IN THE SUPREME COURT OF BRITISH COLUMBIA
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Citation: |
Fleischer Estate v. Straiton Development Corporation, |
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2017 BCSC 1775 |
Date: 20171003
Docket: S179364
Registry: New Westminster
Between:
Gundhart Fleischer, deceased, by his litigation representative,
Sheila Low, Sheila Low and
Abby Mews Development Corporation
Plaintiffs
And
Straiton Development Corporation
Defendants
Before: The Honourable Mr. Justice Jenkins
Reasons for Judgment in Chambers
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Counsel for the Plaintiffs: |
D. Donohoe |
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Counsel for the Defendants: |
G. Crickmore |
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Place and Date of Hearing: |
New Westminster, B.C. March 23 and 29, 2017 |
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Written Submissions: |
April 7, 2017 |
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Place and Date of Judgment: |
New Westminster, B.C. October 3, 2017 |
[1] In this Notice of Application, the plaintiffs seek to add three numbered companies and a fourth company, Star 18 Enterprises Inc. (“Star 18”) as defendants and to substantially amend the Notice of Civil Claim under Supreme Court Civil Rules, [the ”Rules”] 6-1(1) and (2). The factual background which has brought the parties to this point is very complex and relates to a joint venture established in respect of a real estate development in Abbotsford, BC. There are several issues between the parties:
1. Can the three numbered companies - 0746149 B.C. Ltd., 0746154 B.C. Ltd. and 0746157 B.C. Ltd. - collectively referred to as the “Krahn Group” - be added as defendants?
2. Can Star 18 be added as a defendant?
[2] Other complications include two other related proceedings in this court relating to the dealings between these parties. The first is an interpleader application brought by the Krahn Group in Vancouver Action No. S136210 which resulted in an order of Mr.Justice McEwan made April 11, 2016, for payment into court of $1,286,706. A further order of Madam Justice Fleming made April 11, 2017, provided for payment out of court of the sum of $709,206 for Abby Mews with the balance of $577,500 to remain in court. The order of April 11, 2017, also provided:
2. The remaining relief sought in the Notice of Application, specifically the determination of entitlement to the Funds between the Applicant Abby Mews Corporation and the Respondents Sheila Low and Gundhardt Fleischer, is adjourned generally.
[3] Finally, Mr. Crickmore, counsel for Star 18, submitted he also represents the plaintiff Abby Mews. What results is a very complicated set of facts which must be considered in coming in considering this application to amend and add parties to this action.
[4] Prior to February 2006, Abby Mews was the owner and developer of property in Abbotsford. Abby Mews was owned by Gundhardt Fleischer and Sheila Low.
[5] On February 8, 2006, Abby Mews, the defendant Straiton Development Corporation (“Straiton”) and the Krahn Group entered into a joint venture agreement (the “JVA”) under which Straiton became the owner and developer of the Abbotsford property. The original shareholders in Straiton were Abby Mews and the Krahn Group, each holding 50% of the shares in Straiton.
[6] The Krahn Group was to arrange financing for development of the property. All profits realized from the property were to be held by Straiton in trust for Abby Mews and the Krahn Group.
[7] On September 17, 2008, Star 18, a company owned and controlled by Mr. Harry Cassel, purchased 90% of the shares of Abby Mews from Ms. Low and Mr. Fleischer.
[8] On April 30, 2010, Star 18 purchased the remaining 10% of shares in Abby Mews from Ms. Low and Mr. Fleischer. The agreement of April 30, 2010, included an assignment clause, which stated:
3. Claim Against 0746149 B.C. Ltd., 0746154 B.C. Ltd., 0746157 B.C. Ltd. and Straiton Development Corp.
The Shareholders have notified Star 18 that Abby Mews has a claim against 0746149 B.C.Ltd., 0746154 B.C. Ltd., 0746157 B.C. Ltd. and their respective principals and Straiton Development Corp. in connection with an unpaid portion of the purchase price in amount of approximately $600,000 arising from the disposition by Abby Mews of the property which is the subject of the Straiton Joint Venture.
Star 18 has agreed to allow the Shareholders to advance such claim on behalf of Abby Mews and to authorize and empower the Shareholders to proceed with such a claim at such time as the Shareholders elect to do so provided that in proceeding with such claim, the costs of doing so shall be borne by the Shareholders and the Shareholders shall be liable for and shall indemnify Abby Mews from and against any damages, costs and expenses incurred by Abby Mews in connection with the Shareholders advancing such claims. All proceeds or compensation accruing to Abby Mews as a result of such claim shall be for the sole and exclusive benefit of the Shareholders . . .
The agreement of April 30, 2010 made reference to the “First Profit Funds” which are the funds assigned to Mr. Fleischer and Ms. Low referred to in paragraph 3 above. The “Shareholders” referred to in the agreement of April 30, 2010, were Ms. Lee and Mr. Fleischer.
[9] On April 11, 2012, KNK Investments Inc., another Krahn company, and Abrak Krahn entered into a settlement agreement with Gundhardt Fleischer and Sheila Low, among others. The April 11, 2012, agreement included the following clauses:
Representations and Warranties of Fleischer and Low
1. e) notwithstanding that para. 3 of the Second Sale Agreement refers the First Profit Funds being the sume of “approximately $600,000”, the actual amount of the First Profit Funds is $877,500 as set out in . . .the JVA and represents the unpaid purchase price of the Straiton Property arising from its disposition by Abby Mews.
Payment of Consideration
2. Fleischer and Low hereby assign and transfer to the plaintiffs the following portion of the First Profit Funds (the “Settlement Funds”):
a) ˝ of the First Profit Funds, if the amount of the First Profit Funds is less than or equals $500,000; and
b) $250,000, if the amount of the First Profit Funds is more than $500,000.
. . . .
[10] On October 12, 2012, Abby Mews sold its interest in the joint venture and its shareholding interest in Straiton to the Krahn Group for $1,786,706 plus the assumption of mortgage debt. $200,000 was payable immediately and the balance was due within 42 months, ie. April 12, 2016. The Krahn Group and its principals guaranteed the debt to Abby Mews.
[11] On August 8, 2014, Mr. Fleischer executed a promissory note in favour of the Straiton Joint Venture for $50,000.
[12] On March 31, 2016, Clark Wilson, solicitors for the Krahn Group wrote to Mr. Fleischer and Ms. Low confirming the Krahn Group had purchased Abby Mews’ interest in the Straiton Joint Venture and that a final payment of approximately $1.5 million was due on April 12, 2016. The letter also stated that pursuant to the April 2012 settlement agreement,
. . you are entitled to the payment of $877,500 from Krahn Group’s upcoming payment to Abby Mews. We understand that this is the result of two share purchase and sale agreements entered into between you and Ms. Low as vendors and Star 18 Enterprises Inc. as purchasers of the shares of Abbey Mews.
[13] The letter from Clark Wilson continued and referred to the $250,000 First Profit Funds from the April 2012 settlement agreement under which Krahn was to receive that amount and the $50,000 loan from Krahn to Mr. Fleischer, which was to be held back from an upcoming payment to Abby Mews. The letter concluded:
On this basis, the Krahn Group will be holding back the sum of $300,000 from its upcoming payment to Abby Mews. While we appreciate your position is that Abby Mews owes you $877,500 globally, the Krahn Group is obliged to pay the remaining approximately $1.2 million to Abby Mews and cannot hold any further amounts back or pay funds to you directly.
We trust that Star 18 will abide by its obligation to pay the remaining funds to you and Ms. Low. We are unaware of any current litigation between yourself and Star 18 and, as such, have no basis to interplead . . . any of the remaining funds the Krahn Group owes to Abby Mews.
[14] Shortly thereafter, on April 5, 2016, this action was commenced by Mr. Fleischer and Ms. Low against Stainton and at the same time a Certificate of Pending Litigation was filed against the Abbotsford property.
[15] The next day, ie. April 6, 2016, Mr. Fleischer died. Sheila Low has since been appointed as Mr. Fleischer’s litigation representative.
[16] On April 11, 2016, Krahn filed a petition on a without notice basis in action No. C163210, Vancouver Registry to interplead the sum of $1,286,706 on the basis of competing claims to the funds. The Krahn Group sought to retain $300,000 as per the April 2012 agreement and the $50,000 loan.
[17] Also on April 11, 2016, the interpleader order was granted by Mr. Justice McEwan and the sum of $1,286,706 was paid into court in action No. C163210. That order also provided:
2. Upon the Petitioners paying the Funds into court, the liability of the Petitioner with respect to the Funds be extinguished.
[18] On January 26, 2017, Abby Mews filed a Revised Notice of Application to set aside the interpleader order and for the sum of $1,286,706 to be paid out to Abby Mews.
[19] In February 2017 both Mr. Cassel and Ms. Low were cross-examined on their affidavits filed in action No. C163210.
[20] Next, on March 2, 2017, an order was granted in action No. C163210 by Madam Justice Fleming varying the order of April 11, 2016, as follows:
a. the sum of $577,500 (the “Funds) if the Original Amount shall remain paid into court at the Vancouver Registry;
b. liability of the petitioners with respect to the Funds is extinguished; and
c. the sum of $709,206, being the balance of the Original Amount, be paid out of court to Gavin Crickmore, in trust, counsel for the Applicant Abby Mews Development Corporation.
and
2. The remaining relief sought in the Notice of Application, specifically, the determination of entitlement to the Funds between the Application Abby Mews Development Corporation and the respondents Sheila Low and Gundhardt Fleischer, is adjourned generally.
[21] In the Amended Notice of Application filed March 20, 2017, the plaintiffs are seeking leave to file an Amended Notice of Civil Claim and to add the Krahn Group and Star 18 as defendants to this proceeding.
[22] The proposed Amended Notice of Civil Claim was appended to the original Notice of Application which was filed on February 16, 2017. The proposed Notice of Civil Claim references all of the agreements referred to above and includes claims of the personal plaintiffs or alternatively, by Abby Mews as their trustee for a vendor’s lien against the funds in court in action No. S163210, judgment against the Krahn Group or any other claimant to the funds in court, damages against Star 18 for breach of the agreement of April 20, 2010, and other relief. It is also apparent from all of the materials that Star 18 is a claimant seeking payment of the funds in court.
[23] Star 18 has raised several issues in response to the Amended Notice of Application. One includes an interpretation of the documentation and other evidence that the April 2010 agreement does not assign a claim to Mr. Fleischer and Ms. Low but only permits them to commence an action in the name of Abby Mew. The second includes submissions that admissions made by Ms. Low in the cross-examination of her on her affidavit in action No. S163210 are inconsistent with the proposed claims and inconsistent with the evidence she has deposed in affidavits. In reply, the personal plaintiffs state that the transcript of the examination for discovery in action No. S163210 is protected by litigation privilege and therefore cannot be referred to in this action.
[24] In Strata Plan No. VIS3578 v. Canan Investment Group Ltd., 2010 BCCA 329, 6 B.C.L.R (5th) 31, [Canan Investment] the court discussed general principles for consideration on an application to join a new defendant:
[45] Subrule 15(5)(a)(iii) thus establishes two requirements that an applicant must prove to succeed in joining a new defendant. First, it must show that there is a question or issue between the plaintiff and the proposed defendant that relates to the relief, remedy, or subject matter of the proceeding. The threshold is low. It has been expressed as establishing simply that there is a real issue between them that is not frivolous, or that the plaintiff has a possible cause of action against the proposed party. This requirement may be met solely on the basis of proposed amendments to the statement of claim, or the parties may provide affidavit evidence addressing it. If evidence is provided, the court is not to weigh it and assess whether the plaintiff could prove the allegations. It is limited to examining the evidence only to the extent necessary to determine if the required issue between the parties exists: Strata Plan LMS 1816 v. Acastina Investments Ltd., 2004 BCCA 578, 33 B.C.L.R. (4th) 69; MacMillan Bloedel Ltd. v. Binstead et al. (1981), 58 B.C.L.R. 173 (C.A.).
[25] If a limitation defence is raised in opposition to an application to add a party, Madam Justice Neilson stated:
[47] The existence of a limitation defence is a relevant, but not determinative, factor in deciding whether to permit joinder, since the effect of s. 4(1)(d) of the Limitation Act is to extinguish such a defence if the proposed defendant is added. In Brito (Guardian ad litem of) v. Wooley (1997), 15 C.P.C. (4th) 255, [1997] B.C.J. No. 2487, Joyce J. set out a three step approach to considering a possible limitation defence, which was adopted by this Court in Strata Plan LMS 1725 v. Star Masonry Ltd., 2007 BCCA 611, 73 B.C.L.R. (4th) 154 at para. 12. I summarize it as follows:
1. If it is clear there is no accrued limitation defence, the only question is whether it will be more convenient to have one or two actions since the plaintiff will be able to commence a new action against the proposed defendant if it is unsuccessful in the joinder application.
2. If it is clear there is an accrued limitation defence, the question is whether it will nevertheless be just and convenient to add the party, notwithstanding it will lose that defence. The answer to that question will emerge from consideration of the factors set out in Letvad.
3. If the parties disagree as to whether there is an accrued limitation defence, and a court cannot determine this issue on the joinder application, the court should proceed by assuming that there is a limitation defence, and consider whether it is just and convenient to add the party, even though the result will be the elimination of that defence. If that question is answered affirmatively, an order for joinder should be made, and it becomes unnecessary to deal with the limitation issue since it will be extinguished by s. 4(1)(d) of the Limitation Act.
[48] There is also a fourth option, an alternative to the third step, set out by Lambert J.A. in Lui v. West Granville Manor Ltd., [1987] W.W.R. 49, 11 B.C.L.R. (2d) 273 at 303 (C.A.) [Lui No. 2]. He suggested that when the limitation issue could not be determined on the joinder application, and the applicant had not established that considerations of justice and convenience justified extinction of the limitation defence under s. 4(1) of the Limitation Act, judicial discretion could be exercised to permit joinder on terms that the limitation defence would be preserved and determined at trial. That approach was considered and adopted in Strata Plan No. VR 2000 v. Shaw, [1998] B.C.J. No. 1086 (S.C.) [Shaw] and Stone Venepal (Celgar) Pulp Inc. v. IMO Industries (Canada) Inc., 2008 BCCA 317, 83 B.C.L.R. (4th) 138.
[26] Counsel for Star 18 has referred the court to the decision of Meade v. Armstrong (City), 2011 BCSC 1591, 92 M.P.L.R. (4th) 134, which included six rules for consideration in these applications including:
1) A party should be added where that party’s participation is necessary for the proper determination of the case: Van de Perre v. Edwardes, [2001] 2 S.C.R. 1014 at para. 48;
. . . .
3) In exercising the discretion to add a party, the court should not concern itself as to whether the action will be successful other than to be satisfied that there may exist an issue or question between the applicant and the party being joined: MacMillan Bloedel Ltd. v. Binstead, [1981] B.C.J. No. 1611 at para. 12;
. . . .
6) Unless there is prejudice, amendments should be granted liberally to enable the issues to be tried: Langret Investments S.A. v. McDonnel, [1996] B.C.J. No. 550 at para. 43.
[27] The several actions in which the parties and proposed parties are involved together with the several complex agreements give rise to many discreet issues which could be litigated between several parties, not only including the current and proposed parties to this action.
[28] After a review of all of the materials before me and the principles established in law, I am satisfied that the criteria required to support the order sought by the plaintiffs have been satisfied. In so deciding, I have considered the following:
a) There are issues between the plaintiffs and Star 18 which relate to the remedies sought by the plaintiffs in the proposed Amended Notice of Civil Claim. More particularly, Star 18 and the plaintiffs submit differing interpretations of clause 3 of the agreement of April 30, 2010. This clause permitted the personal plaintiffs to advance a claim against the Krahn Group in the name of Abby Mews for the balance of the purchase price of the Abbotsford property which is now represented by the balance of funds in court in action No. S163210. Both the personal plaintiffs and Star 18 are making claims against those funds. It is necessary for Star 18 to participate in this proceeding so as to be able to determine entitlement to the funds as between the personal plaintiffs, Star 18 and the Krahn Group, especially since the latter has not opposed being added as a defendant.
b) Although Star 18 has gone to considerable lengths to convince the court that there is no merit to the proposed claims, the court is not in a position to be able to weigh the evidence at this point in time so as to be able to determine the chances of success if the amendments are ordered. It has been submitted by Star 18 that inconsistencies between the affidavit evidence and cross-examination of Ms. Low reveal inconsistent claims and credibility issues which could not support the proposed claims. There are issues between Star 18, Abbey Mews, the personal plaintiffs and the Krahn Group which is all the court need determine, not whether the allegations can be proven. (Strata Plan LMS 1816, 2004 BCCA 578, 246 D.L.R. (4th) 57, MacMillan Bloedel Ltd. 58 B.C.L.R. 173, 13 A.C.W.S. (2d) 16). In any event, if I am wrong the examination for discovery transcript of Ms. Low in Action No. S163210 is subject to litigation privilege and cannot be referred to in this action.
c) All of the authorities suggest that the threshold on these applications is low. Even if there may be weaknesses apparent in the position of the plaintiffs, the evidence as I understand it shows a lis between them and the proposed defendants sufficient to justify the addition of Star 18 and the Krahn Group as defendants in this action.
d) Regarding the limitation issue raised by Star 18, both counsel before me have set out substantial submissions on the same which satisfy me the three step approach discussed by Joyce J. in Brito Brito (Guardian ad litem of) v. Wooley (1997), 15 C.P.C. (4th) 255 has been satisfied.
[29] Leave is granted to the plaintiffs to file an Amended Notice of Civil Claim in the form attached as “Appendix A” to the Notice of Application filed February 16, 2017.
[30] 074149 B.C. Ltd., 074154 B.C. Ltd., 074157 B.C. Ltd. and Star 18 Enterprises Inc. are added as defendants to this proceeding.
[31] Regarding costs, the plaintiffs are entitled to costs in the cause.
“Jenkins J.”