Court File and Parties
COURT FILE NO.: CV-18-135256 DATE: 20180829
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
ROMAN FEIGIN Plaintiff – and – AIDA L’VOVA, YURI KULINICH, ELENA L’VOVA, HOMELIFE VICTORY TEAM REALTY INC., FRONTDOOR DEVELOPMENTS INC. and BROOKFIELD RESIDENTIAL (ONTARIO) LIMITED Defendants
COUNSEL: M. Forget and J. Harrison, for the Plaintiff A. Lokshin, for the Defendant Aida L’vova Y. Lipetz, Agent for Yuri Kulinich June 19, 2018 Yuri Kulinich, Self-represented, June 21, 24 and 25, 2018
HEARD: June 19, 21, 24 and 25, 2018
REASONS FOR DECISION
EDWARDS J. :
Overview
[1] The Plaintiff sought an order before me on June 19, 2018, finding the Defendants Aida L’vova (Aida) and Yuri Kulinich (Yuri) (the L’vova Defendants) in contempt for breaching various court orders; specifically:
(a) the Order of Justice Charney dated April 5, 2018 in the nature of a Mareva injunction;
(b) the Order of Justice Charney dated April 17, 2018; the Order of Justice Di Luca dated May 10, 2018 requiring the Defendants to provide a full accounting, together with supporting backup documentation concerning the sale of a property referred to in these proceedings as the Thomas Cook Avenue property; and
(c) the Order of Justice Mulligan dated April 24, 2018 requiring Yuri to pay into court the sum of $700,000.
The Facts
[2] In September 2016, the Plaintiff agreed to lend Aida and her then husband Yuri the sum of $850,000, to be repaid by November 30, 2016. The monies were not repaid, and instead the L’vova Defendants persuaded the Plaintiff to use the funds to purchase a property in Vaughan, and subsequently the property known in these proceedings as the Thomas Cook Avenue property.
[3] Further funds were advanced by the Plaintiff to the L’vova Defendants, which were used for purported renovation costs and expenses associated with the properties totalling approximately $280,000.
[4] On February 1, 2018, the L’vova Defendants sold the Thomas Cook property for $1,660,000. The L’vova Defendants assured the Plaintiff that he would be reimbursed for the funds that he had loaned to the Defendants following the sale.
[5] Despite various assurances, by February 9, 2018 the L’vova Defendants failed to provide the funds as promised. In fact, on February 9, 2018 Aida transferred $700,000 to her son Martin Kulinich (Martin), who then at the direction of Aida disbursed those monies into various bank accounts in the Kingston area which he had opened on February 2, 2018.
[6] On February 9, 2018 the Plaintiff had discussions with Aida, who informed him that the L’vova Defendants were going to use the funds to close a transaction referred to as Lot 59 of the Oxford Hill at Heritage Estates Development located in Richmond Hill, Ontario (the Oxford Hill property). The Oxford Hill property was to close in March 2018, at which time the L’vova Defendants informed the Plaintiff that they would return his funds after the Oxford Hill property sold in April 2018.
[7] The L’vova Defendants refused the Plaintiff’s requests with respect to information and documentation concerning the Oxford Hill property. The Plaintiff, being concerned, attended at the Oxford Hill property and discovered that none of the homes in the development appeared completed.
[8] On April 5, 2018, Charney J. granted an exparte Mareva injunction restraining the L’vova Defendants from transferring, assigning, encumbering or dissipating their assets. Charney J. further ordered the L’vova Defendants to provide an accounting of the proceeds of sale forthwith. The Mareva injunction granted by Charney J. was extended by Order of Minden J. on April 12, 2018.
[9] On April 13, 2018, the Plaintiff received bank statements for one of Aida’s bank accounts that showed approximately $921,000 being deposited (The Proceeds) on the day the sale of the Thomas Cook Avenue property closed. The bank statements further indicated that Aida had moved in excess of $790,000 of the proceeds in the two weeks following the deposit.
[10] On April 16, 2018, Aida swore an affidavit which amongst other things stated:
I hereby do not oppose any of the requirements of the Order of Mr. Justice R.E. Charney dated April 5, 2018 regarding freezing of my assets and keep being extended until the final decision is made in this action.
[11] Aida further stated in her affidavit:
I hereby declare that I absolutely comply with and follow the Order of Mr. Justice R.E. Charney of the Superior Court of Justice dated April 5, 2018, and I do not have intention to violate it.
[12] There is a suggestion in the evidence before me that neither Aida nor Yuri speak English. The affidavit sworn by Aida before Charney J. makes no indication that it was a translation from the Russian language into English.
[13] During the course of the proceedings before Charney J. on April 17, 2018, a dialogue took place between Charney J. and Aida which I reproduce as follows:
THE COURT: I just need to know where the money went. AIDA L’VOVA: Okay, understand.
[14] Subsequent to the Order of Charney J. dated April 17, 2018, Aida sent a letter to Mr. Forget - counsel for the Plaintiff, which amongst other things states:
Please note that Mr. Justice R.E. Charney in his Order dated April 17, 2018 did not ordered (sic) that I must provide the Plaintiff with the bank accounts in which the proceeds of the sale of 2 Thomas Cook on February 1, 2018 were deposited AND transferred because he understood that it is not an easy job.
[15] The letter signed by Aida on April 20, 2018 is in the English language, and there is no indication that it was a translation.
[16] On the same date, April 20, 2018, Aida wrote directly to Charney J. and stated amongst other things:
I did not provide the Plaintiff with my bank account transfers as of yet due to the following reason:…
[17] The reasons provided by Aida in her letter to Charney J. seek to explain why she has not provided the details of the bank account transfers. None of the reasons provided in her letter of April 20, 2018, make reference to the transfer of the proceeds to her son. The letter to Charney J. signed by Aida again is in the English language, and there is no indication that it is a translation from Russian to English or vice versa.
[18] In his Order of April 17, 2018, Charney J. ordered that the L’vova Defendants provide the Plaintiff with the bank accounts into which the proceeds of sale of 2 Thomas Cook Avenue were deposited or transferred, by 4:00 p.m. on April 18, 2018. As Charney J. indicated in his dialogue with Aida referenced above, he wanted to know where the money went and Aida confirmed that she “understood”.
[19] Despite the fact that she knew that she had transferred the $700,000 to her son Martin, at no time during the proceedings before Charney J. did Aida advise the court as to where the funds actually were, despite the fact this clearly was within her knowledge.
[20] On April 18, 2018 Aida’s son Martin, at the direction of Aida transferred $185,000 of the monies that had been transferred to him, to his father Yuri. Further transfers took place at the direction of Aida to Martin on April 23 and 27, 2018. Martin has sworn an affidavit in these proceedings dated May 14, 2018, in which he states:
In or around the end of April 2018, when we were pre-approved for the mortgage, I issued by Aida L’vova’s request several bank cheques to Yuri Kulinich, and also gave him cash for a total of $700,000 which I received from Aida L’vova on February 9, 2018…I do not know where this money is now.
[21] On May 18, 2018 Yuri swore an affidavit in these proceedings, in which amongst other things he stated:
I firmly believe that the return of any money to the plaintiff is currently unfair and will result in Aida’s failure to fulfill (sic) the financial obligations to close deals with Brookfield Residential Inc. and Frontdoor Developments Inc., as the sole registered owner of their Brookfield Property and the Oxford Hill Property, and it will force her to declare bankruptcy.
I consider the plaintiff’s wishes cynical, and could not allow the onset of such consequences . Therefore, I persuaded Aida and Martin to give the above money to me. [Emphasis added.]
[22] Despite his earlier assertion suggesting that the return of the money to the Plaintiff would be “unfair”, Yuri then goes on in his affidavit to confirm he has received $700,000 from his son Martin, and then states:
I do not have this money now, because I paid them for my gambling debts, but I promise to return it to Aida as soon as Brookfield Property and the Oxford Hill Property are finally closed and all disbursements will be fairly divided between Aida and the Plaintiff who is her business partner-investor to those properties.
[23] In essence, if the evidence of Yuri was to be believed, the $700,000 has been used by him to pay off gambling debts.
[24] On May 24, 2018 this matter came before Mulligan J., who amongst other things ordered Yuri to pay $700,000 into court within 15 days. The monies have not been paid into court, hence the proceedings came before me seeking orders in the nature of a finding of contempt as against both Aida and Yuri.
[25] When the matter came before me on June 19, 2018, I advised the parties that I would defer any finding with respect to the issue of contempt until June 21, 2018. I also ordered Yuri and Aida to produce copies of all banking records that could evidence how the $700,000 was withdrawn from Martin’s bank account and deposited into Yuri’s bank account. I further ordered production of all banking records showing how the money was then taken out of Yuri’s bank account, and thereafter paid to “whoever”. I further ordered Yuri to produce his banking records and hard copies of any documents that demonstrate how the money was withdrawn and to whom the money was paid. Yuri was further ordered to provide the names and addresses of the persons to whom the monies were paid, and if there was evidence of actual gambling debts the evidence of those debts was to be provided, together with the names of the individuals and the addresses of those persons holding the gambling debt. I further ordered that the monies were to be paid into court by June 21, 2018 at 4:00 p.m.
[26] When the matter came back before me on June 21, 2018, the $700,000 still had not been paid into court. Yuri refused to provide the names of the individuals to whom he says he paid the monies to pay off outstanding gambling debts.
The Law of Civil Contempt
[27] Litigants who submit their disputes to the court in the civil context rarely find themselves in a situation where they face anything more than paying a monetary award of damages. But this action demonstrates how this court must, where the evidence warrants it, ensure that orders of the court are obeyed. If an order of the court is not obeyed, not only is one side of the litigation disadvantaged, but more importantly the rule of law is fundamentally undermined. Our system of justice is premised on the fundamental assumption that an order of the court will be obeyed, subject only to the right of a litigant to seek recourse in the Court of Appeal. In this case, none of the orders under review have been appealed.
[28] Rule 60.05 and 60.11 of the Rules of Civil Procedure directs the court in how to deal with a civil contempt motion. A judge dealing with a civil contempt motion may “make such an order as is just”. If there is a finding of contempt the court may order the contemnor imprisoned, pay a fine, or do or refrain from doing an act, pay costs, and comply with any other order that the presiding judge considers necessary. As a matter of fairness a contempt motion is, generally speaking, broken into two separate and distinct phases, i.e. the liability phase in which the court is called upon to determine if there is contempt, and the penalty phase which only occurs once there is proof beyond a reasonable doubt that contempt has been established.
[29] A contempt motion is a quasi-criminal proceeding within the context of a civil action, and requires the party seeking a finding of contempt to prove the case against the contemnor beyond a reasonable doubt. The law is clear that the moving party must prove beyond a reasonable doubt an intentional act or omission on the part of the alleged contemnor, that is an intentional act or omission that is a breach of a clear order of which the contemnor has notice (see Carey v. Laikin, 2015 SCC 17, at para. 38).
[30] Because the alleged contemnor faces the possibility of incarceration, there are strict procedural protections which are imbedded into a civil contempt motion. These include the following:
a) the right to be provided with particulars of the allegations of contempt; b) the right to be heard; c) the right to be presumed innocent until the particulars of contempt have been proven beyond a reasonable doubt; d) the right to make full answer and defence, which includes the right to counsel, the right to cross-examine witnesses and the right to call rebuttal evidence; and e) the right not to be compelled to give evidence (see Vale v. USWA Local 6500, et al., 2010 ONSC 3039).
Position of Aida L’vova
[31] Counsel for Aida argues that his client did not understand what Charney J. meant by an accounting. She understood that Charney J. had ordered an accounting as it relates to the relationship between the parties over a two year period. Counsel for Aida noted that his client was not represented by counsel when she appeared before Charney J., and the fact that Aida had retained a chartered accountant to compile a lengthy accounting of “all the ins and outs, all the goings on of their two year relationship”, was evidence of her good faith. Counsel for Aida further points to the fact that his client is not English speaking, but rather a Russian speaking person.
[32] It is further argued on behalf of Aida that the $700,000 has been taken by Yuri, and that she has been duped to have cheques made out to him that he ultimately cashed through a cheque cashing agency known as GTA Financial.
[33] Fundamentally, counsel for Aida argues that she did not understand the Order of Charney J., and that she did not understand that allowing Yuri to take the funds was a violation of the Order.
[34] As I indicated to counsel for Aida during the course of argument on June 21, 2018, I found this argument difficult to accept given the dialogue between Charney J. and Aida in which Charney J. stated “I just need to know where the money went”, to which Aida responded “Okay, understand”.
[35] Counsel for Aida further argues that in addition to her misunderstanding as to what she could or could not do as a result of the Order of Charney J., she did not understand that she was not permitted to deal with her assets nor transfer anything. As I indicated to counsel again during the course of our dialogue on June 21, 2018, I had great difficulty with this assertion given her own affidavit filed before Charney J. in which she stated:
I hereby declare that I absolutely comply with and follow the Order of Mr. Justice R.E. Charney of the Superior Court of Justice dated April 5, 2018, and I do not have intention (sic) to violate.
She further stated in her affidavit:
I hereby do not oppose any of the requirements of the Order of Mr. Justice R.E. Charney dated April 5, 2018 regarding freezing of my assets and keep being extended until the final decision is made in this action. [Emphasis added.]
[36] By her own words, Aida understood her assets were frozen as a result of the Order made by Charney J. on April 5. Any action she took after April 5 with respect to her assets was done with the full knowledge on Aida’s part that she was doing something contrary to assets being frozen.
The Contempt of Aida L’vova
[37] As it relates to both Aida and Yuri, I am satisfied that all of the procedural safeguards required by the law of civil contempt were afforded to them. The Plaintiff’s motion materials make clear the particulars of contempt alleged against them. They were both afforded the right to be heard and in the case of Aida she had counsel of her choice, while Yuri opted to represent himself after previously having been represented by counsel. They were both given a brief adjournment between the original return date of the contempt motion and the actual hearing of the motion so as to purge their contempt.
[38] In my view, the contempt of Aida was clear on its face when she attended before Charney J. On April 17, 2018, she knew full well that she had transferred $700,000 to her son Martin, and on the day after her attendance before Charney J. she gave directions to her son to transfer funds to Yuri. This was not a case of any misunderstanding on the part of Aida, but rather a clear and calculated decision on her part to place the proceeds of sale in the form of the $700,000 outside of the reach of the court Order. She directed that the money be transferred to Martin, and thereafter to Yuri.
[39] Even her own counsel during the course of argument acknowledged the breach of the Order of Charney J. dated April 17, 2018, when he stated at page 24 of the transcript of the proceedings:
MR. LOKSHIN: …So with respect to the Mareva there is one mere instance of breach. THE COURT: There is a bit more than a mere breach. MR. LOKSHIN: No, it’s not a mere breach but I mean there’s only one instance of her breaching, and that is the only evidence that you have, and it’s open for you to find is that she breached it by permitting her son to transfer the funds. She did not -- THE COURT: She didn’t permit, she directed. MR. LOKSHIN: There is no evidence -- I mean her son’s evidence is that she requested but her evidence is that she -- THE COURT: Are you telling me that her son would have done this without her direction? MR. LOKSHIN: With her (sic) father’s direction he would have. THE COURT: Let’s have a look at the son’s Affidavit. MR. LOKSHIN: No, he said “requested”. We can avoid reading it. He said “My mother requested” -- “At my mother’s request” it says. The express language, I agree, says “At my mother’s request”.
[40] As I indicated to counsel during the course of argument, it was my conclusion then - and remains my conclusion, that this court can draw no other inference other than Aida consciously and knowingly violated the Order of Charney J. by directing the money that she knew when she was in front of Charney J. was in her son’s possession, should then be transferred into Yuri’s possession. When I rhetorically posed the question how that could not be seen as a breach of an order and a contempt of court, her counsel stated:
I’m not arguing that it isn’t. I’m arguing that the only -- I want to delineate the two instances of contempt and those are that she allowed her son…
[41] Counsel for Aida suggests that when she gave the direction to her son to transfer the funds to Yuri, she did so as a result of “…ignorance of what the Order forbade her from doing…” Aida knew of the existence of the Order; and she knew about its contents. In my view, there is no dispute on the evidence that Aida knowingly breached the Order of Charney J. dated April 17, 2018, when she within 24 hours gave directions to her son to transfer the funds to Yuri. There will be a finding of contempt as against Aida, as it relates to those actions and those actions only.
Position of Yuri Kulinich
[42] As it relates to the actions of Yuri, he attended before me on June 21, 2018 without counsel. Yuri stated on the record “so I have not complied with it” (the Order of the court requiring him to pay the $700,000 into court, as per the Order of Mulligan J.).
I then engaged Yuri in the following discussion:
THE COURT: Do you intend to comply with it, sir? MR. KULINICH: I intend to do so. THE COURT: So what are you going to do, sir? MR. KULINICH: I intend to find money and to give the money to my ex-wife because it was she that I took the money from her, and about the rest of the money, let a Chartered Accountant find out --
[43] Further dialogue ensued between myself and Yuri, in which he essentially indicated that he would leave no stone unturned in order to pay the money into court. Yuri did not provide the details of the names and addresses of the people to whom he says he paid the $700,000 to discharge his so-called gambling debts. Evidence was provided to the court showing the cashing of various cheques at a cheque cashing business. This evidence demonstrates that Yuri incurred a not insubstantial cheque cashing charge in the thousands of dollars.
[44] There can be no doubt that Yuri is in contempt of the Order of Mulligan J. requiring him to pay the $700,000 into court within 15 days. He is also in contempt of my Order of June 19, 2018 made in his presence, when he was ordered to provide details of the names and addresses of the persons to whom he paid the $700,000 to discharge what he describes as gambling debts. No such disclosure was made by Yuri, and he refuses to provide such disclosure. When I asked him if he intended to disclose the names and addresses of the persons to whom he says he paid the $700,000, he categorically refused to do so.
The Evidence of Larisza Stern
[45] Prior to the commencement of argument on the penalty phase, counsel for Aida sought leave to call the evidence of Ms. Stern who had been served a subpoena pursuant to Rule 39.03 of the Rules of Civil Procedure. The request was opposed by Mr. Forget. I ruled that as this matter was a quasi-criminal matter the Defendants should be afforded every latitude, and I allowed Ms. Stern to testify.
[46] Ms. Stern is a 50% owner of GTA Financial, which she describes as a “cheque cashing” type business similar to a Money Mart. She testified that she had no prior relationship with either Aida or her husband, and that they came to visit her together some time just prior to April 18, 2018. The meeting lasted between 15 minutes to a half an hour. The purpose of the meeting was to explain how her business worked. She confirmed that they discussed the cashing of cheques and that this discussion took place in Russian. She further confirmed that Aida was well aware that bank drafts drawn on the financial institutions where her son had deposited the $700,000 would be converted into cash.
[47] Having heard the evidence of Ms. Stern who was called as a witness on behalf of Aida, I was left with no doubt that Aida was involved in the conversion of the $700,000 into cash. Mr. Lokshin argued that I should not accept Ms. Stern’s evidence as she had a poor recollection of the meeting with the L’vova Defendants, and in any case Aida disagreed with the evidence of Ms. Stern. As I pointed out to Mr. Lokshin, the difficulty I had with this argument was that he called Ms. Stern as his witness and I heard no actual evidence from Aida that contradicted Ms. Stern’s assertion that Aida was at the meeting with Yuri. I gave Mr. Lokshin the opportunity to call Aida as a witness to give sworn viva voce evidence that might support his assertion that she did not attend the meeting. As was her right, Aida could not to be compelled to testify; Aida chose not to testify. While Aida could not be compelled to testify, if she wanted the court to give any credence to the assertions of her counsel, those assertions required evidence to back them up.
[48] Ms. Stern gave her evidence in a somewhat confused manner, but on the essential aspect of her evidence that she participated in a meeting with Aida and Yuri, I have no hesitation in accepting this evidence. She was called as Aida’s witness, and she has no reason to lie about a meeting that at the time I suspect was fairly routine for her given the nature of her business.
[49] Mr. Lokshin, while suggesting that the evidence of Ms. Stern should not be accepted by the court, candidly agreed with me that if I did accept her evidence (as I have now done), that her evidence is “highly damaging” to Aida. I agree. To convert bank drafts into cash is not illegal. However, I can think of no logical reason why Aida and Yuri would convert $700,000 that was on deposit in four different financial institutions from bank drafts into cash, other than to make the tracing of those funds next to impossible. Aida asserts she was duped by her husband. If she was duped she was willfully blind, as she had total control over the $700,000 when she transferred the money from her bank into bank accounts controlled by her son. There is nothing in the record to suggest that her son Martin would have done anything with the money without his mother’s consent. She directed her son to have the $700,000 converted into bank drafts. She knew from her meeting with Ms. Stern and Yuri that the funds were going to be converted into cash.
[50] What makes Aida’s involvement in the conversion of the $700,000 from bank drafts into cash most damaging, is that her meeting with Ms. Stern took place before she attended before Charney J. on April 17, 2018. As I have previously noted, in his dialogue with Aida Charney J. said “I just need to know where the money went”, to which Aida confirmed she understood. It was well within her knowledge when she was before Charney J. that the money was in her son’s bank account, and that she fully intended to have the funds converted into cash using a cheque cashing business. Aida knew full well the court wanted to know where the money was, and she chose to ignore an order of this court to disclose the whereabouts of the money.
[51] By the time Ms. Stern testified, I had already made a finding that Aida was in contempt of the Order of Charney J. dated April 17, 2018. Ms. Stern’s testimony simply reinforced my earlier finding.
PENALTY
Position of the Plaintiff on Penalty
[52] Mr. Forget, on behalf of his client, asserts that the proper penalty for both L’vova Defendants is a period of incarceration in the range of 10 to 12 months. As it relates to Aida, Mr. Forget went through the court record to demonstrate that Aida was not the innocent victim she makes herself out to be. Rather, he argues that Ms. Stern’s evidence makes clear she was a willing participant in the conversion of the funds into cash, and that there can be no logical reason for such conversion other than to make the tracing of the funds impossible. Mr. Forget argues that it would have been a simple task for Aida to have advised Charney J. that the funds were in bank accounts she controlled through her son. Had she made that disclosure when Charney J. asked her where the funds were, those funds would have been immediately frozen by the Mareva order already in place, thus making the conversion to cash impossible.
[53] Mr. Forget argues that Aida knew exactly what she was doing, and that what she did was all done in an effort to have available the necessary funding to close the Oxford Hill property. In support of this argument Mr. Forget points to the affidavit of Mr. Williams, a mortgage broker, filed by Aida, that demonstrates what Aida needed to do to obtain a mortgage commitment to close the Oxford property. Mr. Forget notes that at no time was any of the information in Mr. Williams’ affidavit ever disclosed to Charney J.; Di Luca J.; or Mulligan J.
[54] As it relates to Yuri, Mr. Forget notes that Yuri still has not complied with the Order of Mulligan J. requiring him to pay the funds into court, nor has he complied with my Order requiring him to disclose the names and contact information of the persons to whom he says he paid the funds to discharge gambling debts. Mr. Forget infers from all of the evidence that both Aida and Yuri know exactly where the funds are, and that they refuse to pay the funds into court as they need the money to close the Oxford property.
Yuri’s Position on Penalty
[55] While Yuri is presently self-represented, he was represented by a lawyer up until his second appearance before me. His lawyer is now off the record. It would appear this lawyer gave legal advice to both Yuri and to Aida. This is confirmed in an email marked as Exhibit C to the affidavit of Zhanna Park, where the lawyer confirms that he has advised both of them of the ramifications of not complying with the Order of Charney J., which ramifications could include imprisonment.
[56] Yuri’s mother tongue is Russian. An interpreter was provided to translate the proceedings before me. I noticed during the proceedings that the interpreter was not translating from English to Russian. I stopped the proceedings to remind the interpreter that he was supposed to be translating for Yuri. I was advised by the interpreter that Yuri fully understood the English proceedings and did not need a translator.
[57] When it came time for Yuri to make his submissions to the court, he read from a prepared text in Russian that was translated by the interpreter. The essence of Yuri’s submissions was that his wife Aida was not guilty of anything, and that he had duped her into giving him the cash that he had used without her permission to pay off gambling debts as he was fearful for his life. He did confirm that Aida attended the meeting with Ms. Stern when the discussion took place about converting bank drafts to cash. Yuri apologized for his actions and stated he was hopeful of getting $700,000 from various sources, including friends, and that he would pay the money into court by mid-September 2018. Yuri completed his prepared text by advising the court that “I am willing to be punished for my contempt”.
Aida’s Position on Penalty
[58] I received both written and oral argument from counsel on behalf of Aida. The essence of those submissions is that Aida was duped by her husband into transferring the $700,000 to him, and that she had no knowledge that he was going to use the money to pay off gambling debts. It is also argued that she never intended to mislead the court about the whereabouts of the money when she was before Charney J., and that if she had understood the effect of the Mareva Order made by Charney J. she would never have acquiesced in the transfer of the money to Yuri.
[59] In both his written and oral submissions, Mr. Lokshin has made it clear to the court that his client is deeply apologetic for her actions, and that if she had understood the import of Charney J.’s Orders she would never have done what she did. Aida herself read from a prepared text in English which demonstrated, in my view, not only that Aida was apologetic for her actions, but that she also could communicate and understand English despite her protestations to the contrary.
[60] As it relates to her personal status, Mr. Lokshin notes there is evidence that Aida has been suffering from depression, anxiety, insomnia and crying spells, for which she has been treated by a doctor since April 13, 2018. In the letter appended to her affidavit of July 18, 2018 from Dr. Milad, it is further noted that Aida has a three year history of claustrophobia. Aida indicates in her affidavit that because of her claustrophobia she cannot use an elevator. Aida goes on in her affidavit to suggest that if she is incarcerated she will suffer “severe mental distress”.
[61] Mr. Lokshin acknowledged during the course of argument as it relates to penalty, that his client was in breach of the Order of Charney J. and that his client simply did not understand the impact of the Order. As I have already explained, I do not accept that argument. Having accepted the evidence of Ms. Stern, I am left with no doubt that Aida knew exactly what she was doing, and perhaps more importantly what she intended to do with the money when she appeared in front of Charney J. on April 17, 2018. She knowingly deceived the court by not advising Charney J. where the money was, when Charney J. told her all he wanted to know was where the money was. This was a simple question that could easily have been responded to by Aida. She could have told Charney J. the money was in four bank accounts in Kingston in the name of her son. Aida is not the unsophisticated person portrayed by her counsel. Aida was an active participant in a scheme designed to hide the whereabouts of the $700,000.
[62] Mr. Lokshin argues that the appropriate penalty is one that would allow Aida to serve her sentence under a form of house arrest, or at the worst would allow her to serve the sentence on weekends, thus allowing her to continue with her employment. The suggested house arrest could include a requirement that Aida be subject to electronic monitoring over a period of 30 to 60 days, or 90 days if served in a jail on weekends. Mr. Lokshin quite properly in his submissions notes the comments of the Court of Appeal in Re Chiang, 2009 ONCA 3 at para. 90, to the effect that “[c]ustodial sentences for civil contempt are rare. Lengthy custodial sentences are even rarer”, in support of his submission that this court should not impose a lengthy sentence of incarceration.
Analysis as it Relates to Penalty
[63] A Mareva injunction has been described as an exceptional and drastic remedy (see Sabourin and Sun Group of Companies v. Laiken, 2013 ONCA 530). The whole purpose of a Mareva injunction is to provide a remedy to an aggrieved party, where it can be established that a “rogue is flouting the civil processes of the court”. As Myers J. in Pronesti v. 1309395 Ontario Ltd., 2015 ONSC 1139 at para. 31 goes on to state “…[a] civil remedy that cannot be enforced provides scant justice to the applicant. The civil law must enforce its Mareva orders if justice is to be served in cases involving people whose consciences do not bind them to comply with the law...”
[64] The facts of this case clearly demonstrate that both Aida and Yuri knew exactly what they were doing. Aida was in attendance before Charney J. when she knew that the only real thing Charney J. wanted to know was the whereabouts of the $700,000. On the very day she was in attendance before Charney J., Aida knew where the funds were – in four bank accounts in Kingston controlled by her son, and that there was a plan afoot to convert those funds to bank drafts and thereafter to cash. Neither she nor Yuri had any intention of complying with the Order made by Charney J., nor any of the subsequent Orders made by Mulligan J. or myself.
[65] There is nothing inherently wrong with cash. But where funds are moved around various banking institutions and then converted into cash, particularly in the quantity found in this case, in the absence of some legitimate reason for so doing - and in the face of a Mareva injunction, the party operating in that fashion will likely find themselves facing the scrutiny of the court.
[66] In determining the appropriate penalty the sentencing court, when faced with the determination that there has been a finding of contempt, must take into account not only the fashioning of a punishment that may provide a remedy to the aggrieved party, but perhaps of equal if not greater importance take into account the desirability and necessity of ensuring compliance with court orders. This is particularly so when it comes to a Mareva order, which is intended to freeze the assets of a rogue. If the rogue is allowed to get away with flouting the order of the court, there will be little reason for the court to issue future Mareva orders. As such, as Myers J. stated in Pronesti at para. 33 “…[s]ome punishment is required for deterrence and to express condemnation, but compelling compliance with the underlying order is required to achieve civil justice”.
[67] This province and this country revolves around the rule of law. Without the rule of law some will argue this country could not survive in the form we know it today. It is precisely because of the rule of law that litigants are expected to obey court orders. Many may not agree with the orders that emanate from our courts, and if they disagree they have the right to appeal to a higher court. But once those orders are final, we as a society have accepted that the rule of law requires compliance with a lawful court order. As McLachlin J. (as she then was) observed in United Nurses of Alberta v. Alberta (Attorney General), [1992] 1 SCR 901 at para. 931 “[t]he rule of law is directly dependent on the ability of the courts to enforce their process and maintain their dignity and respect. To maintain their process and respect, courts since the 12th century have exercised the power to punish for contempt”.
[68] In determining the appropriate penalty in the face of a finding of civil contempt, the Ontario Court of Appeal in Chiang at para. 11 noted that “[i]n civil contempt, the court’s emphasis is less about punishment and more about coercion -- attempting to obtain compliance with the court’s order…” In determining the appropriate penalty in this case, my sentence will bear the imprint of coercion or as some may call it “the carrot and the stick”. Coercion may provide not only compliance with the orders made by this court, but also a remedy for the aggrieved Plaintiff. If the $700,000 gets paid into court, everyone is a winner.
[69] The penalty phase of a civil contempt hearing bears many similarities to the criminal law, and as such the principles of sentencing that are entrenched in the Criminal Code at s. 718.1 have found their way into many of the cases dealing with civil contempt. These principles include the following:
- The sentence must be proportionate to the gravity of the offence and the degree of responsibility of the offender - in this case the actions of both Aida and Yuri demonstrate, in my view, a high degree of moral and legal culpability in that their actions were deliberate and calculated to avoid the requirement to disclose to the court the whereabouts of the money.
- The sentence must be increased or decreased as the case may be to account for aggravating or mitigating factors surrounding the contempt or the contemnor - in this case I see few mitigating factors other than the apologies made by both Aida and Yuri, both of which I accept as sincere but made well after the “horse has left the barn”.
- A sentence should be similar to sentences imposed on similar contemnors, for similar contempts committed in similar circumstances (see s. 718 Criminal Code and Chiang at para. 24) - in this case I was provided with a number of cases from both sides that imposed various penalties. I have considered those cases in fashioning the penalty that follows.
- Sentences should be fashioned in such a way as to denounce the unlawful conduct of the contemnor; promote a sense of responsibility in the contemnor; and perhaps of even greater significance deter the contemnor and others from defying lawful court orders (see Chiang, at para. 24).
- In imposing sentence the court must consider a sanction that does not involve jail (see s. 718(2) of the Criminal Code). In this case, I have considered the submissions made on behalf of both Aida and Yuri that would amount to a sentence less than jail and involve a fine. I am not satisfied that a fine in this case would reflect the degree of culpability represented by their actions. To impose a fine would not adequately deter others from adopting a similar course of action when faced with a Mareva- type order.
[70] The sentence that I have crafted is one that is intended to reflect both the principles of deterrence and denunciation, but also one that has built into it an element of coercion as required by the Court of Appeal decision in Chiang. As such, adopting the words of Myers J. in Pronesti at para. 48 “… the following sentences represent first and light steps balancing all of these objectives”.
[71] I am therefore directing that two separate Form 60L Warrants of Committal issue against both Aida L’vova and Yuri Kulinich, in which the last paragraph shall read: YOU ARE ORDERED TO ARREST Aida L’vova and Yuri Kulinich and to deliver them to a correctional institution today, to be detained there for 2 days ending August 31, 2018.
[72] This matter will then return back before me during the week of September 17, 2018, on a date to be agreed upon by counsel. The purpose of the hearing on that date will be to determine if there has been compliance with the Order of Charney J., Mulligan J. and my Order. Specifically, I will be looking to determine if the $700,000 has been paid into court. If there has been no compliance with these orders of the court then a further Form 60L Warrant of Committal shall issue, the last paragraph of which shall read: YOU ARE ORDERED TO ARREST Aida L’vova and Yuri Kulinich and to deliver them to a correctional institution today, to be detained there for a period of 88 days, which sentence shall be served on an intermittent basis by way of weekend incarceration commencing at 7:00 p.m. on each Friday, terminating on each Sunday at 7:00 p.m., until the 88 day sentence has been completed. For each weekend the sentence is served, Aida L’vova and Yuri Kulinich shall be credited with 3 days against the sentence imposed. If the $700,000 is paid into court while this aspect of my Order is in effect, counsel for Aida and/or Yuri may move to vary this Order.
[73] If it is not clear from these Reasons, my intent is to give Aida and Yuri a clear understanding that this court will enforce orders made by this court, while at the same time giving them one last chance to purge their contempt and to comply with the orders of this court requiring that they pay into court the $700,000. In essence, this Order is also intended to coerce compliance with the Order of Charney J. and Mulligan J. Yuri has suggested the funds will be forthcoming by mid-September. We will see if this comes true when we reassemble in Newmarket during the week of September 17, 2018. If there is still non-compliance, then Aida and Yuri will know what they face; they will be incarcerated for 88 days, to be served on weekends - a sentence that will occupy, by my calculation, 30 weekends.
[74] As for the costs of these contempt proceedings, I hope that the parties will be able to work out a reasonable costs resolution that reflects the degree of success achieved by the parties reflected in these Reasons. If the parties cannot resolve the issue of costs, I will receive written submissions from counsel as follows: from the Plaintiff by September 15, 2018, limited to five pages; responding submissions from Aida and Yuri by September 30, 2018, also limited to five pages; and any reply submissions from the Plaintiff by October 7, 2018, limited to two pages. If I do not receive any written submissions from the Plaintiff by September 15, 2018, I will assume the issue of costs has been resolved between the parties.
Justice M.L. Edwards Released: August 29, 2018