COURT FILE NO.: CV-21-749 DATE: 20220107

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Sapex Canada Inc. Plaintiff – and – 2264233 Ontario Inc. cba Georgina Health Centre, Georgina Health Centre Inc. and Dieneen Lepp Defendants

COUNSEL: Matthew Kersten, for the Plaintiff Michael Gayed, for the Defendants

HEARD: December 13, 2021

REASONS FOR DECISION

DE SA J.:

Overview

[1] The Plaintiff, Sapex Canada Inc. (“The Plaintiff” or “Sapex”), brings this urgent motion, with notice to the Defendants, 2264233 Ontario Inc. cba Georgina Health Centre (the “Tenant”), Georgina Health Centre Inc. (“Georgina Health”) and Dieneen Lepp (“Lepp”), seeking a Mareva injunction against the Defendants.

[2] On or about November 17, 2021, the Plaintiff became aware that Lepp was selling her primary residence, located at 714 Laidlaw Crescent, Kingston, Ontario (“the Kingston Property”). The listing agreement with the real estate agent for the Kingston Property was entered into on November 3, 2021. The Property sold on November 11, 2021 for $525,000 and was scheduled to close December 16, 2021.

[3] On the basis of the intended disposition of the Kingston Property, the Plaintiff brought this motion for a Mareva injunction as against the Defendants, and Lepp in her personal capacity and in her capacity as an officer and director of 2264233 Ontario Inc. (the “Tenant”) and Georgina Health Centre Inc. (“GHC”). The Plaintiff takes the position that the sale of the Kingston Property provides evidence that the Defendants are attempting to dissipate assets with a view to avoiding judgment.

[4] The Defendants take the position that the Plaintiff’s election to proceed by way of Simplified Procedure precludes it from seeking injunctive relief. Even if the Court does have the jurisdiction to grant injunctive relief, the Defendants argue that the Plaintiff has not met the requirements for a Mareva injunction.

[5] I disagree with the Defendants that the Court lacks the jurisdiction to make the requested order. However, having reviewed the material filed, I am not satisfied that there is anything untoward regarding the sale of the Kingston Property, nor am I of the view Ms. Lepps’ conduct is directed at dissipating assets to avoid judgment.

[6] On December 14, 2021, I dismissed the motion with reason to follow.

[7] These are the reasons for my decision.

Summary of Facts

Background

[8] The Plaintiff Sapex Canada Inc. is the landlord of a plaza located at 45 Gristmill Road, Holland Landing, Ontario (the “Plaza”). By lease dated October 23, 2015, the Plaintiff leased Unit 3 and Unit 9 of the Plaza (the “Leased Premises”) to the Defendant 2264233 Ontario Inc. (the “Tenant”). The Defendants, Georgina Health Centre (“GHC”) and Dieneen Lepp (“Lepp”) are listed as indemnifiers of the lease.

[9] The Plaintiff commenced this action for breach of lease by Statement of Claim issued March 1, 2021 under the Simplified Procedure.

[10] The lease between the Plaintiff and the Tenant commenced on December 1, 2015 and was scheduled to conclude on November 20, 2022. The Claim has alleged that the Tenant was consistently late in paying its rent for the Leased Premises.

[11] The Plaintiff thereafter purported to terminate the Lease with the Tenant by notice dated February 4, 2020. The Plaintiff issued this notice due to alleged rent arrears in the amount of $21,005.06. The Plaintiff leased the Leased Premises to another unit holder of the Plaza, Ultimate Health Care in October, 2020.

[12] As a result of the Tenant’s breaches and defaults, Sapex has claimed liquidated damages and losses in the principal amount of $191,599.66 comprised of arrears of rent, costs of recovering and reletting the Premises and liquidated damages in respect of the benefit lost for the remaining balance of the term under the Lease. Sapex made, and continues to make, efforts to mitigate its damages. The principal amount of the claim is now $110,905.38.

The Sale of the Kingston Property and Purchase of the Harrowsmith Property

[13] Lepp was residing at 718 Laidlaw Crescent in Kingston (the “Kingston Property”). She has owned the Kingston Property since 2018.

[14] In October, 2021, Lepp was searching for an older home with a larger parcel of land and, by Agreement of Purchase and Sale dated October 18, 2021, Lepp purchased 3989 38 Road in Harrowsmith (the “Harrowsmith Property”) for $435,000.

[15] The purchase of the Harrowsmith Property was originally scheduled to close on January 14, 2022 to permit Lepp time to sell the Kingston Property. However, given the quick sale of the Kingston Property in November 2021, Lepp moved forward the closing of the Harrowsmith Property to December 3, 2021.

[16] Ultimately, the closing on the Harrowsmith Property had to be moved to December 9, 2021 to arrange for a bridge loan to finance the purchase given that the Kingston Property was closing on December 16, 2021.

[17] The Parcel Register for the Harrowsmith Property makes clear that Lepp is now the owner of the Harrowsmith Property. The Parcel Registrar reflects that the Harrowsmith Property closed on December 9, 2021. As indicated on the Parcel Registrar, the Harrowsmith Property was purchased by Ms. Lepp for $435,000. The first and second mortgages for the Harrowsmith Property of $282,750 and $65,250 are reflected on title. These mortgages leave Ms. Lepp equity in the Harrowsmith Property of approximately $87,000.

[18] The closing on the Kingston Property was scheduled for December 16, 2021. The Agreement of Purchase and Sale and the trust ledger statement confirm the closing date of December 16, 2021.

[19] Two mortgages are currently registered on title to the Kingston Property: one by Equitable Bank and a second by Community Trust. The current amounts of these mortgages are, respectively, approximately $235,000 and $135,000. The Trust Ledger also references the Promissory Note relating to the bridge loan used to finance the Harrowsmith Property.

[20] The Trust Ledger also shows the majority of the funds from the sale of the Kingston Property will go to pay the outstanding mortgages on the Property as well as the bridge loan of $111,000 taken out to finance the Harrowsmith Property. After expenses are paid, Ms. Lepp will have a cash balance of just over $20,000.

Analysis

1) Does this Court have jurisdiction to grant a Mareva injunction in matters proceeding under the Simplified Procedure?

[21] Rule 76.02(1) of the Rules of Civil Procedure requires that the Simplified Procedure be used if the claim is below $200,000 and the claim is exclusively for money, real property, and personal property.

[22] While the use of Simplified Procedure is mandatory in these cases, a plaintiff has the option of bringing a claim under the Simplified Procedure in any case, even if the value of the plaintiff’s claim is higher than $200,000 – subject to the defendant objecting.

[23] Rule 76.01 of the Rules of Civil Procedure provides that the Simplified Procedure does not apply to: Class proceedings, Construction Act actions (except trust claims), Case managed actions, actions commenced or continuing where a jury notice is delivered in accordance with subrule 76.02. These types of actions are inherently complex and therefore the ordinary civil procedures must apply to these actions so that they can proceed efficiently and fairly.

[24] According to the Defendants, the wording of Rule 76.02(1) of the Rules of Civil Procedure specifically limits the jurisdiction of the court to matters involving “money, real property, and personal property.” If the plaintiff seeks alternate relief like an injunction, as in this case, the Defendants maintain that the action must proceed by way of the ordinary procedure.

[25] Notably, the Defendants do not object to the matter continuing under the Simplified Procedure. Rather, the Defendants maintain it is simply a question of the Court’s jurisdiction to grant the relief sought.

[26] In support of their position, the Defendants rely upon the cases of De Rose & Associates v. Cariati, 2007 ONSCDC 46707, pp. 3 and 4, para. 6 and Gensteel Doors Ontario Inc. v. All Can Doors & Hardware Inc., [2016] ONSC 2026 (S.C.J.(Master)), pp. 1 and 3, paras. 1, 4 and 12.

[27] I disagree with the Defendants that this Court lacks the jurisdiction under the rules to grant an injunction in a matter proceeding by way of the Simplified Procedure.

[28] Rule 76.01(2) of the Rules of Civil Procedure provides that the rules that apply to an action apply to an action that is proceeding under this Rule, unless this Rule provides otherwise. O. Reg. 284/01, s. 25.

[29] As evident from the relevant provisions, while the Simplified Procedure is mandatory for matters which are under $200,000 where the claim is exclusively for money, real property, and personal property, it remains available for other matters. In fact, Rule 76.02(3) of the Rules of Civil Procedure specifically provides that the Simplified Procedure may be used in any other action at the option of the plaintiff, subject to subrules (4) to (9).

[30] It is only those matters specified in the section that are precluded from proceeding under the Simplified Procedure.

[31] I also disagree that the main action must be removed from the Simplified Procedure when ancillary relief like an injunction is sought.

[32] Indeed, requiring the parties to move the main action over to the ordinary procedure whenever injunctive relief is requested would not only waste judicial resources and be a source of inefficiency but would have the effect of actively discouraging the public from utilizing the Simplified Procedure process, contrary to the intent of the legislature which increased the monetary limit to apply to claims up to $200,000.

[33] Regardless, even if the provision were interpreted in the way suggested by the Defendants, it would not limit this Court’s jurisdiction to grant injunctive relief where warranted. The rules are to be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits. Rule 1.04 of the Rules of Civil Procedure.

2) Should a Mareva injunction be granted in this case?

[34] Rule 40.01 of the Rules of Civil Procedure provides that an interlocutory injunction under section 101 of the Courts of Justice Act may be obtained on a motion to a judge by a party to a proceeding or an intended proceeding.

[35] Interim Mareva injunction orders are granted with a view to freezing and preserving the assets of parties to ensure that the assets are available for execution in satisfaction of any judgment adverse to the parties. While the general principle remains that a party to a proceeding may not obtain execution before judgment, the Mareva injunction doctrine is a limited exception to this rule: Chitel v. Rothbart, (1982), 39 OR (2d) 513 (CA), at paras. 30-32.

[36] To obtain a Mareva injunction, the moving party must establish that:

1. it has a strong prima facie case;
2. there is a real and genuine risk that the defendant will put assets beyond the reach of creditors for the purpose of avoiding judgment;
3. the moving party will suffer irreparable harm; and
4. the balance of convenience favours the moving party.

Chitel v. Rothbart, ibid, at para. 5; Chitel v. Rothbart, supra note 35, at para. 56; RJR-MacDonald Inc. v. Canada (Attorney General), 1994 SCR 117 at p. 335-343.

[37] I am satisfied that there is a strong prima facie case for a breach of a commercial lease and the indebtedness of the Defendants. While the precise amounts owing may be in dispute, I am satisfied that the Plaintiff is likely to succeed in obtaining judgment against the Defendants.

[38] However, I am not satisfied on the basis of the materials filed that the there is a real and genuine risk that the defendant will put assets beyond the reach of creditors for the purpose of avoiding judgment.

[39] The Plaintiff submits that the risk of dissipation can be inferred by the past and present conduct of Lepp. He relies on the Defendants failure to pay rent, and the fact that Lepp is selling the Kingston Property.

[40] I find nothing unusual in Ms. Lepp’s decision to move from Kingston to Harrowsmith. She has provided the Parcel Register confirming her ownership/purchase of the property in Harrowsmith and the Trust Ledger showing the intended allocation of the proceeds from the sale of the Kingston Property. Most of the equity from the Kingston Property has been transferred to the Harrowsmith Property which is within the jurisdiction.

[41] Furthermore, the corporate Defendants are still going concerns. There is no evidence filed by the Plaintiff indicating any attempt to shut down or close up the Defendant corporations.

[42] I am not satisfied that Ms. Lepp’s conduct is directed at frustrating any judgment that the Plaintiff may ultimately obtain against her or the corporate Defendants.

[43] I am also satisfied that the balance of convenience militates against granting the injunction in the circumstances.

[44] The motion is dismissed.

Justice C.F. de Sa

Released: January 7, 2022