





CITATION:
Paragon Development
          Corporation v.
Sonka
Properties Inc., 2011 ONCA 30



DATE: 20110117



DOCKET: C50399



COURT OF APPEAL FOR ONTARIO



Weiler, Watt and Karakatsanis JJ.A.



BETWEEN



Paragon Development
          Corporation and

583533 Ontario
          Limited




Claimants (Respondents)



and



Sonka
Properties Inc.
, Morris Kaiser, Apple
          Hill,
Frabar
Management Limited, Islington
          Enterprises Inc.
Emkay
,
Frane
Investments Limited,
Morka
Management (1988) Inc.,
Morka
Management (1989) Inc., CBMM Holdings, Lakeview
          Forest Developments a.k.a.
Lakefor
Holdings Inc., Kaiser
          Equity Islington Affiliates,
Morka
Management
          (1990) Inc.,
Morka
Management (1985) Inc.,
Frabar
Management Inc., Marlton Holdings Inc.,
Morka
Management (1986) Inc., Estate of Maier Kaiser,
          North Sydney Associates, Morris Kaiser $US,
Morka
Management (1991) Inc., and
The Estate of Sonia Kaiser





Respondents (
Appellants
)



AND BETWEEN



Marka
Properties Inc.,
Veraka
Properties Inc.,
Boran
Properties Inc.
,
and
Poban
Properties Inc.
personally and for themselves and for all other shareholders of the style of
          cause referenced corporations except the defendant, in the name of and on
          behalf of those two corporations



Claimants (
Respondents/Appellants on
          Cross-appeal
)



and



Sonka
Properties Inc.
and Morris Kaiser



Respondents
          (
Appellant/Respondent on Cross-appeal
together with Estate
          of Sonia Kaiser
)




J. Gardner
Hodder
for the appellants

John T. Porter and Greg
Sheahan
for
          the respondents, Paragon Development Corporation and 583533 Ontario Limited

Theodor
Kerzner
, Q.C. for the
          respondents/appellants by way of cross-appeal,
Marka
Properties Inc.,
Veraka
Properties Inc.,
Boran
Properties Inc., and
Poban
Properties Inc.



Heard:
December 15, 2010



On appeal and cross-appeal from the
          judgment of Justice Herman Wilton-Siegel of the Superior Court of Justice,
          dated March 27, 2009, with reasons reported at (2009), 96 O.R. (3d) 574.



Weiler J.A.:



[1]

The issue
raised
by the
    appellants,
Sonka
Properties

Inc. (
Sonka
) and the Estate of Sonia
    Kaiser, is straightforward.

[2]

The appellants challenge the trial judges conclusion
    that although the Estate of Sonia Kaiser is the legal owner of the shares of
Sonka
, the beneficial owner of the shares is the late Sonia
    Kaisers surviving husband, Morris Kaiser.  The appellants argue that Sonia Kaiser (or her estate) was always both
    the legal and beneficial owner of the shares in
Sonka
.  They submit that the trial judge was not
    entitled to come to the conclusion that Morris Kaiser was the beneficial owner
    of the shares.  The appellants submit
    that in order to come to that conclusion, the trial judge would have had to
    find either that there was a trust in favour of Morris Kaiser or that a fraud
    had been committed.  However, fraud was
    not pleaded and the trial judge made no express finding that a trust existed.
    Further, the appellants submit that the requirements of a trust are not met.

[3]

We disagree.  Section 1(1) of the
Business
    Corporations Act,
R.S.O. 1990,
c
. B. 16 (
OBCA
) defines beneficial interest and
    beneficial ownership as including ownership through a trustee, legal
    representative, agent or other intermediary.  The definition in the
OBCA
indicates
    that beneficial interest can exist outside a finding that a trust exists or
    that a fraud has taken place.

[4]

Existing jurisprudence also supports the conclusion
    that a beneficial owner is one who has an equitable claim to shares whether or
    not they have been issued and appropriated to him.  Beneficial ownership is not limited to
    ownership through a trustee.  See
Fedel
v. Tan
(2008), 93 O.R. (3d) 274 (S.C.),
    at
paras
. 209 and 216.

[5]

The question of
    whether the trial judge was entitled to come to the conclusion that Morris
    Kaiser was the beneficial owner of the shares must be considered against the
    background of the evidence relating to Morris Kaiser and Sonia Kaisers
    respective involvements with
Sonka
.  Morris Kaiser was an accountant who was the
    person primarily responsible for instructing counsel in connection with the
    corporate structure through which the shares in issue were distributed. When Morris
    Kaisers father, Maier Kaiser, passed away in 1977, his interests in certain predecessor
    companies passed to his estate.  Maiers
    widow enjoyed a life interest in the estate and, upon her death in 2005, the
    residue passed to each of their three children, Morris Kaiser being one of
    them.  The successor by amalgamation of
    the predecessor companies was Paragon Development Corporation, whose shares
    were acquired by 583533. As of November 30, 1984, all of the shares of 583533
    came to be held by various holding companies, of which
Sonka
was one. Morris Kaiser enjoyed the use, benefit and absolute control of
Sonkas
shares and he exercised that control over a lengthy
    period of time well past Sonias death in 1993.  By contrast, Sonia Kaiser was described as being unversed in financial
    affairs.  There was no evidence that she
    was ever appointed as an officer or director, or exercised any powers as a
    shareholder prior to her death.  The
    facts found by the trial judge support his conclusion that Morris Kaiser was
    the beneficial owner of the shares.

[6]

In the circumstances, it was not necessary for the
    trial judge to make an express finding that the shares of
Sonka
were held in trust for Morris Kaiser.  A
    bare trustee holds legal title to property on behalf of another and has no
    independent power, discretion or responsibility in connection with the
    property.  That description fits the
    trial judges findings respecting Sonia Kaiser.  In making the findings he did, the trial judge
    implicitly found Sonia Kaiser to be a bare trustee who held title to
Sonkas
shares for Morris Kaiser.

[7]

In view of our conclusion that Sonia Kaiser is a bare
    trustee and not entitled to any distribution, the appellants submission that
    the time limit for bringing an action against the estate of Sonia Kaiser
    arising out of the operation of ss. 38(2) and (3) of the
Trustee Act
,

R.S.O. 1990,
    c. T.23, has passed and that the respondent cannot withhold a distribution to
    the estate of Sonia Kaiser, is irrelevant.

[8]

In any event,
    ss. 38(2) and (3)
have
no application to this
    appeal.  The effect of ss. 38(2) and (3)
    is to require that actions for wrongs committed by the deceased, for
which
the estate is liable, must be brought within two years
    of the date of the death of the deceased.  Section 38 was enacted to create an exception to the draconian rule that
    actions that were personal to the deceased did not survive death, while at the
    same time imposing a limitation period to avoid creating indefinite exposure to
    the estate:
Waschkowski
v. Hopkinson Estate
(2000), 47 O.R. (3d) 370 (C.A.), at p. 373.

[9]

No wrong is alleged against Sonia Kaiser
    personally.  This is a pure economic loss
    claim.  No claim is made against the
    estate of Sonia Kaiser.  The estate was
    simply added as a defendant, on consent, in order to allow it to make
    submissions as an affected party, because any order affecting
Sonkas
entitlement to a distribution from 583533 would
    indirectly affect the estate.

[10]

Further, no limitation period would apply.  This action was, in essence, an oppression
    action based on breach of fiduciary duty.  The trial judges order to withhold distribution to
Sonka
was based on the equitable rule in
Cherry
    v.
Boultbee

(1839), 41 E.R. 171, or,
    alternatively, in the courts broad discretion to make an order under s. 248(3)
    of the
Ontario Business Corporations Act
,

R.S.O. 1990, c. B 16, as amended.

[11]

Accordingly, the appeal is dismissed with costs to the
    respondents fixed in the amount of $17,500 inclusive of taxes, but with
    disbursements payable in addition.

[12]

Since the appeal has been dismissed, the cross-appeal
    is moot and is also dismissed with costs to the cross-appellants fixed in the
    amount of $4,000 inclusive of all taxes and disbursements.

[13]

If necessary, further brief submissions as to the
    manner of payment of costs may be made in writing.

RELEASED:  JAN 17,
    2011


KMW                                                                                Karen
    M. Weiler J.A.

I
    agree David Watt J.A.

I
    agree Karakatsanis J.A.


