2013 QCCQ 13021, 2013 QCCQ 13021

1167 Caledonia inc. c. Zafran 2013 QCCQ 13021 COURT OF QUEBEC CANADA PROVINCE OF QUEBEC DISTRICT OF MONTREAL CIVIL Division No: 500-22-174666-100 DATE: October 18, 2013 ______________________________________________________________________ BY THE HONOURABLE ELIANA MARENGO, J.C.Q. ______________________________________________________________________ 1167 CALEDONIA INC. Plaintiff v. MORTY ZAFRAN and ZAFRAN HOLDINGS INC.

Defendants and SOL KALISKY ALAN PAGE DAVID PERLIN FARHAT AHMAD HARRY FELDMAN SYDNEY LEVITSKY MICHAEL SIMONETTA RALPH GINZBURG SHELDON DERRICK ESTATE RICHARD KLINE and PHILLIPS FRIEDMAN KOTLER Defendants in forced intervention ____________________________________________________________________ JUDGMENT RENDERED FROM THE BENCH ______________________________________________________________________ The written version of this judgment contains minor clerical modifications, for clarity's sake.

A) MOTION FOR DISAVOWAL [ 1 ] WHEREAS , in May, 2006, 1167 Caledonia Inc. (hereafter "Caledonia") was appointed nominee by the individuals and companies collectively designated as "the Owner" in nominee agreement D-2; [ 2 ] WHEREAS said agreement specifically sets out what Caledonia was empowered to do; [ 3 ] WHEREAS said agreement states that Caledonia "(had) no legal or beneficial interest in or to the Real Property"; [ 4 ] WHEREAS it is clear that Caledonia was not empowered to take legal action, except upon the request of the co-owners holding a majority of the then issued and outstanding units of 1167 Caledonia Road Property Co-Ownership (section 7 of the agreement); [ 5 ] WHEREAS there is no evidence of any such request; [ 6 ] WHEREAS , therefore, Caledonia's motion for disavowal is illegal, for lack of interest and appropriate authorization; [ 7 ] WHEREAS, in par. 7 of their plea, defendants themselves admitted the following: « 7.

La demanderesse n'a toujours agi, à

titre de prête-nom, qu'aux fins de la gestion et de la disposition de l'immeuble situé au 1167 Caledonia, Toronto, Ontario, comme en fait foi le « Nominee Agreeement » dont copie est produite avec les présentes pour en faire

partie intégrante comme pièce D-2. » [ 8 ] WHEREAS said defendants further underlined sections 2, 4, 5 and 8 thereof; [ 9 ] WHEREAS , as the saying goes, "What's good for the goose, is good for the gander"; [ 10 ] WHEREAS Caledonia was without interest and capacity to file the motion for disavowal, as above stated; [ 11 ] WHEREAS , what is more, defendant's attorney placed himself in an untenable and conflictual situation, by representing both the defendants in the principal action, as well as Caledonia, who is plaintiff in the principal action, in the motion for disavowal; [ 12 ] WHEREAS , in the Court's view, this is a nonsensical way to proceed; [ 13 ] WHEREAS a lawyer cannot dance between the parties in the same action, and choose a partner depending on the nature of the motion or proceeding presented and the conclusions sought; [ 14 ] WHEREAS one is hard-pressed to find a logical reason for doing so, especially given the judgment rendered by the Honourable Michel A.

Pinsonnault, on July 15, 2011, with respect to defendants' motion for forced intervention, and given that the issues and arguments raised in the motion for disavowal, dated May 21, 2013, are those contained in defendants' plea, dated January 25, 2011; [ 15 ] GIVEN, also, the tardiness of the motion, which seems to be a last ditch effort to avoid a trial; [ 16 ] WHEREAS it would indeed appear, as pleaded by the « mises en cause » in said motion, namely Phillips Friedman Kotler and Me Sydney Cutler, that the motion for disavowal was presented in an attempt to do indirectly, what the Honourable Pinsonnault decided defendants could not do directly, namely: « ORDONNER à l'étude Phillips Friedman Kotler et à Me Sydney Cutler de cesser immédiatement d'agir au nom de la demanderesse/requérante »; [ 17 ] WHEREAS this was a clumsy way to attempt to circumvent the trial on the merits, and an ineffective way at that; [ 18 ] WHEREAS , lastly, the motion for disavowal is unfounded, as, in essence, it is defendants who are asking for the disavowal of plaintiff's attorney, albeit they are wearing Caledonia's hat to do so, that which they cannot do under s. 243 C.P.C.; WHEFORE THE COURT, HEREBY : DISMISSES the motion for disavowal as amended; THE WHOLE , with costs (to be paid by defendants Morty Zafran and Zafran Holdings Inc.).

B) THE MERITS [ 19 ] As to the merits, the action is unfounded, for the same reasons as given above, with respect to the absence of interest and capacity. Caledonia did not institute the action in accordance with the terms and conditions of nominee agreement D-2 (sections 3 & 7 of the agreement, art. 1427 C.C.Q.). More specifically, the Court is not convinced that Caledonia acted upon the request of the co-owners holding a majority of the then issued and outstanding units of 1167 Caledonia Road Property Co-ownership.

No written instructions and directions or resolutions were produced to this effect. [ 20 ] Certainly the adoption of a motion to authorize the lawsuit (instituted on September 30, 2010) post facto, namely on January 31, 2012, is irregular and contrary to the spirit and the letter of the nominee agreement. [ 21 ] Furthermore, of all the below-mentioned witnesses, only Sol Kalisky confirmed that he gave instructions to plaintiff's lawyers to institute proceedings.

[ 22 ] What is more, Michael Simonetta (page 56 of the transcript) stated that the prospect of suing defendants was only "discussed amongst the co-owners in general and not within 157 particularly". [ 23 ] As well, Ralph Ginzburg (page 78 of the transcript) stated that he personally did nothing in this regard. [ 24 ] When Luciano D'Ignazio was asked in cross-examination if he participated in taking the proceedings, he nebulously answered that he was not the "first one up front" (page 94 of the transcript). [ 25 ] It should also be noted that demand letter P-1 only specifically refers to Sol Kalisky and does not break-down the majority of stakeholders referenced therein. [ 26 ] As Me Cutler stated this morning, it is not sufficient to justify one's actions by saying, "I spoke to so and so, and it's OK".

This was a fight between co-owners, and written instructions were necessary to proceed in accordance with the nominee agreement; and, as the Court said this morning, "What's good for the goose is good for the gander". [ 27 ] As for the cross-demand, it is also dismissed. [ 28 ] Defendants, who had the burden of proof, did not show, by preponderance of evidence, firstly, that defendant Zafran was publicly accused of fraud or theft. In fact, the Honourable Pinsonnault himself categorized the action as being a « recours en répétition de l'indu ».

This is a far cry from assimilating the language of the introductory motion to fraud and theft. [ 29 ] Secondly, there is no evidence that

a) plaintiff wilfully attacked Zafran's reputation, or that

b) Zafran sustained any concrete and quantifiable damages causally linked to plaintiff's actions. [ 30 ] The Court understands that Zafran felt vexed and insulted by the recriminations of several individuals involved in or affected by the sale of the property, regarding more specifically the fee paid to Zafran Holdings; however, Zafran's perception of the events is purely subjective. In fact, the Court heard several witnesses, who confirmed that they were strongly opposed to said payment being made without their prior knowledge or consent.

Those witnesses are Michael Simonetta; Sheldon Derrick; Luciano D'Ignazio; David Perlin; Sydney Levitsky; and Sol Kalisky. [ 31 ] There is ample evidence, therefore, that there truly was widespread dissension amongst the ranks, which only goes to show that the genesis of the action, albeit improper for other reasons, was based on fact, not fiction; nor is there any evidence of bad faith or of an intrinsic desire, by plaintiff, to sue in order to harm. [ 32 ] This case does not, therefore, meet the criteria for the granting of extrajudicial costs, and no damages shall be awarded in this regard. [ 33 ] As stated in Groupe Guy Pépin inc. c.

Nova PB inc. [1] , which refers back to Viel c. Les entreprises immobilières du terroir ltée [2] , one would need to show: « le cas où la contestation judiciaire est, au départ de mauvaise foi, soit en demande ou en défense. », which is not the case here (and need I remind defendants that good faith is always presumed, art. 2805 C.C.Q.?); or « le cas lorsqu’une

partie de mauvaise foi, multiplie les procédures, poursuit inutilement et abusivement un débat judiciaire. », which is not the case here; or the case of: « Une

partie (qui) s'aperçoit de son erreur et poursuit inutilement le débat judicaire. », which again is not the case here; even if, at the end of the day, the Court has decided that the action is unfounded.

As we all know, one must distinguish between « l'abus de droit sur le fond du litige et l'abus de droit d'ester en justice. » [3] [ 34 ] Respectfully submitted, this is a sad case of respectable, hard-working and honest individuals and professionals, who got caught in a web of miscommunications and human emotions, and who were perhaps a little too eager to use the nominee agreement and litigation as vehicles to wash their dirty laundry, so to speak, and assuage their bruised egos.

It is the Court's conviction, however, that they did so without malice, ill intent or bad faith. [ 35 ] As for the lawyers, they were simply doing their jobs. [ 36 ] Despite the Court's best efforts, its attempts to convince the parties to settle out of Court, fell upon deaf ears. [ 37 ] Hopefully, all involved will now find it within themselves to move on to greener pastures. WHEREFORE THE COURT HEREBY: DISMISSES both the demand and the cross-demand, each party paying its own costs. __________________________________ ELIANA MARENGO, J.C.Q.

Me Sidney Cutler Me Tetiana Gerych Phillips Friedman Kotler Attorneys for Plaintiff Me Gilles Poulin Attorney for Defendants Dates of hearing: May 22, October 16, 17 and 18, 2013