Court File and Parties

COURT FILE NO.: CV-22-00690644 DATE: 20230327

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Santina Calisto, Plaintiff AND: Covenant Group Ltd., Defendants Royal Bank of Canada, Third party

BEFORE: Justice Papageorgiou

COUNSEL: Boris Alexander, boris.alexander@monkhouselaw.com, for the Plaintiff Margarita Dvorkina Mdvorkina@rickettsharris.com, for the Defendant

HEARD: March 27, 2023

Endorsement

[1] The defendant, Covenant Group Ltd. (“Covenant”) brings a motion for: a) interim recovery of personal property from a bank account held by the Third Party, Royal Bank of Canada (“RBC”); and a Norwich order requiring RBC to provide banking records of RBC in respect of account XXX009 (the “Account”).

[2] The action within which this motion was brought is an action for wrongful dismissal brought by the plaintiff Santina Calisto (“Calisto”). Covenant has defended the proceeding and in a counterclaim has alleged that Calisto was involved in a fraud in October 2022 whereby funds belonging to Covenant in the amount of $108,198.09 were allegedly diverted to an Account fraudulently created for this purpose.

[3] RBC and Calisto take no position in this motion.

[4] For the reasons that follow I am granting the Norwich order and granting an order freezing the Account in question. I am adjourning the motion for interim recovery of personal property. Once Covenant has information regarding the party in whose name the Account is, they may serve these materials on any such parties and return before me to argue the adjourned motion for interim recovery of personal property.

Norwich Order

[5] It is trite that a Norwich Order is a form of equitable relief requiring a third-party to an action or potential action to disclose information that is otherwise confidential: Norwich Pharmacal Co. v. Customs and Excise Commissioners ("Norwich"), [1974] A.C. 133 (H.L). In Glaxo Wellcome PLC v. M.N.R., [1998] 4 F.C. 439 at para. 20 (C.A.) the Federal Court of Appeal described such motions as follows:

The equitable bill of discovery is in essence a form of pre-action discovery.... This remedy permits a court, acting through its equitable jurisdiction, to order discovery of a person against whom the applicant for the bill of discovery has no cause of action and who is not a party to contemplated litigation.

[6] In Alberta (Treasury Branches) v. Leahy 2000 ABQB 575, [2000] A.J. No. 993 (Q.B.) aff’d (2002), 51 Alta L.R. (4th) (C.A.) application for leave to appeal dismissed [2002] S.C.C.A. No. 235 at para. 106 ("Leahy"), the Court identified the following considerations which guide the exercise of the court’s discretion:

a. Does the applicant have a bona fide claim? b. Was the third party from whom the information is sought involved in the events giving rise to the claim? c. Is the third party the only practicable source for the information? d. Can the third party be indemnified for the cost of complying with the order and any potential damages that might flow from compliance? e. Do the interests of justice favour granting the relief sought?

[7] These criteria, excluding the requirement for damages indemnification, were subsequently adopted by Spence J. of the Ontario Superior Court of Justice in Isofoton S.A. v. Toronto Dominion Bank, (2007), 85 O.R. (3d) 780 at para 40.

[8] Further to the above factors, the Ontario Court of Appeal confirmed in GEA Group v. Flex-N-Gate Corporation, 2009 ONCA 619 that there is an additional requirement of “necessity”: the applicant must establish that the discovery sought is “necessary” at the given stage in the proceeding and is not intended to circumvent the normal discovery process. This requirement is met where the party seeking the relief establishes, based on the facts of their case, that the discovery sought is needed for a legitimate objective, such as the identity of a wrongdoer, to evaluate whether a cause of action exists, to plead a known cause of action, to trace assets, or to preserve evidence or property.

[9] Covenant has satisfied all the requirements for a Norwich Order. In particular, the claim is bona fide since Covenant has provided its evidence that moneys paid by a client who believed they were paying Covenant were diverted to the Account which is held by unknown persons. Covenant needs to determine who opened the Account to determine who has allegedly defrauded it. RBC is the only practicable source of the information and the Norwich Order is necessary.

[10] The interests of justice favour granting the Norwich Order. Any potential prejudice is limited because the form of the Norwich order sought restricts the uses of any information obtained from RBC. Covenant seeks only to use the information to determine who opened the Account and how much is remaining in the Account.

Interim Recovery of Personal Property

[11] I am not prepared to make the Order seeking interim recovery of personal property at this time. While the evidence before me establishes a prima facie case that Covenant is entitled to the moneys in the Account, this is effectively an ex parte motion since the party who opened the Account is not before the Court. It is impossible to know if that party has any claim to such Account in the circumstances.

[12] Counsel referred me to the decision of Justice Morgan in Sartori Interreseautaug Inc. v. Doe, 2023 ONSC 1097 which similarly involved allegations of diversion of funds to an account fraudulently created. Although Justice Morgan granted the order for interim recovery of personal property, in that case, there had been a mareva injunction order granted first with respect to the account in question. At a later time, the moving party appeared seeking the Order for interim recovery of the funds in the account; it appears that the bank provided information regarding the identity of the party who opened the account such that that party could be served.

[13] In my view, at this time Covenant’s interests are sufficiently protected by the issuance of a mareva injunction with respect to the Account at this time, together with an Order that it may return and seek the Order for interim recovery of personal property after it determines who opened the Account and such party is served, if possible.

[14] Once Covenant determines who opened the Account, and serves them, if possible, it may return before me by scheduling the return of this motion with my assistant on an urgent basis, with such motion to be added to my list. I have provided counsel with my assistant’s email address for such purpose. If Covenant cannot determine who opened the Account or if anyone has a claim to it, it may similarly return before me in respect of the motion for interim recovery of personal property.

Justice Papageorgiou Date: March 27, 2023