Court File and Parties
COURT FILE NO.: CV-24-00714218-0000 DATE: 20240604 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: MAXOL WEALTH INVESTMENTS INC., Plaintiff AND: ARASH MISSAGHI, CANADA CAPITAL CORPORATION INC., MISCO HOLDINGS INC., ASTANNI ORGANIZATION INC., ASTANNI CAPITAL CORPORATION, VICOMTE CAPITAL INC., SAARAD INVESTMENTS INC., BARRIMCO (RH) INVESTMENTS INC., SAMIRA YOUSEFI, MOHAMMAD ZARFCHI-SHIRAZI, NEENA MISSAGHI, SKYMARK CAPITAL CORPORATION, VALIOLLAH ONSORI-SAISAN, VISCOUNT FINANCIAL CORPORATION, GUEORG SAFARIAN, MANSTEEEL NEW LISKEARD INC., REZA C ZARRINNIA, NARGES HAGHIGHIBAVAFA, DEIHIM ZARRINNIA, FREDERICK ALLEN YACK, SHAHRYAR MAZAHERI and MAZAHERI LAW PROFESSIONAL CORPORATION, Defendants
BEFORE: Akazaki J.
COUNSEL: Sahar Cadili and Vanessa Ford, for the Plaintiff James Zibarras, for the Defendants Valiollah Onsori-Saisan, Skymark Capital Corporation, and Misco Holdings Inc. Tony Antoniou, for the Defendants Shahryar Mazaheri and Mazaheri Law Professional Corporation Spencer Toole, for the Defendants Saarad Investments Inc., Samira Yousefi, Viscount Financial Corporation and Gueorg Safarian Aaron Hershtal, for the Defendant Fred Yack
HEARD: May 16, 2024
Endorsement
1This was a motion by the Defendants, Valiollah Onsori-Saisan and Skymark Capital Corporation (“moving parties”), to set aside a Mareva injunction originally obtained on a motion without notice (ex parte motion). In the event the court declines to lift the injunction, the moving parties ask that a further $60,000 be released to Miller Thomson LLP, in trust, for the purposes of funding the defence of the moving parties and another defendant Misco Holdings Inc. (“Misco”).
Background
2The original motion for a Mareva injunction arose from the plaintiff’s loss of $1.28 million to a syndicated mortgage fraud. An aggressive mortgage broker encouraged the plaintiff’s principal to free up capital in the family home to invest in private mortgages with other participants to earn high interest. Once the plaintiff invested the funds, the returns on investments would be paid for long enough to allow the recipients to move the money around and out of reach.
3The fraud, as described in the statement of claim and in both sides’ affidavits, took place over a stretch of time. It started with the plaintiff’s principals’ expression of interest in creating an investment fund for the family by releasing the equity in their home. They mortgaged their home with an institutional lender and paid into a fund that promised a higher rate of return through the investment in syndicated private mortgages. They created the plaintiff holding company for the purpose of managing the investment.
4The front for the scheme was Saarad Investments Inc. (“Saarad”), operated by Samira Yousefi. She was responsible for a hard sell on behalf of the “syndicate.” The syndicated funds managed by Yousefi were to be secured by mortgages on properties in the Greater Toronto Area. Two real estate lawyers, Frederick Yack and Shahryar Mazaheri, represented the syndicate on the mortgage deals. It turned out that the owners and the other members of the syndicate were affiliated entities, and the scheme was an elaborate ruse to obtain the plaintiff’s money.
5Yack acted for the principal of the plaintiff, Alisa Pogorelovsky, in obtaining the transfer of 50% of the family home from her mother, in order to complete the mortgage financing to free up the $1.28 million for investing in the scheme. Ms. Pogorelovsky found Yack amiable and trustworthy. Later, he stated he did not act for her in the syndicated mortgage investment and claimed only to take instruction from Yousefi. Between Yousefi, the agent of predatory fraudsters, and Pogorelovsky and her mother, the prey, Yack’s management of client retainers entailed a malignant interpretation of s. 3.4 of the Law Society of Ontario’s Rules of Professional Conduct regarding the avoidance of client conflicts.
6The mother-to-daughter transfer was, technically, a different matter than the mortgage deals orchestrated by Yousefi. However, given the purpose of the transfer, Yack owed Pogorelovsky a duty as a trusted advisor on the overall set of transactions. Indeed, there was evidence that Yack provided her with advice on the operation of syndicated mortgages. At least two other lawyers have already lost their licences for having aided “Missaghi and his associates” in fraudulent real estate transactions: Law Society of Ontario v. Mehta, 2019 ONLSTH 154, at para. 12.
7By two bank drafts dated November 16, 2022, the plaintiff paid the first tranche of $850,000 for 25% participation in a mortgage of $3,400,000 on a property at 200 Hymus Rd., Toronto, and a second $400,000 in a non-syndicated mortgage to be registered against a property at 120 Pugsley Ave., Richmond Hill. Finally, Yousefi induced the plaintiff into investing $80,000 in a first mortgage administered by Saarad on a property at 1107 Lakeshore Rd. S., New Liskeard. There were other transactions listed in the Pororelovsky affidavit filed with the ex parte motion, possibly transactions meant to give the appearance of legitimacy to the Hymus, Pugsley and Lakeshore mortgage loans, but these three were the ones that resulted in the plaintiff’s loss.
8The Affidavit of Alisa Pogorelovsky on the original ex parte motion went into considerable detail about the various interactions and transactions. Eventually, after she hounded Yousefi for progress on receiving returns on the investments, the plaintiff started to receive some small amounts of returns, including two cheques from Skymark Capital Corporation (“Skymark”) in the amount of $7,083.33 each. The amount was equal to one quarter of the $28,333.33 monthly repayments on the Hymus Rd. mortgage. However, the borrower in that mortgage was Canada Capital Corporation and not Skymark. In the second of three affidavits he filed, Onsori-Saisan denied any knowledge of the plaintiff. Despite this disclaimer of knowledge, his evidence established that Skymark was either the recipient of the plaintiff’s funds instead of Canada Capital Corporation or a shell operated by a loyal foot soldier.
9The cheques and other small payments appear to have been efforts to comfort the plaintiff as to the progress of the mortgage investments. The plaintiff finally discovered there were no mortgages on the properties securing the plaintiff’s investments. The plaintiff hired lawyers, whose investigations into the matters turned up similarities to a number of mortgage fraud schemes allegedly organized by Arash Missaghi. Much of the evidence on the scheme was speculative, but the plaintiff proved the essential elements of the fraud for the purposes of injunctive relief, in that the plaintiff was parted from its money and never received much back beyond the dribs and drabs clearly intended to buy time to dispose of the money. Ms. Pogorelovsky eventually lost the family home and has $331,425.43 left in her bank account.
10On February 12, 2024, I issued the subject Mareva injunction against all the defendants save the lawyers. At that time, the plaintiff had uncovered a network of shell companies whose directorship once or presently included Arash Missaghi and his relatives, including the moving party Onsori-Saisan. These companies, named as defendants, were either on the borrower side or the lender side of the fake transactions. The expectation was that if the net was cast too broadly, they would come back to court and show how they were not involved in the fraud or that the plaintiff’s motion was defective. Alternatively, if they could not show cause, I expected at least some to come back and ask for relief to pay their legal fees and everyday expenses.
11No one except the moving parties responded to the order. That is somewhat telling, in that all the remaining defendants managed to stay functioning, and even some hiring lawyers, despite a court order freezing all their bank accounts. Apart from a small amount frozen in one of the other defendants’ bank accounts, the other non-lawyer defendants have so far not been affected by the order. The exception was Onsori-Saisan.
12The defendants attending the 10-day return of the motion pursuant to rule 40.02 were Onsori-Saisan and Skymark. The standard wording for the Mareva order developed by this court’s Commercial List Users Committee caught the bank account of Pomanar Dessert Inc. (“Pomanar”), a bakery in Don Mills owned and operated by Mr. Onsori-Saisan as its sole shareholder, director, and officer. The order froze $210,000 in the bakery’s operating account.
13He retained counsel to bring a series of motions for the release of funds from the bakery’s bank account to pay the retainer of the moving parties’ lawyers, to pay regular business expenses of the bakery, and to pay Mr. Onsori-Saisan’s living expenses. Those orders were granted on consent of the plaintiff, on the rationale that the bakery will always have a float from revenues to stay in business. On this motion, the moving parties requested a further release of $60,000 from the Pomanar bank account for the funding of the moving parties’ legal expenses. The plaintiff again consented.
14On February 21, 2024, I granted the order continuing the injunction until trial, without prejudice to any defendants subject to the order to move to set it aside on four days’ notice. Onsori-Saisan and Skymark have now brought such a motion. They raise the following issues in support of their position:
a. the plaintiff failed to make full and frank disclosure, b. the injunction was overly broad in having captured the business account of Pomanar, a non-party unrelated to the proceeding, and c. the plaintiff’s undertaking regarding damages is insufficient.
15As part of the third issue, they also seek an order that the plaintiff pay Pomanar’s damages resulting from the freezing of its bank account. I will deal with each of these issues in turn.
(a) Full and Frank Disclosure
16The moving parties’ counsel presented very detailed legal submissions on the full and frank disclosure requirement for an ex parte motion for a Mareva injunction to freeze parties’ assets prior to judgment.
17The duty to make full and frank disclosure requires the moving party to disclose any relevant facts, even if in hindsight the court would not have dismissed the motion even with the benefit of such additional facts. The mere possibility of affecting the outcome requires the facts to be disclosed. The moving party cannot overstate its position, and it must present the other side’s case to the extent possible. Selective exclusion of facts or even law can be fatal to the survival of the order. See Shaw Communications Inc. v. Young et al., 2021 ONSC 7918, at paras 15-19.
18Counsel for the moving parties suggested that this duty extended to defects in the plaintiff’s legal brief regarding the test on an ex parte motion for a Mareva. I disagree. Mareva injunctions form part of the bread and butter of the civil jurisdiction of the court. Motions judges, including the undersigned, are capable of error, but not for lack of institutional knowledge. In my view, the duty of full disclosure regarding current law refers to the substantive law of the cause of action, not the civil procedure rules. The paradigm is the failure to alert the court to a change in the law in respect of the underlying cause of action, or reason to doubt the currency of the law on which the moving party relies as the basis of the injunction. In any event, the moving parties did not suggest that I was unaware of any elements of the basic test for a Mareva order when I granted the original order.
19The moving parties argued that the plaintiff failed to disclose or spell out the absence of facts or pleadings connecting the moving parties to the alleged fraudulent scheme. They pointed to the very general pleading in para. 74 of the statement of claim that Skymark and Onsori-Saisan were acting with other defendants to defraud the plaintiff. In their submission, the plaintiff owed a duty to point to the fact that there was nothing beyond that broad allegation pleaded against the moving parties.
20I agree with the moving parties’ counsel that the duty of full and frank disclosure includes pointing out the logical gaps in the case against a particular target of the freezing order. It extends to submissions made in a factum. I read the narrative following paragraph 117 of the plaintiff’s affidavit to mean that it was the full extent of what the plaintiff, including its lawyers, discovered after they started to investigate the fraud. On the whole, I read the materials on the ex parte motion to be targeting the entities and personalities directly named in the mortgage documentation prepared by Yousefi, Yack, and Mazaheri.
21The information about the moving parties was indeed sparse and consisted of two points. First, it was clear they were included in the law suit because the plaintiff received mortgage payments from Skymark even though Skymark had not been a borrower disclosed to the plaintiff. Second, Onsori-Saisan was a director of a Skymark: a company that, through the plaintiff’s lawyers’ research, was once controlled by Arash Missaghi or his relatives.
22Some of the hearsay information and inferences contained in the plaintiff’s original motion materials reflected the selective reasoning accompanied by the presence of a known mortgage fraudster in the midst of transactions that had just resulted in the depletion of one’s life savings. Undoubtedly, this reasoning directed much of the original investigation. However, once the plaintiff’s law firm requisitioned the provincial corporate profiles of the parties to the transactions, the only one that did not have a connection to Missaghi or to his relatives was the plaintiff. This was not an actual private lending market. Rather, it was a number of shell companies created to lend the appearance of such a market to unsuspecting members of the public.
23I did not require the plaintiff on the ex parte motion to lead me by the nose to the fact that the active facilitators of the fraud were Yousefi, Yack, and Mazaheri, that the rest of the pleadings and affidavit evidence was based on public records and from other legal cases, and that the plaintiff and its lawyers did not have much evidence against Onsori-Saisan and Skymark. In the ex parte motion materials, the role of the moving parties as disclosed by the plaintiff was peripheral at best. The cheques were the only tangible hook to suspect they had been recipients of the plaintiff’s money. The corporate profile linking Skymark to Missaghi was more than a red flag. Nevertheless, if Skymark provided post-dated cheques to the plaintiff in the exact amount due under the Hymus mortgage loan, the fact that Skymark had nothing to do with the Hymus property made the cheques evidence that the plaintiff’s money had been diverted to a purpose other than the one disclosed by Yousefi, Yack, and Mazaheri.
24Had the moving parties come forward with some exculpatory evidence, the weakness of the link between them and the fraudulent scheme could have supported the position that their inclusion in the motion was an overreach possibly fatal to the continuation of the injunction against them. The problem with this argument is that the facts subsequently disclosed by the moving parties over three affidavits strengthened the connection between the moving parties and the fraudulent scheme. In particular, by consolidating the facts in the affidavits of Onsori-Saisan, the court could see it received from him evidence of the following facts:
a. He moved to Toronto from Montreal in the early 2000’s. Prior to that, he came to Montreal after fleeing the 1978 Iranian revolution. He owns an investment property in King City valued at $3.5 million with a mortgage of $2.3 million. The rent on the building pays for the mortgage. He lives in a condo in Richmond Hill worth $850,000, with equity of about $480,000. b. He operates a bakery valued at $1.2 million. As a result of the injunction freezing his bakery’s bank account, it suffered loss of profits in the amount of $11,500 before the moving parties obtained the order allowing ordinary business expenses to be paid out of the account. This loss is based on the reduction of revenues compared to ordinary revenues of $90,000 and profits of $18,000 per month based on a margin of 20%. c. He is a distant relative of Arash Missaghi. Missaghi and his wife provided the seed money for his bakery. They control or have controlled upwards of $50 million in North American assets. The purchase price of the bakery, acquired as an asset sale pursuant to an agreement dated February 23, 2017, was $180,000. d. In return for the seed money for the bakery, Onsori-Saisan agreed to help with Missaghi’s commercial interests. Onsori-Saisan became a director of Misco, the owner of the large commercial property on Hymus Road. He then became a director of Skymark, an entity similar to Misco. e. Skymark did not receive the plaintiff’s funds. Rather, it obtained a $900,000 loan from Saarad on November 21, 2022. The loan was for a 12-month period at an interest rate of 10% per annum plus a $50,000 origination fee, a $550.00 application fee, and a monthly administration fee of $350.00. He vouched for Yousefi as “an honest, ethical business person.” Saarad directed the loan repayments be made to the plaintiff, pursuant to a direction dated November 28, 2022. Skymark provided Saarad six post-dated cheques in the amount of $7,093.33 each, care of Frederick A. Yack. f. Ultimately, in May and July 2023, Skymark repaid the loan in full by payments totaling $885,000. Onsori-Saisan obtained most of the funds by refinancing the King City property.
25The evidence from the moving parties established that Onsori-Saisan became beholden to Missaghi and his wife, although he expressed it in terms of gratitude. If Onsori-Saisan required the Missaghis help to acquire a $180,000 business, it is clear that he did not arrive from Montreal with the type of capital he now owns. In paragraph 11 of his affidavit of March 5, 2024, he expressed his gratitude to the Missaghis and stated he “had always wanted to help them back in some way.” In the same paragraph, he described how Arash Missaghi’s wife Laila (sic) Alizadeh told him to contact the owners of Misco, who appointed him director and manager. Thus, it seems, he became connected to the Hymus property securing the plaintiff’s $850,000 investment, because the parcel register for Hymus showed Misco as the owner.
26Onsori-Saisan did not identify the purpose of Skymark’s $900,000 loan from Saarad. His evidence, however, raises the clear inference that $900,000 of the plaintiff’s funds passed through Skymark or was held by it between November 2022 and July 2023. The statement that Skymark never received the plaintiff’s funds then raises the question why it was repaying $7,093.33 repayments to Saarad, care of Yack.
27The corporate profile for Misco show that, prior to Onsori-Saisan, the directors were Hossein Missaghi and Layla Alizadeh (sic). The profile for Skymark shows that, prior to Onsori-Saisan, the director was Neena Missaghi. In none of the affidavits of Onsori-Saisan did he suggest that Missaghi is a common name or some other explanation why, apparently, various relatives of Arash Missaghi would be on the lending and borrowing sides of the various secured lending transactions resulting in the plaintiff being parted from its $1.28 million. Rather than demonstrating that the plaintiff had exaggerated the connection between the moving parties and the fraud, the Onsori-Saisan affidavits, read in context, showed that the plaintiff had understated the connections. Indeed, in my March 11, 2024, endorsement, I commented that the new evidence from Onsori-Saisan made the connection between him and the fraud perpetrated on the plaintiff almost conclusive.
28The purpose of the full and frank disclosure rule is to protect the rights of the absent parties to a motion without notice against unfairness and to safeguard the administration of justice. If the absent party, once served with the order and the ex parte motion materials, comes to court showing it was less involved in the fraud than disclosed by the plaintiff, I could see grounds for setting aside the injunction even though there may still be grounds to implicate that previously absent party.
29Here, the moving parties came to court with information that implicated them to a greater extent than the plaintiff’s evidence and the inferences one could reasonably draw from it. Instead of being a peripheral figure, Onsori-Saisan now appears to have been directly involved in the handling of the stolen money. His evidence tends to show him to have been a dupe or blind accomplice of the persons behind Saarad. However, Skymark had the use of the plaintiff’s money and Misco was the owner of the property on which the plaintiff understood Yack would file a mortgage securing the investment. In the most favorable or innocent explanation, Onsori-Saisan’s repayment of the Saarad loan to Skymark out of refinancing proceeds from his personal King City property meant he had some benefit of $900,000 of the plaintiff’s money. Otherwise, why would Skymark repay the loan with payments to the plaintiff?
30Providing additional grounds for the granting of the injunction does not demonstrate a failure to provide full disclosure. Rather, the plaintiff under-promised and somehow induced the moving parties to over-deliver information supporting the case against the defendants, including the moving parties.
(b) Breadth of the Order
31The moving parties objected to the fact that the injunction captured the bank account of Pomanar Dessert Inc., the operating company of the bakery. The order restrained any funds under the defendants’ control or power. Because Onsori-Saisan is the sole director, shareholder, and officer of Pomanar, he has control over the funds.
32The moving parties argued that the funds in the account do not belong to Onsori-Saisan. Pomanar, as a corporation, has a distinct legal personality. The rule in Foss v. Harbottle remains current for the purpose of distinguishing the legal rights of the corporation from the economic interests of its controlling shareholders. Since there is no evidence that Pomanar was used as an instrument of fraud, the court should not “pierce the corporate veil”: Meditrust Healthcare Inc. v. Shoppers Drug Mart, at paras. 30-31. The issue in this motion, however, does not concern the legal rights or liabilities of Pomanar. Rather, the Mareva injunction is intended to restrain Onsori-Saisan’s economic assets. Since the court has allowed Pomonar to use the bank account for its ordinary business, i.e. paying suppliers etc., the effect of the injunction is limited to preventing him from disposing of the business or its capital as represented by his control over all its shares. The wording of the Commercial List’s model order was intended to catch the assets of non-party corporations over which the defendant exercises control: Buduchnist Credit Union Limited v. 2321197 Ontario Inc. et al., 2022 ONSC 3414, at para. 73, rev’d on other issues, 2024 ONCA 57.
33Injunctions, including Mareva injunctions, can entail application to non-parties as circumstances require: Google Inc. v. Equustek Solutions Inc., 2017 SCC 34, [2017] 1 SCR 824, at para. 33. See also Equustek Solutions Inc. v. Jack, 2014 BCSC 1063, at paras. 125-33. The purpose of a Mareva is to restrain a defendant or others from disposing of dealing with assets in order to put them beyond the court’s reach: Buduchnist, 2024 ONCA 57, at para. 45.
34In the circumstances of this motion, the evidence points to Onsori-Saisan as having three personalities. One is the de facto sole proprietor of a bakery whose value increased from $180,000 to $1.2 million since 2017, when the Missaghis helped him buy it. The other is a commercial real estate operator and corporate director overseeing several sites including his own property having a further equity value of $1.2 million. Yet another is a participant in the lending scheme in which the plaintiff lost its money. The fact that he and his corporations are the only defendants who appear to have been seriously affected by the injunction suggests the others have been more skillful at putting their assets, including the funds from the plaintiff, beyond the court’s immediate reach.
35On the basis of Onsori-Saisan’s affidavits, it is unlikely, although perhaps not impossible, that he was able to amass considerable assets through the business of his bakery. However, he clearly had the wind at his back since arriving in Toronto. In both instances, the bakery and the commercial property, the Missaghis were blowing that wind in the right directions. There is enough evidence in his affidavits to indicate that much or all of it, including the bakery, represents a pool of capital generated by the activities of the other defendants. Even without that characterization of the bakery business, there is sufficient evidence that Onsori-Saisan handled the plaintiff’s money, in the tripartite transaction among Skymark, Saarad, and his personal finances, to have made him a participant in the plaintiff’s loss. To the extent that he can operate the bakery but cannot dispose of it or deplete it, that is part of the intended purpose of the injunction.
(c) Sufficiency of Undertaking
36The plaintiff’s principal, Alisa Pogorelovsky, originally provided a personal undertaking in her affidavit. There was some confusion surrounding whether this was truly a personal undertaking, or one made in her capacity as the corporation’s principal. The plaintiff’s subsequent affidavit of May 6, 2024, however, cleared up any ambiguity and stated that it was a personal undertaking.
37The plaintiff tried to dial back the personal undertaking and asked to be relieved of it. Her counsel cited Sabourin and Sun Group of Companies v. Laikin, at para. 16, as an example of a plaintiff being relieved of an undertaking if the defendants’ actions rendered the plaintiff insolvent and the requirement would deny her the use of a Mareva order. As I explained during the hearing, there was no motion to relieve the plaintiff of the undertaking. Asking for interlocutory relief of this nature in a responding factum did not follow the correct procedure under rule 37.
38That said, there is an element of mootness to the issue. The only damages that could have been suffered was that initial period before the court permitted the bakery access to its operating account to run its ordinary business. The affidavit of Onsori-Saisan on the issue of damages is that his bakery suffered a loss of $11,500 due to the injunction. It is based on a loss of revenues from his having to insist on cash sales only during the period of the injunction, so that he would have sufficient cash to pay suppliers. Whatever the validity of the claim, the amount is not so great that the plaintiff’s principal would be unable to pay it personally if the injunction turned out to be unjustified at the end of trial.
39This is therefore an issue that can turn both ways. There is little risk of the plaintiff’s principal being exposed to significant liability for damages, because no other funds appear to have been caught by the order in the immediate term. That could be a reason to relieve her of the undertaking or detract from her position that she faces hardship if the undertaking is not lifted. Either way, it is not fair to the parties to lift the undertaking without a proper notice of motion and full hearing on the subject. Having said that, there is no reason to lift the Mareva injunction due to the insufficiency of the undertaking, since the evidence of damages does not show that the plaintiff or its principal are unable to abide by any order for damages. I will not entertain the plaintiff’s motion at this time.
Disposition of the Motion
40The moving parties have failed to establish that the plaintiff failed to make full and frank disclosure when seeking the original injunction, that the bakery’s funds are wholly unrelated to the subject matter of the case against the defendants, and that the undertaking for damages was insufficient. Their motion is dismissed. The only exception to that is the request for a further $60,000 to be released from the Pomanar account for the benefit of Skymark, Onsori-Saisan, and now Misco. The plaintiff consented to that relief. I will grant it, subject to the condition below tying it to the release of funds for the legal defence.
Costs
41The plaintiff seeks costs of the motion on a full indemnity basis, in the amount of $36,244.75. Had the motion been successful and the injunction set aside, it would have faced the jeopardy of an order for costs on a substantial indemnity basis: Voysus Connection Experts Inc. v. Shaikh, 2020 ONSC 1539, at para. 8. The moving parties, in their factum, also sought full indemnity costs, based on the decision in 781526 Ontario Inc. et al v. Gerstein et al, 2023 ONSC 4313, at paras. 2-3. They sought an award of $66,824.81, if the court granted their motion to lift the injunction.
42The factors under rule 57.01 for the exercise of discretion under s. 131 of the Courts of Justice Act, R.S.O. 1990, c. C.43, mostly relate to the steps in the particular proceeding, such as the conduct of the parties or steps taken that proved to be unnecessary. In this motion, the grounds for the motion and relief sought were somewhat topsy-turvy. The attack on the undertaking for damages was launched by moving parties who had suffered no damages. The bakery’s damages were stemmed at $11,500, but it has already lost several multiples of that amount funding the defence of parties implicated in the fraudulent scheme. The argument regarding full and frank disclosure was not for the failure to provide evidence helpful to the defence, but rather the failure to provide evidence more helpful to the plaintiff.
43I appreciate the moral argument of the plaintiff’s claim for full indemnity costs. As the victims of the fraudulent scheme, the plaintiff’s principal and her husband understandably feel they should not be put to any expense for the interlocutory motions of one of the parties to the fraud. Despite Onsori-Saisan’s evidence confirming that he and his companies were involved in the fraud, there remains the possibility that he was duped by the real masterminds and that, at the end of the day, he was lured into the mortgage fraud scheme because his relatives helped him to start the bakery. A trial, or at least a round of discovery, will be required to place him closer to the active center of the scheme.
44I therefore conclude that the scale of costs must be determined on the usual procedural factors, such as the expectations of the parties and the procedural circumstances of the motion. On one hand, there is also a strong argument that the motion ought never have been brought. On the other hand, the Superior Court has shied from awarding full indemnity costs in civil matters, in the absence of a contractual or statutory provision and in the absence of litigation misconduct on the part of the unsuccessful party. While it could be tempting to counter the moving parties’ request for full indemnity costs with an award against them of like kind, an award of costs on a substantial indemnity scale seems to reflect the overall justice of the motion and its outcome. I therefore fix costs on that scale in the amount at $32,688.08.
45That said, the costs order must be meaningful and must reflect the need to bring the moving parties and the related other defendants into the reality of the litigation. It is therefore fitting to tie the release of funds from the bakery’s account to the costs award. If the moving parties and Misco can borrow from the bakery to pay for the defence, the moving parties can also do so to pay the plaintiff’s costs of the motion. This is not an order against Pomanar but, rather, an order against the principal of that corporation.
Order
46Therefore, the court disposes of the motion in accordance with the following orders:
1The motion by Skymark Capital Corporation and Valiollah Onsori-Saisan to set aside the order of February 12, 2024, as continued on February 21, 2024, is hereby dismissed.
2The motion by Skymark Capital Corporation and Valiollah Onsori-Saisan for further release to Miller Thomson LLP, in trust, of $60,000 from the bank account of Pomanar Dessert Inc., on account of legal fees and disbursements, is granted on consent, subject to the condition in paragraph 4 below.
3The moving parties, Skymark Capital Corporation and Valiollah Onsori-Saisan, shall pay the plaintiff its costs on a substantial indemnity scale in the amount of $32,688.08, inclusive of disbursements and taxes.
4The amount to be released to Miller Thomson LLP in trust from the bank account of Pomanar Dessert Inc. pursuant to this order shall be extended to $92,688.08. Out of any funds so released, the costs award in paragraph 3 above shall be paid first to the plaintiff, to the order of Dickinson Wright LLP, in trust. Upon satisfaction of the costs order, the balance paid to Miller Thomson LLP will be available for that law firm’s fees and disbursements.
Akazaki J.
Date: June 4, 2024