COURT FILE AND PARTIES

COURT FILE NO.: CV-13-486220
DATE: 20140310

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: BANK OF MONTREAL, Plaintiff

AND:

HENRY JUROVIESKY, ANNE PIAFSKY-JUROVIESKY, FIRE PASTE INNOVATION LTD. and FIRE PASTE ACCEPTANCE CORPORATION, Defendants

BEFORE: D.L. Corbett J.

COUNSEL: Sean N. Zeitz, for the Plaintiff
David M. Marcovitch, for the Defendant

HEARD: November 19, 2013

ENDORSEMENT

[1] Mr Juroviesky moves for an order removing a certificate of pending litigation from title to his matrimonial home in which he holds a 50% interest. The bank agrees that the certificate should be removed, but seeks terms granting the bank a charging order against Mr Juroviesky’s interest in the house.

[2] For the reasons that follow, in the unusual circumstances of this case, I grant the order on the terms proposed by the bank.

Background

[3] Henry Juroviesky markets himself as a senior commercial litigator with expertise in class actions and securities litigation. He is licensed to practice law in Ontario and in several American jurisdictions.

[4] Mr Juroviesky’s law firm, Juroviesky LLP, obtained credit from Bank of Montreal, including an operating line and a corporate credit card (Mastercard). Mr Juroviesky provided a personal guarantee to the bank to a limit of $650,000 plus interest.

[5] The corporate Mastercard went into default. Default continued under the credit card and in May 2013 the bank wrote demanding that the situation be rectified and that there be continued compliance with the terms of the operating line.

[6] The default was not rectified and on July 26, 2013, the bank demanded payment of the outstanding credit card debt and the operating line and made demand of Mr Juroviesky under the personal guarantee. Total indebtedness then stood at $560,453.65 (as of August 16, 2013). No payments have been made since.

[7] The bank learned of two situations that caused it concern about whether Mr Juroviesky would, honour his personal guarantee:

(a) Mr Juroviesky is a defendant in a multi-million dollar action in Hamilton, Ontario. On the face of those proceedings, Mr Juroviesky is sued in his professional capacity. However, the claim considerably exceeds Mr Juroviesky’s professional liability insurance coverage; and

(b) on December 19, 2012, Mr Juroviesky transferred his 50% interest in his matrimonial home to his wife for nominal consideration.

[8] On the strength of this information, the bank alleged that the transfer of the home was a fraudulent conveyance and obtained a certificate of pending litigation (“CPL”) from Master Barbara McAfee on August 6, 2013. The bank relied upon an abstract of title obtained July 12, 2013 on this motion.

[9] A CPL is usually obtained without notice, and such was the case here.

[10] When the bank went to register the CPL on title, it searched title again and learned that on July 26, 2012, a 50% interest in the house had been conveyed back to Mr Juroviesky.

[11] The bank served a copy of its motion materials, the order, and the CPL on Mr Juroviesky, and acknowledged that the CPL had been obtained on the basis of a factual error. The bank asked for an explanation for the conveyance and reconveyance to consider its position respecting terms of an order removing the CPL.

[12] Mr Juroviesky then moved for an order removing the CPL without terms, and took the position that the order had been obtained on the basis of “material misrepresentations” made to Master McAfee.

[13] The bank filed materials explaining that it proceeded in good faith, and did not learn until it registered the CPL that the house had been reconveyed back to Mr Juroviesky.

[14] Mr Juroviesky’s counsel cross-examined the bank’s solicitor for seven hours on an unremarkable affidavit attaching ordinary banking documents.

[15] Mr Juroviesky sought to remove the bank’s solicitors of record on the basis that they could not be both counsel and witnesses in the same proceeding, despite the fact that the solicitor’s affidavit was uncontroversial.

[16] The bank’s fraudulent conveyance action was brought in good faith, based on the facts of which the bank was aware. The bank exercised reasonable diligence investigating its claim. There was nothing dishonest or negligent in the bank’s evidence before Master McAfee. Thus, even though there was a factual inaccuracy in the bank’s materials, I am satisfied that the bank satisfied its obligations of full and fair disclosure.

[17] The question is: what should be done now?

[18] First, the CPL must be removed from title. A CPL is only available where a plaintiff claims an interest in land. Now that title has been reconveyed, the bank has no claim for fraudulent conveyance, and no other interest in the property. Both sides agree with these propositions. Thus an order shall go discharging the CPL.

[19] Second, should the bank be entitled to a charging order against Mr Juroviesky’s interest in the matrimonial home as a term of discharging the CPL?

[20] The bank’s claim against Mr Juroviesky is contested. In the ordinary course, the bank would not be entitled to security or execution before judgment. The bank’s requested terms for setting aside the CPL amount to a request for a limited Mareva injunction to replace the CPL. The jurisdiction for such an order may be found in s.103(6)(c) of the Courts of Justice Act, which provides that:

[t]he court may make an order discharging a [CPL]… and the court may, in making the order, impose such terms as to the giving of security or otherwise as the court considers just.

Alternatively, the jurisdiction may be found in the general authority to grant injunctions where it is “just or convenient” to do so, found in s.101 of the Courts of Justice Act.

[21] To obtain a Mareva injunction, a moving party must show:

(a) a strong prima facie case on the merits; and

(b) a real risk that the defendant is removing or about to remove assets from the jurisdiction or is dealing with assets in a manner that is clearly distinct from the usual or ordinary course of business or living, so as to render the possibility of future tracing of assets remote, if not impossible.[^1]

Strong prima facie Case

[22] I am satisfied that the bank has a strong prima facie case. Mr Juroviesky signed the guarantee. The underlying debt is largely uncontested. Mr Juroviesky’s primary defences appear to be:

(i) the guarantee was in respect to a different operating company for a prior legal practice, and not the one under which he was carrying on business at the time that the current indebtedness was incurred; and

(ii) the bank allowed a person without signing authority to deplete the operating account’s assets, and therefore the bank is liable for Juroviesky LLP’s failure to meet its obligations as they fell due.

[23] The first defence is interesting, and I cannot conclude that it is doomed to fail. But neither am I persuaded that it has much chance of success. It will be for the trial or summary judgment motions court to make that determination, which I would think would be possible on the basis of the written record, perhaps supplemented with limited oral evidence.

[24] I have no view on whether there is any merit to the second defence. However, the alleged predations of the person allegedly without signing authority were minor in comparison to the overall indebtedness. While the allegedly unauthorized withdrawals may have been part of the overall picture that led the bank to have concerns about the debtor, the loans are demand facilities and the bank is entitled to require repayment of them in any event. The strength of this defence may be further eroded by the manner in which it was raised: the bank was first told of this in Mr Juroviesky’s affidavit sworn August 23, 2013. Even if Mr Juroviesky succeeds on this aspect of his defence, the likely result would be a modest reduction in the overall debt, which would not materially affect his liability on the personal guarantee.

Real Risk of Asset Depletion or Removal

[25] The conveyance of the matrimonial home for nominal consent is not a basis for a CPL any more, since the property has been reconveyed back. However, it is still a circumstance that gives me concern about the prospect that Mr Juroviesky may take steps to become judgment-proof. Mr Juroviesky says in his affidavit that the transfer was part of a long intended organization of his personal finances. He has provided no evidence to substantiate this claim other than his own testimony. He has described the original deed under which he and his wife acquired joint title as a “mistake”, but has provided no corroboration for this claim.

[26] The conveyance to Mr Juroviesky’s wife was done when Mr Juroviesky was facing a substantial claim in legal proceedings that exceeded his professional liability insurance coverage. Mr Juroviesky evaluates his risk in these proceedings as minimal. That may be, but it seems more than coincidental that he decided to rectify the “mistake” in title to his house while those proceedings were outstanding and the position of his firm with the bank was deteriorating. It is also suspicious that the reconveyance was implemented on the same day that the Court of Appeal released a decision in parallel proceedings[^2] that Mr Juroviesky says has the effect of extinguishing his potential liability in the proceedings against him.

[27] I am not convinced by the innocent explanation given for the transfer. The bank has a reasonable concern that it may not be paid. First, there is the fact that it has not been paid by the debtor, and the greater part of the debt is owing on any available version of the facts. Mr Juroviesky claims to have a net worth of over $1 million, apart from his interest in the matrimonial home, and disavows any intention to become judgment-proof, and yet he has contested this motion on a basis that has been so excessive as to be improvident. Mr Juroviesky points to collateral guarantees from other related companies, but does not explain why those guarantors have not paid the debt. I am satisfied that the second branch of the test for a Mareva injunction is made out sufficiently to ground the limited terms the bank seeks as part of the order discharging the CPL.

[28] Had I been persuaded that perhaps the bank’s requested terms were unnecessary, because there appear to be other assets to satisfy these obligations, there would have been one other point to consider. During my research I came upon the recent decision of my colleague W. Matheson J. in Juroviesky v. Lawyers Professional Indemnity Company.[^3] From this decision, it appears that Mr Juroviesky has been sued for $1.2 million, and that his insurer has successfully resisted Mr Juroviesky’s claim to insurance coverage for the claim. Had I not been satisfied that I should grant the terms sought by the bank, I would have given both sides an opportunity to make submissions respecting the impact, if any, of W. Matheson J.’s decision on the issues before me. Since I was satisfied without placing any weight on W. Matheson J.’s decision, I did not find it necessary to seek additional submissions from the parties.

Allegation of Material Misrepresentation

[29] Rule 39.01(6) provides for “full and fair disclosure of all material facts” where a party is seeking an order on a motion without notice. This rule is a codification of longstanding principles.

[30] In his original factum, Mr Juroviesky sets out several cases where this principle has been applied to set aside orders obtained in breach of R.39.01(6). Where the breach is done by counsel deliberately, this is “most serious misconduct on the part of an advocate”.[^4]

[31] There is not much point in stating this principle unless there is some suggestion that there has been a breach by counsel of his duties to the court of fairness and candour. And there was no point to the rancourous seven hour cross-examination of the bank’s solicitor on his routine affidavit if not to test a theory of “serious misconduct” on his part in obtaining the CPL. This line of argument is not repeated in Mr Juroviesky’s amended factum which was the basis for oral argument. In my view there never was any basis for these imputations raised by Mr Juroviesky.

[32] There are several other decisions where courts have noted the need for “scrupulous adherence” to the principles of full and fair disclosure on without notice motions.[^5] Then Mr Juroviesky’s factum argues that “[i]t does not matter if the misrepresentation is deliberate or unintentional”. The one authority cited in support of this statement does not address the issue of inadvertent factual errors.[^6]

[33] It matters very much whether a misrepresentation is deliberate, unintentional, careless, negligent, reckless, a result of being duped, or completely inadvertent. The nature of the error, and the degree of advertence will play a large role in the court’s response.[^7]

[34] In this case, the bank and its solicitors did not know that the property had been reconveyed at the time that they obtained the CPL. The bank’s solicitors acted reasonably in relying on the July 12th title search. They made full and frank disclosure to the Master of what they knew, including the date of the title search. Master McAfee proceeded on August 6th on the strength of a title search from July 12th. Master McAfee made no error in so doing, even though there was some risk, inherent in the situation, that something had happened affecting title between the time of the title search and the time of the motion. That risk was low, and lower still that harm could result from some unknown change of circumstances in the interim.[^8]

[35] Mr Juroviesky points to other alleged deficiencies in the materials before Master McAfee. I do not analyse them in detail. They are without merit. The affidavit in support was obviously from the bank’s solicitor, on the strength of banking documents provided to him by his client. It was obvious that the bank’s solicitor had no personal knowledge of them beyond the fact that they had been received from the bank. The materials before the Master indicated that the bank learned of the impugned conveyance in May 2013 when in fact the bank had found out on March 18, 2013. The date this fact was discovered was irrelevant to the issues before the Master. The error was within the bank’s knowledge, but it was an inadvertent and unimportant slip.

Scope of the Order

[36] The bank is not seeking a full-blown Mareva injunction. The terms sought by the bank match the concerns raised by the impugned transfer of the matrimonial property. I am satisfied that the order is of reasonable scope. There is no basis to suppose that it will prejudice Mr Juroviesky: the bank has indicated that it will co-operate by agreeing to replacement security if Mr Juroviesky and his wife wish to sell the house and buy another.

Order, Costs and Case Management

[37] An order shall go discharging the CPL on the terms proposed by the bank. The bank has given the usual undertaking as to damages, which should be referenced in the order.

[38] The bank has succeeded and is entitled to its costs. As indicated in my reasons, I found Mr Juroviesky’s approach to this motion to be unduly confrontational and improvident: the seven hour cross-examination of the bank’s solicitor was grossly excessive in the circumstances of this motion. As a sanction for litigating inappropriately, Mr Juroviesky shall pay substantial indemnity costs.

[39] I have several different costs outlines from the bank, no doubt reflecting the different appearances before me. The bank’s counsel shall resubmit the bank’s costs outline, and may provide brief written argument by March 24, 2014. Mr Juroviesky may delver responding submissions by March 31, 2014. There shall be no reply or oral costs submissions.

[40] Counsel agree that this case should have case management, but not on the process for seeking that assistance. I prefer Mr Marcovtich’s approach: as provided in the Rules, the parties may write to the Regional Senior Justice requesting case management and/or appointment of a judge to hear all motions in the case. In view of my involvement to this point, and the comments I have made in this decision respecting the underlying merits of the case, I think it would be best if another judge undertook any case management role that may be considered appropriate, though that is, of course, up to the Regional Senior Justice or his designate.

D.L. Corbett J.

Date: March 10, 2014

[^1]: Aetna Financial Services Ltd. v. Feigelman, 1985 55 (SCC), [1985] 1 S.C.R. 2, at paras. 29 and 30. See also Chitel et al. v. Rothbart et al., 1982 1956 (ON CA), [1982] O.J. No. 3540 at para. 43, 55, 57 (Ont. C.A.); Fonagay v. Oasis Tracking Ltd., [2006] S.J. No. 392.

[^2]: Barclays Bank PLC v. Devonshire Trust, 2013 ONCA 494.

[^3]: 2014 ONSC 43.

[^4]: Miksche Estate v. Miksche, 2009 60409 (ONSC), per D.M. Brown J.; Rule 4.01, Law Society of Upper Canada Rules of Professional Conduct.

[^5]: Windsor v. Mako, 2008 55146 (ONSC), per Quinn J. See also JDM Developments Inc. v. J. Stollar Construction Ltd., 2004 35004 (ONSC), per DiTomaso J.

[^6]: Sparkle Ventures Inc. et al. v. At My Accounting Department Inc. et al., 2011 ONSC 1972, per D.M. Brown J.

[^7]: Sherwood Dash Inc. v. Woodview Products Inc., [2005] O.J. No. 5298; America v. Friedland quoted in Two-Tyme Recycling Inc. v. Woods, [2009] O.J. No. 4894 at para. 47.

[^8]: This is contrasted with many motions under the Construction Lien Act where, because of the dynamic nature of those proceedings, and the potentially final effect on sheltered liens of orders discharging liens, it is necessary to have a timely sub-search of title immediately before a motion. There is no requirement for similar sub-searches when seeking to obtain a CPL, subject to the overriding discretion of the Master deciding the motion for the CPL.