Endorsement
Introduction
The applicant, Vivian Dubrofsky (“Vivian”), seeks interim injunctive relief under section 248(3)(a) of the Business Corporations Act (Ontario) (the “OBCA”) to restrain her mother, Maryka Weisz (“Maryka”), from withdrawing funds out of Art Tile Limited (“Art Tile”), unless the funds are needed for ordinary course expenses, until the final disposition of the matter.
For the reasons set out below, the motion is dismissed.
Background
Art Tile is a corporation incorporated under Letters Patent on July 22, 1964, and later incorporated and amalgamated in Ontario on December 31, 1991.
Art Tile was founded by the late Jakob Weisz, who was the company’s sole director and officer until 2017. Mr. Weisz passed away in 2020.
Maryka was Jakob’s wife until his passing.
Jakob and Maryka had three children: Vivian, Edward Weisz and Tamara Youngerwood.
Art Tile is a real estate holding company.
Art Tile has assets in excess of $40 million, including a valuable real estate asset (the Westmore Property) worth more than $30 million, approximately $11 million held in trust by Paliare Roland Rosenberg Rothstein LLP, and approximately $1 million held in trust by Stikeman Elliot.
Maryka has been the sole director of Art Tile since 2017. She holds 1000 Class B shares and has voting control of Art Tile.
The common shares of Art Tile are held in 1/3 proportions:
a. Vivian;
b. Tamara Youngerwood (Vivian’s sister); and
c. Kafter Holdings Inc. (“Kafter”), a company controlled solely by Maryka.
Vivian also held 49,970 Class D shares of Art Tile, which are worth approximately $8,000,000. She redeemed these Class D shares in November 2024, and is owed approximately $8,000,000 from Art Tile. Under the Articles of Amendment of Art Tile, “[i]n the discretion of the board of directors, the redemption price may be paid in cash or by the transfer of any other corporate assets, the fair market value of which is equal to the redemption price or by the issuance of a demand promissory note payable by the corporation, the principal amount of which is equal to the redemption price.” Vivian’s evidence is that she has not been paid the redemption price.
Vivian worked full time with Art Tile from 2006 until the end of 2024, when her employment was terminated by Maryka.
Maryka’s annual salary as a director of Art Tile was $120,000.
Vivian’s evidence is that Maryka has withdrawn additional funds, in excess of $4 million, from Art Tile.
Following the sale of a property in which Art Tile had an interest (the Tapscott property), Art Tile’s proceeds were transferred to Paliare Roland to hold in trust (approximately $11 million). At a case conference before Osborne J., Maryka’s counsel undertook not to move these funds absent consent of the parties or court order. This undertaking is reflected in Osborne J.’s endorsement.
Analysis
The only issue on this motion is whether Vivian is entitled to an interlocutory order restraining Maryka from withdrawing funds from Art Tile.
As noted above, Vivian seeks this interim relief under s. 248 of the OBCA.
Under section 248(3) of the OBCA, the court may make any interim or final order it thinks fit, including an order restraining the conduct complained of.
The relief sought is an interlocutory injunction; accordingly, the Applicants must satisfy the test set out in RJR-MacDonald Inc. v. Canada (A.G.), [1994] 1 S.C.R. 311, at para. 43:
a. There must be a serious issue to be tried;
b. The moving party would suffer irreparable harm if the application were refused; and
c. The balance of convenience must favour granting the injunction.
In determining whether there is a “serious issue to be tried” the Court must be satisfied that “the claim is not frivolous or vexatious.”
Based on the record before me, I am satisfied that there is a serious issue to be tried. Maryka did not file affidavit evidence. Vivian’s evidence is that Maryka has personally withdrawn over $4 million from Art Tile without explanation.
The other shareholder, Vivian’s sister, has not provided any evidence.
Maryka submits that due to the nature of the relief sought, the test to be applied is not “serious issue to be tried,” but is “strong prima facie case.” Her position is that the relief sought is Mareva-type relief because, among other things, Vivian seeks an order enjoining Maryka from withdrawing or distributing funds from Art Tile’s bank accounts, other than for ordinary course expenses, and maintaining certain funds in lawyers’ trust accounts. To establish a “strong prima facie” case, Vivian must show that she is “clearly right and almost certain to win at trial:” Lee v. Chang, 2018 ONSC 930, at para. 45.
Vivian’s position is that the relief sought is to require Maryka to refrain from certain conduct (prohibitory), as opposed to requiring her to do something (mandatory).
In my view, Maryka is correct on the test to be applied. In McGrath v. Desai, 2023 ONSC 7094, at paras. 30 and 31, Vermette J. determined that the “strong prima facie” test applied where “most of the relief sought by the Applicants is relief to restrain the Respondents from parting with their assets (including funds) so that they may be preserved in case the Applicants’ claim succeeds.” That is the case here. Vivian wants to ensure that Art Tile’s assets are preserved.
As noted above, Maryka has not filed evidence. Maryka takes issue with much of Vivian’s evidence in argument. However, Vivian’s unchallenged evidence includes considerable payments made to Maryka above her salary from Art Tile, and a payment from Art Tile to Maryka’s company, Kafter, among other things. Because the only material evidence the court has is Vivian’s, in my view Vivian has met either test.
However, Vivian has not satisfied the court that she would suffer irreparable harm if the application were refused.
As noted by the Court in Primont Homes (Vaughan) Inc. v. Maplequest (Vaughan) Developments Inc., 2024 ONSC 1940, at para. 139:
The word “irreparable” refers to the nature of the harm suffered rather than its magnitude. It is harm that either cannot be quantified in monetary terms or that cannot be cured, usually because one party cannot collect damages from the other. [...]
Art Tile has over $12 million in lawyer trust accounts. Paliare Roland has agreed to maintain the approximately $11 million it holds in trust subject to paying the Canada Revenue Agency the taxes that will be owed in respect of the disposition of another real property previously held by Art Tile (Denison). Those funds will only be otherwise used with the consent of the parties.
The primary asset of Art Tile is the remaining real property (Westmore Property) that is worth in excess of $30 million. Maryka states that any proposed sale of the Westmore Property will be put to Art Tile’s shareholders for approval in accordance with the OBCA. Further, Maryka has agreed that there will be no borrowing or encumbrances against the Westmore property.
If an agreement is reached in respect of the sale of the Westmore property, the applicant may wish to seek at that time further assistance from the court. At this time, it is an extremely valuable illiquid asset held by Art Tile.
Given the current state of affairs of Art Tile, I am not satisfied that Vivian would suffer irreparable harm in the absence of the imposition of the requested injunction. To the extent that Vivian has suffered damages as a result of actions allegedly taken by Maryka, Vivian can claim damages. There is $11 million in Paliare Roland’s trust account that, other than paying CRA, will not be moved absent agreement of the parties or court order. There is also an illiquid property that is worth more than $30 million. Maryka cannot “drain the company” given that the vast majority of the company’s assets are either held in trust or illiquid (and cannot be encumbered).
Vivian noted in her factum that “relief is necessary to ensure that Mary does not in any way encumber the Westmore property in the interim period. There is presently nothing in place to stop Mary from unilaterally encumbering Westmore, and then misappropriating the funds.” As noted, Maryka in her factum and oral submissions agreed to not encumber the Westmore Property.
Disposition and Costs
Order to go as follows:
a. The Westmore Property will not be encumbered, pending written agreement of the parties or further court order; and
b. The funds currently being held in trust by Paliare Roland LLP from the proceeds of sale received from Tapscott will continue to be held in trust, other than amounts to be released to pay amounts owing to the Canada Revenue Agency on the sale of Tapscott when those amounts are due, and otherwise the funds will be held in trust pending written agreement of the parties or further court order.
The balance of the relief requested by Vivian is dismissed, without prejudice to Vivian seeking injunctive relief in respect of the proceeds of sale, if the Westmore Property is sold.
The parties are encouraged to settle the issue of costs between them. If they are unable to do so by April 30, 2025, they shall notify my judicial assistant. In such case, Maryka shall file her submissions of up to 3 pages (plus bill of costs) by May 14, 2025. Vivian shall file her cost submissions of up to 3 pages (plus bill of costs) by May 28, 2025.
Jana Steele
Released: April 1, 2025