COURT FILE NO.: 397/08
DATE: 20080916
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
B E T W E E N:
BANK OF MONTREAL
Plaintiff
- and -
DIMITRI’S SERVICE CENTER INC. and BISHOI NABIL DIMITRI also known as BISHOI NABIL MAHROUS
Defendants
Sean N. Zeitz, for the Plaintiff
Jeffrey C. Silver, for the Defendants
HEARD at Toronto: September 16, 2008
janet wilson J.:
[1] The plaintiff, the Bank of Montreal (the Bank) seeks leave to appeal from the order of Hoy J., dated July 28, 2008. The motion is dismissed.
[2] Hoy J. set aside the ex parte order of Cumming J., allowing the seizure and sale of scheduled property owned by the defendants as she concluded that the Bank had failed to provide full and fair disclosure in the affidavit material filed before Cumming J. She also ordered costs in favour of the defendants in the motion before her. She confirmed that the Bank was not entitled to claim against the defendants for the costs incurred in obtaining the ex parte order or in the motion before her.
The Bank relies on the test for leave to appeal in both Rule 62.02(4)(a) and (b).
[3] Hoy J. concluded that the Bank misrepresented the facts before Cumming J. She stated:
The Bank’s affidavit before Cumming J. expresses concern that the debtor would dispose of the assets at issue if notice was given. The exhibits thereto, from the Bank’s appraiser, merely indicate that the debtor’s principals’ position was that they would not give up the assets without a court order. The affidavit of the debtor in this matter is consistent with the Bank’s appraiser’s memo; namely, that the debtor for various reasons feels that the Bank is not entitled to the assets and is unwilling to cede possession without a court order. The debtors wanted their day in court.
The Bank’s affidavit does not disclose that the debtor’s account manager was aware at all times of the location of the debtor’s business (as the debtor asserts in its affidavit) or that at least prior to demand, the debtor was not in default of any financial obligations to the Bank and, according to the debtor, did not owe its landlord any money. The Bank’s affidavit does not set out the “full picture”. The Bank’s materials did not meet the high standard applicable on an ex parte order.
THE ARGUMENTS
Rule 62.02(4)(a)
[4] The Bank argues that the decision of Hoy J. is in conflict with a decision of Spies J. in Cantar Pool Products Ltd. (Re) [2006] O. J. No. 3693 (S.C.), and that it is desirable for the test for appropriate disclosure to be clarified by the Divisional Court.
[5] I disagree. Hoy J. did not apply a different test to that enunciated by Spies J. Cantar. She simply reached a different conclusion based on the facts of this case. Hoy J. concluded that the Bank breached its duty to disclose all material facts relevant to the ex parte application.
[6] Hennessy J. in Walden Electrical Ltd. v. Lopes Mechanical Ltd. 2006 Carswell Ont. 7407 (S.C.) confirms that the caselaw is clear and consistent that applicants seeking ex parte orders are subject to the clear and high standard of fully disclosing material facts. A breach of this duty will justify the ex parte order being set aside as a matter of right.
[7] Sharpe J. confirms in United States v. Friedland [1996] O. J. No. 4399 (Gen. Div.) at para. 178 that the:
Authorities establish that where there has been a finding of material non-disclosure or misstatement, the injunction must be set aside as a matter of right, without regard to whether the injunction might be sustainable on the basis of a corrected record, and that a litigant who fails to make full and frank disclosure forfeits whatever right it might have had to a Mareva injunction.
[8] The Bank’s argument pursuant to s.62.02(4)(a) therefore fails.
Rule 62.02(4)(b)
[9] The Bank also argues that there is good reason to doubt the correctness of Hoy J.’s decision and that the issue is one of importance justifying leave. Again, I disagree.
[10] The Bank misrepresented relevant facts about the defendants’ move to new premises, painting the innuendo of questionable dealings. A representative of the Bank had met with the defendants prior to initiating these proceedings in the new premises.
[11] The Bank also baldly suggested that the defendants were in arrears of rent. The defendants dispute this fact. These two facts are material in the Bank’s request for an ex parte motion to seize the goods in question.
[12] The affiant before Cumming J. was a member of the Bank’s Special Account Management Unit. He had no prior personal knowledge of the defendants’ banking relationship. He did not inform himself with respect to material facts with the Bank staff (i.e. about the defendants’ move) nor did he submit all of the relevant banking documents in the motion material. The affiant failed in his duty to inform himself of all the relevant facts. (see the decision of Master Clark in Royal Bank v. Zlotnik [2002] Carswell Ont. 4000 para. 12).
[13] Hoy J. makes it clear that any party seeking an ex parte order is subject to a high standard with respect to accuracy and truth of the contents of the motion material. An unwarranted seizure can effectively put a client out of business. I agree with her decisions in all respects. The Bank’s request for leave pursuant to Rule 62.02(4)(b) is therefore dismissed.
COSTS
[14] After hearing submissions from counsel with respect to costs, I conclude that the Bank shall not be entitled to claim any costs from the defendants with respect to this motion. In addition, the Bank shall forthwith pay to the defendants’ counsel partial indemnity costs fixed in the amount of $6,825.53.
JANET WILSON J.
Date of Reasons for Judgment: September 16, 2008
Date of Release: September 19, 2008
COURT FILE NO.: 397/08
DATE: 20080916
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
B E T W E E N:
BANK OF MONTREAL
Plaintiff
- and -
DIMITRI’S SERVICE CENTER INC. and BISHOI NABIL DIMITRI also known as BISHOI NABIL MAHROUS
Defendants
ORAL REASONS FOR JUDGMENT
JANET WILSON J.
Date of Reasons for Judgment: September 16, 2008
Date of Release: September 19, 2008