Court File and Parties

COURT FILE NO.: CV-23-00702978-00CL DATE: 2023-09-06 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN: CITIBANK, N.A., Applicants – and – ARALPA HOLDINGS LIMITED PARTNERSHIP, RODRIGO LEBOIS MATEOS, ARATERRA INVERSIONES, S.L. and TERRALPA INVESTMENTS FUND I LIMITED PARTNERSHIP, Respondents

COUNSEL: Brent Harrison, Stephen Brown-Okruhlik, Guneev Bhinder, for the applicants Paul-Eric Veel, Christopher Yung, Katrina Dodson, for the respondents

HEARD: August 29, 2023

CAVANAGH J.

Endorsement

Introduction

[1] The Applicant, Citibank, N.A., commenced this application by a Notice of Application issued on July 18, 2023. Citibank seeks:

a. An order pursuant to section 101 of the Courts of Justice Act appointing Grant Thornton Limited as receiver with the limited powers to investigate and monitor the assets of the respondent Rodrigo Lebois Mateos (“Mr. Lebois”).

b. An order under Rule 32.01 of the Rules of Civil Procedure for the inspection of property for certain records related to the respondent Terralpa Investment Fund 1 Limited Partnership (“Terralpa LP”) and its general partner, the respondent Araterra Inversiones, SL Sociedad Unipersonal; (“Araterra Inversiones”).

c. An order requiring the respondents Terralpa LP and Araterra Inversiones to comply with the record-keeping and disclosure requirements of the Limited Partnerships Act.

[2] The Respondents oppose this application. They have brought a motion for:

a. An Order permanently staying the application in favour of ongoing proceedings (the “New York proceedings”) in the United States District Court for the Southern District of New York (the “U.S. District Court”). [1]

b. In the alternative, an Order temporarily staying the application pending the final adjudication of the U.S. proceeding or to such other time as this Court may direct.

[3] On August 14, 2023, Justice Conway released an endorsement providing that, with the agreement of the parties, the stay motion will be argued on the same day as the hearing of the application.

Factual Background

Parties

[4] Citibank is a bank organized under the laws of the United States of America.

[5] Mr. Lebois is resident of Mexico City or Spain. He is the founder, Chairman, President, and majority shareholder of a Mexican company called Unifin Financiera, SAB de CV SOFOM ENR (“Unifin”). Unifin faced significant financial hardships in 2022, culminating in its bankruptcy proceeding before the Mexican courts beginning in November 2022.

[6] The Respondent Aralpa Holdings Limited Partnership (“Aralpa Holdings”) is a New Brunswick limited partnership. Mr. Lebois is its sole limited partner.

[7] Terralpa LP is a limited partnership registered under Ontario’s Limited Partnerships Act. It was created in 2019. Its general partner is the respondent Araterra Inversiones. Araterra Inversiones is a Spanish entity registered in Ontario as an extra-provincial corporation with share capital. Mr. Lebois is Chair of the Board of Directors of Araterra Inversiones.

Loan and defaults

[8] Citibank extended a loan to an Aralpa Holdings in 2017 pursuant to a multi-draw term note that was amended and restated at various times (the “Note”). The amount outstanding under the Note is currently more than US $35 million. As security for the indebtedness under the Note, Citibank took shares of Unifin. The value of the Unifin shares has decreased markedly. Mr. Lebois provided a personal guaranty in respect of the obligations under the Note (the “Guaranty”).

[9] On April 13, 2022, Citibank gave an initial notice of default to Aralpa Holdings and Mr. Lebois under the Note and Guaranty. The initial and subsequent defaults upon which Citibank relies include breaches of covenants regarding Mr. Lebois’ total net worth and requiring Aralpa Holdings and Mr. Lebois to maintain unencumbered liquid assets above certain ratios to the amount outstanding.

Citibank’s evidence regarding discussions with Mr. Lebois and his representatives concerning waivers of defaults under the Note and Guaranty

[10] Citibank’s evidence is that in the spring and summer of 2022, Mr. Lebois requested and obtained from Citibank multiple waivers of the defaults under the Note and Guaranty. He and his representatives held discussions with Citibank surrounding the waivers which are set out in the affidavit of Citibank’s witness, Mario Meza, who was Citibank’s Mexico Risk Head during the relevant period.

[11] Mr. Lebois participated personally in some discussions with Citibank and was also represented by his daughter, Almudena Lebois Ocejo, and the manager of his family office, José Llamas.

[12] Mr. Meza’s evidence is that on a call on July 29, 2022, Ms. Ocejo advised Citibank that Mr. Lebois owns substantial Spanish real estate investments “via Terralpa”, which she described as a Canadian limited partnership. Mr. Meza refers in his affidavit to other telephone conversations on August 15, 2022 and August 17, 2022 in which Ms. Ocejo advised Citibank that he holds substantial investments through Terralpa.

[13] Mr. Meza states in his affidavit that Citibank has not been able to determine with certainty the nature of Mr. Lebois’ ownership interest in Terralpa LP.

Evidence of the Respondents

[14] In response to this application, the Respondents rely on the affidavit of Daniel J. Saval, an attorney in New York who is counsel to Aralpa and Mr. Lebois in the New York proceedings, whose evidence addresses those proceedings (and related proceedings in Spain).

[15] The Respondents also rely on the affidavit of Antonio Rodriguez, who states that he is the Finance Manager of a group of companies carrying on business under the name Terralpa Group. Mr. Rodriguez’ evidence addresses Terralpa LP. Mr. Rodriguez states that Terralpa LP has no assets and does not carry on business. The Applicant objects to this evidence as impermissible hearsay because, it contends, Mr. Rodriguez’ understanding was informed by information from others who have not provided evidence. The Applicant does not accept the truth of the statements made by Mr. Rodriguez about Terralpa LP.

Legal proceedings before the U.S. District Court

[16] The Note and Guaranty are both governed by New York law.

[17] In October 2022, Citibank commenced an action before the US District Court against Aralpa Holdings and Mr. Lebois. In the U.S. action, Citibank alleges that Aralpa Holdings committed various defaults under the Note. Citibank seeks judgment on the amount outstanding under the Note and Guaranty.

[18] Aralpa Holdings and Mr. Lebois entered a response to the U.S. action by filing an answer. They assert defences including that Citibank’s claims are barred by the doctrines of waiver and estoppel.

[19] On December 27, 2022, Citibank brought a motion in the U.S. action for judgment on the pleadings, which remains pending.

[20] On July 17, 2023, Citibank brought a motion in the U.S. action for pre-judgment attachment of assets to secure satisfaction of a potential judgment. The U.S. District Court endorsed a timetable and the motion has been briefed, although it remains pending as of the date of the hearing of this application and motion.

[21] At the hearing of this application, I was informed by counsel that the U.S. District Court has scheduled oral briefing of the motion for judgment on the pleadings and on the motion for pre-judgment attachment. The oral briefing is scheduled for September 11, 2023 for both motions.

Analysis

[22] I first address whether I should grant a temporary stay of Citibank’s application in Ontario for the appointment of an investigative receiver pending the outcome of the motion before the U.S. District Court for pre-judgment attachment of assets.

[23] Section 106 of the Courts of Justice Act confers jurisdiction on this court to stay a proceeding on a temporary basis where related foreign proceedings will substantially reduce the issues to be determined, or if success in the foreign proceeding could render the local proceeding substantially moot or otherwise have an impact on the outstanding issues in the case: Link & Associates v. Howard Paul Ivany, 2017 ONSC 4891, at paras. 13-15, citing Hollinger International Inc. v. Hollinger Inc., 2004 CarswellOnt 3442 (S.C.J.).

[24] In TransAsia Private Capital Ltd. v. Export Development Canada, 2022 ONSC 7126, Kimmel J. exercised her discretion to order that the application before her be stayed pending determination of the substantive disputes in litigation in a foreign court. Justice Kimmel addressed the factors set out in the jurisprudence and considered whether: (a) there is a substantial overlap of the issues between the proceedings; (b) the cases share the same factual background; (c) issuing a temporary stay will prevent unnecessary and costly duplication of judicial and legal resources; and (d) the stay, if granted, will result in an injustice to any party. Justice Kimmel concluded that the application before her should be stayed until the substantive disputes have been determined in the foreign proceedings.

[25] The Courts of Justice Act, in s. 138, provides that as far as possible, a multiplicity of proceedings shall be avoided.

[26] The issues to be argued before the U.S. District Court on September 11, 2023 include the issues raised on Citibank’s motion for judgment as well as those raised on Citibank’s motion for pre-judgment attachment of assets. The application before me shares the same factual background as the litigation before the U.S. District Court, and there is clearly a substantial overlap between the issues on the motions before the U.S. District Court and the issues before me on this application. Citibank has not shown that the U.S. District Court lacks jurisdiction to make an order that addresses Citibank’s request for information concerning Mr. Lebois’ assets in Ontario, if any.

[27] I am satisfied that success or failure by Citibank on its motion for pre-judgment attachment of assets is likely to have an impact on the issues raised on the application before me. In my view, issuing a temporary stay of Citibank’s application for the appointment of an investigative receiver may prevent an unnecessary and costly duplication of judicial and legal resources because the decision of the U.S. District Court may narrow the issues to be determined on this application or render them moot.

[28] Given that oral briefing of the Citibank’s two motions is scheduled for September 11, 2023, I am satisfied that a temporary stay of Citibank’s application for the appointment of an investigative receiver is unlikely to result in injustice to any party.

Citibank’s application for relief under the Limited Partnerships Act

[29] Citibank seeks an order that the Respondents Terralpa LP and Araterra Inversiones (i) comply with the record keeping and disclosure requirements of the Limited Partnerships Act, and (ii) deliver to the Investigator (who they ask the court to appoint) all information, books and records in their possession disclosing the ownership and capital structure of all investments in any way connected to the Respondents or to their affiliated entities.

[30] The Limited Partnerships Act requires disclosure of the identities of the general partner of the limited partnership and the limited partners of the limited partnership and disclosure of the amounts of capital contributions, if any, of limited partners. The Respondents accept that the records of the limited partnership in this respect have not been kept up to date.

[31] The relief sought by Citibank under the Limited Partnerships Act is not within the jurisdiction of the U.S. District Court to grant. Citibank is entitled to an order under s. 34(2) of the Limited Partnerships Act directing Aralpa LP and its general partner, Araterra Inversiones, to, without delay, comply with the provisions of the Limited Partnerships Act.

The Respondents’ request for a sealing order

[32] The Respondents seek an order that until further order of this Court, the unredacted versions of Exhibits “T” and “UU” of the affidavit of Mario Meza sworn July 24, 2023, filed in support of the application be sealed. The Respondents submit that a sealing order is necessary to protect the sensitive and private financial information contained in the unredacted exhibits.

[33] The redacted information in Exhibit “UU” has already been filed under seal in the U.S. District Court proceedings. The redacted information in Exhibit “TT” contains similar information as the redacted portions of Exhibit “UU”.

[34] I am satisfied that the request for a sealing order satisfies the requirements in Sherman Estate v. Donovan, 2021 SCC 25, at para. 38 for the following reasons:

a. There is an important public interest in preserving confidential financial information, and a public interest in the comity and cooperation pleading courts in different jurisdiction;

b. There are no reasonable alternative measures to address the risk because to decline to grant a sealing order in Ontario would render ineffective the sealing order made in the U.S. District Court proceedings.

c. Only minor portions of the exhibits are sought to be redacted. The remainder of the exhibits, the affidavit to which those exhibits are attached, and the balance of other records in the application will not be sealed and will be available to the public. The information over which confidentiality is sought to be maintained is discrete, proportional and limited, and consistent with the scope of the sealing order made in the U.S. District Court proceedings.

Disposition

[35] For these reasons:

a. The Respondents Aralpa LP and Araterra Inversiones are ordered to comply, without delay, with the provisions of the Limited Partnerships Act. I ask counsel to provide me with an approved form of Order.

b. An order is made sealing the unredacted versions of Exhibits “T” and “UU” to the affidavit of Mario Meza sworn July 24, 2023 and the Motion Record in support of the motion for a sealing order. Order to issue in form of Order signed by me today.

c. The balance of Citibank’s application is temporarily stayed pending the outcome of Citibank’s motion before the U.S. District Court for pre-judgment attachment of assets.

Cavanagh J. Date: September 6, 2023

Footnote

[1] The proceedings are titled Citibank, N.A. v. Aralpa Holdings Limited Partnership and Rodrigo Lebois Mateos (No. 22-CV-08842 (JLR)).