Court File and Parties

COURT OF APPEAL FOR ONTARIO DATE: 20220615 DOCKET: M53458 (C69263, C69264, C69278, C69305, C69306, C69318, C69321) van Rensburg J.A. (Motion Judge)

DOCKET: C69263 BETWEEN Ernst & Young Inc., in its capacity as Court-Appointed Monitor of Bondfield Construction Company Limited Applicant (Respondent/Responding Party)

and

John Aquino, Marco Caruso, Giuseppe Anastasio a.k.a. Joe Ana, Lucia Coccia a.k.a. Lucia Canderle, the Estate of Michael Solano, Giovanni Anthony Siracusa a.k.a. John Siracusa, 2483251 Ontario Corp. a.k.a. Clearway Haulage, 2420595 Ontario Ltd. a.k.a. Strada Haulage, 2304288 Ontario Inc., 2466601 Ontario Inc. a.k.a. MMC Contracting, 2420570 Ontario Ltd. a.k.a. MTEC Construction, Time Passion, Inc. and RCO General Contracting Ltd. Respondents (Appellants/Moving Parties)

DOCKET: C69264 AND BETWEEN KSV Kofman Inc. in its capacity as Trustee-in-Bankruptcy of 1033803 Ontario Inc. and 1087507 Ontario Limited Applicant (Respondent/Responding parties)

and

John Aquino, Marco Caruso, Giuseppe Anastasio a.k.a. Joe Ana, the Estate of Michael Solano, Lucia Coccia a.k.a. Lucia Canderle, Dominic Dipede, 2483251 Ontario Corp. a.k.a. Clearway Haulage, MMC General Contracting, MTEC Construction, Strada Haulage, 2104664 Ontario Inc., and 2304288 Ontario Inc. Respondents (Appellants/Moving Parties)

DOCKET: C69278 AND BETWEEN KSV Kofman Inc. in its capacity as Trustee-in-Bankruptcy of 1033803 Ontario Inc. and 1087507 Ontario Limited Applicant (Respondent/Responding Party)

and

DOCKET: C69305 AND BETWEEN KSV Kofman Inc. in its capacity as Trustee-in-Bankruptcy of 1033803 Ontario Inc. and 1087507 Ontario Limited Applicant (Respondent/Responding Party)

and

DOCKET: C69306 AND BETWEEN Ernst & Young Inc., in its capacity as Court-Appointed Monitor of Bondfield Construction Company Limited Applicant (Respondent/Responding Party)

and

DOCKET: C69318 AND BETWEEN KSV Kofman Inc. in its capacity as Trustee-in-Bankruptcy of 1033803 Ontario Inc. and 1087507 Ontario Limited Applicant (Respondent/Responding Party)

and

DOCKET: C69321 AND BETWEEN Ernst & Young Inc., in its capacity as Court-Appointed Monitor of Bondfield Construction Company Limited Applicant (Respondent/Responding Party)

and

Counsel: Terry Corsianos and George Corsianos, for the moving parties John Aquino, 2304288 Ontario Inc., Marco Caruso, Giuseppe Anastasio, and Lucia Coccia-Canderle Alan Merskey, Evan Cobb and Stephen Taylor, for the responding party Ernst & Young Inc., in its capacity as Court Appointed Monitor of Bondfield Construction Company Limited Jeremy Opolsky and Craig Gilchrist, for the responding party KSV Restructuring Inc. in its capacity as Trustee in Bankruptcy of 1033803 Ontario Inc. and 1087507 Ontario Limited

Heard: June 2, 2022 by video conference

Endorsement

[1] This is a motion for a stay of execution of the judgments of Dietrich J. dated March 19, 2021, as upheld by this court on March 10, 2022 for the reasons reported at 2022 ONCA 202, pending the decision of the Supreme Court on the moving parties’ leave application. Pursuant to the judgments, the moving parties are liable jointly and severally to pay $21,807,693 to the Monitor and $11,366,890 to the Trustee. [1]

[2] The judgments were obtained in the context of proceedings involving Bondfield Construction Company Limited and certain of its affiliates (collectively “Bondfield” or the “debtor companies”) under the Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C-36 (the “CCAA”) and the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (the “BIA”). The responding parties are Bondfield’s Monitor and the Trustee in Bankruptcy of two Bondfield affiliates, collectively known as Forma-Con, which are subject to proceedings under the BIA.

[3] The judgments resulted from applications by the Monitor and the Trustee under s. 96 of the BIA (and, in the case of the Monitor, under s. 36.1 of the CCAA which incorporates by reference s. 96 of the BIA) for declarations that various payments from Bondfield to the moving parties were transfers at undervalue made with the intent to “defraud, defeat or delay” Bondfield’s creditors, and for compensation for those transfers. The judgments were stayed automatically pending the appeal to this court. Any further stay requires a court order.

[4] This motion is brought under s. 65.1(1) of the Supreme Court Act, R.S.C. 1985, c. S-26, which provides:

The Court, the court appealed from or a judge of either of those courts may, on the request of the party who has served and filed a notice of application for leave to appeal, order that proceedings be stayed with respect to the judgment from which leave to appeal is being sought, on the terms deemed appropriate.

[5] Initially, the moving parties moved for a stay of the judgments pending the disposition not only of their leave application, but also, if granted leave, of their appeal to the Supreme Court. At the outset of the hearing of the motion, however, the moving parties’ counsel confirmed that the order sought at this stage is confined to a stay of the judgments pending the disposition of their leave application. The moving parties indicated that their leave application was served and filed with the Supreme Court on April 21, 2022.

[6] The test is set out at para. 15 of Ting (Re), 2019 ONCA 768, 73 C.B.R. (6th) 1, as follows:

The test for granting a stay pending an application for leave to appeal to the Supreme Court of Canada is well-established. The moving party must demonstrate that: (i) there is a serious issue to be adjudicated on its proposed appeal, including that the appeal raises an issue of public or national importance; (ii) it will suffer irreparable harm if the stay is not granted; and (iii) the balance of convenience favours granting the stay. These three components are interrelated in that the overriding question is whether the moving party has shown that it is in the interests of justice that the court grant a stay. [Citations omitted.]

[7] Two preliminary observations are in order. First, the moving parties are offering no security for the judgments in their motion for a stay, instead arguing that in the particular circumstances of this case the Monitor and the Trustee will have recourse to sufficient assets, liquid and otherwise, to satisfy the judgments. Second, the Monitor has given assurances and an undertaking not to take certain steps pending the disposition of the application for leave to appeal. At para. 59 of its factum, the Monitor states:

[W]ith respect to the risk that any seized or liquidated assets will be distributed to creditors, the Monitor is not in a position to distribute funds to creditors of the Bondfield Group at this time, nor will it be in such a position prior to the resolution of the leave motion before the Supreme Court. In any event, the Monitor will undertake not to distribute any seized assets or the fruits thereof to Bondfield’s creditors until resolution of the leave to appeal motion. [Emphasis added.]

[8] The Trustee’s counsel confirmed that the Trustee agrees to be bound by the same undertaking.

[9] The moving parties contend that they meet the first branch of the test for a stay – that they have a good chance of obtaining leave to appeal to the Supreme Court and succeeding in their appeal. In brief, their argument is that, although Mr. Aquino was found to have acted fraudulently as the directing mind of Bondfield and Forma-Con when these corporations made transfers for nil value, his intention should not have been imputed to the debtor companies under the corporate attribution rule because Mr. Aquino’s actions were not intended to benefit Bondfield. Essentially, the challenge is to Lauwers J.A.’s conclusions at paras. 78 and 79 of the appeal decision. The moving parties acknowledge that there is no attack on the findings of fraud against Mr. Aquino; rather, the focus is on the imputation of his fraud to the debtor companies that he controlled for the purpose of s. 96(1)(b)(ii)(B) of the BIA (requiring that the debtors intended to defraud, defeat or delay a creditor).

[10] This argument, which was unsuccessful at first instance and on appeal to this court, may well have been novel, and, as Lauwers J.A. observed, raised a thorny issue concerning the interaction between the corporate attribution doctrine and s. 96 of the BIA. Whether the corporate attribution doctrine formulated in Canadian Dredge & Dock Co. v. The Queen, [1985] 1 S.C.R. 662, and as applied in Deloitte & Touche v. Livent Inc. (Receiver of), 2017 SCC 63, [2017] 2 S.C.R. 855, is the correct point of departure for determining the intention of a corporate debtor to defraud creditors under s. 96(1)(b)(ii)(B) of the BIA, and whether the approach by this court in this case is correct, may raise an issue of public importance concerning the interpretation of s. 96. Nevertheless, I see nothing in the result in this case that is inconsistent with settled law applying s. 96 of the BIA, and, irrespective of how the test might be interpreted and applied, I see no reasonable prospect of a different result, should the Supreme Court grant leave to appeal and hear the appeal.

[11] In any event, I agree with the responding parties that the determinative factor in this motion is the inability of the moving parties to prove irreparable harm if the stay is refused, now that the Monitor and the Trustee have given the undertakings noted above. The moving parties’ argument about irreparable harm at this stage is simply that without a stay, Mr. Aquino will be prevented from negotiating a sale of his 8.3% interest in the “Anderson property” to a third party (should an interested third party come forward), a sale that he acknowledges would be subject to the Monitor’s prior approval and would generate proceeds for the Monitor. This is a property that Mr. Aquino claimed was of “no value” during his recent cross‑examination in related Mareva injunction proceedings. His other claimed interests in various properties and corporations are disputed and the subject of litigation, or are interests as a shareholder in the insolvent debtor companies themselves. This does not constitute irreparable harm.

[12] Nor does the balance of convenience favour the moving parties. The moving parties admit that they received millions of dollars from Bondfield for no value and do not challenge the findings that they engaged in a fraudulent invoicing scheme. The Monitor submits that it, and by extension the creditors, would suffer irreparable harm if the execution of the judgments is further delayed. I note that the status quo at this stage is different from what it was before the appeal to this court, where monetary judgments are stayed pending appeal: see Rules of Civil Procedure, R.R.O. 1990, Reg. 194, r. 63.01(1). Instead, a monetary judgment is not automatically stayed pending further appeal to the Supreme Court. Rather, s. 65(1)(d) of the Supreme Court Act provides that, with respect to a monetary judgment, the execution of the judgment will not be stayed pending appeal unless the appellant provides security for the amount of the judgment below “to the satisfaction of the court appealed from”. While there is no statutory requirement for security to be provided pending leave to appeal to the Supreme Court, in the only other case referred to by the parties where a stay of a monetary judgment was granted by this court pending leave to appeal to the Supreme Court (Livent Inc. v. Deloitte & Touche, 2016 ONCA 395, 131 O.R. (3d) 784), the moving parties provided security for the judgment proposed to be appealed. As noted in that decision, security for the judgment can substantially mitigate the risk of harm from a stay of execution: at para. 13. No security has been offered in this case, and I have concluded that the assets in the Monitor’s hands are insufficient to satisfy the judgments.

[13] For these reasons, the motion is dismissed. Costs to the Monitor in the sum of $25,000 and to the Trustee in the sum of $2,500, inclusive of HST and disbursements, payable by the moving parties jointly and severally.

“K. van Rensburg J.A.”

[1] Some moving parties’ individual liabilities are limited.

Ernst & Young Inc. v. Aquino, 2022 ONCA 472

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