Court File No.: CV-13-10280-00CL
ONTARIO SUPERIOR COURT OF JUSTICE
Commercial List
B E T W E E N:
DBDC SPADINA LTD., and THOSE CORPORATIONS LISTED ON SCHEDULE “A” HERETO
Applicants
- and -
NORMA WALTON, RONAULD WALTON, THE ROSE & THISTLE GROUP LTD. and EGLINTON CASTLE INC.
Respondents
- and -
THOSE CORPORATIONS LISTED IN SCHEDULE “B” HERETO, TO BE BOUND BY THE RESULT
MOTION RECORD OF THE MANAGER, SCHONFELD INC. (Motion to authorize a claims process in respect of certain Schedule C Properties and
other relief returnable September 8, 2015)
GOODMANS LLP Barristers & Solicitors Bay Adelaide Centre 333 Bay Street, Suite 3400 Toronto, Ontario M5H 2S7 Brian Empey LSUC#: 30640G Mark S. Dunn LSUC#: 55510L
Tel: (416) 979-2211 Fax: (416) 979-1234 Lawyers for The Manager
TO: Lenczner Slaght Griffin LLP Barristers & Solicitors 130 Adelaide St W Suite 2600 Toronto, ON Canada M5H 3P5 Peter Griffin – [email protected] Shara N. Roy – [email protected] Paul-Erik Veel – [email protected] Matthew B. Lerner – [email protected] Danielle Glatt – [email protected] Tel: 416.865.9500 Fax: 416.865.9010 Counsel to the Applicants
Norma Walton
PO Box 22070 East York Post Office Toronto, Ontario M4H 1N9 Norma Walton - [email protected] Tel: (416) 444-3950 Fax: (416) 489-9973 Respondent
Robins, Appleby & Taub LLP
Barristers & Solicitors 2600 – 120 Adelaide Street W Toronto, Ontario M5H 1T1 Irving Marks [email protected] Dominique Michaud –[email protected] Tel: 416.360.3795 Fax: 416.868.0306 Counsel to Trez Capital Limited Partnership
Minden Gross LLP Barristers & Solicitors 145 King Street W., Suite 2200 Toronto, Ontario M5H 4G2 Timothy R. Dunn Tel: 416.369.4335 Fax: 416.864.9223 E-mail: [email protected] Counsel to 295 The West Mall Portfolio Ltd.
Zimmerman Associates
3338 Dufferin Street Toronto, Ontario M6A 3A4 Lawrence Zimmerman Tel: 416.489.9222 Fax: 416.489.6222 E-mail: [email protected] Counsel to the Handelman Group and the Tannenbaum Group
Lawrence F. Wallach
4580 Dufferin Street, Suite 302 Toronto, Ontario M3H 5Y2 Lawrence F. Wallach Tel: 416.661.5600 Fax: 416.663.4424 E-mail: [email protected] Litigation counsel to E. Manson Investments Limited, B & M Handelman Investments Limited, 1363557 Ontario Limited and Martha Sorger
Stikeman Elliot LLP 5200 Commerce Court West 199 Bay Street Toronto, Ontario M5L 1B9 Maria Konyukhova Tel: 416.869.5230 Fax: 416.947.0866 E-mail: [email protected] Counsel to IMC Limited Partnership
Fogler, Rubinoff LLP
77 King Street West Suite 3000, PO Box 9 TD Centre North Tower Toronto, ON M5K 1G8 Vern W. DaRe – [email protected] Tel: 416.864.9700 Fax: 416.941.8852 Counsel to Riocan Management Inc., RioCan Mortgage Corp., RioCan Real Estate Investment Trust and Trinity Urban Properties Inc.
Aird & Berlis LLP
Brookfield Place 181 Bay Street Suite 1800, Box 754 Toronto, ON M5J 2T9 Steven L. Graff – [email protected] Ian Aversa – [email protected] Jeremy Nemers – [email protected] Tel: 416.865.7726 Fax: 416.863.1515 msi Spergel Inc., in its capacity as the Court-appointed receiver and manager of Academy Lands Ltd.
Jack Copelovici Barristers & Solicitors 1220 Sheppard Avenue East Suite 204 Toronto, Ontario M2K 2S5 Jack Copelovici Tel: 416. 494.0910 Fax: 416.494.5480 E-mail: [email protected] Counsel for Fox Contracting Ltd.
Glaholt LLP
141 Adelaide Street West Suite 800 Toronto, Ontario M5H 3L5 Andrea Lee Tel: 416.368.8280 Fax: 416.368.3467 E-mail: [email protected] Counsel for Gentry Environmental Systems Ltd.
Brauti Thorning Zibarras LLP
151 Yonge Street Suite 1800 Toronto, ON M5C 2W7 David Meirovici – [email protected] Mark R. McMackin – [email protected] Tel: 416.362.4567 Fax: 416.362.8510 Counsel for Norel Electric Ltd.
Chaitons LLP 5000 Yonge Street, 10th Floor Toronto, Ontario M2N 7E9 George Benchetrit Tel: 416.218.1141 Fax: 416.218.1841 E-mail: [email protected] Counsel for Return on Innovation Capital Inc.
Bianchi Presta LLP
Barristers and Solicitors 9100 Jane Street, 3rd Floor Building A Vaughn, Ontario L4K 0A4 Renzo Belluz Tel: 905.738.1076 Fax: 905.738.0528 E-mail: [email protected] Counsel for the Estate of Celestina Venuto and Silvano & Celestina Investments Ltd.
Kramer Simaan Dhillon LLP
Litigation Counsel 120 Adelaide St West, Suite 2100 Toronto, Ontario M5H 1T1 Nathaniel Erskine-Smith – [email protected] Tel: 416.601.6819 Fax: 416.601.0702 Counsel to Atrium Mortgage Investment Corporation
Dale & Lessmann LLP 181 University Avenue Suite 2100 Toronto, Ontario M5H 3M7 David E. Mende Tel: 416.369.7838 Fax: 416.863.1009 E-mail: [email protected] Counsel for First National Financial LP whose first mortgage is registered in the name of Computershare Trust Company of Canada
Oldfield, Greaves, D’Agostino
P.O. Box 16580 172 King Street South Waterloo, Ontario N2J 4X8 Edward L. D’Agostino Tel: 519.576.7200 Fax: 519.576.0131 E-mail: [email protected] Counsel for Macnaughton Hermsen Britton Clarkson Planning Limited
Torkin Manes LLP
151 Yonge Street Suite 1500 Toronto, Ontario M2C 2W7 S. Fay Sulley Tel: 416. 777.5419 Fax: 1.888.587.9143 E-mail: [email protected] Counsel to Almanox Limited
Kramer Simaan Dhillon LLP Litigation Counsel 120 Adelaide St West, Suite 2100 Toronto, Ontario M5H 1T1 Michael Simaan [email protected] Tel: 416.601.0965 Fax: 416.601.0702 Counsel to Windsor Private Capital Inc.
Rosenbaum & Frank LLP
The Exchange Tower 130 King St. W., Suite 1800 Toronto, ON M5X 1E3 Vanessa A. Ibe [email protected] Tel: 416.364.1919 Fax: 416.850.9699 Counsel to Proteck Roofing & Sheet Metal Inc.
Pallett Valo LLP
Lawyers & Trade-Mark Agents 77 City Centre Drive, West Tower, Suite 300 Mississauga, ON L5B 1M5 Alex Ilchenko –[email protected] Tel: 905.273.3300 Fax: 905.273.6920 Counsel to Toronto Children’s Care Inc., operating as Ronald McDonald House Toronto, mortgagee of Gerrard House Inc.
Dickinson Wright LLP 199 Bay Street, Suite 2200 P.O. Box 447, Commerce Court Postal Station Toronto, Ontario M5L 1G4 Mark Shapiro – [email protected] Michael J. Brzezinski - [email protected] Tel – 416-646-4603 Fax – 416-865-1398 Counsel to Florence Leaseholds Ltd., Beatrice Leaseholds Ltd. and ADA Leaseholds Ltd., mortgagees of 1485 Dupont St.
Boghosian + Allen LLP
Litigation Counsel 65 Queen Street West, Suite 1000 Toronto, Ontario M5H 2M5 Rolf M. Piehler – [email protected] Tel – 416.367.5558 Fax – 416.368.1010 Lawyers for Variety Club of Ontario – Tent 28, mortgagee of 14 Trent Avenue and 2 Kelvin Avenue.
Steinberg Morton Hope & Israel LLP
Barristers & Solicitors 5255 Yonge Street Suite 1100 Toronto, Ontario M2N 6P4 David A. Brooker - [email protected] Tel: 416.225.2777 Fax: 416.225.7112 Counsel for Collins Barrow Toronto Limited, court appointed receiver for Global Mills Inc. and Wynford Professional Centre Ltd.
SimpsonWigle Law LLP 501-390 Brant Street Burlington, ON L7R 4J4 Rosemary A. Fisher – [email protected] Tel – 905.639.1052 Fax – 905.333.3960 Counsel to Christine DeJong, Michael DeJong, Christine DeJong Medicine Professional Corporation, C2M2S Holding Corp. and DeJong Homes Inc.
Miller Thomson LLP
5800 Scotia Plaza 40 King Street West Toronto, Ontario M5H 3S1 Margaret R. Sims – [email protected] Jeffrey C. Carhart – [email protected] Tel: 416.595.8615 / 8577 Fax: 416.595.8695 Counsel for Ira Smith Trustee & Receiver Inc., in its capacity as the Court appointed receiver of all of the assets, undertakings and properties of Norma Walton and Ronauld Walton.
Department of Justice
Ontario Regional Office 3400 The Exchange Tower 130 King Street West Toronto, Ontario M5X 1K6 Edward Park – [email protected] Tel: 416.973.3746 Fax: 416.973.0810 Counsel for the Attorney General of Canada
Borden Ladner Gervais LLP 4400 Scotia Plaza 40 King Street West Toronto, Ontario M5H 3Y4 John D. Marshall – [email protected] Tel: 416.367.6024 Fax: 416.361.2763 Counsel for Gideon Levytam and Irene Levytam
Gowling Lafleur Henderson LLP
1 First Canadian Place 100 King Street West Suite 1600 Toronto, Ontario M5X 1G5 E. Patrick Shea – [email protected] Tel: 416.369.7399 Fax: 416.862.7661 Counsel for Peel Education and Tutorial Services Ltd.
6270324
I N D E X
TAB NO. DESCRIPTION PAGE
NUMBER
1. Notice of Motion dated September 1, 2015 1
2. 35st Report of the Manager, Schonfeld Inc. dated July 16, 2015 11
A. Appendix “1” – Endorsement of Justice Newbould dated November 5, 2013 25
B. Appendix “2” – Order of Justice Newbould dated November 5, 2013 44
C. Appendix “3” – Reasons of Justice Brown dated August 12, 2014 62
D. Appendix “4” – Order of Justice Brown dated August 12, 2014 162
E. Appendix “5” – Order dated December 17, 2014 170
F. Appendix “6” – Email exchange between counsel for the Manager and J. Brudner dated May 25 to June 24, 2015 179
G. Appendix “7” – Schedule C Properties Interest Schedule 184
H. Appendix “8” – Order of Justice Newbould dated January 16, 2014 185
Court File No.: CV-13-1 0280-00CL
ONTARIO SUPERIOR COURT OF JUSTICE
(Commercial List)
B E T W E E N:
DBDC SPADINA LTD., and THOSE CORPORATIONS LISTED ON SCHEDULE “A” HERETO
Applicants
- and -
NORMA WALTON, RONAULD WALTON, THE ROSE & THISTLE GROUP LTD. and EGLINTON CASTLE INC.
Respondents
- and -
THOSE CORPORATIONS LISTED IN SCHEDULE “B” HERETO, TO BE BOUND BY THE RESULT
NOTICE OF MOTION
Schonfeld Inc., in its capacity as manager (the “Manager”) of (i) certain companies
listed in Schedule “B” to the Order of Justice Newbould dated November 5, 2013 (the “Schedule
B Companies”), together with the real estate properties owned by the Companies (the “Schedule
B Properties”), as amended by Order of Justice Newbould dated January 16, 2014, and (ii) the
properties listed at Schedule “C” to the Order of Justice Brown dated August 12, 2014 (the
“Schedule C Properties”, together with the Schedule B Properties, the “Properties”) will make
a motion to a judge presiding on the Commercial List on September 8, 2015 at 10:00 a.m., or as
soon after that time as the motion can be heard, at 330 University Avenue, Toronto.
PROPOSED METHOD OF HEARING: The motion is to be heard orally.
1
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THE MOTION IS FOR:
1. an Order:
(a) Authorizing and directing mortgagees having realized net proceeds from the sale
of Schedule “C” Properties (the “Schedule C” Proceeds”) to pay the Schedule C
Proceeds to the Manager;
(b) Appointing the Manager as manager/receiver of the Schedule C Proceeds in
accordance with the terms of the November 5 Order;
(c) Authorizing the Manager to conduct a claims process in respect of the Schedule C
Proceeds in accordance with the Order of Justice Brown dated June 18, 2015 (the
“Claims Procedure Order”);
(d) Requiring that the Dupont Mortgagees (as defined below) provide forthwith an
accounting of the sale of the Property at 1485 Dupont Street, Toronto and pay to
the Manager costs in the amount of $5,000;
(e) Authorizing and directing repayment of $34,710 loaned to the Manager by the
Applicants to fund an insurance policy in respect of the Schedule “C” Properties
(the “Schedule C Policy”), as described below;
(f) Authorizing and directing the Manager to cancel the Schedule C Policy that is
registered in the name of Rose & Thistle and for which there are no properties
currently insured;
(g) Approving the Manager’s disallowance of claims for costs submitted by
contractors in respect of construction liens filed against the Companies; and
(h) Setting a schedule for the resolution of disputes relating to legal costs claimed by
certain construction lien claimants.
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THE GROUNDS FOR THE MOTION ARE:
The Schedule “C” Proceeds
2. In consultation with the Applicants, the Manager determined that no further steps should
be taken in connection with certain Schedule C Properties, while other properties were the
subject of various enforcement proceedings. Accordingly, the Manager sought and was granted
a discharge from eight Schedule C Properties (the “Schedule C Discharge Properties”).
3. After the Manager’s discharge, mortgagees exercised their remedies in respect of the
Schedule C Discharge Properties. Some of these remedies yielded proceeds in excess of the
debts secured against the relevant property.
4. There are numerous claimants to the equity (if any) in each Schedule C Company. The
Applicants assert claims against, and in respect of, the Schedule C Companies that will be the
subject of a hearing scheduled in November 2015. In addition, certain individuals and entities
that invested money with the Waltons claim to be entitled to certain Schedule C Proceeds. The
Waltons also claim to be entitled to proceeds from the sale of Schedule C Properties.
5. Before an equity distribution in respect of the Schedule C Proceeds can be made, it is
necessary to determine what (if any) creditors are owed money by the owners of the Schedule C
Properties.
6. In light of the foregoing, the Manager recommends that a claims process be run to
identify creditors with a claim to the Schedule C Proceeds. The proposed claims process would
be conducted in accordance with the Claims Procedure Order, which is designed as a template
that can be used wherever the Manager determines that a claims process is necessary and
appropriate and has been used successfully to date.
Accounting from Dupont Mortgagees
7. One of the properties from which the Manager sought discharge was the Schedule B
property located at 1485 Dupont Avenue (the “Dupont Property”). Because the Manager was
appointed in respect of both the Schedule B Companies and Schedule B Properties, the
Manager’s mandate continued in respect of the owner of the Dupont Property even after it was
discharged from the property itself. In order to fulfil this mandate, the Manager sought and
3
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obtained an Order dated December 17, 2014 (the “December 17 Order”), requiring that any
mortgagee that sold a Schedule B Property provide a full accounting to the Manager within 14
days of closing the sale.
8. The Dupont Property was sold on or around May 20, 2015 but, despite numerous requests
and the Dupont Mortgagees having been provided with specific notice of their obligations under
the December 17 Order more than three months ago, no accounting has been provided.
Unfortunately, the Manager has concluded that it requires the assistance of the Court to obtain
the necessary accounting.
Schedule C Funding and Insurance
9. All of the Schedule C Properties have either been sold by the Manager or turned over to
mortgagees as part of enforcement proceedings. Accordingly, the policy of insurance held by the
Rose & Thistle Ltd. with Unica Insurance having Policy Number YFHOPC14501 (the
“Schedule C Policy”) in respect of the Schedule C Properties is no longer required and the
Manager respectfully recommends that it be authorized and directed to cancel the Schedule C
Policy.
10. The Manager’s continuation of the Schedule C Policy was funded by a loan from the
Applicants. Accordingly, the Manager also recommends it be authorized and directed to repay
the amounts advanced by the Applicants to fund the Schedule C Policy from the proceeds of sale
of the sale of Schedule C Properties presently held by the Manager.
Costs claims by lien claimants
11. Each time the Manager sold a Property, it obtained an order approving each sale and
vesting any liens (and other encumbrances) off of the title to that Property. Rather than pay
money into Court pursuant to Section 44(1) of the Construction Lien Act, the Manager or its
counsel held an amount in trust equal to the full amount of the claim for lien (the “Claim
Component”) and an additional 25% as security for costs to a maximum of $50,000 (the “Costs
Component”) (together, the “Lien Holdback”). In each case, the Lien Holdback was to be held
pending further order of the Court.
4
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12. Certain lien claimants submitted claims for the Costs Component as part of the
Manager’s claims processes. However, the Manager is of the view that the costs provision of the
Construction Lien Act does not create a new debt that should be paid in the claims process, but
rather provides that a lien claimant is entitled to security for a potential future costs award.
Unless and until costs are awarded, a defendant to a lien claim does not owe costs pursuant to the
Construction Lien Act, or otherwise.
13. The Manager respectfully recommends that a schedule be established for an expeditious
resolution of these issues.
14. Rules 2.03, 3.02, 16 and 37 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.
15. Such further and other grounds as counsel may advise and this Honourable Court permit.
THE FOLLOWING DOCUMENTARY EVIDENCE WILL BE USED AT THE
HEARING OF THE MOTION:
16. The 35th Report of the Manager dated August 27, 2015; and
17. Such further and other material as counsel may advise and this Honourable Court may
permit.
Date: September 1, 2015
GOODMANS LLP 333 Bay Street, Suite 3400 Toronto, Canada M5H 2S7 Mark Dunn LSUC#: 55510L Tel: (416) 979-2211 Fax: (416) 979-1234 Lawyers for the Manager
5
SCHEDULE “A” COMPANIES
1. Dr. Bernstein Diet Clinics Ltd.
2. 2272551 Ontario Limited
3. DBDC Investments Atlantic Ltd.
4. DBDC Investments Pape Ltd.
5. DBDC Investments Highway 7 Ltd.
6. DBDC Investments Trent Ltd.
7. DBDC Investments St. Clair Ltd.
8. DBDC Investments Tisdale Ltd.
9. DBDC Investments Leslie Ltd.
10. DBDC Investments Lesliebrook Ltd.
11. DBDC Fraser Properties Ltd.
12. DBDC Fraser Lands Ltd.
13. DBDC Queen’s Corner Ltd.
14. DBDC Queen’s Plate Holdings Inc.
15. DBDC Dupont Developments Ltd.
16. DBDC Red Door Developments Inc.
17. DBDC Red Door Lands Inc.
18. DBDC Global Mills Ltd.
19. DBDC Donalda Developments Ltd.
20. DBDC Salmon River Properties Ltd.
21. DBDC Cityview Lands Ltd.
22. DBDC Weston Lands Ltd.
23. DBDC Double Rose Developments Ltd.
24. DBDC Skyway Holdings Ltd.
25. DBDC West Mall Holdings Ltd.
26. DBDC Royal Gate Holdings Ltd.
27. DBDC Dewhurst Developments Ltd.
28. DBDC Eddystone Place Ltd.
29. DBDC Richmond Row Holdings Ltd.
6
SCHEDULE “B” COMPANIES
1. Twin Dragons Corporation
2. Bannockburn Lands Inc. / Skyline – 1185 Eglinton Avenue Inc.
3. Wynford Professional Centre Ltd.
4. Liberty Village Properties Ltd.
5. Liberty Village Lands Inc.
6. Riverdale Mansion Ltd.
7. Royal Agincourt Corp.
8. Hidden Gem Development Inc.
9. Ascalon Lands Ltd.
10. Tisdale Mews Inc.
11. Lesliebrook Holdings Ltd.
12. Lesliebrook Lands Ltd.
13. Fraser Properties Corp.
14. Fraser Lands Ltd.
15. Queen’s Corner Corp.
16. Northern Dancer Lands Ltd.
17. Dupont Developments Ltd.
18. Red Door Developments Inc. and Red Door Lands Ltd.
19. Global Mills Inc.
20. Donalda Developments Ltd.
21. Salmon River Properties Ltd.
22. Cityview Industrial Ltd.
23. Weston Lands Ltd.
24. Double Rose Developments Ltd.
25. Skyway Holdings Ltd.
26. West Mall Holdings Ltd.
27. Royal Gate Holdings Ltd.
28. Royal Gate Nominee Inc.
29. Royal Gate (Land) Nominee Inc.
30. Dewhurst Development Ltd.
31. Eddystone Place Inc.
7
32. Richmond Row Holdings Ltd.
33. El-Ad (1500 Don Mills) Limited
34. 165 Bathurst Inc.
8
SCHEDULE “C” PROPERTIES
1. 3270 American Drive, Mississauga, Ontario
2. 0 Luttrell Ave., Toronto, Ontario
3. 2 Kelvin Avenue, Toronto, Ontario
4. 346 Jarvis Street, Suites A, B, C, E and F, Toronto, Ontario
5. 1 William Morgan Drive, Toronto, Ontario
6. 324 Prince Edward Drive, Toronto, Ontario
7. 24 Cecil Street, Toronto, Ontario
8. 30 and 30A Hazelton Avenue, Toronto, Ontario
9. 777 St. Clarens Avenue, Toronto, Ontario
10. 252 Carlton Street and 478 Parliament Street, Toronto, Ontario
11. 66 Gerrard Street East, Toronto, Ontario
12. 2454 Bayview Avenue, Toronto, Ontario
13. 319-321 Carlaw, Toronto, Ontario
14. 260 Emerson Ave., Toronto, Ontario
15. 44 Park Lane Circle, Toronto, Ontario
16. 19 Tennis Crescent, Toronto, Ontario
17. 646 Broadview, Toronto, Ontario
9
DBDC SPADINA LTD. ET AL
Applicants
and NORMA WALTON ET AL Respondents
Court File No: CV-13-10280-00CL
ONTARIO SUPERIOR COURT OF JUSTICE
(Commercial List)
Proceeding commenced at TORONTO
NOTICE OF MOTION
GOODMANS LLP Barristers & Solicitors 333 Bay Street, Suite 3400 Toronto, Canada M5H 2S7
Mark Dunn LSUC#: 55510L Tel: 416.979.2211 Fax: 416.979.1 234 Lawyers for the Manager
10
Court File No.: CV-13-1 0280-00CL
ONTARIO SUPERIOR COURT OF JUSTICE
(Commercial List)
B E T W E E N:
DBDC SPADINA LTD., and THOSE CORPORATIONS LISTED ON SCHEDULE “A” HERETO
Applicants
- and -
NORMA WALTON, RONAULD WALTON, THE ROSE & THISTLE GROUP LTD. and EGLINTON CASTLE INC.
Respondents
- and -
THOSE CORPORATIONS LISTED IN SCHEDULE “B” HERETO, TO BE BOUND BY THE RESULT
35th REPORT OF THE MANAGER, SCHONFELD INC. (Motion to authorize a claims process in respect of certain Schedule C Properties and other
relief returnable September 8, 2015)
11
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Contents
I. Introduction ..........................................................................................................................2
A. Purpose of this Report ..............................................................................................2
B. Terms of reference ...................................................................................................3
C. Background ..............................................................................................................3
D. The Schedule “C” Proceeds .....................................................................................4
II. Accounting from Dupont Mortgagees .................................................................................6
III. Schedule C Funding and Insurance......................................................................................7
IV. Costs claims by lien claimants .............................................................................................7
V. Conclusions and Recommendations ..................................................................................10
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I. Introduction
1. This is the 35th Report of Schonfeld Inc. (the “Manager”) in its capacity as Manager of (i)
certain companies listed at Schedule “B” to the Order of Justice Newbould dated November 5,
2013 (the “Schedule B Companies”),1 together with the properties owned by those companies
(the “Schedule B Properties”); and (ii) the properties listed at Schedule “C” to the Judgment and
Order of Justice Brown dated August 12, 2014 (the “Schedule C Properties” and together with
the Schedule B Properties, the “Properties”).
A. Purpose of this Report
2. The Manager has brought a motion for certain relief including an Order:
(a) Authorizing and directing mortgagees having realized net proceeds from the sale
of Schedule “C” Properties (the “Schedule‘C Proceeds”) to pay the Schedule C
Proceeds to the Manager;
(b) Appointing the Manager as manager/receiver of the Schedule C Proceeds in
accordance with the terms of the November 5 Order;
(c) Authorizing the Manager, to conduct a claims process in respect of the Schedule
C Proceeds in accordance with the Order of Justice Brown dated June 18, 2015
(the “Claims Procedure Order”);
(d) Requiring that the Dupont Mortgagees (as defined below) provide forthwith an
accounting of the sale of the Property at 1485 Dupont Street, Toronto and pay to
the Manager costs in the amount of $5,000;
(e) An Order authorizing and directing repayment of $34,710 loaned to the Mangaer
by the Applicants to fund an insurance policy in respect of the Schedule “C”
Properties (the “Schedule C Policy”), as described below;
1 Schedule “B” was amended by Order dated January 16, 2014.
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(f) An Order authorizing and directing the Manager to cancel the Schedule C Policy
that is registered in the name of Rose & Thistle and for which there are no
properties currently insured;
(g) An Order setting a schedule for the resolution of disputes relating to legal costs
claimed by certain construction lien claimants, as described below.
B. Terms of reference
3. Based on its review and interaction with the parties to date, nothing has come to the
Manager’s attention that would cause it to question the reasonableness of the information
presented herein. However, the Manager has not audited, or otherwise attempted to
independently verify, the accuracy or completeness of any financial information of the Schedule
B Companies or of the companies that own the Schedule C Properties (the “Schedule C
Companies”, and collectively with the Schedule B Companies, the “Companies”). The Manager
therefore expresses no opinion or other form of assurance in respect of any of the Companies’
financial information that may be in this Report.
C. Background
4. The Schedule B Companies are a group of real estate development corporations
incorporated as part of a series of joint ventures between Dr. Stanley Bernstein and companies
that he controls (the “Bernstein Group”) and Norma and Ronauld Walton and entities that they
control (the “Walton Group”). Most of the Schedule B Companies were incorporated to
purchase and develop a particular Schedule B Property.
5. In the summer and fall of 2013, the relationship between the Walton Group and the
Bernstein Group broke down amid allegations that the Walton Group had, among other things,
placed mortgages on jointly-held properties without the Bernstein Group’s consent and failed to
provide reporting required by the agreements that govern the joint venture. The dispute between
the Walton Group and Bernstein Group is described in more detail in the Endorsement of Justice
Newbould dated November 5, 2013, which is attached as Appendix “1”.
6. Pursuant to the Order of Justice Newbould dated November 5, 2013 (the “November 5
Order”), which is attached as Appendix “2”, the Manager was appointed to provide independent
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management of the Schedule B Companies and the Schedule B Properties for the benefit of all
stakeholders.
7. By Order entered on June 4, 2014, the Manager was directed by the Court to hold the net
proceeds of the sale of the Front Street Property (as defined below) pending completion of a
claims process to be approved upon a further motion before the Court.
8. The Manager’s mandate was further expanded to include certain other real estate
properties owned by the Walton Group, being the Schedule C Properties, pursuant to the Reasons
of Justice Brown dated August 12, 2014, which are attached as Appendix “3”, and the Judgment
and Order of Justice Brown dated August 12, 2014 (the “August 12 Order”), which is attached as
Appendix “4”.
II. The Schedule “C” Proceeds
9. The August 12 Order provided that the terms of the November 5 Order applied to the
Schedule C Properties except that the stay of proceedings set out in the November 5 Order did
not apply to certain mortgagees having registered charges against the Schedule C Properties (the
“Schedule C Mortgagees”).
10. Certain Schedule C Mortgagees exercised various remedies in respect of certain Schedule
C Properties. The Applicants agreed to fund the Manager’s costs in respect of the Schedule C
Properties while the Manager and the Applicants assessed which properties should be marketed
and sold by the Manager but were not prepared to fund expenses relating to properties that were
the subject of mortgagee enforcement proceedings. In consultation with the Applicants, the
Manager determined that no further steps should be taken in connection with certain Schedule C
Properties. Other properties were the subject of various enforcement proceedings. Accordingly,
the Manager sought and was granted a discharge from eight Schedule C Properties (the
“Schedule C Discharge Properties”).
11. After the Manager’s discharge, mortgagees exercised their remedies in respect of the
Schedule C Discharge Properties. Some of these remedies yielded proceeds in excess of the
debts secured against the relevant property. These amounts are summarized in the chart below:
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Company/Owner Property Funds received from mortgagee
Funds held by mortgagee (approx.)
St. Clarens Holdings 777 St. Clarens $ 630,000
Emerson Development
260 Emerson $ 270,000
Walton 44 Park Lane $ 425,000
United Empire Lands 3270 American Drive $ 1,803,000
12. In the ordinary course (ie., if the owners of the relevant companies continued to operate)
these proceeds would be paid by the mortgagee (or the receiver appointed by the mortgagee, as
appropriate) to the owner. However, the companies that own the Schedule C Properties (each of
which had no business apart from the relevant company and now has no assets at all) are not
operating and the Waltons (who are the registered owners of most or all of the shares of each
Schedule C Company) are in personal receivership.
13. There are numerous claimants to the equity (if any) in each Schedule C Company. The
Applicants assert claims against, and in respect of, the Schedule C Companies that will be the
subject of a hearing scheduled in November 2015. In addition, certain individuals and entities
that invested money with the Waltons claim to be entitled to certain Schedule C Proceeds. The
Waltons also claim to be entitled to proceeds from the sale of Schedule C Properties.
14. Before an equity distribution in respect of the Schedule C Proceeds can be made, it is
necessary to determine what (if any) creditors are owed money by the owners of the Schedule C
Properties.
15. In light of the foregoing, the Manager recommends that a claims process be run to
identify creditors with a claim to the Schedule C Proceeds. The proposed claims process would
be conducted in accordance with the Claims Procedure Order., which is designed as a template
that can be used wherever the Manager determines that a claims process is necessary and
appropriate and has been used successfully to date.
16
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III. Accounting from Dupont Mortgagees
16. As described above, the Manager has sought its discharge from properties where the
mortgagee has exercised enforcement remedies. One such property is the Schedule B Property
located at 1485 Dupont Avenue (the “Dupont Property”). The Manager was appointed in respect
of both the Schedule B Companies and the Schedule B Properties so its mandate continued in
respect of the owner of the Dupont Property even after it was discharged from the property itself.
In order to ensure that it could fulfill its mandate, and that mortgagees’ remained accountable for
the results of their enforcement efforts, the Manager sought and obtained an Order dated
December 17, 2014 (the “December 17 Order”), which is attached as Appendix “5”, requiring
that any mortgagee that sold a Schedule B Property provide a full accounting to the Manager
within 14 days of closing the sale.
17. On or around May 25, 2015, the Manager learned that the Dupont Property had been
sold. Accordingly, the Manager wrote to counsel to the Dupont Mortgagees to confirm that the
sale had closed, confirm that the fees allocated to the Dupont Property pursuant to the Order of
Justice Newbould dated April 20, 2015 would be paid immediately (or on closing, if the sale had
not yet closed) and that a full accounting would be provided in accordance with the December 17
Order within 14 days. Counsel advised that they were not acting on the sale and asked that the
Manager’s counsel contact the Dupont Mortgagees’ agent, Jack Brudner, directly. Accordingly,
the Manager’s counsel forwarded the request for confirmation to Mr. Brudner on May 25, 2015.
18. Mr. Brudner responded on June 9, 2015 to request a copy of the December 17, 2014
(which was made on notice to the Dupont Mortgagees). A copy of the Order, together with a
reference to the relevant paragraph was provided to him. On June 24, 2015, Mr. Brudner
promised an accounting that week or the following week. The exchange between counsel for the
Manager and Mr. Brudner is attached as Appendix “6”.
19. Despite Mr. Brudner’s assurance, and the Dupont Mortgagees having been provided with
specific notice of their obligation to deliver an accounting more than three months ago, no
accounting has been provided.
20. In light of the foregoing, the Manager determined that the assistance of the Court is
required to secure an accounting in respect of the Dupont Property. In addition, the Manager
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respectfully submits that, in the circumstances, it is appropriate for the Dupont Mortagees to pay
the costs of the Manager’s motion to compel an accounting on a substantial indemnity basis.
IV. Schedule C Funding and Insurance
21. When it was appointed to be manager/receiver of the Schedule C Properties, the Manager
decided that it should continue a policy of insurance held by the Rose & Thistle Ltd. (“Rose &
Thistle”) with Unica Insurance having Policy Number YFHOPC14501 (the “Schedule C
Policy”) in respect of the Schedule C Properties. The Manager cancelled coverage of individual
properties, but the insurer requested that the Manager cancel the policy outright. The policy is
in the name of Rose & Thistle, which is not part of the Manager’s mandate. Accordingly, the
Manager requires specific authorization to cancel it.
22. The Manager’s continuation of the Schedule C Policy was funded by a loan from the
Applicants, as set out in the schedule set out in the interest schedule attached as Appendix “7”.
23. All of the Schedule C Properties have either been sold by the Manager or turned over to
mortgagees as part of enforcement proceedings. Accordingly, the Schedule C Policy is no longer
required and the Manager respectfully recommends that it be authorized and directed to cancel
the Schedule C Policy.
24. The Manager also recommends it be authorized and directed to repay the amounts
advanced by the Applicants to fund the Schedule C Policy from the proceeds of sale of the sale
of Schedule C Properties presently held by the Manager.
V. Costs claims by lien claimants
25. The Manager partially disallowed claims for costs relating to construction lien actions
commenced after the appointment of the Manager. Each of the underlying lien actions was
stayed and did not progress past the filing of the statement of claim, but each of the claimants
asserts an entitlement to costs equal to 25% of the value of the lien or equal to their full
indemnity costs. The Manager disallowed these claims on the basis that the lien claimants are
not owed any debt by the relevant Companies and the costs claims appear to be premised on
what is, in the Manager’s view, an incorrect interpretation of the Construction Lien Act. The
context underlying these Disputed Claims, and the Manager’s rationale for the partial
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disallowances in issue, are described below. That rationale was also described in the
Supplementary Report to the Manager’s 22nd Report but the Manager delayed bringing the issue
on for a hearing because it received further claims asserting essentially the same argument.
26. The Manager respectfully recommends that a schedule be established for an expeditious
resolution of the issues described below.
27. In the period that preceded the appointment of the Manager on November 5, 2013, a
number of contractors working on the Properties were not paid for some or all of their work.
Many of these contractors registered liens pursuant to the Construction Lien Act. The
Construction Lien Act requires that a lien claimant register a lien on title to preserve their claim
and then commence an action and (in some cases) register a certificate of action on title in order
to perfect its lien. If a lien is not perfected within the prescribed period then the relevant lien
expires.
28. The November 5 Order included a stay of proceedings against the Companies but
provided that its terms did not operate to “prevent the filing of any registration to preserve or
perfect a security interest” or “prevent the registration of a claim for lien.” The Manager has,
from the inception of these proceedings, taken the position that lien claimants were entitled to
commence actions to perfect their security interests but that the stay of proceedings imposed by
the November 5 Order precluded further steps in any of the construction lien actions. This
position was clarified in the Order of Justice Newbould dated January 16, 2014 (the “January 16
Order”) and attached as Appendix “8”, which provided that
4. THIS COURT ORDERS that persons claiming to be entitled to liens under the Construction Lien Act, R.S.O. 1990, c.C.30 are hereby granted relief from the stay provisions of the November 5 Order solely to allow them to register claims for liens against the Properties and to issue and serve statements of claim to perfect and protect their alleged security interests.
29. The practical effect of the November 5 Order and January 16 Order was that many
companies registered liens against the Properties and commenced actions to perfect these liens
but none of these actions proceeded any further.
30. Many of the Properties that the Manager and mortgagees sold have had construction liens
registered against them. If these Properties were to be sold outside of a court supervised process,
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then the liens would have to be vacated either: (i) with the consent of the lien claimant; or (ii) by
paying money into Court pursuant to section 44(1) of the Construction Lien Act. Section 44(1)
of the Construction Lien Act allows any person to seek an order vacating a claim for lien from
title upon paying into court an amount comprised of two components: (i) the full amount of the
claim for lien (the “Claim Component”); and (ii) an additional 25% as security for costs to a
maximum of $50,000 (the “Costs Component”).
31. Each time the Manager sold a Property, it obtained an order approving each sale and
vesting any liens (and other encumbrances) off of the title to that Property. Rather than pay
money into Court pursuant to Section 44(1) of the Construction Lien Act, the Manager or its
counsel held an amount in trust equal to the Claim Component and the Costs Component (the
“Lien Holdback”). In each case, the Lien Holdback was to be held pending further order of the
Court.
32. The Disputed Costs Claims appear to be based on the premise that section 44(1) of the
Construction Lien Act entitles a lien claimant to a costs award equal to 25% of its claim and that
the lien claimants are entitled to the Costs Component as of the Lien Holdback as a matter of
right. Having consulted with its counsel, the Manager does not agree. The Construction Lien
Act, provides that a lien claimant is entitled to security for a potential future costs award. Unless
and until costs are awarded, a defendant to a lien claim does not owe costs pursuant to the
Construction Lien Act, or otherwise.
33. More specifically, section 44(1) outlines the purpose of both the Claim Component and
the Cost Component. It explicitly states that the Costs Component is paid as security for costs:
Without notice
44. (1) Upon the motion of any person, without notice to any other person, the court shall make an order vacating,
(a) where the lien attaches to the premises, the registration of a claim for lien and any certificate of action in respect of that lien; or
(b) where the lien does not attach to the premises, the claim for lien,
20
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SCHEDULE “A” COMPANIES
1. Dr. Bernstein Diet Clinics Ltd.
2. 2272551 Ontario Limited
3. DBDC Investments Atlantic Ltd.
4. DBDC Investments Pape Ltd.
5. DBDC Investments Highway 7 Ltd.
6. DBDC Investments Trent Ltd.
7. DBDC Investments St. Clair Ltd.
8. DBDC Investments Tisdale Ltd.
9. DBDC Investments Leslie Ltd.
10. DBDC Investments Lesliebrook Ltd.
11. DBDC Fraser Properties Ltd.
12. DBDC Fraser Lands Ltd.
13. DBDC Queen’s Corner Ltd.
14. DBDC Queen’s Plate Holdings Inc.
15. DBDC Dupont Developments Ltd.
16. DBDC Red Door Developments Inc.
17. DBDC Red Door Lands Inc.
18. DBDC Global Mills Ltd.
19. DBDC Donalda Developments Ltd.
20. DBDC Salmon River Properties Ltd.
21. DBDC Cityview Lands Ltd.
22. DBDC Weston Lands Ltd.
23. DBDC Double Rose Developments Ltd.
24. DBDC Skyway Holdings Ltd.
25. DBDC West Mall Holdings Ltd.
26. DBDC Royal Gate Holdings Ltd.
27. DBDC Dewhurst Developments Ltd.
28. DBDC Eddystone Place Ltd.
29. DBDC Richmond Row Holdings Ltd.
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SCHEDULE “B” COMPANIES 1. Twin Dragons Corporation
2. Bannockburn Lands Inc. / Skyline – 1185 Eglinton Avenue Inc.
3. Wynford Professional Centre Ltd.
4. Liberty Village Properties Inc.
5. Liberty Village Lands Inc.
6. Riverdale Mansion Ltd.
7. Royal Agincourt Corp.
8. Hidden Gem Development Inc.
9. Ascalon Lands Ltd.
10. Tisdale Mews Inc.
11. Lesliebrook Holdings Ltd.
12. Lesliebrook Lands Ltd.
13. Fraser Properties Corp.
14. Fraser Lands Ltd.
15. Queen’s Corner Corp.
16. Northern Dancer Lands Ltd.
17. Dupont Developments Ltd.
18. Red Door Developments Inc. and Red Door Lands Ltd.
19. Global Mills Inc.
20. Donalda Developments Ltd.
21. Salmon River Properties Ltd.
22. Cityview Industrial Ltd.
23. Weston Lands Ltd.
24. Double Rose Developments Ltd.
25. Skyway Holdings Ltd.
26. West Mall Holdings Ltd.
27. Royal Gate Holdings Ltd.
28. Dewhurst Development Ltd.
29. Eddystone Place Inc.
30. Richmond Row Holdings Ltd.
31. El-Ad Limited
32. 165 Bathurst Inc.
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SCHEDULE “C” PROPERTIES
1. 3270 American Drive, Mississauga, Ontario
2. 0 Luttrell Ave., Toronto, Ontario
3. 2 Kelvin Avenue, Toronto, Ontario
4. 346 Jarvis Street, Suites A, B, C, E and F, Toronto, Ontario
5. 1 William Morgan Drive, Toronto, Ontario
6. 324 Prince Edward Drive, Toronto, Ontario
7. 24 Cecil Street, Toronto, Ontario
8. 30 and 30A Hazelton Avenue, Toronto, Ontario
9. 777 St. Clarens Avenue, Toronto, Ontario
10. 252 Carlton Street and 478 Parliament Street, Toronto, Ontario
11. 66 Gerrard Street East, Toronto, Ontario
12. 2454 Bayview Avenue, Toronto, Ontario
13. 319-321 Carlaw, Toronto, Ontario
14. 260 Emerson Ave., Toronto, Ontario
15. 44 Park Lane Circle, Toronto, Ontario
16. 19 Tennis Crescent, Toronto, Ontario
17. 646 Broadview, Toronto, Ontario
6486490
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DBDC SPADINA LTD., et al Applicants
NORMA WALTON, et al Respondents
Court File No. CV-13-10280-00CL
ONTARIO SUPERIOR COURT OF JUSTICE
Commercial List
Proceeding commenced at Toronto
MOTION RECORD OF THE MANAGER,
SCHONFELD INC. (Motion to authorize a claims process in respect of certain Schedule C Properties and other relief
returnable September 8, 2015)
GOODMANS LLP Barristers & Solicitors Bay Adelaide Centre 333 Bay Street, Suite 3400 Toronto, Canada M5H 2S7
Brian Empey LSUC#: 30640G Mark S. Dunn LSUC#: 55510L Tel: (416) 979-2211 Fax: (416) 979-1234 Lawyers for The Manager File No. 14-0074
6488637
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