SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: CV-14-00003262-0000

DATE: 2015 09 11

RE: WESCOM SOLUTIONS INC.

– AND –

NADIA MINETTO AKA NADIA ARSENAULT, ERIC YIP AKA SAM YIP AKA SAMUEL YIP AKA SAMSON MAN CHUN YIP, GF INTERNATIONAL, GABRIEL KIT CHUN FUNG, PLUS ONE SOLUTIONS, JOHN DOE #1 AND JOHN DOE #2

BEFORE: EMERY J.

COUNSEL:
James Norton, for the Plaintiff

Brendan van Niejenhuis, for the Defendants

HEARD: August 11, 2015

ENDORSEMENT

[1] On July 9, 2014, the plaintiff Wescom Solutions Inc. (“Wescom”) discovered that its trusted employee, the defendant Nadia Minetto (“Minetto”) had perpetrated a fraud that caused Wescom a loss of at least $6,831,834.

[2] Wescom commenced this action shortly after detecting Minetto’s fraud. On July 17, 2014, Wescom obtained an order on an ex-parte basis from Justice Donohue of this court for, among other things, a Mareva injunction, an Anton Piller order and an order sealing the court file, at least with respect to evidence given or to be given with respect to Nadia Minetto.

[3] On July 30, 2014, Minetto was cross-examined on an affidavit of assets she was required to provide pursuant to Justice Donohue’s order.

[4] On October 24, 2014, Wescom and Minetto entered into a settlement agreement that contemplated the return of property and payment of funds by Minetto in exchange for certain forbearance by Wescom. Pursuant to the settlement agreement, Minetto consented to judgment in the form attached to the settlement agreement.

[5] On October 31, 2014, Wescom obtained the judgment for which Minetto had given consent in the amount of $6,831,834.17 plus pre-judgment interest.

[6] On December 16, 2014, Minetto was interviewed by counsel for Wescom pursuant to section 5 of the settlement agreement. This interview was conducted when Minetto was under oath and represented by counsel. Wescom takes the position that Minetto admitted during that interview that she had committed breaches of the settlement agreement that she understood to be material breaches. Alternatively, Wescom takes the position that the evidence given by Minetto at the interview should be considered admissions of fact or admissions that support inferences that Minetto had committed material breaches of the settlement agreement.

[7] On December 22, 2014, counsel for Wescom gave notice to Minetto’s lawyers that Wescom takes the position that it is no longer bound by the provisions of the settlement agreement with respect to not enforcing the judgment against Minetto’s residence.

[8] On March 24, 2015, Wescom obtained a writ of seizure and sale upon requisition from the court. The writ of seizure and sale was filed with the sheriff for the Regional Municipality of Peel the following day.

[9] On July 21, 2015, Wescom was advised by Minetto’s lawyers that she was taking the position that the enforcement of the judgment was “subject to a condition” and that leave to obtain a writ of seizure and sale was therefore required under Rule 60.07(2).

[10] Wescom therefore brings this motion based on the material breaches it alleges Minetto has committed. Wescom seeks an order directing Minetto to consent to judgment for the delivery of her residence to Wescom towards the judgment debt. Alternatively, Wescom seeks leave to obtain a writ of seizure and sale nunc pro tunc to proceed with the process of selling Minetto’s residence under the Rules of Civil Procedure. Wescom also seeks an order to unseal that part of Justice Donohue’s order relating to evidence given or to be given with respect to Minetto.

Background Information

[11] It is important to note from the outset that the following recitals are found at the beginning of the settlement agreement between the parties:

C. WSI asserts that it discovered Minetto’s fraudulent activities on July 14, 2014, and then commenced an action in the Ontario Superior Court of Justice seeking the recovery of the allegedly misappropriated funds, an accounting and a tracing of those funds and assets;

D. WSI and Minetto wish to fully and finally settle the action and any and all claims which are, or could reasonably have been, pleaded therein, and reach a final resolution of WSI’s claim, all subject to the terms of this Settlement Agreement and the judgements provided for under this Settlement Agreement.

[12] Wescom and Minetto entered the settlement agreement to allow Minetto to retain the residence to enable her to rebuild life for herself and her family if she fully complied with the terms of the settlement agreement.

[13] Paragraph 15 of the settlement agreement is integral to this motion. Paragraph 15 recognizes that Minetto’s residence has a net equity of $110,000 for the purposes of Minetto’s exercise of rights under the section of the settlement agreement titled “transfer of assets to the credit of the action” in which it is found. Minetto’s rights under the section, or termination of those rights are set out in paragraph 15 as follows:

15. With respect to the Residence the parties agree as follows:

(a) For the purpose of Minetto exercising her rights under this section, the Residence has net equity of $110,000.00 (the “Equity”);

(b) For a period of up to 90 days after the execution of this Agreement, Minetto shall be entitled to seek and obtain the largest available proportion of private loan, mortgage or other financing, from the Residence or otherwise, as can be secured on commercially reasonable terms, and to pay such amount, up to the full amount of the Equity, to WSI’s lawyers, in trust, as a credit to the judgment to which Minetto will consent under section 4 herein;

(c) If any of the following events occurs, then Minetto’s rights under this section are null and void, and she authorizes and irrevocably directs her lawyers to sign a consent to judgment declaring the Residence has been held under a constructive trust for the benefit of WIS, and transferring title in the Residence to WSI or as it directs in a form acceptable to counsel for WSI:

(i) Minetto advises WSI or its lawyers, at any time, that she will not seek or is unable to obtain such financing;

(ii) Within 90 days after the signing of this Agreement, Minetto has not made payment to WSI’s lawyers in trust in an amount equal to the Equity;

(iii) If there has been a Material Breach of this Agreement by Minetto, whether before or after signing this Agreement.

[14] The settlement agreement provided that Wescom would not take any steps of execution against the residence unless there was a material breach of the settlement agreement. This forbearance is found in paragraph 26, which reads as follows:

26. Provided that there is no Material Breach of this Agreement by Minetto (whether before or after this Agreement is signed), then the following shall apply:

(a) WSI shall not in any calendar year, enforce the Judgment against the Exempt Amount of the Money Received in that year;

(b) Take any steps to execute against the Residence;

(c) WSI agrees that any one vehicle designated by Minetto, with, in the case of a new vehicle, a MSRP value of up to $30,000 and in the case of a used vehicle a purchase price of up to $30,000, shall be exempt, provided however this exemption does not apply to the Mercedes and Audi vehicles which shall be transferred to WSI under this Agreement or the Judgment.

(d) The Plaintiff agrees to exempt from seizure and sale the household furniture and personal items listed by Minetto in Schedule B other than those listed in Schedule E.

If there is a Material Breach of this Agreement by Minetto at any time, whether before or after this Agreement is signed, WSI will no longer be bound by the terms of this section.

[15] In this way, the parties reached an accord that Wescom would not to execute or enforce the judgment against Minetto’s residence upon payment of up to $110,000 to Wescom, being the amount that would have otherwise been available through judicial sale under a writ of seizure and sale. However, Wescom agreed to this forbearance provided that there was no material breach of the settlement agreement by Minetto under paragraph 15 (c) or paragraph 26.

[16] The term material breach is a defined term in the settlement agreement. In section 1(k) material breach is defined as follows:

(k) “Material Breach” means and of the following acts, omissions or events:

(ii) any failure by Minetto to comply with her obligations to cooperate in section 5 and 6 of this Agreement, including any failure to be truthful and forthcoming with respect to all material facts and information;

(iii) any breach of the warranties or representations made by Minetto, as set out in section 2 of this Agreement and the related Schedules, whether before or after entering into this Agreement;

(iv) the failure of Minetto to provide the statutory declaration, including her annual tax return, and notices of assessment as required by sections 21 and 22;

(v) the failure of Minetto to make a payment of 50% of Money Received in excess of the Exempt Amount as provided by section 24.

[17] Paragraph 2 of the settlement agreement reads as follows:

2. Minetto makes the following representations and warranties:

(a) That she has disclosed all of her Assets, whether currently held by the ISS, by her or by anyone on her behalf, and all of those Assets are fully and accurately listed in Schedule B to this Agreement;

(b) That she did not breach any, and has fully complied with all, of the terms and provisions of the Donahue Order, except for those acts expressly excluded and as set out in Schedule C to this Agreement;

(c) That she has disclosed all gifts and/or loans she has given to anyone since May 2011, with a cumulative value per donee or loan recipient of more than $1,000.00, and all such gifts and loans are accurately and fully listed in Schedule D to this Agreement;

[18] It is also important to set out Schedule D, being the list of gifts and loans by Minetto since May 2011 described in paragraph 2(c) of the settlement agreement:

SCHEDULE D – Gifts and Loans by Minetto since May 2011

A $10,000 loan to Taima Zanetta, another WSI employee

A $10,000 loan to Nadia's sister Sonya Hamilton made and repaid in 2013.

A $60,000 loan to Fabio Ponte which was returned and given to ISS

[19] Paragraph 5 imposed obligations on Minetto to disclose information to Wescom as follows:

5. Subject to her rights under the Canada Evidence Act, the Ontario Evidence Act and the Canadian Charter of Rights and Freedoms, Minetto shall co-operate with WSI and provide assistance to it in the Action by:

(a) Furnishing reasonable information to WSI concerning the factual subject-matter of the Action;

(b) Furnishing reasonable information to WSI which is relevant to or may assist with a proper accounting and tracing from all the illegal purchases she made with the Amex Card;

(c) providing WSI’s lawyers, on request, all relevant documents she has in her possession, control or power relating to the subject matter of subsections (a) or (b);

(d) attending at the offices of WSI’s lawyers, on a date to be agreed upon but in any event within thirty (30) days of signing this Agreement, to be interviewed with respect to the subject matter of subsections (a) and (b) of this section, and signing a sworn statement confirming the information provided in that interview;

(e) If requested, attending to be examined under oath at the offices of WSI’s lawyers or the office of an examiner in downtown Toronto, with respect to the subject matter of subsections (a) and (b) of this section;

(f) Providing such further and other assistance which WSI’s lawyers may reasonably request in relation to WSI’s prosecution of the Action and tracing of assets.

In providing such co-operation, Minetto will be truthful and forthcoming with respect to all material facts, but shall be entitled to seek and obtain legal advice as to the extent of her obligations hereunder, provided she seeks such legal advice without delay. Furthermore, in providing such co-operation, Minetto shall at all times be deemed to have objected to every question asked and to have claimed all of the protections available under the Canada Evidence Act, the Ontario Evidence Act, and the Canadian Charter of Rights and Freedoms. WSI and WSI’s lawyers agree that they will treat any information provided by Minetto in this regard, whether by way of examination or otherwise, as subject to the implied undertaking rule and subject to the above-noted statutory protections.

[20] Paragraph 9 of the settlement agreement provides that Wescom shall keep all information it receives from Minetto confidential. However, this paragraph also provides that Wescom shall be entitled to use all information received from Minetto to prosecute the action (against any of the defendants) and to recover its assets through tracing.

[21] Paragraph 28 of the settlement agreement provides for the consequence should it be determined that Minetto has provided false information, failed to make material disclosure, has lied or has failed to cooperate or failed in her duties described within the settlement agreement as follows:

28. Should it be determined at some later date following the execution of these Minutes of Settlement that Minetto has provided false information, failed to make material disclosure, has lied, has failed to cooperate or failed in her duties described within these Minutes of Settlement, any provisions relating to exemptions from seizure shall be of deemed null and void.

[22] In summary, the parties agreed to exempt Minetto’s residence from execution under the judgment provided that all terms and Minetto’s obligations to provide disclosure and information were met. This was the deal.

[23] Wescom acknowledges that Minetto paid $110,000 under the provisions of the settlement agreement relating to the exemption of the residence from seizure or execution under paragraphs 15 and 26 of the agreement.

[24] Richard Guttman is the Vice President, as well as legal and general counsel for Wescom. Mr. Guttman swore the affidavit in support of the Plaintiff’s motion on July 31, 2015. That affidavit contains an updated report dated August 25, 2014 from KPMG Forensic Inc. that identifies the irregular American Express transactions made by Nadia Minetto using the Plaintiff’s credit card. Mr. Guttman’s affidavit attaches many other documents as exhibits in support of the motion, including excerpts from the interview of Nadia Minetto on December 16, 2014 conducted under paragraph 5 of the Settlement Agreement.

[25] Minetto filed no affidavit in response to the Plaintiff’s motion, or any transcript of an interview or examination of her under oath. Therefore, I consider the evidence given by Richard Guttman in his affidavit as uncontroverted. I also accept the evidence given under oath by Minetto at her interview on December 16, 2014 as the only evidence from her on the motion.

[26] Minetto perpetrated the fraud upon Wescom by using her corporate American Express credit card for her personal use. Between January 2011 and July 9, 2014, Minetto purchased approximately $6.2 million dollars in products from Apple Inc. which she then resold. According to the supporting affidavit of Richard Guttman, Minetto charged $2,151,643.00 to the corporate American Express card to purchase product from Apple Inc. in the last eight months before detection.

[27] Minetto has not provided any explanation or given an account of substantially all of the proceeds she received from the resale of Apple products she purchased by using the Plaintiff’s credit card. According to Wescom’s forensic accountant, Minetto would have received $3.7 million dollars from the resale of those Apple products based on a resale value of between 60% and 75%. Despite the requirement for an affidavit of assets under the Donohue J. order and the disclosure requirements under the settlement agreement, Minetto has only disclosed assets totalling $483,000.00.

[28] Minetto admits to having received between $700,000.00 to $812,000.00 between April and June 2014 from the resale of Apple products purchased with the Plaintiff’s credit card. From this revenue, Minetto has only accounted for $314,000.00 (which is included in the $483,000.00 in assets she has disclosed.) Minetto has offered no explanation to the Plaintiff to account for the more than $400,000.00 she received during those months. I note that April to June 2014 are the three months that immediately preceded Wescom’s detection of Minetto’s fraud.

[29] As of the date of Mr. Guttman’s affidavit, Wescom has recovered only $445,324.33 from Minetto.

Analysis

[30] Wescom seeks the following orders with respect to execution under the Settlement Agreement:

1. An Order directing Minetto’s lawyers to sign a consent to judgment declaring the residence at 7 Natureway Court in Bolton, Ontario as being held under a constructive trust for the benefit of Wescom, and transferring title to the residence to Wescom or as the court may direct in a form acceptable to counsel for Wescom;

2. In the alternative, granting judgment in the form of a declaratory order that the residence has been held by Minetto on a constructive trust for the benefit of Wescom and directing the register of land titles to amend its records to record Wescom as holding title to the property, subject to any existing registered mortgages; or

3. In the alternative, a declaratory order that the writ of seizure and sale dated March 24, 2015 is valid and enforceable in aid of execution to the judgment dated October 31, 2014, nunc pro tunc.

[31] For the reasons that follow, I grant leave for Wescom to requisition and for this court to issue the writ of seizure and sale, nunc pro tunc.

[32] I am not prepared to grant the order requested the Plaintiff to unseal that part of Justice Donohue’s order with respect to evidence given or to be given by Nadio Minetto because there was no evidence or reason given on the motion to do so.

Reason Why Leave Is Required

[33] Wescom interviewed Minetto under paragraph 5 of the settlement agreement on December 16, 2014. Wescom’s lawyers subsequently wrote to Stockwoods LLP who were then acting for Minetto, to advise that, as Minetto had admitted to material breaches in the settlement agreement, Wescom was no longer bound by the provisions of the settlement agreement to forbear on executing against her residence.

[34] On March 24, 2015, Wescom requisitioned a writ of seizure and sale. When this writ of seizure and sale was issued, Wescom filed it with the sheriff for the Regional Municipality of Peel the following day.

[35] On June 3, 2015, Mr. van Niejenhuis wrote to counsel for Wescom to ask if Wescom would consent to lift the writ to permit Ms., Minetto to re-finance the residence. Wescom declined that request given all of the circumstances.

[36] On July 13, 2015, counsel for Wescom was asked by counsel for Minetto whether Wescom had been granted leave of the court under rule 67.07(2). Counsel for Minetto took the position as of July 21, 2015 that enforcement of the judgment was “subject to a condition” and that leave of the court is required for a writ to issue. Wescom therefore brought this motion if leave is necessary.

[37] A judgment creditor may requisition the registrar of the court to issue a writ of seizure and sale as of right under Rule 60.07(1). However, leave is required to obtain a writ of seizure and sale from the registrar if more than six years have elapsed since the date of the order, or if enforcement of the order is subject to a condition.

[38] Minetto takes the position that Wescom is contractually estopped from enforcing the judgment because of the rights and obligations between the parties under the settlement agreement. It is Minetto’s position that compliance with the settlement agreement is a condition that precludes enforcement of the judgment. In her view, execution under the judgment is not available to Wescom unless she is found to have breached the settlement agreement according to its terms.

[39] Wescom takes the position that the enforcement of the judgment is not subject to a condition because no condition with respect to enforcement or execution appears in the judgment.

[40] I consider the enforcement of the judgment to be subject to a condition. I say this for two reasons. First, the lawyers for Wescom were authorized as agents for Minetto’s lawyers to sign a consent to the judgment attached as Schedule A to the settlement agreement immediately upon Minetto signing the settlement agreement. Therefore, the consent to judgment was given in conjunction with the signing of the settlement agreement to make the judgment subject to the settlement agreement and its terms.

[41] Second, the consent to judgment authorized under section 4 of the settlement agreement made the consent judgment contractual in nature. A consent order or judgment is considered at law to be a contract between the parties: Teitelbaum v. Dyson (2000), 7 C.P.C. (5th) 356.

[42] The enforcement of the judgment given by Minetto was therefore subject to a condition. That condition was the agreement between the parties that Wescom would not and could not execute upon the residence if Minetto did not breach the settlement agreement in a material way. Leave is therefore required for the court to issue a writ of seizure and sale under Rule 60.07(2).

The Condition is removed by Minetto’s breach

[43] The question of whether Wescom has satisfied this court that Minetto has breached the settlement agreement in a manner that removes the condition to permit Wescom to obtain a writ of seizure and sale turns on whether Minetto has committed a material breach of the settlement agreement.

[44] Wescom argues that it need only establish that Minetto has committed a material breach as that term is defined, and in any manner under the terms of the settlement agreement itself. Wescom relies upon the answers given by Minetto under oath at the interview on December 16, 2014 as evidence of one or more material breaches.

[45] Minetto argues that Wescom’s disbelief of any answer is not sufficient to show a material breach. Minetto further argues that any material breach must be shown as more than minimal or trifling to entitle Wescom to escape the protections provided to Minetto under the settlement agreement.

[46] It is important to remember basic principles that inform the role of the court when called upon to interpret a commercial agreement. The court is required to search for an interpretation “which, from the whole of the contract, would appear to promote or advance the true intent of the parties at the time of entry into the contract”: Consolidated Bathurst Export Ltd. v. Mutual Boiler and Machinery Insurance Co., [1980] 1.S.C.R 888 (S.C.C.) Parties must be held to the bargain they have struck: Belovich v. Steiner, 2008 ONCA 445. Surrounding circumstances must only be considered when it would be of assistance to understand and interpret the contractual language used by the parties: Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633.

[47] I do not find there to be an ambiguity between the definition of the term material breach under section 1(k), and section 28 of the settlement agreement. The defined term under section 1(k) relates to how that term is to be understood where it appears throughout the agreement, including at paragraph 26 of the settlement agreement that provides that as long as there is no material breach of this agreement by Minetto (whether before or after the agreement was signed), then Minetto and her assets are entitled to the protection of certain assets from execution. Paragraph 28 provides a general set of rights to Wescom to relieve it from any provisions in the settlement agreement relating to the exemption of assets from seizure for any overt failure to act under the settlement agreement. In my view, this distinction is evident from the language used in each paragraph, and the placement of those paragraphs in the structure of the settlement agreement when read as a whole.

[48] From the language used in the placement of paragraphs 1 (k) when read together with paragraph 15 and 26 on one hand, and paragraph 28 on the other, Wescom is given two sets of rights to guard against a material breach. The first is related to specific failures or breaches should they be made by Minetto under paragraphs 15 or 26, measured by the definition of “material breach” in paragraph 1(k). The definition of material breach in paragraph 1(k) incorporates by reference Minetto’s contractual obligation to make full and frank disclosure to Wescom under paragraph 2 of the agreement, and to give her ongoing cooperation to supply information under paragraph 5 that would assist with Wescom’s recovery of the judgment debt.

[49] The second applies if Minetto breaches any contractual or legal duty of honesty or good faith she owes during her performance of the settlement agreement, having regard to the general purposes of the settlement agreement expressed in recital paragraphs C and D. This duty of honesty is consistent with the general law applicable to contracting parties during the performance of the agreement.

[50] Wescom and Minetto owe a continuing and overarching duty of good faith to each other during the performance of the settlement agreement. This duty of good faith requires the parties when performing their duties and obligations under a contract with each other to do so honestly and reasonably: Bhasin v. Hrynew, 2014 SCC 71. Minetto owed contractual