COURT OF APPEAL FOR ONTARIO

CITATION: Ontario Securities Commission v. Bluestream Capital Corporation, 2020 ONCA 530

DATE: 20200824

DOCKET: M51589

Paciocco J.A. (Motion Judge)

BETWEEN

Ontario Securities Commission

Creditor (Responding Party)

and

Bluestream Capital Corporation, Bluestream International Investments Inc., Krown Consulting Corp., 1859585 Ontario Ltd. (Operating as Sovereign International Investments) and Peter Balazs

Debtors

and

Camerlengo Holdings Inc.

Garnishee (Moving Party)

Mark A. Ross and Eric Brousseau, for the moving party

Ian K. Latimer and Asad Ali Moten, for the responding party

Heard: August 20, 2020 by videoconference

REASONS FOR DECISION

[1] Bluestream Capital Corp (“Bluestream”) had been used as a vehicle of fraud by Peter Balazs. On April 1, 2015, the respondent, the Ontario Securities Commission (“the OSC”), obtained a disgorgement order against Bluestream so that it could attempt to recoup funds for Mr. Balazs’s victims.

[2] Camerlengo Holdings Inc. is a closely held holding company, used by the Camerlengo family for tax purposes. Mr. Fred Camerlengo is the sole shareholder and directing mind of Camerlengo Holdings Inc. He utilized several other corporations in connection with his business as an electrical contractor, prior to his retirement.

[3] During its investigation, the OSC discovered that on January 27, 2011 Camerlengo Holdings Inc. lent $200,000 to Bluestream. On August 29, 2017, the OSC issued a notice of garnishment to Camerlengo Holdings Inc. for this amount. Mr. Camerlengo obtained leave to represent Camerlengo Holdings Inc. and a garnishment hearing was scheduled in early April before Schreck J. The sole ground of opposition offered by Camerlengo Holdings Inc. at that hearing was that losses suffered by members of the Camerlengo family, as victims of the frauds, should be set off against Camerlengo Holding Inc.’s debt to Bluestream.

[4] On April 18, 2018 Schreck J. issued his decision. He denied the set-off defence, declaring that Camerlengo Holdings Inc. owed $200,000 to Bluestream and must pay that amount to the Sheriff. Camerlengo Holdings Inc. did not appeal that decision.

[5] Discussions were undertaken between Mr. Camerlengo and the OSC about recovery of the debt. On October 24, 2018, OSC counsel notified Mr. Camerlengo that the OSC would obtain the records of Camerlengo Holdings Inc. and go after any improper transactions. A judgment debtor examination was held on November 21, 2018.

[6] On December 23, 2019, after further investigation, the OSC commenced a civil action against Mr. Camerlengo and his wife, Mirella Camerlengo. The OSC alleged, among other things, that the June 25, 1996 conveyance by Mr. Camerlengo of his interest in the matrimonial home to his spouse was a fraudulent conveyance, that Mr. Camerlengo wrongly commingled personal and corporate funds, and that he improperly disbursed funds through Camerlengo Holdings Inc. for his benefit and the benefit of his wife. This activity allegedly included the false identification of the Bluestream loan deposit as a shareholder advance by Mr. Camerlengo to Camerlengo Holdings Inc., declaring illegal dividends, and paying funds from Camerlengo Holdings Inc. to himself, M. Camerlengo and others, to the prejudice of creditors.

[7] Camerlengo Holdings Inc. now brings a motion pursuant to r. 3.02 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, to extend the time within which Camerlengo Holdings Inc. can appeal Schreck J.’s decision of April 18, 2018. Camerlengo Holdings Inc. also seeks corollary orders authorizing the serving and filing of a notice of appeal, establishing a deadline for the perfection of the appeal, and a stay of Schreck J.’s decision. By challenging the decision that creates the debt, Camerlengo Holdings Inc. hopes to cut the legs out from under the OSC’s action against the Camerlengos.

[8] I would dismiss Camerlengo Holdings Inc.’s motion. In all the circumstances, including the familiar factors for consideration identified in Enbridge Gas Distributions Inc. v. Froese, 2013 ONCA 131, 114 O.R. (3d) 636, at para. 15, it is not in the interests of justice of the case to extend the time for appeal, leaving it unnecessary and inappropriate to grant the corollary relief requested.

[9] First, Camerlengo Holdings Inc. concedes that it had no intention within the appeal period to appeal the decision. This is not fatal to the motion, since the absence of an intention to appeal is only a factor to be considered: Kefeli v. Centennial College of Applied Arts & Technology, [2002] O.J. No. 3023 (C.A.), at para. 14. The presence of an intention to appeal is, however, an important consideration unless the explanation for the absence of an intention mitigates its absence. The explanation for the absence of an intention to appeal that Camerlengo Holdings Inc. advances does not do so.

[10] Paragraph (j) of Camerlengo Holdings Inc.’s Notice of Motion accurately summarizes the state of the relevant evidence before me: “Justice Schreck’s decision was not challenged until now because Camerlengo Holdings was represented by Fred Camerlengo and the judgment was against a dormant holding company with no assets”.

[11] In relying on the fact that Camerlengo Holdings Inc. was represented by Fred Camerlengo, Camerlengo Holdings Inc. claims that it has been prejudiced by his ignorance of the law. He attests that he did not appreciate that there was a right of appeal, or that the decision was “wrong”. Camerlengo Holdings Inc. contends that it should be given a right of appeal now that it has taken legal advice and educated itself.

[12] The OSC asks me not to believe the claims of Mr. Camerlengo’s ignorance of the law. It points out that Mr. Camerlengo operated a highly successful business and was an experienced litigant, having been a represented party in several legal actions. It says that Mr. Camerlengo’s claim that he did not know there was a right of appeal is unbelievable, and that during the judgment debtor examination he agreed with the suggestion that he thought Schreck J.’s decision was wrong when it was released.

[13] I need not make credibility findings to determine whether the absence of an intention to appeal has been persuasively explained. This is because the additional explanation for the delay in appealing that is offered - the fact that Camerlengo Holdings Inc. was judgment proof – works strongly against the extension requested.

[14] Quite plainly, the fact that Camerlengo Holdings Inc. was judgment proof could only have relevance on this issue if this fact was considered by Mr. Camerlengo in deciding whether to challenge the decision. Either, contrary to the first explanation, Mr. Camerlengo was aware of the possibility of appeal and chose not to spend the resources required to do so because be believed Schreck J.’s decision to be pointless, or he chose not to seek legal advice about whether anything could be done about Schreck J.’s decision because be believed the decision to be pointless. Either way, on behalf of Camerlengo Holdings Inc., Mr. Camerlengo made a tactical decision to take no measures to seek to disturb the legal force of a solemn judicial decision because he believed it to be unenforceable. In my view, it is not in the interests of justice to assist Camerlengo Holdings Inc. in overcoming the implications of its own considered decision to disregard a judicial ruling.

[15] The admission that Camerlengo Holdings Inc. considered the fact that it was judgment proof also diminishes the force of its attempt to rely on Mr. Camerlengo’s ignorance of the law as a basis for the extension. If Camerlengo Holdings Inc.’s decision not to seek outside help from Mr. Camerlengo or his family to pay for a lawyer was encouraged by the belief that the proceedings against it did not matter because it was judgment proof, it is difficult to treat its unrepresented status as a consideration favouring an extension of the time to appeal. It appears instead to have been a tactical gamble aimed at saving family money that may prove to have failed.

[16] The length of the delay also works against Camerlengo Holdings Inc.’s request. It has been well over two years since that decision, the bulk of the delay occurring before COVID-19 slowed the wheels of justice. I do not accept Camerlengo Holdings Inc.’s attempt to lay responsibility for this inordinate delay at the feet of the OSC because it delayed its enforcement efforts. Again, that is tantamount to saying, “Had the OSC alerted us sooner that the decision may matter, we would have acted sooner”.

[17] I accept that the delay has caused prejudice. The recovery efforts of the OSC are undertaken on behalf of the Balazs’ victims whose interests are compromised by any delays in recovery.

[18] Finally, with respect to the strength of the appeal, I do not share Camerlengo Holdings Inc.’s assessment that Schreck J.’s decision is obviously incorrect. Camerlengo Holdings Inc.’s appeal rests on the theory that, even though no finding was made on this issue by Schreck J., its loan to Bluestream must be taken on appeal to have been a demand loan that was not yet due and payable, and therefore not subject to garnishment under the authority of Transportaction Lease Systems Inc. v. Spire Freezers Ltd., 2011 ONSC 5509. Camerlengo Holdings Inc.’s case on appeal is certainly arguable, but its outcome is far from obvious.

[19] First, the status of the loan was not raised as an issue before Schreck J. The only objection taken to the garnishment was the set-off claim and Camerlengo Holding Inc. does not propose to take issue with Schreck J.’s decision on this issue if an extension of time to appeal is granted. As pointed out by OSC counsel during the hearing, Schreck J. decided correctly the only issue litigated before him.

[20] Second, even if this first obstacle is overcome, success in an appeal of Schreck J.’s decision depends upon this court accepting the twin submissions that: (1) the loan in question was a demand loan that was not due and payable, and (2) garnishment of a debt under a demand loan is only possible where a demand for payment has been made and the loan becomes payable.

[21] The first submission is problematic. Cases provided by Camerlengo Holdings Inc. do support the proposition that a loan made without terms is a demand loan, however it was not affirmatively established before Schreck J. that the Bluestream loan did not have terms, and there is controversy between the parties about who bore the burden at the garnishment hearing on this question. Moreover, Camerlengo Holdings Inc. did not take the position before Schreck J. that the loan was not due and payable. To the contrary, he testified that the reason he did not repay the loan was that Mr. Balazs disappeared.

[22] Even if this proves to have been a demand loan that was not yet due and payable, the application of the decision in Transportaction Lease Systems Inc. is not assured. That decision is not binding in this court. Indeed, this court does not appear to have decided whether demand loans can be garnished where no demand has been made. Moreover, in Transportaction Lease Systems Inc., at para. 19, M. Brown J. specifically left open the possibility that another judge may come to a different decision where there are allegations of fraudulent transactions or conveyances taken. In this case such allegations have been made.

[23] In deciding where the interests of justice lie, Camerlengo Holdings Inc. asks that I consider the inequity of the OSC seeking to set aside longstanding transactions, including the conveyance of an interest in the matrimonial home, in order to obtain recovery from victims of the very fraud they are pursuing. In order to do so I would have to prejudge the merits of the OSC’s action, and I will not do so. Moreover, if I was to get into the business of considering the equity of the OSC’s action I would have to consider that unless the OSC’s action succeeds, Mr. Camerlengo may receive a windfall. As the sole shareholder of Camerlengo Holdings Inc., he will have had the benefit of a $200,000 loan that Camerlengo Holdings Inc will never have to repay.

[24] In all of the circumstances, it is not in the interests of justice to extend the time to appeal. The motion for an extension under r. 3.02 is dismissed, as are the requests for leave to file a notice of appeal and time to perfect.

[25] Costs are payable to the OSC in the amount of $10,000, inclusive of disbursements and applicable taxes.

“David M. Paciocco J.A.”