COURT FILE NO.: 2039/16

DATE: 2019 09 03

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: ROBERT GLEGG, Plaintiff

AND:

2137691 ONTARIO LIMITED operating as GRAND ESTATE HOMES, LEONORA FALBO aka ELEONOR FALBO aka LEONORA BREWDA aka ELEONOR BREWDA, TRON ELECTRIC INC., GIUSEPPE CERASUOLO and DINO & CHRIS ELECTRIC LTD., Defendants

BEFORE: Ricchetti J.

COUNSEL: J. Zibarras and K. Genest, for the Plaintiff J. Berkow and A. Wygodny, for the Defendants 2137691 Ontario Limited o/a Grand Estate Homes and Falbo/Brewda N. Buhary, for the Defendants Tron Electric and Giuseppe-Cerasulo G. Judd, for the Defendants Dino and Chris Electric Ltd.

HEARD: September 3, 2019

ENDORSEMENT

MOTION

[1] Today’s attendance was a motion to determine whether this court should continue the Mareva Injunction Order issued on June 25, 2019 (which was adjourned on consent by court order on terms, on July 5, 2019, to permit materials and cross-examinations) (“Outstanding Orders”).

[2] Initially, the Plaintiff sought an adjournment to permit the examination of a witness from “Invidiata.” There were two issues which the Plaintiff sought to put additional evidence before the court.

[3] The first related to whether Ms. Falbo’s property had been listed for sale. The fact is that there was really no dispute that the subject property had been “listed” – the exclusive listing agreement in the motion material was proof of that. The real issue was whether the subject property had been listed in “MLS”. Ms. Falbo did not dispute this but explained the reason for the listing and the lack of an intention to actually sell the property. In any event, I am not persuaded that this is significant to the outcome of this motion.

[4] Secondly, the Plaintiff sought to examine Ms. Falbo on the issue of whether HST was to be paid on the subject property, if sold. On July 5, 2019, the court ordered that materials were to be filed and cross examinations were to occur on July 31, and Aug. 1, 2019. It turned out that the cross examinations took place on August 14, 2019. Answers to the undertaking by Ms. Falbo were delivered on August 20, 2019 in which Ms. Falbo stated that HST was not payable on the sale of the subject property. On August 26, 2019 the Plaintiff sought to cross examine Ms. Falbo on August 30, 2019, the last business day prior to the return of this motion. This cross examination never happened. However, Ms. Falbo was in court today. She was called to testify. She did so. She was cross-examined by the Plaintiff’s counsel. She could add nothing further than her husband, Mr. Brewda, who took care of the accounting of the subject property, would know about whether the HST was payable. Mr. Brewda was in court. He was called to testify. He was cross-examined by Plaintiff’s counsel. Essentially, he stated he believed that no HST would be payable based on his experience, but if wrong, it would calculated only on the profit and therefore, not be very much.

[5] Eventually, the Plaintiff’s counsel chose not to press the issue of the adjournment.

[6] Full submissions were heard as to whether the court should continue the Outstanding Orders.

[7] At the conclusion of the motion, I advised counsel that the Outstanding Orders would be dissolved with reasons to follow. These are those reasons.

BACKGROUND

[8] This action was commenced by the Plaintiff on July 7, 2016 for alleged deficient renovation work done to the Plaintiff’s home commencing in 2014. Essentially, the Plaintiff claims fraud and negligence by the parties with respect to electrical work done to his home, including the manner in which the work was carried out. The alleged cost to repair the deficient work is $475,000. The Plaintiff also claims $1,500,000 in punitive damages.

[9] 2137691 Ontario Limited (“213 Ont.”) and Ms. Falbo are the general contractor/ principal respectively for the renovations to the Plaintiff’s home.

[10] Tron Electric Inc. (“Tron”), Giuseppe Cerasuolo is one of the electrical contractors/ principal respectively who performed electrical work on the Plaintiff’s home.

[11] Dino & Chris Electric Ltd. is another electrical contractor who performed work on the Plaintiff’s home.

[12] Defences were filed by the Defendants. Cross-claims were also filed.

[13] The action proceeded. It is close to being set down for trial.

[14] On June 19, 2019, the Plaintiff sought an ex parte Mareva Injunction order. Essentially the Plaintiff stated:

a) The electrical work (and other work) had been done without obtaining any permits and without the necessary Electrical Safety Authority filings;

b) When the Town of Oakville made inquiries about the renovations to the Plaintiff’s home, the Plaintiff alleged that Ms. Falbo asked the Plaintiff to lie about the scope of the work. The Plaintiff refused;

c) In early 2016, the electrical certificate for the work was needed. On March 18, 2016, Ms. Falbo provided a “forged” ESA certificate from Tron for the electrical work done. Tron’s ESA certificate was a false certificate;

d) There were significant electrical deficiencies which would cost the Plaintiff “no less than $475,000” to correct; and

e) The Plaintiff believed that Ms. Falbo was attempting to sell her home to dissipate assets to avoid any judgment the Plaintiff might receive.

[15] The Plaintiff alleges that Ms. Falbo (and 213 Ont.) were participants in the fraud - the forged Tron ESA certificate. The evidence on this is “thin” at best and much more in the nature of speculation. Essentially, the Plaintiff submits that because Ms. Falbo knew the ESA certificate was required, had said earlier that she had a certificate and then produced the forged Tron ESA certificate, the Plaintiff concludes that Ms. Falbo participated in this fraud.

[16] The Plaintiff asserted that Ms. Falbo intended to “dissipate her assets and/or remove her assets from the jurisdiction.” In support of this assertion the Plaintiff provided the following evidence:

a) On June 8, 2019, a real estate agent, with whom the Plaintiff “believed” were potential buyers, showed Ms. Falbo’s home despite the fact that there was no “for sale” sign. A private listing was discovered by the Plaintiff. The Plaintiff read into this as a surreptitious attempt to sell Ms. Falbo’s home as a deliberate action by Ms. Falbo to show her home to prospective buyers on a date Ms. Falbo knew Mr. Glegg would not be home to avoid him knowing the home was for sale. This portion of the affidavit concluded that “I believe that Ms. Falbo is attempting to sell her property at 58 Bel Air Drive in an attempt to dissipate her assets to avoid a potential judgment against her……I believe there is a real risk that Ms. Falbo will remove the proceeds of the sale from this jurisdiction or from my reach in order to avoid payment of any judgement.”; and

b) Ms. Falbo allegedly owns, directly or indirectly, another property (which is registered in 213 Ont.’s name) which was also for sale but had large mortgages registered by Foremost Financial, a company which Ms. Falbo’s husband was a managing partner and vice president. The suggestion or implication was that these mortgages were placed to eliminate or reduce the equity in this other property.

[17] The June 25, 2019 an interim ex parte order, a Mareva injunction and CPL, was granted by this court. The motion was returnable before me on July 5, 2019.

[18] On July 5, 2019, the parties agreed to a timetable to hear the motion, including filing of additional materials, cross-examinations and a return date (and that the original order would remain in place subject to certain agreed upon changes).

[19] The responding materials were comprised of an affidavit of Ms. Falbo. The significant parts of the responding materials set out:

a) Ms. Falbo and her husband were both born and raised in Ontario, with children in school, and they have no intention of leaving this jurisdiction;

b) 213 Ont. has been in business building luxury homes for about 11 years and has significant assets;

c) There is substantial equity in Ms. Falbo’s home and the other home;

d) The mortgages registered to Foremost Financial were to secure monies paid for the construction costs;

e) The Bel Air property was included in a “showcase” of Ontario Lake waterfront homes. The date of the showing was selected by Inviadata as part of a large marketing program, entirely inconsistent with the suggestion by Mr. Glegg that it was done to avoid his scrutiny for the surreptitious disposal of assets. I must admit this is very compelling evidence entirely inconsistent with a fundamental part of Mr. Glegg’s original basis for obtaining the June 25, 2019 Order;

f) Contrary to Mr. Glegg’s assertion that Ms. Falbo did not obtain a building permit from the Town of Oakville, one was obtained (Permit No. 2015-2468). The only outstanding item was the electrical inspection /certificate;

g) Tron sent to Ms. Falbo an email on March 8, 2016 that the Plaintiff’s home had passed the electrical inspection and provided a certificate in that regard. The certificate was then forwarded to the Plaintiff. Ms. Falbo denies knowing that the certificate was a false or improper certificate; and

h) Subsequently, Tron was charged with providing a false certificate and other regulatory charges. On February 26, 2019, Tron pleaded guilty to some charges.

[20] Cross-examinations on the motion materials took place in August 2019.

[21] Mr. Glegg was cross-examined on August 14, 2019. Certain issues arose regarding his cross-examination:

a) I am particularly troubled with Mr. Glegg’s refusals set out on pages 19 through 25 of the transcript. Of particular concern is that there may be construction insurance, available to respond to the Plaintiff’s claim. It might be that this is 132 Ont.’s insurance that the Plaintiff knew nothing about or believed would not respond to this claim, but Mr. Glegg refused to answer any questions about his knowledge regarding this insurance. This is particularly troubling since he was asked whether this insurance was obtained through the Plaintiff’s broker, Chubb and reference was made to correspondence between Mr. Glegg and Chubb regarding this insurance for the renovations. Mr. Glegg also refused to answer whether he knew that Tron’s insurance was available for his claim and whether he had made a claim against this insurance policy. There simply is no evidence of this in the Plaintiff’s motion materials and there is no evidence whether this insurance policy would respond to the claim advanced here; and

b) In pages 26 through 30, Mr. Glegg refused to answer whether he had retained a Mr. Chesterton regarding the electrical deficiencies and to produce Mr. Chesterton’s report.

ANALYSIS

[22] After receiving notice of the Mareva order, the party affected by the ex parte order is entitled to present its case either by way of motion to set aside the ex parte order, or on the hearing of the motion to continue the ex parte order. On a motion to vary or end the Mareva injunction, the judge must treat the matter as an original substantive application and determine not only whether the order ought or ought not to have been made, but also whether, having been made, it should be rescinded or varied.

Full and Frank Disclosure of Material Facts

[23] One of the fundamental requirements for obtaining an ex parte injunction is the requirement to make full and frank disclosure of all material facts. The failure to do so, itself may be grounds to terminate the original ex parte order granted.

[24] Let me first deal with a submission by the Plaintiff which underscore a particularly troublesome issue. The Plaintiff submits that it was incumbent on the Defendants to include in their responding materials what they say was material non-disclosure. I disagree. The onus is on the applicant/plaintiff to make full and frank disclosure to the court of all material matters. The Defendants are under no obligation to include a reference to such issues in its responding materials. The Defendants have no obligation to file any responding materials. Deficiencies in the applicant/plaintiff disclosure can be demonstrated to the court based on the applicant’s materials alone or the cross-examination of the applicant alone.

[25] As a result, when the applicant/plaintiff is being cross-examined, the issue is whether the question asked is relevant to the Mareva injunction application. Clearly the issue of whether there is other insurance available to the applicant/plaintiff (and whether any claim has been made on such insurance) is highly relevant to the issue whether the Defendants are attempting to (or have a reason to) dissipate their assets to avoid paying a judgment to the Plaintiff.

[26] Further, where questions are asked regarding the extent of the electrical deficiencies and whether ESA has done a final inspection, such questions are relevant to determine the potential exposure the Defendants face and whether the alleged steps being taken are or appear to have been taken to avoid payment of a potential judgment. In other words, it is evidence as to whether the applicant/plaintiff’s belief that the intention of the Defendants’ actions is to avoid judgement or simply carrying on business in the usual course is genuine, credible or simply speculative or a bald statement.

[27] There is no doubt that the availability of insurance or the extent of the electrical deficiencies “might” have had an impact on whether the original order of June 25, 2019 was made.

[28] In this case, the failure of the Plaintiff to respond to these questions is fatal to the continuation of the June 25, 2019 and July 5, 2019 orders. See Chitel et al v. Rothbart et al, 1982 CanLII 1956.

[29] On this basis alone, the Outstanding Orders ought to be dissolved.

The Underlying Test is no longer met

[30] The test on a motion for a freezing order is harder to meet than the test on an ordinary injunction. The granting of a Mareva injunction, requires that the applicant establish a strong prima facie case. In other words, the moving party establishes a strong prima facia case when it demonstrates it is ˊclearly rightˋ in its allegations…or that it is ˋalmost certain to succeed at trialˊ in respect of those allegations.

[31] One of the Plaintiff’s counsel’s submissions is inconsistent with the materials demonstrating the Plaintiff has a strong prima facie case. The Plaintiff’s counsel admits that there is a strong credibility issue in the competing affidavits on such important issues as whether Ms. Falbo intended to sell her home or whether she has the intention to dissipate assets to avoid a judgment in favour of the Plaintiff. The reason this is critical is that the onus remains on the Plaintiff to establish a strong prima facie case. Acknowledging competing credible and reasonable evidence, including those which if accepted at trial that there was no fraud by Ms. Falbo, significantly weakens the Plaintiff’s argument that he has a strong prima facie case against Ms. Falbo.

[32] There are other significant facts alleged in Mr. Glegg’s affidavit which are now questionable evidence at this stage and for this motion:

a) Mr. Glegg suggested that no permit had been obtained for the renovations to his home and that he was asked to lie about the extent of the work – presumably to avoid the necessity of compliance with the necessity to obtain a building permit from the Town of Oakville. However, a building permit was obtained by 132 Ont.; and

b) Mr. Glegg stated that Ms. Falbo was involved in the obtaining of the forged ESA electrical certificate. However, when questioned during the submissions on this motion as to the evidence supporting this allegation, it appears there is nothing more than speculation that Ms. Falbo was involved in this fraud. Clearly there was a fraud by Tron. But the evidence that Ms. Falbo knew or participated in this fraud on Mr. Glegg is simply not based on any clear and convincing evidence or even the presence of any badges of fraud. 132 Ont. and/or Ms. Falbo may or may not be liable for Tron’s deficient electrical work, if any, but that is a far cry from establishing that Ms. Falbo participated in the fraud as alleged by Mr. Glegg.

[33] As a result, I am no longer persuaded that the Plaintiff has demonstrated a strong prima facie case.

[34] I am no longer persuaded that there is evidence of a serious risk that Ms. Falbo (and 132 Ont.) are attempting to dissipate assets before and to avoid judgment.

[35] Much of Mr. Glegg’s original affidavit contained speculation on this issue. For example, Mr. Glegg speculated that Ms. Falbo was attempting to sell her home on June 8, 2019 without a “for sale” sign to avoid Mr. Glegg knowing that she was dissipating her assets. It would appear there is very strong evidence to the contrary.

[36] Mr. Glegg also implied that the Foremost Financial mortgages on the second property (owned by 132 Ont.) were encumbered by Ms. Falbo’s husband to erode equity available to a judgment creditor. There is no evidence to this effect. Again, the speculation was not borne out by the subsequent evidence.

[37] The principle that Mareva injunctions are a limited and extraordinary exception to the rule against granting execution before judgment. In this case, the circumstances do not establish the need or meet the test for granting such an extraordinary remedy. As a result, the Outstanding Orders ought to be dissolved. So ordered.

THE CERTIFICATE OF PENDING LITIGATION

[38] I agree that the CPL was not sought in the Statement of Claim and there is no basis to continue the CPL.

[39] Given the above analysis on the Mareva injunction, the Plaintiff fails to meet the test for the issuance of a CPL in the circumstances of this case.

[40] The CPL is hereby ordered removed from title to the property referred to in the June 25, 2019 order.

COSTS

[41] Any party seeking costs shall serve and file written submission on entitlement and quantum within three weeks of the release of these reasons. Written submissions shall be limited to 5 pages, with attached Costs Outline and any authorities.

[42] Any responding party shall have three weeks thereafter to serve and file responding submissions. Written submissions shall be limited to 5 pages with any authorities relied on attached.

[43] There shall be no reply submissions without leave.

Ricchetti J.

Date: September 3, 2019

COURT FILE NO.: 2039/16

DATE: 2019 09 03

ONTARIO

SUPERIOR COURT OF JUSTICE

RE: ROBERT GLEGG, Plaintiff

AND:

2137691 ONTARIO LIMITED operating as GRAND ESTATE HOMES, LEONORA FALBO aka ELEONOR FALBO aka LEONORA BREWDA aka ELEONOR BREWDA, TRON ELECTRIC INC., GIUSEPPE CERASUOLO and DINO & CHRIS ELECTRIC LTD., Defendants

BEFORE: Ricchetti J.

COUNSEL: J. Zibarras and K. Genest, for the Plaintiff J. Berkow and A. Wygodny, for the Defendants 2137691 Ontario Limited o/a Grand Estate Homes and Falbo/Brewda N. Buhary, for the Defendants Tron Electric and Giuseppe-Cerasulo G. Judd, for the Defendants Dino and Chris Electric Ltd.

ENDORSEMENT

Ricchetti J.

Released: September 3, 2019