COURT FILE NO.: CV-12-450443

DATE: 2012-04-12

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Autopoietic Telemetric Solutions Limited, Plaintiff

AND:

John Loughlin, on his own and trading as Eurologix Security, Defendant

BEFORE: Michael G. Quigley

COUNSEL: Christian C. Chijindu, for the Plaintiff

HEARD: Ex Parte, in Chambers April 11, 2012

ENDORSEMENT

[1] The plaintiff Autopoietic Telemetric Solutions Limited (“ATS”), moves ex parte under Rule 37.12.1(1) based on allegations of fraud for a Mareva Injunction and other related orders freezing the bank accounts in Canada held at TD Canada Trust by the defendant Michael Loughlin, trading as Eurologix Security. The related relief sought includes an order preventing the dissipation of assets owned by the defendant in Canada or elsewhere, an order preventing the sale or other disposition of the real estate located at 5 Hesham Dr., Whitby, Ontario, and finally, a Norwich Order requiring the Toronto Dominion Bank, or TD Canada Trust to provide access and information to ATS regarding the bank account to which the it transferred U.S. $1,873,070.28 to or for the credit of the defendants.

[2] ATS is a company registered in the United Kingdom with a registered address at 18 Hartman Lane, South Shields, Tyne & Wear, England, NE34 0EF, and it carries on business as a supplier of telemetric products and counterterrorism consultancy and equipment. It was formed in 2010 with contacts in the Nigerian government. It has websites that can be found on the Internet at www.autopoietic.com and www.ATS – guickby.com.

[3] The individual defendant is a director of a registered company in the United Kingdom by the name of Eurologix Security Limited. In Ontario, however, the defendant does not carry on business through a corporate entity, but rather, as a sole proprietorship with the registered business name of "Eurologix Security." Its business registration number of 190118562 is attributed to that business at a registered place of business, which is reflected in the business registration records as being located at 15 Heaver Dr., Whitby, Ontario L1N 9K4.

[4] In support of the injunctive relief sought by the plaintiff in this motion, an affidavit is filed by one Nkiruka Ochei, an assistant to Mr. Christian Chijindu, the solicitor for the plaintiff, ATS. That affidavit is largely based upon an affidavit filed by Mr. Philip Tann, Director and Chief Technical Officer of ATS, which was filed in the High Court of Justice, Queen's Bench Division in the United Kingdom in support of a Mareva Injunction and similar relief that has been granted there freezing the assets of Mr. Loughlin and Eurologix Security Limited in the similar action commenced by ATS in the United Kingdom. Particulars of that claim, the affidavit of Dr. Tann, and the Order of the Hon. Mr. Justice Eder of the High Court of Justice, Queen's Bench Division issued on December 29, 2011 and filed on December 30, 2011 in the Queen's Bench Listing of the High Court of Justice, were attached as Exhibit 2 to Mr. Ochei’s affidavit.

[5] The specific claims of the plaintiff relate to three purchase orders under which the defendant is alleged to have agreed to supply certain detection equipment upon receipt of funds in its Canadian bank account in Whitby, Ontario in the sums of $1,534,995.06, $214,845.12, and $123,230.10, for a total of $1,873,070.28, all in United States dollars. ATS transferred those amounts electronically into a TD Canada Trust account that is under the sole and absolute control of the defendant at the TD Canada Trust branch located at 110 Taunton Rd., Whitby, Ontario. The last transfer of funds is alleged to have taken place on October 17, 2011. Notwithstanding the transfer of funds, however, no goods were ever delivered to the consignment address in Nigeria.

[6] Then, in November of 2011 and after allegedly receiving all of the monies paid for the supply of the contracted goods, Mr. Loughlin advised the plaintiff that Eurologix Security Canada had met its demise, that he had been laid off and that the company had “gone bankrupt.” As a result, Mr. Loughlin indicated to the UK purchasers that the equipment would not be supplied. He told them that the money might not be refunded in light of the alleged bankruptcy of Eurologix Security Canada. He told them not to contact him further.

[7] Based on its investigations and these assertions of fact, however, ATS contends that there is no such company as "Eurologix Security Limited" or "Eurologix Canada" registered in any province in Canada. Contrary to John Loughlin’s claims as reflected in e-mail exchanges between himself and Dr. Philip Tann and which were included as exhibits in the application record, "Eurologix Security Canada" does not actually exist. It is not a bankrupt company. Eurologix Security Canada is not an incorporated entity reflected in the files of bankrupt corporations. Rather, as noted, that name appears merely to be a trade name used by Mr. Loughlin for the purposes of operating his “business.”

[8] Rather, ATS contends that Michael Loughlin, the defendant, is the sole owner and proprietor of Eurologix Security and, accordingly, that he is individually liable and responsible for the defalcation and fraud that is alleged to have been perpetrated by him against ATS as set out in its Statement of Claim dated April 3, 2012, and in the similar claims it has commenced in the United Kingdom. ATS contends that the defendant is singularly responsible for the operation and running of the accounts to which ATS deposited its monies in respect of contracts entered into for the purchase of the goods which were to be supplied to addresses in Nigeria. ATS claims that those contracts have been breached by the defendants by their failure to deliver the goods to the purchaser as agreed. It claims that the failure of these contracts is due to fraudulent conduct and that the defendant is the commanding mind behind the frauds that are alleged to have been perpetrated against it by the individual defendant in his own right, and under Eurologix Security’s trade name.

[9] The position of the plaintiff is that the defendant misrepresented these matters as part of a deliberate effort to embezzle funds belonging to ATS with the intention of unjustly enriching himself with the plaintiff’s money. ATS says that its investigations have disclosed that Mr. Loughlin bought a house in Whitby, Ontario for $369,500 in cash and without a mortgage in December 2011. Further, it is claimed that Mr. Loughlin has paid off all of his debt and his mortgage in the United Kingdom, relative to the UK residential addresses reflected in the UK court documentation, and it is believed that he has been embezzling the funds continuously since they have been received.

[10] It is for these reasons that the plaintiff seeks not only a Mareva Injunction and non-dissipation orders relative to the assets of the defendant, but also a Norwich Order requiring the Toronto Dominion Bank to disclose the receipt and disbursement of funds relative to this account in order to assist the plaintiff to trace the allegedly embezzled funds.

Analysis

[11] ATS seeks this interim injunctive relief under Rule 40 of the Rules of Civil Procedure and section 101 of the Courts of Justice Act. The injunction is requested on an interlocutory or interim basis in order to prevent the defendant from dissipating assets allegedly wrongly received by him. To succeed in obtaining the injunction it seeks, the applicant must establish that there is either a prima facie case or that the claim is not frivolous or vexatious. In a case such as this, where it is an interim injunction that is sought without notice in an effort to restrain the respondent from disposing of his assets until the disposition of the case or further order of the court, it is the higher prima facie threshold that applies. The applicant must demonstrate the existence of a serious question to be tried.

[12] Secondly, ATS must show that it would suffer irreparable harm if the injunction were to be refused. In assessing that question, the court is to determine whether the harm caused is of such a nature that it is not compensable by damages. Irreparable harm may be also be found where one party will suffer permanent market loss or irrevocable damage to its business reputation which is not capable of being calculated: see R.J.R. MacDonald Inc. v. Canada (Attorney General), 1994 CanLII 117 (SCC), [1994] 1 S.C.R. 311 (S.C.C.) at para. 64, and Canpages Inc. v. Québecor Media Inc., (2008) CarswellOnt 3193 (Ont. Sup. Ct.) at para. 14.

[13] Finally, the applicant must show that it will suffer the greater harm from the refusal of the injunction to be granted them the respondent will likely suffer from the granting of the injunction: see R.J.R. MacDonald, above, at paragraph 48. Reduced to its essence, however, the law requires that these three conditions must be considered simultaneously to determine if it is appropriate that the Mareva Injunction be granted, and the central question in that determination is whether it is just and equitable in the circumstances of the case to grant the injunctive relief: 2645 Skymark Investments Inc. v. Canadian Neher Holdings Corp., 2000 CarswellOnt 23 (Ont. Sup. Ct.)

[14] As for the Norwich Order, the test set out in Isophoton S.A. v. Toronto Dominion Bank, 2007 CanLII 14626 (ONSC), requires that five separate elements be considered before the order is granted. First, there should be evidence of a valid bona fide claim or a reasonable claim and the standard required is that the claim not be frivolous or vexatious. This test is essentially the same as that established under the Mareva Injunction requirements. Secondly, the applicant must establish that the bank from which the information is sought is somehow connected in the wrongful act, albeit innocently. Thus, in a case such as this one, when the bank is allegedly unknowingly in receipt of allegedly fraudulent funds, it will be considered to be an "innocently involved" third party.

[15] Third, the bank must be the only practicable source of information in light of the inability of the victim to approach the alleged wrongdoer for the information. The case law shows that financial institutions are often the only real source of the information required to prove a claim and permit the wronged party to locate fraudulently transferred assets or funds. Fourth, the victim is required to indemnify the third party for any costs associated with complying with the order, but in Isophoton, the court rejected the argument that an undertaking as to damages was required, stating that it was difficult to envisage a situation in which a financial institution that is subject to a Norwich Order would be subjected to liability and a damages award for disclosing financial information pursuant to a court order. The court advised there that should a concern materialize for the financial institution in the facts of a specific case, the financial institution in question could seek the additive protection of being able to retain legal counsel and return to court for further directions if necessary.

[16] Finally, a Norwich Order will only be issued after the court has considered all the respective interests and weighed the benefits of revealing the information against the interest of maintaining confidentiality. This follows since there is serious prejudice to an alleged wrongdoer in releasing confidential financial records without their knowledge or consent, but on the other hand, our courts are reluctant to protect the rights of wrongdoers if maintaining confidentiality in essence protects fraudulent conduct, or acts.

[17] I agree that the plaintiff, ATS has established a prima facie case as against the defendant, based on the affidavit evidence and exhibits set out in their ex parte motions materials. As such, their application will succeed and they will be granted the orders they seek freezing the bank accounts at Toronto Dominion and TD Canada Trust and to trace and preserve the assets of the defendant with the account held at TD Canada Trust on the authority of the R.J.R. MacDonald and Isophoton decisions. It is of considerable support and relevance to my conclusion that asset-freezing and non-dissipation orders have already been obtained by the ATS from the High Court of Justice - Court of Queen's Bench Division in the United Kingdom based on the thorough and detailed affidavit of Dr. Philip Tann, dated December 29, 2011. Moreover, having regard to the almost U.S. $2 million value of the claim made by the plaintiff as against the defendant, Michael Loughlin, with respect to funds allegedly transferred to the TD Canada Trust bank account in Whitby, Ontario, it seems clear to me that the balance of convenience in a circumstance such as this unquestionably favors the plaintiff.

[18] The prima facie evidence presented on this motion for an ex parte Mareva Injunction and Norwich Order satisfies me that justice demands that the freezing order sought by the plaintiff be granted on an interim without prejudice basis for at least such time until the matter can return after the orders have been implemented and a return date is established for the return of the motion. Obviously it will be up to the motions judge on the return date to determine whether the injunctive relief ought to be continued beyond that date and if so, on what terms. In light of the fact that the injunction is being issued on April 12, 2012, it strikes me that the motion should be initially returnable in two weeks for the purposes of the matter to at least be spoken to at that time, and to enable the court to obtain an update on what the circumstances are and what the fallout has been from the granting of its order freezing Mr. Loughlin's Canadian assets, and requiring the Toronto Dominion Bank to produce the information sought by the plaintiffs pursuant to the Norwich Order granted hereunder.

[19] Orders are to go as follows:

(a) an order of interlocutory or interim injunction against the defendant from the moving of any of his assets in Canada; in particular, his bank accounts held at the TD Canada Trust into which the plaintiff claims to have made payments;

(b) an order freezing the bank accounts or any account held at TD Canada Trust by the defendant, in his personal capacity, or his capacity trading as Eurologix Security;

(c) an order preventing the defendant Michael Loughlin, on his own or carrying on business as Eurologix Security, from disposing of, dealing with or diminishing the value of any assets owned by him in Canada or elsewhere;

(d) an order preventing the defendant, Michael Loughlin from selling or otherwise disposing of the real estate known as 5 Hesham Dr., Whitby, Ontario; and

(e) an order requiring the Toronto Dominion Bank or TD Canada Trust to provide access and information to the plaintiff regarding the bank account to which the plaintiff transferred the sum of $1,873,070.28 in United States dollars to or for the credit of the defendant.

[20] In light of the circumstances, costs of this ex parte order are reserved to the motions return judge on April 26, 2012.

Michael G. Quigley, J.

Date: April 12, 2012