ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
Vincenzo Pronesti
Applicant
- and -
1309395 Ontario Ltd., 1794566 Ontario Ltd., 1794565 Ontario Ltd., Shakeel Balroop, Satt Balroop and Sham Balroop also known as Shamshad Balroop
Respondents
Oscar Strawczynski,
for the Applicant
Shakeel Balroop, Satt Balroop and Sham Balroop in Person
HEARD: December 15, 2014
F.L. Myers J.
REASONS FOR decision
[1] For oral reasons delivered on December 15, 2014, the court found the three Balroop respondents to be in contempt of court. At that time, I indicated further reasons in writing would be forthcoming. These are those reasons.
[2] The applicant alleges that he was the mortgagee of 1309395 Ontario Ltd. After a tax sale of the mortgaged land was conducted by the municipality, approximately $247,000 was being held in court in Belleville for the mandatory one year statutory period pending payment out to the parties entitled to receive the funds in accordance with the priorities established by law. The respondent 1309395, the owner of the land, apparently moved before the court in Belleville for payment out of the funds to itself. It gave notice to the municipality but not to the mortgagee. It moved before the one year period had expired and without mentioning to the court that the applicant was a mortgagee or that, as mortgagee, it had a superior claim to the funds in court.
[3] Shakeel Balroop is the owner of 1309395. Together with his parents, Satt and Sham Balroop, they own and manage a number of corporations – many of which have other relationships with the applicant. They apparently claim that they have other claims against the applicant in respect of other properties that they feel entitled to set off against the applicant’s secured claim on the property that is the subject matter of this proceeding. I leave the merits to the judge who hears the return of the application on December 29, 2014.
[4] By order dated October 24, 2014, I granted a Mareva injunction on a without notice basis. I found that the applicant had established a strong prima facie case of fraud and a risk of dissipation. In accordance with the standard form draft order, the formal Mareva order contained the following notice on its front page:
If you, the Respondents, disobey this order you may be held to be in contempt of court and may be imprisoned, fined or have your assets seized.
[5] Paragraphs 3 and 4 of the Mareva order dated October 24, 2014 provided as follows:
DISCLOSURE OF INFORMATION
THIS COURT ORDERS that the respondents each prepare and provide to the applicant within 10 days of the date of service of this order, a sworn statement describing the nature, value, and location of the respondent’s assets worldwide, whether in his own name or not and whether solely or jointly owned.
THIS COURT ORDERS that each Respondent submit to examinations under oath within 10 days of the delivery by that respondent of the aforementioned sworn statements.
[6] It is not contested that the Balroops did not deliver sworn statements in the time required by this order.
[7] By endorsement dated November 3, 2014, Lederman J. continued the Mareva order and set a partial schedule for the hearing of the applicant’s motion to continue the order for the remainder of the proceeding and for a proposed motion by the respondents to set aside the Mareva order.
[8] On November 14, 2014, Sham Balroop attended for cross-examination pursuant to the schedule ordered by Lederman J. During the cross-examination, Mrs. Balroop advised that the respondents were planning to attend motion scheduling court on November 17, 2014 to schedule the return date of their motion to set aside the Mareva injunction. She refused to be examined further because she did not have a lawyer. In addition, she testified that in light of the motion that she intended to bring to set aside the Mareva order, she “assumed” that all proceedings, including her cross-examination were stayed.
[9] The matter came before me in Civil Practice Court on November 17, 2014. As set out in my endorsement that day, “I explained to the respondents who appeared before me today that there is a subsisting order of the court that must be complied with unless or until it is set aside.”
[10] My endorsement continues:
14 The orders of the court are to be complied with. Accordingly, the respondents are to deliver to counsel for the applicant the financial information required by paragraph 3 of the Mareva injunction dated October 24, 2014 by 4:00 PM EST on Tuesday, November 18, 2014. Mrs. Balroop is to re-attend for cross-examination at 2:00 PM EST on Wednesday, November 19, 2014 at the same location as the aborted examination last week. The cross-examination is under paragraph 4 of Mareva injunction. Mrs. Balroop is required to answer all questions relevant in any way to any matter referred to in paragraph 3 of that order. If the applicant wishes to examine any other respondent under the provisions of the Mareva injunction, he may serve a notice of examination, subject to the service provision set out below, and those respondents shall attend on Friday, November 21, 2014 at 10:00 o’clock a.m. for cross-examination and shall answer all questions relevant in any way to any matter referred to in paragraph 3 of the Mareva injunction dated October 24, 2014.
[11] In light of the time that had already passed, I continued the Mareva order and scheduled to return of the applicants’ motion to set aside the Mareva order to be heard at the same time as the return of the main application on December 29, 2014. I amended Justice Lederman’s schedule accordingly.
[12] The Balroops delivered a notice of motion for leave to appeal. Upon attending for cross-examination on November 19, 2014 in accordance with the November 17, 2014 order, Mrs. Balroop gave the following evidence:
82 Q: Is it your position that you do not need to comply with Justice Myers’ order of October 24?
A: I have--
83 Q: Until the motion to determine whether or not it should be set aside has been heard?
A: Yes.
84 Q: That is your position?
A: That is our position
[13] When asked if she had provided a statement of her assets as required by paragraph 3 of the Mareva order she responded at question 109:
A: Until my motion is heard and until I’ve sought legal counsel then I will know what to do.
[14] The remainder of the cross-examination was an exercise in obfuscation by Mrs. Balroop. Accordingly, the plaintiff brought a motion for contempt which was first returnable November 28, 2014.
[15] At that time, the defendants appeared by counsel.[^1] The matter was adjourned to December 8, 2014 with the following endorsement:
[Counsel] apologized for his clients and gives their undertaking to comply with the Mareva order by: (a) producing sworn complete financial records of the respondents on December 2, 2014; and (b) attending for cross-examination on their finances on December 5/2014. This is a mandatory minimum compliance required.
[16] On December 2, 2014, each of the Balroop’s swore an affidavit containing brief summaries of their assets and liabilities. They provided no backup or supporting documentation.
[17] On December 5, 2014, Shakeel Balroop and Sham Balroop were cross-examined. Neither could account for the use of approximately $247,000 that is the subject matter of the lawsuit. They were shown bank statements that the applicant had obtained from their banks under the Mareva order. The bank statements showed movements of significant sums of money that they admitted they had performed, yet they had no backup documentation nor any independent recollection of why the transactions occurred, where the money went, etc.
[18] The motion for contempt came before me on December 8, 2014. It was adjourned on consent. The following is the endorsement that I made that day:
The motion for contempt is adjourned on consent on terms as per order signed. The respondents’ disclosure has yet to satisfy the terms as ordered. They must meet the words and spirit of the Mareva order by disclosing fully and completely exactly where the money received by 1309395 Ontario Ltd. was moved, spent or otherwise disbursed. The next hearing will deal with the merits of contempt. Order signed.
[19] A copy of the order dated December 8, 2014, that was signed, on consent, is attached as Appendix “A” to these reasons. As is apparent from paragraph 2 of the order, the respondents were ordered to provide an accounting for eight specific transactions. Moreover, the order describes the accounting to be provided and says that, “at a minimum, compliant accounts shall include” and goes on to describe effectively all relevant backup documentation.
[20] In addition, paragraph 7 of the consent order required the respondents to surrender their passports to their counsel by no later than 12 o’clock noon on December 9, 2014 and counsel was ordered not to release the passports except by further order of the court or on written consent of the applicant’s counsel.
[21] Satt Balroop and Sham Balroop were in court when the December 8, 2014 order was made. Their counsel consulted with them concerning the passport request made by the applicant. They consented. Thereafter, they failed to provide their passports to their counsel. Their excuse is that they did not understand what they had agreed upon and that they did not receive the final entered order until later. Neither is an excuse for ignoring the express terms ordered. Satt Balroop gave clear evidence before me on December 15, 2014 as to why he says he needs his passport and hence was not willing to comply with the order despite his consent.
[22] In purported compliance with the December 8 order, the respondents produced an unsworn affidavit of Shakeel Balroop. His unsworn assertions described some uses of funds including approximately $50,000 spent on travel to Israel, Las Vegas, New York, Germany, South Africa, Florida, British Columbia, Alberta, Jamaica and Hong Kong in 2013 and 2014. Apparently, Mrs. Balroop contracted cancer and had surgery in 2012 or early 2013. The Balroop’s determined to use the funds that they obtained from the court, at least partially, for family trips in light of Mrs. Balroop’s illness. Although Mrs. Balroop advised that she currently suffers from diabetes, there is no evidence before the court as to the status of her cancer now some two years after her surgery. However, it must be borne in mind that this motion is in relation to disclosure rather than the use of funds. It is for the merits of the return of the application to determine whether the Balroops had rights to use the funds that they obtained from the court in Belleville. With respect to disclosure, the unsworn affidavit of Shakeel Balroop fulfilled none of the description of minimum compliant accounts set out in paragraphs (b), (c), and (d) of paragraph 2 of the order of December 8, 2014.
[23] I heard the motion for contempt on December 15, 2014. At the outset of the hearing, the respondents’ lawyer advised the court that his retainer had been terminated by the respondents. He advised that he did not have the respondents’ passports and confirmed that the December 8 order, and the passport provision in particular, were made on consent.
[24] The applicant points to the following evidence of contempt:
the respondents failed to provide their passports to their counsel;
the respondents provided no receipts or documentation of any kind to evidence spending on their travel. During the hearing of the motion the respondents showed their passports to counsel for the applicant to establish various immigration stamps. They produced no documentation concerning their spending;
the respondents never provided sworn information required by paragraph 3 of the November 17 order;
Mrs. Balroop refused to answer all relevant questions on November 19 in breach of paragraphs 4 and 6 of the November 17 order;
the respondents failed to comply with paragraph 3 of the original Mareva injunction within the time required;
Sham Balroop and Shakeel Balroop frustrated the accounting ordered November 28, 2015 by feigning to have no memory under cross- examination on December 5, 2014;
the respondents have not produced “complete financial records” as required by the November 28, 2014 endorsement;
the respondents have failed to comply with the provisions of paragraph 2 of the December 8 order as to the minimum standards of accounting required of them.
the disclosure that has been made, such as it is, was only made at the last minute prior to the hearing of the content motion.
[25] The essence of the Balroops’ reasons for not disclosing documents is that in November, 2013, their house was broken into. At that time, they say, a chest was stolen that contained their records. Thereafter, they moved their remaining records to a property that they owned out of town that was a closed school. They say they stored their documents in the principal’s office. In April, 2014, three youths broke into the school and made a mess of it. Apparently, the respondents do not claim that the youths stole their business records.
[26] However, the school property was mortgaged to the applicant in one of a number of transactions among the parties. The applicant ultimately sold the school property under power of sale in early July, 2014. The respondents say that applicant or its purchaser disposed of all of the chattels that were on the premises including their business records. Thus, they lost their records for 2013 in December of last year and they lost any remaining records in early July of this year. However, there is no indication as to why they have not produced records on or after July of this year or made efforts to obtain records as ordered.
[27] On the witness stand on December 15, 2014, Shakeel Balroop and Sham Balroop both had a significantly better memories than they had during their prior cross examinations. Shakeel Balroop was able to discuss the $42,000 paid to the property known as 30-32 Dundas Street; $5,000 paid for property taxes on 134 Willow; $50,000 paid on travel; $24,000 paid to living expenses; $2,000 repaid to Anthony Romano; $3,000 repaid to Muriel Smith; $24,000 to repay loans borrowed for 265 Front Street; $5,500 for legals and to fix up property at 1766 Weston Road; $4,000 to board up the school property. He produced two certificates evidencing payments made to cancel tax sales. In all, he spoke of approximately $103,000 paid from the monies received from the Belleville court towards various properties in which the Balroops had interests. He admitted further that he knew where the money went prior to his cross-examination in which he denied such recollection. He only first attended at TD Bank to attempt to get bank records on Friday, December 12, 2014. He has yet to approach CIBC to obtain records for accounts there.
[28] At the end of his testimony, Shakeel Balroop made a heartfelt plea that he wished to fully account for all funds received, subject, of course, to their defence the main proceeding. He said they took the money to pay their debts and enjoy life while Mrs. Balroop remains with them.
[29] Mrs. Balroop testified as well. She identified transactions from her bank account that she could not identify during her cross-examination previously. When asked when she obtained her information, she responded, “I always knew”. She admitted that she had not sought any documentation concerning a loan that she took from Quintessential Credit Union. She advised that a $50,000 deposit in her bank account in March, 2014 was the proceeds of a loan from Quintessential Credit Union as opposed to being money taken from the court. She said the money flowed through another company maintained by the Balroops. She has not asked CIBC for the bank statements of that company. She identified a $50,000 disbursement from her account as having been paid to her husband, Satt to repay a loan from a Mr. Miracle that had been used to repay loans for living expenses.
[30] Mrs. Balroop complained that she was being tortured and threatened with jail in order to improve her memory.[^2] Mrs. Balroop complained that they were a law-abiding family and that she had never had so much as a speeding ticket. She complains that they feel entitled to have taken the money from the court without notifying the court that the applicant appeared to have a secured claim against the funds because the Balroops make claims against the applicant for improvident realization of another property.
[31] Mrs. Balroop could now recall a payment of $3,000 to RE/MAX in trust in an effort to “redeem” their triplex property. She says she has a letter from the agent proving it. Notably, the letter has not been produced.
[32] Finally, Satt Balroop gave evidence that he is in the lighting business although he has not yet earned any commissions for his efforts. He testified that he told the applicant that the Balroops took the money, have spent it, and are willing to make restitution. They were good business partners for 15 years until, the Balroops say, the applicant’s son became involved and impaired their relationships with tenants. Mr. Balroop says he is an undischarged bankrupt from a bankruptcy long ago in Alberta. He produced one document, a receipt from a company called Mohawk Imperial Sales signed by Mr. Andrew Miracle, confirming payment of $60,000 paid by Satt Balroop “in regards to the restaurant equipment”. The receipt records a further $15,000 outstanding. Under cross-examination, Mr. Balroop confirmed that he bought restaurant equipment with a value of $33,000 that is stored at their Dundas Street property. This was the first time that this asset was disclosed despite the affidavits sworn December 2, 2014 and another unsworn affidavit advanced by Mr. Balroop at the hearing on December 12, 2014 that was marked as Exhibit A. Under cross-examination concerning where funds went in relation to his house, Satt Balroop said, “you can have access to all these documents”. None was produced, however. His only effort to obtain documents as ordered was to obtain the one receipt from Mohawk.
[33] The elements of contempt of court were set out by the Court of Appeal in Bell ExpressVu Limited Partnership v. Torroni, [2009] 0J No. 356 as follows:
- The three constituent elements of the test for civil contempt were summarized by this court in Prescott-Russell Services for Children and Adults v. G(N) (2006), https://www.canlii.org/en/on/onca/doc/2006/2006canlii81792/2006canlii81792.html, 82 O.R. (3d) 686, at para https://www.canlii.org/en/on/onca/doc/2006/2006canlii81792/2006canlii81792.html#par27:
The criteria applicable to a contempt of court conclusion are settled law. A three prong test is required. First, the order that was breached must state clearly and unequivocally what should and should not be done. Secondly, the party who disobeys the order must do so deliberately and willfully. Third, the evidence must show contempt beyond a reasonable doubt. Any doubt must clearly be resolved in favor of the person or entity alleged to have breached the order.
[34] I noted in my oral reasons, ignorance of the law is no excuse. The orders set out above are clear and leave no room for doubt as to what was required. The Balroops were provided with multiple opportunities to comply with the orders. The December 8, 2014 order was made with their consent and is very specific and detailed. I have considered each of the items numbered 1 through 8 listed in paragraph 24 above, and am satisfied that in each case the order at issue was clear and unequivocal and that the listed parties intentionally failed to comply with the terms set out. Even if they are missing records, they nonetheless made no production of records for the period after the school was sold, apart from the three documents referred to above, nor did they make any serious attempts to obtain records as ordered.
[35] In closing argument, Shakeel Balroop couldn’t have been clearer. He said he knows that there is more that the Balroops can do to give clear-cut explanations of where the funds went. They intend to do so before the return of the main application. He said, “We know all the information is there and we just need to compile it better”. He said that they had documents, “spread all over the place” so they need counsel to help them. He understood that to this point they had just given small amounts of information.
[36] After finding each of the Balroops in contempt of court on December 12, 2014, the court set a return date for a scheduling hearing and advised the Balroops that they still had time in which to purge their contempt. The hearing of the main application and the Balroops’ motion to set aside the Mareva order is returnable December 29, 2014. If they wish to purge their contempt prior to sentencing, complying with all of the orders that have been made and doing so prior to the hearings on the 29th will be a very important demonstration of their sincerity.
[37] Order accordingly.
F.L. Myers, J.
DATE: December 18, 2014
[^1]: At the respondents’ request, the Mareva order was varied to allow them to pay $10,000 to retain counsel.
[^2]: The court did note during an earlier hearing that perhaps a couple of nights in jail might improve the Balroops’ memories. Without taking credit, the court notes a vast improvement did in fact occur during the hearing of the motion.