CITATION: Pavao v. Estate of Luis Pavao, 2017 ONSC 542
TORONTO COURT FILE NO.: FS-15-20544
DATE: 20170123
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Maria P. Pavao
Applicant
– and –
Estate Of Luis Pavao, Zenaide Ferreira, Jose Ferreira, Joao Pavao And Oswaldo Pavao (Beneficiaries of the Estate of the Respondent, Luis Pavao), and Victor Pavao and Michael Pavao (Beneficiaries of the Estate of the Respondent, Luis Pavao)
Respondents
Gisel Bettencourt, for the Applicant
Jessica Hewlett, for the Respondents, Zenaide Ferreira and Jose Ferreira
Andreas G. Seibert, for the Respondents, Victor Pavao and Michael Pavao
HEARD: January 19, 2017
REASONS FOR DECISION
CHARNEY J.:
Introduction
[1] On January 19, 2017 I heard the applicant Maria Pavao’s (the applicant) motion for an order to require the respondent Zenaide Ferreira (Ms. Ferreira) to pay into court the sum of $235,567.90. The applicant alleges that Ms. Ferreira has withdrawn, transferred or converted that amount from a joint bank account held by the applicant and her late husband Luis Pavao (Luis). The motion was brought on one week’s notice because the applicant was concerned that Ms. Ferreira would dispose of or otherwise dissipate assets if the motion were delayed.
[2] Ms. Hewlett appeared on behalf of Ms. Ferreira and requested an adjournment to provide Ms. Ferreira with an opportunity to respond to the allegations in the applicant’s motion. Ms. Hewlett advised that Ms. Ferreira’s regular counsel was not available to appear on the motion until April 18, 2017.
[3] I granted the adjournment to April 18, 2017 on the following terms:
Applicant’s motion is adjourned to April 18, 2017
Respondent will file any affidavit material in response to the motion by Feb. 6, 2017
Applicant (and Respondent) are given leave to cross-examine on opposing party’s affidavits. All cross-examinations should be conducted prior to April 1, 2017, unless parties agree otherwise
The Applicant will commence an action or application against the Respondent Zenaide Ferreira within 14 days of the date of this Order.
The Canadian Imperial Bank of Commerce shall disclose to the Applicant’s counsel the amounts in any accounts held by Zenaide Ferreira and/or Jose Ferreira, or accounts in which either of these parties have an interest, including:
i. CIBC Account # […]
ii. CIBC Account # […]
iii. CIBC Account # […]
The Canadian Imperial Bank of Commerce shall freeze until further order of the court the sum of $235,567.90 in the three accounts referred to in para. 5 above, or in any other account held by Zenaide Ferreira and/or Jose Ferreira.
The amount frozen pursuant to para. 6 of this Order will be reduced to the extent that the Respondent delivers to the Applicant’s lawyer, Gisel Bettencourt, any uncashed bank drafts from the Account of Mario Pavao and/or Luis Pavao, and Ms. Bettencourt confirms with the CIBC that such uncashed bank drafts will be held by Ms. Bettencourt until further order of the Court, unless the parties agree otherwise.
This Court also orders the relief requested in paragraph 2 and 4 of the Applicant’s Draft Order:
- The respondent Zenaide Ferreira, shall surrender to counsel for the Applicant, Gisel Bettencourt within fourteen (14) days any and all uncashed bank drafts, international money orders and other negotiable instruments in her possession, power, or control, which the said Respondent obtained by withdrawing, transferring or converting cash from any of the Applicant’s and/or Respondent, the late Luis Pavao’s bank accounts, including the following instrument obtained using cash from CIBC account […]:
Date
Amount
Deposited to/Purchased
Payable to
Dec. 8, 2015
$10,000
CIBC Bank Draft […]
Mia Pavao
- The Respondents, Zenaide Ferreira and Jose Ferreira, shall deliver to counsel for the Applicant, Gisel Bettencourt, within 20 days, all papers and property in their possession, power, or control belonging to the Applicant and the deceased Luis C. Pavao and the estate of Luis C. Pavao, including but not limited to all banking, investment, estate planning, business, tax, insurance, and legal files and documents and all powers of attorney and wills of Luis C. Pavao
[4] I advised counsel that I would provide more detailed written reasons the next week. These are those reasons.
Facts
[5] For many decades the Pavao family operated a profitable retail grocery business in Kensington Market. Ms. Ferreira acted as the bookkeeper for and the financial advisor to Luis and his business operations. The business generated significant cash revenues that the applicant alleges were taken to Ms. Ferreira’s home on a weekly basis. The cash from the business was used to purchase various properties, including a restaurant, a working farm and a vacant farm.
[6] In the summer of 2015 Luis’ health began to deteriorate. He was admitted to hospital in August 2015 and died there on December 14, 2015 at the age of 82.
[7] The applicant is now 81 years old and in poor health. She is illiterate and does not speak English.
[8] Shortly before the date of separation Luis sold the restaurant property that was owned solely by him. He deposited the proceeds of the sale - $311,892 - of the property into his bank account on August 7, 2015. While that bank account was held jointly with the applicant she did not know that it existed. She only discovered its existence after the Court issued an order on April 28, 2016 compelling the bank to disclose all accounts belonging to Luis (the disclosure order).
[9] The parties separated on September 1, 2015 after 61 years of marriage. The applicant commenced a Family Law Act R.S.O. 1990, c. F.3 (FLA) Application in November 2015 just prior to Luis’ death. The applicant sought, inter alia, support and an equalization of net family property. She also sought an accounting and disclosure from Ms. Ferreira in relation to any monies or properties she received on Luis’ behalf. In her answer to the claim for an accounting Ms. Ferreira denied that she received directly or indirectly any cash or proceeds belonging to the Pavaos with the exception of a cheque in the amount of $50,000 which was a gift from Luis for all the help that she gave him over the years.
[10] After Luis’ death the FLA proceeding was continued against the same parties by Notice of Application on March 4, 2016 under ss. 58, 62 and 63 the Succession Law Reform Act R.S.O. 1990, c. S.26 (SLRA). At that time the applicant did not know what had happened to the funds from the sale of the restaurant.
[11] Since obtaining the disclosure order the applicant has discovered other accounts in which Luis deposited funds from his business operations. The applicant discovered that Ms. Ferreira was also named as an account holder and received all of the bank statements at her home. Her signature appears on all cheques written on the account and her name and that of Luis Pavao are printed on the cheques.
[12] The applicant alleges that Ms. Ferreira has transferred to herself or to accounts held jointly with her husband Jose Ferreira (via money orders, bank drafts, cheques and transfers) virtually all of the proceeds from the sale of the restaurant. They allege that, unbeknownst to the applicant, Ms. Ferreira transferred a total of $235,567.90 from the Pavao’s joint bank account into her accounts. The applicant has produced the bank documents (cheques, bank drafts and international money orders) to support this allegation.
[13] This amount includes a $100,000 bank draft that was cashed by Ms. Ferreira as recently as December 9, 2016.
[14] The applicant has pointed to a number of other financial irregularities involving Ms. Ferreira. She alleges that Luis transferred property to Ms. Ferreira to shield assets from the applicant, and that the Ferreira’s have taken advantage of Luis’ death to keep properties and cash belonging to the estate and/or the applicant.
[15] The applicant brought this motion on January 11, 2017 seeking an order to require Ms. Ferreira to pay $235,567.90 into court within 14 days.
[16] As an alternative, or as a term to be imposed for granting the requested adjournment, the applicant seeks an order to freeze the assets claimed to belong to the applicant and the Estate of Luis Pavao, and, in particular, the three bank accounts held by Ms. Ferreira to which the evidence indicates the money was transferred.
Analysis
[17] Section 101 of the Courts of Justice Act authorizes the court it grant an “interlocutory injunction or mandatory order…when it appears to a judge of the court to be just or convenient to do so”. The relief sought by the applicant (to pay money into court) would be a mandatory order.
[18] In order to claim such a mandatory order on an interlocutory basis against Ms. Ferreira the applicant must satisfy the test for a Mareva injunction.
[19] In O2 Electronics Inc. v. Sualim, 2014 ONSC 5050 at para. 67, Perell J. summarized the law relating to Mareva injunctions as follows:
For a Mareva injunction, the moving party must establish: (1) a strong prima facie case; (2) that the defendant has assets in the jurisdiction; and (3) that there is a serious risk that the defendant will remove property or dissipate assets before the judgment. A Mareva injunction should be issued only if it is shown that the defendant’s purpose is to remove his or her assets from the jurisdiction to avoid judgment. The moving party must also establish that he or she would suffer irreparable harm if the injunction were not granted and that the balance of convenience favours granting the injunction. Absent unusual circumstances, the plaintiff must provide the undertaking as to damages normally required for any interlocutory injunction.
[20] I am satisfied that the applicant has met the test for a Mareva injunction in this case. The evidence presented by the applicant on this motion presents a strong prima facie case that Ms. Ferreira has converted funds from the applicant’s joint account or the proceeds of the sale of a property to which the applicant has a valid claim, to Ms. Ferreira’s own use. Ms. Ferreira’s past conduct establishes a circumstance of urgency such that there is a serious risk of removal, dissipation or hiding of such assets if the injunction is not made until this motion can be heard in three months. Now that Ms. Ferreira’s activities regarding these funds have been detected the funds are at risk.
[21] I am satisfied that the applicant, who is 81 years of age and in poor health, will suffer irreparable harm if the assets are dissipated before this motion can be heard with a full record. This is a circumstance where if the assets are dissipated they may not be recovered in the applicant’s lifetime. The sum in question can be traced directly to the Pavao’s joint bank account and/or the sale proceeds of the restaurant property. The freezing order does not interfere with Ms. Ferreira’s ability to conduct banking with respect to funds linked to her own income. Finally, while the freezing of Ms. Ferreira’s bank accounts for three months may be an inconvenience, no evidence was presented to suggest that Ms. Ferreira had any immediate need for these funds over the next few months. Indeed, her counsel advised that she was a woman of means who owned many properties in Toronto.
[22] At para. 37 of her factum the applicant has provided the required undertaking with respect to damages.
[23] In the case of Sibley & Associates LP v. Ross, 2011 ONSC 2951 Strathy J. (as he then was) reviewed the cases related to interim Mareva injunctions and allegations of fraud. He stated (at paras. 62 – 63):
[T]he law has sought to draw a fair balance between leaving the plaintiff with a "paper judgment" and the entitlement of the defendant to deal with his or her property until judgment has issued after a trial. In my respectful view, a plaintiff with a strong prima facie case of fraud should be in no more favoured position than, say, a plaintiff with a claim for libel, battery or spousal support. On the other hand, there may be circumstances of a particular fraud that give rise to a reasonable inference that the perpetrator will attempt to perfect the deception by making it impossible for the plaintiff to trace or recover the embezzled property. To this extent, it seems to me that cases of fraud may merit the special treatment they have received in the case law.
Rather than carve out an "exception" for fraud, however, it seems to me that in cases of fraud, as in any case, the Mareva requirement that there be risk of removal or dissipation can be established by inference, as opposed to direct evidence, and that inference can arise from the circumstances of the fraud itself, taken in the context of all the surrounding circumstances. It is not necessary to show that the defendant has bought an air ticket to Switzerland, has sold his house and has cleared out his bank accounts. It should be sufficient to show that all the circumstances, including the circumstances of the fraud itself, demonstrate a serious risk that the defendant will attempt to dissipate assets or put them beyond the reach of the plaintiff.
[24] In my opinion the prima facie evidence of fraud in this case is sufficiently strong that it gives rise to the inference that there is a real risk that Ms. Ferreira will attempt to dissipate or hide the $235,567.90 that can be traced directly from the Pavao’s assets. Ms. Ferreira’s failure to reveal the bank drafts and money orders traceable to the Pavao’s account or proceeds of sale in her Answer to the FLA Application is damning in this regard.
[25] Given the concerns raised in this proceeding I have also ordered that the bank disclose to the applicant the particulars of other accounts held by the respondents Mr. and Ms. Ferreira.
Procedural Issue
[26] The order granted on January 19, 2017 included a requirement that the applicant commence an action or application against Ms. Ferreira within 14 days of the date of the order. While Mr. and Ms. Ferreira were named as respondents in both the applicant’s FLA and SLRA Applications, it is apparent that the allegations and relief claimed in this Notice of Motion go well beyond the allegations and relief claimed in the originating process of those two proceedings.
[27] This motion was brought on an urgent basis. The rules do provide that in certain urgent situations a motion for an interlocutory order may be brought before a proceeding is actually commenced. “Motion” is defined in Rule 1.03 of the Rules of Civil Procedure to mean “a motion in a proceeding or an intended proceeding”. Pursuant to Rule 37.17 “in an urgent case, a motion may be made before the commencement of a proceeding on the moving party’s undertaking to commence the proceeding forthwith.” Similarly, Rule 40 provides that an order for an interlocutory injunction or mandatory order “may be obtained on motion to a judge by a party to a pending or intended proceeding.”
[28] The allegations of fraud in the Notice of Motion are quite serious, and I am concerned that, should this matter proceed further, the FLA and/or SLRA Applications are not the appropriate context in which to hear and decide such serious allegations against someone who is not a family member. Ms. Ferreira is entitled to proper notice of the allegations made against her and the specific relief claimed in a proceeding apart from this motion (see my decision in Dimartino v. Dimartino, 2016 ONSC 7461, at paras. 34 -42). Such an action might include a claim for damages against Ms. Ferreira, which is not claimed in either the FLA or SLRA actions. If the applicant intends to claim damages against Ms. Ferreira, Ms. Ferreira is entitled to notice and the right to mount a defence.
[29] Accordingly, the order granted on January 19, 2017 included a requirement that the applicant commence an action or application against Ms. Ferreira within 14 days of the date of the order. It is not my intention to generate a multiplicity of proceedings, and any such action or application may well be joined together with the existing FLA and SLRA proceedings. On the other hand, it may be more expeditious for this claim against Ms. Ferreira to proceed independently of the existing applications – I leave that issue to the parties and a future court to sort out if necessary.
Third Party Disclosure
[30] The applicant also sought an Order requiring the Canadian Imperial Bank of Commerce to disclose and produce to any party to these proceedings requesting disclosure or production any and all information and/or documentation pertaining to three specific CIBC bank accounts. I reserved my decision on that issue until today.
[31] An order to require a third party to provide an applicant with pre-action information where the applicant believes that it needs the third party’s assistance to determine the circumstances of an alleged wrong doing is sometimes referred to as a Norwich order. See: 1654776 Ontario Limited v. Stewart, 2013 ONCA 184 at para. 45. See also: Tetefsky v. General Motors Corp., 2010 ONSC 1675 at para. 33:
Under a Norwich Order, a plaintiff may obtain discovery from a person including a person against whom there is no cause of action in order to identify a wrongdoer and to obtain information about wrongdoing so that the plaintiff may bring proceedings
[32] In Isofoton S.A. v. Toronto Dominion Bank (2007), 2007 CanLII 14626 (ON SC), 85 OR (3d) 780; 282 DLR (4th) 325 the Superior Court decided that a Norwich order may be granted when a potential plaintiff believes it has been defrauded and seeks access to bank records to prove the fraud and to recover the wrongfully obtained property.
[33] In Bergmanis v. Diamond & Diamond, 2012 ONSC 5762 Perell J. summarized the requirements for a Norwich order as:
(1) the plaintiff must have a bona fide claim or potential claim against a wrongdoer; (2) the defendant to the Norwich proceeding must have a connection to the wrong beyond being a witness to it; (3) the defendant to the Norwich proceeding must be the only practical source of the needed information; (4) the interests of the party seeking the disclosure must be balanced against the interests of the defendant to the proceeding, including his or her interest in privacy and confidentiality, and any public interest that would justify non-disclosure; and (5) the interests of justice must favour obtaining the information.
[34] I have already determined that the applicant has presented a strong bona fide claim or potential claim against Ms. Ferreira. In the present case the bank is an innocently involved third party in receipt of allegedly fraudulent funds from the Pavao’s accounts or properties. This satisfies the second part of the Norwich test. The bank, as is often the case, is likely the only practical source of information that would enable the applicant to locate fraudulently transferred assets or funds. (Autopoietic Telemetric Solutions Limited v. John Loughlin, 2012 ONSC 2305 at para. 15).
[35] The respondent’s primary response is that the claim for disclosure goes too far back. Given the evidence that has so far been revealed with respect to Ms. Ferreira’s activities, the fact that she has had a fiduciary duty to the applicant for many years, and the length of time that she could exercise control over the Pavao’s finances, it is my view that the applicant’s need for this information overrides the Ferreira’s interest in privacy and confidentiality, and it is in the interest of justice that the applicant obtain this information.
[36] Accordingly, this Court makes the following additional order:
[37] The Canadian Imperial Bank of Commerce shall disclose and produce to any party to these proceedings requesting disclosure or production any and all information and/or documentation pertaining to the following accounts:
CIBC Account No.
Account Holder(s)
Zenaide Ferreira
Jose and Zenaide Ferreira
Jose and Zenaide Ferreira
Justice R.E. Charney
Released: January 23, 2017
CITATION: Pavao v. Estate of Luis Pavao, 2017 ONSC 542
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Maria P. Pavao
Applicant
– and –
Estate Of Luis Pavao, Zenaide Ferreira, Jose Ferreira, Joao Pavao And Oswaldo Pavao (Beneficiaries of the Estate of the Respondent, Luis Pavao), and Victor Pavao and Michael Pavao (Beneficiaries of the Estate of the Respondent, Luis Pavao)
Respondents
REASONS FOR DECISION
Justice R.E. Charney
Released: January 23, 2017