COURT FILE NO.: CV-17-587367

DATE: 20180207

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N :

KYOUNG HWA LEE AND YOUNG SEA GUAK

Plaintiffs

– and –

MYOUNG JA CHANG A.K.A. MYOUNGJA CHANG A.K.A. MYOUNG-JA CHANG A.K.A. MYOUNG JA YOON A.K.A. MYOUNGJA YOON AND KWANG EUI CHANG A.K.A. KWANGEUI CHANG A.K.A. KWANG-EUI CHANG AND JI YOUNG CHANG A.K.A. JENNY CHANG A.K.A. JENNY JI YOUNG CHANG A.K.A. JI-YOUNG CHANG AND BO YOUNG CHANG A.K.A. BONNIE CHANG A.K.A. BONNIE BO YOUNG CHANG A.K.A. BO-YOUNG CHANG

Defendants

Sang Joon Bae

for the Plaintiffs

Robert Choi

for the Defendants Myoung Ja Chang, Ji Young Chang and Bo Young Chang

No one appearing for the Defendant Kwang Eui Chang

HEARD: January 29 and February 2, 2018

FAVREAU J.:

Introduction

[1] On January 18, 2018, the plaintiffs obtained an ex parte Mareva injunction against the respondents which was to expire on January 29, 2018.

[2] On January 29, 2018, I heard a motion on notice to the defendants to extend the Mareva injunction. Counsel appeared on behalf of three of the defendants, Myoung Ja Chang ("Ms. Chang"), Ji Young Chang ("Ji Young") and Bo Young Chang ("Bo Young"), advising that he would likely be retained by the fourth defendant Kwang Eui Chang ("Mr. Chang"). On the motion, he argued that the injunction as against two of the defendants, Ji Young and Bo Young, should not be continued as the evidence before the judge who originally made the order was insufficient, or, in the alternative, he sought release of funds for his clients to defend the litigation and for business and living expenses.

[3] At the conclusion of argument on the motion, I made an order continuing the injunction against all defendants until the release of my decision.

[4] The day following argument, the plaintiffs' counsel requested an opportunity to introduce additional evidence in support of the continuation of the injunction against Ji Young and Bo Young. In response to this request, I received additional materials and heard submissions on February 2, 2018.

[5] At the conclusion of the argument on February 2, 2018, I rejected the request to introduce additional evidence and terminated the injunction as against Bo Young and Ji Young with reasons to follow. These are my reasons.

Factual and procedural background

Events leading up to ex parte motion

[6] The litigation between the parties arises from a longstanding relationship between two families that appears to have gone awry.

[7] The plaintiffs live in the Republic of Korea ("Korea"). Kyoung Ha Lee ("Ms. Lee") and Young Sea Guak ("Mr. Guak") are married, and are the parents of Yoo Jin Guak ("Yoo").

[8] The defendants Ms. Chang and Mr. Chang are married to each other but recently separated, and are the parents of the defendants Ji Young and and Bo Young.

[9] The plaintiffs met the defendants in 1998 in Korea when Mr. Chang started giving art lessons to Yoo. In 2000, the defendants moved to Canada, and Yoo moved with them to continue her art lessons and to learn English. Yoo lived with the Changs for a number of years.

[10] The plaintiffs claim that over the course of more than ten years, they lent Ms. Chang and Mr. Chang various amounts of money, and that they now owe the plaintiffs over $500,000.00. The affidavit evidence on the motion recounts circumstances under which loans for various amounts were made between 1999 and 2011. This includes a payment of $100,000 that was meant to assist Ms. Chang and Mr. Chang to buy their family home in Toronto at 206 Cummer Avenue (the "Cummer House"). Ms. Lee's evidence is that no interest was to be paid on the loan, but that Ms. Chang promised to repay the loan plus an amount that reflected the proportionate increase in the value of the property when the house was sold. Ms. Lee claims that there was a similar agreement with respect to a $25,000 loan that was to go toward a town house real estate investment.

[11] The plaintiffs also claim that, in 2010, Ms. Lee provided her credit cards to Ms. Chang during a visit to Korea to assist them in doing some shopping. The plaintiffs claim that, sometime later, Ms. Chang and Bo Young impersonated Ms. Lee in calls to the credit card company for the purpose of getting a cash advance on the credit card. The cash advance was deposited into Ms. Lee's accounts, after which Ms. Lee agreed to lend Ms. Chang the money because Ms. Chang claimed to be in very difficult financial circumstances.

[12] The plaintiffs claim that Ms. Chang made many promises to repay all of the amounts borrowed from Ms. Lee, and that over time Ms. Chang represented that she and her family were experiencing financial difficulties but that the amounts owed would all be paid when she and her husband sold the Cummer House.

[13] The plaintiffs retained a lawyer in Ontario in January 2017 to investigate the status of the Cummer House. The investigation revealed that the Cummer House was sold on October 20, 2016 for $2.34 million.

[14] Ms. Lee then had a number of communications with Ms. Chang who indicated that she had not yet received the sale proceeds, but that she would repay the amounts owed when she received money from the sale of the house. Despite this assurance, no money was paid.

[15] The plaintiffs sent Ms. Chang and Mr. Chang a demand letter on August 21, 2017. Ms. Chang responded to the letter that same day via email, indicating that she intended to repay the loans.

[16] However, the loans were not repaid and Ms. Chang filed for bankruptcy in September 2017. In her bankruptcy documents, Ms. Chang only lists a debt of $8,000 to the plaintiffs.

[17] On January 18, 2018, the plaintiffs brought an ex parte application. The plaintiffs sought an order freezing all of the defendants' assets and requiring financial institutions where the defendants held accounts to deliver the defendants' banking records. The plaintiffs also sought to lift the stay of proceedings applicable to the claim against Ms. Chang pursuant to section 69 of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3. The motion was supported by affidavits sworn by Ms. Lee, Mr. Guak and Yoo. Most of the affidavit evidence is focused on interactions between Ms. Chang and Ms. Lee, and in particular the circumstances under which the various loans were made and promises made by Ms. Chang for repayment.

[18] By order made January 18, 2018, the judge who heard the ex parte motion granted the injunctive relief requested and lifted the stay against Ms. Chang thereby permitting this action to be brought against her (the "Order"). The endorsement is very brief stating "Upon review of the Application material and the submissions of counsel, Order (as revised) to issue as signed by me".

[19] Amongst other things, the Order freezes all of the defendants' assets, requires various financial institutions to provide financial records relevant to the defendants within 15 days of the Order, requires the defendants to provide a sworn statement "describing the nature, value, and location of their assets worldwide, whether in their own name or not and whether solely or jointly owned" within 15 days of the Order, and requires the defendants to submit to examinations under oath in respect of their financial information within 20 days of the Order. The order also provides that the injunction was to expire on January 29, 2018, unless it was extended by a further judicial order.

[20] On January 18, 2018, pursuant to the lifting of the stay of proceedings in respect of Ms. Chang, the plaintiffs issued a claim against the defendants. The claim alleges inter alia that Mr. Chang and Ms. Chang committed acts of fraud, fraudulent misrepresentation and breach of trust by failing to repay the loans following the sale of the Cummer Home, by actively concealing that the Cummer House had been sold, and by diverting the sale proceeds to Bo Young and Ji Young. The claim against Bo Young and Ji Young is for fraudulent conveyance, knowing receipt, knowing assistance and unjust enrichment in relation to the alleged receipt of the proceeds from the sale of the Cummer House.

Motion for continuation of Order

[21] Following the making of the Order, the plaintiffs notified the defendants of the Order and the litigation.

[22] After being served with the materials, Ms. Chang, Bo Young and Ji Young retained counsel. As mentioned above, Mr. Chang has not yet retained counsel, but counsel for the other defendants indicated on the motion that he expects to be retained by Mr. Chang.

[23] Counsel for the parties attended Civil Practice Court on January 26, 2018, to schedule the January 29, 2018 motion. At that time, on consent, an order was made providing for the release of $20,000 out of the frozen funds to the defendants.

[24] The motion to continue the injunction came before me on January 29, 2018. In support of the motion, the plaintiffs relied on the materials that were before the motion judge on the ex parte motion and an additional affidavit sworn by a law clerk advising that the plaintiffs had not yet received all of the bank records captured by the Order.

[25] Counsel for Ms. Chang, Bo Young and Ji Young indicated that he opposed the continuation of the Order against Bo Young and Ji Young on the basis that the materials before the motion judge were insufficient to support the injunctive relief that had been granted. Alternatively, the defendants sought the release of funds from the frozen assets for living expenses, business expenses and legal fees. The only material filed on behalf of these defendants was an affidavit sworn by Bo Young. Her affidavit does not address the merits of the claim against her and the other defendants. Rather, it contains a broad statement that she disagrees with many of the statements in the plaintiffs' affidavits, and focuses on the hardship caused by the Order. As part of the evidence of her financial needs, she indicates that she owns a convenience store in Alberta through a numbered company, and that the Order will prevent her from meeting business expenses in the immediate future.

[26] I have also been advised that the plaintiffs commenced parallel proceedings in Alberta, where the defendants, except for Mr. Chang, now reside.

Events following the hearing of the motion

[27] The day after the hearing of the motion, counsel for the plaintiffs requested a conference call for the purpose of filing additional evidence. I granted the request for the call and was advised that, as a result of the order requiring financial institutions to disclose the defendants' financial information, the plaintiffs now had additional evidence relevant to the financial transactions between the defendants that the plaintiffs wanted me to consider in reaching my decision on whether the Order should be continued.

[28] In response to this request, I set a schedule requiring the plaintiffs to serve their materials in support of the request to file the additional evidence by 4:00 pm on January 31, 2018, requiring the defendants to serve their materials by 4:00 pm on February 1, 2018, and scheduling a hearing for the afternoon of February 2, 2018. I also made an order partially lifting the Order to permit Bo Young to meet imminent business expenses and to allow the defendants to access a further $10,000 for legal fees.

[29] At the conclusion of the hearing on February 2, 2018, I made an order that dismissed the request to introduce additional evidence, continued the Order against Ms. Chang and Mr. Chang, and terminated the injunctive relief in the Order as against Bo Young and Ji Young, with reasons to follow.

Issues and analysis

[30] The issues to be decided on this motion are:

a. Whether to admit the additional financial evidence obtained by the plaintiffs as a result of the Order?

b. Whether the Order should be continued against Bo Young and Ji Young?

c. Whether further funds should be released from the frozen assets for living expenses, business expenses and legal fees?

New evidence

[31] The additional evidence the plaintiffs seek to have me consider are banking records which they claim demonstrate that Ms. Chang received the proceeds from the sale of the Cummer House in October 2016 and that she passed most of that money on to Bo Young that same month, after which Bo Young essentially emptied the account into which the money had been deposited.

[32] The plaintiffs' lawyer argued that I should consider this evidence because it was not available at the time the motion was originally argued before me on January 29, 2018, as the records were only delivered to his office on the morning of January 30, 2018. He relied on the decision in Soriano v. Laberakis, [2006] O.J. No. 565 (Div. Ct.), dealing with the circumstances in which it is appropriate for a court to admit fresh evidence.

[33] The defendants’ lawyer argued that I should not admit this additional evidence. He argued that, in deciding whether to continue the Order, I am only to have regard to the record that was originally before the motion judge when he granted the Order on an ex parte basis, and that it would be improper for me to consider any evidence obtained as a result of the Order.

[34] I agree that this situation is different from other circumstances in which a party seeks to put forward fresh evidence before a decision is issued. Even if the evidence had been available at the January 29th hearing, the fact that it was obtained as a result of the Order is what makes the evidence problematic.

[35] Rule 40.02(1) of the Rules of Civil Procedure provides that an order ex parte for interlocutory relief can only be granted for 10 days. Subsequently, unless the Court orders otherwise, Rule 40.02(2) provides that a motion to continue is to be brought on notice to the parties affected.

[36] Where an injunction was initially granted ex parte, the motion for continuation is to proceed as a hearing de novo. The rationale for considering the matter afresh was explained as follows in NAC Air LP v. Wasaya Airways Ltd., [2007] O.J. No. 4618 (Sup. Ct.), at paras. 16 and 17:

A judge who hears a motion to rescind or vary an ex parte injunction hears the matter de novo. As the Manitoba Court of Appeal explained in Pulse Microsystems Ltd. v. Safesoft Systems Inc. (1996) 1996 CanLII 7295 (MB CA), 134 D.L.R. (4th) 701, first principles require the hearing of opposing sides before the court adjudicates. The Latin term, audi alteram partem, captures this notion: hear the other side. This balance is upset when a court makes an ex parte order, as it must do from time to time.

The reviewing judge has the advantage of full argument by counsel for both sides. Counsel assist the court with the facts and the applicable law, so that the court can better arrive at a balanced decision.

[37] In Pricewaterhousecoopers LLP v. Phelps, 2010 ONSC 1061 (Sup. Ct.), this Court considered a similar situation where a plaintiff sought to rely on evidence obtained as a result of an ex parte Anton Piller order on the motion to continue the order. In that case, at para. 12, the Court explained that at the hearing to continue, the parties against whom injunctive relief was obtained ex parte had a choice between challenging the sufficiency of the record on which the injunction was originally obtained or advancing evidence in response to the plaintiff's evidence. If the defendants choose to only attack the sufficiency of original record, then it should not be open to the plaintiff to rely on evidence obtained through the injunction:

As the defendants herein are seeking to oppose the continuance of the Anton Piller order based on the record which existed before Tausendfreund J. on October 1, 2009, the plaintiff should not be allowed to bolster its claim for the continuance of the Anton Piller order or its claim that it was entitled to an Anton Piller order on October 1, 2009, by placing before the court additional evidence in the form of the evidence obtained by the supervising solicitor pursuant to the Anton Piller order dated October 1, 2009. Even if the defendants were moving to set aside the Anton Piller order pursuant to Rule 37.14 solely on the record that was before Tausendfreund J. on October 1, 2009 I would not allow the evidence seized by the supervising solicitor to be placed before the court. If the defendants do not place additional evidence before the court then the Anton Piller order should stand or fall on the record as it existed on October 1, 2009.

[38] In this case, at the hearing on January 29, 2018, the defendants' counsel made an argument that was in fact only directed at the record before the ex parte motion judge, arguing specifically that the record did not support the injunctive relief granted against Bo Young and Ji Young. As referred to above, the only evidence put forward by the defendants is an affidavit sworn by Bo Young wherein she indicates in broad strokes that she disagrees with much of the evidence put forward by the plaintiffs. But the bulk of the affidavit is directed at the financial hardship caused by the Order, and her need to access funds for legal fees, personal expenses and business expenses.

[39] Counsel for the plaintiffs sought to distinguish Pricewaterhousecoopers LLP v. Phelps, supra, on the basis that that case dealt with an Anton Piller order, whereas the Order in this case was for a Mareva injunction. In my view, this distinction is irrelevant. First, the commonality between the situation in that case and the situation in this case is the granting of extraordinary injunctive relief on an ex parte basis. The role of the reviewing judge in looking at whether the relief should continue does not change depending on whether we are dealing with a Mareva injunction or an Anton Piller order. In addition, in both cases, what is at issue is whether plaintiffs can rely on evidence obtained as a result of ex parte orders to bolster their case on the continuation motion. Whether the evidence was obtained as a result of Anton Pillar order or an order for production of documents by financial institutions in the context of a Mareva injunction is irrelevant.

[40] Relying on cases such as Ford v. Toronto (City), 2012 ONCJ 92 (OCJ) at para. 2, counsel for the plaintiffs also argues that because the motion to continue is a hearing de novo, both sides are entitled advance new evidence. In general, there is no doubt that a hearing de novo is not confined to the evidence that was before the original decision maker. However, it is evident from the decision in Pricewaterhousecoopers LLP v. Phelps, supra, that in the context of a motion to continue an order that was originally obtained ex parte, the responding party is entitled to test the record as it was before the judge who originally made the order. In such circumstances, if it turns out that there was insufficient evidence to support the order, the order is essentially void ab initio, making it improper to rely on evidence that was obtained as a result of the order.

[41] Therefore, in my view, based on the reasoning in Pricewaterhousecoopers LLP v. Phelps, supra, it would not be appropriate for me to consider the additional evidence obtained by the plaintiffs as a result of the Order. Accordingly, in deciding whether the Order should be continued against Bo Young and Ji Young, I have only considered the record that was before the motion judge who heard the matter ex parte.

Continuation of Order against Bo Young and Ji Young

[42] As indicated above, for the purposes of the motion before me, counsel for Ms Chang, Ji Young and Bo Young only sought to preclude the continuation of the injunction against Ji Young and Bo Young, while reserving the right to bring a motion to set aside the injunction against Ms. Chang and possibly Mr. Chang at a later date.

[43] In Furrow Systems International Ltd. v. Island Pools & Landscaping Ltd., 2014 ONSC 1428 (Sup. Ct.), this Court described the test for a Mareva injunction as follows:

A Mareva injunction is an extraordinary remedy intended to restrain a defendant from dissipating assets or conveying away his or her own property pending the court's determination in the proceedings. Numerous decisions of this court have made clear that there is a strong aversion to prejudgment execution which a Mareva injunction effectively gives to a successful plaintiff. A plaintiff seeking a Mareva injunction must satisfy the normal criteria for an injunction as well as the additional criteria for a Mareva injunction. In that regard, the moving party must establish the following:

1. A strong prima facia 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.

The party seeking a Mareva injunction must establish that the defendant's purpose is to remove his or her assets from the jurisdiction so as to avoid judgment. As well, the moving party must establish that he or she will suffer irreparable harm if the injunction is not granted, and that the balance of convenience favours the granting of the injunction (see Chittel v. Rothbart, (1982), 1982 CanLII 1956 (ON CA), 39 O.R. (2d) 513 (C.A.).

[44] In this case, counsel for Bo Young and Ji Young argues that the evidence put forward by the plaintiffs does not support the first and third requirements for a Mareva injunction. In particular, he argues that the plaintiffs' evidence does not demonstrate a strong prima facie case against Bo Young and Ji Young, and there is no evidence to support a finding that there is a serious risk that these two defendants will remove or dissipate assets before judgment.

[45] A strong prima facie case requires the plaintiffs to demonstrate that they are clearly right and almost certain to succeed at trial: see Quizno's Canada Restaurant Corp. v. 1450987 Ontario Corp., 2009 CanLII 20708 (ON SC), [2009] O.J. No. 1743 (S.C.J.), at para. 39.

[46] I agree with the defendants that, in this case, the evidence in support of any claims against Bo Young and Ji Young as it existed on the ex parte motion is very thin and certainly does not support a strong prima facie case.

[47] The claims against Bo Young and Ji Young set out in the statement of claim are for fraudulent conveyance, knowing receipt, knowing assistance and unjust enrichment. However, in the factum before the ex parte motion judge and on the motion before me, the plaintiffs only argued that they had a strong prima facie case against Bo Young and Ji Young based on the equitable remedies of knowing receipt and knowing assistance.

[48] The elements required to make out claims for this type of equitable relief are follows:

a. A claim for knowing assistance requires the plaintiffs to show:

i. An act of fraud or dishonesty on the part of the trustee;

ii. That the defendant had knowledge of the trustee’s dishonest conduct; and

iii. That the defendant assisted the trustee in perpetrating the dishonest conduct.

See Locking v. McCowan, 2016 ONCA 88 (C.A.), at para. 15;

b. A claim for knowing receipt requires that the plaintiffs show:

i. That the property was subject to a trust in favour of the plaintiff;

ii. That the property that the defendant received was taken by a third party from the plaintiffs in breach of trust; and

iii. That the defendant did not take the property bona fide for value without notice.

See Eaton v. HMS Financial Inc., 2010 ABQB 635 (Alta. Q.B.), at para. 25.

[49] Essentially, the allegations against Bo Young and Ji Young in the statement of claim are that, following the sale of the Cummer House, Ms. Chang and Mr. Chang diverted proceeds from the sale of the house to Bo Young and Ji Young that were owing to the plaintiffs and that these defendants participated in deceiving the plaintiffs into believing that the proceeds from the sale of the house had not yet been paid out.

[50] The statements in the affidavit sworn by Ms. Lee in support of these allegations are limited to the following bald speculative assertions:

I do verily believe that Jiyoung and Boyoung received from Kwangeui and Myoungja proceeds of sale of Cummer House and other funds borrowed by Kwangeui and Myoungja from Youngsea and me, and Jiyoung and Boyoung knew at all material times that the proceeds of sale and other money they received from their parents were rightfully belonging to Youngsea and me.

I do verily believe that Jiyoung and Boyoung received sale proceeds of Cummer House to defeat the rights of Youngsea and myself as creditors of their parents Kwangeui and Myoungja.

I do verily believe that Jiyoung and Boyoung actively participated in schemes of defrauding Youngsea and me by assisting Myoungja and Kwangeui to actively conceal the fact that Cummer House was sold, by receiving proceeds of sale of Cummer House as they knew the funds wholly or substantially belonged to Youngsea and me and also by telling my daughter Yoojin false information in the hopes they would deceive Youngsea and me by deceiving my daughter.

Based on the foregoing, I do verily believe that the respondents would hide and dissipate proceeds of sale of Cummer House, and I also do verily believe that they are in the process of transferring $500,000 out of the province of Ontario.

[51] The evidence referred to above is woefully insufficient to support the claims against Bo Young and Ji Young. They are conclusive speculative statements that cannot establish any of the elements required to found a claim for knowing assistance or knowing receipt. In Furrow Systems International, supra, at paras. 6 and 11, the motion Judge rejected similar speculative evidence:

In Mr. Dirracolo's affidavit he states:

I believe Jose Rego and his wife have sold their home but I do not know the closing date other than the fact that from the sign on the front lawn, the property has been sold. I believe that the defendants have diverted the trust funds and that they are attempting to liquidate all assets in the jurisdiction and remove them from the jurisdiction in order to avoid payment to the plaintiff, amongst others.

I am not satisfied on the evidence before me that the plaintiff has established a strong prima facia case as against Mr. and/or Mrs. Rego. The bald statement quoted above from Mr. Dirracolo's affidavit does not meet the strong prima facia requirements to obtain a mareva injunction.

[52] The only other evidence with respect to Ji Young before the ex parte motion judge is evidence about conversations between Ji Young and Yoo in November 2016, wherein Ji Young apparently told Yoo that the proceeds from the sale of the Cummer House had not yet been paid out. In her affidavit, Yoo speculates that Ji Young was lying at the time she made this statement:

In or about November 2016, I sent a text message to Jiyoung and asked her whether Cummer House was sold. Jiyoung sent me a reply and said that the closing was not completed. I deleted this text message and it is not in my possession any more.

I do verily believe that when I communicated with Jiyoung in November 2016 via text messages, she was fully aware of the fact that Cummer House was already sold in October 2016.

I do verily believe that Jiyoung knew at all times that her parents had contractual obligation to pay my parents a substantial part of proceeds of sale of Cummer House, and I do further verily believe that she was actively concealing the fact that Cummer House was already sold and the closing was completed on October 20, 2016, so that her parents could hide proceeds of sale of Cummer House to defeat the rights of my parents as her parents’ creditors.

[53] Setting aside the reliability of this evidence given that there is no print out of the text message, while it may be the case that Ji Young was not truthful in making the statement to Yoo in November 2016, on the record before the ex parte motion judge the plaintiffs had not put forward any evidence that at the time Ji Young made the statement she was in fact aware that the proceeds for the sale had been paid out to her parents.

[54] The plaintiffs also rely on evidence that Bo Young was involved in discussions with Ms. Lee's credit card companies to obtain the advance referred to above. This may demonstrate that Bo Young has been untruthful in the past. However, on the record before the ex parte motion judge, it does not show that she was actively involved in concealing the fact that the proceeds of sale had been paid to her mother.

[55] In any event, in my view, the biggest weakness in the plaintiffs' evidence against these two defendants on the ex parte motion is that there was in fact no evidence that the daughters received the proceeds of sale from the Cummer House. They may well have received such proceeds, but on the record before the judge on the ex parte motion, the evidence on this point was only speculative and did not make out a strong prima facie case.

[56] It appears that the applicants sought to taint the daughters with their mother's alleged misconduct. However, the fact that Ms. Chang may have done something improper with the proceeds of sale and then declared bankruptcy cannot be conduct imputed to the daughters without any evidence beyond speculation. The Court in Pricewaterhousecoopers LLP v. Phelps, supra, at para. 34, rejected this type of argument based on guilt by association:

Further, even if I accept that there was evidence of the dishonest character of the personal defendants that evidence cannot and should not result in an inference that the corporate defendants, because they have hired the individual defendants, are dishonest corporations which would deliberately destroy evidence. This type of reasoning "guilt by association" was rejected in Agracity, supra, at paras. 104-106, wherein Dufour J. stated:

The plaintiffs adduced little or no evidence of the honesty or dishonesty of the other defendants, relying instead upon a "guilt by association" analysis:

1. Ashley is dishonest and is the type of person who would destroy documents;

2. The other defendants are related to and/or doing business with Ashley; and

3. Therefore, the other defendants are dishonest and the types of individuals who would destroy documents.

This argument obviously fails, given my finding that the plaintiffs have not adduced sufficient proof that Ashley is dishonest or that he is the type to destroy documents. Further, I would not accept this flawed attempt at syllogistic reasoning in any event -- the major premise and minor premise do not lead logically to the conclusion. Further, a simplistic "guilt by association" argument cannot support an inference that the other defendants are dishonest.

[57] Even if the plaintiffs had a strong prima facie case against Bo Young and Ji Young, I am not satisfied that the plaintiffs' evidence supported a finding that there is a serious risk that these two defendants would remove or dissipate assets from Ontario before a judgment is rendered. The applicants had put forward absolutely no evidence other than the speculative statement made in Ms. Lee's affidavit above, to support a finding that there is a serious risk that Bo Young or Ji Young would move or dissipate their assets in order to avoid judgment.

[58] It is unclear from the record on the ex parte motion whether the daughters have any assets in Ontario as they both live in Alberta, where the applicants have commenced parallel proceedings. More importantly, in her affidavit, Bo Young states that through a corporation she is the owner of a convenience store in Alberta, which suggests a permanent residence, as well as ongoing assets and a revenue stream in that province. While I do not have the benefit of similar evidence from Ji Young, there is nevertheless no evidence that she is at risk of dissipating her assets to avoid judgment.

[59] Accordingly, in my view, the plaintiffs' record as it was on the ex parte motion does not support granting injunctive relief against Bo Young and Ji Young.

[60] In Pricewaterhousecoopers LLP v. Phelps, supra, paras. 43 to 46, the Court addressed concerns that may arise from the apparent inconsistencies between the findings of the judge hearing a motion for injunctive relief ex parte and the judge hearing the motion to continue:

First principals require that the judge reviewing an ex parte order must hear the matter de novo (Gulf Islands, supra; Pulse Microsystems, supra, NAC Air, supra). The principal of audi alteram partem requires that the court have the advantage of full argument from both sides; to do otherwise would visit an injustice upon the defendant.

In this matter, as in all ex parte motions, the judge of first instance did not have the benefit of hearing argument from both sides. So, if the moving party failed to make a balanced presentation of the facts and law, including informing the court of any facts or points of law that favour the other side, the judge is at a disadvantage. Relying on the disclosure and candour of counsel, he may grant an injunction on what is clearly, in hindsight, an insufficient foundation. I am not suggesting in any way that counsel appearing before Tausendfreund J. on October 1, 2009 attempted to mislead him. I am satisfied that counsel appearing before Tausendfreund J. mistakenly felt he had satisfied the requirements of the Celanese test.

However, as the judge who hears a motion to rescind or vary an ex parte injunction, I have the advantage of hearing the matter de novo with full argument from both sides. I repeat the words of Smith J.A. in Gulf Islands, at para. 22, as they are apposite:

In [ex parte] proceedings a Judge usually relies on counsel to a large extent, both as to the facts and the law; and to hold that when the inconclusive order is looked at again more carefully, the party at first absent is restricted so that he cannot raise all the points that he could have raised if heard in the first instance, is clearly an injustice.

I have had the opportunity, without any time constraints, to carefully review the material that was put before the judge of first instance and consider it afresh. Additionally, I have had the advantage of full argument by counsel for both parties.

[61] In my view, the same applies in this case. On the ex parte motion, the judge did have the benefit of the defendants’ submissions distinguishing the claims against Ms. Chang and Mr. Chang from those against Ji Young and Bo Young. I heard submissions from counsel for the defendants directed at this issue, and it is with the benefit of such arguments that the distinctions to be drawn between the defendants are evident.

Conclusion

[62] For the reasons set out above, at the conclusion of the hearing on February 2, 2018, I made the following order:

a. The plaintiffs' motion to adduce the affidavit of Seingkon Yoo sworn January 31, 2018 is denied;

b. The plaintiffs' motion to continue the Order is granted as it affects the defendants Myoung Ja Chang and Kwang Eui Chang, without the prejudice to these defendants' ability to bring a motion at a later date to set aside or vary the Order; and

c. The Order in so far as it grants injunctive relief against the defendants Ji Young Chang and Bo Young Chang is terminated. For greater certainty, paragraph 2 of the Order is amended to remove references to Boyoung and Juyoung. In addition, any references to the "respondents" in paragraphs 2, 3, 4, 5, 6, 7, 8 and 9 do not include Ji Young Chang and Bo Young Chang, and only refer to Myoung Ja Chang and Kwang Eui Chang.

[63] Given my determination that the injunction should not be continued against Bo Young and Ji Young, it is not necessary for me to consider whether any additional funds should be released to the defendants.

[64] I urge the parties to reach agreement on costs, failing which the defendants are to make submissions no longer than 3 pages within 10 days of the release of this decision, and the plaintiffs are to make responding submissions no longer than 3 pages within 10 days thereafter.

[65] If any issues in relation to the implementation of my order, the parties can contact my assistant to request a Case Conference.

FAVREAU J.

RELEASED: February 7, 2018