Court File and Parties
COURT FILE NO.: CV-18-133985 DATE: 20220502 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Reza Hassim Zadeh Tabrizi a.k.a. Reza Hassan Zadeh Tabrizi, Plaintiff AND: Majesty Development Group Inc., Xing Quan Wang, Yu Sheng Xiao and Century 21 South Breeze Realty Inc., Defendants
BEFORE: Justice V. Christie
COUNSEL: Esmaeil Mehrabi, Counsel, for the Plaintiff Kenneth MacDonald, Counsel, for the Defendants, Majesty Development Group Inc., Xing Quan Wang, Yu Sheng Xiao
HEARD: April 29, 2022
Endorsement
Overview
[1] This is a motion brought by the Plaintiff asking for various forms of relief as follows:
a. Determination as to whether the Mareva injunctions ordered by Justice Charney on January 22, 2018, and Justice Sutherland on November 10, 2021, can continue post-judgment to be used in aid of execution;
b. An order setting aside the Mareva injunctions issued against the Plaintiff;
c. In the alternative, an order lifting the Mareva injunctions, after the Defendant, Majesty Development Group Inc., registers its writ of seizure and sale against the Plaintiff;
d. In the further alternative, an order varying Justice Sutherland’s Order of November 10, 2021, unfreezing the bank accounts belonging to the Plaintiff and Parsi Nick Ltd. in order for the Plaintiff to obtain funds for his ongoing living expenses and payment of funds to his legal counsel, including funds that are owed to his trial counsel;
e. An order varying the Mareva injunctions to i) allow the Plaintiff to enter into a proposal and/or assignment into bankruptcy; and ii) assign all his assets to a licenced trustee;
f. An order that upon assignment of all his assets to a licenced trustee in bankruptcy, both the Mareva injunctions are set aside.
[2] The Plaintiff argued that the litigation and the two Mareva injunctions have created a myriad of legal and financial issues for the Plaintiff which need to be addressed now that the trial judgment has been released. The Plaintiff claimed that he and his family have endured considerable financial and mental stress resulting from the injunctions. The Plaintiff disagrees with the allegations contained in the materials filed with the court on the injunctions and asserts that he never attempted to liquidate his assets to avoid paying any future judgment. As this matter is now completed, and Majesty has not moved to continue the Mareva injunctions, the Plaintiff argued that he is no longer subject to the terms of the injunctions, as there has been a final determination of liability and all interlocutory orders have merged with the judgment. Having said that, the orders are still being enforced by the institutions.
[3] The Plaintiff argued that there is no justifiable reason to continue the Mareva injunctions post-Judgment in aid of execution and that continuing to do so is prejudicial to the Plaintiff’s livelihood and continues to cause grave hardship on his family where there is no need. The Plaintiff further argued that the judgment award, less the deposit being held in trust, is more than covered by the equity in the residence without the need to continue the second Mareva injunction. Alternatively, the Defendant, Majesty, could register a writ of seizure and sale, thereby obviating the need for the injunction.
Background Facts
[4] This action was commenced in response to a dispute that arose from an aborted real estate transaction in relation to 15 Blackforest Drive, Richmond Hill, Ontario. In that deal, the Plaintiff was the proposed purchaser and the Defendant, Majesty Development Group Inc. (“Majesty”), was the proposed seller. After the deal did not close as scheduled on December 15, 2017, it was the Plaintiff that initiated this claim for breach of the Agreement of Purchase and Sale. A defence and counterclaim were made in response.
[5] In 2018, Majesty brought an application to obtain the deposit of $150,000.00 that the Plaintiff provided in relation to the real estate transaction. The deposit was ordered to be held in trust with the Defendant, Century 21 South Breeze Realty Inc., pending trial.
[6] On January 18, 2018, Majesty brought an ex parte motion for an injunction to prevent the sale and transfer of the Plaintiff’s residence located at 68 McCallum Drive, Richmond Hill, Ontario, where the Plaintiff resides with his family. Charney J. issued the Mareva injunction against the residence on January 22, 2018. The endorsement stated in part:
[19] Given the evidence before me, I am satisfied that there is a real risk of removal of assets if the McCallum home is sold. The timing of the listing of the property for sale one week after Majesty advised that it would not sign the application papers, and Tabrizi’s subsequent extended visit to Iran, provide grounds for believing that there is a risk of the assets being removed before judgment. Risk of removal can be established by inference, and such an inference can be drawn on the evidence presented in this motion…
He ordered that the Plaintiff pay the net proceeds of any sale of his home into court and that he was not to transfer title or put any further mortgage or encumbrance on his home. This order was to expire in 10 days as it was brought without notice.
[7] On January 30, 2018, this Mareva Order was extended by Speyer J. until further order of the court. In her endorsement, Speyer J. referred to an email dated July 27, 2017 that the Plaintiff argued was not brought to the attention of Charney J. Speyer J. stated in part as follows:
…On this motion, the newly acquired information must be considered to determine whether the strong prima facie case initially established by the Applicants before Charney J. has been undermined. I conclude that it has not been undermined. The respective obligations and rights of the applicant and respondent were established by the agreement of purchase and sale, and the single amendment made thereto…
I conclude that there has been no change in the apparent strength of Majesty’s case and that it remains a strong prima facie case.
The Respondent has not argued that any re-consideration of Charney J.’s conclusions regarding the other pre-conditions for this injunction is warranted, or that the balance of convenience has changed.
[8] In August 2019, the Plaintiff was required to obtain refinancing for the residence as the mortgage had matured. Majesty opposed the refinancing. A motion was brought on August 21, 2019, which was heard by this Court. This Court approved the refinancing which merely entailed switching the lender from CIBC to HSBC, without changing the amount of the encumbrance.
[9] In 2020, the Plaintiff attended HSBC to attend to banking matters. At that time, he accepted an offer for a preapproved line of credit which resulted in a new mortgage being registered by HSBC on the residence. Specifically, on April 28, 2020, HSBC registered a mortgage on the Plaintiff’s home which had the effect of increasing the existing mortgage from $662,801.70 to $1,150,000.
[10] In 2021, Majesty brought another ex parte motion to freeze all of the assets of the Plaintiff, including all of the Plaintiff’s bank accounts. Sutherland J. issued the Mareva injunction freezing all of the Plaintiff’s assets on November 10, 2021. Specifically, the court ordered that the bank accounts and all worldwide assets of the Plaintiff and his business, Parsi Nick Ltd., be frozen until further order of the court. There were also disclosure obligations, including:
THIS COURT ORDERS that Tabrizi, Parsi and PP provide, within fifteen days of this order, sworn statements describing the nature, value, and location of the assets referred to above;
THIS COURT ORDERS that Tabrizi, Parsi and PP provide to Majesty, within thirty days of the order, copies of all cheques either of them issued from any of their bank accounts, and all records showing the payee and amount for all transfers, from April 1 2020 to the present;
THIS COURT ORDERS that Tabrizi provide to Majesty, within fifteen days of this order, a full accounting of the proceeds of the mortgage Tabrizi registered on 68 McCallum Drive, Richmond Hill, Ontario (“McCallum”) on April 28, 2020) as instrument #YR3092757 (“the Mortgage”), including the exact present whereabouts of those proceeds and a full description of any asset(s) purchased with those proceeds including, in the case of real property, the deeds, addresses and legal descriptions, and in the case of investments, the financial institution, account numbers and account statements;
The Defendant submitted that the Plaintiff has not complied with the disclosure obligations.
[11] Case conferences were held on November 12 and 15, 2021 before de Sa J. At this time, the Defendants requested that, due to the Plaintiff’s willful and ongoing disregard for the court orders, the Plaintiff’s claim and defence to counterclaim should be struck. The Court stated as follows:
[8] I will not strike the plaintiff’s pleadings. The mortgage in issue was placed well over a year ago. The parties are on the eve of trial. The plaintiff has representation and is prepared to proceed to trial. In my view, at this stage, the matter should be heard on the merits.
[9] Given the injunction of Sutherland J., the plaintiff is no longer in a position to pay his living expenses, or even the legal fees/expenses associated with this action.
[13] The plaintiff has advised that he has just over $160,000 in his bank accounts which are the funds obtained from HSBC (the balance remaining from the monies advanced in April 2020). According to the plaintiff, he requires these funds to pay his day to day living expenses, to pay the mortgage on the Property, and to pay his legal fees.
[15] I am prepared to release sufficient funds to permit the plaintiff to cover his living expenses, the mortgage, and pay for his legal expenses. I have asked counsel to provide me with the particulars relating to the account to be unfrozen and the amount required to meet these obligations.
[16] It is unclear how the plaintiff obtained a line of credit from HSBC against the Property in the face of the injunction (which was registered on title). However, the plaintiff is not to draw any additional funds against the house moving forward.
[12] At a case conference on November 18, 2021, de Sa J. ordered that the Mareva injunction of Sutherland J. (November 10, 2021) was to be “extended until further order of this Court” and that all accounts and assets were to remain frozen, with the exception of one account, which could be accessed solely for legal fees and personal expenses up to a maximum of $45,000.
[13] This action was the subject of a three-week trial before de Sa J., beginning on November 22, 2021. The trial ended on January 6, 2022.
[14] Following the completion of the trial, but before judgment was delivered, on February 2, 2022, the Plaintiff brought a motion before Sutherland J. for an Order varying the Mareva injunction Order of Justice Sutherland from November 10, 2021. The court permitted the lifting of the Order to release $8000 from specific accounts. Otherwise, Justice Sutherland’s Order of November 10, 2021 was to “remain in effect until further Order of this court”.
[15] On March 29, 2022, de Sa J. released his decision which found the Plaintiff liable to Majesty for damages in the amount of $659,570.00, the difference in sale price between the Agreement of Purchase and Sale and the actual sale in February 2019, including carrying costs. The trial judge stated in part as follows:
[86] I find that the Plaintiff breached the APS when he made the decision not to close. In my view, his decision to exit the APS related primarily to the drop in the real estate market.
[88] Majesty takes the position that the Plaintiff’s failure to close related to his inability to obtain the requisite financing. According to the Plaintiff, he had the equivalent of close to $1,000,000 in an Iranian bank account. He had his own home to get a line of credit for financing. He had a commitment from the bank for close to $1,000,000 ($930,000 based on appraised value of $1.7 million). He was positioned to pay for the Property on closing.
The judgment did not deal with the Mareva injunctions. Further, de Sa J. allowed the parties to make written submissions as to costs, a process which is not yet complete. However, it is known that the Defendants are seeking costs in the approximate amount of $160,000.
[16] On April 1, 2022, the matter came before Sutherland J., during which time the Plaintiff argued that the injunction orders were or should be terminated. The endorsement of Sutherland J. reads in part as follows:
Justice De Sa has rendered his Decision from the trial. The issue of the mareva injunction was not dealt with. The plaintiff wants the injunction lifted given final Judgment has been rendered. The Defendants oppose the lifting of the mareva injunction.
A motion will need to be argued. I have given the parties my views.
The parties agree that the issue for this motion is whether the injunction orders should continue after the Judgement of De Sa J. I am not seized.
Sutherland J. then set a timetable for the serving and filing of material, and scheduled this motion.
Analysis
Does Majesty meet the test to continue the Mareva injunctions post-judgment in aid of execution?
[17] Section 101 of the Courts of Justice Act states:
101 (1) In the Superior Court of Justice, an interlocutory injunction or mandatory order may be granted or a receiver or receiver and manager may be appointed by an interlocutory order, where it appears to a judge of the court to be just or convenient to do so.
(2) An order under subsection (1) may include such terms as are considered just.
[18] Rule 40.01 of the Rules of Civil Procedure states:
40.01 An interlocutory injunction or mandatory order under section 101 or 102 of the Courts of Justice Act may be obtained on motion to a judge by a party to a pending or intended proceeding.
[19] In Vannatto Estate v. Smith (c.o.b. Bayview Contractors), [1999] O.J. No. 2264 (S.C.), the court held at paragraph 8 as follows:
[8] On a motion to continue an injunction granted without notice the plaintiff has the burden of satisfying the court that the order should stand. On the evidence before me, I conclude that the plaintiff has not satisfied that burden. Accordingly, I am not prepared to continue the order.
[20] In Lamont v. Ken [1999] O.J. No. 277 (Ont. Gen. Div.), Justice Sachs referred to Canadian Pacific Airlines Ltd. v. Hind (1981), 132 O.R. (2d) 591 at 594 (H.C.), wherein Grange J. established a five-part test for the court to consider when determining whether to continue a Mareva injunction post-judgment in aid of execution. The requirements cited were as follows:
a) the plaintiff must make full and frank disclosure of all material facts within his/her knowledge;
b) the plaintiff must give particulars of the claim against the defendant, stating the grounds of the claim and the amount thereof, and the points that could be fairly made against it by the defendant;
c) the plaintiff must give grounds for believing that the defendant has assets in the jurisdiction;
d) the plaintiff must give grounds for believing that there is a real risk of the assets being removed out of the jurisdiction, or disposed of within the jurisdiction, or otherwise dealt with so that the plaintiff will be unable to satisfy a judgment; and
e) the plaintiff must give an undertaking as to damages.
See also: Coast to Coast Against Cancer v. Sokolowski, 2016 ONSC 170 at para. 6; American Environmental Container Corp. v. Kennedy et al, 2014 ONSC 4438, para. 3
[21] In Alfano v. Piersanti, 2012 ONCA 612, the Ontario Court of Appeal held that a Mareva injunction can remain in place even if an appeal has been commenced, because the order is not for enforcement but to preserve and protect assets. The Court stated:
[13] During oral argument, counsel for the appellants properly acknowledged that this appeal turns on whether the motion before Newbould J. leading to the Impugned Order was a motion to enforce the Trial Judgment. In my view, neither the receivership order nor the Mareva injunction granted by Newbould J. constituted steps under the Trial Judgment or for its enforcement within the meaning of rule 63.03(1).
[14] Firstly, the Impugned Order was not a “step” under the Trial Judgment. The relief granted by Newbould J. was in a separate action with different parties and different causes of action which, as I have said, included reliance on the Fraudulent Conveyances Act and the Assignments and Preferences Act.
[15] Secondly, the Impugned Order was protective and preservative in nature. Cumming J. made this observation in his endorsement. The only relief sought on the motion before Newbould J. related to the preservation of assets pending determination of the respondents’ new action. The Impugned Order therefore did not amount to enforcement of the Trial Judgment. I agree with the respondents’ submission that the effect of the stay of the Trial Judgment was to suspend their enforcement rights. However, their rights as judgment creditors remained intact pending appeal.
[16] Furthermore, the appointment of a receiver and the granting of a Mareva injunction are not necessarily orders for enforcement in any event. Indeed, in this case, the receiver was appointed pursuant to s.101 of the Courts of Justice Act.
[22] Firstly, the Plaintiff argued that the Defendant, Majesty, has not brought a motion to continue the Mareva injunctions in aid of execution. However, given the reality that the Plaintiff finds himself in, considering institutions are still enforcing the injunctions and the accounts remain frozen, the Plaintiff had no choice but to bring his own motion. According to the Plaintiff, however, this does not change the onus and burden, and therefore, Majesty still has the onus of proving that it meets all parts of the test.
[23] In this case, the two injunctions are to continue until further order of the court. Therefore, there is no question that the injunctions are still in place despite the judgment on the substantive action. This court has not been provided with any binding or persuasive authority to support an argument that the injunctions ended with the judgment, however, cases have been provided to demonstrate that injunctions can be in place post judgment.
[24] Having said that, however, this court agrees that, despite the fact that Majesty has not brought this motion, rather it is a motion brought by the Plaintiff, the Defendant, Majesty, still carries the onus of demonstrating that the injunctions should continue.
[25] According to the Plaintiff, the Defendant would be able to satisfy points B and C of the test set out above. As for point B, there is now a judgment concluding this matter and, therefore, no dispute as to the merits of the claim. As for point C, the Plaintiff admittedly has assets in Ontario.
[26] The Plaintiff argued that the Defendant would fail to meet the test in relation to points A, D and E and that this Court’s discretion should be exercised in light of the change in circumstances of this case, given that the equitable remedy of a Mareva injunction is only warranted when it is just and convenient pursuant to the Courts of Justice Act. See: SFC Litigation Trust (Trustee of) v. Chan, 2017 ONSC 1815, para. 29 and 32.
[27] In relation to point A, the Plaintiff argued that Majesty has failed to make full and frank disclosure when obtaining the ex parte orders. Specifically, the Plaintiff stated that Majesty falsely argued that Tabrizi put his residence on the market in September 2017 with the intention of dissipating his assets in order to avoid paying any future judgment. The Plaintiff stated that the real reason for putting the house on the market in September 2017, prior to any contemplated litigation, was with the hopes of selling it in order to close the Blackforest deal which was to occur a few months later. It is of note that when the matter returned before Justice Speyer, counsel for the Plaintiff (not counsel on this motion) did not raise the issue.
[28] This court accepts that a failure to provide full and frank disclosure of all relevant facts, or a misleading of the court on material facts, allows the court to exercise its discretion against continuing the injunction. In this case, however, this court is not convinced that this is a failure to make full and frank disclosure of all relevant facts, or any misleading on material facts. The Plaintiff’s intention with respect to putting his house on the market was subject to interpretation. One interpretation could be that he did so to complete the Blackforest deal. Another interpretation could be that he did so in order to liquidate assets, anticipating that the Blackforest deal would go sideways. It is not for this court to question the conclusions reached by Charney J. on this issue – conclusions that were not challenged when the matter returned before Speyer J.
[29] In relation to point D, the Plaintiff argued that there is no real risk of dissipation of assets, or at least that Majesty has failed to demonstrate this to the court.
[30] It must be shown that the person is taking steps to put his assets out of the reach of creditors, either by removing them from the jurisdiction of the court or by dissipating or disposing of them other than in the normal course of business or living. See Chitel v. Rothbart (1983), 39 O.R. (2d) 513 (ON CA).
[31] The Plaintiff argued that the line of credit obtained in 2020 does not lead to a demonstrated risk, despite the fact that the Defendant relies on this fact extensively.
[32] This court is convinced that there remains a real risk of the dissipation of assets for the following reasons:
a. Ignoring completely the comments made in the affidavit presented by Majesty on this motion, it defies logic and common sense that the Plaintiff did not know that the line of credit obtained in 2020 would result in a further mortgage to the home. It would have been clear on documents signed by the Plaintiff what was occurring. It is obvious that the bank was unaware of the Mareva injunction on the residence at that time, and clearly did not do its due diligence. However, the Plaintiff certainly knew that the Mareva injunction prohibited any further mortgages, liens, encumbrances against the home. This was abundantly clear. While HSBC may be on the losing end of an argument to recoup their losses due to their lack of diligence, this is irrelevant to the Plaintiff’s demonstrated intention to further encumber the residence in violation of the injunction. His willingness to do this, not the ultimate result, creates the risk. It is also of note that the Plaintiff has refused to provide any documentation in relation to this line of credit.
b. Not only did he accept this line of credit, willingly, but also borrowed $250,000 against it before the remaining funds were frozen.
c. More recently, the Plaintiff purchased a vehicle worth over $100,000. This vehicle has been repossessed by the bank because the bank refused to draw payment from the account as a result of the second Mareva Order. Again, this shows an intention on the Plaintiff’s part to attempt to use assets from the frozen accounts. While he has been unable to achieve his purpose, this does not remove the risk that has been created.
d. The Plaintiff has failed to comply with the disclosure / production requirements of the November 10, 2021 order, which includes orders that the Plaintiff provide a full description of all assets by November 25, copies of all cheques and transfers from his accounts by December 10, and a full accounting of the proceeds of the 2020 mortgage by November 15. The Plaintiff has not provided any information about assets since that time, except two or three bank statements sent out at the time of the case conferences with De Sa J. in November 2021 and Sutherland J. in February 2022.
[33] It is this court’s view that there is a real risk that the Plaintiff will dissipate assets if the freezing order is lifted.
[34] Finally, with respect to part E of the test, the Plaintiff argued that Majesty has failed to provide an undertaking for damages as required by Rule 40.03, since the previous undertakings are no longer valid as circumstances have changed. This court strongly disagrees. Firstly, counsel for the Defendant has indicated that Majesty is prepared to renew or provide further undertaking in relation to damages. However, there would seem to be no basis for such a renewal of the undertaking as it still exists. Any damages in relation to potential litigation with RBC for the car loan, frankly, were created by the Plaintiff in an attempt to utilize funds from accounts he was not entitled to use.
[35] While this court appreciates that there is no clear end in sight for the injunctions, this does not mean, as the Plaintiff suggests, that those injunctions will be in place forever. However, for the time being, assuming and accepting that the Defendant has the onus to demonstrate that the injunctions should continue, this court is satisfied that they have met that test.
[36] This court accepts that, typically, the Defendant could have the judgment signed and issued without the finality of the costs award and could then register writs of seizure and sale which would protect property from transfer. However, in this case a notice of appeal has been filed. Rule 63.01 states:
63.01 (1) The delivery of a notice of appeal from an interlocutory or final order stays, until the disposition of the appeal, any provision of the order for the payment of money, except a provision that awards support or enforces a support order.
In Fontaine v. Canada (Attorney General) 2012 ONCA 206, the court held that to qualify as an order “for the payment of money”, the order or applicable term must create a fixed debt obligation that is actual, not prospective or contingent on some other determination or satisfaction of various conditions precedent. This court is of the view that a writ of seizure and sale would fall within the terms of the automatic stay provision. Rule 60.02 states:
60.02 (1) In addition to any other method of enforcement provided by law, an order for the payment or recovery of money may be enforced by,
(a) a writ of seizure and sale (Form 60A) under rule 60.07;
(b) garnishment under rule 60.08;
(c) a writ of sequestration (Form 60B) under rule 60.09; and
(d) the appointment of a receiver.
It would seem clear that if the reasons for decision of de Sa J. were turned into an order, as the Plaintiff suggested, “any provision of the order for the payment of money” would be automatically stayed. It would make no sense whatsoever that the Defendant would then be able to move under Rule 60.02 to enforce an order for payment of money through a writ of seizure and sale, or by any other means, when that order for payment is stayed. It is the view of this court that this enforcement mechanism is not available to the Defendant at this time, therefore, the only means of protecting the assets is through the injunction mechanism.
[37] This court is satisfied that there is a real risk of dissipation of assets so that the Plaintiff would be unable to satisfy the judgment. At this time, continued Mareva injunctions are the only mechanism to protect against that occurring.
Can the Mareva Injunctions be Varied to release funds to the Plaintiff for the purpose of paying legal fees and living expenses?
[38] There is no question that the court has the authority to vary a Mareva injunction to permit a party to maintain a certain standard of living and meet debts. It is common to see the release of funds for living and legal expenses. This has been done previously in this case.
[39] In Canadian Imperial Bank of Commerce v. Credit Valley Institute of Business and Technology, the Defendants sought to vary an injunction order previously made against them to permit payment of various expenses, including ongoing living and legal fees for civil and criminal counsel. The court stated in part:
[17] The purpose of the Mareva injunction is a limited one. It is meant to restrain a defendant from taking unusual steps to put his assets beyond the reach of the plaintiff in order to thwart any judgment the plaintiff might eventually obtain. It is not meant to give the plaintiff any priority over other creditors of the defendant, nor to prevent the defendant from carrying on business in the usual course and paying other creditors. The nature of the Mareva is such that it is typically sought and granted, in the first instance, without notice to the defendant, but then is subject to a motion by the defendant to vary the injunction to permit payments in the usual course of business or living…
[18] This principle has been endorsed by the Supreme Court of Canada (referring with approval to the Iraqi Ministry of Defence decision) in Aetna Financial Services Ltd. v. Fegelman (1985), 15 D.L.R. (4th) 161 at 177. Thus, even where the Mareva injunction may have been originally granted in a broad and sweeping form, this is in contemplation that it will likely later be modified to permit the defendant to maintain his normal standard of living and to meet legitimate debt payments accruing in the normal course. It is common for such exemptions to include the payment of ordinary living expenses and reasonable legal expenses to defend the lawsuit: University of British Columbia v. Conomos, [1989] B.C.J. No. 2269 (B.C.S.C.); Kelly v. Brown, [1990] O.J. No. 419 (Ont.Ct.Gen.Div.); National Bank of Canada v. Melnitzer, [1997] O.J. No. 2424 (Ont.Ct.Gen.Div.); Pharma-Investment Ltd. v. Clark, [1997] O.J. No. 1334 (Ont.Ct.Gen.Div.); Halifax plc v. Chandler, [2001] E.W.J. No. 5249 (R.C.J.C.A.).
[21] The test to be applied in determining whether a defendant ought to be permitted to make payments out of funds subject to a proprietary injunction begins (as does the variation of a Mareva injunction) with a consideration of whether the defendant has established on proper evidence that he has no other assets available to him to pay the expenses. If the defendant passes that hurdle, the court must engage in a balancing exercise "as to whether the injustice of permitting the use of the funds by the defendant is out-weighed by the possible injustice to the defendant if he is denied the opportunity of advancing what may of course turn out to be a successful defence": Halifax plc v. Chandler at para. 17.
[40] The Plaintiff argued that, at this point, when the judgment has been rendered, it would be unjust to not unfreeze the bank accounts belonging to the Plaintiff and his business, Parsi Nick Ltd.
[41] This court agrees that the purpose of the Mareva injunction is not meant to give Majesty any priority over other creditors, nor to prevent the Plaintiff from living or paying other debt.
[42] The test to vary a Mareva injunction was set out in Credit Valley at paragraph 26 as follows:
a. Has the person established on the evidence that he has no other assets available to pay his expenses other than those frozen by the injunction?
b. If so, has the person shown on the evidence that there are assets caught by the injunction that are from a source other than the aggrieved party?
c. The person is entitled to the use of non-proprietary assets frozen by the Mareva injunction to pay reasonable living expenses, debts and legal costs. Those assets must be exhausted before the person is entitled to look to the assets subject to the proprietary claim.
d. If the person has met the previous three tests and still requires funds for legitimate living expenses and to fund his defence, the court must balance the competing interests of the aggrieved party in not permitting the person to use the aggrieved party’s money for his own purposes and of the person subject to the Mareva injunction, in ensuring that he has a proper opportunity to present his defence before assets in his name are removed from him without a trial. In weighing the interests of the parties, it is relevant for the court to consider the strength of the case.
[43] In this court’s view, the Plaintiff has not demonstrated that he has no assets available to pay his expenses other than those frozen by the Mareva injunctions. In his recent supplementary affidavit, the Plaintiff stated “I had some funds invested in the stock market; however, those investments lost substantial value due to market downturn a few years ago and their value is negligible”. He does not reveal the value or provide any documentation to demonstrate his definition of “negligible”, which is a relative descriptor.
[44] During the trial, the Plaintiff admitted that he is self employed when questioned by the trial judge. Clearly, the Plaintiff was able to qualify for a mortgage for over $600,000 from HSBC in August 2019 and to increase the mortgage to $1,150,000 in 2020. He has made trips to Iran. He committed to the purchase of a vehicle valued at over $100,000 in late 2020 or early 2021. He states in his affidavit that his monthly living expenses are just under $11,000. This court knows nothing about the household income or how this lifestyle is otherwise supported.
[45] Further, this court does not accept that the equity in the residence is sufficient as security for the judgment. Accepting the appraised value of the home as $1,660,000, as per the Plaintiff’s appraisal, and the outstanding mortgage of $853,804, there is approximately $806,196 in equity, which is jointly shared between the Plaintiff and his wife. The Plaintiff’s share is not enough to cover the judgment and any possible costs award.
Can the Mareva injunctions be varied to the extent of allowing the Plaintiff to enter into an assignment in bankruptcy, and thereafter vacate the Mareva Injunctions altogether, upon assignment of his assets to a trustee in bankruptcy?
[46] In the written materials, the Plaintiff stated that he is considering filing a notice of intention to make a proposal under the Bankruptcy and Insolvency Act. At the hearing, counsel for the Plaintiff made this sound like more of a certainty, although, he wished to organize the assets and debts in advance of filing notice. He suggested that there were still unknowns, such as the amount of costs from trial, as well as potential litigation in relation to the vehicle that was repossessed.
[47] It would appear to this court that those things are substantially quantifiable at this time. The Defendant, Majesty, has already presented its submissions in relation to the request for costs. It is unlikely that the court would award more costs than those being requested, therefore, a reasonable estimate can be provided. As for the vehicle, it would seem quite easy to estimate a loss, given the purchase price of the vehicle, and its used listed book value.
[48] During the submissions on this motion, it seemed likely that the Defendant, Majesty, would agree to an Order of this court that if a notice of intention to make a proposal in bankruptcy was filed, and if the ongoing injunctions stand in the way of a bankruptcy proceeding, there would be an agreement that the injunctions be lifted to allow the bankruptcy to proceed. The concern at the hearing, however, seemed to be the uncertainty as to whether a bankruptcy was going to be pursued. This court is optimistic that if the Plaintiff wishes to make a proposal under the Bankruptcy and Insolvency Act, the Defendant will agree to lift the injunctions. Given that, at the end of the hearing, the Plaintiff’s intention in relation to bankruptcy was still unclear, it would not be appropriate for this court to make any order in this regard.
Conclusion
[49] Having considered all of the circumstances, and having ignored completely the hearsay affidavit of Majesty, the Plaintiff’s motion is dismissed.
[50] If the parties are unable to agree as to costs of this Motion, the court will accept written submissions on costs, which shall be no more than three pages in length, excluding supporting documentation, and which shall be provided to the court office electronically, and to Bev.Taylor@ontario.ca, no later than 4:30 p.m. on May 9, 2022.
Justice V. Christie Date: May 2, 2022