COURT FILE NO.: CV-23-00704917-0000
DATE: 20230829
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Caroline McNicoll, Plaintiff
v.
Pavilion Diamonds International Inc., Antonio Palazzolo a.k.a. Tony Palazzolo a.k.a. Tony Pala and Carmen Palazzolo, Defendants
BEFORE: Associate Justice Rappos
COUNSEL: Christopher G.T. Tan, for the Plaintiff
HEARD: In writing
E N D O R S E M E N T
Nature of the Motion
[1] The Plaintiff, Caroline McNicoll, brings an urgent motion, in writing and without notice, for leave to issue a certificate of pending litigation (“CPL”) with respect to real property municipally known as 618 Amberwood Crescent, Picking, Ontario (the “Property”).
[2] In support of her motion, the Plaintiff has filed an affidavit she swore on August 23, 2023. A copy of the Plaintiff’s claim was included in her motion record. The Plaintiff did not file a factum in support of her motion.
[3] The urgency is because the Property has allegedly been sold and it is unclear when the sale transaction will close.
[4] For the reasons set out below, the Plaintiff’s motion is dismissed.
Facts - Background
[5] The Plaintiff commenced the action pursuant to a statement of claim issued on August 23, 2023. The Defendants in the action are Pavilion Diamonds International Inc. (“Pavilion”), Antonio Palazzolo a.k.a. Tony Palazzolo a.k.a. Tony Pala (“Mr. Palazzolo”) and Carmen Palazzolo (“Ms. Palazzolo”).
[6] Mr. Palazzolo is said to be the directing mind and sole officer, director, and shareholder of Pavilion. Mr. Palazzolo is also said to be the spouse of Ms. Palazzolo.
[7] The Plaintiff claims to have been defrauded by Pavilion and Mr. Palazzolo through a fraudulent scheme in which she was misled into believing that she was investing in and had ownership of fancy-coloured diamonds. The Plaintiff claims, inter alia, damages of $425,000 from Pavilion and Mr. Palazzolo and return of certain diamonds.
[8] The Plaintiff’s affidavit contains excerpts from two publications that detail criminal charges brought against Mr. Palazzolo in the United States for a conspiracy that persuaded investors in the United States and Canada to invest in diamonds and other jewelry through false and misleading information. Mr. Palazzolo has apparently pleaded guilty to certain criminal charges before the United States District Court for the northern District of Ohio, Eastern Division.
Facts – The Property
[9] With respect to Ms. Palazzolo, she is the sole registered owner of the Property and has been since November 26, 1993. In the claim, the relief sought against her is limited to the issuance of the CPL against the Property, a declaration that any sale of the Property is a fraudulent conveyance under the Fraudulent Conveyances Act (Ontario), and a declaration that the Plaintiff possesses an equitable interest in the Property on the basis of a constructive or resulting trust.
[10] The Plaintiff does not, in her claim, seek a declaration that Mr. Palazzolo has an ownership interest in the Property. The Plaintiff believes that Mr. Palazzolo has such an interest because he currently resides there, and told her that:
“he would sell his house (Palazzolo also said that he did not know where he would be living after his house sold)… [and] that he would use the proceeds of sale from the sale of his house to pay me what was owed to me.”
[11] Additionally, the Plaintiff claims that Mr. Palazzolo has an ownership interest on the basis that a charge/mortgage registered on title to the Property on September 7, 2018 (the “Charge”) says that he consented to the transaction and is a guarantor of the mortgage.
[12] At the time of the swearing of the Plaintiff’s affidavit, a transfer of the Property had not occurred. The Plaintiff has attached to her affidavit a copy of listing for the Property from the HouseSigma website.
[13] The website excerpt shows that the Property was listed for sale from March 21, 2023 to March 28, 2023 for $2.3 million. The listing price was reduced to $1.95 million on March 28, 2023, and then to $1,899,900 on April 13, 2023. The listing was apparently terminated on May 3, 2023 as a result of the alleged sale of the Property for $1.87 million.
[14] The Plaintiff alleges that the proposed sale of the Property is “suspicious”, given the fast reductions of the listing price, the apparent sale of the Property for significantly less than the original listing price in a short period of time, and given that Mr. Palazzolo did not provide her with notice of the listing or sale of the Property.
[15] There is no evidence as to the fair market value for the Property. The Plaintiff has not filed any appraisal evidence for the Property or set out the value for comparable properties in the area.
[16] The Plaintiff is concerned that there is going to be a dissipation of assets and that Pavilion has numerous creditors. She believes that “[t]he Property is likely the only asset upon which a Judgement of this Honourable Court could be enforced” and that the sale “would prevent the Plaintiff from recovering any monetary remedies awarded by this Honourable Court.”
[17] The Plaintiff registered a caution on title to the Property on August 4, 2023.
Analysis
[18] Section 103 of the Courts of Justice Act (Ontario) and Rule 42 of the Rules of Civil Procedure set out the court’s authority to grant leave for the issuance of a CPL.
[19] The Plaintiff has satisfied the requirement in subrule 42.01(2) that the claim for a CPL must be included in the pleading, together with a description of the Property sufficient for registration. Subrule 42.01(3) permits the Plaintiff to bring the motion without notice to the Defendants.
[20] In Perruzza v. Spatone, 2010 ONSC 841 at paragraph 20, Master Glustein (as he then was), set out the factors for courts to consider in determining whether to grant leave to issue a CPL.
[21] The threshold issue is whether there is sufficient evidence before the Court to support that there is a triable issue as to whether the Plaintiff has a reasonable claim to an interest in the Property.
[22] The Plaintiff claims to have an interest in land due to her Fraudulent Conveyances Act claim and her claim to of equitable interest on the basis of a constructive or resulting trust.
[23] Courts have held that an action to set aside a fraudulent conveyance is an action in which an interest in land is brought into question. See The United States Securities and Exchange Commission v. Boock, 2010 ONSC 2340 at paragraph 9.
[24] Section 2 of the Fraudulent Conveyances Act provides that “Every conveyance of real property…made with intent to defeat, hinder, deal or defraud creditors or others…are void as against such persons and their assigns.”
[25] Based on my review of the claim, the Plaintiff is not seeking judgment against Ms. Palazzolo for any amount. Even if wholly successful in her action as currently framed, she will not be a creditor of Ms. Palazzolo.
[26] As a result, the Plaintiff does not have standing to challenge the sale of the Property by Ms. Palazzolo under the Fraudulent Conveyances Act, and there is no triable issue as to whether the Plaintiff has a reasonable claim to an interest in the Property on the basis of the Fraudulent Conveyances Act claim.
[27] With respect to the claim for an equitable interest in the Property on the basis of a constructive or resulting trust, Ms. Palazzolo has been the sole registered owner of the Property for almost 30 years. There is nothing in the materials that states that Ms. Palazzolo had any involvement whatsoever with the relationship between the Plaintiff, Pavilion and Mr. Palazzolo.
[28] There is also no evidence in the record that provides any connection between the damages suffered by the Plaintiff and the Property, or the money paid by the Plaintiff to Pavilion and the Property.
[29] The fact that Mr. Palazzolo resides in the Property, guaranteed a loan obtained by Ms. Palazzolo, and had to consent to Ms. Palazzolo granting the Charge on the Property, which is required under section 21(1) of the Family Law Act for a matrimonial home, does not result in Mr. Palazzolo having an ownership interest in the Property.
[30] The Plaintiff relies on Mr. Palazzolo’s alleged representations that the Property would be sold, and the proceeds would be used to repay amounts owed to her. However, there is nothing in the record that explains how, if such representations were made, they would entitle the Plaintiff to a declaration that she has an equitable interest in the Property on the basis of a constructive or resulting trust.
[31] As a result, in my view, based on the record before me, there is no triable issue as to whether the Plaintiff has a reasonable claim to an equitable interest in the Property on the basis of a constructive or resulting trust.
[32] Lastly, I note that the Plaintiff is candid in her affidavit that she is seeking the CPL for the Property as it may be the only asset owned by the Defendants.
[33] As seen in Rahbar v. Parvizi, 2022 ONSC 1104 (paragraph 40) and 2254069 Ontario Inc. v. Kim, 2017 ONSC 5003 (paragraph 28), a CPL is intended to protect an interest in land where other remedies would be ineffective. It is not intended to secure a claim for damages.
[34] It is also not to be used to achieve pre-judgment execution on what is fundamentally a damages claim if the extraordinary remedy of a Mareva injunction would not be available on the merits. See Sachkov v. Ilnitskaya, 2021 ONSC 5495 (paragraph 29). Securing a property “for enforcement purposes is clearly not the type of interest in land that a CPL is intended to protect” (see Casaplata Inc. v. Alo, 2023 ONSC 3359, paragraph 23).
Disposition
[35] For the reasons set out above, the Plaintiff’s motion is hereby dismissed.
Associate Justice Rappos
DATE: August 29, 2023