COURT FILE NO.: CV-22-00002925-0000 DATE: 2023 07 27
SUPERIOR COURT OF JUSTICE – ONTARIO 7755 Hurontario Street, Brampton ON L6W 4T6
RE: BRADLEY J. GRANT INVESTMENTS INC. AND: NESTIG INC. and STEPHEN LEE HEIMBECKER also known as STEVE HEIMBECKER
BEFORE: Justice RICCHETTI
COUNSEL: C. Abela and A. Pepushaj for the Plaintiff R. Bucholz for the Defendants, Nestig Inc. and Stephen Lee Heimbecker
HEARD: July 20, 2023
Amended Reasons to paras. 91 and 94
ENDORSEMENT On Interim Mareva / Norwich Orders
[1] This is a motion by the Plaintiff for an interim Mareva Injunction and for a Norwich Order.
[2] On October 11, 2022, Bradley J. Grant Investments Inc. (Grant) commenced an action against Stephen Lee Heimbecker (Heimbecker) and Nestig Inc. (Nestig) for breach of contract and breach of fiduciary duty. Recently, Grant amended its claim to add parties and causes of action to include allegations of fraud.
Service
[3] This motion was not brought ex parte. Instead, it was brought on short service. Service on the Defendants Nestig and Heimbecker was made on July 12, 2023. Heimbecker is the president and director of Nestig.
[4] Nestig and Heimbecker (jointly referred to as Heimbecker) had already retained counsel in this proceeding and had delivered a Defence. Notwithstanding short service, a responding affidavit was delivered by Heimbecker.
[5] The added parties, Stephen Lee Heimbecker as Trustee of the Stephen Heimbecker (2015) Family Trust (Trust), Joanna Heimbecker (Ms. Heimbecker) and Keystone Capital (Keystone), although served, were not represented at today’s motion. These parties did not file any materials.
[6] Nestig and Heimbecker ask the court to consider that they have only had a brief time to prepare responding materials. I accept that a full opportunity for Heimbecker to respond to the motion was not possible. However, I note, that Heimbecker filed a 24 page, 104 paragraph responding affidavit dated July 20, 2023, which must be and has been considered on this motion.
[7] On consent, the parties agreed that the interlocutory motion for the Mareva Injunction on its merits, with a full evidentiary record (counsel to agree on a timetable) will be heard on September 18, 2023, at 10 am before me, in person.
The Parties
[8] Grant is a company where Bradley Grant is its principal.
[9] Nestig is an Ontario company. It was a licensed mortgage broker until its license was suspended on June 27, 2023.
[10] Mr. Heimbecker is the president and director of Nestig and was licensed as Nestig’s principal mortgage broker. Mr. Heimbecker’s license expired on March 31, 2022.
[11] Ms. Heimbecker is the spouse of Mr. Heimbecker and the corporate secretary, treasurer and director of Nestig.
[12] The Trust is a shareholder of Nestig. Mr. Heimbecker is the trustee.
[13] Keystone is an Ontario corporation. Mr. Heimbecker was one of two directors, secretary and treasurer up until October 7, 2022.
The Position of the Parties
Grant’s Allegations
[14] Grant alleges that Heimbecker and Nestig perpetrated a fraud in excess of $51 million dollars. This alleged fraud involved Ms. Heimbecker, the Trust and Keystone through the receipt, transfer and distribution of monies from Heimbecker obtained from Grant.
[15] Grant alleges that beginning in 2018, it advanced monies to Heimbecker, who was to add an equal amount of his own monies to the Grant advances, to purchase mortgages or short-term loans. Heimbecker was to then bundle the acquired investments and sell them to third parties, such as mortgage investment corporations, for substantial fees and interest. Since 2018, there have been about 80 of these transactions (advances by Grant). By 2021, the amounts advanced by Grant grew to the approximately $60 million dollars.
[16] Grant was to, in early December 2021, receive the return of approximately $50 million dollars from Heimbecker.
[17] In November 2021, Grant alleges that Heimbecker advised him that Heimbecker was selling Nestig. Heimbecker asked Grant to advance approximately $51 million dollars for new mortgage tranches. In return, Heimbecker agreed to give Grant 10% of Nestig’s gross sale proceeds. Grant would also receive interest and fees nearing $2,000,000 on maturity of approximately one month.
[18] Heimbecker copied Grant with an email to his lawyer allegedly asking his lawyer to document the 10% deal. A letter, in late November 2021, from Heimbecker’s lawyer, on behalf of Mr. Heimbecker, Ms. Heimbecker, Nestig and the Trust, confirmed the sale of Nestig was expected to close on April 2022 and the law firm clients agreed to pay all the outstanding advances from Grant and the agreement to pay Grant the 10% of the gross proceeds.
[19] Four cheques were provided to Grant on December 1, 2021, totalling approximately $50 million dollars.
[20] Grant advanced approximately $51 million dollars, by way of 3 cheques, dated December 1, 2021. Promissory notes were provided for the three advances, with maturity dates of early January 2022, and with very substantial returns promised to Grant for this short-term advance.
[21] No repayment has been made on the three December 1, 2021 advances. Instead, Heimbecker on several occasions unilaterally created new promissory notes with later maturity dates.
[22] Given the delay and failure to return the funds to Grant, Grant asked for details of the mortgages/investments acquired with the monies Grant had advanced.
[23] Some information/documentation regarding the utilization of Grant’s advances was provided in August 2022. However, Heimbecker only did so on a without prejudice basis. Grant alleges that, even that information/documentation provided, was woefully deficient.
[24] What is not disputed is that the information/documentation disclosed in August 2022 is incomplete and not before this court.
[25] Heimbecker has chosen not to waive its “without prejudice” claim to allow the information/documentation provided in August 2022 to be tested for accuracy/veracity nor put before this court. Now, Heimbecker’s counsel submits that Grant has no right to this information/documentation regarding the underlying mortgages/investments. Heimbecker submits he may be prohibited from producing this information/documentation due to some alleged confidentiality, although, exactly why is not set out by Heimbecker.
[26] Grant alleges that it recently discovered Heimbecker is disposing of (or attempting to dispose of) certain assets, including racehorses, a farm and a home suggestive he is moving to the United States of America (US).
[27] Grant points to the fact Heimbecker was the subject of another Mareva Injunction granted by this court in an alleged check “kiting” scheme with the TD Bank (although the TD Bank was subsequently paid its claim and the action resolved).
[28] Grant seeks an interim Mareva Order pending the motion being heard on September 18, 2023 and a Norwich Order to obtain the necessary financial information/documentation regarding the utilization and transfers of all of Grant’s advances to Heimbecker.
Heimbecker’s Position
[29] Heimbecker denies that any fraud was perpetrated on Grant. Heimbecker alleges the business relationship between Nestig and Grant, and rights thereunder, are fully and solely set out in the promissory notes. There is no dispute that the Grant advances have not been repaid.
[30] Heimbecker submits that this action is a simple debt action regarding the three $51 million promissory notes issued in December 2021. In other words, Grant lent money to Heimbecker over the years, as evidenced by the promissory notes. Nestig is not in a financial position to repay the Grant advances. As for the non-repayment of the three December 2021 promissory notes, Heimbecker states:
For a variety of reasons, Nestig was not able liquidate the underlying loans related to BJG’s December 2021 advances and, as a result, it was not able to repay the amounts owing on the promissory notes upon their maturity dates.
[31] Accordingly, Heimbecker submits that no Mareva Order should be granted.
[32] The promissory notes do not provide Grant with additional security nor the right to obtain disclosure of Heimbecker’s business activities, including the utilization of the Grant advances. Accordingly, Heimbecker submits the Norwich Order should not be granted.
The Law
Mareva Injunction
[33] To obtain a Mareva Injunction, the moving party must establish each of:
(a) the moving party has a strong prima facie case;
(b) there is a serious risk that the defendant will remove property or dissipate assets before judgement in an effort to defeat enforcement of the claim advanced should a judgment be obtained. It is sufficient to show that the circumstances, including any circumstances of fraud, breach of trust or otherwise, the moving party demonstrates a serious risk that defendant has or will attempt to dissipate assets or put them beyond the reach of the plaintiff;
(c) the moving party will suffer irreparable harm;
(d) the balance of convenience favours granting an interlocutory injunction; and
(e) the moving party has given an undertaking as to damages.
[34] The risk of removal or dissipation of assets can be established by inference where strong prima facie fraudulent activities have been established.
[35] In Sibley & Associates LP v Ross, 2011 ONSC 557, the Court stated:
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 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 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.
[36] The court is to assess whether the moving party has shown “the defendant threatens to so arrange his assets as to defeat his adversary, should that adversary ultimately prevail and obtain judgment, in any attempt to recover from the defendant on that judgment." See Aetna Financial Services v. Feigelman, [1985] 1 SCR 2 at para. 25.
[37] In Canadian Imperial Bank of Commerce v. Credit Valley Institute of Business and Technology, [2003] O.J. No. 40, [2003] O.T.C. 7 (S.C.J.), at para. 16, Justice Molloy discussed the requirements for a Mareva Injunction, and the test a plaintiff must meet to obtain that kind of order:
A Mareva injunction does not require the plaintiff to show any ownership interest in the property subject to the injunction and does not require the plaintiff to establish a case of fraud or theft. It is a recognized exception to the rule established in Lister v. Stubbs (1890), 45 Ch. D. 1 that the court has no jurisdiction to attach the assets of a debtor for the protection of a creditor prior to the creditor obtaining judgment. Because of the exceptional nature of the relief, the test on the merits for obtaining a Mareva injunction is more onerous than for other injunctive relief and requires that the plaintiff establish a strong prima facie case: Chitel v. Rothbart (1983), 39 O.R. (2d) 513 at 522 and 532 (C.A.). In addition to the other requirements for an injunction, the plaintiff must show that the defendant is taking steps to put his assets out of the reach of creditors, either by removing them from the jurisdiction of the court or by dissipating or disposing of them other than in the normal course of business or living: Chitel v. Rothbart at p. 532-533.
[38] Accordingly, Mareva Orders are not limited to actions involving and establishing proof of fraud in every case.
Norwich Order
[39] To grant a Norwich Order, the moving party must establish each of the following:
(a) the plaintiff has a bona fide claim or potential claim against the defendant;
(b) the party from whom production is sought, must have a connection to the wrong beyond being a witness. The classic situation is a financial institution which unknowingly is or was in receipt of or transferring allegedly fraudulent funds;
(c) the party from whom production is sought must be the only practical source of the needed information. This can be demonstrated by the moving party if the defendant has refused to produce the documentation, previously provided false information or if he is unlikely to provide accurate and complete information; and
(d) the interests of justice must favour the obtaining the documentation.
Discussion
The Promissory Notes are Not Necessarily Definitive of the Business Arrangement
[40] Promissory notes are evidence of an indebtedness. By themselves, they do not necessarily set out the business arrangements between the parties.
Lender or Capital Financing?
[41] It is undisputed that, until 2022, Nestig was a registered mortgage broker and Heimbecker was its principal broker (as well as its principal).
[42] Heimbecker approached Grant in 2018 “about potential investment/lending opportunities” where “Grant could make funds available to finance transactions and earn significant returns in the form of favourable interest charges and fees”.
[43] Bruce Buckley, who attended with Grant at Mr. Heimbecker’s office with Mr. Grant at the beginning of the business relationship, states that Mr. Heimbecker advised he would also put his money into the transactions and described Mr. Heimbecker and Grant as partners in “obtaining mortgages of customers for a short period of time”.
[44] Heimbecker proposed that Grant advance funds to Nestig “which Nestig would then use to broker and arrange loans to third parties on BJG’s behalf.” (Emphasis added). There is an email of December 17, 2018 and an email of July 18, 2019 email consistent with Grant’s described business arrangement.
[45] Heimbecker alleges that Grant refused this proposal, but instead, Grant wished to fund Nestig’s business – in other words, provide capital funding or financing of Nestig’s business through loans evidenced by promissory notes.
[46] Emails well after the parties commenced their business arrangements, are inconsistent with Heimbecker’s allegation that the parties rejected the initial proposed business arrangement. Instead, these emails provide some evidence of the joint investment business arrangement described by Grant.
[47] Let me describe some of the significant problems with Heimbecker’s description of the business arrangement:
a) Heimbecker acknowledges it used the Grant advances (there were approximately 80 such advances) to buy “tranches and sell the tranches to other lenders or otherwise liquidate the debts” to repay Grant.
Heimbecker would, on each occasion, advise Grant of the amount Grant needed to invest, some of the details of the investment, the interest to be earned on the investment, the duration of the investment, and the fees to be earned on the investment.
It makes no sense that this level of information on an “advance by advance” basis is consistent with Grant being a financier of Nestig.
b) There is no documentation to support Heimbecker’s alleged business arrangement. In particular there is no written agreement or emails setting out that Grant was the capital investor or financier of Nestig. This is particularly troubling where Heimbecker is a sophisticated investor, a licensed mortgage broker and the amount advanced by Grant from December 2018 to December 2021 was around $400 million dollars.
c) Heimbecker’s emails clearly suggest a joint investment business arrangement. For example, one email states that “we earn a 7% fee” and “we earn a 12% interest” and “legal costs to us”. See December 17, 2018 email from Heimbecker.
There are emails where Heimbecker states “we can fund this group of $6.4 MM in deals.” with $2,000,000 from Grant and they would proportionally allocate the legal fees. See email from Heimbecker dated March 1, 2019.
Many of the emails from Heimbecker suggest that Grant is only taking a portion of the investment and that “we will fund deals and I will be assigning the deals to a 3rd party investor” – “no legals for us”. For example, see email from Heimbecker dated May 10, 2019.
For example, some emails even expressly state a “50-50 split” (See emails July 9, 2019, June 6, 2019) and other emails simply show a 50% of the investment advance from Grant (for example see emails August 9, 2019, July 25, 2019).
The investment returns, usually fees, were also being split (for example see email October 17, 2019).
d) The continuous return of monies by cheque, with another investment transaction where Heimbecker suggested to Grant another lucrative transaction requiring a larger advance from Grant, in not indicative of Grant being Nestig’s financier. In fact, it is more indicative of fraudulent activity.
[48] Heimbecker’s language and the contents of his emails simply are inconsistent with Grant being a financier to Nestig.
Heimbecker to Equally Advance Monies?
[49] Grant alleges that Heimbecker was to match its advances for the investment opportunities. If accepted, this would demonstrate a much greater business arrangement than a pure financier relationship and more a joint investment arrangement as alleged by Grant.
[50] Heimbecker denies this on the basis he didn’t have the funds to match Grant’s contributions to the mortgage purchases in the business arrangement described by Grant.
[51] The Heimbecker’s emails described above are consistent with the “joint investment” business arrangement suggested by Grant.
[52] But there are more. For example, in the December 17, 2018 email from Heimbecker he stated that they would fund equally a $2.1 million dollar group of mortgages, and, in the July 18, 2019 email to Grant, Heimbecker says – “or Brad and I can split the 5.89 M I’m easy”.
[53] In addition, there is evidence that Heimbecker was also investing his funds. For example, in Heimbecker’s email of December 2, 2019, Heimbecker states “last minute deal that Brad and I are funding”. Or the Heimbecker email of December 14, 2019 where Heimbecker says “If you wanted, we could each fund $2.14 and trap a fee of $96K each”.
[54] These provide consistent evidence for Grant’s alleged business arrangement that each would fund 1/2 of the investments in the mortgage/short term loan tranches.
The Sale of Nestig and Splitting of the profits
[55] Grant says that the December 1, 2021 advances for $51 M were also encouraged by the promise of a 10% payment of the gross proceeds of sale of Nestig.
[56] Shortly before the three December 2021 advances from Grant to Heimbecker, in November 2021, Heimbecker wrote to his lawyer telling him that, as Heimbecker was selling Nestig, the lawyer should draw documents to give Grant 10% of the sale proceeds of Nestig. On November 23, 2021, Heimbecker’s lawyer, on behalf of Mr. Heimbecker, Ms. Heimbecker, Nestig and the Trust, wrote to Grant as follows:
Mr. and Mrs. Heimbecker and Stephen Heimbecker 92105) Family Trust intend to sell their entire interest in Nestig Inc. in a contemplated transaction targeted to close in or around April 2022. Pursuant to this contemplated transaction, and should same come to fruition, our clients will repay all outstanding loans owing by them from you personally, and Bradley J. Grant Investments Inc. and as you or they may direct. We further confirm that in addition to the repayment of all the loans, and pursuant to your discussions without our clients, you and your corporation will received ten (10%) percent of the gross proceeds from the sale of Nestig Inc.
(Emphasis added).
[57] It is noteworthy that the commitment to repay Grant came from all the Defendants except Keystone.
[58] Further, the timing is noteworthy – just 7 days before Grant was to receive approximately $50 million dollars return on his investment, which would be on the same day advanced again to Heimbecker for that amount and more.
[59] If Grant was simply providing capital or financing to Nestig, why would Heimbecker agree to do so as Nestig was his business, and he took the risks and reaped the rewards.
[60] Heimbecker describes the December 1, 2021, as other advance(s) in his described financing business arrangement. The timing is very suspicious:
a) the return of monies to Grant by Heimbecker’s cheques on December 1, 2021,
b) Heimbecker’s promise of a 10% profit from the sale of Nestig just a couple of weeks before December 1, 2021,
c) the advance by Grant to Heimbecker on the same day, December 1, 2021, of an even larger amount than Grant was to receive,
d) Heimbecker was getting out of the mortgage brokerage business in 2022,
e) Mr. Heimbecker’s license was expiring (and did expire) in March 2022 and
f) Nestig’s license was suspended in June 2023.
The increasing amount of the Grant advances
[61] The evidence is that Grant’s advances, were repaid by cheque from Heimbecker, but further larger advances from Grant to Heimbecker by cheque on the same day were paid to Nestig for the next investment transaction. This simply kept increasing the net amount of money Heimbecker received from Grant.
[62] For example, on September 30 and October 1, 2021, three promissory notes matured, with a total of $34,631,755.32, for repayment to Grant, yet, on that same day, Grant issued cheques for two new deals for $36,200,000 owed to Grant.
[63] Heimbecker described these as “redeployment” of the funds. Further examples are set out at para. 16 to the affidavit of Mr. Soriano.
Not Just between Grant and Nestig
[64] Heimbecker states the business arrangement was between Grant and Nestig.
[65] Yet, repayments to Grant were made from various accounts, including Heimbecker’s personal accounts. For example, to replace a repayment of $28.9 million dollar cheque which could not be cashed, Heimbecker gave Grant a personal cheque for $20,000,000. This cheque too was not negotiable.
[66] When the December 1, 2021 promissory notes were unilaterally replaced by Heimbecker, the debtor was no longer just Nestig, but also included a reference to Mr. Heimbecker.
[67] It is also important to note that Heimbecker’s lawyer’s letter of November 23, 2021 makes reference to “our clients” (being Mr. Heimbecker, Ms. Heimbecker, the Trust, and Nestig) would repay the amounts owing to Grant under the advances.
The Lack of Transparency/Documentation/Information of Underlying Use of Grant Monies
[68] Heimbecker would often send emails, copied to Grant, detailing the proposed investment, set out the proposed use of each advance, the interest rates, the returns, the fees etc. Sometimes, third parties were copied on these emails.
[69] When Heimbecker failed to repay the monies owed to Grant in 2021, Grant’s counsel requested documentation and security relating to the “underlying” investments for which Grant’s advances had been used.
[70] Heimbecker’s initial position was that Grant “was not entitled to such information under the terms of the promissory notes” but, eventually, in August 2022, some such information/documentation was provided to Grant’s counsel but only on a “without prejudice” basis.
[71] Now, Heimbecker refuses to produce the documentation showing the utilization of the Grant advances. Heimbecker’s position would, despite encouraging Grant to make advances to the investments specified by Heimbecker, Heimbecker could avoid showing what Heimbecker actually did with the Grant advances, and whether the funds were used for the specified and limited purpose Heimbecker had represented. In these circumstances, there is a prima facie case of trust established by Grant. And the failure to provide the documents to establish compliance with that trust, would be a prima facie breach of that trust. This logic would equally apply to a breach of fiduciary duty analysis.
[72] Accordingly, disclosure by Heimbecker as to the detailed and specific use of Grant’s advances is of fundamental importance to all the claims advanced by Grant.
[73] Heimbecker’s position is set out in para. 53 of his affidavit:
This meeting and subsequent communications were done on a without prejudice basis so I am not able to share the details of what was discussed or provided at that time. However, I can say that I explained in a general way how the December 2021 Advances had been deployed by Nestig for underlying loans. I also explained that some of these loans were secured by mortgages, Nestig was working to have others secured, and there were others that were not secured. I was able to show details in relation to some loans for borrowers who had provided consents that allowed Nestig to share such information but I was not able to do so for borrowers from whom Nestig did not have consent.
[74] It is highly suspicious that Heimbecker now refuses or fails to disclose the use of and underlying investment transactions that he represented to Grant to get him to make the advances.
[75] What limited “without prejudice” information Heimbecker provided is fraught with problems. Grant cannot go to the third parties, even if identified in the limited disclosure, to verify the actual utilization of his monies or ascertain if there is any legal recourse to the underlying security if there is any.
[76] There is also no explanation by Heimbecker how and why this information/documentation would be privileged or confidential. After all, many of these were business deals involving registered mortgages (presumably the details of which are available on a public record at a registry office), third parties, available for purchase by mortgage brokers.
[77] This is very troubling, particularly since Heimbecker points to having made “some disclosure” in response to this motion as not having entirely denied Grant the documentation/information sought. But Heimbecker can’t have it “both ways”.
[78] Heimbecker submits that Grant is not entitled to the underlying investment documentation/information under the terms of the promissory note. However, a promissory note is simply evidence of the indebtedness. It does necessarily describe the business relationship between the parties to the promissory note. Simply pointing to the terms of the promissory note is not determinative of the issue whether Grant is entitled to the underlying investment documentation. For example, if the monies were subject to a trust for use by Heimbecker for a specific purpose, the terms of the promissory note, whatever they may be, would not deprive Grant from obtaining confirmation that the monies were used for the purpose advanced. The same can be said for any misappropriation of the funds.
High Profit Promised / Unilateral Actions of Heimbecker
[79] The three December 1, 2021 notes were due on January 4 and 7th, 2022. Heimbecker did not repay the December 1, 2021 Grant advances.
[80] The alleged profits on these three advances alone – for a period of approximately 1 month, was approximately $2,000,000 - an approximately 4% return in just one month! The sheer amount of the return in such a short time raises suspicions.
[81] Heimbecker didn’t even respect the legality of the promissory notes which he now seeks to enforce strictly in accordance with is alleged business arrangement. Heimbecker then unilaterally extended the repayment dates in the three December 2021 promissory notes to May 31, 2022 but now the notes were from “Heimbeckers c/o Nestig”.
[82] Heimbecker then issued two cheques to Grant, one for $20,000,000 and one for approximately $8,000,000. Both cheques “bounced”.
[83] Heimbecker then, again unilaterally replaced the new note to January 1, 2023.
[84] If any thing, Heimbecker’s views of the enforceability of the promissory notes was fluid – what he decided and when he decided there would be repayment.
Dissipation of Assets
[85] Mr. Heimbecker stated that:
There is a balance owing on the promissory notes that were issued by Nestig in this matter. I am continuing to work towards a full liquidation so that this balance can be repaid in full.
(Emphasis added).
[86] This is an admission that Heimbecker is liquidating assets!
[87] There was the contemplated sale of Nestig.
[88] Then there is the sale by Heimbecker of a significant number of thoroughbred horses. There is the sale of 27 racehorses by Heimbecker in 2022/2023 (mostly 2022).
[89] Then there is the intended sale of the farm.
[90] I am satisfied that there has been a dissipation and intended dissipation of assets established by Grant.
The Intended sale of the Puslinch Property and Moving to the US
[91] The sale of the home - the Puslinch Property. The Puslinch Property has been listed for sale for $3.9 million dollars with the listing stating:
“Prominent Standardbred Owner Switching To Thoroughbred's And Relocating To the U.S.”.
[92] While the wording may be a little ambiguous, it is suggestive that Heimbecker is moving to the US and changing his horse business.
[93] Heimbecker’s counsel’s explanation regarding the “relocating to the US” was that Heimbecker is changing from standardbred to thoroughbred horses and moving his horse business to the US. – not that Mr. Heimbecker is moving to the US. Either way, it puts Heimbecker’s assets out of reach of the Ontario and Canadian jurisdictions.
[94] Heimbecker states that this security on the Puslinch Property is being replaced with other undisclosed primary security. This assertion leaves even more questions regarding Heimbecker’s financial dealings and impact of the transactions on Grant’s claim, if successful.
[95] There are power of sale proceedings for the farm described by Heimbecker:
There is a mortgage secured against the farm property and related mortgage against the family home in favour of Squire Investments. The mortgage against the farm property was taken out in October 2022 in order to deal with the TD Bank issue referenced above. While there is a power of sale proceeding ongoing in relation to this mortgage, I have arranged with the lender to list and sell the farm property in order to satisfy the debt owing on that mortgage. There is a conditional sale for the farm property that I expect will soon firm up for a sale in October at a sale price of around $3.7M. The lender is aware of this sale and I am in regular contact with him regarding the status of the sale and the mortgage. This sale will clear off the Squire Investments mortgage(s) against the farm property and 28 Charing Cross.
Nestig is closed
[96] Given then Mr. Heimbecker’s license has expired (and he was the principal broker), Nestig’s business came to an end as it clearly did so when Nestig’s license was suspended.
[97] There is no evidence of a sale of Nestig or whether Nestig’s assets (such as purchased mortgages or loans) have been transferred away.
Other Mareva Order against Nestig
[98] On October 12, 2022, TD brought a motion for Mareva and Norwich Injunctions against Mr. Heimbecker, Ms. Heimbecker, Nestig, Keystone, and other related parties. TD claimed that Mr. Heimbecker, Ms. Heimbecker, Nestig, Keystone, and others orchestrated circular transactions where balances from one ledger are moved to another to give the illusion of legitimate funds moving in and out of bank accounts. TD further claimed that Mr. Heimbecker, Ms. Heimbecker, Nestig, Keystone, and other related defendants perpetrated a sophisticated “cheque kiting” fraud, which created serious risk of asset dissipation pending trial.
[99] Heimbecker alleges that the TD claim arose from a single cheque cashed before expected funds had been deposited.
[100] On October 14, 2022, Justice Vermette of the Ontario Superior Court of Justice issued both Mareva and Norwich Injunctions against Heimbecker, Ms. Heimbecker, Nestig, Keystone, and others.
[101] Without more detail, this is not a significant factor in deciding this motion.
Other claims for Non-payment
[102] I agree that other claims by third parties have little or no impact on this motion. The details of those claims including the validity of the claims and the extent of payments, their business arrangements are unknown.
Claims of Asset Acquisitions
[103] Acquisition of assets by Heimbecker, even extremely valuable assets, during the period of time Grant was making advances, by itself, means very little without further evidence.
Analysis
Interim Mareva Injunction
[104] Given the above, I am satisfied that Grant has, based on the evidence currently before me, a strong prima facie case of fraud and breach of trust and/or breach of fiduciary duty.
[105] The most significant factor in this court’s decision is that Heimbecker clearly provided investment details as a means of inducing Grant to advance monies in those investments, but now fails or refuses to disclose any information or documentation to support, that the funds used by Heimbecker were used in the manner represented to Grant. This factor alone raises a prima facie case of fraud or breach of trust or breach of fiduciary duty.
[106] The other circumstances described above, when coupled with the non-disclosure, even when Heimbecker’s evidence is considered, re-enforces the finding that, based on the current evidence, Grant has established a strong prima facie fraud, breach of trust, breach of fiduciary duty satisfying this part of the test.
[107] As for the other Defendants, whether they knowingly or unknowingly, they have apparently received, transferred or dealt with Grant’s advances. Their involvement is clearly established through the lax dealings by Heimbecker’s use of personal accounts, and their promise to repay Grant’s loans in their lawyer’s letter.
[108] It is important to note that Ms. Heimbecker and the Trust are shareholders of Nestig and were part of the arrangement (or encouragement for Grant to make the December 1, 2021 $51 million dollar advances) and were selling Nestig and agreeing to give Grant the 10% of the gross proceeds. See November 23, 2021, letter from Mr. Mahistedt.
[109] I am also satisfied that the circumstances discussed above, demonstrate that Heimbecker has and is attempting to liquidate assets in Ontario, which will make any judgment which Grant may obtain difficult if not impossible to enforce.
[110] The irreparable harm is established because, then in addition to the disposition of Nestig’s assets, the disposition by Heimbecker of its assets (including mortgage/short term loan tranches) through and to the other Defendants, will irreparably harm Grant by putting enforcement out of reach or at least make it difficult to trace Grant’s advances.
[111] The balance of convenience favours Grant. The Order will preserve the status quo until the motion is heard for an interlocutory Mareva Order. The Order will also require immediate disclosure of the Defendant’s assets to ensure that, if the interlocutory order is granted, any additional transfer or disposition of assets will be readily ascertainable.
[112] An undertaking to this court has been given by Grant.
[113] The Order as signed be me will issue for the interim Mareva Injunction in accordance with the terms set out therein.
Norwich Order
[114] For the reasons set out above, I am satisfied that Grant has a bona fide claim against the Defendants and that monies advanced by Grant have been transferred into or from the accounts set out in the draft order.
[115] The Financial Institutions are simply parties who have the documentation required relating to the allegations in this case. The Financial Institutions are not parties nor have any allegations been made against them in this action.
[116] The documentation is NOT forthcoming from Heimbecker and as such, I am satisfied that the only source of obtaining this documentation, particularly at this early stage of the proceeding, is by issuing the Norwich Order requiring production of the documentation from the Financial Institutions.
[117] I am satisfied, that in these circumstances, the interests of justice require that the Norwich Order be granted in the form signed by me.
Conclusion
[118] The two interim Orders are to issue in the form signed by me. Those Orders remain in effect until vacated or amended by the court.
[119] This matter is returnable on September 18, 2023 at 10 am in person.
[120] The parties are to agree on a timetable for all steps needed for the motion to proceed on September 18, 2023 on a full evidentiary record.
[121] Costs of today’s are reserved to September 18, 2023.