1954294 Ontario Ltd. v. Crocco, 2022 ONSC 5279
CITATION: 1954294 Ontario Ltd. v. Crocco, 2022 ONSC 5279
DIVISIONAL COURT FILE NO.: 424/22
DATE: 20220914
ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT
BETWEEN:
1954294 ONTARIO LTD.
Moving Party
– and –
FRANCESCO CROCCO also known as FRANK CROCCO, 2262230 ONTARIO LIMITED, 2225703 ONTARIO LIMITED, RAY ABRAHAM, ANNA CROCCO and DAVID CROCCO
Respondents
COUNSEL:
Ronald B. Moldaver K.C., for the Moving Party
Gavin H. Finlayson and Madeleine Dusseault, for the Respondents, Francesco Crocco also known as Frank Crocco, 2262230 Ontario Limited, Anna Crocco and David Crocco
No one appearing for 2225703 Ontario Limited and Ray Abraham
HEARD at Toronto (by videoconference): September 14, 2022
matheson J. (Orally)
[1] 1954294 Ontario Ltd. (“195”) has brought a motion for leave to appeal the decision of Justice S. Lavine dated July 18, 2022 (the “Decision”). The Decision ended an ex parte interlocutory injunction that had restrained the respondents from dealing with a mortgage.
[2] The leave to appeal motion is scheduled to be heard in the week of November 7, 2022.
[3] Two motions are before me today:
(1) 195’s motion for an interim stay of the Decision pending the determination of its motion for leave to appeal and, if leave is granted, the appeal itself; and
(2) the Crocco respondents move for security to support the undertaking given in the injunction proceedings if an interim stay is granted in relation to the first motion.
[4] With respect to the parties before me, I note that counsel appears representing a group of respondents that I have just called the “Crocco respondents” that include 2262230 Ontario Limited (“226”) and three individuals, Frank, Anna, and David Crocco. The other two respondents, specifically 2225703 Ontario Limited (“222”) and Ray Abraham are taking no part in these motions.
[5] The case management of these motions bears a brief summary. The underlying motion for leave to appeal was submitted to the court on or about July 28, 2022, along with a request that it be addressed urgently. An urgent case conference was scheduled. That case conference took place via telephone before me on August 8, 2022 and addressed the scheduling of both of the motions that I have just referred to.
[6] I set an early date for the motions and an accelerated schedule, and I granted an interim stay until today in order that the moving party’s motion for a stay would be able to be heard. I permitted $25,000 of funds to be used by the Crocco respondents to pay counsel.
[7] I will not attempt to recount the very detailed events giving rise to two actions, one of which gave rise to these proceedings in Divisional Court. Those events are recounted in great detail, not only in the factums before me but in the reasons for the Decision of Justice Lavine and an extensive record.
[8] Very briefly I note that the underlying events arise from steps taken to develop a property in Vaughan that has been called, in some of the briefings before me, the “Keele Lands”. The Keele Lands were owned by 195. As I will mention again in a moment, the ownership of 195 is at issue.
[9] Joe Abdulah claims to be the sole shareholder of that corporation. The respondent Frank Crocco claims to be an 80% shareholder of that corporation. Mr. Abdulah and Mr. Crocco were pursuing a business venture together to develop the Keele Lands. They had a falling out. Mr. Crocco controls the respondent company, 226.
[10] 195 had purchased the Keele Lands in 2018 with a mortgage of $5 million held by a mortgage company. That mortgage was refinanced by 226 for about $6.37 million. Mr. Abdulah alleged that the increase in the mortgage amount was improper and commenced the first action.
[11] In February 2021, 226 sold the Keele Lands to 222. The consideration for that sale was cash and a vendor takeback mortgage. The sale was conducted under a power of sale proceeding pursuant to the 226 mortgage.
[12] A second action was then commenced. In that second action, 195 obtained an ex parte interim injunction from Justice Bale in April 2021, enjoining any person from dealing with 226’s vendor takeback mortgage. It was alleged that the sale under power of sale was invalid because the 226 mortgage was invalid.
[13] The motion to extend the ex parte injunction came before Justice Lavine, giving rise to the Decision.
[14] In support of the ex parte injunction motion before Justice Bale, 195 had put forward the affidavit of Mr. Abdulah. In that affidavit, he swore that he was the sole shareholder, director and officer of 195. He would therefore have authority to speak for that company, which was the party seeking the ex parte injunction. In his affidavit, Mr. Abdulah made no mention of a dispute about the shareholdings in that company. I will get back to that.
[15] Moving to the Decision of Justice Lavine. I note the following. By the time of the hearing before her, there was a very extensive evidentiary record. I will not attempt to summarize it entirely given its volume. However, I note the following things that formed part of that record and were not put forward on the ex parte motion:
(1) a prior affidavit of Mr. Abdulah in which he swore that both he and Mr. Crocco were shareholders of 195; and
(2) share certificates signed by both Mr. Abdulah and Mr. Crocco and signed corporate minutes signed by both of them that showed Mr. Crocco as not only as a shareholder but also an officer and director of 195.
[16] Moving party’s counsel emphasized before me that that affidavit put forward on the ex parte motion also appended a statement of claim. Upon reading that statement of claim, one would read both an allegation by Mr. Abdulah that he was the sole shareholder and an acknowledgment that the shareholdings were disputed.
[17] In the Decision, Justice Lavine gave extensive reasons that address the factual record in some detail and also address a number of the issues raised again before me today.
[18] I now return to the motion before me. There is no dispute about the test for an interlocutory stay of proceedings. It is well established and not disputed. There are three main factors to be considered: first, whether there is a serious question to be tried; second, whether the moving party will suffer irreparable harm if the stay is not granted; and third, the balance of convenience. These are not isolated considerations. They overlap with each other in most cases. Overall, the question for me is whether or not the justice of the case calls for a stay.
[19] I begin with the first factor, which is whether there is a serious question to be tried. This is a low threshold, as submitted by the moving party, yet it remains a relevant consideration. In considering this factor, I note the following.
[20] The underlying proceeding is a motion for leave to appeal. There is no appeal as of right. There is a threshold that must be met to get leave to appeal. In this case, the moving party relies on Rule 62.02(4)(b). Under that branch of the leave test, it must be shown, among other things, that the proposed appeal gives rise to an issue of importance. Further, even if leave to appeal were granted, the resulting proceeding is an appeal and therefore subject to a standard of review. It would not be a fresh consideration of the voluminous record and a fresh exercise of discretion as to whether or not the ex parte injunction ought to have been continued.
[21] The moving party has put forward submissions not only on the low threshold, with which I agree, but also on the various reasons why the moving party submits that their motion for leave to appeal has considerable merit. It is described not as a case of non-disclosure as found in the Decision but really a failure to anticipate a potential claim of the Crocco respondents in preparing the ex parte injunction materials.
[22] There are additional submissions that essentially come down to saying that the alleged non-disclosure is in any event on matters that are either not relevant at all or certainly not material. As far as an important issue, it is strongly put forward that there is an important issue about what amounts to full and frank disclosure and what would entitle an injunction to be terminated for the failure to give full and frank disclosure.
[23] The respondents submit that this is a very weak case for leave to appeal, that Justice Lavine engaged in a straightforward application of accepted law to the voluminous record before her, that her Decision is very fact specific and therefore does not give rise to any issue of general importance, and that it would not meet the low threshold for a serious question to be tried.
[24] Moving to irreparable harm, the moving party 195 emphasizes that what it is seeking in this action is the mortgage itself as opposed to money and that it is an in rem remedy. It further submits that there is a concern that if the interlocutory stay is not given, the mortgage will be terminated, and its proceeds will disappear before the merits of this dispute can be determined. It is further submitted that 195 will be put out of business. There are other submissions but those are the main ones.
[25] In response, the respondents bring forward the expected argument that this is a money case. This is a mortgage on terms, which can be quantified and given a monetary value, and ultimately this is about monetary damages not some sort of in rem claim. In that regard, the respondents note that this is commercial land, not unique land, and that property has already been sold. On that last submission, I note that the sale of the property is one of things that is in dispute in the overarching litigation.
[26] Not surprisingly, the respondents submits that the real concern here, by the moving party, is whether it will be able to collect on the damages claims in the fullness of time in this litigation. In that regard, the respondents further emphasize that it is not just a claim against the company that has the vendor takeback mortgage (226). Also named as defendants, sued personally, are three members of the Crocco family.
[27] On the subject of monetary claims, the moving party has put forward authority for the proposition that a monetary claim is not fatal to a stay motion. Counsel relies, among other cases, on RJR MacDonald v. Canada (Attorney General), [1994] 1 S.C.R. 311, where it says that monetary loss will not “usually” amount to irreparable harm.
[28] I move on to the balance of convenience. As is often the case, many of the arguments put forward by the moving party in relation to irreparable harm are also advanced on the balance of convenience. I will not repeat them here. 195 also submits that there will not be no harm to 226 if the stay is granted. The other significant additional factor put forward is that there is a very short time between now and the determination of the motion for the leave to appeal in November.
[29] In response, the respondents indicate that the balance of convenience favours them, noting that the injunction had already been in place for over a year and has tied the hands of these people from using their capital to engage in their development business. The respondents also submit that this was a case of egregious material non-disclosure. This gets back to the merits and a serious question to be tried. Essentially, the responding party submits that this motion amounts to the moving party asking for execution before judgment.
[30] Having considered all the submissions and the entirety of the materials before me, I turn to the question of the overall justice of this case having regard for all factors. Without limiting that consideration, in my view the most significant factors are these:
a) Although the threshold of a serious question to be tried is low, this leave motion appears to me to be especially weak.
b) I am not persuaded that there will be irreparable harm.
c) I am not persuaded that the balance of convenience favours a further stay, which would have the effect of extending the injunction first ordered by Justice Bale even longer.
[31] I am therefore not prepared to exercise my discretion to grant the requested stay pending the motion for leave to appeal.
[32] This morning, Mr. Moldaver observed that the circumstances that are relevant to a stay may change between now and the disposition of his client’s motion. I accept that submission. I therefore do not dismiss the balance of the motion, seeking a stay pending the appeal if leave to appeal is granted. Should that occur, it is open to Mr. Moldaver’s client to request that the balance of the motion be rescheduled in this court and seek a case conference if any additional materials are requested.
[33] Because of my disposition today, it is not necessary for me to go on and consider the second motion, which was contingent on the granting of an interlocutory stay. I also adjourn that motion, which can be brought back on the same basis if leave to appeal is granted.
[34] Counsel are in the process of attempting to reach an agreement on costs. In all the circumstances of this motion, I am prepared to give them extra time to do so. They shall notify the court no later than September 22, 2022, either of their agreement or their inability to agree attaching the relevant cost outlines.
matheson J.
Date of Oral Reasons for Judgment: September 14, 2022
Date of Written Release: September 20, 2022
CITATION: 1954294 Ontario Ltd. v. Crocco, 2022 ONSC 5279
DIVISIONAL COURT FILE NO.: 424/22
DATE: 20220914
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
BETWEEN:
1954294 ONTARIO LTD.
Plaintiff/Moving Party
– and –
FRANCESCO CROCCO also known as FRANK CROCCO, 2262230 ONTARIO LIMITED, 2225703 ONTARIO LIMITED, RAY ABRAHAM, ANNA CROCCO and DAVID CROCCO
Defendants/Respondents
ORAL REASONS FOR JUDGMENT
matheson J.
Date of Oral Reasons for Judgment: September 14, 2022
Date of Written Release: September, 2022