Canadian National Railway Company v. Holmes et al., 2015 ONSC 1475

COURT FILE NO.: CV-08-7670-00CL

DATE: 20150310

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Canadian National Railway Company, Plaintiff

AND:

Scott Paul Holmes,

Jennifer Lynn Parisien, also known as Jennifer Lynn Flynn, in her personal capacity and as the sole proprietor and operating as Efficient Construction,

Janice Shirley Maureen Holmes,

Murray Fussie,

Scott Albert Pole,

Ricky Sousa, in his personal capacity and operating as Trax Unlimited,

Michael Sousa, also known as Mike Sousa, in his personal capacity and operating as Trax Unlimited,

Julie Sousa,

2035113 Ontario Ltd.,

Complete Excavating Ltd.,

Monterey Consulting & Construction Ltd.,

2071438 Ontario Ltd., operating as Complete Trax,

2071442 Ontario Ltd.,

The Scott Holmes Living Trust,

The Jennifer Lynn Flynn Living Trust,

Greyslone Ltd.,

and Belview Management Ltd., Defendants

BEFORE: Mr. Justice T. McEwen

COUNSEL: Monique J. Jilesen and David Quayat, for the Plaintiff

Marc Munro, for the Defendants Scott Holmes, Jennifer Lynn Flynn, 2071442 Ontario Ltd., Complete Excavating Ltd., Monterey Consulting & Construction Ltd., The Scott Holmes Living Trust, 2035113 Ontario Ltd. and the Jennifer Lynn Flynn Living Trust.

HEARD: January 30, 2015

ENDORSEMENT

[1] The defendants Scott Holmes (“Holmes”), Jennifer Lynn Flynn (“Flynn”), 2035113 Ontario Ltd., Complete Excavating Ltd., Monterey Consulting & Construction Ltd., 2071442 Ontario Ltd., The Scott Holmes Living Trust, and The Jennifer Lynn Flynn Living Trust, (collectively “the moving defendants”) make a motion to me, as the case management judge, seeking three orders as follows:

i) an order varying the order of D. Brown J., (as he then was) dated August 15, 2011, so that their action does not have to proceed to trial with action CV-13-10158-00CL;

ii) an order setting aside the Mareva Order of Lederman J. dated August 8, 2008 which, amongst other things, prohibits the moving defendants from selling, removing, dissipating, alienating, transferring, aligning, encumbering or similarly dealing with their assets; and,

iii) alternatively, an order varying Lederman J.’s order to allow the moving defendants to sell assets and/or use certain assets as security for either a mortgage or line of credit in order to obtain the funds Holmes and Flynn are entitled to pursuant to the order of Lederman J. and the subsequent order of January 21, 2010, or to use funds from the sale of the assets to pursue business opportunities.

i) Varying the order of D. Brown J., dated August 15, 2011

[2] I am not prepared to vary this order at this time. The moving defendants argue that the plaintiff has failed to take steps in either action and the delay is prejudicing the moving defendants; accordingly, it should be able to move to trial in this action without the necessity of the consolidated action being tried at the same time.

[3] While there has unquestionably been delay, it has certainly not been one-sided, and cannot only be visited upon the plaintiff. The moving defendants have initiated a number of proceedings and motions which have resulted in delay. As set out by D. Brown J. there is good reason to have the actions consolidated and it is an understatement to say that the actions involve highly contentious issues which was the reason case management was ordered.

[4] As I advised the parties I am directing that they schedule a 9:30 appointment before me with all counsel, in both actions, so that this matter can be timetabled and proceed to trial as quickly as possible to end the seemingly, never-ending array of interlocutory proceedings.

ii) Motion to set aside the Marvea Order of Lederman J., dated August 8, 2008

[5] On a motion to vacate an injunction, the parties agree that the applicable authority is set out in the case of Jack Digital Productions Inc. v. Comex Foreign Exchange Inc. [2007] O.J. No. 3994 (SCJ), where the Court may consider a number of factors, including:

a) whether there has been inordinate delay in advancing the claims;

b) harm to the defendant;

c) the balance of convenience; and,

d) whether the present facts are substantially different from the facts upon which the original order was given.

[6] As further held by Himel J. in Jack Digital a motion to reopen, vary or dissolve an injunction also involves extraordinary relief. Accordingly, in my view, the moving defendants face a heavy burden.

[7] As set out by Molloy J. in Canadian Imperial Bank of Commerce v. Credit Valley Institute of Business and Technology 2003 CanLII 12916 (ON SC), [2003] O.J. No. 40, the test to be applied in varying a Mareva Order is as follows:

(i) Has the defendant established on the evidence that he has no other assets available to pay his expenses other than those frozen by the injunction?

(ii) If so, has the defendant shown on the evidence that there are assets caught by the injunction that are from a source other than the plaintiff, i.e. assets that are subject to a Mareva injunction, but not a proprietary claim?

(iii) The defendant is entitled to the use of non-proprietary assets frozen by the Mareva injunction to pay his reasonable living expenses, debts and legal costs. Those assets must be exhausted before the defendant is entitled to look to the assets subject to the proprietary claim.

(iv) If the defendant has met the previous three tests and still requires funds for legitimate living expenses and to fund his defence, the court must balance the competing interests of the plaintiff in not permitting the defendant to use the plaintiff’s money for his own purposes and of the defendant in ensuring that he has a proper opportunity to present his defence before assets in his name are removed from him without a trial. In weighing the interests of the parties, it is relevant for the court to consider the strength of the plaintiff’s case, as well as the extent to which the defendant has put forward an arguable case to rebut the plaintiff’s claim.

[8] Essentially, the moving defendants submit that the plaintiff has delayed in proceeding with the action. The Mareva Order is now over six years old. The moving defendants, therefore, submit there is virtually no reason for it anymore since there is very little money left, the Monitor/Receiver has been discharged, and there is now potential tax liability of over $1 million dollars which the moving defendants attribute, at least partially, to the Monitor/Receiver. They argue that in these circumstances the practical effect of continuing the Mareva Order would be a simple dissipation of the estate in circumstances where the moving defendants, particularly Holmes and Flynn, are suffering from extreme financial difficulty.

[9] In this regard, however, once again I accept the submissions of the plaintiff that the delay cannot be entirely visited upon the plaintiff given, amongst other things, the number of interlocutory motions brought by the moving defendants in this action as well as an application for a an order of Mandamus to investigate the CN police and difficulties that thereafter arose with respect to scheduling discoveries.

[10] I further agree with the plaintiffs that the factual underpinnings of the Mareva Order have not substantially changed based on the record that was placed before me.

[11] Also, insofar as harm and the balance of convenience are concerned I have difficulty, at this time, accepting Holmes’ explanation that he and Flynn are in significant financial difficulty. He has been provided contradictory and incomplete evidence with respect to his access to funds in the cross examinations conducted with respect to this motion. His evidence has been contradictory with respect to $720,000.00 worth of loans and/or gifts he has received either over a two-year or six-year period. He has refused to disclose the identity of the people who have made those loans citing security reasons which I find to be unconvincing. In any event, steps could have been made to disclose those identities to the Court in some way, shape or form. Instead, a simple refusal to provide the information was given at his cross examination. In my view, the refusal was given at the moving defendants’ peril, absent a reasonable explanation, which has not been provided.

[12] In addition to the $720,000.00, approximately $304,000.00 was disbursed in living expenses subsequent to Lederman J.’s order. I released a further $100,000.00 on July 9, 2014. The record also discloses that other funds have been available to Holmes and Flynn. Additionally, attempts were made to dispose of assets and forward monies to Caribbean accounts after the Monitor/Receiver was appointed and motions had to be brought to prevent this from occurring. Further, Flynn continues to own and manage the Dory Lane property in Florida, which is a rental property.

[13] In light of the above, it is my view that although the Mareva Order has been in place for several years it ought not to be vacated in circumstances where the delay can be substantially attributed to the moving defendants; the moving defendants have received large amounts of money; and, they will not provide meaningful information with respect to alleged loans/gifts.

iii) Motion to Vary Lederman J.’s Order

[14] I earlier dealt with a motion to vary the order of Lederman J. and released decisions on July 19, 2014 releasing $100,000.00 to the moving defendants. At that time I found it was reasonable to do so but that any further motion for other relief would require particulars of expenditures, employment, earnings, economic expectations, amongst other things.

[15] That information has not been provided for this motion. Similarly, as noted, the moving defendants have had access to the $720,000.00 either over a six-year or two-year period leading up to the summer of 2014. This is a significant amount of money and its origins and use have not been explained.

[16] In light of a failure to explain the origin and use of the $720,000.00 and to comply with my further order I am not inclined to make any substantial variance at this time.

[17] I am prepared, however, to allow the moving defendants to dispose of properties that they currently own under court supervision, and have the monies placed into court or their solicitor’s trust account so that monies can be freed up to deal with the potential appeal of the tax assessment that has been imposed by the CRA in excess of $1 million dollars which covers a period of time, in part, when the Monitor/Receiver was involved. This was discussed at the hearing of the motion. As case management judge I will have to discuss further with counsel exactly what properties will be sold, how the monies will be held, and how the appeal will proceed. In my view it is of benefit to both the plaintiff and the moving parties to determine whether the tax liability can be reduced or defeated altogether.

[18] I am also of the view that, subject to the moving defendants complying with my July 9, 2014 order and making reasonable disclosure with respect to the $720,000.00, living expenses and/or legal expenses may be paid to the moving defendants. This may be reasonable in light of the longstanding nature of the Mareva Order and the fact that not all living expenses were paid as per the terms of the order prior to it being varied to allow for the reduction or elimination of living expenses.

[19] Once again, as case management judge, the parties may attend before me at a further motion or a 9:30 appointment to review the further variance of the Mareva Order if the moving defendants wish to do so. I would, however, encourage them to try to resolve as many of the issues as possible such as the sale of properties and the funding of the tax appeal before further attendances take place.

Disposition

[20] The moving defendants’ motion to vacate the order of Lederman J. and the order of D. Brown J. is dismissed.

[21] The motion to vary the order of Lederman J. is allowed as per the above terms.

[22] Although success in the motion was mixed the plaintiff ensured greater success and I fix costs payable to the plaintiff in the amount of $20,000.00 for fees plus HST and disbursements of $5,011.80 plus HST payable in the cause.

Mr. Justice T. McEwen

Date: March 10, 2015