ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: 04-CV-266546
DATE: 20130618
BETWEEN:
Barkatali Nazarali Pirani
Plaintiff
– and –
Yasmin Esmail, Tajdin Esmail and
Alnaz Ismail Jiwa
Defendants
John Philpott, for the Plaintiff
Morris Cooper, for the Defendants
HEARD: November 1, 2012
ellen macdonald j.
reasons for decision
Background
[1] The Defendants Yasmin Esmail and Tajdin Esmail (“the Esmail Defendants”) seek an order affirming the undertaking respecting damages (“the Undertaking”) made by the Plaintiff, Barkartali Nazarali Pirani (“Pirani”), on an interim injunction that lasted nine days. The Esmail Defendants seek an order allowing an inquiry into damages on the undertaking. The endorsement of Justice Stinson clarifies that the motion is to determine whether the undertaking given on the Mareva Injunction should be enforced.
[2] The Esmail Defendants based their claim for damages on the basis that the nine day Interim Injunction caused them to lose a lucrative contract for the purchase of frozen octopus from the United Republic of Tanzania, in Africa. The frozen octopus transaction was not brought to the Court’s attention at the continuation hearing, despite the fact that the Esmail Defendants had already entered into agreements requiring them to transfer funds to Tanzania on the day after the hearing.
[3] Mr. Philpott referred to Pirani v. Esmail, 2012 ONSC 3843. This is Justice Greer’s costs endorsement, wherein she summarized her findings at trial as follows:
My Judgment is 28 pages in length and through the Judgment I note how the Esmails were both in breach of trust, how both were in breach of their fiduciary duties. Both lied under oath and destroyed or secreted away every single bank statement each has received over all those years the trusts was in existence. Neither was an honest but mistaken litigant. They kept no account whatsoever in their administration of the trust. I found their conduct to be egregious throughout the Trail, as well as during the administration of the Trust.
[4] The plaintiff submits that this motion should be dismissed for the following reasons:
(a) the extant case law bars the Esmail Defendants from seeking damages as they were unsuccessful on the merits of the action, being found liable to Pirani for breach of trust, breach of fiduciary duty, and for aggravated damages;
(b) the Esmail Defendants have come to equity with unclean hands, acting egregiously and improperly during the time period underlying the litigation and during the litigation itself; and
(c) the Esmail Defendants claim for damages is bound to fail as there is no substantive evidence that the Interim Injunction actually caused them any damages.
[5] This motion brought by the Defendants is confined to the question of fixing the damages payable to the Defendants by the Plaintiff pursuant to the Plaintiff’s undertaking as to damages dated September 7, 2011 and is a consequence of the order of Justice Whitaker dated October 20, 2011 dismissing the ex-parte injunction.
[6] On October 11, 2011 Justice Whitaker granted the interim injunction freezing the Esmail Defendants’ assets and ordering the Canadian banks to freeze up to $350,000.00 in the Esmail Defendants’ accounts.
[7] On October 20, 2011 Justice Whitaker ordered that the interim injunction be terminated on the grounds that the Applicants had not established a strong prima facie case on the merits or that there is a serious risk that the Respondents will remove assets from the jurisdiction or dissipate them.
[8] In this motion, Mr. Cooper on behalf of the Defendants is seeking to enforce the Plaintiff’s undertaking as to damages in obtaining the ex-parte injunction during the trial before Justice Greer.
[9] The background of this motion flows from the order of Justice Whitaker who granted an ex-parte injunction freezing all of the Esmail Defendants’ assets and ordering all Canadian banks to be notified of the motion to freeze up to $350,000.00 in the Esmail Defendants various bank accounts. The order was promptly served by the Plaintiff on all of the banks in which the Esmail Defendants were known to hold their accounts.
[10] Justice Whitaker’s Mareva Injunction order required that the matter be returned to the Court after notice was served on the Esmail Defendants. The damages now sought by the Esmail Defendants relate to the period of time when their bank accounts were frozen and the consequential damage that they allege were suffered by them by reason of the ex-parte Mareva Injunction. Mr. Cooper reviewed the applicable law relevant to the issues raised in this motion including the leading case in the Supreme Court of Canada in Vieweger Construction Co. v. Rush & Tompkins Construction Ltd., 1964 53 (SCC), [1965] S.C.R. 195 (S.C.C.) and in the subsequent 2003 decision of the Court of Appeal of Ontario in Gu v. Tai Foong International Ltd. (2003), 2003 20380 (ON CA), 168 O.A.C. 47 (Ont. C.A.).
[11] The defendants submitted that the “failure on the merits” by the Plaintiff refers to the merits of the injunction, not the merits of the subsequent action where the action does not seek an injunction. There is no authority for the proposition that if the Plaintiff is successful at trial, the undertaking as to damages is unenforceable.
[12] In the recent decision in the Saskatchewan Court of Appeal in Potash Corp. of Saskatchewan Inc. v. Barton 2011 SKCA 96 (C.A.) (“Potash”). In Potash, an employer had commenced an action against a former employee and was granted an interim injunction restraining the employee from disclosing confidential information. That interim injunction was ultimately set aside. The Court reversed the Motions Judge concluding that the Motions Judge erred in determining whether or not the injunction was properly granted. In Potash, the court concluded that whether the issue was not whether it was properly granted but whether there were special circumstances disentitling the defendant to the Reference to determine damages. The Court of Appeal ordered that the matter be returned for the holding of a Reference, to determine whether or not the employee suffered any damages.
[13] The Defendants rely on certain paragraphs in Potash, as set out in their factum:
Par. 23: It is common ground that the Court will not look with favour on any attempt by a plaintiff to resile from the undertaking that the plaintiff has given to abide by any order the Court may make as to damages sustained by the defendant as a result of the granting of the interlocutory injunction. It is also uncontestable that the undertaking to pay those damages is given to the Court granting the interlocutory injunction, and not to the defendant.
Par. 26: The Court has no power to compel an applicant for an interim injunction to furnish an undertaking as to damages. All it can do is to refuse the application if he declines to do so. The undertaking is not given to the defendant but to the Court itself. Non-performance of it is contempt of Court, not breach of contract, and attracts the remedies available for contempts; but the Court exacts the undertaking for the defendants benefit. It retains a discretion not to enforce the undertaking if it considers that the conduct of the defendant in relation to the obtaining or continuing of the injunction or the enforcement of the undertaking makes it inequitable to do so; but if the undertaking is enforced the measure of the damages payable under it is not discretionary. It is assessed on an enquiry into damages at which the principles to be applied are fixed and clear. The assessment is made on the same basis as damages for breach of contract would be assessed if the undertaking had been a contract between the plaintiff and the defendant, that the plaintiff would not prevent the defendant from doing that which he was restrained from doing by the terms of the injunction..
Par. 38: The question, simply put, is whether this is a case where it is appropriate to depart from the strong presumption that a party who gives an undertaking to obtain an interlocutory injunction should be held to it. The Chambers Judge, in my opinion, erred in concluding that the Court was to consider whether or not the injunction was properly granted “having regard to all of the circumstances including the conduct of the parties, the history of the litigation between them, the terms of the interim injunction, why it was granted and why it was discontinued.” The issue is not whether it was properly “granted”. The issue is whether there are “Special Circumstances,” as contemplated in Vieweger Construction Co., disentitling the defendant to a reference to determine the damages, if any, he or she suffered as a result of the granting of the interlocutory injunction.
Par. 39: The Ontario Court of Appeal recently dealt with this issue in United States v. Yemec, 2020 ONCA 414, 329 D.L.R. ((4th) 96 (Ont. C.A.). The Court referred to Vieweger Construction Co. and noted that the Court had elaborated on what constitutes special circumstances in Gu v. Tai Foong International Ltd., where it stated that the discretion to relieve a party from its undertaking as to damages is a narrow one and that there is a strong presumption in favour of an inquiry.
[14] In Potash, the Saskatchewan Court of Appeal reached its conclusion by relying extensively on United States v. Yemec (2010), 2010 ONCA 414, 100 O.R. (3d) 321 (C.A.) (“Yemec”). In Yemec, the United States had sued certain Ontario telemarketers for selling lottery tickets to U.S. residents. The United States had obtained an interim injunction against the defendants, which had been set aside. The Ontario Court of Appeal in Yemec agreed with the Motions Court Judge. The Court of Appeal reasoned that:
Par. 69: I agree with the motion judge that this is not an appropriate case to depart from the strong presumption that a party who gives an undertaking to obtain an interlocutory injunction should be held to the undertaking.
Par. 74: As explained by A.A.S. Zuckerman in his article “The Undertaking as to Damages – Substantive and Procedural Dimensions” (1994) 53 Cambridge L.J. 546, at p. 557, “a plaintiff who suppresses the facts that would count against his application strips the defendant of his procedural protection [notice and the opportunity to be heard] and causes an ex parte order to be made when it might otherwise have been denied.” To prevent such abuse, notes the author, it is important to have effective and robust sanctions. “Without an adequate sanction of damages, and absent contempt or abuse of process, the worst that a plaintiff who fails to disclose the full facts has to fear is a discharge of the ex parte injunction with costs.
Par. 76: Effectively, after wrongly obtaining the ex parte orders, the U.S. now seeks to avoid an inquiry into damages on the basis that the undertakings were worthless from the outset since there can be no damages flowing from the termination of an illegal operation. In my view, to give effect to such an argument in these circumstances would be to undermine the serious nature of a damages undertaking.
Par. 77: Third, while the quantum of any damages is an open question, I am not persuaded that the defendants’ damages claim is “plainly unsustainable”, to borrow from the language of Yukong Line Ltd. v. Rendsburg Investments Corp. [2000] EWCA Civ. 358 (C.A., at para. 35. I say this notwithstanding ample evidence that the defendants contravened Canadian and U.S. law in operating their lottery-ticket telemarketing business.
[15] The position of the Esmail Defendants is similar to the position of the defendants in Yemec; that is to say, the determination of the extent of the provable damages, and the assessment of the provable damages, will be up to the damages inquiry Judge who will have to make a determination based on legal principles of causation, remoteness, forseeability and mitigation. But there are some major differences. These are the factors outlined in paragraph [4] above and the non-disclosure off the transaction regarding the octopus transaction. See paragraph [2] above.
Disposition
[16] For all of the above reasons, the motion to enforce the undertaking as to damages brought by the Esmail Defendants is dismissed.
[17] On a matter of costs, I am referred to the Costs Outline of the Plaintiff, Pirani. I would award costs on a partial indemnity basis totaling $4,976.80.
Ellen Macdonald J.
Released: June 18, 2013
COURT FILE NO.: 04-CV-266546
DATE: 20130618
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Barkatali Nazarali Pirani
Plaintiff
– and –
Yasmin Esmail, Tajdin Esmail and
Alnaz Ismail Jiwa
Defendants
REASONS FOR DECISION
Ellen Macdonald J.