Court File and Parties

Newmarket Court File No.: FC-15-49325-00 Date: 20181010 Corrigenda: 20181011 Superior Court of Justice - Ontario

Re: Alberto Benarroch, Applicant And: Monique Abitbol, Respondent Carlos Abitbol, Respondent Sara Abitbol, Respondent Jacob Benarroch, Respondent Louis R. Montello, Respondent Las Princesas Corp., Respondent HPI Administrative Services LLC, Respondent Hercules Products Inc., Respondent Turnberry TS2 Corp., Respondent Miami Alone Properties Corp., Respondent Plasticos Hercules CA, Respondent Productos Hercules CA, Respondent Rafael Benarroch, Respondent

Before: The Honourable Madam Justice H. McGee

Counsel: S. Zucker, Counsel for the Applicant, not participating in this Motion J. Moldaver/L. Konkol, Counsels for the Respondent Monique Abitbol S. Dewart/T. Gleason, Counsels for Louis R. Montello and Las Princesas Corp.

Heard: September 21, 2018

Ruling on Rule 25(19)(d) Motion (text of original decision has been amended – change appended)

Introduction

[1] When Monique Abitbol answered Alberto Benarroch’s Application for Divorce in December of 2015, she had already obtained an ex-parte injunction prohibiting 12 named co-respondents from dealing with any property of any kind in any worldwide jurisdiction. The injunction was never contested and was subsequently used to secure a prohibition in the State of Florida against a key property in this determination, referred to as the “Golden Beach” property.

[2] The ex-parte injunction and Ms. Abitbol’s Answer, which includes a Claim by Respondent has since been served on her co-respondents with one significant omission: her former father-in-law, Jacob Benarroch. Two of the served co-respondents, Mr. Montello, Jacob Benarroch’s lawyer and Las Princesas, the corporation that owns the property have never filed an Answer to her Claim.

[3] On April 18, 2018 Ms. Abitbol obtained a final Order on Motion without Notice against the applicant and the two co-respondents in default. The final Order dismisses the financial claims of the applicant and requires him to make a partial equalization payment to her of 25 million dollars, and to pay costs of $721,975. Those terms have not been appealed and are not the subject matter of this motion.

[4] The April 18, 2018 final Order also disentitles the two co-respondents in default from further notice or participation, and permits Ms. Abitbol to proceed against them by way of uncontested trial. The Order declares that the two co-respondents are holding the Golden Beach property in trust for Alberto Benarroch. The property is owned by Las Princesas Corp. whose shares are wholly owned by another corporation, whose shares are owned [^1] by Jacob Benarroch, the co-respondent who has not been served.

[5] Pursuant to Rule 25(19)(d) of the Family Law Rules [^2] the two co-respondents: Louis Montello and Las Princesas Corp. now ask the court to set aside the terms within the final Order that prohibit their further participation, and to declare them to be holding the Golden Beach property in trust for Alberto Benarroch, by way of a constructive trust.

The Two Co-Respondents Seeking to Have the Final Order Changed

[6] Mr. Montello is a lawyer in private practice in Aventura, Florida. He acts for Jacob Benarroch, a wealthy citizen of Venezuela who is believed to be currently residing in Caracas, its largest city. Jacob Benarroch is the father of Alberto, and grandfather to the parties’ five children. Jacob has proven impossible to serve. Mr. Montello has asserted throughout that he has no instructions to accept service.

[7] Ms. Abitbol has never sought an Order for substituted service.

[8] Mr. Montello also serves as the agent for several corporations in which Jacob Benarroch has an interest, including a Florida company called Las Princesas Corp. Jacob is the sole officer and director of Las Princesas Corp. which is the registered owner of real property in Miami, Florida located at 296 South Parkway PW, Golden Beach, Florida, U.S.A., 33160. Las Princesas is a wholly owned subsidiary of a Panamanian corporation called Altamonte Group Holdings Corp whose shares are owned by Jacob.

[9] In her Claim by Respondent, Ms. Abitbol asserts that the Golden Beach property is beneficially owned by her former spouse, Alberto Benarroch. Before she served her Answer and Claim, Ms. Abitbol obtained an ex parte Mareva injunction from this court on November 26, 2015. The Order prevents the co-respondents from dealing in any manner with any worldwide property, in which they might have a direct or indirect legal or beneficial interest.

[10] That Order laid the foundation for Ms. Abitbol to secure the Golden Beach property through an Order of the Circuit Court for Miami-Dade County. It was obtained mid-way through Jacob’s demolition of the existing structure. To this day the property remains partially demolished and is uninhabitable.

Why Mr. Montello and Las Princesas Have Never Filed an Answer

[11] When Mr. Montello was personally served with the Answer and ex-parte Order, he did not initially recognize it as an originating process that required an Answer. He later did come to that appreciation, but nonetheless, continued to decline to file an Answer, lest he be deemed to attorn to our jurisdiction.

[12] Mr. Montello’s reason for immediately retaining Ontario counsel, Mr. Van Woudenberg of Gardner Roberts LLP in late 2015 was to contest the jurisdiction of the Ontario court.

[13] On January 6, 2016 Mr. Van Woudenberg emailed Ms. Abitbol’s counsel, Mr. Moldaver to advise that he expected to bring a motion to stay this proceeding on the basis that the court lacked jurisdiction. Mr. Van Woudenberg’s email of that date is prefatory and might have entirely passed without further mention, but for subsequent events. It reads:

I have been contacted by Louis Montello with respect to the world-wide freezing order against him. I will likely be bringing a motion to set aside the order on the basis of lack of jurisdiction and seeking a stay of the proceeding against Montello, a motion that can be brought without attorning to the jurisdiction of the Ontario court. Please keep me advised of any steps you are taking in the main action that might affect Montello.

[14] Mr. Van Woudenberg declined to accept service on behalf of Jacob Benarroch, and he emphasised his limited retainer at every opportunity. For example, in his letter of May 12, 2016, he wrote to counsels for Mr. Alberto Benarroch and Ms. Abitbol that he was retained “for the limited purpose of bringing a motion to set aside service outside Ontario against those defendants and a stay under section 106 of the Courts of Justice Act.”

[15] In the November 8, 2016 cover letter to the anticipated motion, Mr. Van Woudenberg advised that “[i]n the circumstances, our retainer is limited to bringing this motion and we do not have instructions to accept service of any materials unrelated to your client’s response to same.”

[16] The motion on jurisdiction was argued on March 29, 2017. Mr. Van Woudenberg was unsuccessful, and his motion for leave to appeal was dismissed on January 5, 2018. In a reserved decision released August 10, 2018 costs of the March 29, 2017 motion were awarded against Mr. Montello and Las Princesas in the amount of $46,222.08.

The Final Order of April 18, 2018

[17] After leave to appeal was dismissed, there was still no Answer from Mr. Montello and Las Princesas. Three months later Ms. Abitbol moved without further notice for a final Order dismissing Alberto Benarroch’s financial claims, [^3] an Order for a partial equalization payment [^4] and Orders against the two co-respondents.

[18] Her counsel, Mr. Moldaver did not provide any notice that he was moving for a final Order. Perhaps he took seriously Mr. Van Woudenberg’s repeated assertions of a limited retainer.

[19] Justice Sutherland reviewed the written materials and heard oral submissions over the course of a full day. With some adjustments, the final Orders sought by Ms. Abitbol were granted. Mr. Moldaver’s materials made no mention of Mr. Van Woudenberg’s involvement.

[20] Mr. Alberto Benarroch’s financial claims were dismissed and he was not permitted to participate in the Application further, but for claims of custody and access. He was ordered to make a partial equalization payment of $25 million dollars to Ms. Abitbol, and to pay her costs of $721,975.68.

[21] At paragraphs 3 and 4 of the final Order Mr. Montello and Las Princesas were disentitled to any further notice or participation in the proceeding. Ms. Abitbol was permitted to deal with the balance of her claims by uncontested trial.

[22] At paragraph 6 the court declared that Las Princesas and/or Mr. Montello, was, or continues to hold in trust for the Applicant, Alberto Benarroch, by way of a constructive trust, the property known as 296 South Parkway PW, Golden Beach, Florida, U.S.A., 33160; and that the property was acquired by Alberto Benarroch during the marriage.

[23] Mr. Montello and Las Princesas learned of Justice Sutherland’s April 18, 2018 final Order when a copy of the Order and the motion material was later served. It is not contested that they have since sought to change paragraphs 3, 4 and 6 of the final Order on a timely basis. LawPro counsel argues the Motion to Change on behalf of Mr. Van Woudenberg.

[24] I was advised during this motion that nothing to date has been paid by Mr. Alberto Benarroch, and that he is effectively judgment-proof. He has neither appealed the April 18, 2018 Order, nor sought a change.

Final Orders can be made Without Notice

[25] Rule 14(12) creates a presumption that motions are to be made on notice to affected parties. The requirement to provide notice prior to seeking an Order that will affect another party is consistent with the overarching principle of the Rules to deal with cases justly and in accordance with procedural fairness.

[26] However, when a responding party to a family law proceeding does not participate, the Rules permit the moving party to seek relief without further notice. Such is the case with a motion for final Orders without notice, more commonly referenced as a 23C, or motion for uncontested trial. In civil proceedings it is better known as a default judgment.

Setting Aside an Order made Without Notice: the Operation of Rule 25(19)(d)

[27] The Family Law Rules do not have a specific provision for setting aside Orders made without notice, but in Gray v. Gray, 2017 ONCA 100 [^5], the Ontario Court of Appeal settled the court’s authority to do so pursuant to Rule 25(19)(d).

CHANGING ORDER — FRAUD, MISTAKE, LACK OF NOTICE (19) The court may, on motion, change an order that, (a) was obtained by fraud; (b) contains a mistake; (c) needs to be changed to deal with a matter that was before the court but that it did not decide; (d) was made without notice; or (e) was made with notice, if an affected party was not present when the order was made because the notice was inadequate or the party was unable, for a reason satisfactory to the court, to be present. O. Reg. 151/08, s. 6.

SAME (20) Rule 14 applies with necessary changes to a motion to change a final order under subrule (19) and, for the purpose, clause 14 (6) (a) shall be read as if the reference to a temporary order were a reference to a final order. O. Reg. 151/08, s. 6; O. Reg. 142/14, s. 10.

[28] A strict reading of Rule 25(19)(d) suggests that family courts have a broad discretion to vary, suspend or discharge a final Order made without notice. Unlike its civil law counterpart in Rule 19 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 [^6], there is no administrative procedure in family law to note a respondent in default, no ability for a registrar to grant an Order on default, and importantly, no deemed admission of the truth of all allegations of fact found in the unanswered pleading.

[29] Rule 25(19)(d) is thus positioned away from the more structured approach taken within Rule 19 of the Rules of Civil Procedure and closer to the principled, flexible approach of Rule 2(2) of the Family Law Rules which states that “the primary objective of these rules is to enable the court to deal with cases justly.” The court may set aside the whole of the Order or only certain portions, may change the Order, correct it, or add to it.

[30] Dealing with a case justly is the starting point for the analysis in both Rule 25(10)(d) of the Family Law Rules; and Rule 19 of the Rules of Civil Procedure. Rule 19.03(1) and 19.08(1) each provide that “a default judgment may be set aside or varied by the court on such terms as are just.”

[31] As explained by the Ontario Court of Appeal in Mountain View Farms Ltd. v. McQueen, 2014 ONCA 194 [^7] justly dealing with a claim to set aside an order requires the court to consider the particular circumstances of each case in accordance with the following factors, none of which are individually determinative:

a. Whether the motion was brought promptly after learning about the judgment; b. Whether there is a plausible excuse or explanation for the defendant’s default in complying with the Rules; c. Whether the facts establish that the defendant has an arguable defence on the merits; d. The potential prejudge to the moving party should the motion be dismissed, and the potential prejudice to the respondent should the motion be allowed; and e. The effect of any order the court might make on the overall integrity of the administration of justice.

The Just Result for this Motion to Change a Final Order

[32] Much was made by LawPro counsel for Mr. Montello and Las Princesas of the final line tacked on to Mr. Van Woudenberg’s email of January 6, 2016: “[p]lease keep me advised of any steps you are taking in the main action that might affect Montello.” Counsel asks that I find Mr Moldaver’s failure to give notice of the April 18, 2018 motion to be a sufficient basis on which to set aside the final Order.

[33] A quick phone call or email to Mr. Van Woudenberg would certainly have been time well spent, and money well saved in this contentious litigation. But in the absence of any undertaking by Mr. Moldaver to keep Mr. Van Woudenberg apprised, and in the face of his tenaciously limited retainer, I do not find the January 6, 2016 email to be determinative. To determine a just result requires the more detailed consideration of the factors set out in Mountain View Farms Ltd.

[34] On the first factor, there is no dispute that this Motion to Change the final Order has been brought promptly. On the second, I acknowledge the detailed and forceful submissions of each counsel, and ultimately find that there is no compelling excuse or explanation for Mr. Montello and Las Princesas’ failure to file an Answer after the January 2018 dismissal of their leave to appeal the decision granting Ontario jurisdiction. It was not Mr. Moldaver’s duty to alert Mr. Montello and Las Princesas to the fact that their Answer had been due since January 16, 2016. Contesting jurisdiction does not effect a permanent stay of proceedings.

[35] I do give effect to the third factor and find that Mr. Montello and Las Princesas have an arguable defence on the merits, including a defence to the declaratory relief made within paragraph 6 of the final Order.

[36] Mr. Montello is a Florida lawyer retained by Ms. Abitbol’s former father-in-law. He has no ownership interest in, or control over the Golden Beach property which she pursues. There is no compelling evidence at this time that he acts in any manner but as an agent or personal attorney. A party to an action must be a litigant against whom Orders can be made. What Orders are sought against Mr. Montello that cannot be satisfied through a summons to witness?

[37] Las Princesas is a corporation whose shares are owned by another corporation, whose shares are owned by Ms. Abitbol’s former father-in-law. A declaration that the Golden Beach property is beneficially owned by Alberto Benarroch in the face of legal ownership by Las Princesas would require a complex set of findings. Ms. Abitbol’s case presumes that real property is the subject matter of the proposed trust, and not the shares of the corporation. An appropriate remedy for a trust claim may not be proprietary. Can a trust be asserted against a corporation without serving the owner of its shares?

[38] What is the nature of the trust? At its best, Ms. Abitbol’s evidence is that she and her former spouse visited the property prior to its purchase at which time Alberto told her that he was purchasing it for their family, and that he planned to raze it and build a new house. She does not assert a resulting trust, that is, that Alberto tendered the purchase money for property placed in another’s name. The basis for the constructive trust is unclear, and made more uncertain by the defended record now before me, which was not available to Justice Sutherland.

[39] Can a litigant assert a trust on behalf of an opposing party? Alberto’s evidence is that there is no trust, and that his father purchased the property as an investment. Again, with the benefit of a fuller record than that before Justice Sutherland, I can see that his assertion is corroborated by certain subsequent events. Ms. Abitbol does not dispute that Jacob Benarroch has carried all the costs of the Golden Beach property, including its maintenance (taxes and insurance) and the partial demolition.

[40] I also give effect to the fourth and fifth consideration. The injunction against the Golden Beach property was obtained through an ex parte motion, as was the declaratory Order of April 18, 2018. The former was never contested in fear of acceding jurisdiction. There has been no determination of Ms. Abitbol’s constructive trust claim on a defended record.

[41] To deny the participation of the co-respondents, and to allow declaratory relief that transfers ownership of a significant asset to an opposing party [^8] from a corporation whose shares are controlled by a non-party is highly prejudicial to the co-respondents, and carries no prejudice for Ms. Abitbol that cannot be compensated by costs. Her counsel’s animated assertions that she cannot afford to litigate further, that is, to reply to their defence on the merits is not an available basis upon which to deny their participation.

[42] It would not be in keeping with the overall integrity of the administration of justice to allow such expansive ex-parte declaratory relief to stand, or to deprive Mr. Montello and Las Princesas of the ability to pursue a defence on the merits. This is a situation of disproportionate prejudice to the co-respondents. A balanced consideration requires that greater weight be placed on the last three factors in these circumstances.

[43] Order to go setting aside paragraphs 3, 4 and 6 of the April 18, 2018 final Order on terms to be determined. Those terms will at a minimum include the payment of the costs Order of August 10, 2018, the payment of costs of this motion, [^9] and an expedited timetable for pleadings and the trial of this Application.

Submissions for Additional Terms

[44] Neither counsel made submissions on proposed terms to set aside paragraphs 3, 4 and 6. Further submissions are invited on any terms additional to the above, including if it cannot be agreed, a timetable for an expedited proceeding. Unless otherwise agreed, Ms. Abitbol’s submissions are due October 22, Mr. Benarroch’s are due November 2 and Reply (if necessary) is due by November 9, 2018. Costs submissions will be invited upon the determination, or agreement of the additional terms.

Justice H. McGee Date: October 10, 2018

AMENDMENT Paragraph 44 has been amended to read that: “Mr. Benarroch’s are due November 2” not “Ms. Abitbol’s.”

Footnotes

[^1]: Ownership is not contested, but I do not have the documents necessary to check whether the company that owns Las Princesas is wholly owned, or simply controlled by Jacob Benarroch. [^2]: June 18, 2018 motion at Volume 15, Tab 1 of the Continuing record. All references in these reasons to Rules are to the Family Law Rules unless otherwise stated. [^3]: A decision of August 21, 2017 had prohibited Alberto from taking any further steps in this proceeding pending compliance with a payment term. He has never made the payment. He is in significant arrears of child and spousal support. He has failed to pay outstanding costs awards. [^4]: Partial, because Alberto has also failed to provide the disclosure necessary to a final determination. [^5]: 2017 ONCA 100 at para 33 [^6]: RRO 1990, Reg 194 [^7]: 2014 ONCA 194 [^8]: For purposes of execution? Does Mr. Benarroch have other creditors? What is the priority of creditors in the State of Florida? [^9]: If owed by Mr. Montello and Las Princesas, but if costs are determined as owing by Ms. Abitbol they are to be deducted from those ordered August 18, 2018.