SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Maddison Joe Holdings Inc. v. Mill Street & Co. Inc., All Source Security Container Mfg. Corp., Roy Murad and Noah Murad;
BEFORE: ASSOCIATE JUSTICE C. WIEBE
COUNSEL: Jason M. Berall for Madison Joe Holdings Inc. (“Madison”);
Michael Simaan for Mill Street & Co. Inc., All Source Security Container Mfg. Corp., Roy Murad and Noah Murad (together “the Defendants”);
HEARD: January 28, 2022.
REASONS FOR DECISION
1This is a motion by Madison for various relief concerning the enforcement of a $1.5 million judgment it has against the Defendants: answers to undertakings and refusals given at examinations in aid of execution of Roy Murad and Noah Murad; production as listed in the notices of examination; requiring a reattendance of both these Defendants at further examinations in thirty days; costs of the examinations in aid execution to date; and costs of this motion.
2In December, 2016 the Defendant, All Source Security Container Mfg. Corp. (“All Source”) issued three promissory notes in the amount of $1.1 million plus interest to Madison guaranteed by Mill Street & Co. Inc. (“Mill Street”), Roy Murad (“Roy”) and Noah Murad (“Noah”). The notes matured in December, 2017 and 2018. Noah was president of Mill Street at the time. Roy is Noah’s father. On March 10, 2020 Justice Kimmel granted summary judgment in favour of Madison as against the Defendants and later ordered costs in favour of Madison.
3On May 12, 2020 a secured creditor of Mill Street put Mill Street into receivership. There was also an appeal of the Kimmel judgment which was dismissed on April 6, 2021 with costs in favour of Madison.
4Madison proceeded to enforce the judgment. It scheduled examinations in aid of execution of Roy and Noah for September 30, 2021. The notices of examination contained a list of documents to be brought to the examinations. The two did not appear. After serving a notice of motion to compel their attendance, Roy and Noah attended at examinations on November 1, 2021. They brought no documents with them. They gave undertakings and refusals.
5This motion essentially concerns four assets. The key evidence about these assets on this motion is the following:
997322 Ontario Inc. (“997”): It is undisputed that this company is a 50% shareholder of Mill Street. In an examination, Noah described this company as “my father’s firm.” The corporation profile report for 997 shows Roy’s wife, Monica, as the sole director and officer and 15 Mill Street, Toronto as its registered head office. This is the home of Roy and Monica. The credit agreement between Mill Street and the secured creditor describes 997 as the “Murad Family Trust.” In an affidavit in the receivership, Roy described himself, not 997, as a shareholder in Mill Street. He later purported to correct this statement by saying that the shareholder was 997 and that he, Roy, was an authorized signing officer of 997. During his examination in aid of execution, Roy admitted to being employed by 997, being its “directing mind,” and having knowledge of its financial affairs. Roy admitted getting over a $1 million in compensation and dividends from 997.
2394419 Ontario Limited (“239”): It is undisputed that this company is the other 50% shareholder of Mill Street. Noah is the sole director and officer of 239. 239 leases cars Noah drives. In the credit agreement between Mill Street and the secured creditor 239 is described as the “Noah Holdco.” In his examination in aid of execution Noah claims that his wife is the sole shareholder of 239.
15 Mill Street: This is the home where Roy and Monica live. The registered owner is Monica. In his examination Roy admitted he “probably” guaranteed the mortgage on the premises. The house is listed for sale for $7,495,000. Again, the corporation profile report for Mill Street shows this property as a registered head office of the company.
128 Beverley Glen Blvd.: This is the home where Noah lives with his wife. Noah owns it jointly with his wife. They purchased it in 2018.
6Rule 60.18(2) provides a non-exhaustive list of issues that may be asked on an examination in aid of execution. They are the following:
a) the reason for nonpayment or nonperformance of the order;
b) the debtor’s income and property;
c) the debts owed to and by the debtor;
d) the disposal the debtor has made of any property either before or after the making of the order;
e) the debtor’s present, past and future means to satisfy the order;
f) whether the debtor intends to obey the order or has any reason for not doing so; and
g) any other matter pertinent to the enforcement of the order.
7In 6071376 Canada Inc. v. 3966305 Canada Inc., 2021 ONSC 205 at paragraph 20 Justice Gomery stated “that a judgment debtor examination is not a cat and mouse game or any kind of game at all. . . . The examining creditor has the right to obtain a full account of the debtor’s property, as well as how he has disposed of property he held, all the way back to the time that the debt came into existence. The debtor is obliged to cooperate and even assist in this exercise.”
8On the question of whether the debtor can be asked questions about property owned by a third party such as a spouse of the debtor, Associate Justice Dash stated in J.G. Young & Son Ltd. v. Gelleny 2002 CarswellOnt 3597 at paragraph 15, referring to Monkman v. Robinson(1886), 1886 CanLII 198 (MB QB), 3 Man. R. 640 (Man. Q.B.), “the creditor was not permitted to ask the debtor husband questions respecting his wife's property unless a connection was established between the debtor and his wife's property.” In the next paragraph His Honour went on to state that the debtor could be asked questions intended to establish that connection, namely about acts done in connection with the asset owned by the third party. For instance, he said, concerning a house owned by the debtor’s spouse, questions could be asked about whether the debtor supplied monies for the purchase of the house. In paragraph 14, he said that “the debtor must properly account for his business affairs.”
9The defendants had not answered their undertakings when this motion began. They have now purported to do so. This has reduced the issues in this motion.
10Using the above decisions as a guide, I make the following rulings on the contested questions given at Noah examination:
a. Q. 114, p. 28: To provide a copy of the closing documents for 128 Beverley Glen.
11This has not been answered. Noah is joint owner of this house. Clearly, a connection between him and this property is established by the evidence. This question must be answered.
b. Q. 140, p. 34-35: To advise whether the $50,000 a year from the new consulting job is also paid into the joint account.
12This was an undertaking. The answer was, “no, it was not put into the joint account.” Madison wants disclosure of the joint account into which the money was paid. In accordance with the debtor’s positive obligation to assist, this must be done.
c. Q. 198, p. 48: To advise where 239 does its banking.
13Noah refuses to answer this question as he says he is not the owner of 239. I am satisfied by the above noted evidence that there is a sufficient connection between Noah and 239 to require that he answer this question. I so order.
d. Q. 199, p. 48: To advise what bank, what type of account, what the current balance is, and to provide the bank statements for the last five years, and the account number for each account that 239 holds.
14Noah refuses to answer this question again as he says he is not the owner of 239. For the same reasons I gave in d above, I require that Noah answer these questions.
15Concerning the contested questions given by Roy, I make the following rulings:
e. Q. 78/79, p. 23: To advise who the other directing minds of 997 are.
16This question was not answered. The evidence above establishes a clear connection between Roy and 997. He admitted to being the company’s “directing mind.” This must be answered.
f. Q. 101/102, p. 28: To advise who started the company.
17This question was not answered. For the reasons in e above, it must be answered.
g. Q. 109/110, p. 32: To advise who does the accounting at 997.
18This question was not answered. For the reasons in e above, it must be answered.
h. Q. 111, p. 32: To provide a copy of 997’s annual financial statements from December 2016 to the present.
19This question was not answered. For the reasons in e above, it must be answered.
i. Q. 111, p. 32: To provide a listing of 997’s assets and liabilities.
20This question was not answered. For the reasons in e. above, it must be answered.
j. Q. 112, p. 33: To advise what bank 997 uses; a listing of all of 997’s bank accounts; and all of 997’s bank statements from 2016 to the present.
21This question was not answered. For the reasons in e. above, it must be answered.
k. Q. 142. p. 39: To advise what Mr. Murad got paid for the consulting role for Mill Street, for the most recent three years of his engagement as a consultant (2007-2010).
22This question was not answered. The evidence establishes a clear connection between Roy and Mill Street through Roy’s control of 997, the owner of the half the shares of Mill Street. As a result, it is acceptable to ask Roy about his business affairs concerning Mill Street. This would include the money he earned consulting for Mill Street even going back before the promissory notes in question. This may lead to assets of Roy that can still be recovered. This question must be answered.
l. Q. 162, p. 46: To advise how the purchase price was paid for 15 Mill Street.
23This question was not answered. The evidence establishes a clear connection between Roy and 15 Mill Street despite the fact that his wife is the registered owner of the property. He admits to guaranteeing the mortgage on the property. He controls the company whose registered head office is at this address. He lives at this address. At minimum, this foundation entitles Madison to ask further questions as to the potential connection between Roy and this property. This question must be answered.
m. Q. 163, p. 47: To provide a copy, if Mr. Murad can obtain them, of whatever bank records there are, showing the payment of the purchase price for 15 Mill Street.
24This question was not answered. For the reasons in l above, it must be answered.
n. Q. 168, p. 48: To advise how much the renovations cost for 15 Mill Street.
25This question was not answered. For the reasons in l above, it must be answered.
o. Q. 169, p. 48: To advise how the renovation of 15 Mill Street was funded.
26This question was not answered. For the reasons in l above, it must be answered.
p. Q. 169, p. 49: To provide a copy of any bank records that show the funding of the renovation of 15 Mill Street.
27This question was not answered. For the reasons in l above, it must be answered.
q. Q. 175, p. 50: To advise if Monica Murad does anything for work, how long she’s done that for, what company it’s for, and what her salary is.
28This question was not answered. Monica Murad is the sole director and officer of 997, is the spouse of Roy, and is the registered owner of 15 Mill Street, the registered head office of 997. Roy is the directing mind of 997, lives at 15 Mill Street and has guaranteed the mortgage on 15 Mill Street. There is enough of a connection here to justify a full examination of the bona fides of Monica Murad’s employment. This must be answered.
r. Q. 284, p. 76: To provide the account number for the BMO line of credit, how much the line of credit can be up to, and the terms of the line of credit.
29This question was not answered. It clearly concerns Roy’s assets and must be answered.
s. Q. 142, p. 40: To advise if there were funds received by Mr. Murad directly or indirectly from Mill Street during December, 2016 to the present, what bank account, bank, and bank account, etc., the funds went into.
30This is an undertaking. Roy answered that he cannot answer the question as he does not have access to the Mill Street books and records which are in the receivership. This is not responsive to the question as Roy would no doubt have his own books and records of what he and where he deposited the money. This question must be answered in full with a description of what Roy did to answer the question.
t. Q. 227, p. 62: To advise how much is still owing on the 2020 Ram pickup truck and to provide the financing statements.
31This is an undertaking. Roy answered by referring to “attachment no. 14.” Attachment 14 is the purchase agreement for the vehicle dated May 11, 2020. There is no reference in this document to what is presently owning on the vehicle. As a result, the answer is no responsive. It must be answered properly.
u. Q. 244, p. 65: Request was to provide Mr. Murad’s monthly bank account statements for the past five years.
32This is an undertaking. Roy answered by saying that he did not receive monthly statements for this account. I find that hard to believe. The evidence also indicates that Roy has a history of not being helpful in the receivership. Furthermore, Roy must actively assist Madison in elucidating his affairs. In this case, that means that he must ask the bank to confirm in writing that there were no monthly bank statements for this account in the last five years and must produce the bank’s response. If there such monthly statements, they must be produced with Madison reimbursing the Defendants for any reasonable costs they incur to get those statements. That is what I order.
v. Q. 249, p. 67: Request was to provide bank statements going back five years, and if Mr. Murad is unable to obtain those, for him to request them.
33This is an undertaking. Roy answered that he would get “what we have access to. We’re not going to pay for bank statements.” I understand that this remains outstanding. If the answer means getting the bank statements from the bank, the Defendants must be reimbursed for their reasonable costs in doing so. This question must be answered.
w. Q. 254, p. 69: To provide a listing of all shares of public and private companies that Mr. Murad owns and how and where those shares are held.
34This is an undertaking. Roy purported to answer this undertaking by enclosing an RRSP statement for him for the period November, 2017 to December, 2017. There is no list of holdings in this statement. Therefore, this answer is not responsive in any way. At minimum, Roy must provide an updated RRSP statement. He must also provide a list of all shares Roy owns as requested and indicate how and where these shares are held.
x. Q. 285/286, p. 76: To advise whether Mr. Murad is owing money to anyone other than the credit cards and BMO line of credit.
35This is an undertaking. Roy answered that he owes money to his wife and 997 towards funds advanced against their house. This is answer is responsive. Mr. Berall can pursue this question at the resumption of the examinations. I make no order on this question.
y. Q. 286, p. 77: To advise what the basis is for the money owing and provide a copy of the documents evidencing the debt, to the extent there are any.
36This is an undertaking. Presumably this relates to the previous question in x above. Roy answered that the registered mortgages on title show loans outstanding on Monica’s house totaling $2.8 on the first and second mortgages. This is not responsive to the question, which asks as to the basis for the monies owed by Roy to Monica and 997 and to provide copies of the documents evidencing the debt. This question must be answered.
z. Q. 287, p. 77: To advise who in the last 5 years Mr. Murad guaranteed any indebtedness for anyone else, the basis for that guarantee and why it was provided in connection with that debt, and any related documents evidencing the guarantees.
37This was an undertaking. Roy answered that he guaranteed the corporate debt of Mill Street and 997. This is partially responsive. He must answer the remainder of the undertaking.
aa. Q. 174, p. 49-50: To provide a copy of the most recent mortgage statement for 15 Mill Street with TD Bank.
38This was an under advisement that was not answered. For the reasons in l above this must be answered.
bb. Q. 174, p. 50: To provide a copy of any agreement signed in connection with the 15 Mill Street mortgage that would set out the other terms of the mortgage.
39This was an under advisement that was not answered. For the reasons in l above this must be answered.
cc. Q. 180, p. 51: To advise who received the $1,000,000 mortgage from Hillmount Capital and what bank account any money in connection with the mortgage went into.
40This was an under advisement that was not answered. For the reasons in l above this must be answered.
dd. Q. 181, p. 51: To provide the most recent mortgage statement from Hillmount Capital Mortgage.
41This was an under advisement that was not answered. For the reasons in l above this must be answered.
ee. Q. 181, p. 51: To provide a copy of any agreement signed in connection with the Hillmount Capital Mortgage.
42This was an under advisement that was not answered. For the reasons in l above this must be answered.
ff. Q. 182, p. 52: To provide the Agreement of Purchase and Sale and the closing documents received in connection with the purchase of 15 Mill Street.
43This was an under advisement that was not answered. For the reasons in l above this must be answered.
gg. Q. 187, p. 53: To advise as to Hillmount Capital Mortgage’s informal appraisal was for 15 Mill Street and to provide a copy of any documents setting out what the appraisal was.
44This was an under advisement that was not answered. For the reasons in l above this must be answered.
45In addition, Madison seeks an order that Roy and Noah produce for inspection within 14 days all the documents listed in the notices of examination for the examinations on November 1, 2021. Neither Roy nor Noah came to the examinations with any documents. I have reviewed the notices and find the documents listed therein within the scope of what can be examined as listed in Rule 60.18(2). Rule 34.10 (2) and (3) require that these documents be produced for inspection at the examinations. I grant this order as well.
46Madison also seeks an order that Roy and Noah return for a continuation of their examinations in aid of execution within 30 days of this order. Rule 60.18 allows only one examination in aid of execution within a twelve month period “unless the court orders otherwise.” Given the number of undertakings and questions that were not answered or that were not properly answered, I find that the initial round of examinations was not completed and must be completed. I grant this requested order.
47Madison also seeks an order that the Defendants pay Madison partial indemnity costs in the amount of $6,807.82 for the September 30, 2021 and November 1, 2021 examinations in aid of execution. Rule 60.19(1)1 entitles a creditor to such costs. The $6,807.82 represents about 10 hours of Mr. Berall’s time, which is reasonable. The shown partial indemnity rate is also reasonable for a lawyer of Mr. Berall’s vintage. The disbursements are primarily for a transcript fee of just over $2,000, which is acceptable. I order that this $6,807.82 be paid by the Defendants.
48Finally, there is the question of the costs of this motion. Mr. Berall filed a costs outline for Madison showing a total of $10,193.71 in partial indemnity costs. Mr. Simaan indicated that the Defendants are not seeking costs. They did not file a costs outline.
49Madison was entirely successful on this motion and deserves costs. The motion was necessary. While the Defendants eventually answered undertakings, they only did so after the motion was brought. I also found the refusals not to be proper.
50The costs outline shows a total of 20.2 hours of Mr. Berall’s time in preparing for this motion and arguing it. There are two partial indemnity rates shown for Mr. Berall as his rate changed in 2022. Neither rate seems unreasonable for a lawyer of his experience. I do not criticize the time shown as the motion involved some work. The undertakings and refusal chart had to be prepared and the evidence in support of Madison’s position had to be compiled. My one criticism is that Mr. Berall did all the work when some of it could have been by others at less cost. I have decided to award Madison $9,500 in partial indemnity costs.
51Counsel can prepare a draft order for my signature and email it to my Assistant Trial Coordinator.
DATE: February 8, 2022 _____________________________
ASSOCIATE JUSTICE C. WIEBE