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defendants Snelcrest Gardens Inc., Mellow Gardens Development Inc., 797820 Ontario Limited)…” (b) Frank Katana is an owner in Valleywood through his company the defendant M.A.K. Shoes Inc.. The plaintiff states that the said defendant may also own and control Valleywood through his co-defendant Ljubica Katana or through trust arrangements involving other members of his family. The plaintiffs state that if ownership in the Valleywood companies (through M.A.K. Shoes Inc.) is held in the name of the Katana Family Trust, (the “Trust”), the plaintiffs state that they are entitled to reach the assets of the said Trust on the basis of principles of subrogation and also on the basis that the Trust is illegal and/or it is a sham, and that Frank Katana is the beneficial owner of any and all assets owned by this “Trust”. [13] In its Amended Statement of Claim in the Second Action, Hilltop also alleged Katana had acted as Valleywood’s agent, and therefore they should be held jointly and severally liable for the damages Katana had been ordered to pay Hilltop in the First Action. In addition, it sought a declaration that Katana was the beneficial owner of the assets held in the Katana Family Trust. [14] The Second Action took approximately 5 years to come to trial and approximately 40 days to try in the spring and fall of 2001. The evidence was completed on June 22, 2001. When the trial re-commenced on September 4, 2001, Hilltop sought injunctive relief against Valleywood on the basis that the evidence at trial had established that Hilltop had a strong prima facie case, representatives of Valleywood had given false and misleading evidence on interlocutory motions and there was good reason to conclude that if the order was not made, the assets of Valleywood would be dissipated pending final disposition of the action. [15] After hearing the motion for three days in September 2001, Greer J. granted Hilltop injunctive relief. [16] Subject to payment out of operating funds, she ordered monies owing to Valleywood to be held in trust pending final disposition of the Second Action. [17] In her Reasons respecting the motion for injunctive relief, Greer J. noted the following: (a) in the First Action, Hilltop had obtained judgment against Katana (the President of Valleywood) in the amount of $2 million (which, with interest and costs, approximated $4 million); (b) after Hilltop obtained that judgment, Katana took steps to make himself judgmentproof through fraudulent conveyances, which gave rise to the Second Action (commenced in June 1996); (c) weakness, contradictions and inconsistencies in Katana’s evidence at trial; (d) evidence at trial showing Katana’s failure to disclose. [18] Valleywood’s and the Katana Family Trust’s application for Leave to Appeal to the Divisional Court was dismissed on November 5, 2001. 3 2003 CanLII 45839 (ON SC)
[19] On June 20, 2002 Greer J. gave judgment in the Second Action in favour of Hilltop. Her findings included the following: (a) Katana, his wife, sister and brother-in-law had made a fraudulent conveyance and had fraudulently registered a mortgage; (b) Katana is the beneficial owner of all of the assets held by the Katana Family Trust formed to protect Katana’s interest in MAK Shoes Inc.; (c) Valleywood is jointly and severally liable with Katana for the amount of the judgment in the First Action, which with accrued interest, costs and punitive damages by June 20, 2002 totalled approximately $5.5 million; [20] Greer J. dismissed Katana’s counterclaim for reasons including the following: Katana orchestrated the whole fraudulent conveyance scheme to get assets out of his hands....False and misleading representations were made by Katana … to the CIBC, which spilled over into the Action before me, to the municipal and government authorities to circumvent planning laws, to the court in interlocutory proceedings in this action, in the various transactions involving MAK and Celebrity shares and redemptions and loans. The Trust was a sham put forward by Katana to protect his beneficial interest in MAK and Valleywood. [21] Res judicata and “abuse of process” were raised before Greer J. Her Reasons released June 20, 2002 include the following at paragraphs 194-206: The Issues of Abuse of Process, Res Judicata and Issue Estoppel [194] The Defendants, as part of their Counterclaim, allege abuse of process, as they say that the issues in the Trial before me should be dismissed because those claims are now res judicata and an abuse of process. They further claim that issue estoppel also applies to the Plaintiffs’ claims. The issues before MacKenzie J., are set out in his Reasons for Judgment dated April 21, 1995. The issues were broken up into those relating to the Wilsons, and those relating to DiBattista and Hilltop. Since the Wilsons were let out of the action prior to the commencement of Trial before me, I make no comments on those. The issues relating to DiBattista and Hilltop include whether DiBattista was a confidee of, and owed a fiduciary duty to Katana in respect of certain information and documents obtained by him from Katana through Kikas, and if so, were these documents confidential in nature. They also include whether DiBattista wrongfully interfered with any contractual relations existing between the Wilsons and Katana. MacKenzie J. found no liability on the part of DiBattista and Hilltop. Further, it is clear in his Reasons on the Motion to re-open, that MacKenzie, J. saw the issue of the fraudulent preference/conveyance then being alleged against Katana and his wife, as being “sufficiently distant from the primary issues of liability and quantification of damages” that were the subject of his Judgment. He therefore saw no justification to reopen the proceeding before him. [195] In the case before me, a great deal of evidence that was proffered from the action before MacKenzie J., and was by necessity was raised before me, in order to provide the full picture of how Valleywood was developed and what it consisted of. That does not mean that there has been an abuse of process or res judicata. The fact that the pleadings in this action were amended to include more claims than just the fraudulent preferences/conveyances, does not make it an abuse of process. In fact, the issue of res judicata was raised by the Defendants on the Motion before Boland J., and she dismissed that issue. This does not mean, of course, that the Defendants cannot raise it at Trial before me. They have done so. [196] Donald J. Lange, in The Doctrine of Res Judicata in Canada, Butterworths, 2000, at pp. 12 –14 sets out parameters of the doctrine. The burden is on the party proving res judicata. The Court may look to the documentation behind the formal judgment to determine what was decided for the purpose of res judicata. See: Rolston et al. V. Lapa Cadillac Gold Mines (1937) Limited et al. [1950] O.R. 103-114, citing Johanesson v. Canadian Pacific Railway, 32 Man. R. 210, [1922] 2 W.W.R.341, 66 D.L.R. 599, affirmed 32 Man. R. at 221, [1922] 2 W.W.R. 761, 67 D.R.L. 636. Lange, in summarizing the ambit of inquiry, says it is 4 2003 CanLII 45839 (ON SC)
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