Court File and Parties

CITATION: Jiaxing Economic Co-operation Co. Ltd. v. 2438866 Ontario Inc., 2017 ONSC 5596

COURT FILE NO.: 471/17

DATE: 20170920

SUPERIOR COURT OF JUSTICE – ONTARIO

DIVISIONAL COURT

RE: Jiaxing Economic Co-operation Co. Ltd. and Jiaxing Shunxing Textile Chemicals Co. Ltd., Plaintiffs/Moving Parties

AND:

2438866 Ontario Inc., Bo Shao and Yue Gu, Defendants/Responding Parties

BEFORE: Kiteley J.

COUNSEL: Colin Holland, for the Plaintiffs/Moving Parties

J.G. Hodder, for the Defendants/Responding Parties

HEARD AT TORONTO: September 20, 2017

ENDORSEMENT

[1] The plaintiffs brought this motion pursuant to rule 63.02 for a stay of execution of the judgment of Pollack J. dated July 27, 2017[^1] pending their appeal. Since the appellants require leave to appeal, I have considered the motion in the context of a stay pending the determination of the in writing motion for leave to appeal which will be heard by a panel of the Divisional court.

[2] In the decision dated July 27, 2017 Pollack J. set aside the ex parte order made December 22, 2015 ordering the Registrar to issue a CPL against title to the Bannatyne property; discharged the registration of the CPL; dismissed the motion by the plaintiffs for a CPL on title to the Lawson property; dismissed the plaintiffs motion for a Mareva Injunction; and ordered the plaintiffs to pay costs of $74,180.68.

[3] In their notice of motion, the appellants seek leave to appeal with respect to the order vacating the CPL on Bannatyne and dismissing the motion for a CPL on Lawson. The motion for leave is pursuant to rule 62.02(4)(b). The motion for stay is with respect to the order vacating the CPL on Bannaytne. With respect to Lawson, the appellants ask for an order restraining the defendants from selling or encumbering the property pending the appeal.

[4] Counsel agree that the test for ordering a stay is that the court must be satisfied that there is a serious question to be tried on the appeal; that the applicant will suffer irreparable harm if the stay is not granted; and that the balance of convenience favours the applicant.

[5] The appellants take the position that there is a serious question to be determined namely whether the motion judge erred by, inter alia, failing to consider what counsel submits was extensive evidence of fraudulent conduct, and by failing to draw adverse inferences against the respondents for their refusal to provide evidence of the source of funds used to purchase Bannatyne and Lawson. Furthermore the appellants assert that the totality of the evidence supports a finding that the motion judge misapplied the legal test that the respondent must satisfy to defeat the appellants’ claim to CPL’s. Counsel takes the position that the application of an incorrect legal standard is an error of law, to be reviewed on the standard of correctness.

[6] The threshold for determining that there is a serious question to be tried on the appeal is low. However, I must make a preliminary assessment of the likelihood of success on the motion for leave to appeal.[^2] As indicated at paragraph 15 of the decision, the parties relied on 24 volumes of materials including six lengthy facta. Counsel for the appellants takes the position that, in her analysis, the motion judge erred in making findings that are not supported by the evidence. In his submissions, he referred to many of the exhibits in an effort to demonstrate that the motion judge had also ignored evidence from which she could have drawn inferences against the defendants.

[7] In her decision, the motion judge did not provide a detailed analysis of the evidence before her. Nor was she required to do so. I consider it unlikely that the appellants will be able to establish there is good reason to doubt the correctness of the orders with respect to the CPL’s. However, even if I had been persuaded that she made such errors or failed to consider compelling evidence, I consider it unlikely that the appellants can meet the second aspect of the test. The decision of the motion judge addresses specific circumstances of events that occurred in China and in Canada. Based on the submissions made today, which I expect constituted a brief snapshot of the submissions made before the motion judge, the circumstances are unique and peculiar to these parties. I consider it unlikely that the appellants will be able to establish that the appeal involves matters of such importance that, in opinion of the panel, leave to appeal should be granted. Counsel asserts that there is a public importance element if one characterizes the financial transactions as money laundering in a global context. I am not persuaded that the record can be so characterized. One of the orders sought is the recognition of a judgment made in China in favour of the appellant JECL against a corporation referred to as JZH and against the personal defendants. On the record, this is fundamentally a question of direct and indirect attempts by a creditor to seek payment on account of supply and sales contracts. Those issues do not reach the level of public importance.

[8] The second element of the test is whether compliance with the order under appeal would cause irreparable harm to the appellants. The evidence in support of that submission is at paragraph 18 of the affidavit of Filosa sworn August 16, 2017 which is information Filosa received from Mr. Holland “based on his discussion with the appellants”. I understand that the record for the motion for stay was put together quickly and that first hand evidence was not available but it could have been assembled in the interim. Assuming I do rely on it, it reflects only conjecture that, if the CPL is vacated, the defendants will sell Bannatyne and that will render the appeal moot. I observe that the mootness of the appeal is more compelling when the appeal is as of right rather than with leave. I can find that the appellants will be harmed by losing access to funds but I am unable to conclude that they will be irreparably harmed if the stay is not granted.

[9] I turn to the balance of convenience. The defendants Shao and Gu tried to sell Bannatyne and entered into an agreement of purchase and sale. They say the deal did not close because of the CPL while counsel for the appellants argues that the appellants would have agreed to an order lifting the CPL to accommodate the closing on conditions including putting the net proceeds into trust. I need not decide which version is most accurate. In the motion for a stay, the defendant corporation (which owns the two properties) and the defendants Shao and Gu (who have lived in each property from time to time) did not provide evidence on the subject of the balance of convenience. Had I found irreparable harm, I would have concluded that the balance of convenience was in favour of the appellants.

[10] As indicated above, counsel for the appellants also sought a restraining order with respect to Lawson. The analysis required to consider that request is the same as the analysis above with respect to the stay motion. That motion is also dismissed.

Order to go as follows:

[11] The motion for stay of the order dated July 27, 2017 with respect to Bannatyne pending the determination of the motion for leave to appeal is dismissed.

[12] The motion for a restraining order with respect to the Lawson property pending the determination of the motion for leave to appeal is dismissed.

[13] On the return of the motion on August 14, 2017, the defendants gave an undertaking not to dispose or encumber either property pending the determination of this stay motion. They are relieved of that undertaking.

[14] The appellants shall pay to the defendants costs in the amount of $5000 payable within 30 days.

Kiteley J.

Date: September 20, 2017

[^1]: 2017 ONSC 3214 [^2]: Sim v. Yeum 2010 CarswellOnt 7752