SUPERIOR COURT OF JUSTICE – ONTARIO
COURT FILE NO.: CV-14-119893-SR
DATE: 20140912
RE: Furrow Systems International Ltd. cob under the firm name and style of FSI Landscape Supply, Plaintiff
-and-
Island Pools & Landscaping Ltd., Jose Rego and Diane Rego, Defendant
BEFORE: The Honourable Mr. Justice M.L. Edwards
COUNSEL: Gregory Hemsworth, for the Plaintiff
HEARD: September 11, 2014
ENDORSEMENT
EDWARDS, j.:
[1] The plaintiff seeks an order in the form of a mareva injunction and a certificate of pending litigation against the residence of the named defendants Jose and Diane Rego at 42 Hillsburgh Road, Brampton, Ontario. The motion was heard ex parte.
The Facts
[2] The plaintiff is in the business of delivering landscaping materials and has, over some period of time, dealt with the defendant Island Pools & Landscaping Ltd. (hereinafter “Island Pools”).
[3] Up until the fall of 2013 the running account which had been maintained between the plaintiff and Island Pools was operated satisfactorily and had not been in arrears. Things changed in 2014, and as of the present time the plaintiff is allegedly owed in excess of $24,000.
[4] On August 19, 2014 Mr. Ross Dirracolo, the president of the plaintiff had arranged to meet with the defendant Jose Rego, who is shown on the corporation profile of Island Pools as the sole director. Mr. Rego did not meet with Mr. Dirracolo as planned, and as such Mr. Dirracolo then attended on job sites where he had delivered materials for Island Pools. He met with a person who described himself as the foreman of Island Pools, “Fabio”, who advised him that he should “watch out for Joe because he was closing up his business and moving back to Portugal”.
[5] Mr. Dirracolo, armed with this new information, went to Mr. Rego’s residence and discovered a for sale sign marked “Sold” on the front yard of Mr. Rego’s home. Mr. Dirracolo has continued to attempt to meet or speak with Mr. Rego without success.
[6] In Mr. Dirracolo’s affidavit he states:
I believe Jose Rego and his wife have sold their home but I do not know the closing date other than the fact that from the sign on the front lawn, the property has been sold. I believe that the defendants have diverted the trust funds and that they are attempting to liquidate all assets in the jurisdiction and remove them from the jurisdiction in order to avoid payment to the plaintiff, amongst others.
[7] It is alleged in the Statement of Claim that Island Pools has been paid by the owners of the projects for which the plaintiff supplied landscaping materials, and that payments have been made to Island Pools, which payments are all trust funds pursuant to Part 2 of the Construction Lien Act. It is alleged that the plaintiff is the beneficiary of those trust funds, and that Island Pools has diverted the trust funds to its own use in breach of the trust provisions of Part 2 of the Construction Lien Act, and that Jose Rego knew or ought to have known of the breach of trust.
[8] At its highest, the evidence that I have with respect to the diversion of the aforesaid trust funds is the quoted passage above from Mr. Dirracolo’s affidavit. The quoted passage is nothing more than an assertion based on a belief, at most supported by the fact that there is a for sale sign on the property owned by Mr. and Mrs. Rego.
[9] A mareva injunction is an extraordinary remedy intended to restrain a defendant from dissipating assets or conveying away his or her own property pending the court’s determination in the proceedings. Numerous decisions of this court have made clear that there is a strong aversion to prejudgment execution which a mareva injunction effectively gives to a successful plaintiff. A plaintiff seeking a mareva injunction must satisfy the normal criteria for an injunction as well as the additional criteria for a mareva injunction. In that regard, the moving party must establish the following:
A strong prima facia case;
That the defendant has assets in the jurisdiction; and
That there is a serious risk that the defendant will remove property or dissipate assets before the judgment.
[10] The party seeking a mareva injunction must establish that the defendant’s purpose is to remove his or her assets from the jurisdiction so as to avoid judgment. As well, the moving party must establish that he or she will suffer irreparable harm if the injunction is not granted, and that the balance of convenience favours the granting of the injunction (see Chittel v. Rothbart, (1982), 1982 1956 (ON CA), 39 O.R. (2d) 513 (C.A.).)
[11] I am not satisfied on the evidence before me that the plaintiff has established a strong prima facia case as against Mr. and/or Mrs. Rego. The bald statement quoted above from Mr. Dirracolo’s affidavit does not meet the strong prima facia requirements to obtain a mareva injunction.
[12] While I appreciate that it may be difficult for a plaintiff in a similar situation to that which the plaintiff finds itself to meet the test of establishing a strong prima facia case that trust funds of a corporate defendant have found their way into the hands of the principal of the corporation, the fact remains that a mareva injunction is an extraordinary remedy requiring the moving party establish a strong prima facia case.
[13] The plaintiff not having met the test for a mareva injunction, the plaintiff’s motion seeking injunctive relief is dismissed.
[14] The alternative remedy sought by the plaintiff is for a certificate of pending litigation as against the residence of the defendants Jose and Diane Rego.
[15] Counsel referred me to a decision of Blair J. in Transmaris Farms Ltd. v. Sieber, [1999] O.J. 300. At paragraph 62, Blair J. states:
Under the Courts of Justice Act, R.S.O. 1990, c. C.43, section 103, a certificate of pending litigation may be issued by the court where a proceeding is commenced in which an interest in land is in question. The authorities cited above confirm the principle that if reasonable claims are put forward in an action for a constructive trust or fraudulent conveyance in respect of a property, a certificate of pending litigation may issue pending trial. The party seeking the certificate need not prove its case at this point. The test is met where there is sufficient evidence to establish a reasonable claim to an interest in the land based upon the facts, and on which the plaintiff could succeed at trial: Vettese v. Fleming, supra, at p.p. 244-245 (per Chapnik J.); 931473 Ontario Ltd. v. Coldwell Banker Canada Inc. (1991), 5 C.P.C. (3d) 238 (Ont. Gen. Div.), Sutherland J., at pp. 257-261.
[16] In order for the plaintiff to succeed with its claim for a certificate of pending litigation, the plaintiff has to establish on the facts before me that it has a reasonable claim for a constructive trust or a fraudulent conveyance in respect of the property owned by Mr. and Mrs. Rego. The sole basis for a claim based on a constructive trust arises out of the same paragraph of Mr. Dirracolo’s affidavit quoted above. For the same reasons that I am not prepared to grant a mareva injunction, I am not prepared to grant a certificate of pending litigation. There is no real interest in land that is the subject matter of the litigation between the corporate plaintiff and the corporate defendant. This case is all about an unpaid debt between the plaintiff and Island Pools. There is no basis for a claim based on an interest in land, and the motion seeking a certificate of pending litigation is also dismissed.
Justice M.L. Edwards
Released: September 12, 2014