Superior Court of Justice - Ontario
Re: 1910878 ONTARIO INC. o/a MISSISSAUGA CHINESE CENTRE, Plaintiff And: 2551204 ONTARIO INC. o/a BLUE LAGOON SEAFOOD MASTER, XIAO NING CHEN and MING YU WU, Defendants
Before: Sanfilippo J.
Counsel: Ran He, for the Plaintiff No one appearing, for the Defendants. Motion brought ex parte.
Heard: In writing, June 1, 2020
Endorsement
SANFILIPPO J.
Overview
[1] The Plaintiff, 1910878 Ontario Inc. operating as Mississauga Chinese Centre is the landlord of commercial premises at 888 Dundas Street East, Mississauga, Ontario. Pursuant to a commercial lease entered in September 2018, the Plaintiff Landlord leased Unit C3-C4 to the Defendant 2551204 Ontario Inc. (the “Corporate Tenant”), which carried on a restaurant business from the Leased Premises. The Defendant Ming Yu Wu is said to have signed an Indemnity Agreement in support of the Corporate Tenant’s obligations (the “Indemnifier”).
[2] The Corporate Tenant made payments under the Lease from September 2018 to January 2020 but, according to the Landlord, stopped making payments under the Lease in February 2020.
[3] On May 13, 2020, the Landlord initiated this action against the Corporate Tenant, the Indemnifier, and Xiao Ning Chen (“Chen”), whom the Landlord alleged is the principal of the Corporate Tenant and its “alter ego”. The Landlord pleaded that the Indemnifier and Chen are spouses.
[4] In this action, the Landlord seeks fourteen categories of relief against the Defendants that the Plaintiff contends arose from the Corporate Tenant’s default in payment of rent. Amongst the relief sought by the Landlord are three remedies that the Landlord seeks against a residential property that the Defendant Chen and the Indemnifier co-own, known municipally as 53 Adrianno Crescent, Woodbridge, Ontario (the “Residential Property”). Specifically, the Plaintiff seeks a declaration that the Plaintiff “holds legal and/or equitable ownership in the property”; an Order granting leave for the issuance of a Certificate of Pending Litigation against the Residential Property, and; in the alternative, an interim injunction restraining the Indemnifier and Chen from disposing of any of their assets in Ontario, including the Residential Property.
[5] The Landlord brought this motion in writing, without notice to the Defendants, for Mareva injunctive relief against the Indemnifier. The Landlord sought an Order restraining the Indemnifier from selling, transferring, assigning or encumbering the Residential Property without the Landlord’s approval, and an Order granting leave to register any such Order against title to the Residential Property.
[6] For the reasons that follow, this motion is dismissed.
I. This Motion
[7] The Landlord brought this motion in writing under Rule 40 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. Rule 40.01 provides that an interlocutory injunction may be obtained on motion to a judge by a party to a pending or intended proceeding.
[8] The Landlord’s motion was based on the affidavit evidence of two deponents: Nan Jiang, the Landlord’s office manager; and Ye Yuan, an articling student at the law firm acting for the Landlord.
A. The Plaintiff Did Not Establish a Basis for Moving Without Notice
[9] A motion for an injunction that is brought without notice requires “extraordinary urgency”, where “the delay necessary to give notice might entail serious and irreparable injury to the [moving party]”: Robert Half Canada Inc. v. Jeewan (2004), 71 O.R. (3d) 650 (S.C.J.), at para. 32. “Extraordinary urgency” includes where there is good reason to believe that the Defendants, if given notice, will act to frustrate the process of justice before the motion can be decided, or where there is simply not the time or means to provide notice: Robert Half Canada, at paras. 36-40.
[10] There is a very strong presumption against proceeding without notice. The moving party must bring all material facts to the attention of the judge that bear on the issue of whether notice ought to be given. This duty applies to the substantive basis of the claim for an interlocutory injunction and the facts upon which the moving party relies in proceeding without notice: Akagi v. Synergy Group (2000) Inc., 2015 ONCA 368, 125 O.R. (3d) 401, at para. 95; United States v. Friedland, [1996] O.J. No. 4399 (S.C.J.), at paras. 26-37.
[11] The Landlord argued in its factum that it had “serious and compelling reasons for this motion to proceed on an ex parte basis since any notice to the Defendants would prompt them to quickly and surreptitiously transfer or encumber the [Residential Property], thereby defeating the purpose of this motion and causing irreparable harm to the Plaintiff”: para. 64. The Plaintiff did not cite or refer in its factum to any evidence in support of this submission.
[12] I did not identify evidence in Ms. Jiang’s Affidavit or Mr. Yuan’s Affidavit that would be sufficient to establish the “extraordinary urgency” necessary to support the Plaintiff advancing this motion without notice to the Indemnifier. I thereby conclude that this motion should have been brought on notice. However, based on my assessment that this motion is without merit, I find that it would be inefficient to decline to hear the motion solely on the basis of lack of notice.
B. The Plaintiff Did Not Establish the Basis for a Mareva Injunction
[13] The test for granting an interlocutory injunction is well-established and was adopted by the Supreme Court of Canada in RJR-MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311, at pp. 347-349. The judge must assess whether there is a serious issue to be tried; whether the moving party would suffer irreparable harm if the injunction were refused, and; which party would suffer greater harm from the granting or refusal of the injunction.
[14] Mareva injunctions are an exception to the general principle that one cannot obtain execution against another’s assets before judgment has been obtained: Mareva Compania Naviera S.A. v. International Bulkcarriers Ltd. (1975), [1980] 1 All ER 213 (Eng. C.A.); Lister & Co. v. Stubbs, [1886-90] All E.R. Rep. 797 (Eng. C.A.). A Mareva injunction “freezes” assets within the court’s jurisdiction, in this case by restraining the Indemnifier from conveying or mortgaging the Residential Property, pending the determination of the proceeding.
[15] The test for granting a Mareva injunction is more stringent than the test for granting an interlocutory injunction. It was adopted in Chitel v. Rothbart (1982), 39 O.R. (2d) 513 (C.A.), at p. 553 which established that rather than show a “serious question to be tried”, the moving party must establish a strong prima facie case on the merits of the main action. The test for a “strong prima facie case” is to assess whether if the court were required to decide the action on the merits on the basis of the material filed, would the plaintiff succeed: Petro-Diamond Inc. v. Verdeo Inc., 2014 ONSC 2917, at para. 25.
[16] Perell J. concisely summarized the requirements of a Mareva injunction in O2 Electronics Inc. v. Sualim, 2014 ONSC 5050, at para. 67:
Because procedural law disfavours pre-judgment execution, to obtain a Mareva injunction, a plaintiff must satisfy the normal criteria for an injunction and also several additional criteria. For a Mareva injunction, the moving party must establish: (1) a strong prima facie case; (2) that the defendant has assets in the jurisdiction; and (3) that there is a serious risk that the defendant will remove property or dissipate assets before the judgment. A Mareva injunction should be issued only if it is shown that the defendant’s purpose is to remove his or her assets from the jurisdiction to avoid judgment. The moving party must also establish that he or she would suffer irreparable harm if the injunction were not granted and that the balance of convenience favours granting the injunction. Absent unusual circumstances, the plaintiff must provide the undertaking as to damages normally required for any interlocutory injunction.
[17] All of these criteria must be established in order for the Plaintiff to succeed on this motion.
(i) Strong Prima Facie Case
[18] Ms. Jiang deposed that 2551204 Ontario Inc. is a tenant under a commercial lease executed in September 2018 with the Plaintiff, 1910878 Ontario Inc. for the Leased Premises. Ms. Jiang deposed, further, that the Defendant Wu Ming Yu executed, at the same time, an Indemnity Agreement in support of the obligations owed by the Corporate Tenant to the Landlord.
[19] Ms. Jiang stated, in her capacity as the Landlord’s office manager responsible for the daily administration of the Plaintiff corporation, that the Corporate Tenant paid the Basic Rent and Fixed Additional Rent due under the Lease from September 2018 to January 2020. She deposed that on February 1, 2020, the Corporate Tenant defaulted in payment of Fixed Additional Rent for February 2020 and defaulted in payment of both Basic Rent and Fixed Additional Rent for March, April, and May 2020. In addition, Ms. Jiang stated that the Corporate Tenant failed to pay water consumption charges from January to April 2020.
[20] Clause 2 of the Indemnity Agreement provides as follows: “The Indemnifiers (sic) shall be jointly and severally liable with the Tenant for all of the Tenant’s obligations under the Lease, as if it (sic) were separately named as a tenant under the Lease”.
[21] Based on the evidence contained in the Motion Record, and in the absence of any responding defence evidence from the Indemnifier, I accept that the moving party Plaintiff has established a strong prima facie case against the Defendant Indemnifier for damages resulting from default of the Lease.
(ii) Assets in the Jurisdiction
[22] Ye Yuan deposed that Ms. Wu owns the Residential Property together with the Defendant Chen. Ye Yuan tendered, as an exhibit to his affidavit, their drivers licences, which indicate that they reside at the Residential Property, and a Parcel Register of the Residential Property. The Parcel Register shows that Ms. Wu and the Defendant Chen obtained title to the Residential Property jointly on April 12, 2016.
[23] I am satisfied, from the evidence tendered on this Motion that the Indemnifier, Ms. Wu, owns property in Ontario at least to the extent of her interest in the Residential Property.
(iii) Serious Risk of Removal or Dissipation of Property
[24] The Plaintiff submitted, based on the affidavit evidence of Ms. Jiang, that the Corporate Tenant is directed and controlled by the Defendant Chen together with his brother-in-law, Mr. Min Lin. Mr. Lin is not a party to this action.
[25] Ms. Jiang deposed that Mr. Lin and the Defendant Chen have told her that the Corporate Tenant had no intention of returning to the Leased Premises, even after the operation of a restaurant could resume during or after the COVID-19 pandemic and have no intention of paying the outstanding or future Lease payments to the Landlord. At its highest, this evidence may be material to the Corporate Tenant’s ability or willingness to comply with the terms of the Lease, but it does not assist in my analysis of whether there is a serious risk of removal or dissipation of property from the jurisdiction.
[26] Rather, the only evidence that the Plaintiff relied on to establish that there is a serious risk of removal or dissipation of property from Ontario is contained in paras. 31 and 32 of Ms. Jiang’s Affidavit, as follows:
In particular, on or around April 6, 2020, Mr. Lin advised me during a telephone call that he and the Defendant Chen did not make money from the operation of the Tenant. Therefore, the Landlord (sic) were to collect any owing amounts (sic) from the Tenant, Defendant Chen and Defendant Wu would sell their family house and move back to China, so that the Landlord would find no one to collect money from.
Because of the intimate family relationship between Mr. Lin and Defendant Wu, I believe that there is a real risk that Defendant Chen and Defendant Wu will dissipate their joint assets in Ontario and leave Canada in an attempt to avoid enforcement of any judgment of (sic) the within action for breach of the Lease.
[27] Ms. Jiang’s evidence in these paragraphs is hearsay. Under Rules 39.01(4) and 39.01(5), hearsay evidence is permitted on motions and on applications for non-contentious facts: Ontario v. Rothmans Inc., 2011 ONSC 2504, at para. 140.
[28] However, the inclusion of hearsay evidence on a key point is not proper. In Beach v. Toronto Real Estate Board, 2010 ONSC 30001, at para. 5, D.M. Brown J. held that “[a]lthough the rules permit a party to include evidence based on information and belief in an affidavit in support of a motion, the inclusion of hearsay evidence on a key point is not proper. Direct evidence should be filed.” Also: Shah v. LG Chem, Ltd., 2015 ONSC 2628, 125 O.R. (3d) 773, at para. 71; Unimac-United Management Corp. v. Cobra Power Inc., 2015 ONSC 5167, at para. 11. Citing Beach, as well as many local authorities, the Court of Appeal of Alberta stated “[t]hough this is doubtless an interlocutory motion for which affidavits on information and belief are admissible, the court is not bound to accept hearsay unnecessarily, still less to give it the same weight as first-hand evidence”: Lameman v. Alberta, 2012 ABCA 59, 522 A.R. 140, at para. 48.
[29] I agree with and adopt the analysis of Perell J., in Gutierrez v. The Watchtower Bible and Tract Society of Canada, 2019 ONSC 3069, at para. 27, that a statement in an affidavit filed on a motion that contains inadmissible hearsay or legal and factual argument best reserved to a factum, may be struck out, in whole or in part, or disregarded.
[30] I recognize and have taken into consideration that hearsay evidence, even on a key point, may be admitted and given weight under the principled exception to the hearsay rule based on assessment of necessity and reliability: R. v. Khelawon, 2006 SCC 57, [2006] 2 S.C.R. 787, at paras. 34-46. Reliability of the hearsay statement can be assessed from the circumstances in which it came about, or because its truth and accuracy can be tested contextually: at paras. 62-64. Here, however, Ms. Jiang’s hearsay statement cannot be rendered reliable by the context or circumstances in which the evidence was provided because there is none. There is no independent supporting evidence; no listing of the Residential Property for sale; no evidence of dissipation; and, no evidence of travel plans to leave the jurisdiction.
[31] Rather, Ms. Jiang solely conveyed Mr. Lin’s statement that the Indemnifier and the Defendant Chen “would sell their family home and move back to China” because the Corporate Tenant’s restaurant operation was not profitable, without any context to support or to allow for the testing of the reliability of these observations. Ms. Jiang does not even depose that the Defendant Chen and the Indemnifier told Mr. Lin that they intended to remove their assets from the jurisdiction and dissipate their assets. Mr. Lin’s observation, relayed by Ms. Jiang, is sheer hearsay, disassociated from any supportive context, unreliable, and thereby, in my determination, inadmissible.
[32] Even had I found this evidence admissible, I would not have placed any weight on it. Ms. Jiang’s belief based on Mr. Lin’s observation or conjecture has little probative value.
[33] This evidence falls far short of establishing that there is a serious risk of removal or dissipation of property necessitating the issuance of a Mareva injunction. On this basis alone, this Motion must be dismissed.
(iv) Balance of Convenience
[34] In light of my determination that the Plaintiff has failed to establish that there is a serious risk of removal or dissipation of property, it is unnecessary to determine which party would suffer greater harm from the granting or refusal of the injunction. However, I have assessed this for completeness of analysis, and have concluded that the balance of convenience supports dismissing the motion. I will explain why.
[35] First, the Plaintiff is attempting to do indirectly what it cannot do directly. The Plaintiff does not have the basis for Mareva injunctive relief against the Defendant Chen. Independent of my determination that the Plaintiff has not established that there is a serious risk of removal or dissipation of property, the Plaintiff could not have established that it has a “strong prima facie case” against the Defendant Chen. He is neither a tenant nor an indemnifier of the Lease. The Plaintiff’s pleaded cause of action against the Defendant Chen, that he “intentionally directed, induced or otherwise caused the Tenant to breach the Lease”, falls well-short of constituting a strong prima facie case. Yet, if the Mareva injunction sought by the Plaintiff were to be issued, Mr. Chen’s interest in the Residential Property would be enjoined by reason of his co-ownership of that property with the Indemnifier. Mr. Chen’s interests in the Residential Property would effectively be as restrained as the property interests of the Indemnifier.
[36] There is a second way that the Plaintiff is attempting to do indirectly what it cannot do directly. The Plaintiff sought, in its Statement of Claim, leave to issue a Certificate of Pending Litigation for registration against the Residential Property. The Plaintiff has not moved for this relief, but the Mareva injunctive relief sought by the Plaintiff, and pleaded as alternative to the claim for the issuance of a Certificate of Pending Litigation, would have the same effect. It is well-established that a Certificate of Pending Litigation can only be issued where an interest in land is put in question by the proceeding: Chilian v. Augdome Corp. (1991), 2 O.R. (3d) 696 (C.A.); Rule 42.01; Courts of Justice Act, R.S.O. 1990, c. 43, s. 103. This action does not raise any interest in the Residential Property other than as a focus for execution of any eventual judgment.
[37] Last, there are other remedies available to the Plaintiff in the event of a fraudulent conveyance that it can consider and pursue, on notice to the Defendants, independent of the issuance of a Mareva injunction, should the Landlord consider that it has the basis for such relief. Accordingly, the balance of convenience supports not granting the relief sought by the moving party Plaintiff.
(e) Conclusion
[38] The Plaintiff has not established the basis for the issuance of a Mareva injunction against the Defendant Ming Yu Wu.
II. Disposition
[39] This motion in writing, brought without notice to the Defendants, for an Order restraining the Defendant Ming Wu Yu from selling, transferring, assigning or encumbering the Residential Property without the Landlord’s approval or further order of this Court, and for an Order granting leave to register any such Order against title to the Residential Property, is dismissed.
Sanfilippo J. Released: June 1, 2020