COURT FILE NO.: 593/07
DATE: 20071213
SUPERIOR COURT OF JUSTICE – ONTARIO
DIVISIONAL COURT
RE: Mitchell Chang v. Laura Lynn Colligan
BEFORE: Kiteley J.
COUNSEL: John P. Ormston, solicitor for the plaintiff/appellant
Milton A. Davis, solicitor for the defendant/respondent
HEARD: December 10, 2007
E N D O R S E M E N T
[1] Pursuant to rule 62.02(4)(b), the appellant seeks leave to appeal the order made on October 10, 2007 by Allen J.[^1] in which she set aside five ex parte orders that had been obtained at the instance of the appellant.
Background:
[2] Chang and Colligan met in 2001 and embarked on a business relationship and an on and off personal relationship until July 2006. The personal relationship occurred between January 2001 and December 2002 and again from July 2005 to July 2006.
[3] Chang alleged that, in May 2004, he, Colligan and GG, through a holding company, purchased the property at 64 Glen Road in Toronto for $1.4 mil. On closing, title was taken in the name of Colligan. Within a few days of closing, a declaration of trust was signed whereby Colligan acknowledged that she held a 100% interest in trust for Chang, GG and herself. Chang alleged that, in 2005, he purchased GG’s share.
[4] In May 2006, Colligan signed an agreement to sell Glen Road with a closing date of July 28, 2006.
[5] On closing, all of the net proceeds of sale, approximately $1.6 mil, were deposited to an account in the name of Colligan. Negotiations as to the disputed ownership of the proceeds of sale took place between lawyers for Chang and Colligan and between Chang, Colligan and Colligan’s brother.
[6] Chang began proceedings against Colligan and he obtained a series of ex parte orders. The orders indicate that two affidavits of Chang were relied on at various stages (sworn January 31 and March 26) and 3 affidavits of Y. Vasquez (sworn April 5, April 12, and May 29).
First Order: C. Campbell J. February 26, 2007
[7] Service of the motion for an injunction to have the proceeds of sale paid into court was attempted on Colligan at her last known address and her employer on 5 occasions on February 13, 14 and 18. Colligan was in Dallas but Chang asserted that she did not tell Chang nor did she give a forwarding address to her employer or her brother. An order was made restraining Colligan from dealing with the net proceeds of sale and requiring Colligan to deposit the funds into court.
Second Order: Newbould J. March 27, 2007
[8] Leave was given to amend the statement of claim. Substituted service of the amended statement of claim was directed on several persons. The lawyer for the purchaser was directed to retain the $25000 holdback in his trust account and provide to Chang a copy of the cancelled cheque that reflected payment of the net proceeds to Colligan and provide related closing directions; the lawyer who had acted for Colligan in the negotiations in the fall of 2006 was directed to advise Chang as to the name of the private bank into which Colligan had deposited the proceeds together with any other information he had with respect to the whereabouts of the proceeds of sale. In addition, Colligan was restrained from dealing with her RRSP at a specified financial institution and her furniture and other possessions in storage. She was directed to pay costs fixed at $1000.00.
Third Order: C. Campbell J. April 10, 2007
[9] Canada Post was ordered to produce to Chang all information it had as to an address for delivery for Colligan. The Bank of Nova Scotia was ordered to produce all documents with respect to the deposit of $1.4 mil and subsequent withdrawals. Rogers was ordered to produce information as to whether Colligan’s cell number remained active and the address on file associated with that number. The moving and storage company was ordered to provide information about any retrieval of property from storage, the address for its delivery and the name of any third party carrier that picked up Colligan’s belongings.
Fourth Order: C. Campbell J. April 16, 2007
[10] RBC Dexia was order to produce to Chang all information with respect to the deposit of $1.6 mil and subsequent withdrawals. Costs were reserved to any judge hearing further motions.
Fifth Order: C. Campbell J. June 4, 2007
[11] Colligan was restrained from dealing with funds on deposit with the TD Bank, the Bank of Nova Scotia and the CIBC. Those banks were required to provide Chang with information about contact details for Colligan as well as the amount of funds on deposit. Amex and a locksmith company were directed to provide contact information. Costs were directed to be paid by the defendant in any event of the cause.
Sixth Order: C. Campbell J. June 5, 2007
[12] A similar disclosure order was made against JP Morgan. Costs were directed to be paid by the defendant in any event of the cause.
Order Under Appeal:
[13] On October 4, 2007, Allen J. heard a motion brought by Colligan for an order setting aside the noting in default against her and the ex parte orders. In an endorsement released October 10, 2007, Allen J. gave Colligan 30 days to deliver a statement of defence and counterclaim and she set aside 5 of the 6 orders.[^2]
[14] The motions judge reviewed the divergences in the evidence of the plaintiff and defendant as to who invested in the purchase and renovation of Glen Road, as to the nature of an agreement as to ownership interests, as to how the proceeds of sale were to be distributed, and whether Chang knew how to contact Colligan when she was in Dallas. The motions judge also summarized the positions taken by the parties. The analysis that formed the basis of her order is as follows:
Upon hearing the parties’ arguments and reviewing the materials and case authorities filed, I conclude the Plaintiff was less than candid with the Court when he sought the injunction. He failed to present pertinent information for the Court’s consideration. I therefore grant the Motion for reasons that follow.
It is trite law that a court’s power to order injunctive relief is discretionary and only granted under extraordinary circumstances. I find the injunctive relief requested by the Plaintiff to be continued is exceptionally broad and invasive. There are restrictions on her assets and orders that permit access to financial information and postal and telephone record information. I find this placed a weighty burden on the Plaintiff to satisfy the Court he made full and frank disclosure when he sought the Orders.
It is not the Court’s role on this Motion to make findings of fact or to assess the credibility of the Defendant and Plaintiff. I need only decide whether the plaintiff satisfied the standard of disclosure required of him when he sought restrictions on the Defendant without notice to her.
Of critical importance is the fact the Plaintiff failed to candidly disclose the material fact that the Defendant borrowed $2,000,000 to finance the purchase and renovation of Glen Road. This is a fact that would have been crucial to the Court’s determination on the ex parte motions in that it would have contributed to the Court’s understanding of the Defendant’s position in the dispute over Glen Road. I find this was a significant failure to be frank and candid with the Court.
I do not accept the Plaintiff’s position that documentary support for the Glen Road transaction is irrelevant or inconsequential. [United States v. Friedland, supra] It is clear from his affidavit and cross-examination the Plaintiff refused to provide pertinent information that I find was legitimately requested by the Defendant. The Defendant is entitled to inquire about and seek documentary support for the Plaintiff’s claim he provided the bulk of the funds for the Glen Road venture. If the Plaintiff kept the books as he claimed, the documentation should be available to him to present to the Court. [Chitel, supra, at 5]. I do not find it is an unreasonable standard of disclosure to require the Plaintiff to have disclosed that documentation.
I also do not agree with the Plaintiff that documentation on the other four properties is irrelevant. It is not disputed the Plaintiff and Defendant were in a personal and business relationship over a number of years during which time they were involved in joint ventures where they bought, renovated and sold five properties. Due to the discrepancies in the Defendant’s and Plaintiff’s accounts the evidence is not clear as to the financial connection between Glen Road and the other four properties. However, there seems to have been, and it would not be unreasonable to expect given the Defendant’s and Plaintiff’s relationship, some interconnection or intermingling in the financial dealings with the five properties.
In any event, I find the disclosure of information about the other four properties is relevant and would have provided a context for the Glen Road transaction and a more complete picture of the financial relationship between the Defendant and Plaintiff. [Chitel, supra, at 6]. I find therefore that the Plaintiff ought to have frankly placed those facts before the Court.
Of some concern is the fact the Plaintiff admitted being dishonest in his matrimonial matter and revealed a marked lack of candour and forthrightness on cross-examination. That, I find, puts in question his honesty on the ex parte motion. In the result, I find the Plaintiff, on seeking the injunction, presented an incomplete and misleading picture of the circumstances surrounding Glen Road and his relationship with the Defendant and therefore failed to meet the appropriate standard.
In the circumstances, I decline to exercise the Court’s discretion to continue the injunction. The five ex parte Orders are set aside.
Good Reason to Doubt the Correctness of the Order:
[15] Mr. Ormston argued that the motions judge erred in setting aside the 5 orders based on Chang’s lack of disclosure and based on an assessment of his credibility. The questions he proposes to put to the appellate court are these:
Did the motions judge err in setting aside the ex parte orders obtained by Chang on the basis that Chang failed to make full and frank disclosure on the hearing of the ex parte motions?
Did the motions judge err in considering the credibility of Chang in determining whether there was full and frank disclosure on the ex parte motions?
[16] The motions judge identified 3 areas of non-disclosure. The first was that in his affidavits, Chang did not reveal that Colligan had taken a mortgage in the principal amount of $2 mil to finance the purchase and renovation. Mr. Ormston argued that that information would only have had a material impact if Chang had taken the position that Colligan had no interest in the property. He observed that title was registered in Colligan’s name and only she could execute a mortgage. He pointed out that while the affidavits of Chang were silent on the point, there was a letter attached as an exhibit from the real estate lawyer that indicated that a mortgage initially of $1.6 mil had been registered. In any event, Colligan does not take the position that the mortgage affected her position because she argues that she is entitled to 100% of the net proceeds as a result of an oral agreement and set-off from other properties.
[17] The second was that Chang resisted providing documentary support for his claim that he provided the bulk of the funds for the Glen Road venture. Mr. Ormston argued that that could not be a material fact particularly since Colligan does not assert that Chang made no contribution.
[18] The third was that Chang did not disclose the business relationship with Colligan involving 4 other properties. Mr. Ormston argued that the information about the prior ventures could not be a material fact. It was apparent from the negotiations in the fall of 2006 that the position taken by Colligan and her counsel was that if Chang brought a motion for payment into court as he had threatened to do, he should, in his affidavit in support, address two issues: Colligan’s claim for a set off as a result of the cottage venture; and Chang having lied on his financial disclosure in the matrimonial proceedings involving his wife. Mr. Ormston argued that Chang did address both of those in his evidence on the motions and that he could not be expected to anticipate issues about the business relationship that she had not raised in the negotiations.
[19] The second error relied on by Mr. Ormston was the conclusion that Chang’s honesty was questionable. He argued that the motions judge ought not to have made findings of credibility.
Analysis:
[20] In seeking to obtain an ex parte injunction, the applicant must make full and frank disclosure of all matters in his/her knowledge which are material for the judge to know and of the expected positions of the person against whom the injunction is sought.[^3] Rule 39.01(6) imposes an obligation to make “full and fair disclosure of all material facts” and provides that “a failure to do so is in itself sufficient ground for setting aside any order obtained” without notice.
[21] In making an order for an injunction, the court must consider whether there is a serious question for trial, whether the moving party will experience irreparable harm if the injunction is not granted, and whether the balance of convenience favours the moving party.[^4] The same factors must be applied in a consideration of a request to continue an injunction once notice has been given and the person against whom injunctive relief was ordered has an opportunity to respond. Both at first instance and on the continuation, the judge has a wide discretion whether to order an equitable remedy.
[22] The motions judge considered the appropriate legal principles. Mr. Ormston does not argue otherwise. His position is that there is good reason to doubt the correctness of her order because of the way in which she applied those principles and the manner in which she exercised her discretion.
[23] I disagree. As the court held in Chitel supra, “the relationship between the parties in the instant case was obviously more complicated, complex and extended than that implied in the affidavit”. While it was important to deal with the two issues identified in the negotiations (the cottage and his deceptive disclosure in his matrimonial proceedings) that did not end his obligations. There was much more to their relationship. The prior ventures and the mortgage were part of those complexities. I agree with Mr. Davis, that a reference to a mortgage on closing in an appendix to the affidavit does not mean “it would have been obvious to anyone reading the motion material” that Colligan had executed a mortgage in a significant amount. The fact that Chang and Colligan had had an extensive business relationship over 5 years that involved a total of 5 properties discloses a picture of considerably greater complexity. The property in this proceeding was only one of several. The motions judge had ample basis to conclude that by isolating the Glen Road purchase and not revealing the mortgage and the other ventures and then in cross-examination, resisting providing answers and documents, Chang had not provided “full and frank disclosure” nor “full and fair disclosure”.
[24] Where facts are disputed and evidence is contradictory, a motions judge ought not to make findings of credibility. However, in the transcript of his cross-examination, Chang admitted that he had lied in his (sworn) financial statement about a property and that he had lied in his case conference memorandum about two properties. As paragraph 22 of Mr. Davis’ factum indicated, the motions judge had that evidence and other documents that indicated that Chang had made many material misstatements, some of which were under oath. In exercising the broad discretion she had, it was open to her to consider his admitted dishonesty and his marked lack of candour and forthrightness on cross-examination and conclude that that put into question “his honesty on the ex parte motion”.
[25] I am not persuaded that there is reason to doubt the correctness of the decision of the motions judge. She had a discretion to exercise. She obviously considered the voluminous record before her including the intrusive nature of the orders. Simply because Chang does not like the outcome does not mean that there is reason to doubt the correctness of her order.
Matters of General or Public Importance:
[26] While I need not deal with it, I observe that had I found good reason to doubt the correctness of the order, I would not have been satisfied on the second criterion in rule 62.02(4)(b). Mr. Ormston argued that the issue of what constitutes a material fact is a matter of general importance that transcends the interests of the immediate parties. Furthermore, he asserted that the decision of the motions judge extends the “standard of disclosure on an ex parte injunction to an impossible standard”. I disagree. The principles of “full and frank disclosure of material facts” or “full and fair disclosure” are well known. The law is well settled. Whether the standard was met in this case is of interest only to these litigants. It does not transcend their interests. General or public importance is not engaged.
ORDER TO GO AS FOLLOWS:
[27] The motion for leave to appeal is dismissed.
[28] Counsel having agreed on the amount of costs, the plaintiff shall pay costs to the defendant in the amount of $2500 plus GST.
Kiteley J.
DATE: December 13, 2007
[^1]: [2007] O.J. No. 3875; 2007 CarswellOnt 6562 (Sup. Ct. J.) [^2]: There are 6 orders. Paragraphs 1 and 35 to 39 of the order made October 10th refer only to 5. The financial institution that was the subject of the April 16 order was mentioned by the motions judge in para 14. It may be that she was only requested to set aside 5 of the orders or that missing the order dated April 16th was an oversight. I draw no conclusions from its omission. [^3]: Chitel et al. v. Rothbart et al. (1983) 1982 1956 (ON CA), 39 O.R. (2d) 513 O.C.A. [^4]: RJR MacDonald Inc. v. Canada 1994 117 (SCC), [1994] 1 S.C.R. 311