COURT FILE NO.: CV-11-9318-00CL

DATE: 20131022

SUPERIOR COURT OF JUSTICE – ONTARIO

COMMERCIAL LIST

RE: Bertina Alfano, Trustee of the Carmen Alfano Family Trust, Bertina Alfano, Italo Alfano, trustee of the Italo Alfano Family Trust, Italo Alfano, Ulti Alfano Trustee of the Ulti Alfano Family Trust and Ulti Alfano ,

Plaintiffs

AND:

Terry Piersanti also known as Terry Scatcherd, Christian Piersanti, Piersanti and Co. Barristers and Solicitors, Piersanti and Co. Professional Corporation, 1269906 Ontario Limited, 1281111 Ontario Limited, 1281038 Ontario Limited, 1314112 Ontario Limited, 1281633 Ontario Limited, 1281632 Ontario Limited,

1466556 Ontario Limited, 3957331 Canada Inc., 3964400 Canada Inc., 3968626 Canada Inc., 4002598 Canada Inc., 4011902 Canada Inc., 6051685 Canada Inc., 6060439 Canada Inc., 6260365 Canada Inc., 6292470 Canada Inc., 6306560 Canada Inc., 6324223 Canada Inc., 6792715 Canada Inc., Yonge Centre Properties Inc., 6335144 Canada Inc., TMJ Investments, Tara Piersanti also known as Tara Piersanti-Blake, Justin Piersanti and Morgan Piersanti,

Defendants

BEFORE: Newbould J.

COUNSEL:
V. Ross Morrison and R. Samantha Chapman, for the defendants, moving parties

Kevin D. Sherkin and James F. Diamond, for the plaintiffs, responding parties

Kyla E. M. Mahar, for the Receiver

HEARD: October 17, 2013

ENDORSEMENT

[1] The defendants move to set aside ex parte orders made by me on August 22, 2011 in which a Mareva injunction and a receiver over all of the assets of the defendant corporations were ordered.

[2] The orders were continued by Spence J. on August 31, 2011 over the objections of the defendants who moved to stay the orders pending their motion to set them aside. On October 18, 2011 Cumming J. dismissed a motion by the defendants to set aside my orders of August 22, 2011. Included in the grounds asserted by the defendants was that the plaintiffs had failed to make full and fair disclosure of all material facts in seeking the ex parte orders and that the undertaking as to damages given on the ex parte application was of no value. On September 18, 2012, an appeal by the defendants to the Court of Appeal from the order of Cumming J. was dismissed. On January 17, 2013, the Supreme Court of Canada dismissed a motion for leave to appeal from the decision of the Court of Appeal.

[3] This is the second action involving the Alfano plaintiffs and the Piersantis. The first action involved the actions of the defendant Mr. Piersanti and his wife in connection with a paving business known as Osler Paving Inc. ("Osler"). The Alfano family was the majority shareholder in Osler. Mr. Piersanti was the lawyer for Osler and the Alfano family and the minority shareholder in Osler. MacDonald J., the trial judge in the prior proceeding, held that through a complicated fraudulent scheme orchestrated by Mr. Piersanti and his wife, the interests of the Alfano family in Osler were fraudulently acquired. Judgment was granted in favour of the plaintiffs on March 7, 2011 against Mr. Piersanti and his wife for $20 million. Mr. Piersanti was also ordered to pay punitive damages of $250,000. The defendant 1281632 Ontario Limited, a company owned and controlled by Mr. Piersanti, was ordered to pay $2.5 million into court by October 3, 2010 as a result of an alleged breach of a Mareva injunction that had been granted prior to the trial by Malloy J. on June 18, 2002. Further, it was ordered that the plaintiff Ulti Alfano had a right to a 1/12 interest in the MAP Properties, being three shopping centres known as the Glenwoods Centre, the Tottenham Mall and the Hanlon Park Mall.

[4] This second action is brought in an attempt to protect assets in order to collect on the judgment of MacDonald J. The theory of the claim is that assets owned by Mr. Piersanti or his wife have been hidden in corporations ostensibly owned by others but in fact held for the benefit of Mr. Piersanti or his wife. A number of the defendants were defendants in the first action, including many numbered companies. Other corporations discovered since the previous action, some of which existed at the time that action was commenced but were unknown to the plaintiffs, have been added as defendants in this action as have three children of Mr. Piersanti and his wife: Justin Piersanti born in 1979, Morgan Piersanti born in 1980 and Tara Piersanti born in 1983. The plaintiffs allege that some of the properties were held by corporations in which the sole officer is one of the children and that some of the properties have been mortgaged in favour of corporations which list the children as officers and directors.

[5] The motion now brought by the defendants to set aside the Mareva injunction and the appointment of a receiver is based on four grounds, being (i) the Court of Appeal on the appeal from the judgment of Macdonald J. set aside some of the relief granted resulting in circumstances so dramatically different that the underpinnings of the original order are no longer valid; (ii) the undertaking as to damages given on the ex parte application is of no value; (iii) the plaintiffs have failed to act with reasonable dispatch; and (iv) the balance of convenience favours the defendants.

[6] For the reasons that follow, the motion of the defendants is dismissed.

Changed circumstances

[7] On May 8, 2012 the Court of Appeal for Ontario allowed in part the appeal from the trial judgment of Macdonald J. as follows:

(a) It set aside the judgment against Mrs. Piersanti;

(b) It reduced the judgment against Mr. Piersanti from $20 million to $12,521,555.85;

(c) It set aside the order that 1281632 Ontario Limited pay $2.5 million into court; and

(d) It set aside judgment relating to Ulti Alfano’s interest in the MAP properties.

[8] Where on a motion to dissolve an injunction, it appears that the facts as presented are substantially different from the facts upon which the original order was given or have changed so dramatically that the factual underpinnings of the earlier order are no longer valid, the injunction may be set aside. See Jack Digital Productions Inc. v. Comex Foreign Exchange Inc. (2007), 161 A.C.W.S. (3d) 983, per Himel J. at para. 7.

[9] In my view, the facts are not so dramatically different as a result of the decision of the Court of Appeal. Mr. Piersanti is still liable to the plaintiffs for over $12 million for fraud. While the judgment against Mrs. Piersanti was set aside because the trial judge did not make any findings that would link her actions to the bankruptcy of Osler, which was the triggering event for the damages award, there had been no appeal from the strong adverse findings of credibility of the trial judge regarding Mrs. Piersanti whose evidence she did not believe, and the Court of Appeal did not say otherwise.

[10] The theory of the claim in this second action is that assets owned by Mr. Piersanti or his wife have been hidden in corporations ostensibly owned by others but in fact held for the benefit of Mr. Piersanti or his wife in order to prevent collection on the judgment in the first action. While Mrs. Piersanti is now not liable on that judgment, her husband is for $12 million plus as a result of his fraud. The basic underlying facts of this second action have not changed. The claim as drafted includes the allegation that the properties are held for the benefit of Mr. Piersanti and it is open on the pleadings for a judgment at trial that they are all beneficially owned by him.

[11] The position of the defendants in this second action is that Mr. and Mrs. Piersanti do not own the properties in question and that they are owned by their children. The fact that there is no judgment against Mrs. Piersanti does not fundamentally change the claim of the plaintiffs or this defence of Mrs. Piersanti.

[12] The basis of my original order is set out in paragraphs 13 to 16 of my endorsement, as follows:

[13] The plaintiffs, however, contend that given the history of the misconduct and the untruthfulness of Piersanti and his wife, as found by MacDonald J., the fact that the pattern of shielding their assets from the public appears to repeat itself incessantly, and that a majority of these new transactions were undertaken after the original proceedings were commenced, it is their position that all of the newly discovered properties are truly owned, directly or indirectly, by Piersanti and his wife and that the non-arm’s length mortgages are sham transactions and no money was ever advanced between the related corporations, which are in any event truly owned, directly or indirectly, by Piersanti and his wife.

[14] I am satisfied based on the evidence before me that the plaintiffs have made out a strong prima facie case that there has been fraudulent conduct in the dealings in the properties disclosed in the statement of claim. MacDonald J. found fraudulent activity on the part of Piersanti and his wife. She said she could not rely on anything Piersanti said and that his wife’s evidence was entirely unreliable.

[15] MacDonald J. also found that having someone act as the officer and director of a company controlled by Piersanti was part of the modus operandi that Piersanti utilized on a regular basis to protect disclosure of his interest in various properties. See paras. 130 and 133 of her reasons for judgment. This finding is particularly relevant in the present case.

[16] I am also satisfied that there is a strong risk that Piersanti and his wife will further dissipate assets pending trial for the purpose of avoiding the consequences of a judgment against them. They have done so in the past, having acted contrary to a previous Mareva injunction granted in 2002, and their actions as disclosed in the affidavit material before me indicates a strong likelihood that they will do so again if not enjoined.

[13] It is argued by the defendants that the judgment of Macdonald J. directing $2.5 million to be paid into court was set aside by the Court of Appeal. The plaintiffs in the first action had sought payment into court of the $2.5 million on the basis that Mr. Piersanti had caused his numbered company to pay that amount out in breach of the Mareva injunction previously ordered in that case by Malloy J. The Court of Appeal set aside that order on the basis that the trial judge did not link that award to a breach of the Mareva injunction. The Court of Appeal was careful however not to conclude there had been no breach of the Mareva injunction. O’Connor A.C. J.O. stated:

To be clear, I do not conclude that there was no basis for finding that the Piersantis breached the Mareva injunction. Rather I am not satisfied the trial judge, in her reasons, made that finding. That being the case, the trial judge’s reasons and these reasons should not be read as finally disposing of that issue.

[14] The circumstances have changed to some extent on this point. On the application before me it was put by the plaintiffs that there had been a breach of the Mareva injunction. Now the situation is that this is an open question. I do not, however, think this change makes such a dramatic change in circumstances as to meet the test to dissolve my previous order. My decision that the plaintiffs had made out a strong prima facie case that there had been fraudulent conduct in the dealings in the properties disclosed in the statement of claim was based on far more than the breach of the Mareva injunction, and the fact that it is now an open question does not detract from the basis of my decision.

[15] The facts as presented by the defendants are not substantially different from the facts upon which the original order was given and have not changed so dramatically that the factual underpinnings of the earlier order are no longer valid.

Undertaking as to damages

[16] The defendants contend that the plaintiffs failed to disclose on their ex parte motion before me that the undertaking as to damages given was of no value and that the plaintiffs did not have the financial means to make any payment. Apart from the fact that the defendants argued unsuccessfully before Cumming J. that the plaintiffs had given an undertaking as to damages which was meaningless as they do not have the financial means to make any payment, and thus res judicata is applicable, there is nothing in the point.

[17] The undertaking as to damages was made by the Alfano plaintiffs. Two of them, Italo and Ulti Alfano, guaranteed with others a loan of $2.3 million made in 2003 by Invar Building Corporation to two numbered companies to assist in the acquisition of various real properties and equipment. The loan was secured by all of the assets of the borrower as well as assets of two other companies related to the borrower. In 2005 and 2008 the loan was amended by adding additional security and the loan increased. In December, 2008 demand was made on all of the borrowers and the guarantor for $13.708 million that was apparently then outstanding. No steps were taken to enforce the demand and in August, 2009 additional mortgage security of $20 million was taken over an 11 acre property in Vaughan upon which an asphalt plant was located.

[18] The defendants point to evidence that in 2009 one of the numbered companies that was the borrower decided to shut down its business because a related company was taking over that business. That being the case, it is asserted that this closure should have been disclosed. I fail to see the point. The numbered company was not a plaintiff in this second action and gave no undertaking as to damages. The fact that it gave an undertaking as to damages in the first action is irrelevant. Moreover, there is not now, nor was there at the time of the ex parte motion or the motion by the defendants before Cumming J., any evidence whatsoever that Italo or Ulti Alfano, two of the plaintiffs and two of the guarantors of the Invar loan, would ever be required to pay on their guarantees, or if required, unable to pay them. Mr. Morrison in argument conceded that there is also no evidence that there will ever be a shortfall on the loan after the security is considered and no evidence that Italo or Ulti Alfano could not pay it. There is also no evidence that the other borrower or guarantors will be unable to pay the loan if required. In fact, a receivership action brought by Invar was dismissed on consent on February 4, 2013.

Failure to act with reasonable dispatch

[19] An inordinate delay in pursuing a claim is a reason to dissolve an interim injunction. See Jack Digital Productions Inc.at para. 7 and the authorities referred to.

[20] In this case, the injunction and receiving order was obtained on August 22, 2011. The defence and counterclaim was delivered in November, 2011. It was in August, 2013 that the plaintiffs delivered their defence to the counterclaim.

[21] However, one cannot ignore the nearly endless appeals taken, mostly by the defendants, from the various orders.

(1) The motion to set aside the original ex parte order was dismissed on October 18 by Cumming J.

(2) The decision of Cumming J. was appealed by the defendants to the Court of Appeal, and eventually dismissed on September 18, 2012.

(3) A motion by the defendants to stay the Court of Appeal decision pending an application for leave to appeal to the Supreme Court of Canada was dismissed by the Court of Appeal on November 6, 2012.

(4) The motion by the defendants for leave to appeal the Court of Appeal to the Supreme Court of Canada was eventually dismissed on January 17, 2013.

(5) The decision of the Court of Appeal from the judgment of Macdonald in the first action was released on May 9, 2012. Both parties sought leave to appeal that decision to the Supreme Court of Canada, the plaintiffs filing their application on July 25, 2012 and the defendants on August 1, 2012. These applications were dismissed on November 8, 2012.

[22] Apart from the fact that an inordinate amount of work obviously had to be done on all of these appeal proceedings, as well as other interlocutory motions in the appeals, no fault can be taken for the plaintiffs not proceeding with the second action while the first action was not concluded. Had the defendants been successful on their appeals, there would have been no judgment against them and no basis for the plaintiffs bringing the second action. Had the plaintiffs sought to pursue the second action pending these appeals, one would have expected the defendants to say the second action should not be pursued pending the appeals. Certainly no demands were made by the defendants in the second action to have the plaintiffs proceed with their action pending the appeals.

[23] It appears that the defendants are playing hard ball with respect to the enforcement of the judgment against Mr. Piersanti. He has ignored a notice of examination as a judgment debtor and the defendants refuse to produce him. Mr. Morrison said the reason for this refusal is that Mr. Piersanti disclosed all of his assets in his affidavit sworn as required by the Mareva injunction delivered in September or October, 2011. This of course is no plausible explanation at all. What his assets are at the time of his examination as a judgment debtor is of importance, not what he said in his affidavit in 2011, and in any event the plaintiffs do not have to accept the truthfulness of what Mr. Piersanti may have said in his affidavit. This recalcitrance on the part of Mr. Piersanti speaks loudly as to what steps he would have taken had the plaintiffs sought to pursue the second action while the defendants’ appeals to the Court of Appeal and the Supreme Court of Canada were pending.

[24] Once the Supreme Court of Canada upheld the judgment of the Court of Appeal in the first action, the plaintiffs sought to return to Macdonald J. to have her determine whether the Mareva injunction in that action had been breached by the $2.5 million payments made by Mr. Piersanti’s numbered company and whether the money should be paid into court. There were preliminary attendances for scheduling purposes before Wilton-Siegel in December, 2012. He directed that the motion by the defendants to set aside the original ex parte orders await the decision of Macdonald J.

[25] The motion of the plaintiffs to have the trial judge revisit the issue of a breach of the Mareva injunction was scheduled to proceed several times between February and April, 2013 but cancelled each time by Macdonald J. It was eventually argued on April 26, 2013. On June 13, 2013 Macdonald J. wrote to counsel saying that she would not amend her judgment.

[26] Mr. Diamond advises that since the Supreme Court of Canada has dismissed all of the applications for leave to appeal, he has written trying to set up discovery dates. This discovery has not yet occurred. In light of the position of the defendants that the plaintiffs have not moved fast enough on their action, the defendants should now want to move with dispatch to have the second action proceed. If this does not occur, a 9:30 a.m. attendance can be scheduled to consider the matter.

[27] I find that there has not been delay in the circumstances of this case in the prosecution of this action that would give grounds to dissolve the Mareva injunction and receiving orders.

Balance of convenience

[28] Without any new facts permitting the injunction and receiving order to be dissolved, I do not see how any analysis of the balance of convenience is warranted. In my endorsement on August 22, 2011, I considered this issue at paras. 20 to 24. The decision was upheld by Cumming J. and the Court of Appeal and leave to appeal to the Supreme Court of Canada was denied. The defendants in their factum are arguing this issue of the balance of convenience as if it is being considered for the first time. It is not.

[29] On April 26, 2013 Macdonald J. ordered a trial to determine the damages suffered by some of the numbered company defendants and Mrs. Piersanti in the first action resulting from the Mareva injunction ordered in that action prior to the trial and the fact that the action was dismissed as against them by the Court of Appeal. The defendants say that the continuation of the Mareva order and the receivership order in light of that order of Macdonald J. would be seriously prejudicial to the defendants. They contend that the damages suffered at the very least include the costs of the receivership to date of some $938,000.

[30] I do not agree. What may have to be paid to those defendants as a result of the undertaking as to damages given by the plaintiffs in the first action does not affect the plaintiffs’ right to collect on their $12 million plus judgment against Mr. Piersanti and this second action to preserve assets. Moreover, the fact that receivership costs have been incurred does not necessarily mean that those defendants will be entitled to be paid them by the plaintiffs. Those costs have been incurred partly because of the judgment against Mr. Piersanti and will continue to be incurred. As well, I considered the issue of receivership costs in my August 22, 2011 endorsement dealing with the balance of convenience and stated:

[20] I have considered the balance of convenience and which party would suffer greater harm from the granting or refusing the appointment of a receiver. Certainly the plaintiffs would suffer from a refusal. The properties that would be run by the receiver are commercial properties. There is no reason to think that a receiver would be less capable than the defendants in running them.

[31] So far as the defendant children are concerned, it was unsuccessfully argued before Cumming J. that they should not be included in the orders. It is not open to the defendants to now say the children are being prejudiced by the continuation of the Mareva and receivership orders such that the balance of convenience favours the dissolution of those orders. There was no evidence before me in 2011 or before Cumming J. that the children are being prejudiced in any way, nor is there any such evidence now.

Conclusion

[32] The motion by the defendants to dissolve my orders of August 22, 2011 is dismissed.

[33] The plaintiffs are entitled to their costs. If costs cannot be agreed, brief written submissions of no more than three pages along with a cost outline in accordance with the rules may be made within 10 days and the defendants shall have a further 10 days to make reply submissions of not more than three pages.

Newbould J.

Date: October 23, 2013