AE Hospitality Ltd. v. George, 2015 ONSC 1785

ONTARIO

SUPERIOR COURT OF JUSTICE

CITATION: AE Hospitality Ltd. v. George, 2015 ONSC 1785

COURT FILE NO: CV-13-493425

DATE: 20150319

B E T W E E N:

AE Hospitality Ltd., Applause Catering Inc. and Encore Food With Elegance

Plaintiffs

• and -

Irene George, Anne Bolotin, Eugene George, The Canadian Imperial Bank of Commerce, Bank of Nova Scotia, Bank of Montreal, HSBC Bank Canada and TD Canada Trust

Defendants

Keith M. Landy & Shawn Tock,

for the Plaintiffs, AE Hospitality Ltd., Applause Catering Inc. and Encore Food With Elegance

David Altshuller & Lara Di Genova,

for the Defendants, Irene George, Anne Bolotin and Eugene George

HEARD: March 18, 2015

WHITAKER J.

1The plaintiffs seek to recover funds stolen from them by the defendant, Irene George, their former controller and bookkeeper.

2After receiving disclosure pursuant to an Order of Justice Chiapetta, the plaintiffs became aware of significant fraud operations carried out over a number of years. After receiving production, the plaintiffs obtained a Mareva injunction over the defendant’s assets. The Mareva injunction was set out in an order of Justice Corbett of January 20, 2014. The defendants now take the position that they have insufficient funds to pay various expenses, including their legal counsel. The plaintiffs seek to have the defendant’s motion dismissed.

3It is apparent that both parties have at different times been less than forthcoming in their disclosure and during various examinations.

4I also find that the defendants have not provided sufficient evidence concerning their financial circumstances which would allow me to come to any reliable conclusion as to whether funds paid into court are required in order to permit the defendants to proceed with this litigation.

5In the decision of Molloy J in Canadian Imperial Bank of Commerce v. Credit Valley Institute of Business and Technology, 2003 12916 (ON SC), the court was asked to determine if various injunction orders should be varied to allow the defendant to pay certain expenses, including legal fees. The Court of Appeal in Waxman v. Waxman, 2004 39040 (ON CA), adopts the reasoning of Justice Molloy in describing the applicable test:

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?

The answer to this is, no. It is unclear whether the defendants have any further assets, partly because they are acknowledged liars, and partly because the supporting material which might lead to this conclusion is absent.

ii. Has the defendant shown on the evidence that there are assets caught by the injunction that are from a source other than the plaintiff?

The answer is, no. The assets are currently paid into court from the sale of the defendant’s property.

iii. Is the defendant entitled to use non-proprietary assets frozen by the Mareva injunction to pay his 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.

The answer is, no. The defendant has the burden of demonstrating that these assets must be exhausted and that burden has not been met.

iv. If the defendant has met the previous test there must be a balancing of the competing interests of the plaintiff for not permitting the defendant to use the plaintiff’s money.

The answer here is, no. The threshold requirement of having met the previous three tests applies and that has not occurred here.

6To reiterate, the task is that set out in a decision of the Court of Appeal in Waxman, and affirmed in the Credit Valley decision, as well as the Royal Bank of Canada v. Welton, 2009 55107 (ON SC) of Justice Newbould.

7There are four parts to the test set out by Justice Molloy. The defendants have not satisfied me that it is able to meet any of the four sub-points in the test. The motion is dismissed.

8The parties shall make written submissions as to costs within 10 days, on less than two pages.