COURT FILE NO.: CV-14-00508355-0000

DATE: 20140724

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: AMERICAN ENVIRONMENTAL CONTAINER CORP., SAN JUAN PRODUCTS INC. and KIJO LEASING ULC, Plaintiffs

AND:

PAUL KENNEDY, LEANNE KENNEDY, DARRAN GREEN, SAN JUAN PRODUCTS (CANADA) LTD., SJP ENTERPRISES (CANADA) LTD., SJP ENTERPRISES INC., AECC/SAN JUAN, OASIS FIBERGLASS POOLS INC., BACKYARD OASIS, 2001530 ONTARIO INC., O/A SOUTHERN COMFORT, SAN JUAN ENTERPRISES (CANADA) INC., RONALD KENNEDY, COLBY LYONS, 1324653 ONTARIO LTD., LEISURE POOLS ONTARIO LTD., LEISURE POOLS LOGISTICS LTD., LEISURE POOLS GTA LTD., LEISURE POOLS CANADA INC., LEISURE POOLS CANADA LTD., 1766846 ONTARIO LTD. and LEISURE POOLS OF TORONTO INC., Defendants

BEFORE: R. F. Goldstein J.

HEARD: July 23, 2014

APPEARANCE: Avrum D. Slodovnick, for the Plaintiffs, Moving Party

endorsement

[1] The Plaintiffs obtained a default judgment against some of the Defendants from Justice Perell on October 28, 2013. They now seek to execute on that judgment by means of launching a new action. The Plaintiffs have sued some additional parties that they claim have been used to hide or dissipate assets. In this new action the Plaintiffs have added new Defendants in addition to the original Defendants. By original Defendants I mean the Defendants to the original action. By new Defendants I mean the additional Defendants that are subject to the new action. These new Defendants are persons and companies closely related to the original Defendants. The Plaintiffs allege that the new Defendants are part of a scheme to prevent execution of Justice Perell’s order. The Plaintiffs thus bring an ex parte application for a Mareva injunction, a Norwich order, a certificate of pending litigation, an amendment of the new Notice of Action, and a sealing order.

[2] The Plaintiffs manufacture pools. They entered into an agreement with some of the original Defendants to act as their Canadian dealer. The relationship deteriorated and contentious litigation ensued. In August 2009 Justice Strathy imposed a non-dissipation order on the original Defendants. He also ordered production of books and records. The original Defendants never complied with Justice Strathy’s order. The original Defendants claimed that they were unable to comply with the production order because the Plaintiffs had stolen the records. In May 2013 the Plaintiffs brought a motion before Justice Frank to strike the defence and counterclaim on the basis of the failure to comply with Justice Strathy’s order, particularly the order for production of books and records. Justice Frank found that the original Defendants “concocted” the excuse about the alleged theft of the books and records. Indeed, while Justice Frank had reserved on the motion the original Defendants said that they had, in fact, “found” the missing records. Justice Frank did, however, give the original Defendants another month to comply with Justice Strathy’s production order. They did not do so. In September 2013 Justice Frank struck the statement of defence and counterclaim. Justice Perell’s judgment followed in October 2013. It is noteworthy that Justice Frank found that the original Defendants had lied to Justice Strathy.

[3] A Mareva injunction can be used to assist a creditor in aid of execution: Lamont v. Kent, [1999] O.J. No. 277, 1999 CarswellOnt 216 (Ont.Ct.Gen.Div.). I am satisfied that there are grounds to believe that the original Defendants either have been or will dissipate assets that may well properly belong to the Plaintiffs as a result of paragraph 1 of Justice Perell’s order. I am also satisfied that there are grounds to believe that the new Defendants are playing a role. There is a strong prima facie case on the merits, given the rulings of Justices Strathy and Perell, and especially given the comments of Justice Frank. I also find that there is a genuine risk of disappearance of the assets: Chitel v. Rothbart (1982), 1982 1956 (ON CA), 39 O.R. (2d) 513 (C.A.). There will, therefore, be a Mareva injunction to prevent the dissipation of the assets, especially since there is some evidence that the original Defendants are in breach of what are now (as a result of the order of Perell J.) trust obligations: Univalor Trust S.A. v. Link Resources Partners Inc., 2012 ONSC 6034 (Sup.Ct.). I take particular note of the fact that judgment has already been granted in circumstances that give rise to a real concern about the actions of some or all of the Defendants: Lamont v. Kent, at para. 13; Sibley & Associates LP v. Ross, 2011 ONSC 2951, [2011] O.J. No. 2656, 106 O.R. (3d) 494 (Sup.Ct.). I note that there has been an undertaking as to damages from the Plaintiffs.

[4] The Plaintiffs do not have copies of the banking records of the Defendants. The Defendants have, over the years, wilfully refused to produce records (as found by Justice Frank) which means that the Plaintiffs are not in a position to say which financial institutions the Defendants deal with. As a result, they ask that the Norwich order be served upon each of the Big Five Canadian banks.

[5] The Plaintiffs are asking for quite extraordinary relief. In essence, the Plaintiffs ask that each of the Big Five banks check their records in order to see if any of the Defendants have documents, and then produce them. The Plaintiffs acknowledge that this request is extraordinary but they say that they are left with no choice.

[6] In GEA Group v. Ventra Group Inc., 2009 ONCA 619 the Court of Appeal set out the criteria for granting a Norwich order. A Norwich order is meant to be a flexible, equitable remedy. After reviewing the criteria as set out by Cronk J.A., I am satisfied that the Plaintiffs’s request is unusual, but necessary. I agree that as a practical matter the Plaintiffs have no reasonable alternative to obtaining this information: Autopoietic Telemetric Solutions Limited, [2012] O.J. No. 1618, 2012 CarswellOnt 4324 (Sup.Ct.). There will, therefore, be a Norwich Order. It is part of the Norwich Order that the costs of searching for and producing documents incurred by the Banks will be paid for by the Plaintiffs.

[7] The Plaintiffs also request a Certificate of Pending Litigation in relation to a property owned by the Defendant Paul Kennedy’s father, Ronald Kennedy. Ronald Kennedy has owned this property for many years. He is one of the new Defendants. In 2009 Paul Kennedy and his family moved in. The Plaintiffs have put forward some evidence that the property was dilapidated and run-down prior to Paul Kennedy’s residence. The property has since been substantially improved, including the installation of an indoor and an outdoor pool that belonged to the Plaintiffs. There is evidence that funds and property that properly belonged to the Plaintiffs can be traced to the property – and this in the face of the dissipation order issued by Justice Strathy. There will, therefore, be a certificate of pending litigation placed on the property.

[8] The Plaintiffs seek to amend the Notice of Action to include some new Defendants that they have recently become aware of. Given that the pleadings are not closed, the amendment is granted.

[9] Finally, the Plaintiffs request a sealing order. The comments made by Justice Frank give me great concern about the willingness of the original Defendants to follow court orders once they become aware of them. I am satisfied that the Dagenais/Mentuck criteria apply for at least the short term: R. v. Mentuck, 2001 SCC 76, [2001] 3 S.C.R. 442; Dagenais v. Canadian Broadcasting Corporation, 1994 39 (SCC), [1994] 3 S.C.R. 835. A sealing order will issue. The order may be varied by further order of this Court. It is always a serious matter to issue a sealing order and the open court principle must always be borne in mind. Given that there will be a return of the Mareva injunction within 10 days, another judge will shortly have an opportunity to revisit the issue.

[10] At the request of Counsel for the Plaintiffs, costs are reserved for the judge dealing with the return of the Mareva injunction.

R.F. Goldstein J.

Released: July 24, 2014