COURT FILE NO.: Peterborough CV-127-13-00
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
SolarBlue LLC
Plaintiff
– and –
Kimberly Ann Aus a.k.a. Kimberly A. Aus a.k.a. Kim Aus, Steven M. Gamsby a.k.a. Steven Gamsby a.k.a. Steve Gamsby and 2119889 Ontario Inc.
Defendants
Trung S. Nguyen, for the Plaintiff/Responding Party on Motion
Sarah Clarke, for the Defendants/Moving Party, Kimberly Aus and 2119889 Ontario Inc.
Self -Represented, for the Defendant/Moving Party, Steven M. Gamsby a.k.a. Steven Gamsby a.k.a. Steve Gamsby
HEARD: at Lindsay on November 27 and 28, 2013
REASONS FOR DECISION ON MOTION
R. MacKinnon J.
Background
1All defendants seek orders setting aside the ex parte Mareva order of Gunsolus J. of June 14, 2013. That order restrained them from, amongst other things, disposing, selling, removing, dissipating, transferring or assigning any of their assets (and in the case of Ms. Aus, any of the assets of her company 2119889 Ontario Inc.), on terms.
2The underlying Statement of Claim alleges fraud, conspiracy, and unjust enrichment. Ms. Clarke, for the defendant Aus, correctly points out that there are no pleaded facts to support the claims of fraud or conspiracy against her client. As to unjust enrichment, she argues the facts were and still are, insufficient to sustain a strong prima facie case for injunction. She also argues that the plaintiff failed to disclose relevant and material facts to the issuing judge – specifically that during Mr. Gamsby’s confession in May 2013 he says he told representatives of the plaintiff that Ms. Aus had no knowledge of or involvement in his wrongful conduct. She argues as well that SolarBlue failed to make any inquiries of Ms. Aus herself about her involvement in her common-law husband’s scheme, thereby failing in its obligation to make proper inquiries and to disclose all material facts on the Mareva motion.
3Mr. Gamsby also argues that the plaintiff did not make full and frank disclosure of all materials within its knowledge. He points out there was no direct affidavit evidence demonstrating any complicity in his fraud by his common-law wife, Aus. He argues that SolarBlue pressured and duped him into providing information to it for the sole purpose of pursuing its injunction to secure repayment of its funds. He argues that the crux of the proposed restitution agreement pertained to repayment of funds and that the nature of the ongoing negotiations with him for debt repayment was a crucial omission which the plaintiff should have disclosed to the issuing judge.
4Counsel for the plaintiff argues that SolarBlue not only fully satisfied the test to obtain the Mareva injunction relating to all defendants, but that it continues to do so. He points out, correctly, that the defendant, Gamsby, has admitted in writing to defrauding the plaintiff by directing $750,000 U.S.D. of its funds in 2012 to his common-law wife, Ms. Aus, through her numbered company. Both defendants, Gamsby and Aus, have admitted in writing that the majority of those funds were used for renovations on three real estate properties solely owned by Ms. Aus and/or her company, paying for their joint vacation, purchasing a car for their joint use, and paying down their credit cards.
Rule 39 of the Rules of Civil Procedure
5A pleading of fraud must contain a concise statement of the material facts on which a party intends to rely. There are specific allegations of fraud against Gamsby. He has admitted in writing to defrauding the plaintiff. He admitted inducing SolarBlue to advance funds by preparing a fake letter of intent in which he represented that Kawartha Power had a portfolio of facilities across Ontario. He falsely told SolarBlue that in order to secure the deal it must advance $750,000 U.S.D. to 2119889 Ontario Inc. which he did not tell SolarBlue was his common-law wife’s company. Kawartha Power was a fiction and did not exist. Material facts of fraud are pleaded against Gamsby who says he is impecunious. He is admittedly bankrupt.
6One of the pleaded claims against Ms. Aus is unjust enrichment. To be successful against her, three elements must be satisfied:
a) an enrichment of or benefit to her; and
b) a corresponding deprivation of the plaintiff; and
c) the absence of a juristic reason for the court to allow the enrichment.
There is no requirement that a defendant in an unjust enrichment claim have knowledge of the fraud or conspiracy by which he or she was unjustly enriched. Material facts on the claim of unjust enrichment have been pleaded against Aus.
Discussion
7Mr. Gamsby’s evidence on this set aside motion is that he directed SolarBlue’s monies to Ms. Aus’ company because he did not own a registered business to which to direct the funds. He also swears that he falsely advised her that the funds were being paid by SolarBlue as an advance on commissions. He swears Aus was unaware of both his fraudulent activity and motive. However, Marco Genio, for the plaintiff, swears Gamsby never told SolarBlue that Aus was uninvolved in his fraud.
8Aus swears she became romantically involved with Gamsby in the fall of 2010 and he moved into her residence in September 2011. She swears on this set aside motion that she trusted him and believed him to be honest when he told her in the spring or summer of 2012 that he had a contract with SolarBlue and anticipated making significant commissions. She swears she agreed to his request that he deposit those commissions into her company account on her understanding the funds were legitimate and that such deposits could be made for a proper tax deferral purpose. She at all times denies any knowledge or suspicion of her common-law husband’s fraudulent conduct. She points to Gamsby’s cross-examination on this motion in July 2013 when he swore he lied to her and concocted a story. She swears she committed no fraud, did not conspire with Mr. Gamsby to misappropriate any money, and at no time knew or suspected his funds from SolarBlue were totally illegitimate.
9It is noteworthy in weighing both defendants’ credibility on their affidavits on this motion that despite the Mareva injunction and in the face of an outstanding contempt motion, Ms. Aus and Mr. Gamsby, without court permission, pawned her diamond engagement ring in spite of clear terms in the Mareva order prohibiting them from doing so. In a related motion heard before the hearing of this set aside motion, I found beyond reasonable doubt that both personal defendants were guilty of contempt of court for doing so.
10I also note that while Mr. Gamsby had counsel of record in this matter until November 25, 2013 (2 days prior to this motion), he delivered a Notice of Intention to Act in Person on which he noted his address to be the same residence address as Ms. Aus. He had led me to believe he and Ms. Aus were now separated. When this issue was raised by plaintiff’s counsel on this set aside motion, Mr. Gamsby then reversed his position and eventually gave me a different address for himself. I found this to be very suspicious and it has further negatively affected my assessment of his credibility.
11SolarBlue argues that Gamsby’s bankruptcies explained why he needed to have its funds deposited into his common-law wife’s accounts. Deposits into his personal accounts would have attracted the scrutiny of his bankruptcy trustee. I note that his confession, on its face, states explicitly he was under no duress when he personally prepared and signed it. He now claims he was forced to confess under duress. However the plaintiff’s evidence references a video showing that no one threatened or coerced Gamsby at all – rather Gamsby is shown laughing and smiling at the meeting while he personally prepared his confession on his laptop. I reject his duress assertion.
12Both defendants on this set aside motion argue that:
a) SolarBlue failed to make full and fair disclosure of all material facts when requesting the Mareva order; and
b) it failed to demonstrate a strong prima facie case with respect to its claims against them; and
c) if the Mareva order is not set aside, SolarBlue should be required to provide security.
Strong Prima Facie Case
13The plaintiff has demonstrated a strong prima facie case for maintaining the Mareva order. It has the onus of doing so. Its claims, as I have noted, include fraud and conspiracy against Gamsby and unjust enrichment against Aus. A strong prima facie case of fraud is demonstrated against Gamsby. I have already noted that there is no requirement in an unjust enrichment claim for a defendant to have knowledge of the fraud or conspiracy by which he or she was unjustly enriched. In any event a strong inference is demonstrated that Aus knew or ought have known that the $750,000 U.S.D. which was deposited into her corporate bank account was fraudulently obtained because:
a) Gamsby was then a second time bankrupt and would not have been able to use his own bank account without attracting the scrutiny of his bankruptcy trustee; and
b) Aus knew he had never ever before received such a large amount; and
c) her explanation about using the company for tax deferral strategies makes no sense. She would not have incurred any such liability by allowing her partner to deposit his fraudulent commissions into her bank account without receiving some benefit to her; and
d) she did not question Gamsby for signing the fake agency contract on behalf of her company when she knew he had absolutely no legal authority to do so.
14It has now become obvious that there was not only a risk of asset dissipation but both defendants have now sworn affidavits on these motions confirming that there was actual dissipation of the entire $750,000.
15There is no demonstrated reason in law or justice for either of the defendants to now retain the fraudulently obtained funds. The plaintiff has demonstrated that there is no juristic reason to deny recovery. The strong prima facie case against both defendants on unjust enrichment is rebuttable if they can show there is another reason to deny recovery. None is demonstrated in this case.
Full Disclosure of Material Facts
16SolarBlue had an obligation to provide to Gunsolus J. a full, fair and frank disclosure of material facts. The defendants argue they did not. Chitel et al v. Rothbart (1982) 1982 1956 (ON CA), 39 O.R. (2d) 513 holds that:
the plaintiff must, in securing an ex parte interim injunction, make full and frank discussion of the relevant facts including facts which may explain the defendant’s position if known to the plaintiff. If there is less than full and accurate disclosure in a material way or if there is a misleading of the court in material facts in the original application, the court will not exercise its discretion in favour of the plaintiff and continue the injunction.
17The defendants argue that the following were chief among those not disclosed to Gunsolus J.:
a) Ms. Aus is on a disability as a result of a serious car accident in which she suffered a brain injury. In these circumstances, however, that is irrelevant and immaterial.
b) Ms. Aus relies on her disability income to support her family. That too is irrelevant and immaterial.
c) Mr. Gamsby said he told the plaintiff before bringing its ex parte motion that Ms. Aus had no knowledge or involvement in Gamsby’s wrongful conduct. SolarBlue, however, denies that.
d) Mr. Gamsby said he told Ms. Aus that all of his interactions with SolarBlue were legitimate and lawful. However Aus’ knowledge of the fraud or conspiracy by which she was enriched is irrelevant and immaterial as well.
e) Ms. Aus had no knowledge or suspicion of Mr. Gamsby’s wrongful conduct, played no role and, if so asked by the plaintiff before the Mareva motion, would have said so. However that had no realistic potential to affect the result.
18In cross-examination about how Aus discovered the fraud, Aus and Gamsby gave different accounts:
a) Aus claimed that Gamsby told her about the fraud mid-afternoon on June 18, 2013 while sitting on the grass in front of their home, after the Mareva had been served.
b) In contrast, Gamsby claimed to have told Aus about the fraud on June 10, 2013 in their bedroom in the evening at 7 p.m.
These are significant inconsistencies on a critical event. SolarBlue argues that both defendants’ affidavits are unreliable and I agree.
19I find that the plaintiff made full and frank disclosure of all relevant facts. There was no misleading of the issuing judge on material facts. SolarBlue was not required in these circumstances to assert on the Mareva motion all verbal utterances from a then self-confessed fraudster. Gamsby now swears he told SolarBlue that Aus was not involved in the fraud. His lies, admitted fraud, testimonial inconsistency and demonstrated contempt of court render his assertions unreliable and not capable of belief at all.
20Ms. Aus was not contacted by the plaintiff to be asked to disclose her position about her partner’s fraud before the plaintiff moved for the Mareva order. SolarBlue was not, in these circumstances, required to do so. Aus initially claimed that the majority of SolarBlue’s $750,000 was used to fund renovations on her three properties. However, in her latest affidavit she swears that only approximately half of it was used for renovations on her properties. I find her assertion of lack of knowledge of Gamsby’s fraud to be a convenient fabrication to attempt to shield her assets (which have been unjustly enriched) from the plaintiff. In any event, her knowledge or lack of it is immaterial.
21Full and accurate material disclosure was made. The plaintiff met its onus before the issuing judge and continues to do so on this set aside motion.
Security for the Plaintiff’s Undertaking to Pay Damages
22The defendants seek this Court’s discretionary order requiring the plaintiff to provide security for its undertaking to pay damages. SolarBlue is a limited liability company incorporated in Florida. The defendants argue the plaintiff has not demonstrated it has sufficient assets in Ontario to cover an award of damages and that enforcing such an order from a Florida corporation will pose difficulties for the defendants. Rule 40.03 mandates that the moving party, on an interlocutory injunction, as here, to provide an undertaking in writing unless the Court orders otherwise. That written undertaking has been provided. These defendants now seek the exercise of this Court’s discretion to order otherwise. I am not close to being satisfied that I should do so. I am not satisfied that the defendants have established a significant loss on their part arising from the injunction nor that the balance of convenience favours such an order.
Conclusion
23For the reasons I have given I dismiss both defendants’ motions. In addition I order that the Mareva order of Gunsolus J. of June 14, 2013, as continued by him on June 24 and 26, 2013, be continued. Costs of a motion normally follow the cause. If the parties cannot agree on costs, the party seeking costs shall, within 20 days from the date of issuance of these reasons, deliver a Bill of Costs together with written submissions of no longer than five pages, single spaced. The parties against whom costs are claimed shall deliver their responding submissions of no more than the same length and within 15 days from receipt of the Bill of Costs from the claimant. Reply submissions shall be delivered, if at all, within five days of receipt of responding submissions. All costs submissions shall be forwarded to me in care of my secretary at Barrie.
R. MacKinnon J.
Released: December 17, 2013