Court File and Parties
COURT FILE NO. : CV-23-00698211-0000 DATE : 20230519 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Taha Ahsan, Zahedabibi Ahsan, Arslan Al-Haq, Trevohn Baker, Jamila Shaikh, Mohamed Shaikh, Fatima Shaikh-Uddin, Juliean Smith-Baker, Ahmed Uddin and Sharon Wiltshire Plaintiffs AND: Richard Millhouse Nicholson, and Nicholson Wealth and Risk Solutions Inc. carrying on business as NWR Financial Group, Anthonie Ruinard Jr also known as Anthonie Ruinard, Petrian Orreathia Ruinard, Ruinard Inc., Legacy Investors Group Inc., and John Doe Defendants
BEFORE: Justice Chalmers
COUNSEL: D. Milosevic, J. Miller and C. Aitken, for the Plaintiffs No one appearing, for the Defendants
HEARD: In-Writing
Endorsement
Overview and Factual Background
1The Plaintiffs bring this motion, without notice and on an urgent basis for a Norwich order and Mareva injunction.
2The Defendant, Richard Nicholson (Nicholson) and his company, Nicholson Wealth and Risk Solutions Inc. operating as NWR Financial Group (NWR) recommended that the Plaintiffs invest in a hedge fund operating in the United States called Legacy Investors Group Inc. (Legacy). Control and oversight was to be carried out by Ruinard Inc., Anthonie Ruinard Jr. and Petrian Orreathia Ruinard.
3Nicholson represented to the Plaintiffs that he was the operations manager for the Canadian division of Legacy and that he had personally invested in Legacy. He stated that Legacy is a hedge fund that operated in Arizona. He guaranteed that the Plaintiffs would receive monthly interest payments in the amount of 5 or 6% for their investment. He also represented that Legacy had never lost any investor money and had been profitable for 18 years. The Plaintiffs state that in reliance of the representations, they sent Ruinard and Legacy a total of USD $670,000 between August 2021 and October 2022. The contractually agreed to interest on this amount was USD $345,000.
4Nicholson arranged for the Plaintiffs to wire the funds to Ruinard Inc. or Anthonie Ruinard Jr. Initially some of the Plaintiffs received monthly interest payments. The payments were sent directly from a bank account at the Royal Bank of Canada and not from Legacy. The monthly interest payments eventually stopped. After the monthly payments stopped the Plaintiffs asked Nicholson to return their initial investment and the interest owed to them. Nicholson made promises to repay the Plaintiffs but did not do so.
5Nicholson admitted to one investor Antoine Small that he had not invested funds with Legacy but instead with Nicholson personally. He promised to repay Mr. Small but did not do so.
6The Plaintiffs retained U.S. counsel. They sent correspondence to Legacy at the address set out in the investment documents and the corporate entity address indicated in an Arizona search for Legacy. It was returned to sender. There is no operating business located at the address indicated for Legacy. The Plaintiffs tried to contact Nicholson by phone but have been unsuccessful.
7Nicholson posted pictures and videos of luxury purchases on social media websites including photographs of a $400,000 Lamborghini sports car and a $100,000 luxury watch. Nicholson has sold his home in Ontario. The proceeds of the sale were intercepted. The net proceeds of the sale are in a solicitor’s trust account.
Discussion and Analysis
Without Notice
8The Plaintiffs bring this motion without notice to the Defendants. The issue of providing notice on a Mareva injunction was discussed in 2092280 Ontario Ltd. v. Voralto Group Inc., 2018 ONSC 2305 (Div. Ct.):
12The purpose of proceeding without notice is to obtain an order before those responsible for a fraud become aware of the action so that if the assets are then dissipated, the dissipation can be remedied through the contempt powers available to a court.
13Because of the recognized need to grant Mareva orders on a without notice basis, Mareva orders have their own internal protections including a requirement that if granted, the motion must be returnable within 10 days on notice to the defendants affected so that any objections can be considered by the court. In addition, Plaintiffs are required to give an undertaking relating to any damages suffered by any defendant affected in the circumstances where an improper freezing order has been issued. The Plaintiffs must also meet the very high burden of proof in the test for a Mareva injunction. The Plaintiffs also bear the extraordinary burden of full and frank disclosure of its own and the other sides’ likely case as required on motions made without notice.
28[….] Fraud is a serious crime which threatens unwitting victims with substantial and often devastating financial losses. The Mareva injunction is an important tool for Plaintiffs to try and recover their losses due to fraud or theft. A requirement to notify the perpetrators of a fraud in advance of an impending Mareva injunction would significantly water-down an important remedy for protecting innocent victims. Judgments for damages cannot reasonably be expected to be affordable or collectable against fraudsters. If funds cannot be frozen in advance, a vital arrow in the civil law’s quiver to address serious fraud will be lost. [….]
9The Plaintiffs allege that they were the victim of a fraud committed by the Defendants. The Plaintiffs state that if notice is provided to the Defendants there is a real risk that the Defendants’ assets will be put beyond the reach of the Plaintiffs.
10Here, there is evidence of a fraudulent scheme. In the circumstances of this case, if notice was provided to the Defendants, they may take steps to move assets beyond the Plaintiffs’ reach. I am satisfied that it is appropriate that the motion proceed on a without notice basis.
Mareva Injunction
11Section 101 of the Courts of Justice Act provides the court with the jurisdiction to grant interlocutory injunctions including Mareva injunctions. Section 101 states:
Injunctions and receivers
101 (1) In the Superior Court of Justice, an interlocutory injunction or mandatory Order may be granted or a receiver or receiver and manager may be appointed by an interlocutory Order, where it appears to a judge of the court to be just or convenient to do so.
Terms
(2) An Order under subsection (1) may include such terms as are considered just.
12Rule 40 of the Rules of Civil Procedure provides that an injunction may be obtained on motion, and rule 40.02 (1) provides that an interlocutory injunction may be granted on motion without notice for a period not exceeding ten days. Rule 40 states:
RULE 40 INTERLOCUTORY INJUNCTION OR MANDATORY ORDER HOW OBTAINED
40.01 An interlocutory injunction or mandatory Order under section 101 or 102 of the Courts of Justice Act may be obtained on motion to a judge by a party to a pending or intended proceeding.
WHERE MOTION MADE WITHOUT NOTICE
Maximum Duration
40.02 (1) An interlocutory injunction or mandatory Order may be granted on motion without notice for a period not exceeding ten days.
13A Mareva injunction is an injunctive order that restrains the defendant from dissipating assets or from conveying away his or her own property pending the court’s determination in the proceedings. A Mareva injunction is sometimes called a “freezing injunction” or a freezing order. A Mareva injunction is sometimes combined with a Norwich order, which is an equitable remedy and a form of discovery that strictly speaking is not injunctive relief.
14For a Mareva injunction, the plaintiff must satisfy the requirements for an interlocutory injunction as set out in RJR-MacDonald Inc. v. Canada (Attorney General), [1994] 1 SCR 311 and typically a plaintiff must establish:
(a) a strong prima facie case;
(b) irreparable harm if the remedy for the defendant’s misconduct were left to be granted at trial;
(c) the balance of convenience favours granting an interlocutory injunction;
(d) the defendant has assets in the jurisdiction; and
(e) that there is a serious risk that the defendant will remove property or dissipate assets before judgment. Absent unusual circumstances, the plaintiff must provide the undertaking as to damages normally required for any interlocutory injunction.
15A strong prima facie case is one that will probably prevail at trial or is likely to succeed at trial: Modry v. Alberta Health Services, 2015 ABCA 265.
16In the immediate case, the Plaintiffs have established a strong prima facie case of fraud. To defraud a person is to deprive a person dishonestly of something which is his or of something to which he is or would or might but for the perpetration of the fraud, be entitled. The elements of a claim of fraudulent misrepresentation are: (1) a false statement by the defendant; (2) the defendant knowing that the statement is false or being indifferent to its truth or falsity; (3) the defendant having an intent to deceive the plaintiff; (4) the false statement being material and the plaintiff having been induced to act; and, (5) the plaintiff suffering damages: Bruno Appliance and Furniture Inc. v. Hryniak, 2014 SCC 8.
17I am satisfied that the Plaintiffs have established a strong prima facie case of fraud. The evidence that supports fraudulent activity is as follows:
− Nicholson stated that the funds would be invested with Liberty;
− The funds were wired to the United States with Ruinard Inc. or Anthonie as the beneficiary recipient;
− The initial investment returns were not paid from the United Statues but instead from an RBC account in Mississauga that is close to the NWR office;
− After the advance of funds, Nicholson purchased expensive luxury items;
− In February 2023, Anthonie accused Nicholson of “embezzling money from investors” and severed his relationship with Nicholson;
− Nicholson admitted to Antoine Small that he had not deposited funds paid by Small with Legacy. Although he promised to repay the funds he did not do so and instead sold his house, (the proceeds from the same are in a solicitor’s trust account in Ontario); and
− The demand letter sent to Legacy at its last known address was returned to sender. Legacy, Ruinard inc. and Anthonie Ruinard have failed to accept correspondence and have stopped communicating with the Plainitffs.
18I find the affidavit evidence of Mr. Small to be most persuasive. I note that Mr. Small commenced a separate action and is not one of the Plaintiffs in this action. In his affidavit sworn May 10, 2023, he deposed as follows:
After transferring my funds to Richard [Nicholson] he told me my funds had been invested with Legacy and that a contract supporting investment would be provided to me.
I demanded to receive this alleged Legacy contract for months, but it was never provided.
Finally on April 21, 2022, Richard admitted that my funds had not been invested with Legacy and had only been invested with him personally.
Shortly after Richard called me and said that he would send me a bank draft for the total amount owing by April 26, 2022.
Despite this promise and repeated others after this, I still have not received payment as of today’s date [….].
On May 6, 2022, I discovered that Richard’s property which was pledged as security for the March and April notes had been listed for sale.
19The Plaintiffs must establish that the Defendants have assets in the jurisdiction and the assets are being, or will be, dissipated and will not be available for execution after judgment. In cases involving allegations of fraud, the real risk of the removal or dissipation of assets can be established by inference, as opposed to direct evidence: Sibley & Associates LP v. Ross, 2011 ONSC 2951, at para. 63. As stated by Strathy J. (as he then was):
Rather than carve out an “exception” for fraud, however, it seems to me that in cases of fraud, as in any case, the Mareva requirement that there be a risk of removal or dissipation can be established by inference, as opposed to direct evidence, and that inference can arise from the circumstances of the fraud itself, taken in the context of all the surrounding circumstances. It is not necessary to show that the defendant has bought an air ticket to Switzerland, has sold his house and has cleared out his bank accounts. It should be sufficient to show that all the circumstances, including the circumstances of the fraud itself, demonstrate a serious risk that the defendant will attempt to dissipate assets or put them beyond the reach of the plaintiff.
20I am satisfied that Nicholson has assets in Ontario. He sold his house. The proceeds from the sale are in a solicitor’s trust account. There is evidence that he purchased luxury items such as a Mercedes for his mother and a Lamborghini for himself and a luxury watch.
21I am of the view, that given the circumstances of the fraud itself that there is a serious risk that the Defendants will attempt to dissipate their assets. Nicholson has taken steps to dissipate his assets with the sale of his house after admitted to Mr. Small that the funds had not been invested with Legacy but instead had been invested with him.
22In considering the balance of convenience, the court must consider which of the parties will suffer the greater harm from either granting or refusing to grant the interim order pending a determination on the merits: RJR-MacDonald, at paras. 62, and 63. I am satisfied that the balance of convenience favours the granting of the injunction. This will preserve the status quo and ensure the funds that were allegedly defrauded remain available pending the trial of the action.
23The Plaintiffs have provided an undertaking as to damages.
24I grant the Mareva injunction. The motion was brought without notice. The injunction shall remain in place for a period of 10 days at which time it will expire, unless it is extended by further order of the court: R. 40.02(1).
Norwich Order
25Disclosure of documents may be ordered where the person against whom discovery is sought has, through no fault of his or her own, been involved in the wrongful acts of another so as to facilitate the wrongdoing: Isofoton S.A. v. Toronto Dominion Bank, [2007] 85 O.R. (3d) 780, at paras 30-33.
26The five factors to be considered in an application for a Norwich order are as follows:
(1) Whether the applicant has provided evidence sufficient to raise a valid, bona fide or reasonable claim;
(2) Whether the applicant has established a relationship with the third party from whom the information is sought such that it establishes that the third party is somehow involved in the acts complained of;
(3) Whether the third party is the only practicable source of the information available;
(4) Whether the third party can be indemnified for costs to which the third party may be exposed because of the disclosure, some [authorities] refer to the associated expenses of complying with the orders, while others speak of damages; and
(5) Whether the interests of justice favour the obtaining of the disclosure: GEA Group AG v. Ventra Group Co. (2009) 96 O.R.(3d) 481, at para. 51.
27I am satisfied that the Plaintiffs established the five factors.
28The Plaintiffs have established a reasonable claim. Nicholson made representation to encourage the Plaintiffs to enter into the investor agreements. The representations made were false in that the Plaintiffs were told that Legacy was a bona fide company that had never lost an investor’s money. The interest payments that were initially received were not paid by Legacy but instead from an RBC branch close to Nicholson’s office. Nicholson purchased luxury vehicles and goods. The funds were sent to Ruinard Inc. by wire transfer. It is not clear on the evidence how Nicholson obtained the funds sent to Ruinard to allow him to purchase the luxury goods. Nicholson admitted to Mr. Small that he had not put the money Mr. Small invested to Legacy. The demand letter to Legacy was returned to sender and Nicholson stopped communicating to the Plaintiffs.
29The evidence supports a claim in intentional fraud.
30The Plaintiffs’ funds were transferred to accounts controlled by the non-party financial institutions.
31Here, the moving party alleges that they are victims of a fraud committed by Nicholson. In these circumstances it is unreasonable to expect that information will be provided by the wrongdoer: Isofoton, at para. 52.
32The Plaintiffs have undertaken to indemnify the financial institutions for their costs of complying with the order.
33I am satisfied that the interests of justice favour the order requiring disclosure. The Plaintiffs allege fraud and conversion against the Defendants. In circumstances of fraud, the interests of justice favour obtaining disclosure from the financial institutions to determine the location of the funds. The interests of the Plaintiffs in disclosure far over balances the interests of Mr. Nicholson and his Co-Defendants including their interest in privacy and confidentiality.
34In conclusion, I am satisfied that the Plaintiffs have a bona fide claim against the Defendants and that the financial institutions have a connection to the wrong beyond being a witness to it. Obtaining information from the financial institutions is the only practical source of the needed information. The public interest justifies disclosure and the interests of justice favour obtaining the information.
35I conclude that the Plaintiffs are entitled to the Norwich order.
Conclusion
36For the above reasons, the Mareva injunction, the Norwich Order and the ancillary relief shall be granted as requested.
37I am not seized of the matter. I set May 29, 2023, as the return date for a motion to extend the Order made on this motion without notice.
38I have signed the draft Order.
Date: May 19, 2023