Real Property Limitations Act, does preserve the concept of refusing relief on the ground of acquiescence, the issue of what has occurred and whether the Applicant’s conduct over a period of four years constituted acquiescence is an issue that should be considered and determined on a full record, not on the minimal materials before this Court.
Issue 3: Have the Respondents demonstrated that the Application is an abuse of process?
[50] The Respondents argue that this matter is an abuse of process relying upon Behn v. Moulton Contracting et al 2013 SCC 26, [2013], 2 SCR 227 for the following reasons:
• The principals of the Applicant deceived Her Majesty the Queen in relation to the value of the shares in the Nominee. As stated above, the principals of the Applicant are not the Applicant. The Respondents have not shown any basis to lift the corporate veil and visit upon the Applicant alleged conduct by its owners but this is an issue that may be raised before the Arbitrator and considered on a full record. As well, if there was a fraud as is alleged, this was a fraud against the Trustee and this issue is not before me. Finally, the shareholders of a corporation are entitled to the residual value of the assets of a corporation after dissolution when the debts are paid. There is no evidence on any of this so as to prove that the shareholders of the Applicant were not telling the truth about the value of their shares at the time of their proposal taking into account its debts.
• The Applicant and its owners are indebted to the Co-Ownership. This is an issue of fact that cannot be resolved on this Application. There is simply insufficient material before this court one way or another to determine this issue. It is unclear whether the alleged debt is that of the Applicant or its owners. As well, the basis for this debt is the 2012 audited financial statements that carried forward an alleged debt from the unaudited 2011 financial statements. The audited statements say that the auditor relied upon information from management with respect to this amount carried forward which has not been audited. As well, the alleged debt was written off in the 2012 financial statements. Finally, even this alleged debt incorporates claims related to the management company in respect of overbilling who is not a party to this proceeding and who was not the Applicant, as well as claims against the shareholders of the Applicant who were alleged to have taken out moneys inappropriately.
• The Applicant “negated any home, within decades, of the Tiger Loft project being of any positive value to these Respondents, who are victims of the Raymans. These proceedings constitute re-victimization.” This issue is an issue of fact that cannot be resolved on this Application and is a matter appropriately considered by an Arbitrator.
[51] The important point to note is that the Respondents are not prejudiced by the appointment of the Arbitrator. They will be able to raise all the arguments they raised before me with the Arbitrator.
[52] I find that the Arbitration Agreement is an arbitration agreement within the meaning of s. 1 and s. 5(1) of the Arbitration Act and am granting the Order requested.
[53] In the exercise of my discretion, I am reserving to the arbitrator the issue of the costs of this Application.
Papageorgiou J.
Released: December 8, 2023
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
RAYMAN TIGER INC.
Applicant
– and –
UNGER TIGER INC., GRIESBAUM TIGER INC., BOAKE TIGER INC., HALL TIGER INC., MONETA TIGER INC., and LINDY TIGER INC
Respondent
REASONS FOR JUDGMENT
Papageorgiou J.
Released: December 8, 2023