COURT FILE NO.: CV-13-494002

DATE: 20140417

SUPERIOR COURT OF JUSTICE – ONTARIO

RE: LEON MASSA, Plaintiff

AND:

ALEX SUALIM, SANDRA SUALIM, SANDRA OLUWOLE-AINA, 2078749 ONTARIO LTD., BAUHAUS HOME BUILDERS LTD., and OZILI INC., Defendants

BEFORE: STEWART J.

COUNSEL:
Ruth Promislow, for the Plaintiff

C. Aiello, for Sandra Sualim and Sandra Oluwole-Aina

N.C. Tibollo, for Alex Sualim, 979749 Ontario Limited,
Bauhaus Home Builders Ltd., and Ozili Inc.

HEARD: January 24, 2014

ENDORSEMENT

[1] The Plaintiff seeks a continuation of the Mareva injunction granted ex parte on December 5, 2013 by Stinson J. The injuction was continued by further court order until January 24, 2014. On January 24, 2014, I ordered that the injunctive relief previously granted should continue pending release of my decision on the issues raised during the hearing.

[2] The Defendants oppose the continuation of the injunction and ask that it be dissolved. They also seek expungement of FINTRAC documents from the Plaintiff’s Motion Record as well as an affidavit sworn by Uriah Compton of the United States law enforcement authorities which was attached as Exhibit “A” to the December 3, 2013 affidavit of George Daves filed in support of the request for an injunction.

[3] Alternatively, the Defendants seek an order requiring the Plaintiff to post security in support of his undertaking as to damages.

Background Facts

[4] The Plaintiff alleges fraud against the Defendants and claims damages as a result.

[5] According to the evidence submitted by the Plaintiff and on his behalf, the alleged fraud involves a scheme whereby individuals would be contacted by telephone by someone unknown to them and presented with a business opportunity involving the purchase of silicon germanium from a supplier in China and the sale of the product to a Canadian company.

[6] The Plaintiff and most of the other individuals alleged to have been defrauded were first contacted in 2011. After these individuals had advanced substantial amounts to the purported supplier company (typically directed to accounts in Hong Kong, Cyprus or Greece), it became apparent that the proposed transaction was a sham.

[7] Neither the Plaintiff nor the other individuals met face-to-face with anyone involved in the transaction and had no means of ascertaining the true identity of the perpetrator of the fraud.

[8] Following receipt of complaints from individuals who had been duped by this scheme, the United States law enforcement authorities conducted an investigation. As a result of this investigation, the Defendant Alex Sualim was identified as the perpetrator of the fraud. The basis for this conclusion is set out in the Affidavit of Compton in Support of Criminal Complaint and the Indictment. Sualim has been arrested and is in the United States awaiting trial.

[9] In summary, U.S. investigators determined that the perpetrators of the fraud repeatedly utilized two e-mail accounts to further the scheme, that Sualim is the true owner of these accounts and that he used such e-mail accounts in his personal capacity during the relevant period of time.

[10] The Indictment identifies some of the victims of the fraud and sets out a summary of the particulars of the fraud against such victims. Although the Plaintiff is not one of the United States victims so identified, he alleges in this action that he has been victimized by Sualim by the same fraud carried out in the same manner as set out in the Criminal Complaint and the Indictment. The material submitted by the Plaintiff on this motion summarizes the various identical aspects of the fraud alleged to have been committed against him as those perpetrated against the other victims named in the Indictment.

[11] In addition to the affidavit in support of Criminal Complaint, the evidence before Stinson J. included a FINTRAC report on Sualim and the other Defendants. This FINTRAC report included the following information and commentary:

(a) In a 2011 credit application, Sualim's income was listed as $40,990 and Sandra Sualim's income was listed as $59,037;

(b) In 2011, cash deposits to the personal accounts of the Sualims totalled $96,000. In 2011 (the year in which the alleged fraud was perpetrated), almost $1.2 million was transferred from accounts in Hong Kong and elsewhere to the benefit of Sualim's company, 2078749 Ontario Ltd. ("207");

(c) The Sualims were flagged for money laundering due to, among other things, the volume of ATM cash deposits from September to May 2010 between their business and personal accounts totaling $328,520 and wire credits totaling $669,769.69;

(d) The Suspicious Transaction Report on the Sualims concluded that the business accounts, including those of Sualim's company 2078749 Ontario Limited (“207”), do not appear to be operating according to the business types;

(e) Twelve month investigation has been completed on the account [belonging to 207, Sualim's company]. Cash and cheque deposits are followed by numerous cheques written to contracting companies. The concern is that we are unable to confirm the source of the cash deposited which totalled approximately $108,000 and the cheques written on the account do not appear to be related to the stated nature of the client business. It appears that the company is purchasing real estate based on the cheques issued on the account. There are no cheques or debits for payroll, accounts payable, vehicle maintenance or fuel; and

(f) . . Upon receipt of the wires, client depletes funds by way of large cash withdrawals, GIC purchase, Draft payable to Fasttrack Haulage [operated by Sualim] and transfers to other Canadian account of which cash is subsequently withdrawn. Due to the movement of funds in and out of account along with the fact that the wires are inconsistent with client's employment raises our suspicion of money laundering and hence we have reasonable grounds to report.

[12] Based on the evidence before him, Stinson J. found that the Plaintiff had made out a strong prima facie case that he had been defrauded by Sualim.

[13] Based on the FINTRAC report, Stinson J. concluded that there is evidence that would support the conclusion that at least some of the proceeds of fraud perpetrated upon the Plaintiff may have been shared among the various Defendants.

[14] The evidence before Stinson J. also indicated that the Sualims had just recently sold one of their properties. The Plaintiff relied on, and Stinson J. accepted, such evidence to establish the risk of dissipation of assets.

[15] After noting the evidence that Sandra Sualim (also known as Sandra Oluwole-Aina) had sold one of their properties, Stinson J. concluded that there was some basis to infer a sufficient risk of dissipation of assets that would render the possibility of future tracing of assets remote and the resulting frustration of the enforcement of any judgment the Plaintiff may ultimately obtain.

[16] After granting the Mareva injunction ex parte, Stinson J. directed that the parties return before him on December 12, 2013 to address the question of continuation of the relief.

[17] On December 12, 2013, counsel for the Plaintiff and counsel for Sandra Sualim attended before Stinson J. Sualim and 207 had not been served with the motion materials as the Plaintiff did not have information as to where Sualim was incarcerated in the United States. At the December 12, 2013 hearing, counsel for Sandra Sualim advised the court that he required more time to respond to the motion.

[18] On December 12, 2013, on consent of the Plaintiff, approximately $40,000 of the frozen funds was released to the Defendants.

[19] On consent of the Plaintiff and Sandra Sualim, Stinson J. adjourned the motion to January 24, 2014. A further hearing on December 20, 2013 was scheduled to permit Sandra Sualim to bring a motion to compel Plaintiff's counsel to attend an examination under Rule 39.03 based on counsel's assertion that the FINTRAC document before Stinson J. on the ex parte motion might have been disclosed to Bennett Jones illegally and to limit the scope of the Mareva injunction to the Plaintiff's principal loss of $840,000.

[20] On December 20, 2013, Morgan J. dismissed the motion to examine Plaintiff's counsel on the grounds that such an examination would inevitably encroach so closely upon areas covered by solicitor-client privilege that it would be virtually impossible to distinguish permissible questions from impermissible ones. Morgan J. held that an examination of the deponent George Daves, a litigation assistant, would relay the mechanics of how the FINTRAC document was obtained by Bennett Jones. Morgan J. reduced the “cap” on the freezing order to $1.6 million.

[21] Morgan J. continued the Mareva injunction to January 24, 2014 to address the further continuation of the injunctive relief. Hence, this motion.

Issues:

A. Should the impugned portions of the Plaintiff’s Motion Record and supporting affidavit be expunged?

B. Should the Mareva injunction be continued?

C. Should the Plaintiff be required to post security in support of his undertaking as to damages?

Issue A: Should the impugned portions of the Plaintiff’s Motion Record and supporting affidavit be expunged?

Criminal Complaint

[22] The Defendants seek to strike the Criminal Complaint which is the sworn statement from Uriah Compton prepared in the course of his professional duties as Special Agent of the Internal Revenue Service ("IRS"), Criminal Investigation Divisions. In his sworn statement, Compton summarizes the evidence obtained by the IRS tying Sualim to the fraud.

[23] The Defendants argue that the Criminal Complaint should be struck on the grounds that Compton was not produced by the Plaintiff for cross-examination on his affidavit. The Plaintiff did not commission the sworn statement or have anything to do with preparing such document.

[24] Rule 39.01(4) specifically permits evidence based on information and belief to be filed in support of relief sought on a motion, and provides as follows:

An affidavit for use on a motion may contain statements of the deponent's information and belief, if the source of the information and the fact of the belief are specified in the affidavit.

[25] In his affidavit to which the impugned material is attached as an Exhibit, Daves specified the source of the information and the fact of his belief with respect to it and the other information referred to therein.

[26] Daves was cross-examined on his affidavit and was not challenged on the issue of his belief in the truth of the information set out in the sworn statement of Compton or the Criminal Complaint.

[27] As noted, the Criminal Complaint was not attached to the Daves Affidavit with the object of shielding Compton from cross-examination, nor is it a document prepared by or at the request of the Plaintiff. Its contents, however, are believed by Daves to be true and accurate.

[28] Further, Rule 39.01(4) permits hearsay evidence as an exception to the hearsay rule (see: Ontario Securities Commission v. 1367682 Ontario Ltd. (De Freitas & Associates), 2008 23949 (ONSC)). To the extent this evidence might be considered hearsay, it is admissible on the motion.

[29] Any concerns the Court might have with the Criminal Complaint and the sworn statement of Compton should go to weight and not admissibility. It is evident that the criminal trial on these charges has yet to take place.

[30] With respect to the issue of similar fact evidence raised by counsel for the Defendants, such evidence is permitted where it would be an affront to common sense to suggest that the similarities were due to coincidence (see: R. v. Handy, SCC 56). That test, to be applied potentially to evidence at trial, is not a matter of serious concern at this motion stage. In any event, the information sought to be expunged has not been denied by Sualim or the other Defendants.

[31] As a result, I consider the Criminal Complaint is proper component of the record.

FINTRAC Document

[32] The Defendants argue that the FINTRAC report was obtained “unlawfully”. The uncontradicted evidence before Stinson J., Morgan J. and on this motion is that the RCMP voluntarily and willingly provided the document to Plaintiff's counsel.

[33] Pursuant to s. 55(3) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, S.C. 2000, c. 17, if FINTRAC has reasonable grounds to suspect that designated information would be relevant to investigating or prosecuting a money laundering offence, the Centre shall disclose the information to the appropriate police force (among others). In this case, disclosure was made to the RCMP.

[34] Pursuant to s. 8(2)(a) of the Privacy Act, R.S.C., 1985, c. P-21, the RCMP may disclose personal information for the purpose for which the information was obtained or for a use consistent with that purpose.

[35] In my opinion, there is nothing improper in the disclosure by the RCMP of personal information regarding an accused fraudster to assist the Crown with the criminal prosecution of a fraud or to assist a victim of that crime in seeking recovery. There is no evidence before the court to suggest that disclosure was not consistent with that purpose.

[36] The Defendants also rely on s. 24(1) of the Access to Information Act, R.S.C., 1985, c. A-1 in support of the position that the RCMP cannot disclose personal information under any circumstances. This particular section stands for the simple proposition that upon a request by a member of the public, the government cannot be required to disclose personal information of a third party. This section does not prohibit the disclosure of personal information upon the exercise of police discretion in accordance with the Privacy Act and within the parameters prescribed thereunder.

[37] The Access to Information Act, R.S.C. 1985, c. A-1, and the Privacy Act, R.S.C. 1985, c. P-21, each provide for complaint, investigation and judicial review procedures. Neither provides for exclusion of evidence as a remedy for non-compliance.

[38] Since the FINTRAC reports are relevant, the only discretion this court has to exclude them from evidence is if their prejudicial effect outweighs their probative value. There is no plausible argument to that effect, and the defendants did not attempt to make one.

[39] For these reasons, I decline to expunge the FINTRAC report from this record.

Issue B: Should the Mareva injunction be continued?

[40] Sualim has not filed any affidavit or other evidence on this motion to contradict or explain the information supplied by the Plaintiff.

[41] The uncontradicted evidence before the Court supports the following conclusions:

(a) the Plaintiff has made out a strong prima facie case that he was defrauded by Sualim;

(b) at least some of the fraud proceeds may have been shared among the various Defendants; and,

(c) there is some basis to infer a sufficient risk of dissipation of assets.

[42] The Defendants therefore have failed to put forward any material evidence to challenge the merits of the claim.

[43] It has been suggested on behalf of Sandra Sualim that there has been material non-disclosure by the Plaintiff on the motion before Stinson J. No specifics of such alleged non-disclosure other than the alleged unlawful use of the FINTRAC report. In my opinion, the source of the information relied upon was clear and there was no material non-disclosure of such a degree that would make it inappropriate to continue the injunction.

Issue C: Should the Plaintiff be required to post security in support of his undertaking as to damages?

[44] The Plaintiff has provided an undertaking as to damages in the usual form.

[45] The Plaintiff resides and carries on business in British Columbia. There is no evidence to suggest that his undertaking is worthless or unenforceable at this stage.

[46] It is open to the Defendants to move for the posting of security for costs by the Plaintiff should they so choose. However, at this point in the proceedings and given the state of the present record, I see no basis to justify an order requiring the Plaintiff to pose security in support of his undertaking as to damages.

[47] It is likewise open to the Defendants to move for a further lowering of the “cap” on the scope of the injunctive relief granted on such material as may be necessary and advisable.

Conclusion

[48] The injunctive relief currently in place shall continue pending any agreement of the parties or order of the Court.

Costs

[49] If the parties cannot agree on the subject of costs, written submissions may be delivered by the Plaintiff within 20 days of the date of release of this decision and by any Defendant within 15 days thereafter.

STEWART J.

Date: April 17, 2014