Introduction

[1] The defendant Marion Rewa (a.k.a. “Walker”) brought a motion seeking several forms of relief, on a very substantial evidentiary record, including the discharge of a certificate of pending litigation (“CPL”) under rule 42.02 (1) which was registered by the plaintiff The Regional Municipality of Halton (“Halton”) on a property owned by her, municipally known as 1259 Mississauga Road, Mississauga Ontario (the “Property”).

[2] This action and the other related actions all brought by Halton relate to alleged losses suffered by it in the amount of approximately $23 million connected with the fraudulent use of its procurement process.

[3] This motion involves a complex factual matrix connected with the allegations of fraudulent conduct in this action as well as in the related actions. I will discuss only the material facts that bear on the determination of the motion brought by Walker.

[4] There are over 100 defendants involved in these actions who allegedly perpetrated a complex and widespread series of fraudulent transactions which commenced around 2006 and which continued for well in excess of a decade.

[5] The defendant Walker was married to the defendant Nicolas Rewa (“Rewa”); however, they are now divorced. Although given notice of this motion Rewa took no part in it.

[6] It is alleged that Rewa, while an employee of Halton, defrauded it by a scheme through which he received millions of dollars and material which were used by him and Walker to construct a substantial renovation to the Property in which they lived.

[7] Rewa and Walker were charged with multiple criminal offences relating to the fraudulent scheme by which monies were stolen from the plaintiff. The charges against Walker were withdrawn by the Crown and Rewa pleaded guilty to several charges. As part of his plea deal, he signed an agreed statement of facts in which he admitted to having engaged in the fraudulent scheme, as alleged in this action, while he was employed with the plaintiff.

[8] In his plea agreement Rewa further admitted to having stolen in excess of $2 million in fraudulent benefits both financial and material, which funds and materials were used in the renovations carried out at the Property, throughout which time the Property was registered with Walker as the owner.

[9] As a term of his plea agreement, Rewa agreed to forfeit $2,025,000 on the sale of the Property. Restitution and forfeiture orders were granted on consent of both Rewa and Walker, who remained as the registered owner of the Property at the time of Rewa’s sentencing.

[10] Following the commencement of this action, on April 10, 2017, the court on an ex parte motion, granted a preservation order in respect of the Property and leave to the plaintiff to register a CPL on title.

[11] None of the criminal or civil orders granted, in respect of the Property after Rewa’s convictions, addressed the timing of the sale of the Property.

[12] In May of 2019, the plaintiff moved before a Master for an order under rules 45.01 and 45.02 directing the sale of the Property and the payment into court of the proceeds of sale.

[13] The defendant Walker successfully opposed Halton’s motion as the court concluded that it did not have jurisdiction to consider the motion.

[14] On the present motion, Walker, in her Amended Notice of Motion, in summary, seeks the following orders: (a) an order discharging the CPL on the Property; (b) an order that upon the sale of the Property the sum of $4,026,239 from the proceeds of sale be paid into court; (c) an order varying the preservation order made on April 10, 2017 to the extent necessary to give effect to these orders.

[15] Notably on her motion Walker did not seek an order for the court supervised sale of the Property or by way of a private sale. There is no evidence that the property was listed for sale or that a sale was contemplated at the time the motion was brought.

Evidentiary Overview:

[16] Rewa purchased the Property in 1994 for $503,000, and while he was employed with the plaintiff, he transferred the title to the Property to Walker in 2002 for nominal consideration. As of July 2022, the evidence adduced by Halton on this motion has the property at a value of between $8 and $10 million.

[17] Commencing around 2004, very significant renovations were begun on the Property and they continued over the span of approximately 14 years. The renovations involved at least 134 contractors and suppliers of material, labour and equipment throughout the course of the work.

[18] After becoming aware of Rewa’s fraudulent activities, the plaintiff engaged the services of a forensic accountant, Edward Nagel (“Nagel”) and instructed him to conduct an accounting review related to the fraudulent scheme carried out by Rewa and his associates. Nagel filed a detailed affidavit in reply to this motion setting out particulars as to his accounting investigation and his preliminary opinion as to the amount of the loss suffered by the plaintiff related to the fraudulent scheme allegedly involving the defendants.

[19] Nagel offered a preliminary assessment of the losses sustained of at least $6,051,239, which sum is notably almost 3 times the amount of the fraud as Rewa had admitted to in his plea deal at the time of his sentencing. It is further Nagel’s opinion that most of the funds stolen as a result of Rewa’s fraud can be traced into the Property.

[20] As to the plaintiff’s case against Walker, there is documentary evidence that could lead to a finding that she was an employee of Rewa’s private company, which he operated outside of his employment with Halton. Accounting records show that Walker received significant income and management bonuses from this company over the time the fraudulent scheme was being perpetrated.

[21] As to her current financial situation, on the return of this motion, Walker submitted that she was suffering hardship as a result of the carrying costs and upkeep associated with the Property. However, the evidence also shows that her income after 2019, when she successfully opposed the plaintiff’s motion to sell the property, had increased to the following levels: (a) 2019 – $100,438; (b) 2020 – $108,962; (c) 2021 – $145,449; (d) 2022 – projected – $134,849. From Walker’s evidence it appears that Rewa ceased making child-support payments for a time in 2018, but thereafter resumed those payments. The details with respect to these payments have not been provided.

[22] At the time of the plaintiff’s motion in 2019 seeking an order for the sale of the Property, it had a value of approximately $5.2 million.

[23] There is no cogent evidence as to Walker’s income, expenses and assets that would allow for a proper assessment of her ability to financially cover the carrying and maintenance costs for the Property and to assess her submission that she is suffering a financial hardship as a result of her continued ownership of the Property.

Positions of the Parties:

The Defendant Walker:

[24] It is urged on behalf of Walker that the proceeds of the sale of the property of $6,051,239, that being Nagel’s preliminary estimate of Halton’s loss, would secure the plaintiff’s interest in the Property. The sum of $2,025,000, as per the forfeiture order, would be paid out to the plaintiff upon this sale of the Property with the balance of $4,026,239 would be paid into court as security pending the outcome of the trial.

[25] Walker acknowledges on this motion that the plaintiff has shown that it has a reasonable claim to an interest in the Property.

[26] The defendant further submits that other forms of security are available and adequate in order to provide security for the plaintiff’s claims.

[27] Further the defendant submits that she cannot afford to carry the costs and maintenance with respect to the Property and therefore the CPL should be discharged given her financial hardship.

[28] Walker is not seeking the court’s authorization allowing for the sale of the Property. She is simply seeking the discharge of the CPL and no proposal has been made by her as to how or when the Property would be sold, at what price and how the proceeds of sale would be distributed other than summarized above.

Halton’s position:

[29] The plaintiff opposes the defendant’s motion on several grounds including, that the moving defendant has failed to satisfy any of the requirements under section 103 (6) of the Courts of Justice Act, R.S.O. 1990, c. C.43.

[30] The plaintiff further asserts that the court in all the circumstances should not exercise its equitable jurisdiction to grant the defendant’s motion and discharge the CPL.

[31] Further, the plaintiff submits that its claim for damages is not being secured by way of the CPL, as would be the case in the circumstances of a Mareva injunction, but rather it claims entitlement to a CPL on the basis that it has a proprietary interest in the Property.

Legal Framework:

[32] A motion to discharge a CPL is brought under rule 42.02 (1) and the moving party must satisfy the test provided for in section 103 (6) of the Courts of Justice Act (CJA) which provides as follows:

(6) The court may make an order discharging a certificate,

(a) where the party at whose instance it was issued,

(i) claims a sum of money in place of or as an alternative to the interest in the land claimed,

(ii) does not have a reasonable claim to the interest in the land claimed, or

(iii) does not prosecute the proceeding with reasonable diligence;

(b) where the interests of the party at whose instance it was issued can be adequately protected by another form of security; or

and the court may, in making the order, impose such terms as to the giving of security or otherwise as the court considers just. R.S.O. 1990, c. C.43, s. 103 (6).

[33] The onus on a party moving to discharge a CPL is higher than the one for obtaining the CPL: The Regional Municipality of Halton v. F. Greco & Sons, 2019 ONCS 3583, 2019 ONSC 3583 at para. 47.

[34] A party asserting a right to a CPL may be entitled to it on the basis that the plaintiff had an equitable proprietary interest which could be traced directly into the equity in a property: Central Capital Corp. v. Clausi (1993), 1993 CanLII 8516 (ON SC), 13 O.R. (3d) 335 at paras. 13, 16, and 19.

[35] A reasonable claim to an interest in a property based on allegations of conspiracy and fraud may properly ground a claim for a CPL based on the doctrine of constructive trust and the right to trace funds in a property: HarbourEdge Mortgage Investment Corporation v. Community Trust Company: 2016 ONSC 448.

[36] The factors that a court should consider in determining whether to grant a motion discharging a CPL were set out in the decision of 572383 Ontario Inc. v. Dhunna, 1987 Carswell Ont. 551, 24 CPC (2d) 287 those factors being:

(a) whether the plaintiff is a shell corporation;

(b) whether the land is unique, but bearing in mind that in a sense any parcel of land has some special value to the owner;

(d) whether there is an alternative claim for damages;

(e) the ease or difficulty of calculating damages;

(f) whether damages would be a satisfactory remedy;

(g) the presence or absence of another a willing purchaser; and

(h) the harm done to the defendant if the certificate is allowed to remain or to the plaintiff if the certificate is removed with or without the requirement of an alternative security.

[37] The law with respect to tracing in equity is well summarized in The Law of Restitution (Aurora: Canada Law Book, 1990) by P. Maddaugh and J. McManus. At p. 127 the authors state:

Both the constructive trust and the equitable lien are proprietary remedies. Consequently, it is essential that the claimant be able to identify the property to which he claims to be beneficially entitled as a prerequisite to obtaining such relief. In order to do so, it may be necessary for him to “trace” or “follow” such property, or its product, into the hands of the defendant. Hence, as with the case of following property at law, tracing inequity is in reality, a means to a remedy rather than being a remedy in and of itself. It matters not that the defendant is not the actual wrongdoer so long as he is in possession of some property in which the claimant has an equitable right. The only exception to this is the bona fide purchaser for value who has had no notice of the claimant’s equitable interest.

[38] The authors continue at pp. 140-141 and state:

For purposes of the law of restitution in Canada, it is submitted that it is necessary only for a claimant to establish an equitable proprietary interest in the property in question as a prerequisite for an equitable tracing order. This principle is not limited to situations where legal and equitable proprietary interests are divided. Thus, the absolute legal and beneficial owner of the property, such as the victim of the theft, is able to trace the property into its product. No pre-existing fiduciary relationship need be established – or, for that matter, fictionally imposed an order for the claimant to assert his equitable proprietary rights. Indeed, since the Supreme Court of Canada’s unequivocal recognition of the constructive trust as a general remedial device in Pettkus v. Becker, it must now be concluded that any requirement for a trust or a fiduciary relationship as a precondition to the right to trace in equity has been completely abandoned in Canada.

[39] An important decision considering equitable remedies in circumstances involving the tracing of funds or property is the English Court of Appeal decision in Diplock’s Estate; Diplock v. Wintle, [1948] Ch. 465, [1948] 2 All E.R. 318 at p. 521 where the court stated:

The equitable remedies presuppose the continued existence of the money either as a separate fund or as part of a mixed fund or as latent in property acquired by means of such a fund. If, on the facts of any individual case, such continued existence is not established, equity is as helpless as the common law itself. If the fund, mixing or unmixed, is spent upon a dinner, equity which dealt only in specific relief and not in damages, could do nothing. If the case was one which at common law involved breach of contract the common law could, of course, award damages but specific relief would be out of the question. It is, therefore, a necessary matter for consideration in each case where it is sought to trace money in equity whether it has such a continued existence, actual or notional, as will enable equity to grant specific relief.

See: Central Capital Corp. v. Clausi, supra.

[40] Genuine disputes between parties as to issues of fact should not be decided on a motion to discharge a CPL – the merits of the case must be left to the trial judge: 1408794 Ontario Inc. v. Denofrio, 2000 Carswell Ont. 2842 at para. 12.

[41] A criminal conviction is admissible not only as evidence against the party convicted, but also against any other party to the proceeding, whether the person convicted is a party in the subsequent proceedings or not: Q. v. Minto Management Ltd. et al. (1984), 1984 CanLII 2118 (ON SC), 46 O.R. (2d) 756.

Analysis:

[42] The evidence from the plaintiff is that the full value of the monies fraudulently taken by the defendants and devoted to the renovation of the Property has yet to be determined.

[43] It is urged on behalf of Walker that, on the evidence available at this time, there would be adequate funds invested in the Property that if it were sold the plaintiff’s potential interest would be well covered by those proceeds.

[44] As has been clearly stated several times in the jurisprudence, it is not required of a party seeking a CPL that they must establish the exact value of their claim in the Property. The threshold requirement is that the plaintiff establish a reasonable claim to an interest in the land at issue or one which raises a triable issue: Phi (in Trust) v. Laidlaw Transit Limited, 2006 CanLII 32325 at para. 10.

[45] The moving defendant’s case in seeking to have the CPL discharged is based on their assertion that the plaintiff’s claim, as it may relate to the Property, is limited to the preliminary assessment of Nagel which concluded that at least $6,051,239 had been fraudulently taken from the plaintiff and used for the costs of the renovations carried out at the Property.

[46] For the purpose of her motion, Walker has acknowledged that the plaintiff has demonstrated a reasonable claim to an interest in the land or one which raises a triable issue. It is not for a court on a motion to discharge a CPL to delve into the evidentiary record produced and to determine once and for all the actual value of the plaintiff’s claim. Such fact-finding is properly for the trial judge and the plaintiff’s claim must not be summarily determined on an untested and likely inadequate evidentiary record.

[47] Furthermore, the onus is on the moving defendant. It is essentially urged on behalf of Walker that the plaintiff should establish the true extent of its financial interest in the Property in responding to the motion. That would reverse the onus on this motion and require that the plaintiff meet a standard of proof higher than that which it faced when it applied for the CPL.

[48] As to the Dhunna factors, I have concluded that the moving defendant has failed to satisfy any of these.

• The plaintiff is not a shell corporation but rather a regional municipality.

• The land is an ordinary residential property in Mississauga, Ontario and is not unique.

• In the plaintiff’s fresh as amended statement of claim there is a claim for damages although it is not an alternative claim to the claim in fraud. The registration of the CPL is not to secure damages as asserted by the moving defendant, but rather to secure the plaintiff’s proprietary interest in the Property which rests on a strong prima facie case. As supported by the decision in Diplock’s Estate, the plaintiff’s claims constitute a beneficial entitlement to an interest in the Property and not simply to an arbitrary sum of damages that has been preliminarily determined without a full trial and evidentiary record. The evidentiary record prima facie supports a conclusion that the existence of the monies taken by fraud continues within the proprietary rights, in equity, that the plaintiff has in the Property.

• The damages sustained by the plaintiff are extremely difficult to calculate and the continuing accounting investigation by Nagel has been limited as there has been no full documentary disclosure from the defendants, including Walker, nor any oral discoveries.

• Damages would constitute a satisfactory remedy if the plaintiff’s damages were calculable with reasonable accuracy and if the funds secured by the CPL were available and preserved by a payment of the court. There is no evidence whatsoever that this is the case here.

• The defendant Walker continues to reside in the Property and it is not for sale nor is there any evidence of a willing purchaser.

• The evidence as to the moving defendant’s ability to carry the costs related to the Property is lacking and on balance, in the event the CPL were discharge, the evidence is clear that the plaintiff would lose its entire security.

[49] For the reasons set out, I reject the submissions on behalf of the moving defendant that the CPL registration is in the nature of a Mareva injunction.

[50] On the test in section 103 (6) of the CJA, I have concluded that the moving defendant has failed to satisfy any of the requirements of that test. Were the defendant’s motion granted, based on the relief sought, she would have title to the Property unencumbered by any security in favour of the plaintiff and she would therefore be free to sell or mortgage the property as she saw fit. Again, as noted, there is no request for a court supervised sale of the property in the event the court were to conclude the CPL should be discharged.

[51] With respect to the submission that the plaintiff has failed to prosecute the action with reasonable diligence, I reject that submission.

[52] The actions relating to the complex and widespread fraudulent scheme allegedly carried out by the defendants Rewa and Walker and the defendants in the companion actions have been ongoing through multiple motions and case management conferences. There are several million documents in the productions in these actions. Given the timeframe over which the alleged fraud occurred, and the number of parties allegedly involved in the complex fraudulent scheme, I am satisfied that the plaintiff’s action has been prosecuted with reasonable diligence. It must also be noted that some delay associated with the prosecution of these actions was connected with the interruptions caused by the Covid pandemic.

[53] Turning to section 103 (5) (c), which calls for the court to assess the motion “on any other ground that is considered just”, I have concluded that equitable considerations also favour the dismissal of the defendant’s motion.

[54] Leave to register a CPL in this case was based primarily on the strong prima facie case against the defendant Rewa which demonstrated that he had fraudulently taken several million dollars from the plaintiff and then used those funds to carry out significant renovations to the Property.

[55] The plaintiff’s entitlement to a CPL in the circumstances of this case is far different from what would arise in a simple contract dispute relating to the title or ownership of real property.

[56] The plaintiff’s claim in fraud against the defendant Rewa is compelling, as is the evidence that the proceeds of the fraud are now embedded in the physical building of the Property as well as in its equity. It is of no moment that the title to the Property was registered in Walker’s name throughout the period of time the fraud was being carried out.

[57] Although not entirely determinative of the outcome of this motion, the admitted fraud and resulting conviction of Rewa, as well as the uncontradicted evidence that a very substantial portion of the proceeds of the fraud are now within the Property, all weigh in favour of the dismissal of Walker’s motion.

[58] On the plaintiff’s motion seeking leave to register the CPL as well as responding to a motion to discharge the CPL, it is not incumbent upon it to demonstrate its full financial interest in the Property as secured by the CPL. The evidence shows that the fraudulent scheme, whereby millions of dollars were stolen from the plaintiff, involved potentially thousands of individual fraudulent transactions over many years.

[59] Furthermore, the evidence demonstrates that monies and materials stolen from the plaintiff and applied to the renovations at the Property were used in design/planning work, materials, labour and equipment throughout several areas on the Property. It is not incumbent on the plaintiff in responding to this motion to demonstrate that it has a CPL interest in every inch of the Property.

[60] While the Crown elected not to proceed with charges against Walker, that decision has no impact on her potential civil liability for her involvement in the fraudulent scheme in this action. The determination of her potential liability will be based on findings of fact subject to proof on the balance of probabilities.

[61] Although Walker was not convicted of a criminal offence relating to the fraudulent conduct of Rewa and his associates, so far as the plaintiff’s entitlement to a CPL is concerned, she does not stand in any higher position than her co-defendant Rewa.

Conclusion:

[62] For these reasons, the defendant Walker’s motion is dismissed in its entirety.

[63] As to the costs of this motion, counsel for the plaintiff shall serve and file submissions as to costs of no longer than two pages, along with a costs outline within 20 days, followed by similar submissions from Walker within 20 days thereafter. No reply submissions shall be filed.

Daley J.

Released: December 12, 2023

COURT FILE NO.: CV-17-00001665-0000

DATE: 2023 12 12

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

THE REGIONAL MUNICIPALITY OF HALTON

Plaintiff

and -

NICOLAS REWA, MARION REWA, REWA CONSULTANT LIMITED and 1103882 ONTARIO LIMITED

Defendants

REASONS FOR DECISION

Daley J.

Released: December 12, 2023

The Regional Municipality of Halton v. Rewa et al., 2023 ONSC 6985

Case Summary

Introduction

Evidentiary Overview:

Positions of the Parties:

The Defendant Walker:

Halton’s position:

Legal Framework:

Analysis:

Conclusion:

Judge

Counsel

Parties

Areas of Law

Fact Patterns

Expert Witnesses

Financial Outcomes

Issues

Statutory Provisions 1

Legal Tests 1

Legislation 1