Barristers and Solicitors

B E T W E E N:
 

PART II - SUMMARY OF RELEVANT FACTS 11
            The Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
            The Agreement of Purchase and Sale. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  14
            The Anticipation of Loss by Mariners Haven. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
            Defendants' State of Knowledge. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
            Interim Closing: the Interim Occupancy Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  18
            The Administration of the Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  23
            The Final Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  24
            Benefits to Defendants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  27
            Discovery of Claim for Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..  29
            Size of the Individual Claims and the Cost of Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  30

PART III - THE LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
            Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
            Cause of Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
                        Deposit Interest Claim and Breach of Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
                        The Tort Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
                        Unjust Preference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
                        Punitive Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
                        Compound Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
                        Identifiable Class . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
            Common Issues: Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
            Proposed List of Common Issues (revised) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
                        Claim for Deposit Interest and Related Trust Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
                        Individual Issues - Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
                        Misrepresentation as a Common Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  56
                        Limitation Period as a Common Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
                        Limitation Defence: To Whom It Might Apply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
                        Limitation Defence: Fraudulent Concealment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
                        Limitation Defence: Discoverability of Receipt of Funds by William H. Kaufman Inc. . . . . . . . . . . . . . . 64
            Preferable Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
                        Size of the Plaintiff Class . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .70
                        Judicial Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
                        Representative Plaintiff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
            Communication with the Plaintiff Class . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  76

PART IV - ORDER REQUESTED  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  77
 
 

History of the Action
 

1. The Plaintiff commenced the within action on May 3, 1996, by way of a Statement of Claim issued at Toronto. The Plaintiff seeks to certify the action as a class proceeding pursuant to the Class Proceedings Act, 1992 (the "CPA")

 
2. In brief, the Plaintiff, on her own behalf and on behalf of the members of the proposed Plaintiff Class, subject to certification by this Honourable Court, states that the Defendant Mariners Haven Inc. ("Mariners Haven") was obliged, pursuant to its trust obligations under subsection 53(3) of the Condominium Act, R.S.O. 1980, c.84, and section 33 of Regulation 121, R.R.O. 1980, to pay interest during interim occupancy on deposit monies paid by the members of the proposed class for the purchase of residential condominium units but that the defendant Mariners Haven Inc. paid no such interest.

 
3. The action has been dismissed against Peggy Kaufmann and the two Defendant law firms. The Plaintiff states that the other defendants are liable to the Plaintiff under the principles of knowing assistance and knowing receipt of trust funds. The Plaintiff has also pleaded misrepresentation, civil conspiracy, unlawful interference with economic interests, unjust preference and unjust enrichment.

4. The Statement of Defence and Counterclaim of the Defendants Mariners Haven, William Kaufman, Peggy Kaufman is dated November 18, 1996, and the Plaintiff's Reply and Defence to Counterclaim is dated April, 1997.

 
5. The Defendants state that interest was not payable, and the Defendants rely, inter alia, on standard agreements ("the Interim Occupancy Agreement") executed by purchasers waiving their entitlement to interest. The Defendants plead the application of the Limitations Act.
 
                Amended Amended Statement of Defence, Plaintiff's Motion Record #9, Tab 2
 
 
6. The Defendants brought a motion returnable December 13, 1996, seeking to have the matter transferred to the Commercial List, but were unsuccessful.

 
7. By Notice of Motion dated May 22, 1997, the Plaintiff sought certification of the Plaintiff Class. The motion has been pending since that time.

 
8. By Notice of Motion dated August 7, 1997, the Defendants sought summary judgment dismissing all claims against the individual Defendants, William Kaufman and Peggy Kaufman ("Mr. Kaufman" and "Mrs. Kaufman").

 
9. By Notice of Motion dated February 17, 1998, the Plaintiff brought a cross-motion seeking summary judgment against Mariners Haven, Mr. Kaufman and Mrs. Kaufman.

 
10. By Notice of Motion also dated February 17, 1998, the Plaintiff brought a motion seeking certain interlocutory relief, including joinder of Stuart Snyder, William H. Kaufman Inc., Kaufman Footwear Corporation, Clement, Eastman,

Dreger, Martin & Meunier, and Sims Clement Eastman as defendants.
 
11. By Order dated May 4, 1998, the Honourable Mr. Justice Sharpe (as he then was) dismissed the Plaintiff's motion for
1. an order compelling the Defendant Mr. William Kaufman to attend for examination under oath pursuant to Rule 39.03 as a witness on the pending summary judgment motions; and
2. an order for a certificate of pending litigation in respect to a residential property referred in the Amended Statement of Claim as "the Kaufman Residence."

 
12. In the same Order, His Honour granted leave to join Stuart Snyder and William H. Kaufman Inc. as party Defendants and to amend the Statement of Claim. The Plaintiff was ordered to pay costs to the Defendants in the amount of $6,486.60, and she did so.

 
13. On June 8, 1998, the Plaintiff served the Amended Statement of Claim, as amended pursuant to the Order dated May 4, 1998.

 
14. Sharpe J. made another Order, dated August 19, 1998, granting leave to join the law firms Clement, Eastman, Dreger, Martin & Meunier and Sims Clement Eastman as party defendants and to further amend the Statement of Claim.

 
15. On August 21, 1998, the Plaintiff served on defence counsel the Amended Statement of Claim, as amended in accordance with the Order dated August 19, 1998.

 
16. On August 27, 1998, counsel for the Defendant law firm served their client's Statement of Defence, as well as motion materials seeking summary judgment dismissing all claims against the Defendant law firm.

 
17. Also on August 27, 1998, Mariners Haven, William Kaufman, Peggy Kaufman, William H. Kaufman Inc., and Stuart Snyder served their Amended Statement of Defence and Counterclaim.

 
18. On August 31, 1998, the Plaintiff served her Amended Reply and Defence to Counterclaim.

 
19. On September 1, 1998, the witnesses Stuart Snyder and Stephen R. Cameron were cross-examined on their affidavits.

 
20. On September 3, 1998, the witnesses James Rowland and Wendy Ward-Price were cross-examined on their affidavits.

 
21. On October 2, 1998, the witnesses, D'Arcy Sheard and Dean Muncaster were cross-examined on their affidavits. On the same date, an Amended Notice of Motion was served on behalf of the Defendants Stuart Snyder and William H. Kaufman Inc. seeking summary judgment dismissing all claims against those Defendants.

 
22. On October 27, 1998, the witness, Melvin Walker, was cross-examined on his affidavit.

 
23. On November 9, 1998, motions for summary judgment were heard, at which time the action was dismissed, on consent, as against Margaret Kaufman and the Defendant law firm. The balance of the summary judgment motions were then heard, and Justice Sharpe's endorsement, dismissing both summary judgment motions, was dated November 17, 1998.

 
24. By Order dated December 23, 1998, Justice Sharpe awarded $5,000.00 in costs to the Plaintiff in respect to the summary judgment motions. Those costs were paid.

 
25. On April 28, 1999, the Plaintiff's served on defence counsel an amended Notice of Motion respecting certification, updating the Notice of Motion dated May 22, 1997.

 
26. On September 22, 1999, the Plaintiff was cross-examined a second time on her affidavits.

 
27. The Plaintiff's certification motion was scheduled to be heard on December 13 and 14, 1999.

 
28. Shortly before that motion was to be heard, the remaining Defendants brought a motion seeking leave to issue a third party claim against the Defendant law firms which had previously been let out of the action. The Plaintiff opposed the motion. The Honourable Mr. Justice Cumming granted the order sought on December 9, 1999. The Defendants were ordered to pay to the Plaintiff costs of the resulting adjournment in the amount of $3,000.00. Those costs were paid.

 
29. The certification motion was then adjourned to be heard on May 10 and 11, 2000, along with a motion by the Third Parties for summary judgment as regards the trust aspect of the claim.

 
30. The Third Party Claim was issued on December 16, 1999. It was followed by a Third Party Defence and a Statement of Defence of the Third Party to the Main Action, both dated December 17, 1999. The Plaintiff's Reply to the Defence to the Main Action was dated December 29, 1999.

 
31. On May 10, 2000, the summary judgment motion was heard first, and Justice Cumming granted judgment dated May 23, 2000, reported at (2000), 48 O.R. (3d) 785 (S.C.J.), dismissing the claim to the extent that it is based on a breach of a statutory trust.

 
32. The certification motion was again adjourned pending an appeal of Justice Cumming's judgment to the Court of Appeal.

 
33. On July 4, 2000, Justice Cumming made two orders, both on consent: one further amending the Statement of Claim and another disposing of a motion by the Plaintiff for an injunction to preserve assets in light of the anticipated sale of most of the assets of the Defendant William H. Kaufman Inc. to a third party. The latter order provided that the Defendants shall provide 10 days notice for the Plaintiff of the closing of any sale by William H. Kaufman Inc. of its Kaufman Footwear business.

 
34. In July of 2000, however, the Defendant William H. Kaufman Inc. went into receivership.

 
35. William H. Kaufman Inc. made an assignment in bankruptcy on July 21, 2000, and Ernst & Young Inc. was appointed as the Trustee in Bankruptcy of the bankrupt estate.

 
36. The Plaintiff's appeal was heard by the Court of Appeal on March 9, 2001. At that time the Court of Appeal made an order that
1. the appeal was stayed as against the Bankrupt William H. Kaufman Inc.;
2. that the appeal could proceed as against other parties;
3. that the order was without prejudice to the Plaintiff's seeking leave to proceed with the action; and
4. that the Plaintiff pay the Trustee's costs in the amount of $1,000.00.//

 
37. Those costs were paid.

 
38. The Court of Appeal released its reasons in the appeal on May 8, 2001, allowing the Plaintiff's appeal and confirming that a failure to pay section 53 interest is a breach of trust. Costs were ordered in favour of the Plaintiff in the amount of $34,000.00. Those costs were paid by the Third Party and the Defendants.

 
39. The Plaintiff's solicitors received a Proof of Claim form from the solicitors for the Trusteee on May 11, 2001, and they submitted the Plaintiff's completed Proof of Claim form in respect to the bankruptcy of William H. Kaufman Inc., by registered mail, on June 28, 2001.

 
40. By letter dated July 9, 2001, the Trustee disallowed the Plaintiff's claim.

 
41. By letter dated July 25, 2001, the Plaintiff's solicitors served a Notice of Appeal in respect to the disallowance of the claim by the Trustee.

 
42. Counsel met with Justice Cumming on September 5, 2001, and His Honour directed that the bankruptcy related issues should proceed on February 25, 2002, and continuing into that week, if necessary. His Honour directed that the certification motion would not proceed at that time. That date was adjourned, and the Plaintiff's motion for an order granting leave to continue her claim against the Trustee was rescheduled for June 12, 2002. It proceeded on consent.

 
43. The certification motion was rescheduled by the Honourable Mr. Justice Nordheimer to proceed on October 9 and 10, 2002.

 
44. The Defendants and Third Parties served draft amended defences in July, 2002, in response to which the Plaintiff served draft amended Replies. On September 6, 2002, the Third Parties served their clients' formally Amended Statement of Defence, as amended on September 4, 2002. On September 9, 2002, the Plaintiff filed her Amended Reply and Defence to Counterclaim, as well as her Amended Reply to the Third Parties' Defence to the Main Action.

The Parties

45. The Plaintiff ("Ms. Ward-Price" or "the Plaintiff") was an original purchaser of a residential condominium unit located in Collingwood, Ontario. The unit was in a condominium project in Collingwood comprised ultimately of three condominium corporations and involving purchasers of a total 32 units.

 
46. Mariners Haven is an Ontario corporation and was the developer and declarant in respect to the condominium project.

 
47. Mariners Haven has no assets and is not an operating company.

 
48. Mr. Kaufman was at all material times director, officer and sole shareholder (either directly or through corporations of which he was the sole shareholder) of both Mariners Haven and the Defendant William H. Kaufman Inc. (now in bankruptcy).

49. At all material times, Mariners Haven was one hundred per cent owned by Hutton Securities Inc. which, in turn, was one hundred per cent owned by Mr. Kaufman. At all material times, the Defendant William H. Kaufman Inc. was one hundred per cent owned by 609168 Ontario Inc., and 609168 Ontario Inc. was, at all material times, one hundred per cent owned by Mr. Kaufman.

50. The principal decision making within Mariners Haven was carried out by Mr. Kaufman.

51. Mr. Kaufman was at all times the sole director of Mariners Haven.

 
52. The Defendant, William H. Kaufman Inc., is an Ontario corporation formerly engaged in the business of selling shoes, and it carried on business, inter alia, as Kaufman Footwear.

 
53. Mariner's Haven paid no salaries to anyone, and it had no employees. It did not maintain a separate and distinct corporate office.

54. The Defendant Stuart Snyder ("Mr. Snyder" or "Stuart Snyder") was at all times an officer of Mariners Haven and Vice-President, Finance and Secretary-Treasurer of the Defendant William H. Kaufman Inc.

 
55. The Third Parties Clement, Eastman, Dreger, Martin & Meunier and Sims Clement Eastman are both law firms. For all purposes, they are the same firm carrying on the practice of law in Kitchener, Ontario. One or the other of these firms at all material times acted as solicitors for the Defendant Mariners Haven and acted on closing of the subject condominium unit sales. As stated above, these firms are referred to herein collectively as "the Third Party Law Firm."

56. Stephen Cameron is a partner of the Third Party Law Firm, and he gave evidence on its behalf.

 

57. On or about April 13, 1987, Ms. Ward-Price entered into an Agreement of Purchase and Sale with Mariners Haven for the purchase of her unit.

 
58. The agreements of purchase and sale were in standard form, with only the units, the applicable prices and the dates of entering into the agreements varying for individual purchasers.
 
Affidavit of Ms. Ward-Price, sworn May 4, 1997, Motion Record of the Representative Plaintiff, seeking certification, p.17, para. 36

59. The Third Party Law Firm drafted the Agreement of Purchase and Sale on behalf of Mariners Haven.

60. The Agreement of Purchase and Sale anticipated in three places that the Purchaser would take possession of her unit prior to final closing:
1. In paragraph 2, the Purchaser was required to have paid the entire purchase price prior to taking possession;
2. Paragraph 3(b) of Schedule "A" states that if the Purchaser takes possession of the unit without requesting an inspection before closing, then the purchaser is deemed to have accepted the unit in the state and condition in which it was found; and
3. Paragraph 18 of Schedule "A" gives the Vendor the right, prior to closing, to declare the agreement null and void for any reason, in which event the Purchaser is required to give the Vendor vacant possession.

61. Also, as set out below, the Interim Occupancy Agreement, executed by the Plaintiff on July 15, 1988, refers to the Agreement of Purchase and Sale as having addressed interim occupancy.

 
62. The Defendants have pleaded that because the Agreement of Purchase and Sale does not require interim occupancy, the consumer protection provisions concerning deposit interest do not apply.
 
Amended Amended Statement of Defence and Counterclaim, dated July 31, 2002, Plaintiff's Motion Record #9, Tab 2, p. 24, paras. 17 and 18

The Anticipation of Loss by Mariners Haven

63. The Defendant William H. Kaufman Inc. provided funding for the condominium project by way of loans to Mariners Haven.

64. In respect to the alleged loss on the project by the Defendant William H. Kaufman Inc. of $3.6 million in unrepaid loans to Mariners Haven, this was a loss that was not anticipated to occur at the inception of the condominium project. Mr. Snyder could not say precisely when it first became apparent that the loss might be incurred. He said in cross-examination that he cannot be certain whether or not the likelihood of a loss on the project was apparent at the time that the Interim Occupancy Agreement had been conceived of and drafted.

65. Mr. Snyder provided more information subsequently. Through his counsel he said it appeared that there would be a loss on the project in early 1988, as indicated in the financial statements for Mariners Haven for the year ending December 31, 1997. These were prepared in the first quarter of 1988 and were completed in March, 1988. It is unknown if there were earlier indications.

Answer to Undertaking given at question 52 of the cross-examination of Mr. Snyder, letter from Ms. Pinsler to Mr. Hodder, dated October 26, 1998, Plaintiff's Motion Record #3, p.51.

Defendants' State of Knowledge

66. Prior to the execution of any agreements of purchase and sale, the Third Party Law Firm advised Mariners Haven that, in order to avoid any interest being deemed to be due and owing under the Act, it would be best not to have any purchaser take possession prior to a deed being able to be given. In other words, to avoid paying deposit interest, Mariners Haven should avoid interim occupancy.

67. However, the Third Party Law Firm advised Mariners Haven that, if the Agreement of Purchase and Sale is silent with respect to possession, then the provisions of the general law provide that possession takes place on closing. The Third Party Law Firm advised that, where the Agreement of Purchase and Sale does not require possession prior to closing, then the consumer protection provisions do not apply.

68. The Third Party Law Firm also explained to Mariners Haven the consumer protection provisions in effect under the Condominium Act whereby a person who is required or permitted to move in by the Agreement of Purchase and Sale may be charged a rent, but only with certain restrictions.

69. Mr. Snyder was aware of certain statutory requirements concerning condominiums. Particularly, he was familiar with the requirement of the Condominium Act that a declarant must register a condominium description and declaration without delay, and that title closing should occur without delay.

70. Mr. Snyder was aware that payment of the purchase price of a condominium prior to title closing was relatively unusual in the sale of new homes and condominium units in Ontario.

71. None of the purchasers had any contractual right to interest on their deposit money, and there was no agreement at any time with Mariners Haven to pay interest on the deposits.

Interim Closing: the Interim Occupancy Agreement

72. Interim "closing" for Ms. Ward-Price took place on or about July 15, 1988, at which time she took possession of her unit.

73. Also on that date, she signed the Interim Occupancy Agreement purporting to waive entitlement to deposit interest in exchange for a waiver of interim occupancy fees. The Interim Occupancy Agreement was in the form of a one page signed-back letter.

74. All of the purchasers who took interim occupancy signed this agreement, except for Emily Fodor.

75. The Interim Occupancy Agreement stated that deposit interest and interim occupancy fees were offsetting amounts. It stated, inter alia,
 
Your agreement indicates that under Interim Occupancy rent is payable until the Condominium Corporation is registered and a deed is provided to you (closing date). [emphasis added]

The Condominium Act provides that during the period of Interim Occupancy you are entitled to interest, on the purchase price which you have paid, from the date of occupancy until the closing date mention [sic] above.

76. The "agreement" presumably refers to the Agreement of Purchase and Sale, but the Agreement of Purchase and Sale did not, in fact, refer to the payment of rent.

 
77. The Defendants take the position that interim occupancy fees and deposit interest truly were "offsetting," after taking into consideration tax consequences.
 
Supplementary Affidavit of Stuart Snyder, sworn March 12, 1998, Defendants' Motion Record, page 17, paragraph 24.

78. The Plaintiff states that this is not supportable, given that barter transactions are fully taxable. On the other hand, even if the Defendants are correct in their interpretation of tax obligations, the amounts in question were not in fact "offsetting," and the purported mutual waiver greatly benefited the developer. Detailed calculations are provided below.

79. Ms. Ward-Price, at the time she entered into the Interim Occupancy Agreement, believed the statement therein to be true, namely that the parties were in fact waiving "offsetting amounts."

80. The Defendant Snyder drafted the Interim Occupancy Agreement.

81. The proposition that deposit interest and interim occupancy fees would be mutually waived was an idea that originated either with Mr. Snyder or Mr. Kaufman or the Third Party Law Firm.

82. From its inception, the proposition of offsetting deposit interest and interim occupancy fees is something that, at all times, Mr. Snyder, Mr. Kaufman and the Third Party Law Firm were aware of.

83. In respect to the Interim Occupancy Agreement, there is no significance to the fact that some of the letters were signed by Mr. Kaufman and some were signed by Mr. Snyder, this representing only a division of labour as between Mr. Snyder and Mr. Kaufman.

84. Mr. Snyder states he did not, himself, discuss the offsetting of deposit interest and interim occupancy fees with any of the purchasers.

85. As regards discussions with purchasers concerning the offsetting of interim occupancy fees and deposit interest, it was Mr. Kaufman's role within Mariners Haven to interact with purchasers.

86. Mr. Kaufman was intimately involved with, cognizant of and responsible for the carrying out of trust obligations on behalf of Mariners Haven.

87. Mr. Kaufman personally handled all negotiations of the price for the purchase of condominium units, dealt personally with all complaints about deficiencies in respect to the units and the common elements, and carried out most of the interfacing with purchasers on matters of substance.

88. Mr. Kaufman orally represented to some purchasers that deposit interest and interim occupancy fees were offsetting amounts and that there would be a tax benefit to purchasers if they were to agree that deposit interest be waived in exchange for a waiver by Mariners Haven of interim occupancy fees.

                            Affidavit of D'Arcy Sheard, Plaintiff's Motion Record No. 2, p.98, para.6.
 

89. As stated above, it was standard procedure for Mariners Haven to obtain a written agreement waiving deposit interest and interim occupancy fees from any purchaser who wanted to take interim occupancy (the "Interim Occupancy Agreement"). The only purchaser who did not sign the standard Interim Occupancy Agreement was Emily Fodor, and she has settled her action with Mariners Haven.

                            Affidavit of Stuart Snyder, sworn March 12, 1998, para. 18, Motion Record of the Defendants, Tab 1, page 15
 

90. The Condominium Act limits interim occupancy fees to the total of municipal taxes, estimated common expenses and notional mortgage interest on a vendor take-back mortgage, whether it be an actual or a so-called "phantom mortgage."

91. There could be no phantom mortgage (or not much of one), given that the entire (or almost entire) purchase price was paid prior to the purchasers' taking interim occupancy, such that there was no notional mortgage interest to consider.

92. Mr. Snyder deposed that neither he nor Mr. Kaufman turned his mind to what specific amounts might be payable as deposit interest or what specific amounts might be chargeable as interim occupancy fees. When it was stated by Mariners Haven, in the Interim Occupancy Agreement, that these were offsetting amounts, this was stated to be so without any knowledge as to what these specific amounts might be.

The Administration of the Trust

93. Deposit funds received by Mariners Haven were deposited into a separate trust account ("the Trust Account") held in the name of Mariners Haven's solicitors. The Trust Account was operated in accordance with directions given by Mariners Haven to the Third Party Law Firm. The Third Party Law Firm, but not Mariners Haven, had signing authority on the Trust Account.

94. As for the giving of directions as to what was to be done with the trust funds, the directions were given exclusively by Mr. Snyder and not by Mr. Kaufman.

 

95. There was only one account operated by Mariners Haven in its own name. This was an operating account, and it was separate from the Trust Account maintained by the Third Party Law Firm.

96. All money received from purchasers as deposits and all money received as balances due at title closing of the transactions were received into the Trust Account maintained by the Third Party Law Firm and operated by Mariners Haven. Mr. Snyder stated his belief
1. that the money in the Trust Account was exclusively paid out to Mariners Haven, which deposited it in its own operating account, and
2. that none of the trust monies were paid to any other party.

97. Mr. Cameron stated, however, that not all money in the Trust Account was paid out to Mariners Haven's operating account. He said some of the money from the Trust Account was paid to the Third Party Law Firm to pay Mariners Haven's legal fees.

98. Mr. William Kaufman was the sole director of Mariners Haven at all times. Mr. Kaufman and Mr. Snyder had signing authority on the operating account of Mariners Haven.

99. Ultimately, the Trust Account was entirely emptied and paid out to the operating account of Mariners Haven or was applied to pay legal accounts incurred by Mariners Haven.

                            Cross-Examination of Stuart Snyder, Q.87-88.
 

The Final Closing

100. The declaration and description of the condominium property affecting Ms. Ward-Price were registered on June 27, 1989, thus creating Simcoe Condominium Corporation No. 94.

 
101. Final closing for the purchase by the Plaintiff took place on or about August 16, 1989, at which time she became the registered owner of her unit.

 
102. The closing dates for some members of the proposed Plaintiff Class also took place in August of 1989, and the closing dates for other members of the proposed Plaintiff Class took place at other times. To the extent that the Plaintiff is aware, the other relevant closing dates were in May of 1990 and December of 1990, with one anomalous date of November, 1992.
 
Spreadsheet of information collected by the Plaintiff, Exhibit "C" to the Affidavit of Wendy Ward-Price, sworn February 12, 1998,Plaintiff's Motion Record #2, Tab 3C, p. 56-57

103. Interest payable on deposits was not calculated on the statements of adjustments prepared in respect to the subject transactions and was not paid.

 
104. The Third Party Law Firm prepared the Statements of Adjustments.

105. The Third Party Law Firm made no calculations as to what might be payable by Mariners Haven Inc. as deposit interest.

106. Mr. Snyder deposed that, despite not having calculated deposit interest, the Third Party Law Firm advised Mariners Haven that tax considerations meant that deposit interest was offset by interim occupancy fees.

107. If Ms. Ward-Price, as purchaser, had been paid deposit interest, one would expect to see a credit in the Statement of Adjustments at the time of closing. Typically, in an ordinary condominium purchase transaction, monthly interim occupancy fees are paid like rent every month, and there would be an adjustment for deposit interest dealt with all at one time in the Statement of Adjustments as a credit to the purchaser on closing.

108. In the case of Ms. Ward-Price, there was a balance due on closing in the amount of $3,154.19. Had she been credited with deposit interest, there would have been no balance due on closing. Instead, Ms. Ward-Price states she would have received a substantial payment from Mariners Haven at closing.

109. The Third Party Law Firm was aware, at the time of the preparation of the Statements of Adjustments, that the Condominium Act applies despite any agreement to the contrary. The Third Party Law Firm was not aware of any case law or jurisprudence or any authority that would, in the circumstances, exempt Mariners Haven from paying deposit interest.

Benefits to Defendants

110. The balances paid by the purchasers on closing were used both to pay the operating costs of Mariners Haven and to repay loans to William H. Kaufman Inc.

Affidavit of Stuart Snyder, sworn March 12, 1998, para. 7, a listing of intercompany transactions from 1985 to 1996, marked as Exhibit "A", Motion Record of the Defendants, pages 13 and 22-33

111. During the period January, 1988 to December 31, 1990, that is, contemporaneously with all but one of the closings, Mariners Haven Inc. made payments of money to the Defendant, William H. Kaufman Inc., exceeding $12 million.

Affidavit of Stuart Snyder sworn March 12, 1998, Defendants' Motion Record, p. 13, paras. 7-8 and Exhibit "A," List of Intercompany Transactions

112. If the purchasers had been credited on closing with deposit interest, the Defendant William H. Kaufman Inc.'s losses, by way of unrepaid loans, would have been thereby greater. That is, Mariners Haven would have been able to repay less of its loan obligation to the Defendant William H. Kaufman Inc.

113. The Defendant Mr. Kaufman was the ultimate beneficial owner of William H. Kaufman Inc.

114. The Plaintiff pleads that Mr.Kaufman and Mr. Snyder received personal monetary benefits as a result of the breach of trust by way of their receipt of salary, dividends or forgiveness of loans by William H. Kaufman Inc.

 
115. Contemporaneously with the construction of the subject condominium units, William Kaufman caused Mariners Haven to build him a private residence ("the Kaufman Residence") on land immediately adjacent to the condominium project.

 
116. Prior to construction, William Kaufman entered into an Agreement of Purchase and Sale, dated December 15, 1987, in which he agreed to buy from Mariners Haven the vacant land on which the Kaufman Residence was to be built by Mariners Haven. The purchase price was stated to be $344,309.00 plus a percentage of the development costs of the entire condominium development.

 
117. Mr. Snyder states that the value of that residence was $2,131,312.79, being a total of the land value and construction costs.

118. After construction was completed, Mariners Haven conveyed title to that property to Mr. Kaufman by Deed of Land registered on December 28, 1990.

 
119. At the time of registration, and in support of same, Mr. Kaufman swore an Affidavit of Residence and Value of the Consideration in which he deposed that the land conveyed contained at least one family residence and that the total consideration for the transaction was $694,309.00.

120. Mr. Kaufman personally paid no money to Mariners Haven for the purchase or construction of the Kaufman Residence. Rather, William H. Kaufman Inc. paid the full value of the Kaufman Residence to Mariners Haven. This payment became a credit against future company obligations to Mr. Kaufman for salary and bonus.

121. In respect to the construction of the Kaufman Residence, funds in the amount of $2.1 million flowed through to the general contractor, that is, through Mariners Haven, without any fee being charged by Mariners Haven, as developer, to Mr. Kaufman, as purchaser taking title. Mr. Snyder was not able to say what such a fee might be.

Discovery of Claim for Interest

122. Ms. Ward-Price first became aware of the existence of a claim for deposit interest shortly after her receipt of a copy of a letter dated April 15, 1992 from Jonathan Fine, Barrister & Solicitor, to Simcoe Condominium Corporation No. 144. That letter advised of the possibility of a claim against Mariners Haven for deposit interest by unit purchasers.

Size of the Individual Claims and the Cost of Litigation

123. In the case of Ms. Ward-Price, her deposit interest entitlement at closing was $36,761.50, while the most that could have been charged to her as an interim occupancy fee was $8,302.76. Her calculation of these amounts has not been challenged.

 
124. Ms. Ward-Price's claim is fairly typical in terms of the quantum of the claims of the Proposed Plaintiff Class, based on the thirteen claims which have been capable of calculation so far. Individual claims for interest amounts due at closing range from $21,762.42 to $127,609.94. The median amount of these thirteen calculated claims is $43,163.91. The average claim would therefore be about $60,000.00.

125. Ms. Ward-Price claims the full amount of her deposit interest entitlement. However, if she is obliged to credit Mariners Haven for what they could have charged her as an interim occupancy fee, then her entitlement would be $36, 761.50 less $8,302.76, or $28,458.74. If Mariners Haven's argument is accepted that her true measure of loss is calculated by taking her after tax position as regards deposit interest, then (applying a 47% marginal rate) her entitlement would be 53% X $36,761.50 = $19,483.60, less $8,302.76 = $11,180.84.

126. The Plaintiff estimates the claim of the Proposed Plaintiff Class for deposit interest to be $1.6 million (plus interest and costs). The Defendants have refused the Plaintiff's request for information which would permit the claim to be calculated with precision.

                            Letter from Mr. Brown to Mr. Hodder, dated September 17, 1999, Plaintiff's Motion Record #4, Tab 6
 

127. As stated above, Ms. Ward-Price's claim is typical in its amount. It would be calculated as either $36,761.50, or $28,458.00 or $11,180.84, depending on the success of the set-offs pleaded. The Plaintiff's solicitors have incurred time expenditures, up to October, 1999, exceeding $129,000.00, exclusive of G.S.T. and multiplier. Since then, there has been a further summary judgment motion, an appeal and a bankruptcy motion.

Overview

128. In order to be certified as a class action, the criteria contained in s. 5(1) of the CPA must be met:
 
5(1) The court shall certify a class proceeding on a motion under section 2, 3 or 4 if,
(a) the pleadings or the notice of application discloses a cause of action;
 

(b) there is an identifiable class of two or more persons that would be represented by the representative plaintiff or defendant;
 

(c) the claims or defences of the class members raise common issues;

(d) a class proceeding would be the preferable procedure for the resolution of the common issues; and

(e) there is a representative plaintiff or defendant who,

(i) would fairly and adequately represent the interests of the class,

(ii) has produced a plan for the proceeding that sets out a workable method of advancing the proceeding on behalf of the class and of notifying class members of the proceeding, and

(iii) does not have, on the common issues for the class, an interest in conflict with the interests of other class members.

129. There are four conditions to a class action:
1. The class must be capable of clear definition;
2. There must be issues of fact or law common to all class members;
3. On the common issues, success for one class member must mean success for all;
4. The class representative must adequately represent the class.


Western Canadian Shopping Centres Inc. v. Bennett Jones Verchere (2001), 201 D.L.R. (4^th) 385 at 401-402 (S.C.C.), Plaintiff's Book of Authorities, Vol. 8, Tab 1
 

130. There are three important advantages to class actions: judicial economy, access to justice and deterrence of wrongdoers.

131. An underlying objective of the CPA is to encourage access by victims to the court system and in that way to overcome economic, social, and psychological barriers.

Cause of Action

132. The first branch of the test requires a determination of whether the pleadings disclose a cause of action. The principles to be applied when considering whether pleadings support a legal cause of action are as follows:
1. All allegations of fact, unless patently ridiculous or incapable of proof, must be accepted as proved;
2. The defendant, in order to succeed, must show that it is plain and obvious beyond doubt that the plaintiffs could not succeed;
3. The novelty of the cause of action will not militate against the plaintiffs; and
4. The statement of claim must be read as generously as possible, with a view to accommodating any inadequacies in the form of the allegations due to drafting deficiencies.


Abdool v. Anaheim Management Ltd. (1995), 21 O.R. (3d) 453 at p.469 (Div. Ct), Plaintiff's Book of Authorities, Vol. 3, Tab 1

Cheung v. Kings Land Developments Inc. (2001), 55 O.R. (3d) 747 at 752 (S.C.J.), Plaintiff's Book of Authorities, Vol. 8, Tab 4
 

133. On a motion for certification, the court accepts as true the factual background set out in the Statement of Claim.

134. The Act is solely procedural and therefore if the court should err it should do so on the side of protecting people who have a right of access to the courts.

135. A decision on certification does not constitute a determination on the merits of the action. The presence of common issues is at the very centre of a class proceeding. It is the advancement of the litigation through the resolution of common issues in a single proceeding which serves the goals of the Act.
 
Bywater v. Toronto Transit Commission (1998), 27 C.P.C. (4^th) 172, at para 12 (Gen. Div.), Plaintiff's Book of Authorities, Vol. 8, Tab 5

136. It follows from a dismissal of a Defendant's motion for summary judgment that the statement of claim does disclose a cause of action.
 
Rosedale Motors Inc. v. Petro-Canada Inc. (1998), 42 O.R. (3d) 776 at 784 (Gen. Div.), Plaintiff's Book of Authorities, Vol. 3, Tab 3

137. In the case at bar, the Honourable Mr. Justice Sharpe dismissed the Defendant's motion for summary judgment.

                            Plaintiff's Motion Record #4, Tab 3.
 

138. In his endorsement disposing of the motions for summary judgment, Mr. Justice Sharpe identified a "serious issue" with respect to the letter drafted by the Defendants. His Honour (as he then was) refers, in particular, to the fact that the Defendants did not calculate the amounts owing by way of rent and interest despite making representations to the contrary:
On Mr. Snyder's own evidence, a representation was made in the knowledge of the trust obligations arguably imposed upon Mariners Haven Inc., but without even calculating the amounts. In my view, the fact that the representation contained in the July 15, 1998 letter was made without calculating the amounts involved gives rise to a triable issue as to whether the defendants Snyder and Kaufman were reckless or wilfully blind with respect to the truth and with respect to the obligation imposed upon Mariners Haven.


Endorsement of the Honourable Mr. Justice Sharpe, dated November 17, 1998 at p.4, Plaintiff's Motion Record #4, Tab 3, p. 46-51.

139. The Court of Appeal dismissed the Third Party's motion for summary judgment, as further described below.

Deposit Interest Claim and Breach of Trust

140. The intent of Section 53 of the Condominum Act is that the purchaser be paid interest on money paid to the vendor on account of the purchase price during the interim occupancy period before a registerable deed or transfer is delivered. The reason for doing so is to protect purchasers of proposed condominium units from abuses from vendors who delay in registering declarations by providing an incentive to register quickly.
 
Ackland v. Young-Esplanade Enterprises Ltd. (1992), 10 O.R. (3d) 97, at 105 (C.A.), Plaintiff's Book of Authorities, Vol. 2, Tab 1

141. In another action, a plaintiff class was certified by this Court involving a claim for deposit interest under the Condominium Act which was defended on similar grounds, namely, (1) that purchasers received sufficient value prior to closing from the developer such that deposit interest was not payable and (2) that the purchasers agreed to what transpired as adjustments on closing and therefore had no cause to complain. The total claims, which were successful at trial, approximated the total claims in the within action.
 
Windisman v. Toronto College Park Ltd. (1996), 28 O.R. (3d) 29 (Gen. Div.), Plaintiff's Book of Authorities, Vol. 3, Tab 10

142. Section 61 of the Condominium Act forbids contracting out of its provisions, and the rigour of judicial application of this provision is addressed below under the heading Common Issues.

 
143. In any event, there is no legitimate avoidance of tax by a purported mutual waiver of interest and rent. This is barter.

144. The Plaintiff's cause of action, as a trust claim pursuant to section 53, has been considered by the Court of Appeal. The court held that a condominium purchaser acquires an equitable proprietary interest in the interest payable on her deposit money while she is in interim occupancy. In respect to that interest, she has a proprietary remedy.
 
Ward-Price v. Mariners Haven Inc. (2001), 57 O.R. (3d) 410 at 419-420 (C.A.), Plaintiff's Book of Authorities, Vol. 8, Tab 6

145. While section 53(3) of the Condominium Act imposes a debt obligation on the developer to pay interest on purchase money, that debt obligation is a debt obligation to pay interest on trust funds.

146. The trust created by Section 53 of the Condominium Act is intended to create a broader range of remedies for a purchaser than would be available if only a debtor-creditor relationship existed. It does this by providing the traditional remedies available to a beneficiary when there has been a breach of trust. Indeed, the trust is also intended to protect the purchaser in the event of the developer's insolvency, which is the situation in this case.

147. Strangers to a trust may be liable if they participate in its breach, following the doctrines of knowing assistance and knowing receipt.

Citadel General Assurance Co. v. Lloyds Bank Canada (1997), 152 D.L.R. (4th) 411 (S.C.C.), Book of Authorities of the Defendants, Volume I, Tab 6

148. If a trust is imposed by statute, then a stranger to the trust will be deemed to have known of it.

149. The Plaintiff states that, on the facts, she has demonstrated a prima facie case against the Defendants. The key facts are summarized below under Common Issues.

 

150. The facts as pleaded also make out a cause of action in respect to unlawful interference with economic interests, conspiracy to injure and mispresentation.

 
151. In order to make out the tort of unlawful interference with economic interests, the Plaintiff must establish three propositions: (1) that the Defendant had an intention to injure the Plaintiff, (2) that the Plaintiff suffered economic loss or related injury as a result of the Defendant's conduct and (3) the means employed by the Defendant were unlawful.

152. The tort of conspiracy to injure is comprised of three components:
1. An agreement between two or more persons must be established;
2. Those persons must share a common intent;
1. To act unlawfully, and where the likelihood of injury to the Plaintiff, as a result of the unlawful action is known or should be known to the Defendant (i.e. constructive intent to injure); or alternatively;
2. To act lawfully, but with a predominant purpose to injure the Plaintiff;
3. There must be an overt act pursuant to the common designs; and
4. There must be actual damages arising therefrom.


Daishowa Inc. v. Friends of the Lubicon (1998) 39 O.R. (3d) 620 (S.C.J.), Plaintiff's Book of Authorities, Vol. 8, Tab 8
 

153. There are five general requirements for a claim in negligent misrepresenation:
1. There must be a duty of care based on a special relationship between the representor and the representee;
2. The representation in question must be untrue, inaccurate or misleading;
3. The representor must have acted negligently in making said mispresentation;
4. The representee must have relied, in a reasonable manner, on said negligent misrepresentation; and
5. The reliance must be have been detrimental to the representee in the sense that damages resulted.

154. Civil fraud is proved where it is established that a false representation has been made (1) knowingly, or (2) without belief in its truth, or (3) recklessly, careless whether it is true or false.

Unjust Preference

155. The Plaintiff states that the transfers of funds by Mariners Haven to William H. Kaufman Inc. comprised a preference on the eve of insolvency.

Punitive Damages

156. An award of punitive damages, as regards the performance of a contract, may be made if three requirements are met: (1) the conduct in question must disregard the rights of others so as to deserve public censure; (2) the defendant must commit an independent actionable wrong apart from the breach of contract, as, for example, a breach of fiduciary duty; and (3) the award must serve a rational purpose such as punishing the wrongdoer and deterring others.
 
968703 Ontario Ltd. v. Vernon (2002), 58 O.R. (3d) 215 at 223 and 225 (C.A.) Plaintiff's Book of Authorities, Vol. 8, Tab 11

Compound Interest

157. In the Windisman case, the court disallowed the Plaintiff's claim for compound interest on the basis that her claim was "more akin to a commercial claim for which the ususal prejudgment interest rules are appropriate." However, the Court of Appeal has established beyond doubt in its Ward-Price decision that the obligation to pay interest is itself a trust obligation. In addition, case law concerning constructive fraud arising from breach of trust obligations was not put before the Court in Windisman. Those cases support a claim for compounding of the interest.

Confederation Life Insurance Co. v. Shepherd, Mackenzie, Plaxton, Little & Jenkins, unreported, [1996] O.J. No. 177 (Ont. C.A.), Plaintiff's Book of Authorities, Vol. 8, Tab 12

D'Amore v. McDonald et al., [1973] 1 O.R. 845 at 850 (H.C.), affirmed (1973), 1 O.R. (2d) 370 (C.A.),Plaintiff's Book of Authorities, Vol. 1, Tab 4

Gray v. Yellowknife Gold Mines Limited and Bear Exploration and Radium Limited (No.2), [1946] O.R. 639 (H.C.) at 658, affirmed, [1947] O.R. 994 at 1004 (C.A.), Plaintiff's Book of Authorities, Vol. 1, Tab 8
 

158. In addition, the Windisman case did not entail a finding of a deliberate subversion of the Condominium Act.

 

159. The second requirement of the test for certification is that there be an identifiable class of two or more persons. The purpose of the class definition is threefold:
a) it identifies those persons who have a potential claim for relief against the defendant;

b) it defines the parameters of the lawsuit so as to identify those persons who are bound by its result; and

c) it describes who is entitled to notice pursuant to the Act.

Thus for the mutual benefit of the plaintiff and the defendant the class definition ought not to be unduly narrow nor unduly broad.

160. In descriptive terms, the Plaintiff proposes a class defined as all persons, or their successors, estate trustees or assigns who:

1. were either
1. original purchasers of a condominium unit or units purchased from the defendant corporation at the subject properties; or
2. persons who received a transfer or assignment of an original purchaser's interest in such original purchaser's respective agreement or agreements of purchase and sale prior to final closing; and
2. paid, or were credited with having paid, a deposit or deposits and other monies on account of a sale or an agreement in respect of such unit or units to the defendant corporation or on its behalf; and
3. entered into possession or interim occupancy of the such unit or units prior to final closing; and
4. completed the final closing with respect to such unit or units.


Affidavit of Ms. Ward-Price, sworn May 4, 1997, Motion Record of the Representative Plaintiff, seeking certification, p.8, para. 2
 

161. In the case at bar, the identities of all persons who have a potential claim are known. There are 32 original purchasers of condominium units at Harbour Street, some of whom may be more than one person where individuals have purchased units jointly.
 
Affidavit of Ms. Ward-Price, sworn May 4, 1997, Motion Record of the Representative Plaintiff, seeking certification, p.18, para. 37

162. The Plaintiff does not dispute the statement in Mr. Snyder's recent affidavit that five of the purchasers did not enter into interim occupancy and are therefore properly excluded from the Plaintiff Class. The Plaintiff does not dispute Mr. Snyder's further statement that Ms. Emily Fodor, one of the purchasers, has settled her claim. [Note: it is believed that this settlement took place prior to the Defendants' having notice of the Plaintiff's claim.]

163. The Plaintiff Class, if certified, and subject to opting out, should therefore be comprised of all 26 purchasers (actually 36 if joint purchasers are counted as two) as listed in Exhibit "B" to Mr. Snyder's affidavit of August 19, 1999, or their successors, estate trustees or assigns. These were purchasers who took interim occupancy after paying deposits. The Plaintiff reserves the right to challenge the occupancy dates listed in Mr. Snyder's list. At least one of them is substantially in error.
 
Affidavit of Stuart Snyder, Sworn on August 19, 1999, p.2-3, included in Plaintiff's Motion Record #4, Tab 8, Exhibit "B", page 96

164. Therefore the class definition, as proposed, enables the court to determine whether any person coming forward is or is not a member of the class in fulfilment of the second requirement of the Act. The class is not just identifiable. It is identified.

Common Issues: Generally

165. The third element of the test for certification is that claims of the class must raise common issues. Section 1 of the Act defines "common issues" as:
(a) common but not necessarily identical issues of fact, or

(b) common but not necessarily identical issues of law that arise from common but not necessarily identical facts.

The central notion of a class proceeding is that individuals who have litigation concerns "in common" ought to be able to resolve these common concerns in one central proceeding rather than through an inefficient multitude of repetitive proceedings.

Michael Eizenga et. al., Class Actions Law and Practice. (Toronto: Butterworths, 1999) at 3.11, Plaintiff's Book of Authorities, Vol. 3, Tab 6
 

166. The question underlying commonality is whether certification will avoid duplication of fact-finding or legal analysis.

167. There is substantial merit in trying to utilize the CPA to deal with as many issues as possible.

168. The Representative Plaintiff need not show that everyone in the class shares the same interests in the resolution of the asserted common issue.

169. Common issues need only involve a matter that, if determined, would move the litigation forward. When examining the existence of common issues, it is important to understand that the common issues do not have to be issues which are determinative of liability. The resolution of a common issue does not have to be, in and of itself, sufficient to support relief. To require every common issue to be determinative of liability for every plaintiff and every defendant would make class proceedings with more than one defendant virtually impossible.

 

170. The Plaintiff's position is that while the pleadings potentially raise individual issues, the resolution of the proposed common issues (1) will likely dispose of all issues of liability and (2) will in any event move the litigation forward.

 
171. The common issues need only be issues of fact or law, the determination of which will move the litigation forward. The Act is remedial legislation and should be given purposive interpretation consistent with its goals of promoting judicial economy, facilitating access to justice and encouraging the modification of behaviour of wrongdoers.

Proposed List of Common Issues (revised)

172. The Plaintiff assumes that if the class is certified the Defendants will wish to assert their pleas of set-off and their counterclaim against all class members.

 
173. The Plaintiff proposes the following revised list of common issues:
1. whether the Defendant Mariners Haven Inc. breached the Condominium Act, R.S.O. 1980, c. 84 and Section 33 of Regulation 121, R.R.O. 1980, by paying interest to the members of the Plaintiff Class at less than the prescribed rate and/or paying no interest on deposits paid by the members of the Plaintiff Class during the interim occupancy period, and whether Mariners Haven is liable to pay same;
2. whether the Defendants other than Mariners Haven Inc. are liable to the Plaintiff Class in respect to their knowing assistance of breach of trust and their knowing receipt of trust funds and whether a tracing order should be made;
3. whether liability may attach to any or all of the Defendants without the trial of issues which are specific to individual class members and regardless of any reasons Mariners Haven may have had to let the purchasers into occupancy and regardless of any agreements written or oral that may have been made in respect to same;
4. whether the Defendants were negligent, reckless or fraudulent in representations made to class members, or in failing to disclose material information to class members, prior to their signing of the Interim Occupancy Agreements;
5. whether the actions of the Defendants constitute fraud and a basis for piercing the corporate veil;
6. whether or not the actions of the Defendants constitute unlawful interference with economic interests or civil conspiracy or an unjust preference;
7. whether the Defendant, Mariners Haven, may set off against the class members' claims any charges set out in subsection 51(6) of the Condominium Act, and what is the calculation of the same;
8. whether the Defendant, Mariners Haven, is entitled to counterclaim against the members of the Plaintiff Class for fair market value rent for the period of interim possession of the subject condominium units and what is the calculation of the same;
9. whether or not the Defendants may assert a claim in unjust enrichment against the members of the Plaintiff Class, or vice-versa;
10. whether the claims of some or all class members are governed by the Limitations Act, and if so, whether the limitations issue may be decided without reference to individual issues;
11. whether the Defendants' conduct justifies an award of punitive damages, and if so, what amount of punitive damages is appropriate;
12. whether the class members are entitled to costs of the action or to prejudgment interest, and if so, whether it should be calculated on a compound basis as equitable interest; and
13. the method by which any money payable to the members of the Plaintiff Class is to be determined and distributed.

Claim for Deposit Interest and Related Trust Claim

174. The Plaintiff's principal claim is against Mariners Haven for payment of deposit interest. A class proceeding would be effective for this determination.

175. Regarding the related trust claim, it is helpful to set out, briefly, the theory of the Plaintiff's case, as it has developed on the evidence presented so far.

 
176. The Plaintiff will ask the court to apply the reasons of the Court of Appeal in its decision dismissing the Third Party's summary judgment motion and to find that Mariners Haven was in breach of a statutory trust obligation to pay interest pursuant to section 53(3) of the Condominium Act.

 
177. The Plaintiff will ask the court to consider that the Defendants, William Kaufman, Stuart Snyder and William H. Kaufman Inc., knowingly assisted the aforesaid breach of trust obligation and knowingly received trust money based on the following:
1. The admission that William Kaufman was the sole director and ultimate owner of both Mariners Haven and William H. Kaufman Inc.;
2. The admission that it was merely a division of labour as between Mr. Snyder and Mr. Kaufman as to who signed the letter from Mariners Haven comprising, in the case of each member of the proposed class, the Interim Occupancy Agreement;
3. The manifest misstatement contained in the Interim Occupancy Agreement;
4. The admission that both Mr. Kaufman and Mr. Snyder were aware of the existence of the statutory trust obligation and had sought legal advice in respect to it;
5. The admission that neither Mr. Snyder nor Mr. Kaufman made any calculation as to whether or not deposit interest and interim occupancy fees were in fact offsetting yet signed letters stating this;
6. The evidence that, as signatories to the Interim Occupancy Agreements, both Mr. Snyder and Mr. Kaufman had knowledge of, promoted, assisted in, participated in and acquiesced in the Interim Occupancy Agreements which were not only in contravention of the Condominium Act but were also materially detrimental to the beneficiaries of the statutory trust;
7. The admission that Mr. Snyder was the Chief Financial Officer of William H. Kaufman Inc.; and
8. The admission that William H. Kaufman Inc. received a repayment of loans greater than the total amount claimed by the proposed Plaintiff class.

 
178. In this context, it is important to recognize that the tort claim of misrepresentation might never need to be litigated. Liability may well attach to the Defendants based on the trust claim and the claims of knowing assistance and knowing receipt, which are derived from the trust claim.

 
179. The misrepresentation contained in the Interim Occupancy Agreement is germane as (1) an extension and an exacerbation of the degree of "knowing assistance" rendered by Mr. Snyder and Mr. Kaufman in respect to the breach of statutory trust, (2) evidence of the intention of Mr. Snyder and Mr. Kaufman to avoid the trust obligation or of their reckless or wilful blindness regarding same, and (3) a factor militating in favour of an award of compound interest.

 
180. Individual reliance need not be shown in respect to the doctrines of knowing assistance and knowing receipt. In respect to knowing assistance, it is sufficient to show that a defendant participated or assisted in the breach of trust.

181. The Plaintiff states that the Defendant, William Kaufman, participated and assisted in the breach of trust. Because of ill health, Mr. Kaufman will not be giving evidence at trial. Given Mr. Kaufman's involvement, given that he was the sole Director of Mariners Haven, and given that he was privy to legal advice on the issue of the requirement to pay deposit interest, it is likely that the trial court will apply the observation of Iacobucci J.,

With respect to the knowledge requirement, this will not generally be a difficult hurdle to overcome in cases involving directors of closely held corporations. Such directors, if active, usually have knowledge of all of the actions of the corporate trustee... That is, even if the appellant could argue that he had no subjective knowledge of the breach of trust, given the facts of which he did have subjective knowledge, he was willfully blind to the breach, or reckless in his failure to realize that there was a breach. Furthermore, the appellant received a benefit from the breach of trust.

182. As to knowing receipt, the Plaintiff relies on the apparent benefits to Mr. Kaufman and William H. Kaufman Inc. in circumstances where both Mr. Kaufman, as owner of Mariners Haven of William H. Kaufman Inc., and Mr. Snyder, as Chief Financial Officer of William H. Kaufman Inc., had actual knowledge of a breach of trust. Constructive knowledge on the part of these individuals will be sufficient to support the Plaintiff's claim.

183. Given the positive steps taken by Mr. Snyder and Mr. Kaufman to divert money that otherwise would have gone to satisfy a trust obligation, it is unlikely that the Defendants will succeed in their equitable defences based on re-opening the Agreements of Purchase and Sale and setting off what could have been charged by the Developer, had it chosen to do so. Such equitable defences, in other cases, have been unsuccessful, even when asserted by developers who arguably had "clean hands."

                        Cummins v. Napev Construction Ltd. (1995), 45 R.P.R. (2d) 199 (Ont. Div. Ct.), Plaintiff's Book of Authorities, Tab 3
 

184. After the court has ruled on matters of law, a determination of the amounts owing would be fairly simple, since the same mathematical equation would be used in each instance.

185. In their factum previously filed on the issue of certification, the Defendants developed the argument that balancing equities between parties is complicated and must be done on an individual rather than a group basis. The Defendants assert that the Plaintiff's allegations of knowing assistance and knowing receipt necessitate an inquiry into a balance of equity.

 
186. The argument is deficient, both factually and at law.

 
187. As a matter of legal sufficiency, the Defendants have advanced no authority for the proposition that the behaviour of a beneficiary may be such as to justify or excuse a defendant in knowingly assisting the trustee in its breach of its fiduciary duty to account to the beneficiary, or knowingly receiving trust money and converting same to one's own use.

 
188. This especially so of the obligation to pay interest under section 53 of the Condominium Act. There is no decided case where the behaviour of a claimant disentitled him or her to section 53 interest.

 
189. The Plaintiff's claim is based on a statutory obligation that survives closing. As a defence, a developer may not assert pre-closing issues arising from the parties' contractual relationship.

190. Breach of fiduciary duty has often been the subject of common issues certified in class proceedings in Ontario.

                        Allan v. CIBC Trust Corp. (1998), 39 O.R. (3d) 675 (Gen. Div.), Plaintiff's Book of Authorities, Vol. 4, Tab 3

                        Bunn v. Ribcor Holdings Inc., [1998] O.J. No. 1790 (Gen. Div.), Plaintiff's Book of Authorities, Vol. 4, Tab 4

                        909787 Ontario Ltd. v. Bulk Barn Foods Ltd., [1999] O.J. No. 2973 (S.C.J.), Plaintiff's Book of Authorities, Vol. 4, Tab 5

                        Carom v. Bre-X Minerals Ltd. (1999), 43 O.R. (3d) 441 (Gen. Div.), Plaintiff's Book of Authorities, Vol. 4, Tab 6

Ontario New Home Warranty Program v. Chevron Chemical Co., [1999] O.J. No. 2245 (S.C.J.), Plaintiff's Book of Authorities, Vol. 4, Tab 7

Chippewas of Sarnia Band v. Canada (Attorney General) (1996), 29 O.R. (3d) 549 (Gen. Div.), Plaintiff's Book of Authorities, Vol. 4, Tab 8

191. The Ontario Superior Court of Justice has certified common issues in a class proceeding which are similar to the issues in the instant case. In McLaughlin v. Falconbridge Ltd., the principal defendants were (1) the employer of the members of the Plaintiff class and (2) the employer's actuarial advisor. It was claimed that the Defendants breached their fiduciary duty to the Plaintiffs by withdrawing surplus funds from a pension plan, at the same time misrepresenting to the plaintiffs the true economic circumstances of the plan.

192. The Ontario Superior Court of Justice has also certified common issues in a matter involving a residential condominium development, the misapplication of deposit money held in trust and the allegation that certain strangers to the trust knowingly assisted in breach of the trust obligation together with a claim for tracing of improperly dissipated deposit money held in trust.

193. The Defendants have not advanced any evidence that the members of the Plaintiff class are situated differently, or have behaved differently, in such a way as to necessitate such individual examination. Exceptions to this may be the issues of (1) reliance as regards misrepresentation and (2) discoverability as regards a limitation period. These issues shall be addressed below.

 
194. It is submitted that, in deciding whether or not a common issue is truly common, the court may look at the evidentiary record as to what the Plaintiff class has in common in respect to that issue and what t