NEWMARKET COURT FILE NO.: CV-20-00539-00
DATE: 20211101
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
Maurice J. Neirinck and Mandana Niknejad for the Defendants, Russell Sorichetti, Michael Sorichetti, Sorichetti Bros. Homes (2019) Inc., 1276809 Ontario Inc., Elannic Construction Consultants Inc., 1494285 Ontario Inc., 1713233 Ontario Inc. and 2171167 Ontario Inc.
Heard: July 16, 2021 - via virtual hearing
DECISION
sutherland J.:
Overview
[1] On April 15, 2021, I granted an ex parte Mareva injunction in favour of the plaintiff (“the Mareva Order”).[^1] Since the Mareva Order, there have been two consent orders dated April 23 and April 30, 2021 varying the terms of the injunction.
[2] On July 21, 2021, a further consent order was granted removing the bank account in the name of David Sorichetti from the Mareva Order.
[3] The present hearing is to determine whether the Mareva Order, with the variations mentioned above, should be further continued, varied, or discharged.
[4] For the reasons to follow, I determine that the Mareva Order should not continue.
Background
[5] In my Decision dated April 15, 2021, I briefly set out the facts. I do not intend to substantially repeat the same factual matrix. I will instead deal with the facts as they pertain to the position of the parties and the present reality.
[6] But generally, for over 20 years, the three brothers, Anthony Sorichetti (Anthony), Russell Sorichetti (Russell) and Michael Sorichetti (Michael) 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 brother, 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.
[7] The structure, Anthony indicates, was that each of the three brothers 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, Anthony, Russell and Michael commingled their assets through the Sorichetti Group.
[8] Russell and Michael indicate that they have complied with the disclosure as mandated in the Mareva Order. Neither Russell nor Michael have much personal assets. Russel indicates that he has a bank account with is wife with a minimum amount, a home in Oshawa owned by his wife, RRSP’s of approximately $102,000, $14,000 in a TFSA, around $3,000 in an RCA account, one third interest in the property in Florida and substantial shareholders loans which are owed to him by the Sorichetti Group of Companies. Michael has a cottage which is owned with his wife and assets much the same as Russell. Russell and Michael together have unpaid loans owed to them from the Sorichetti Group of $1,422,367.45 which are more than the loans owed to Anthony from the Sorichetti Group
Position of the Parties
[9] Russell and Michael contend that there is no justifiable reason for the Mareva Order. They have provided all the disclosure ordered. Neither have substantial assets. The Sorichetti Group owes them, along with Anthony, substantial monies. They further contend that the Mareva Order should be set aside because of material non-disclosure by Anthony and that the real property that remains is secured by a mortgage in favour of the Sorichetti Group and that the cash assets that remain are: (i) $288,000 in the Assante account, (ii) $30,000 in the TD joint bank account and $12,000 in the Meridian account. This totals $330,000 which is more than the net proceeds of the sale of the five properties in question. Russell and Michael contend that the net proceeds of sale are $78,510. Michael and Russell concede that from the proceeds, they received $147,118 for their benefit. The result is that the amount in dispute is not significant and that the reality is that the monies owed by way of loans to all three brothers far exceeds the assets of the Sorichetti Group. Michael and Russel argue that there is no justifiable reason or need for the Mareva Order given the financial reality.
[10] Anthony contends that the disclosure of Michael and Russell cannot be verified and cannot be taken as being reliable. Anthony contends that both Russell and Michael could not substantiate the figures for which they claim shows minimal assets are in existence and that the amount paid from the gross proceeds of sale of the five properties are legitimate. Anthony directs the Court to the facts set out in the April 15, 2021 Decision and that Russell has a history of not being upfront and truthful. In effect Anthony “requires the continuation of the Mareva injunction to stop the dissipation of his assets by Russell and Michael.”[^2]
[11] I will deal with the issues raised by Russell and Michael.
Failure to provide full and frank disclosure
[12] Russell and Michael submit that Anthony has failed to provide full and frank disclosure. Given the extraordinary nature of a Mareva injunction, an exceptional duty is upon the moving party in an ex parte application to provide full and frank disclosure. This includes disclosure of facts that do not assist the moving party.
[13] As Justice Sharpe, as he then was, stated in United States of America v. Friedland[^3]:
For that reason, the law imposes an exceptional duty on the party who seeks ex parte relief. That party is not entitled to present only its side of the case in the best possible light, as it would if the other side were present. Rather, it is incumbent on the moving party to make a balanced presentation of the facts in law. The moving party must state its own case fairly and must inform the Court of any points of fact or law known to it which favour the other side. The duty of full and frank disclosure is required to mitigate the obvious risk of inherent in any situation where a Judge is asked to grant without hearing from the other side.
[14] The exceptional duty is obviously onerous for good reason. The threshold of establishing failure of a moving party to adhere to the positive duty to provide full, frank, and disclosure is not a high one[^4]. Courts have indicated that:
(a) There is no requirement to show an intention to mislead, careless non-disclosure is sufficient.[^5] The threshold question is whether the material facts omitted might have made an impact on the granting of the original order.[^6]
(b) Material facts must be readily and clearly highlighted to the court and referred to in the affidavit. These material facts cannot be buried or hidden in exhibits.[^7]
(c) To present fair disclosure the moving party’s counsel, as an officer of the court, is to provide full, frank, and fair disclosure of material facts and “advocacy, must of necessity, take a back seat”[^8]
[15] Material facts are any facts that would have been weighed or considered by the motion’s judge in deciding the issues, regardless of whether its disclosure would have changed the outcome”.[^9]
[16] It is not for the moving party or its counsel to decide not to disclose material facts because they do not agree with the facts or have another interpretation of the facts. Material facts must be disclosed, whether the facts assist or not in obtaining the relief requested by the moving party. The disclosure needs to be fair and balanced.
[17] Failure to comply with this duty to provide full, frank, and fair disclosure of material facts may lead to the Order given being set aside.
[18] Again, as Justice Sharpe stated in United State of America v. Friedland:
If the party seeking ex parte relief fails to abide by this duty to make full and frank disclosure by omitting or misrepresenting material facts, the opposite party is entitled to have the injunction set aside. That is the price the Plaintiff must pay for failure to live up to the duty imposed by law. Were it otherwise, the duty would be empty, and the law would be powerless to protect the absent party.[^10]
[19] Russell and Michael argue that Anthony has failed to fulfil his duty on an ex-parte motion in failing to disclose to the Court:
i. that Anthony had access to the financial records by having possession of the accounting laptop;
ii. that Anthony made no request for information before issuing the Statement of Claim;
iii. Anthony misrepresented Russell’s ownership of 294 Sunset Blvd.;
iv. nondisclosure regrading Pointe Pelle Property;
v. nondisclosure regrading RBC restraining order in 2018.
[20] I will examine each allegation separately.
Possession of the Laptop
[21] Russell and Michael claim that the accounting laptop for the Sorichetti Corporation Group was left in the offices in Oshawa and Anthony had access to the laptop until the offices were closed in the summer of 2019. When the offices were closed, Anthony took the laptop containing the accounting records to his home. Anthony still has possession of the laptop.
[22] Anthony concedes that he does have the laptop, but he could not get access to the accounting program because the annual renewal fee for the program of $1,000 was not paid.
[23] There is no issue that this fact concerning the laptop was not disclosed to the Court on the ex parte hearing. The contents of the laptop as it concerns the accounting information was not provided. Though requested by Russell and Michael to provide a copy of the accounting information, Anthony has not done so.
[24] Michael and Russell argue that Anthony left the impression with the Court that he has been blocked from obtaining accounting information which was not truthful. Also, Anthony’s failure to produce the accounting information from the laptop requires the Court to draw an adverse inference against Anthony.
[25] The difficulty the Court has is that no evidence has been provided on the contents of the laptop which may qualify as material facts that would have affected the Court’s initial Decision to grant the interim injunction. Without this information, the Court cannot make such a conclusion nor can the Court draw an inference that is adverse in the positive obligation to provide full and frank disclosure. It may very well be that information on the laptop is material but neither Russell nor Michael provided any information for the Court to make such a finding or draw an adverse inference.
[26] I do not agree that the failure of disclosing the existence of the laptop purportedly with accounting information for Sorichetti Corporation was a material fact that would have affected the initial Decision in granting the Mareva Order.
Request for Information before commencement of this Proceeding
[27] Russell and Michael argue that Anthony did not request information prior to commencement of the proceeding pertaining to accounting, the proceeds of sale of the Five properties or the renovation of the Wilson Avenue project or how the proceeds of any of the properties were disbursed. They argue that if Anthony requested this information, he would have received answers to his questions.
[28] Moreover, Michael and Russell direct the Court to correspondence sent by their lawyer to the plaintiff suggesting making and exchange of full financial disclosure, appointment of a qualified professional accountant to perform an independent report and efforts to resolve the issues outside of Court. The plaintiff failed to respond. By failing to disclose these facts, Anthony left the Court with an inaccurate impression that the defendants were not cooperating and refusing to provide the requested information. Michael and Russell submit that this serious nondisclosure lead directly to the Mareva Order being granted.
[29] Anthony argues that given the conduct of Russell and Michael of selling properties over Anthony’s explicit objections show that the offers put forth by Russell and Michael would cause further delay and provided more time for Russell and Michael to dissipate assets. Anthony does not dispute that the communication was sent and received.
[30] I agree with the Russell and Michael that Anthony did not comply with his exceptional duty to disclose to the Court all facts, whether such facts benefit the plaintiff or not. It is not the realm of an ex parte motion for pure advocacy. It is for the moving party to provide the Court with a balanced presentation of all information. I also agree that the failure to provide the Court with the communication from Michael and Russell’s lawyer that disclosure of the communication would have an been considered or weighed into the issuance of the Mareva Order.
Misrepresentation regarding Russell’s ownership of 294 Sunset Blvd. (the Cottage),
[31] Michael and Russell argue that Anthony failed to disclose that the Cottage was owned by Russell and his wife jointly. The Cottage was owned by them for over 20 years. Further that Russell and his wife had to sell the Cottage to pay the to RBC to satisfy RBC’s claim of over $820,000. This misrepresentation, Russell and Michael argue left the Court with the impression that Russell is dissipating assets and that Russell received a sizable sum of net proceeds from the sale of the Cottage.
[32] Anthony does not dispute that the only issue he has with the Cottage is that Russell used $20,000 from Sorichetti Group to finance renovations to the Cottage.
[33] At the time the ex parte motion was heard, there is no evidence that Anthony knew that the net proceeds of sale of the Cottage went to pay the debt owed to RBC.
[34] The fact the Cottage was owned as joint tenants with Russell’s wife does not, in my view, constitute a material fact that would have weighed in the granting of the Mareva Order. The fact that the asset was sold could very well indicate the dissipation of assets that would support the granting of a mareva injunction.
[35] Also, I am not convinced that Anthony was aware that net proceeds of sale of the Cottage was used to pay off the debt owed to RBC.
[36] I do not accept the submissions of Michael and Russell that this nondisclosure amounts to nondisclosure of a material fact.
Nondisclosure regarding Pointe Pelle Property
[37] Russell and Michael contend that Anthony did not disclose that there is a $3.5 million mortgage registered against the Point Pelle Property in favour of Sorichetti Construction Inc. (SCI). Russell and Michael state that Anthony is the sole director of SCI. Only Anthony can authorize the discharge of the mortgage and thus, permit any sale of Point Pelle. There was no risk to Anthony that Point Pelle could be sold without Anthony’s knowledge and approval.
[38] From my review, this fact that the mortgage was registered in favour of SCI and that Anthony was the only director of SCI was not disclosed in the ex parte motion granting the Mareva Order.
[39] I am satisfied that the fact that the mortgage registered in favour of SCI and that Anthony was a sole director of SCI is a material fact that would have been considered in the granting of the Mareva Order. The failure to provide this disclosure does not comply with Anthony’s obligation of full and frank disclosure.
Nondisclosure regarding RBC restraining order in 2018
[40] Russell and Michael submit that Anthony failed to provide frank and fair disclosure of the proceeding by RBC against the three brothers and the cashing in of a GIC held by 1713233 Ontario Inc. (“171”) by Russell. The two brothers contend that Anthony did not disclose that he was involved in the RBC proceeding as being the director of SCI and that Anthony deposed an affidavit used in the RBC proceeding. Anthony’s knowledge and active participation was not disclosed. Russell and Michael argue that by including the RBC proceeding in the material before the Court on the ex parte motion was to disparage Russell in the eyes of the Court. The nondisclosure was material to the Court’s Decision.
[41] Again, there is no dispute that Anthony did not disclose the full extent of the RBC proceeding and his involvement in that proceeding. Anthony indicated that he was not aware of the GIC securing the RBC Line of Credit and that Russell cashed in that Line of Credit without Anthony’s knowledge. However, Anthony was directly involved in the litigation with RBC. He is one of the signatories on the Minutes of Settlement. He did not disclose that the GIC was to secure the Line of Credit of Sorichetti Group companies and that he was involved in the settlement with RBC.
[42] Russell’s behaviour in the RBC proceeding as indicated in the Court’s Decision was utilized by the Court in granting the Mareva Order.
[43] Thus, I conclude that Anthony’s involvement in the RBC proceeding is a material fact that should have disclosed to the Court. This nondisclosure was a material fact that would have weighed on the granting of the Mareva order. Anthony had a duty to provide full and frank disclosure. He failed to live up to that duty in his nondisclosure.
Should the Mareva Order be continued, discharged, or varied?
[44] I have found that there has been material nondisclosure by the plaintiff. The plaintiff failed to satisfy his obligation for full and frank disclosure.
[45] Russell and Michael agree that there are assets that are still in existence that Anthony may have an interest. These assets include the $330,000 in cash accounts, the net proceeds of sale from the five properties and the mortgage registered against the title of Pointe Pelle property and the Meaford property.
[46] Anthony indicates that 1 million dollars from the sale of Barton and Centre Street went into various accounts and appears to now be in the Assante account. Approximately $800,000 of these proceeds, Anthony argues, have been dissipated by Michael and Russell.
[47] There are also the personal bank accounts of both Russell and Michael.
[48] Though the Court may discharge or set aside a granted mareva injunction granted on an ex parte basis for nondisclosure of material facts, the Court may order alternate security if the Court believes it is it just and convenient to do so.[^11]
[49] In the circumstances of this case, I agree with Michael and Russell that there has been nondisclosure of material facts. The continuation of the Mareva Order is suspect. However, I am also satisfied that there has been the disbursement of monies and assets that, it appears, Anthony has an interest. These monies and assets appear to have been dealt with by Michael and Russell without Anthony’s agreement. Anthony, all agree, has a one third interest in Sorichetti Group’s assets. This is a determination that a trial judge will have to make.
[50] I therefore conclude that the Mareva Order should be set aside, and an alternate order be granted to provide alternate security to Anthony on assets that have been disclosed to exist which Anthony may have an interest.
Alternate Security
[51] There is the approximate $330,000 in cash in various accounts[^12] that Michael and Russell agree exist. There is the Point Pelee property and the Meaford property. These properties have not been sold.
[52] I am not inclined to have the terms of the Mareva Order continue against the personal properties of either Michael or Russell. The failure to comply with the duty of full and frank disclosure compels the Court to set aside the Order as it affects the personal property of Michael and Russell.
[53] However, for the assets stated in paragraph 51, I exercise my discretion and provide an injunction securing those assets and provide an injunction that those assets shall not be disbursed, dissipated or encumbered in any way without the written agreement of Anthony or a court order.
Disposition
[54] Consequently, I order the following:
i. The terms of the Mareva Order that are still in effect are hereby set aside and discharged along with the two Orders varying the Mareva Order dated April 23 and April 30, 2021.
ii. An interim injunction with respect to the assets named in paragraph 51, namely the accounts with Assante, TD Bank and Meridian and the Point Pelee and Meaford properties namely, that these assets shall not be disbursed, transferred, sold, encumbered, or dissipated in anyway without the written agreement of Anthony or a court order.
Costs
[55] I am inclined to order costs in the cause. If the parties are not agreeable to such an order, the Plaintiff is to serve and file his submissions on costs within 21 days from the date of this Decision, and the defendants will have 21 days thereafter to serve and file their submissions. The submissions to be no more than three pages, double spaced, exclusive of any cost outline and offers to settle. Any case law to be hyperlinked in their submissions. If the plaintiff wishes to file a reply, he may do so within seven days after receipt of the defendants’ submissions. The reply to be no more than one page double spaced. Submissions are to be filed with the court. If no submissions are received within the time period set out herein, an order will be made that there will be no costs.
Released: November 1, 2021
NEWMARKET COURT FILE NO.: CV-20-00539-00
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Anthony Sorichetti
Plaintiff
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
DECISION
Justice P.W. Sutherland
Released: November 1, 2021
[^1]: 2021 ONSC 2816 [^2]: Factum of the plaintiff at para. 9. [^3]: [1996] O.J. No. 4399 (GD), para. 27. Also see Stans Energy v. Krgyz 2015 ONSC 3236 (Div. Ct.) at paras. 37-39 and Chitel v.Robarts (1982) 39 O.R. (2d) 513, 1982 1956 (ON CA). [^4]: Newtee Print & Copy Inc. v. Woodley,[2001] O.J. No. 4180 SCJ leave to appeal refused, [2001]O.J. No. 5634 (Div. Ct.) [^5]: Rosenhek v. Kerzner, [1997] O.J. No. 2932 (GD). [^6]: 830356 Ontario Inc. v. 156170 Canada Ltd [1995] O.J. No. 687 (GD) [^7]: Ibid. [^8]: Mueller-Hein Corp. v. Donar Investments Ltd.,[2003] O.J. No. 2302 (SCJ) at para 48. Also see Promo-AD v. Kellar 2013 ONSC 1633 (SCJ-Comm. List) at para. 52. [^9]: H.J. Sutton Industries Ltd (cob Quality Home Products Ltd) v. Assured-Packaging Inc.,[2001] O.J. No. 5634. [^10]: Supra, note 3, at para. 28. [^11]: See section 101 of the Courts of Justice Act and Choksi v. Peerani 2013 ONSC 5687. [^12]: The Assante account ($288,000), the TD Bank account ($30,378) and Meridian account ($13,179)