NEWMARKET COURT FILE NO.: CV-20-00539-00
DATE: 20210415
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Anthony Sorichetti
Plaintiff
– and –
Russell Sorichetti, Michael Sorichetti, Sorichetti Construction Inc., 1249845 Ontario Limited, Sorichetti Bros. Homes (2019) Inc., 1276809 Ontario Inc., Elannic Construction Consultants Inc., Sorichetti Corporation, 1331201 Ontario Limited, 1494285 Ontario Inc., 1713233 Ontario Inc., Alliance Sorichetti Group Inc., Alliance Peaks Meadows Inc., Sodi Canada Inc., 2171167 Ontario Inc., and Provincial Steel Ltd.
Defendants
Christopher Lee and Tamara Watson, for the Plaintiff
Heard: April 13, 2021-via videoconference
ENDORSEMENT
sutherland J.:
Overview
[1] The plaintiff, Anthony Sorichetti (Anthony or the plaintiff) is the brother of the defendants, Russell Sorichetti (Russell) and Michael Sorichetti (Michael). The three brothers, for over 20 years, conducted and owned an assortment of businesses and companies in which together they accumulated significant money and assets. The three brothers appeared to have had a falling out. The three brothers agreed to equally share the wealth accumulated through their various businesses and companies.[^1] Anthony alleges that Russell and Michael have, for their benefit and to his detriment, diverted income, sold assets and transferred assets out of their respective names. Anthony alleges that Russell and Michael have, as they have done before, taken steps to make themselves judgment proof. Anthony has brought this ex parte motion seeking a Mareva injunction, which includes the freezing of assets of his two brothers to prevent further dissipation of assets to his detriment. Anthony also seeks a restraining order pursuant to the oppression remedy, section 248 of the Business Corporations Act.[^2]
Background
[2] For over 20 years, the three brothers have together and in concert worked to accumulate wealth through their various businesses and corporations. The brothers have accumulated properties in Ontario and elsewhere. The brothers, Anthony alleges, worked as a group to benefit each other equally. There is a fourth brother David Sorichetti (David) who is a financial advisor and was not involved as a partner in the businesses.
[3] The structure, Anthony indicates, was that each brother and their respective spouses had different titles and offices in each of the corporations. But the Sorichetti Group was the entity that was in control of all the corporations and as such, all the corporations were run as a single organization. Thus, the three brothers commingled their assets through the Sorichetti Group. When a company required cash, another of the companies would provide that infusion of cash. When there were liquidity issues, the three brothers would provide an infusion of capital through their personal finances.
[4] Anthony deposes that in the last three years, he has been locked out of decision making and assets have been sold and proceeds disbursed without his approval or knowledge. Anthony states that Michael and Russell have structured their affairs to their benefit without providing Anthony with his equal share. Further, that Michael and Russell have structured debt obligations to others to their benefit and to his detriment.
[5] Anthony provides examples of this behaviour, that includes:
i. The sale of Barton in September 2019 by Russell and Michael. Anthony was not advised of the sale. The proceeds from the sale were not divided with Anthony. Though requested, Anthony has not received any documentation or accounting of the sale.
ii. The amalgamation of Sorichetti Group into Sorichetti Bros. Homes (2019) Inc. (SBH) without the knowledge and approval of Anthony. Anthony is not a director or officer of SBH. His one third interest in the assets of Sorichetti Group were amalgamated into SBH which Russell and Michael allege he as no interest.
iii. After the commencement of this litigation, the sale of the two properties on Centre Street, 702 and 706 Centre Street North, Whitby. The properties were owned by 1494285 Ontario Inc. (149) and formed part of the assets of the Sorichetti Group. The Centre Street properties were sold without the approval and with the expressed objection of Anthony. Anthony, through his counsel sent letters dated April 24, 2020 to Russell, Michael and the real estate broker objecting to the sale and providing copies of the corporate profile which showed that Anthony and his spouse are directors and officers of 149. The sale closed in any event in November 2020, with no accounting or preservation of the proceeds of the sale or any disbursement of any of the proceeds to Anthony.
iv. The registering of SBH with Tarion. Anthony is not an officer or director of SBH but his name is registered with Tarion as a guarantor, making him potentially liable for misdeeds of an entity owned and run by Michael and/or Russell.
v. The selling and destroying of personal assets of Anthony and his spouse. On the Centre Street properties wither were storage trailers that had the personal property of all three brothers. Each brother had storage trailers. Michael and Russell removed their storage trailers and property off the Centre Street properties before the closing of the sale but sold Anthony’s trailer with the transaction. Anthony was prevented from retrieving his trailers/property in May 2020 by cars of Michael or Anthony or their family members being parked in front of the trailer preventing him from removing the trailer off the property.
vi. A pattern of behaviour of Russell in dissipating assets and ignoring written agreements. Russell and his spouse, along with a few of the corporate entities in this proceeding were sued by Royal Bank of Canada (the Bank).[^3] In that proceeding, the Bank alleged that monies that were put in a savings vehicle that were security for a line of credit provided by the Bank were cashed and dissipated without the Bank’s consent and approval. In that proceeding, the court granted a Mareva injunction. On the return on the continuation of the injunction, terms of the injunction were varied on consent and other terms were not and S.F. Dunphy J. heard the motion. Dunphy J. endorsed the record and in his reasons made findings that Russell knew that the monies were being used by the Bank as security for the line of credit and nonetheless improperly obtained and dissipated the security of the Bank.
vii. Other properties that were recently sold are: a) 163 Lakeshore Road East, Meaford owned by 149; b) 100 Holdship Court, The Blue Mountains owned by SBH; c) 35 Bruce Street, The Blue Mountains owned by 2171167 Ontario Inc.; and d) 131 Barton Boulevard, The Blue Mountains owned by SBH. Anthony deposes he has not received an accounting of where the monies for these properties were disbursed or details of the sale.
viii. Anthony deposed and provided documentation that he contributed $35,000 to the purchase of Holdship Court and $161,081 for the purchase of Bruce Street.
ix. Anthony has requested disclosure on the sales of the properties and an accounting of the proceeds from the sales. He has not been provided any documentation or accounting.
x. Russell and Michael have listed for sale Point Pelee without the agreement of Anthony. The listing was removed after Anthony objected to the listing. But there is no agreement that Michael and Russell cannot list Point Pelee without the agreement of Anthony sometime in the future.
xi. Monies from the sale of properties have been deposited in a bank account held by David, and not in the hands of Russell or Michael. These monies are outside of the reach of Anthony and in the hands of a brother who was not involved in the businesses or subject to the sharing agreement.
[6] Anthony deposes that there is a remaining property that the three brothers combined their personal resources and have equal ownership since early 2000. The property is 538 Bevel Line Road, Leamington (Point Pelee) which is owned by Sorichetti Development Group (SDG). Sorichetti Construction Inc. (SCI) has a 3.5 million dollar mortgage on Point Pelee.
[7] There is another property 160 Sunset Boulevard in Blue Mountain (Blue Mountain) which has not been sold and is owned by SBH, which again Anthony claims a one third interest.
Legal Framework
[8] Section 101 of the Courts of Justice Act[^4] and Rule 40.01 of the Rules of Civil Procedure[^5] authorize the Court to grant an interlocutory injunction: “where it appears to a judge of the court to be just or convenient to do so.”
[9] Rule 40.01 mandates that an interlocutory injunction may be granted for a period not exceeding 10 days and that the moving party shall undertake to abide by any order concerning damages that the Court may make. Anthony has provided such an undertaking.
[10] A Mareva injunction is an extraordinary remedy. If granted, it, in effect, freezes assets of the recipient. Thus, it becomes a form of execution before judgment.
[11] The leading cases on temporary or final injunctions are RJR MacDonald Inc. v. Canada (Attorney General)[^6]and R. v. Canadian Broadcasting Corp.[^7] (R. v. CBC).
[12] The test to grant an injunction as set out in RJR MacDonald is well known. The criteria that the party requesting an injunction must demonstrate are:
(a) From a preliminary assessment of the merits of the case, there is a serious question to be tried;
(b) Irreparable harm will result if the relief is not granted; and
(c) Which of the parties would suffer greater harm from the granting or refusing of the injunction pending a decision on the merits.[^8]
[13] The test in RJR MacDonald was slightly modified by the Supreme Court of Canada in R. v. CBC. In R. v. CBC, the Court indicated:
The applicant must demonstrate a strong prima facie case that it will succeed at trial. This entails a strong likelihood on the law and the evidence presented that, at trial, the applicant will be ultimately successful in proving the allegations set out in the originating notice.[^9]
The party seeking the injunction would, unless the injunction is granted, suffer irreparable harm that is not susceptible or would be difficult to be compensated in damages.
The party seeking the injunction “must show that the balance of convenience favours granting the injunction.”[^10]
[14] The Court, in R. v. CBC, emphasized that the burden upon the party seeking the injunction is to show a case of “such merit that it is very likely to succeed at trial.” The Court defined the meaning of “very likely to succeed at trial” in stating: “Meaning, that upon a preliminary review of the case, the application judge must be satisfied that there is a strong likelihood on the law and the evidence presented that, at trial, the applicant will be ultimately successful in proving the allegations set out in the originating notice.”[^11]
[15] In the Mareva injunction context, when the moving party is seeking a freezing of the assets of the recipient, the moving party must establish:
i. A strong prima facie case against the defendants;
ii. The defendants have assets in the jurisdiction;
iii. There is a risk of the assets being removed from the jurisdiction, or disposed of within the jurisdiction or otherwise put beyond the reach of the Court such that the plaintiff will be unable to realize on a judgment in its favour;
iv. The moving party would suffer irreparable harm if the order is not made; and
v. The balance of convenience favours the granting of the order.[^12]
[16] The overriding consideration of the Court “is that the defendant threatens to so arrange his assets as to defeat his adversary, should that adversary ultimately prevail and obtain judgment, in any attempt to recover from the defendant on that judgment.”[^13]
Position of the Plaintiff
[17] The plaintiff argues that the motion must be heard ex parte due to the past conduct of the defendants and particularly Russell and Michael. He argues that Russell and Michael have sold properties, disbursed funds, destroyed property and withheld documentation. He argues that if Russell or Michael are provided with notice of this motion, they, in all likelihood, would dissipate the proceeds of sale of the properties and assets sold by removing said assets out the jurisdiction. He argues with a click of a mouse, Russell and Michael can transfer funds out of the jurisdiction and thus, make themselves judgment proof. It is for this fear of the conduct of Russell and Michael that the motion must be heard ex parte.
[18] Furthermore, Anthony contends that the past conduct of Russell and Michael show a clear pattern of behaviour to remove and dissipate assets to make it impossible for a judgment creditor to realize on any judgment. Russell’s conduct with the Bank shows such a patten of conduct. In addition, Russell’s and Michael’s conduct of:
i. selling properties without the agreement of Anthony and disbursing said funds without the knowledge or agreement of Anthony;
ii. Refusal to provide an accounting or documentation of the sales and disbursement of the proceeds;
iii. Their recent conduct concerning the Centre Street properties;
are evidence of Michael’s and Russell’s conduct that require the need of a Mareva injunction. The purpose of a Mareva injunction is the curtail the conduct of a defendant that threatens to arrange his assets in a way to prevent his adversary from collecting on any judgment that is granted from the Court.
[19] Accordingly, Anthony contends that the test of granting a Mareva inunction has been met in the circumstances of this proceeding and the court must exercise its discretion to grant the Mareva injunction.
Issues
[20] The issues for this Court to determine on this motion are:
i. Should the Court hear this motion ex parte?
ii. If so, has the plaintiff satisfied the criteria for a Mareva injunction?
iii. If so, what are the terms of the order that should be made?
Analysis
Should the court hear this motion ex parte?
[21] The first issue the court raised with the plaintiff is why should the court hear this motion ex parte. The Statement of Claim has been served and eight of the named defendants have served a pleading.[^14]
[22] I am satisfied that this motion must proceed as an ex parte motion. I am satisfied on the evidence presented that there is a significant possibility that if the defendants, namely Russell and Michael, are provided with notice, one or both may take steps to move assets out of the jurisdiction. The conduct of Michael and Russell, as evidenced in the affidavit of Anthony, does provide the court with grave concerns of their conduct if notice is given. Past conduct and as well the selling of properties without the agreement and sometimes knowledge of the Anthony does support the claim of Anthony that the motion should be proceed.
[23] Hence, the court agreed to hear the motion ex parte.
Should a Mareva injunction be granted?
Strong Prima Facie case
[24] I am satisfied that at this stage that Anthony has provided a strong prima facie case. The evidence listed below support Anthony’s position that he has a strong prima facie case:
i. the arrangement of equal sharing by the brothers which is admitted in the pleading of Russell and Michael;
ii. the history of their business ventures;
iii. the monies that Anthony provided from his personal finances;
iv. the selling of properties without the agreement and sometimes knowledge of Anthony;
v. the listing and selling of Center Street properties,
vi. the failure to provide Anthony with proceeds of sale and particularly that of the Centre Street properties after the commencement of this proceeding and against the expressed objection of Anthony;
vii. the failure to account for the proceeds received from the sales;
viii. past conduct and especially that of Russell and evidenced in the Bank action.
[25] It appears from the evidence provided that Russell and Michael have not complied with the arrangement of equal sharing as is undisputed. Russell and Michael have taken steps to their benefit and against the benefit of Anthony in not providing him with his agreed share, not accounting to proceeds from sales received, not providing an accounting and transferring proceeds to David, a person not involved in the businesses and outside of the agreement of equal sharing and not a named litigant.
[26] I find that Anthony has satisfied that first stage and on the evidence provided that he is likely to be successful at trial.
Defendants have assets in the jurisdiction
[27] There is no issue from the evidence presented that the defendants have assets in the Ontario. This stage of the test has been satisfied.
There is a risk of the assets being removed from the jurisdiction or disposed of
[28] The properties that have been sold have been converted into cash. The monies have been deposited in bank accounts not in the name of any of the defendants and/or in accounts that Anthony has no knowledge. In today’s age of technology, such monies can be transferred outside Ontario with a click of a mouse.
[29] The past conduct of bother Russell and Michael makes it likely that they would engage in such conduct to dispose of or transfer monies and assets of the defendants outside the reach of Anthony. Their conduct on the sale of properties and the conduct of Russell with the Royal Bank of Canada, support the real fear that if given the opportunity, either Russell or Michael will dispose of or transfer assets outside the jurisdiction.
[30] I am therefore satisfied that Anthony has met this stage of the test.
Will Anthony suffer irreparable harm?
[31] I am also satisfied that Anthony will suffer irreparable harm if the injunction is not granted. The evidence indicates that Anthony has provided significant funds to the businesses. The assets of the corporate entities have been substantially sold. Russell and Michael have these funds or access to these funds.
[32] If the injunction is not granted, in all likelihood, there will no assets for Anthony to realize on if he is successful in this action.
[33] This stage of the test has been satisfied by Anthony.
Balance of Convenience
[34] The balance of convenience is in favour of Anthony in granting the Mareva injunction.
[35] The conduct of Michael and Russell and the ramifications to Anthony tilt in favour of Anthony. The corporate entities are no longer a going concern. The assets, except for the two properties mentioned, have been sold. The businesses have been wound down.
[36] Furthermore, the overriding consideration of the Court is if the conduct of the defendants threatens to arrange their assets in such a way to defeat Anthony if he should ultimately prevail and obtain a judgment. I find that this bears in the factual situation presented to the Court through the evidence provided. The balance of convenience favours Anthony.
[37] Consequently, I conclude that Anthony has satisfied the criteria for a Mareva injunction and hereby grant a temporary Mareva injunction in his favour.
[38] Given my determination on the Mareva injunction, I need not consider the oppression remedy.
Terms of the Order
[39] Anthony has provided the Court with a draft order. Having reviewed the order, I am not agreeable to all the terms set out in the order.
[40] The Court has amended the terms requested by Anthony in the draft Order. The Court is agreeable to provide Anthony with an order in the form and content as in the Order attached hereto as Schedule “A”.
Disposition
[41] A temporary Mareva injunction is granted to the plaintiff, Anthony Sorichetti.
[42] The terms of the temporary Mareva injunction and order are as set out in Schedule “A” attached hereto.
[43] This motion is returnable to me on April 23, 2021 at 9:30 am.
[44] Costs reserved.
Justice P.W. Sutherland
Released: April 15, 2021
SCHEDULE “A”
Court File No.: CV-20-00000539-0000
ONTARIO SUPERIOR COURT OF JUSTICE
Thursday the 15th
Justice P. Sutherland day of April 2021
BETWEEN:
ANTHONY SORICHETTI
Plaintiff
- and -
RUSSELL SORICHETTI, MICHAEL SORICHETTI, SORICHETTI CONSTRUCTION INC., 1249845 ONTARIO LIMITED, SORICHETTI BROS. HOMES (2019) INC., 1276809 ONTARIO INC., ELANNIC CONSTRUCTION CONSULTANTS INC., SORICHETTI CORPORATION, 1331201 ONTARIO LIMITED, 1494285 ONTARIO INC., 1713233 ONTARIO INC., ALLIANCE SORICHETTI GROUP INC., ALLIANCE PEAKS MEADOWS INC., SODI CANADA INC., 2171167 ONTARIO INC., and PROVINCIAL STEEL LTD.
Defendants
ORDER
NOTICE
If you, the Defendant, disobey this order you may be held to be in contempt of court and may be imprisoned, fined or have your assets seized. You are entitled to apply, with notice to the Plaintiff, for an order granting you sufficient funds for ordinary living expenses and legal advice and representation.
Any other person who knows of this Order and does anything which helps or permits each Defendant to breach the terms of this Order may also be held to be in contempt of court and may be imprisoned, fined or have its assets seized.
THIS MOTION, made without notice by the Plaintiff, Anthony Sorichetti, for an interim Order in the form of a Mareva injunction restraining the Defendants, Russell Sorichetti, Michael Sorichetti, Sorichetti Construction Inc., 1249845 Ontario Limited, Sorichetti Bros. Homes (2019) Inc., 1276809 Ontario Inc., Elannic Construction Consultants Inc., Sorichetti Corporation, 1331201 Ontario Limited, 1494285 Ontario Inc., 1713233 Ontario Inc., Alliance Sorichetti Group Inc., Alliance Peaks Meadows Inc., Sodi Canada Inc., 2171167 Ontario Inc., and Provincial Steel Ltd., from dissipating its assets and other relief, was heard this day by videoconference at 150 Bond Street East, Oshawa, Ontario.
ON READING the Affidavit of Anthony Sorichetti sworn March 25, 2021, on hearing the submissions of counsel for the Plaintiff, and on noting the undertaking of the Plaintiff to abide by any order this Court may make concerning damages arising from the granting and enforcement of this Order,
Mareva Injunction
- THIS COURT ORDERS that each Defendant, and its servants, employees, agents, assigns, officers, directors and anyone else acting on its behalf or in conjunction with any of them, and any and all persons with notice of this injunction, are restrained from directly or indirectly, by any means whatsoever:
(a) selling, removing, dissipating, alienating, transferring, assigning, encumbering, or similarly dealing with any assets of each Defendant, wherever situate, including but not limited to the assets and accounts listed in Schedules “A” and “B” hereto;
(b) instructing, requesting, counselling, demanding, or encouraging any other person to do so; and
(c) facilitating, assisting in, aiding, abetting, or participating in any acts the effect of which is to do so.
- THIS COURT ORDERS that paragraph 1 applies to all of each Defendant’s assets whether or not they are in his own name and whether they are solely or jointly owned. For the purpose of this Order, each Defendant’s assets include any asset which he has the power, directly or indirectly, to dispose of or deal with as if it were his own. Each Defendant is to be regarded as having such power if a third party holds or controls the assets in accordance with his direct or indirect instructions.
Ordinary Living Expenses
- THIS COURT ORDERS that each Defendant may apply for an order, on at least five (5) days notice to the Plaintiff, specifying the amount of funds which each Defendant is entitled to spend on ordinary living expenses and legal advice and representation.
Disclosure of Information
THIS COURT ORDERS that each Defendant prepare and provide to the Plaintiff within ten (10) days of the date of service of this Order, a sworn statement describing the nature, value, and location of his assets, whether in his own name or not and whether solely or jointly owned.
THIS COURT ORDERS that each Defendant submit to examinations under oath within twenty (20) days of the delivery by each Defendant of the aforementioned sworn statements.
THIS COURT ORDERS that if the provision of any of this information is likely to incriminate a Defendant, he may be entitled to refuse to provide it, but is recommended to take legal advice before refusing to provide the information. Wrongful refusal to provide the information referred to in paragraph 5 herein is contempt of court and may render the Defendant liable to be imprisoned, fined, or have his assets seized.
Third Parties
THIS COURT ORDERS Toronto Dominion Bank, Royal Bank of Canada, Bank of Montreal and Meridian Credit Union (the “Financial Institutions”) to forthwith freeze and prevent any removal or transfer of monies or assets of each Defendant held in any account or on credit on behalf of each Defendant, with the Financial Institutions, until further Order of the Court, including but not limited to the accounts listed in Schedule “A” hereto.
THIS COURT ORDERS that the Financial Institutions forthwith disclose and deliver up to the Plaintiff any and all records held by the Financial Institutions concerning each Defendant’s assets and accounts, including the existence, nature, value and location of any monies or assets or credit, wherever situate, held on behalf of each Defendant by the Financial Institutions.
Alternative Payment of Security into Court
- THIS COURT ORDERS that this Order will cease to have effect if each Defendant, or any of them, provides security by paying the sum of $4,000,000.00 into Court, and the Accountant of the Superior Court of Justice is hereby directed to accept such payment.
Variation, Discharge or Extension of Order
THIS COURT ORDERS that anyone served with or notified of this Order may apply to the Court at any time to vary or discharge this Order, on five (5) days notice to the Plaintiff.
THIS COURT ORDERS that the Plaintiff shall forthwith serve his Motion Record, the decision of this Court and this Order upon the defendants by email and shall file the requisite affidavit of service.
THIS COURT ORDERS that the Plaintiff shall file his Motion Record dated April 6, 2021within the next five days.
THIS COURT ORDERS that this Order will be brought back before the Judge who issued this Order on April 23, 2021 at 9:30 a.m. All motions or applications to vary or discharge this Order, or arising out of the issuance or enforcement of this Order, shall be heard by the Judge who issued this Order with the exception of:
(a) urgent matters for which the Judge is not available; or,
(b) as otherwise directed by the Judge.
- THIS COURT ORDERS that costs are reserved.
Justice P. Sutherland
ANTHONY SORICHETTI Plaintiff
and
RUSSELL SORICHETTI ET AL Defendants
Court File No.: CV-20-00000539-0000
ONTARIO SUPERIOR COURT OF JUSTICE
Proceeding commenced at OSHAWA
ORDER
LOOPSTRA NIXON LLP 135 Queens Plate Drive, Suite 600 Toronto ON M9W 6V7 Tel: 416.746.4710 Christopher Lee/LSO#54040J clee@loonix.com
Tamara Watson/LSO#80364U twatson@loonix.com Lawyers for the Plaintiff/ Defendant by Counterclaim
[^1]: This equal division is not in dispute. The issue arises whether certain corporate entities and assets are part of the equal division. See the Statement of Defense and Counterclaim dated July 7, 2020, paras. 11 and 12. [^2]: RSO 1990, c. B.16. [^3]: CV-18-606566-00CL [^4]: RSO 1990 c. C.43 [^5]: RRO 1990 Reg.194 [^6]: 1994 CanLII 117 (SCC), [1994] 1 S.C.R. 311. [^7]: 2018 SCC 5. [^8]: Supra, note 3, at para 43. [^9]: Supra, note 4, at para 18. [^10]: Ibid at para 18. [^11]: Supra, note 4 at para 17. [^12]: HZC Capital Inc. v. Lee 2019 ONSC 4622, at para. 45 [^13]: Aetna Financial Services Ltd. v. Feigelman, 1985 CanLII 55 (SCC), [1985] 1 S.C.R. 2, at para. 25 quoted from HZC Capital Inc., supra, note 12 at para. 46. [^14]: The eight defendants that have serves and Statement of Defence and Counterclaim dated July 7, 2020 are: Russell and Michael, Sorichetti Bros. Homes (2019) Inc., 1276809 Ontario Inc. Elannic Construction Consultants Inc., 1494285 Ontario Inc., 1713233 Ontario Inc., and 2171167 Ontario Inc. The other defendants have not defended the action. These defendants are not actively involved due to the corporate entities being owned by the three brothers and/or not being active entities or are holding companies.