



COURT OF APPEAL FOR ONTARIO

CITATION: Thrive Capital Management Ltd. v.
    Noble 1324 Queen Inc., 2021 ONCA 474

DATE: 20210628

DOCKET: M52469 & M52474 (C69156)

Zarnett
    J.A. (Motions Judge)

DOCKET:
    M52469

BETWEEN

Thrive
    Capital Management Ltd., Thrive Uplands Ltd., 2699010 Ontario Inc. and 2699011
    Ontario Inc.

Plaintiffs (Respondents/Moving Parties)

and

Noble
    1324 Queen Inc.,
Michael Hyman, Giuseppe Anastasio
, David Bowen, Noble
    Developments Corporation,
Hampshire and Associates Incorporated
, Lisa
    Susan Anastasio, Rajeree Etwaroo and Con-Strada Construction Group Inc.

Defendants (
Appellants/Responding Parties
)

DOCKET:
    M52474

AND BETWEEN

Thrive
    Capital Management Ltd., Thrive Uplands Ltd., 2699010 Ontario Inc. and 2699011
    Ontario Inc.

Plaintiffs (Respondents/Responding Parties)

and

Noble
    1324 Queen Inc.,
Michael Hyman, Giuseppe Anastasio
, David Bowen, Noble
    Developments Corporation,
Hampshire and Associates Incorporated
, Lisa
    Susan Anastasio, Rajeree Etwaroo and Con-Strada Construction Group Inc.

Defendants (
Appellants/Moving Parties
)

Brian Radnoff and Joshua Suttner, for
    the respondents, moving parties in M52469 and responding parties in M52474

Justin Necpal and Justin Nasseri, for
    the appellants, responding parties in M52469 and moving parties in M52474

Heard: June 1, 2021 by videoconference

ENDORSEMENT

Introduction

[1]

As a penalty for their disobedience of a
Mareva
injunction, the appellants were ordered to pay the respondents the amount of
    their claim  approximately $9 million. The appellants were also ordered to pay
    around $195,000 in costs to the respondents, and to attend a judgment debtor
    examination (the examination order). The appellants do not contest that they
    were properly found in contempt but will argue on appeal that the penalty was wholly
    disproportionate and the product of an unfair process.

[2]

The respondents move for security for costs of
    the appeal and the proceeding. The appellants resist that request and bring
    their own motion that the examination order be determined to have been
    automatically stayed, or, if there is no automatic stay, that a stay be granted.

[3]

For the reasons that follow, I grant in part the
    motion for security for costs. The appellants contempt of an order designed to
    preserve their assets for the protection of the respondents constitutes a good reason
    for ordering security, as it is both compelling and related to the reason
    security is granted  to provide a measure of protection for costs. I dismiss
    the motion relating to the examination order. I find that the examination order
    is not automatically stayed and, since the appellants are already under court
    imposed obligations to disclose their assets and can be examined on that
    disclosure, compliance with the examination order while the appeal is pending would
    not give rise to irreparable harm; it would not be in the interests of justice
    to grant a stay.

Background

[4]

On April 20, 2020, the respondents commenced an
    action against the appellants, amongst others, seeking substantial damages.
    Various causes of action were asserted, including fraudulent misrepresentation,
    breach of fiduciary duty, and breach of contract.

[5]

The action arose out of the advance, by the
    respondents, of approximately $9 million for the purchase of certain
    properties. The respondents allege that their investment was not used for the
    purpose for which it was advanced, and that the appellants misappropriated large
    sums of it.

[6]

On April 23, 2020, Koehnen J. (the motion judge)
    granted a
Mareva
injunction and related orders against the appellants,
    restraining them (subject to limited exceptions) from selling, transferring, or
    dissipating any of their assets, requiring them to provide an accounting and
    disclosure of information, and directing them to complete the acquisition of
    one of the properties that the respondents funds had been advanced to
    purchase.

[7]

On May 19, 2020, the motion judge declared that
    the appellants had materially breached his April 23 orders and gave them a
    further opportunity to comply. On June 1, 2020, the motion judge suspended the
    exceptions to the
Mareva
injunction due to the appellants continuing
    non-compliance.

[8]

On June 19, 2020, the motion judge conducted a
    contempt hearing. He found the appellants in contempt for having breached the
Mareva
injunction and related orders. In his reasons dated August 21, 2020, the motion
    judge described the breaches as including failure to provide an accounting and
    other disclosure, failure to close the purchase of property, failure to provide
    contact information for individuals or entities who received funds from certain
    bank accounts or from the appellants and, in the case of the appellant Hyman
    and Noble Developments Corporation (a company Hyman controlled), transferring
    funds when prohibited from doing so.

[9]

On November 5, 2020, the motion judge held a
    sentencing hearing. On January 21, 2021, he released reasons finding that the
    appellants had not purged their contempt and remained in breach of his orders. He
    gave judgment (the judgment) with a number of provisions.

[10]

One provision was that, as the sanction for the
    contempt, the appellants were to pay the respondents the amount of their
    investment, less amounts recovered, in the sum of $8,794,606.09.

[11]

A further provision was the examination order
    that directed the appellants to attend for a judgment debtor examination, even
    if they appealed the judgment.

[12]

The judgment also included provisions containing
    awards of costs to the respondents as follows: $36,011.97 for the contempt
    hearing; $48,816.31 for the sentencing hearing; and 109,142.80 for the action.

[13]

The appellants have appealed the judgment
    contending that the motion judge erred in imposing, as a sanction for their contempt,
    a judgment for the amount of the respondents claim, in an action they never
    had a chance to defend. In their appeal factum, the appellants confirm that
    they are not appealing the contempt finding against them. They acknowledge
    that they did not sufficiently comply with court orders and they know there
    are consequences for that. It might be a large fine. It might be jail time. But
    it is not final judgment for $9M...

[14]

The appellants have refused to attend the
    judgment debtor examination.

The Motion for Security for Costs

[15]

Rule 61.06(1) of the
Rules of Civil
    Procedure
, R.R.O. 1990, Reg. 194 provides:

In an appeal where it appears that,

(a) there is good reason to believe that
    the appeal is frivolous and vexatious and that the appellant has insufficient
    assets in Ontario to pay the costs of the appeal;

(b) an order for security for costs could
    be made against the appellant under rule 56.01; or

(c) for other good reason, security for
    costs should be ordered,

a judge of the appellate court, on motion by
    the respondent, may make such order for security for costs of the proceeding
    and of the appeal as is just.

[16]

The respondents seek security for costs as
    follows: $25,000 for the appeal and $193,971.08 for the proceeding. The latter
    sum is the total  of the three costs awards included in the judgment.

[17]

The ordering of security for costs is
    discretionary; a two-step reasoning process is involved. The first question is
    whether the requirements of r. 61.06(1)(a), (b), or (c) are met. If so, the
    second question is whether it would be just to order security, considering the
    circumstances and the interests of justice
: Yaiguaje v. Chevron Corporation
,
    2017 ONCA 827,
138 O.R. (3d) 1
, at
    paras. 18-19.

[18]

The respondents rely on r. 61.06(1)(c) which
    provides that security may be ordered for other good reason. This phrase must
    be understood in the context of the rest of r. 61.06(1). Subrule (a)
    contemplates security being ordered where the appeal appears to be frivolous
    and the appellant has insufficient assets in Ontario to pay the costs of the
    appeal. Subrule (b) contemplates security where an order could be made against
    the appellant under r. 56.01, the rule that governs when security may be
    ordered against a plaintiff at the trial level. Resort to subrule (c) is made
    where the other subrules do not apply. Invoking it should not be routine:

Combined Air
    Mechanical Services Inc. v. Flesch
,
2010 ONCA 633
, 268
    O.A.C. 172, at para.
8
.

[19]

The list of what might qualify as an other good
    reason is not closed. But the reason must be (i) compelling, and (ii) related
    to the purpose of ordering security, which is to provide a respondent with a
    measure of protection for costs:
Combined Air
, at para. 8;
Heidari
    v. Naghshbandi
, 2020 ONCA 757, 153 O.R. (3d) 756, at para. 6.

[20]

I am satisfied that, in this case, the other
    good reason requirement in r. 61.06(1)(c) has been met.

[21]

The
Mareva
injunction and related
    orders granted by the motion judge required the appellants, among other things,
    to make disclosure and to preserve assets. Orders of this nature are designed
    to ensure that a plaintiffs recovery will not be defeated by the defendant
    dissipating its assets before judgment. The propriety of those orders is not at
    issue in the appellants appeal; they concede that they breached those orders
    and do not contest the findings of the motion judge that held them in contempt.

[22]

The violation of these orders constitutes a
    reason to grant security that is compelling, given the serious nature of the orders
    and their violation, and  directly relates to the purpose for which security
    for costs may be ordered.

[23]

An other good reason to order security has
    been found in cases where misconduct is such as to present an unacceptable risk
    that any costs order made on the appeal will not be obeyed. For example, in
York
    University v. Markicevic
, 2017 ONCA 651, at para. 58, Epstein J.A. considered
    that, a finding that the appellant has committed fraudin conjunction with a
    finding that the appellant has taken steps to put his assets out of the reach
    of his creditors, provide other good reason to justify an order for security
    for costs under r. 61.06(1)(c).

[24]

Here, the appellants have been found in contempt
    of orders that were designed to ensure they would honour their obligations if
    found liable. This also presents an unacceptable risk about whether they would
    comply with a costs award if unsuccessful on their appeal.

[25]

Having concluded that the respondents have met
    the requirements of r. 61.06(1)(c):

I must go on to determine whether an order for
    security for costs would be just. Such a determination requires balancing the [appellants]
    right to access to justice against the [respondents] right to protection from
    having to defend unmeritorious positions in circumstances in which it is
    unlikely to recover its costs:
Markevic
, at para. 22.

[26]

The appellants argue that a requirement to post
    security in the amount sought by the respondents would create a barrier to the
    pursuit of their appeal and deny them access to justice. The onus of showing
    that a party should not be ordered to post security due to its impecuniosity is
    on the party making that allegation
: Zeitoun v. Economical Insurance Group
(2008), 91 O.R. (3d) 131 (Div. Ct.), at paras. 45-46, aff'd
2009 ONCA 415
, 96 O.R. (3d) 639
.

[27]

The appellants do not expressly allege impecuniosity.
    In affidavits that they were required to file under the motion judges April
    23, 2020 order, the appellants depose to having negligible assets. However, the
    motion judge, in making his contempt finding, pointed to significant
    discrepancies between what was disclosed in those affidavits and other evidence
    or indications that their assets were far more substantial: 2020 ONSC 4921, at
    paras. 21-30. The appellants filed no evidence on this motion, and have to date
    resisted being examined as to the full extent of their assets under the
    examination order.

[28]

Moreover, the appellants make certain submissions
    that are inconsistent with impecuniosity. They suggest that it is speculative
    to assume they would not honour a reasonable costs award on the appeal and point
    out that they have paid some costs orders in the past.

[29]

Given the above, I am not satisfied that a
    reasonable order for security for costs would result in the appellants being
    unable to pursue their appeal.

[30]

As to the quantum of security, the amount of
    $25,000 for costs of the appeal was not seriously contested. In addition, the
    respondents argue that the security should also include costs of the proceeding,
    particularly two elements of those costs. They submit that the costs of the
    contempt hearing should be posted as security since that award is highly
    unlikely to be disturbed regardless of the result of the appeal, as the
    appellants are not contesting the contempt finding. They make a similar
    argument about the costs of the sentencing hearing. They argue that, given that
    the appellants are not challenging the contempt finding, some sanction would
    have been warranted. Therefore, even if the sanction is varied on appeal, the
    costs order would likely stand. The appellants do not concede these points.

[31]

In the end, a security for costs order,
    including its quantum, is discretionary and must be just. It bears repeating that
    its purpose is to provide a measure of protection, not perfect protection, for
    costs. The need for protection is strongest with respect to costs of the
    appeal, as the respondents should not have to continue incurring expenses to
    respond to the appeal without the prospect of some recovery if costs are
    awarded in their favour. The need for protection exists, but is more attenuated,
    with respect to the costs of the proceeding. The appeal is not causing those costs
    to be incurred  they already have been. On the respondents hypothesis that
    the costs orders for the contempt and sentencing hearings will not be disturbed
    on appeal, the appeal is merely delaying their collection.

[32]

Balancing all factors, I direct that the
    appellants post security for costs of the appeal in the sum of $25,000, and of the
    proceeding in the total sum of $45,000, within 30 days of the release of these
    reasons.

The Motion for a Stay

[33]

As noted above, the judgment provided that the
    appellants attend a judgment debtor examination even if they appealed the judgment.
    The precise wording of the examination order provisions of the judgment are as
    follows:

5.
THIS COURT ORDERS
that,
    notwithstanding any appeals of this order which may be pending, the plaintiffs
    may immediately take steps to enforce the Judgment by conducting judgment
    debtor examinations and pursuing tracing remedies.

6.
THIS COURT FURTHER ORDERS
that the
    Developer Defendants shall attend a judgment debtor examination on a date to be
    determined by the plaintiffs. The Developer Defendants shall each produce all
    documents listed in their Notices of Examination at least 14 days prior to
    their respective examinations and the Developer Defendants shall answer all
    questions arising on any examinations to enforce the Judgment, shall not refuse
    to answer any questions and these examinations may be conducted before Justice
    Koehnen.

[34]

The motion judge gave the following explanation
    for making the examination order:

In addition, I direct that the plaintiffs may
    begin enforcing that judgment by conducting judgment debtor examinations and
    pursuing tracing remedies even if the Defendants appeal this judgment. This is
    appropriate because the net effect of a judgment debtor examination or a
    tracing remedy arising out of it would be the same as having the Defendants comply
    with the Mareva injunction. Among the relief ordered under the Mareva
    injunction was a requirement that Messrs. Hyman and Anastasio provide
    affidavits of assets. I have commented on the complete inadequacy of those
    affidavits in earlier reasons. If the Defendants succeed on an appeal of this
    judgment, the appeal would allow them to defend, as a result of which the
    plaintiffs would continue to have whatever rights they have now, including the
    right to pursue further remedies under the court orders already issued which
    would include the right to cross-examine the Defendants on their statements of
    assets, the accounting and whatever disclosure they have produced.

[35]

The parties subsequently attended before the
    motion judge who refused to give effect to the appellants submission that he had
    no jurisdiction to order examinations with an appeal pending.

[36]

Examinations were scheduled for May 19 and 20,
    but the appellants refused to attend, taking the position that the motion judge
    did not have jurisdiction to order them to attend a judgment debtor examination
    when the judgment was under appeal. They then brought this motion.

[37]

The appellants primary position is that the
    appeal automatically stayed any provision of the judgment for the payment of
    money until the appeal is determined: r. 63.01(1). A judgment debtor
    examination is a step under or for the enforcement of the money provisions of
    the judgment, and the effect of the stay is that no such step may be taken
    until the appeal is determined: r. 63.03(3). The provision that the judgment
    debtor examination may take place notwithstanding any appeals is ineffective,
    as only a judge of this court can lift the automatic stay: r. 63.01(5). If a
    stay is required, they ask that I grant one under r. 63.02(1).

[38]

The respondents argue that the examination order
    was made as part of the sanction for the appellants contempt; it is not in and
    of itself an order for the payment of money and is not automatically stayed. It
    should not be equated with an ordinary judgment debtor examination, which the
    holder of a money judgment that is not stayed can compel under r. 60.18. While
    the motion judge called the examination a judgment debtor examination, he could
    as easily have directed the appellants to be cross examined on the affidavits
    they were required to file under the
Mareva
injunction. The
    respondents also argue that since the appellants moved before this court only
    after they failed to comply with the examination order, they should not be
    given an audience. They submit that a stay of the examination order is not
    warranted; and if it is automatically stayed, the stay should be lifted.

[39]

I agree with the appellants that the fact that
    the motion judge stated that the examination order applied even if there were
    an appeal does not make it so, as only a judge of this court can remove an
    automatic stay. But in my view, the examination order is not automatically stayed
    under r. 63.01(1). It is not an order for the payment of money, nor is the
    examination a prohibited step under r. 63.03, given the existence of a court order
    requiring that examination. While, under r. 63.03, the effect of a stay of a
    provision for the payment of money is that no step under that provision or for
    its enforcement can be taken, the examination sought by the respondents is not being
    pursued under the provision for the payment of money, but under the examination
    order, a separate provision of the judgment which is not automatically stayed.

[40]

Nor, in the unusual circumstances of this case,
    would I grant a stay of the examination order. The overarching consideration in
    whether to grant a stay pending appeal is whether doing so is in the interests
    of justice. Three factors are considered: (1) whether, on a preliminary
    assessment, the appeal raises a serious question, recognizing that this is a
    low threshold; (2) whether the applicant would suffer irreparable harm if the
    application were refused; and, (3) the balance of convenience, namely which of
    the parties would suffer greater harm from the granting or refusal of the
    remedy pending a decision on the merits. The factors are not watertight; the strength
    of one may compensate for the weakness of another:
Zafar v. Saiyid
,
2017 ONCA 919, at paras.
17-19
.

[41]

The appellants identify no prejudice, let alone
    irreparable harm, that they would suffer if they had to be examined. They are
    not in an analogous position to a defendant appealing a money judgment who, if
    they win their appeal, will never have to make disclosure or be subjected to
    intrusive probing of their financial affairs and who can therefore credibly
    claim that they would suffer irreparable prejudice if they had to undergo the
    examination before the appeal is heard. The appellants were required under the
Mareva
injunction to file affidavits disclosing their assets and are subject to cross-examination
    on those affidavits. They are not entitled, under existing court orders that
    are not being appealed, to keep their financial affairs secret from the
    respondents.

[42]

It is not in the interests of justice to grant
    the stay requested. In light of that conclusion, it is unnecessary to address
    the respondents other arguments.

Conclusion

[43]

The motion for security for costs is granted to
    the extent described in para. 32 above. The motion for a stay is dismissed.

[44]

The respondents are entitled to the costs of
    these motions in the total sum of $6,000, inclusive of disbursements and
    applicable taxes.

B. Zarnett J.A.


