Court File and Parties
Oshawa Court File No.: CV-25-00001144-0000 Date: 2025-09-29 Ontario Superior Court of Justice
Between:
STEVEN J. SMITH and MARIE PAQUIN-SMITH, Plaintiffs
– and –
ALICIA MAY PEARSON and 1000540270 ONTARIO INC., Defendants
Counsel:
- Natalia Sidlar, for the Plaintiffs
- Peter W. Neufeld and Adam Persofsky, for the Defendants
Heard: May 30, 2025 and September 8-9, 2025
Reasons for Decision
McKELVEY J.:
Introduction
[1] This is a motion to continue a Mareva injunction which has been brought by the Plaintiffs and which was initially the subject of an Order by Justice Mathai dated May 16, 2025. The Order was taken out on an ex parte basis and the Order required the Plaintiffs to apply for an extension of the Order within 10 days. On May 30, 2025 the matter came before me and I made an Interim Order continuing the Mareva injunction pending a full hearing on the merits of the motion to continue it and subject to provisions which allowed the Defendants access to some of the funds pending a full hearing on the motion.
[2] The Mareva injunction was given in large part because of the circumstances surrounding the transfer and subsequent sale of a property known as "the Upper James Property", which is a property located in Hamilton, Ontario. The Upper James Property was initially purchased by the Defendant on November 2, 2020 for the operation of her business, "Love at First Sight". This business provides high resolution ultrasounds to expectant mothers. As noted in the motion judge's Endorsement, the Upper James Property was mortgage free until a $700,000 mortgage was registered on its title after the issuance of an Agreement for Purchase and Sale of a property at 4255 Tooley Road in Clarington, Ontario.
[3] On April 12, 2022, the Defendant Alicia Pearson and her husband entered into an agreement to purchase the Tooley Property from the Plaintiffs. However, on July 7, 2022, the Defendant and her husband failed to close on the property. On January 5, 2023, an Amended Statement of Claim was served on Ms. Pearson and her husband. It is alleged that Ms. Pearson and her husband are responsible for damages for breach of the Agreement of Purchase and Sale in the sum of $342,349.46.
[4] Subsequently, the Plaintiffs commenced an action for a fraudulent conveyance and brought the within motion for a Mareva injunction.
[5] In his decision on the original motion for a Mareva injunction, Justice Mathai made reference to evidence provided by the Plaintiffs. He comments starting at para. 11 of his decision as follows:
On May 17, 2023, Alicia incorporated the defendant corporation, 1000 Ontario Inc. Alicia is the sole director and there are no officers. On August 4, 2023, Alicia transferred a property she owned, 670 Upper James Street, Hamilton, Ontario ("Upper James Property") to 1000 Ontario Inc. for $2.00. On the same day, a $700,000 mortgage was registered on the property. Prior to the transfer, the Upper James Property was mortgage free.
On August 9, 2024, 1000 Ontario Inc. listed the Upper James Property for sale for $749,000. The Upper James Property was sold on November 7, 2024, for $749,000.
On January 30, 2025, Alicia personally purchased a property at 19 Kilpatrick Court, Clarington, Ontario ("Kilpatrick Property"). The purchase price was $1,375,000. On the same day, a mortgage was registered on title of the Kilpatrick Property in the amount of $1,060,000.
On May 6, 2025, the plaintiffs issued the statement of claim in this action alleging, amongst other things, that the transfer of the Upper James Property to 1000 Ontario Inc. was a fraudulent conveyance ("Fraudulent Conveyance Action").
[6] At para. 18 of his decision, Justice Mathai found that the circumstances of the transfer, sale and encumbrance of the Upper James Property established a strong prima facie case of a fraudulent conveyance. He noted in his decision as follows:
… On the record before me, the timing of the transfer of the Upper James Property to the defendant corporation for the price of $2.00 suggests that it was done to avoid any liability arising from the APS action. There is also strong evidence that Alicia is in breach of the APS and, as a result, the plaintiffs have a strong prima facie case on the APS Action even though that is not the action in which the Mareva injunction is sought.
[7] Justice Mathai found there was a serious risk of dissipation of the Defendants' assets based on the transfer of the Upper James Property from Alicia to 1000 Ontario Inc. He specifically notes that the Upper James Property was mortgage free until a $700,000 mortgage was registered on its title after the issuance of the APS Action.
[8] On the surface this transaction is concerning because it suggests that the Defendants withdrew $700,000 of equity from the Upper James Property. However, evidence provided by the Defendants suggest that on the sale of the Upper James Property, which is referred to later in these Reasons, the Defendants had equity of approximately $400,000 in that property. From that amount, the sum of over $300,000 was transferred to a residential property at 19 Kilpatrick Court. Title to this property is held by Ms. Pearson. Supporting documentation has been provided for this transaction. According to Ms. Pearson, the balance of the funds from the sale of the Upper James Property have been needed to pay for expenses related to her business and for family expenses. This additional evidence goes a long way to undermining the Plaintiffs' position that there have been fraudulent conveyances to dissipate the Defendants' assets.
The Finding by Justice Mathai that the Plaintiffs Were Entitled to a Mareva Injunction
[9] Based on the information provided to Justice Mathai by the Plaintiffs on the initial motion for a Mareva injunction, I agree that the issuance of the Mareva injunction was justified. Justice Mathai, in his decision, sets out the governing principles surrounding the granting of a Mareva injunction. He notes that the law disfavours pre-judgment execution. As a result, to obtain a Mareva injunction, a plaintiff must satisfy the normal criteria for an injunction and the following additional criteria: (1) a strong prima facie case; (2) that the defendant has assets in the jurisdiction; and (3) that there is a serious risk that the defendant will remove property or dissipate assets before the judgment.
[10] Justice Mathai also notes that a Mareva injunction should be issued, "only if it is shown that the defendant's purpose it to remove or dissipate their assets to avoid judgment".
[11] I accept that Justice Mathai has correctly summarized the governing principles with respect to the granting of a Mareva injunction and that his decision in granting the Mareva injunction was appropriate based on the knowledge known at the relevant time.
[12] For purposes of the motion before me, Ms. Pearson filed Affidavits dated May 29 and May 30, 2025. In her Affidavit of May 29th, Ms. Pearson testified that because the Upper James Property was always intended for commercial use, it was always her intention that the title be held by a corporate entity. She goes on to state, however, that due to an administrative error between her mortgage broker and private lender at the time of closing, the property was "mistakenly registered in my personal name rather than in the name of a corporate entity". At para. 16 of her Affidavit she states,
After the purchase of the Upper James Property closed, I saw that my name was personally on the Upper James Property. I asked my business advisor Sam Khan about this, who confirmed that the property should've been held under a holding corporation. However, I was also told that in order to move the property to a corporate name, I would have to pay land transfer tax again, which I couldn't afford. I had just spent everything I had to purchase the building. So I made a plan to do it at a later time, and I always knew it was something that eventually needed to happen.
[13] Ms. Pearson subsequently took out a mortgage from Kuber Mortgage Investment Corporation. The lender required that she agree to a blanket mortgage that placed a second mortgage on her then residential property at 1 Carl Raby Drive in Bowmanville.
[14] Ms. Pearson further stated that in July of 2022, after the purchase of the Tooley Property fell through, she was still required to repay the mortgage to Kuber Corporation as it was being discharged from Carl Raby which had recently sold in anticipation in her purchasing the Tooley Property. In addition, Ms. Pearson stated that carrying the Upper James Property with the Kuber Mortgage turned out to be completely unaffordable for her. It contained an interest rate of 8.99% which was subsequently reduced to 7.99%. At para. 19, of her May 29th Affidavit, she states,
Further, carrying the Upper James Property with the Kuber mortgage turned out to be completely unaffordable. As indicated in the borrower statement attached hereto as Exhibit "I", the interest rate at the time of discharge was 7.99% (reduced from 8.99%), I only made payments to the interest, and I was charged $18,000/year in broker fees. Factoring in property taxes, I was paying $30,000+ per year in expenses on the property without reducing the mortgage.
[15] Ms. Pearson then decided to discharge the Kuber Mortgage using her personal funds from the proceeds of sale from Carl Raby. The Mortgage from Kuber Corporation was discharged on November 3, 2022.
[16] Ms. Pearson then sought financing from Scotia Bank. She states that she had a call with a business advisor/broker, Sam Khan, about this who connected her with Bal Preet a business advisor at Scotia Bank. Mr. Khan told her that she wouldn't qualify for a new commercial mortgage in under 30 days. He suggested that, if possible, she discharge the Kuber Mortgage temporarily if she could, to avoid renewal and fees and then apply for traditional "A" lender mortgage under a corporate entity.
[17] Ms. Pearson therefore proceeded to discharge the Kuber Mortgage using her personal funds from the sale of Carl Raby. She notes that those personal funds were never intended to be tied up in her business. They were meant to be directed to the purchase of a future family home. She also states that because the Upper James Property was used for commercial purposes, Scotia Bank required that it first be transferred to a holding company.
[18] Once Ms. Pearson refinanced the Upper James Property, she says that Scotia Bank only approved a $290,000 mortgage. The mortgage payments at Scotia Bank were still a little less than $3,000 a month, plus $1,300 a month in property taxes. All of this, Ms. Pearson states, made it hard for her to operate the business out of the Upper James Property location.
[19] That's when she found a new commercial unit for rent in west Hamilton for $1,200 per month plus tax which was more affordable. She decided to operate her business out of that unit instead and to sell the Upper James Property. Given the respective costs of renting versus owning the Upper James Property, this decision seems to have been a reasonable one to make.
[20] On November 7, 2024, Ms. Pearson's holding company sold the Upper James Property in an arms-length transaction. The sale price was $726,480.76 and the net proceeds from the sale of the Upper James Property amounted to $411,942.06.
[21] In her Affidavit of May 30, 2025, Ms. Pearson sets out how the net proceeds from the sale of the Upper James Property were distributed. At para. 5 of her Affidavit she states that she used $239,265.53 of the $411,942.06 to close on the Kilpatrick Property which was purchased on January 30, 2025. Another $69,000 from the proceeds of sale of the Upper James Property were used to secure last minute financing from a private lender to close on the Kilpatrick Property. The balance of the proceeds of approximately $103,676.53 were held in the holdco Scotia Bank Account which was gradually reduced over time to pay for her family's living expenses.
Analysis
[22] If the evidence of Ms. Pearson is accepted, it would appear that the transactions involving the Upper James Property were not in an attempt to dissipate assets or move them out of the jurisdiction. It is also apparent that if Ms. Pearson's evidence is accepted, her purpose was not to remove or dissipate her assets in order to avoid judgment. This would in turn suggest that there is no basis for the Mareva injunction to continue.
[23] The Plaintiffs maintain that Ms. Pearson's evidence ought not to be accepted. The Plaintiffs argue that Ms. Pearson's evidence that she delayed putting the Upper James Property into a holding company was in part motivated by the fact that she might have to pay land transfer tax again, is contradicted by her evidence on cross-examination. At question 100 of her cross-examination, the following question and answer was given:
Question: You'll agree with me that the transfer of 670 Upper James from you personally to your holdco, what I call 100 Ontario Inc., would be exempt from land transfer tax?
Answer: Yes.
[24] That answer, however, does not go to her understanding of the situation at the relevant time.
[25] Earlier in the cross-examination at questions 80-82, Ms. Pearson gave the following evidence:
Question: In paragraph 16, this Sam Khan, he was your financial advisor at the time?
Answer: Business advisor.
Question: Business advisor. And it was Mr. Khan who told you that you would have to pay land transfer tax if the property were transferred from you personally to a holdco?
Answer: Whenever changing title, he mentioned you have to pay land transfer tax.
Question: So he said whenever changing title.
Answer: Yes.
[26] I have concluded that the evidence of Ms. Pearson that at the relevant time she thought she would have to pay land transfer tax twice based on the information provided to her by her adviser is not called into serious question by her later evidence at examination for discovery which was held on July 23, 2025, that she now accepts that land transfer tax would not have been payable between her and a holding company.
[27] The Plaintiffs argue that there is no evidence that title to the Upper James Property was always intended to be held by a corporate entity. They note that at the time the Upper James Property was purchased, Ms. Pearson did not incorporate a holding company until she was served with the Statement of Claim in the breach of the Agreement of Purchase and Sale action. They maintain that this contradicts her evidence that title to the property was always intended to be held by a corporate entity – if so, a corporation would have been formed when the property was purchased.
[28] The Plaintiffs also argue that there is no evidence that Scotia Bank required and insisted that title to the Upper James Property be held by a corporate entity. The Plaintiffs maintain that these are self-serving statements. They argue that the lack of evidence necessitated that an adverse inference be drawn.
[29] In support of their position that an adverse inference should be drawn, the Plaintiffs rely on a series of cases including the decision of the Superior Court in Lurtz v. Duchesne, at paras. 22-26. That decision makes reference to the Supreme Court's decision in Lévesque v. Comeau. In the Duchesne decision, the Court notes that an adverse inference with varying weight attached to it may occur in circumstances where a party fails to call a material witness and it is apparent from all of the other evidence in the case that the witness, who is particularly and uniquely available to that party, would have been able to help the court by giving evidence on a material issue.
[30] It is apparent, however, that the alleged discussion with Mr. Khan was subject to a request by the Plaintiff for him to confirm his evidence on that point. There are references in the evidence to texts which were sent by the Plaintiff to Mr. Khan and Mr. Preet asking them to cooperate by providing information on this motion. Unfortunately, neither responded to that invitation, according to evidence from the Defendants. In the circumstances, it does not appear that either Mr. Khan or Mr. Preet were "uniquely available" to Ms. Pearson and an adverse inference, in my view, cannot be properly taken.
[31] I therefore am prepared to accept Ms. Pearson's evidence that she was told at the relevant time that if she transferred the Upper James Property, she would have been exposed to payment of land transfer tax a second time.
[32] The Plaintiffs further allege that Ms. Pearson's evidence that Scotia Bank required the Upper James Property to be held in a holding company is without any corroboration.
[33] In support of her position in this regard, Ms. Pearson has made reference to some internal documents from Scotia Bank dealing with her request for the mortgage from Scotia Bank. Under the heading "Business Legal Name" it refers to a holding company to be incorporated. Under the pre-funding conditions, the document states that the first pre-funding condition is that the articles of the incorporation for the holdco need to be provided. The Plaintiffs are correct that this does not independently corroborate the Plaintiffs' evidence that she was told by Scotia Bank that in order to obtain the loan on the Upper James Property, she needed to incorporate a company. However, that documentation is consistent with her evidence and provides support for it.
[34] I also find it significant that the substantial majority of the funds from the sale of the Upper James Property were directed by Ms. Pearson into the purchase of the Kilpatrick home. She took ownership of the home in her own name. Had Ms. Pearson wanted to dissipate her assets to avoid judgment, it strikes me that she could have easily directed ownership of the home to someone other than herself. The Plaintiffs argue that this might have been impossible for her because if she had not placed the home in her name, she might not have been able to obtain financing for the project. In my view, however, such an explanation is purely speculative and in any event, if she was truly a fraudster who was trying to dissipate her assets, there was no specific need for her to purchase a property at all. The family could simply have continued to rent a family home providing Ms. Pearson with the opportunity to direct the proceeds from the transaction elsewhere.
[35] In the end, I am satisfied that Ms. Pearson's purpose in conducting the financial transactions in dispute were not intended to remove or dissipate her assets to avoid a judgment in the action involving the sale of the Tooley residence. I am also satisfied that the balance of convenience favours a discontinuance of the Mareva injunction. In her Affidavit of July 23, 2025, Ms. Pearson describes the effect that the Mareva injunction has had on her, her family and her business. She states that the Mareva Order has caused her to be in arrears for her car insurance and that her insurance company has cancelled her car insurance due to non-payment. She further has allowed her life insurance policy payments to cease. A number of her employees have left the business because they were not being paid on time. She also notes that she has not been able to operate her business on certain ad hoc days which negatively impacts the business's sales and profits.
[36] Its is apparent that Ms. Pearson's business is suffering at the present time and the Mareva injunction is contributing in a significant way to this. It is also apparent that overall Ms. Pearson is struggling financially at the moment due to the business and family expenses. This does not justify a Mareva injunction in the absence of evidence of any fraudulent conveyance or evidence that the Defendants' purpose in the financial transactions which have occurred was to dissipate her assets and avoid judgment.
[37] There is no compelling evidence adduced by the Plaintiffs suggesting that any funds are being sent outside the Province of Ontario or that Ms. Pearson is about to sell her current family home which would appear to be her main financial asset at the moment. I am satisfied with the explanations Ms. Pearson has given with respect to the issues surrounding the Upper James Property. The balance, in my view, clearly supports a discontinuance of the Mareva injunction at this point.
Conclusion
[38] For the above reasons I have concluded that the Mareva injunction should not be continued. This is without prejudice to the right of the Plaintiffs to bring a further motion before the Court in the event that new evidence suggesting that such an order is appropriate becomes available.
[39] If counsel are not able to agree on costs, then an appointment may be taken out through the trial coordinator's office within 30 days of the release of these Reasons to set a date for an attendance before me to deal with the issue of costs. In the event that an attendance before me is necessary to deal with costs, then the parties at least two days prior to that hearing are to submit brief written submissions on the issue of costs.
Justice M. McKelvey
Released: September 29, 2025