COURT FILE NO.: CL-13-10261-00CL

DATE: 20140523

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Petro-Diamond Incorporated, BioUrja Trading, LLC and Kolmar Americas Inc., Plaintiffs

• v -

Verdeo Inc., Bioversel Trading Inc., Great Lakes Biodiesel Inc. (formerly Bioversel Sarnia Inc.), Einer Canada Inc. (formerly Bioversel Inc.), Arie Mazur and Sergey Ptushkin, Defendants

BEFORE: Mr. Justice H. J. Wilton-Siegel

COUNSEL: Lou Brzezinski and Catherine MacInnis, for the Moving Parties/Plaintiffs

David E. Lederman and Ryan Cookson, for the Responding Parties/Defendants

HEARD: April 3, 2014

ENDORSEMENT

[1] The plaintiffs seek a Mareva injunction in respect of the assets wherever situate of the defendants, including in particular a biodiesel plant located at 1 St. Clair Drive, Welland, Ontario that is owned by the defendant Great Lakes Biodiesel Inc. (the “Plant”) and any assets in Ontario owned by the defendant Arie Mazur (“Mazur”). In the alternative, the plaintiffs seek either interim relief under the oppression provisions of the Business Corporations Act or leave to issue a certificate of pending litigation as against the Plant.

[2] The plaintiffs claim that the defendant Verdeo breached its contracts with them. Two of the three plaintiffs have already obtained judgments against Verdeo in the United States, while the other plaintiff is still in the process of litigating its claim. Verdeo ceased operations in February 2011 and has no assets with which to satisfy the claims against it. The plaintiffs allege that substantial funds were fraudulently conveyed by Verdeo to the defendants and have commenced this action in Ontario in an attempt to trace and recover those funds.

[3] In the result, the plaintiffs’ motions for a Mareva injunction against the assets of Great Lakes Biodiesel Inc., and for interim relief under s. 248(3) of the Business Corporations Act, are dismissed on the grounds that the plaintiffs have not established a strong prima facie case of a fraudulent conveyance to that corporation that funded the construction of the Plant or a fraudulent conveyance in respect of the issue of shares by that corporation. The plaintiffs’ motion for leave to issue a certificate of pending litigation against the Plant is also dismissed.

Background

The Parties

[4] Verdeo Inc. (“Verdeo”) is a corporation incorporated under the laws of Delaware on September 9, 2007. It carried on business as an international broker and trader in the fuel business until it apparently ceased operations in February 2011. It currently has no assets.

[5] The original directors of Verdeo were Mazur and Matt Jansel, each of whom resigned on July 3, 2008 after all of the outstanding shares of Verdeo were conveyed to Sergey Ptushkin (“Ptushkin”) for $1.00, allegedly in satisfaction of a debt due to Ptushkin. Thereafter, Ptushkin was apparently the sole director of Verdeo. However, the record indicates that Mazur continued to control Verdeo through a management agreement between Verdeo and Bioversel Trading Inc. dated October 20, 2009 (the “Verdeo Management Agreement”).

[6] Bioversel Trading Inc. (“BTI”) is a corporation incorporated under the laws of Ontario on July 31, 2007. BTI apparently terminated active business operations in 2012 and currently is said to have no assets. According to its corporate filings of September 24, 2013, Mazur was the sole director and officer of BTI from June 30, 2009. It is understood that Mazur resigned as a director on April 19, 2012.

[7] Einer Canada Inc. (“Einer”) is a corporation incorporated under the laws of Ontario on May 28, 2007 under the name of Bioversel Canada Inc. Its name was changed to Einer Canada Inc. on June 7, 2013, effective April 2, 2012. As of September 24, 2013, Sergey Akulov (“Akulov”) and Alexis Tsielepsis were the directors and Akulov was the sole officer. Mazur was a director of Einer from the date of its incorporation until his resignation on April 19, 2012.

[8] Great Lakes Biodiesel Inc. (“GLB”) is a corporation incorporated under the laws of Ontario on May 28, 2007. It was originally incorporated under the name Bioversel Sarnia Inc. and adopted its present name on January 9, 2013. According to GLB’s corporate filings as of September 24, 2013, the directors were Barry Kramble, Wilson Parasiuk and Alexander Timofeev. Mazur was a director of GLB from the date of its incorporation until his resignation on April 19, 2012.

[9] Orense Investments Limited (“Orense”) is a Cypriot corporation that is not a party to this action or to any of the U.S. actions (as defined below). Orense currently owns all of the outstanding shares of GLB directly and indirectly through its ownership of Einer, as described further below.

The Proceedings in the United States

[10] Each of the plaintiffs has commenced an action in the United States (collectively, the “U.S. actions”) in respect of contracts between each of them and Verdeo for the sale of biodiesel fuel or biodiesel fuel credits which Verdeo failed to deliver.

[11] The action of BioUrja Trading, LLC (“BioUrja”) was commenced in Texas against Verdeo, BTI, Mazur and Ptushkin, among others. It related to Verdeo’s failure to perform a contract entered into with BioUrja in May 2010 and a subsequent settlement agreement respecting its non-performance dated January 18, 2011. Judgment was issued on December 9, 2013 in favour of BioUrja against Verdeo and BTI in the amount of U.S. $2,956,768.49, as well as against Mazur and Ptushkin in the amounts of $11,000 and $40,000, respectively (the “BioUrja Judgment”). The judgments against BTI, Mazur and Ptushkin were based on findings of fraudulent transfers.

[12] The action of Petro-Diamond Incorporated (“Petro-Diamond”) against Verdeo was commenced in California on June 13, 2011. It related to Verdeo’s failure to perform contracts entered into with Petro-Diamond in September 2009 and modified in December 2010. In 2012, Einer, BTI and Mazur were added as defendants. In 2012, summary judgment was granted against Verdeo in the amount of $2,550,000. The trial against the remaining defendants, based on fraud and fraudulent conveyances, among other claims, proceeded.

[13] Subsequent to the hearing of this motion, the Court was provided with a judgment of the California court dated April 14, 2014 (the “Petro-Diamond Judgment”). In the Petro-Diamond Judgment, the court granted judgment in the amount of $2,550,000 against each of Verdeo, Einer, BTI and Mazur based on findings of fraudulent transfers and “the conclusion that each of said defendants is the alter ego of the other and, in particular, of Verdeo Inc., the original principal debtor.” The court did not specify the particular transfers that it considered to constitute fraudulent transfers, although it did refer to the evidence before it relating to, among other things, a loan to Orense, a $12.5 million transfer from Einer/BTI and a forgiveness of $12.5 million of debt by Verdeo in favour of BTI, all of which appear to relate to the Orense Transaction (as defined below) although that cannot be considered to have been established for present purposes and is not relied upon herein.

[14] The action of Kolmar Americas Inc. (“Kolmar”) was commenced in the State of New York in 2008 against Verdeo. It related to Verdeo’s failure to perform contracts entered into with Kolmar in 2009. By order dated December 19, 2013, BTI, Einer, Mazur and Ptushkin have been added as defendants in respect of claims based on piercing the corporate veil and fraudulent conveyances. This action has yet to proceed to trial.

The Action

[15] The purpose of the action in Ontario is to trace the funds of Verdeo, BTI and Einer that the plaintiffs allege have been fraudulently conveyed away by these defendants since the commencement of the U.S. actions. The plaintiffs assert that the net effect of these alleged fraudulent transactions was that GLB received a considerable amount of monies that it has used to fund the construction of the Plant.

[16] In the statement of claim, which was issued on September 20, 2013, the plaintiffs seek a declaration setting aside three categories of transfers on the grounds that such transfers are voidable as fraudulent conveyances:

1. all intercompany transfers of cash, funds and assets between Verdeo and BTI in 2010 and 2011 described therein;

2. alleged loans of U.S. $1,189,425 from Verdeo to Mazur in 2010; and

3. the “Orense Transaction”, which the plaintiffs allege totalled between U.S. $12.5 million and U.S. $14 million.

In the alternative, the plaintiffs allege that approximately U.S. $20 million or U.S. $22 million was transferred from Verdeo to BTI and was used to construct the Plant giving rise to a constructive trust in their favour.

[17] The statement of claim was amended on February 26, 2014. As amended, the statement of claim also seeks a declaration setting aside as fraudulent conveyances all inter-company transfers from Einer and/or BTI to GLB that were used to develop and/or construct the Plant. The plaintiffs allege that the funds BTI received from Verdeo were used for this purpose or “were transferred to proxies or related corporations and individuals”. In addition, the plaintiffs seek an order setting aside all issuances of shares by GLB since January 1, 2011. They allege that the issuances of shares to Orense and the other shareholders of GLB, with the exception of Einer, constituted a sham and were effected to transfer ownership of GLB, and therefore of the Plant, from Einer to Orense to escape any claim against the assets of Einer. In addition, the plaintiffs seek recognition and enforcement of the BioUrja Judgment against each of Verdeo, BTI, Mazur and Ptushkin.

Procedural History

[18] The plaintiffs commenced this motion for a Mareva injunction on an ex parte basis, seeking an order preventing the defendants from disposing of any of their assets. By order dated September 27, 2013, C. Campbell J. ordered short service on the defendants.

[19] On September 30, 2013, counsel for the defendants BTI, GLB, Einer and Mazur (collectively, the “Represented Defendants”) provided an undertaking on behalf of the Represented Defendants not to transfer or dispose of the Plant. The undertaking was embodied in an order of C. Campbell J. dated September 30, 2013. The Plant is the only asset of the defendants in Ontario of which the plaintiffs are aware and, accordingly, transfers of monies directly or indirectly to or from GLB are the focus of this motion.

[20] By order dated October 10, 2013 (the “Morawetz Order”), Morawetz J. adjourned the plaintiffs’ motion for a Mareva injunction to December 20, 2013 on the condition that the Represented Defendants undertake in the interim not to dispose of or further encumber the Plant or the equipment and machinery located at the Plant. The Morawetz Order set a timetable for the exchange of affidavits in respect of the motion and for cross-examinations. Morawetz J. also ordered that the plaintiffs post security for costs in the amount of $91,000.

[21] The Morawetz Order was extended on consent to January 30, 2014 by order of Mesbur J. dated November 25, 2013. On January 30, 2014, the plaintiffs brought a motion for a further adjournment in order to obtain answers to refusals given in the cross-examinations. The plaintiffs’ motion for an adjournment was denied for the reasons set out in an endorsement of the Court dated March 17, 2014 (the “Endorsement”).

[22] By order of the Court, the Morawetz Order was extended post January 30, 2014 pending a determination of a motion of the Represented Defendants for a lifting of the undertaking in respect of the Plant. By order of the Court dated March 19, 2014, the undertaking was continued subject to an exception to permit a mortgage on the Plant and related equipment to secure a bona fide new financing to GLB for use by GLB in the ordinary course of its business.

[23] In addition, a motion of the Represented Defendants for a stay of this action was scheduled for April 24, 2014. On that date, the parties agreed to an order of this Court staying the action on certain terms pending the recognition and enforcement proceedings contemplated for the BioUrja Judgment and the Petro-Diamond Judgment.

Applicable Law

The Requirements for a Mareva injunction

[24] The five requirements for a Mareva injunction are well established in our case law:

(a) the plaintiff must make full and frank disclosure of all material matters within his or her knowledge;

(b) the plaintiff must give particulars of the claim against the defendant, stating the grounds of the claim and the amount thereof, and the points that could be fairly made against it by the defendant;

(c) the plaintiff must give grounds for believing that the defendant has assets in the jurisdiction;

(d) the plaintiff must give grounds for believing that there is a real risk of the assets being removed out of the jurisdiction, or disposed of within the jurisdiction or otherwise dealt with so that the plaintiff will be unable to satisfy a judgment awarded to him or her; and

(e) the plaintiff must give an undertaking as to damages.

See Chitel v. Rothbart (1982), 1982 1956 (ON CA), 39 O.R. (2d) 513 (C.A.), at pp. 528, 532-33, and Third Chandris Shipping Corp. v. Unimarine S.A., [1979] 1 Q.B. 645, at pp. 668-69 (C.A.).

[25] Of particular significance on this motion, it is also a fundamental requirement that the plaintiff demonstrate a strong prima facie case on the merits: Aetna Financial Services Ltd. v. Feigelman, 1985 55 (SCC), [1985] 1 S.C.R. 2, at p. 27. The test for demonstration of a strong prima facie case is understood to be: “if the court had to decide the matter on the merits on the basis of the material before it, would the plaintiff succeed?”: see Robert J. Sharpe, Injunctions and Specific Performance (loose-leaf November 2013-Rel.) (Toronto: Canada Law Book, 2013), ch. 2, at pp. 13-14.

The Fraudulent Conveyances Act

[26] In this case, the plaintiffs allege fraudulent transfers under the section 2 of the Fraudulent Conveyances Act, R.S.O. 1990, c. F.29 (the “FCA”). The relevant provisions of the FCA are as follows:

2. Every conveyance of real property or personal property and every bond, suit, judgment and execution heretofore or hereafter made with intent to defeat, hinder, delay or defraud creditors or others of their just and lawful actions, suits, debts, accounts, damages, penalties or forfeitures are void as against such persons and their assigns.

3. Section 2 does not apply to an estate or interest in real property or personal property conveyed upon good consideration and in good faith to a person not having at the time of the conveyance to the person notice or knowledge of the intent set forth in that section.

4. Section 2 applies to every conveyance executed with the intent set forth in that section despite the fact that it was executed upon a valuable consideration and with the intention, as between the parties to it, of actually transferring to and for the benefit of the transferee the interest expressed to be thereby transferred, unless it is protected under section 3 by reason of good faith and want of notice or knowledge on the part of the purchaser.

[27] Notwithstanding the language of s. 2 of the FCA, fraudulent transactions subject to the FCA are voidable rather than void. This has two consequences. First, fraudulent transactions are apparently good as between the parties themselves, with the result that title to conveyed property validly passes to the debtor’s transferee. In addition, third party rights that arise prior to an order under the FCA setting aside a conveyance will be valid as against creditors of the debtor: see M.A. Springman, George R. Stewart & J.J. Morrison, Frauds on Creditors: Fraudulent Conveyances and Preferences (loose-leaf 2011-Rel. 7) (Toronto: Carswell, 2009), ch. 6, at pp. 1-6.

[28] As discussed below, the plaintiffs ask the Court to draw inferences as to fraudulent intent based on the existence of “badges of fraud”. They rely on the principles described by Spence J. in Cybernetic Exchange, Inc. v. J.C.N. Equities Ltd. (2003), 15 R.P.R. (4th) 74 (Ont. S.C.J.), at para. 222, quoting C.R.B. Dunlop, Creditor-Debtor Law in Canada, 2nd ed. (Scarborough, Ont.: Carswell, 1994), at pp. 613, 614-615:

[T]he plaintiff may raise [an] inference of fraud sufficient to shift the evidentiary burden to the defendant if the plaintiff can establish that the transaction has characteristics which are typically associated with fraudulent intent. No doubt proof of one or several badges of fraud will not compel a finding for the plaintiff, but it does raise a prima facie case which it would be prudent for the defendant to attempt to rebut.

[29] The present motion raises two issues not normally present in proceedings under s. 2 of the FCA.

[30] First, the remedy under s. 2 of the FCA is an order voiding the transaction found to constitute a fraudulent conveyance. Therefore, to the extent that any conveyance, whether in the form of a loan or otherwise, that would otherwise be a fraudulent conveyance is reversed by the transferor and transferee or repaid by the transferee, there would appear to be no remedy available to a plaintiff. Thus, to the extent that any transfers by way of the alleged loans from Verdeo to BTI or from BTI to GLB have been repaid, there would be no basis for any order under s. 2 of the FCA.

[31] Second, and more importantly for present purposes, the plaintiffs are relying on the FCA as opposed to any of the other statutes that might have been available in the circumstances. In particular, they are not asserting that such transactions constituted a “fraudulent preference” under s. 95 of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (the “BIA”) or a transfer at an undervalue under s. 96 of that statute. Nor do they rely on the Assignments and Preferences Act, R.S.O. 1990, c. A.33, s. 4 (the “APA”). Under s. 2 of the FCA, a transfer to a third party in satisfaction of a valid outstanding obligation or debt does not constitute a “fraudulent conveyance” even if the effect is to prefer the third party creditor over a plaintiff whose outstanding debt was not satisfied. A debtor is free to choose which creditor the debtor wishes to repay subject to operation of these provisions of the BIA or the APA in the event of bankruptcy or insolvency of the debtor.

The Business Corporations Act

[32] The plaintiffs also allege that the alleged transfers give rise to an oppression claim under section 248 of the Business Corporations Act, R.S.O. 1990, c. B.16 (the “OBCA”). The relevant provisions of the OBCA for present purposes are the following:

248. (1) A complainant and, in the case of an offering corporation, the Commission may apply to the court for an order under this section.

(2) Where, upon an application under subsection (1), the court is satisfied that in respect of a corporation or any of its affiliates,

(a) any act or omission of the corporation or any of its affiliates effects or threatens to effect a result;

(b) the business or affairs of the corporation or any of its affiliates are, have been or are threatened to be carried on or conducted in a manner; or

(c) the powers of the directors of the corporation or any of its affiliates are, have been or are threatened to be exercised in a manner,

that is oppressive or unfairly prejudicial to or that unfairly disregards the interests of any security holder, creditor, director or officer of the corporation, the court may make an order to rectify the matters complained of.

[33] In this proceeding, the definition of “affiliates” under the OBCA is also relevant. An “affiliate” is defined as an affiliated body corporate within the meaning of subsection 1(4) of the Act. The relevant provisions of the OBCA are as follows:

(4) For the purposes of this Act, one body corporate shall be deemed to be affiliated with another body corporate if, but only if, one of them is the subsidiary of the other or both are subsidiaries of the same body corporate or each of them is controlled by the same person.

(5) For the purposes of this Act, a body corporate shall be deemed to be controlled by another person or by two or more bodies corporate if, but only if,

(a) voting securities of the first-mentioned body corporate carrying more than 50 per cent of the votes for the election of directors are held, other than by way of security only, by or for the benefit of such other person or by or for the benefit of such other bodies corporate; and

(b) the votes carried by such securities are sufficient, if exercised, to elect a majority of the board of directors of the first-mentioned body corporate.

[34] For the purposes of this motion, the following observations regarding the operation of s. 248 are relevant.

[35] First, paragraphs 248(2)(a) and (b), upon which the plaintiffs rely, address acts or omissions, or the conduct of the business and affairs, of a corporation or any of its affiliates. For this purpose, a “corporation” is a body corporate to which the OBCA applies. Accordingly, BTI, Einer and GLB are corporations for such purpose but not Verdeo.

[36] Second, under the definition of “affiliate” set out above, Einer, BTI and GLB are affiliates, as all are controlled by Orense. However, Verdeo is not an affiliate and was not throughout 2010 and 2011. While Mazur may have exercised control over Verdeo during that period through the Verdeo Management Agreement between BTI and Verdeo, such an arrangement does not constitute “control” under s. 1(5) of the OBCA and, accordingly, Verdeo was not an affiliate of BTI, Einer or GLB.

The Motion for the Mareva Injunction

[37] In order to succeed on its motion for a Mareva injunction, the plaintiffs must establish, among other things, a strong prima facie case of fraudulent conveyances of monies from Verdeo to GLB, either directly or indirectly via transfers to Einer or BTI and subsequent transfers from these corporations to GLB. They must also establish a real risk of dissipation of assets if the injunctive relief is not granted. I will deal with each issue in order.

The Plaintiffs’ Allegations of Fraudulent Conveyances

The Positions of the Parties

[38] The plaintiffs’ allegations of fraudulent conveyances have become more focussed in the course of the proceedings in this action described above. For present purposes, the plaintiffs have narrowed their allegations of fraudulent conveyances under s. 2 of the FCA to two matters: (1) the transfer of approximately U.S. $20 million from BTI or Einer to GLB to fund the construction of the Plant; and (2) the issuance of common shares in GLB to Orense, thereby significantly diluting the interest of Einer in GLB. These allegations are addressed in greater detail below.

[39] The Represented Defendants say that Orense, directly and through its ownership of the outstanding shares of Einer, is the sole owner of GLB, subject to some residual claims of Mazur and others in the event of a sale of GLB or of the Plant. They assert that Orense financed the entire cost of the construction of the Plant, and the acquisition of equipment for the Plant, by a combination of financing provided through Einer and BTI and financing provided directly to GLB. They also say that the only involvement of BTI took the form of loans totaling U.S. $4,024,794.05 that were made between January 1 and December 31, 2011 and were repaid in full by December 20, 2013. They say that the construction of the Plant was otherwise entirely funded by Orense by the subscription for shares in GLB referred to above.

The Principal Evidence of the Plaintiffs

[40] The following summarizes the principal evidence upon which the plaintiffs assert that they have established a prima facie case of transfers of monies directly or indirectly to GLB that constitute fraudulent conveyances under s. 2 of the FCA warranting a Mareva injunction to prevent the disposition or dissipation of the assets of GLB. The plaintiffs assert, in the alternative, that this evidence supports an order for a certificate of pending litigation in respect of the Plant based on their constructive trust claim. In addition, the plaintiffs rely on the existence of circumstances they characterize as “badges of fraud”, which are discussed further below.

[41] The plaintiffs originally filed four affidavits on the motion. Only one of the affidavits sets out facts pertaining to the alleged fraudulent transfers. The affidavit of the President of Petro-Diamond states, among other things, that Verdeo transferred U.S. $22,084,048.33 to BTI in 2010 and attaches a copy of the 2010 general ledger of Verdeo in support of this allegation. The affidavit states that, after receipt of these funds, BTI invested or loaned $12 million to GLB in early 2011. The same affidavit also asserts facts respecting the Orense Transaction described in the statement of claim and addressed in greater detail below. In addition, the affiant referred to Mazur’s evidence in a deposition in the U.S. actions to the effect that Einer or BTI provided the funds for the construction of the Plant, although he also states that such funds were received by Einer or BTI from Orense. Lastly, the affiant says that Verdeo transferred U.S. $2,050,000 to BTI in the first quarter of 2011 prior to ceasing operations and that this payment represented substantially all of Verdeo’s revenues in 2011.

[42] The plaintiffs also say that BTI loaned or otherwise invested approximately U.S. $20 million to or in GLB in 2010 and 2011, based on an excerpt of a deposition of Prakash Patel (“Patel”) which is described below.

[43] The plaintiffs also filed certain reply materials, including an affidavit of Viral Mehta sworn March 28, 2014 which addressed certain matters pertaining to Patel’s testimony on his cross-examination in the U.S. actions. This affidavit also attached copies of the Einer general ledger accounts and the BTI general ledger accounts for 2010, which had been produced by the Represented Defendants in the U.S. actions.

The Principal Evidence of the Represented Defendants

[44] In response to the motion for a Mareva injunction and their own cross-motion seeking a stay of the action, the Represented Defendants filed five affidavits. Of these affidavits, one pertained to Mazur’s sale of a residence in Toronto, two were affidavits of counsel in the California and Texas litigation, respectively, advising of the status of these matters, and a further affidavit was provided by corporate counsel to Einer addressing the New York litigation. The last affidavit of Barry Kramble, sworn November 1, 2013, the chief executive officer of GLB at the time, generally describes GLB’s activities and status. This affidavit is described below. Subsequently, the Represented Defendants filed responding materials that included the affidavit of Patel dated March 26, 2014 described below.

[45] The Represented Defendants rely principally on the testimony of Barry Kramble, the former chief executive officer and current vice-president, business development, of GLB. Mr. Kramble testified that Orense had funded GLB to the extent of approximately $45 million for the construction of the Plant. He also testified with respect to BTI’s $4 million loan to GLB, described above. There is no mention of any of the other defendants or of any transfers of monies from or to any of the other defendants in this affidavit.

The Patel Testimony

[46] As mentioned, the plaintiffs rely heavily on the testimony of Patel given on October 9, 2012 in the U.S. actions. He was the chief financial officer of Einer during 2010, 2011 and 2012. He resigned on March 13, 2013. Mr. Patel testified that approximately U.S. $20 million was invested by BTI in GLB by way of a loan to GLB that was incurred by GLB as BTI paid GLB’s expenses of construction of the Plant and acquisition of equipment for the Plant. Mr. Patel said this investment was funded out of a combination of funds received from the shareholder, understood to be Orense, and BTI’s active business income, which is understood to mean assets of BTI used and/or generated in its business activities, i.e. its working capital. Mr. Patel indicated that he thought approximately U.S. $8 million was funded by Orense and the balance, approximately U.S. $12 million, was therefore loaned by BTI from its working capital assets. The plaintiffs say there is no evidence this loan was set up as a payable to BTI. The plaintiffs also say that there is no evidence that this loan was repaid by GLB. They say this money was instead simply transferred to GLB and has disappeared from the financial statements of both BTI and GLB.

[47] In a subsequent affidavit sworn March 26, 2014 in this proceeding that was produced by the Represented Defendants, Patel attached a copy of the Einer general ledger report for 2011, which shows no activity. Patel stated that all of Einer’s transactions in 2011 would have been reported on the BTI general ledger. The affidavit also attached a copy of the BTI general ledger for 2011 and a copy of the GLB general ledger for the same year. Patel noted that account #2140 of BTI reflected a BTI loan to GLB in 2011 in the amount of $2,818,765.95, which was within $10,000 of the amount shown in the corresponding GLB general ledger account. Based on his review of the records, Patel concluded that his statement in the 2012 examination regarding the amount of the loans from BTI/Einer to GLB was incorrect. It should also be inferred from his statement that Patel considers the records of BTI and GLB to be reliable in this respect.

Preliminary Issue – The Relationship of Orense to the Represented Defendants

[48] An important issue in this proceeding is the relationship between the Represented Defendants and Orense. The following summarizes the evidence before the Court and my conclusions regarding the relationship of Orense to the Represented Defendants.

[49] First, the shareholder register of GLB shows Einer to be the sole shareholder of GLB until April 19, 2012, holding 96,000 common shares. On that date, 9,495,000 common shares were issued to Orense and an additional 9,000 common shares were issued to Einer. In addition, on December 31, 2012, an additional 13,818,620 common shares were issued to Orense. Accordingly, since April 19, 2012, Orense has been the holder, directly and indirectly through Einer, of all of the outstanding common shares of GLB.

[50] In support of these share issuances, the Represented Defendants have submitted three documents executed between Orense and GLB. Two of these documents pertain to the share issuance of 9,495,000 shares. They indicate that the aggregate subscription price for these shares was $27,000,000. The third document relates to the share issuance of 13,818,620 common shares. It indicates that the subscription price was $13,818,620, which was satisfied by the conversion of an outstanding loan from Orense to GLB.

[51] The financial statements that were produced by the Represented Defendants reflect the issuance of all of the shares attributed to Einer and the 9,495,000 shares attributed to Orense. However, the financial statements of GLB cannot be fully reconciled with the share records of that corporation. In the case of the shares issued to Orense, the stated capital in the financial statements appears to be higher than the $27 million contemplated by the two subscription agreements. In addition, the loan-to-equity conversion resulting in the issuance of 13,818,620 additional common shares to Orense is not reflected on the GLB financial statements.

[52] Second, the Einer 2011 income tax return shows the ownership of Einer at December 31, 2011 to be Mazur – 42%; Akulov – 34%; Orense – 11%. There is no evidence of the ownership of the balance of these shares. It is clear, however, that Mazur, Akulov and the other unnamed shareholders subsequently sold their shares in Einer to Orense, as it is apparently undisputed that Orense owns all of the outstanding shares of Einer at the present time. It also appears that Mazur sold his shares to Orense in or about April 2012.

[53] It should be noted that, insofar as BTI made any loans to GLB during 2011, such loans would have been made at a time when Orense was only a minority shareholder of Einer. The Represented Defendants say that Orense funded such loans. There is an unanswered question as to the understanding between the parties regarding the obligation of the other shareholders who do not appear to have put up their respective pro rata shares of such loans. This is addressed further below.

[54] Third, it is not disputed that Einer owns all of the shares of BTI. Among other evidence, this is reflected in BTI’s tax returns. Accordingly, Orense has also indirectly owned and controlled BTI since April 2012.

[55] Fourth, the plaintiffs argue that Orense was “closely related” to all the defendants during 2010 and 2011 when the alleged transfers occurred. They point to a number of factors including: (1) the alleged loan from Verdeo to Orense of $12.5 million in 2010, representing a part of one version of the Orense Transaction; (2) a marketing agreement among Orense, Verdeo and BTI dated December 15, 2009; (3) Orense’s shareholding in Einer, as a co-shareholder with Mazur; and (4) the alleged capital injection of funds in BTI by Orense in satisfaction of the loan in (1) above.

[56] The onus rests with the plaintiffs to establish, on a balance of probabilities, that Orense was related to one or more of the Represented Defendants during 2010 and 2011 in a manner that is significant for present purposes. They have not satisfied this onus. Each of the relationships described above is a commercial or a financial relationship. There is nothing in the evidence regarding these relationships that could ground a finding that Orense was not at arm’s length from the Represented Defendants. In particular, there is nothing in the record to suggest either common ownership of Verdeo by Orense and Mazur, control of Orense by Mazur, or use of Orense as a “clearing house” by the Represented Defendants, as the plaintiffs allege. Further, despite the finding below regarding the Orense Transaction – which address a fraudulent conveyance involving Verdeo, BTI and Mazur – there is no evidence before the Court that Orense and Mazur acted in concert to defeat the creditors of Verdeo.

[57] I therefore conclude that, for purposes of this motion, I must proceed on the basis that Orense was not related to any of the Represented Defendants during 2010 and 2011 other than as a party with whom the Represented Defendants had arm’s length commercial relationships.

Preliminary Observations

[58] The principal issue for the Court on this motion is, as stated above, whether there is a strong prima facie case of fraudulent conveyances for the purposes of s. 2 of the FCA. The following four considerations are of considerable significance in the determinations reached below.

[59] First, the standard on this motion is a strong prima facie case. In this case, the onus rests with the plaintiffs to identify actual transfers of monies that constitute fraudulent conveyances. The Court cannot find a strong prima facie case if the evidence establishes that it is a least as probable that any given transaction was a valid transaction rather than a fraudulent transfer. As well, the Court cannot find transaction documentation to be fabricated in the absence of some supporting evidence.

[60] Second, as a related matter, in the absence of documentation or evidence of credible third parties establishing that particular transfers and other transactions have been fabricated, the plaintiffs ask the Court to draw the inference of fabrication based on a finding that Mazur is not a credible party combined with his control of each of Verdeo, Einer and BTI during the period 2009 to April 2012. They argue that this evidence is sufficient to ground a conclusion that the evidence relied upon by the Represented Defendants is fabricated or otherwise misleading.

[61] However, the Court cannot make findings of credibility on this motion based solely on the written record before it. I do not consider this to be a matter of law but rather a conclusion that is specific to the facts of this case. While the plaintiffs may be correct in their assertions, I do not think that the Court can make such a finding given that there is documentary evidence as well as testimony of Kramble and of Patel that is supportive of at least some aspects of Mazur’s testimony. Any such determination of credibility would require a trial in the circumstances of this case. Accordingly, the Court cannot find that the transfers between Verdeo and Einer or BTI constituted fraudulent transfers solely because Mazur controlled each corporation during the relevant period.

[62] Third, there is a further consideration in respect of the plaintiffs’ assertion that the transfers from Einer or BTI to GLB, in particular, are tainted by Mazur’s involvement as a director of GLB. Apart from the difficulty of a finding based on Mazur’s credibility as discussed above, there is no evidence that Mazur controlled GLB. There is also evidence that by April 2012 at the latest, and possibly earlier on a formal or informal basis, Orense controlled GLB and Einer/BTI. As discussed above, the Court must proceed on the basis that Orense is an independent third party, i.e., that it is not related to, or controlled by, Mazur.

Analysis and Conclusions Regarding Allegations of Fraudulent Conveyances

[63] As mentioned, the plaintiffs focus their allegations of fraudulent conveyances under s. 2 of the FCA on two matters: (1) the transfer of approximately U.S. $20 million from BTI or Einer to GLB to fund the construction of the Plant and (2) the issuance of common shares in GLB to Orense, thereby significantly diluting the interest of Einer in GLB. I will address each allegation in turn.

[64] The principal issue for the Court is the extent to which the plaintiffs have established a claim that BTI transferred approximately U.S. $20 million to GLB under circumstances that constitute a “conveyance” described under section 2 of the FCA. To succeed on this claim, the plaintiffs must demonstrate fraudulent transfers at two separate levels: (1) between Verdeo and either Einer or BTI and (2) between Einer or BTI and GLB. I will address the evidence for the alleged fraudulent transfers in respect of each of these levels in turn.

Verdeo Transfers to Einer

[65] For completeness, the plaintiffs do not allege that Verdeo made any transfers directly to Einer. Moreover, the evidence of Patel is that Einer did not have its own bank account during 2010 and 2011. Accordingly, in this endorsement, the issue of fraudulent conveyances from Verdeo is restricted to transactions involving BTI, including the Orense Transaction.

Verdeo Transfers to BTI

The Evidence

[66] The plaintiffs say that Verdeo loaned considerable amounts to BTI that constitute a fraudulent conveyance for purposes of the FCA.

[67] There is evidence in BTI’s accounts of considerable transfers to and from Verdeo. Tab 8 of the Plaintiffs’ Compendium III reflects loans from Verdeo totaling approximately $25.955 million in the course of 2010 recorded in account #2148 on the BT1 general ledger. It also shows repayment from BTI totaling $30.706 million during the same period. During 2010, the outstanding loan amount in this account reached approximately $21.667 million before being reduced. At December 31, 2010, the loan amount in this account was actually in a debit balance of approximately $3 million after a number of year-end adjustments. The BTI general ledger for account #2148 in 2011, which is set out at Tab 13 of the Plaintiffs’ Compendium III, reflects total loans of approximately $5.186 million and payments by BTI totaling $2.129 million. At the end of 2011, the outstanding loan due to Verdeo in this account was only $27,778.98.

[68] The loan balances shown on the BTI general ledger cannot be reconciled exactly with the limited Verdeo accounting records provided to the Court. There are, however, Verdeo records that reflect loan balances to BTI that roughly approximate the 2010 and 2011 year-end balances in account #2148 in the BTI general ledger described above.

[69] At Tab 25 of the Plaintiffs’ Compendium II, there is a different trial balance of Verdeo for the same date (December 31, 2010) that reflects a change in the relevant account from a liability to Einer to a liability to BTI in the amount of $2,874,926.29. This approximates the receivable shown on BTI’s general ledger of approximately $3 million at that date. I note the difference may be explained by the exchange rate between the U.S. and Canadian dollars. Similarly, the trial balance for Verdeo at December 31, 2011 at the same Tab 25 shows a receivable from BTI of $23,055.24, which may correspond to the liability shown on BTI’s general ledger of $27,778.98 adjusted to reflect the conversion of U.S. dollars into Canadian dollars.

[70] In addition, at Tab 20 of the Plaintiffs’ Compendium I, there are two sheets that appear to show loans to BTI although there is no specific reference to Verdeo on these sheets. The first sheet reflects total loans of $19,590,950 during 2010 while the second reflects total loans of $1,950,000 during 2011.

[71] At Tab 25 of the Plaintiffs’ Compendium II, there is a report titled “Transactions by Account Report” for 2010 that includes an intercompany account of Verdeo with BTI (account # 2135). That account includes most of the loans reflected on the sheet described above for 2010 but cannot be fully reconciled with that sheet. The balance in that account at December 31, 2010 is, however, $2,874,926.29, being the amount shown on the second trial balance of Verdeo at that date described above.

[72] If it is assumed that the differences between amounts on these sheets and on the BTI general ledger under account # 2148 represent conversion of U.S. funds into Canadian dollars, a large number of the transactions on these sheets can also be correlated with transactions reflected in the BTI account as either a “loan from Verdeo” or a “transfer from Verdeo”. In the case of the 2010 sheets, while there are a number of smaller transactions not reflected in the BTI account, all but approximately $340,000 of the total of $19,590,950 can be so correlated. In the case of the 2011 sheet, all of the transactions correlate although there is a large discrepancy between the amount shown for the first transaction on the BTI general ledger and the corresponding amount shown on the Verdeo sheet.

[73] I would note, however, that at Tab 20 of the Plaintiffs’ Compendium I there is a statement also purporting to be a trial balance of Verdeo at December 31, 2010. It includes a loan due from Einer totaling approximately $22 million but does not show any loan payable or receivable with respect to BTI. There are, therefore, two trial balances for Verdeo at December 31, 2010 in evidence. In addition, there is also an unaudited balance sheet of Verdeo as at December 31, 2011 at Tab 20 of the Plaintiffs’ Compendium II which shows a year-end liability to BTI in the amount of $3,499,564.26. Neither of these discrepancies in the materials at Tab 20 of the Plaintiffs’ Compendium II has been explained.

Conclusions

[74] The plaintiffs argue that all of the separate loans and transactions recorded under BTI’s account # 2148 should be treated as a transfer from Verdeo to BTI that constitutes a fraudulent conveyance subject to the Act. However, with the exception of the entry or entries associated with the Orense Transaction which is discussed below, there is evidence indicating that all of these loans and other transfers have been repaid, apart from $27,778.98 as of December 31, 2011. There is no evidence of any activity in respect of this loan account after that date. There would therefore be essentially no amount to be repaid by BTI to Verdeo even if the alleged transfers were invalidated under the Act.

[75] I have considered whether there is any evidence that would support a conclusion that additional loans or transfers were made outside the Verdeo and BTI intercompany accounts described above that would also constitute transfers under the FCA. As described above, however, the evidence, while not definitive, does not reflect any significant transfers that were not captured by these accounts.

[76] For present purposes, given that the onus falls on the plaintiffs, I conclude that the plaintiffs have not established a strong prima facie case of transfers of monies from Verdeo to BTI that have not been substantially repaid, with the exception of the amount referable to the Orense Transaction, which is addressed below.

The Orense Transaction

[77] The plaintiffs assert, in particular, that a $12.5 million transaction involving Orense reflected in the books of Verdeo and BTI (herein, the “Orense Transaction”) constitutes a transfer on its own to which the FCA applies. The plaintiffs seek an order declaring the Orense Transaction to be void as a fraudulent transfer under the FCA.

[78] The statement of claim provides three possible alternative forms of the alleged Orense Transaction as follows:

1. a loan of U.S. $12.5 to $14 million from Verdeo to Orense in 2010. Although not expressed in the amended statement of claim, it is understood that the plaintiffs allege that Orense used this money to make an equity injection in Einer and/or BTI which was used to reduce BTI’s loan obligation to Verdeo under the intercompany loan account #2148 described below;

2. an assignment from BTI to Verdeo of a note receivable in the amount of U.S. $12.5 to Cdn. $14 million from Orense in partial satisfaction of the Verdeo loan to BTI under the intercompany loan account #2148; and

3. the assumption by BTI of an obligation of $14 million of Verdeo owed to Orense in respect of a customs seizure in Italy of illegally imported biodiesel fuel, with a corresponding reduction of BTI’s obligation to repay the outstanding loan made by Verdeo to BTI under the intercompany loan account #2148. It is alleged that this obligation arose because Orense had a corresponding reimbursement obligation to a customer to whom it had sold the biodiesel fuel.

[79] The specific transfer alleged to constitute a fraudulent conveyance in each case is different. In the first version of the Orense Transaction, the plaintiffs challenge the validity of the implied payment from BTI to Verdeo of U.S. $12.5 to $14 million. In the second version, the plaintiffs say that the note receivable in the amount of U.S. $12.5 to Cdn. $14 million from Orense was not legitimate. Similarly, in the third version, the plaintiffs deny the existence of any obligation of Verdeo to Orense in the amount of $14 million that was assumed by BTI.

[80] With one qualification, each of these versions or explanations of the Orense Transaction have in common an indirect funding of BTI in the amount of U.S. $12.5 million or Cdn. $14 million, which might have been treated as the equivalent in Canadian dollars of U.S. $12.5 million. In each case, the net effect would appear to be a reduction of BTI’s obligation to Verdeo on a basis which left U.S. $12.5 million or Cdn. $14 million in BTI. The qualification pertains to the first version of the Orense Transaction. It is unclear whether the BTI journal entry is intended to reflect an actual payment from BTI to Verdeo. To the extent it does, the BTI loan would have been reduced accordingly and the argument of a fraudulent transfer could not be sustained. To the extent it does not, the result would be the same under all three versions of the Orense transaction.

Evidence

[81] The Orense Transaction is reflected, in part, in the following entries in the records of Verdeo and BTI.

[82] The Verdeo financial statements for December 31, 2010 at Tab 20 of the Plaintiffs’ Compendium I include a page listing certain journal entries, including a debit to “accounts-receivable – Orense” and a credit to “Loan payable – Bioversel Inc.”. This sheet appears to be a listing of certain year-end journal entries, as two of the other items on the list are also shown as December 31 journal entries in account #2148 of BTI. This year-end journal entry appears to correspond to the entries in the Verdeo general ledger accounts #2145 (Loan-Orense) and #2135 (Interco-Bioversel Trading) for 2010 at Tab 25 of the Plaintiffs’ Compendium II. The financial statements for Verdeo at December 31, 2011 therefore show the amount of $12,500,000 as a debit, i.e. as a receivable of Verdeo. There is, however, no explanation in the record for this re-characterization of the Orense Transaction. This matter is discussed further below.

[83] In addition, account #2148 in the BTI general ledger includes a journal entry on December 31, 2010 in the form of a debit or receipt of $12.5 million described in the following terms: “to record the cash received from Orense via Verdeo as Equity injection.” This journal entry also appears to re-characterize the transaction, although, as discussed below, the purpose of this entry is not clear.

[84] The Represented Defendants object to the introduction of the page of the BTI general ledger for 2010 showing this entry on December 31, 2010 in account #2148. The objection is based on the understanding that the plaintiffs would not be introducing any further evidence after April 24, 2014. I note, however, that this page is included in the entire BTI general ledger for 2010 which had previously been produced by the Represented Defendants pursuant to a court order in the Kolmar action in California. Fairness dictates that it be admissible in this proceeding. However, insofar as Viral Mehta states in his affidavit sworn March 28, 2014 that this document pertains to Einer, he is clearly incorrect as the general ledger pertains to BTI.

Analysis and Conclusions Regarding the Orense Transaction

[85] The issue for the Court on this motion is whether the plaintiffs have established a strong prima facie case that the Orense Transaction was fabricated and that, accordingly, there was no transaction giving rise to a legitimate basis for reducing the loan payable by BTI to Verdeo by U.S. $12.5 million or Cdn. $14 million. In this regard, I note the following three considerations.

[86] First, the plaintiffs cannot establish which of these three versions of the Orense Transaction, if any, occurred. In part, this is a result of the fact that Orense is not a party to this action and has not participated in any manner in this motion.

[87] Second, however, Verdeo and BTI have adopted the three alternative explanations at various times since 2010, without any explanation. The fact that the plaintiffs cannot propose a definitive form of the Orense Transaction should therefore not be determinative on this issue given the confusion, perhaps the intentional confusion, engendered by the actions of the Represented Defendants.

[88] Third, the failure of the Represented Defendants to provide a clearer description of the Orense Transaction is meaningful in the face of the conflicting versions that they have themselves provided. I think the Court can reasonably infer: (1) that the purpose of these alternative versions was to seek to characterize the Orense Transaction in a manner that was in the best interests of one or both of the principal participants rather than to reflect the reality of the transaction; and (2) in the absence of an explanation for these versions that is directed to any other party, the purpose of these alternative versions was to mislead the plaintiffs, as creditors of Verdeo, among others.

[89] In the absence of a definitive explanation for the Orense Transaction, the plaintiffs argue that associated “badges of fraud” support the conclusion that the Orense Transaction constituted a fraudulent conveyance of U.S. $12.5 million or Cdn. $14 million from Verdeo to BTI. I agree. I am of the opinion that the plaintiffs have established a strong prima facie case that the Orense Transaction resulted in an unsupported reduction in BTI’s loan obligation to Verdeo of U.S. $12.5 million or Cdn. $14 million based on the following considerations.

[90] First, there is no evidence of any payment of monies from BTI to Verdeo. In these circumstances, under any of the three versions of the Orense Transaction, the BTI loan from Verdeo was reduced without evidence of any actual payment to Verdeo or to another party on behalf of Verdeo.

[91] Second, throughout the relevant period and, in particular, at the time of the Orense Transaction, Mazur controlled each of Verdeo, BTI and Einer. He was in a position to provide an explanation of the Orense Transaction and has had more than adequate notice, in this proceeding and in the U.S. actions, of the significance which the plaintiffs attach to this transaction. He has chosen not to provide a clear explanation. The absence of a legitimate business or tax reason for the transaction is a significant “badge of fraud” in the present case.

[92] Third, in this regard, the Verdeo general ledger accounts evidence a year-end re-characterization of the Orense Transaction without any explanation. For the reasons set out above, I conclude that it is probable that this entry was intended to mislead creditors of Verdeo.

[93] Fourth, as a related matter, Mazur had notice of the mounting obligations of Verdeo, not only to the plaintiffs but also to other parties. The disposition of the monies represented by the Orense Transaction was made in the face of these circumstances. This knowledge of Mazur should be imputed to both Verdeo and BTI by virtue of his relationships with these corporations.

[94] Fifth, in addition, there is an apparent motive for the Orense Transaction which, while speculative, cannot be discounted as it relates to the larger issue of the relationship among Mazur, his associates, and Orense in respect of GLB. There is no adequate explanation for Ptushkin’s ownership of Verdeo. Moreover, Verdeo was controlled by Mazur through the Verdeo Management Agreement. Mazur, Alculor and Orense, among others, were shareholders of Einer which owned GLB, which was, in turn, the entity in which the Plant was to be constructed and operated. Mazur required monies to fund his pro rata share of the investment which, ultimately, he was unable to obtain. It is possible that the Orense Transaction was a means of funding a portion of that investment to satisfy the obligation of Mazur and Akulov to Orense.

[95] Based on the foregoing, I therefore conclude that the plaintiffs have established a strong prima facie case of a transfer of U.S. $12.5 million or Cdn. $14 million from Verdeo to BTI that constituted a fraudulent conveyance under s. 2 of the FCA. The critical issue on this motion is, therefore, whether the plaintiffs can also establish the existence of a fraudulent conveyance from BTI to GLB. For clarity, however, I also have concluded above that the evidence does not establish that Orense and Mazur acted in concert to defeat the creditors of Verdeo. In particular, the evidence before the Court is not sufficient to establish that Orense’ participation in the Orense Transaction, the precise nature of which remains unclear, was directed towrd hindering or defeating the creditors of Verdeo in concert with Mazur.

BTI Transfers to GLB

[96] I propose to address the plaintiffs’ allegations of fraudulent transfers from BTI to GLB first by reference to the specific evidence of transactions between these corporations and then by considering the more general claims of the plaintiffs.

The Loans from BTI to GLB Acknowledged by the Represented Defendants

[97] The Represented Defendants acknowledge that BTI made loans to GLB totaling approximately $4 million. These loans are evidenced in the records of these corporations. Tab 7 of the Plaintiffs’ Compendium III reflects loans totaling approximately $1.278 million at the end of 2010 recorded in account # 2140 on the BTI general ledger. This loan rises to approximately $3.550 million at the end of 2011, as reflected in Tab 12 of the Plaintiffs’ Compendium III. Tab 17 of the Defendants’ Compendium sets out the corresponding account, also being account #2140, in the GLB general ledger. These records reflect full repayment of these loans by December 20, 2013.

[98] In this regard, I note that the outstanding amounts on December 31, 2010 are exactly the same in the BTI general ledger account and in the GLB general ledger account for this loan. After adjusting for the two journal entries on January 1, 2012 in account #2140 in the GLB general ledger, the outstanding amounts are also exactly the same on December 31, 2011. In addition, as Patel noted in his affidavit sworn March 26, 2014, the aggregate amount of the BTI loan to GLB in the BTI general ledger account for 2011, being $2,818,765.95, is within $10,000 of the corresponding amount in the GLB general ledger account.

Conclusions

[99] The plaintiffs argue that all of the separate loans recorded under BTI’s account #2140 should be treated as a fraudulent conveyance subject to the FCA. However, as set out above, the evidence establishes that, while BTI made the loans described above to GLB, the full amount of such loans was repaid. There would therefore be no amount to be repaid by GLB to BTI even if the alleged transfers were invalidated under the FCA.

[100] To avoid this difficulty with their argument, the plaintiffs argue that the Court should disregard the repayments recorded on the BTI general ledger. I see no basis for doing so. There is no evidence that the general ledgers of BTI and GLB do not represent actual loans and actual repayments between the parties. The plaintiffs rely on the evidence of the BTI general ledger with respect to the payment of funds to GLB, thereby implicitly asserting their validity. They cannot deny the validity of the same records with respect to the repayment of the loan and assert that such entries are a fabrication without some supporting evidence.

[101] Accordingly, I conclude that the evidence does not disclose a strong prima facie case of a fraudulent conveyance in respect of the loans made by BTI to GLB that are reflected in account #2140 of each of these corporations.

The Plaintiffs’ Further Claims of Loans From BTI to GLB

[102] In the absence of evidence of specific transfers that they have identified in the accounting records of BTI and GLB, the plaintiffs urge the Court to conclude that BTI transferred approximately $20 million to GLB in 2010 and 2011, based on certain evidence discussed below, and that such transfers constituted a fraudulent conveyance for the purposes of the FCA. In this regard, it is not sufficient for this purpose to find that BTI received either U.S. $12.5 million or Cdn. $14 million in the Orense Transaction from BTI. It is also necessary to establish the existence of one or more transfers of these monies from BTI to GLB. The critical question on this motion is, therefore, whether the evidence supports a finding, on a balance of probabilities, of any transfer or transfers between BTI and GLB in addition to the loans acknowledged by the Represented Defendants addressed above.

The Orense Investment in Great Lakes Biodiesel Inc.

[103] Before addressing the plaintiffs’ submissions in this regard, it is necessary to assess the evidence regarding the alleged investment of Orense in GLB.

[104] The relevant evidence consists principally of the following four matters. First, Kramble testified on his cross-examination that Orense invested $45 million in GLB. This was not contradicted. Second, there is documentary evidence, described above, pertaining to the share issuances. This suggests that Orense subscribed for shares and converted an outstanding loan into additional shares of GLB. The evidence regarding the conversion of the outstanding loan to equity does not, however, indicate whether the loan was made directly to GLB by Orense or was made indirectly through the agency of BTI. Third, as discussed above, the GLB financial statements are partially supportive of the share issuances, despite the reconciliation problem described above. Fourth, Patel testified that BTI made loans to GLB that were partly funded by BTI’s trading assets and partly by the shareholders of Einer. In his affidavit of March 26, 2014, he stated that he believed the total of BTI’s loans to GLB out of its own assets was limited to the $4 million discussed above. In his earlier testimony in the U.S. actions, Patel testified that the BTI loans to GLB totaled approximately $20 million and that the shareholders of Einer funded the loans not funded out of BTI’s own assets. By implication, then, Patel considered that the Einer shareholders provided approximately $16 million for this purpose.

[105] This raises the related matter of the relative contributions of the Einer shareholders to the BTI loan to GLB that has been mentioned above. While Mazur and Akulov may have made some loans that are not in evidence, Orense was the only one of the Einer shareholders that appears to have had the financial capacity to provide funds in the amount contemplated by Patel. By his own admission, Mazur did not have the financial capacity to invest and therefore sold his shares in Einer to Orense. The parties have not drawn the Court’s attention to any equity injections or other payments from Mazur or Akulov to Einer or BTI. The only payments identified by the plaintiffs are those alleged to have come from Orense. In any event, even if there were similar payments by Mazur and/or Akulov for investment through BTI or GLB, there is no reconciliation of the total of all contributions to GLB via BTI alleged by the plaintiffs nor of the respective contributions of the Einer shareholders in GLB.

[106] The plaintiffs make two submissions regarding the conclusions that the Court should draw from this evidence.

[107] First, the plaintiffs submit that there is no evidence of any consideration flowing from Orense to GLB, whether through Einer/BTI as its agent or directly, and that, accordingly, all the issuances of shares to Orense should be invalidated as fraudulent transfers for purposes of s. 2 of the FCA.

[108] I do not accept this argument. The onus is on the plaintiffs to prove, on a balance of probabilities, that Orense did not make the investments in the Plant alleged by the Represented Defendants. I do not think I can reach this conclusion on the facts in evidence before the Court. Rather, I think it is at least as likely that Orense did make these investments for the following reasons.

[109] There is no question that the Plant cost is in excess of $30 million. The evidence of Kramble is clear and not contradicted. The other evidence described above is also at least partially supportive of the position of the Represented Defendants. In particular, Patel’s testimony implies that shareholders provided most of the funds that were loaned by BTI to GLB. There is no evidence of any potential investors other than Orense, Mazur and Akulov. While Mazur and Akulov may have made some loans prior to selling their shares, the plaintiffs have not identified any such loans in the record. Orense was, as noted, the only one of the Einer shareholders that appears to have had the financial capacity to provide funds in the amount required to construct the Plant. In addition, the GLB financial statements partially reflect the alleged Orense investment and do not assist the plaintiffs in any manner.

[110] I accept that there remain at least two issues of some significance regarding the Orense investment. First, the share subscription agreements are silent regarding any involvement of BTI. Given that at least part of the Orense investment in GLB appears to have been made through BTI at least initially, there is an issue as to whether the parties have re-characterized this investment for reasons that are relevant to this action. Second, as the plaintiffs point out, there is no actual evidence of payment and a material discrepancy in the GLB financial statements that has not been explained. These issues may point to material falsification of the records pertaining to the Orense investment in GLB. Each of these possibilities is, however, purely speculative. The plaintiffs have not produced any evidence that supports either scenario.

[111] Based on the evidence that is before the Court, the Court cannot conclude that the evidence demonstrates that Orense did not make its alleged investment in GLB and that the GLB records have been falsified. In the absence of any other explanation of the funding of the construction of the Plant that is supported by the evidence and given the fact that the evidence is at least partially supportive of the alleged Orense investment for such purpose, I conclude that it is at least as probable that Orense made the payments and loans contemplated by the share subscription agreements described above either directly to GLB or indirectly through BTI.

[112] The plaintiffs’ second submission is that Orense was simply a “clearing house” for Verdeo and Mazur. I have set out above the reasons for concluding that the Court must proceed on the basis that Orense is an independent party from Mazur and Verdeo. There is also no basis in the evidence reviewed in reaching that conclusion that would support the plaintiffs’ alternative allegation that Orense was a clearing house for Verdeo and Mazur. There is also no evidence that Mazur controlled Orense. Accordingly, this argument is also rejected.

The Plaintiffs’ Submissions

[113] In this section, I propose to address three issues raised by the plaintiffs and/or prompted by the plaintiffs’ submissions.

Submission Based on Badges of Fraud

[114] First, the plaintiffs urge the Court to find, based on Patel’s evidence, that $20 million, $12 million or $8 million was provided by BTI out of its own assets and that such transfers constituted a fraudulent conveyance based on a number of “badges of fraud”. They refer to the following eight circumstances in particular.

[115] First, the plaintiffs say the Court should rely on the findings of fraud against Mazur, BTI and Ptushkin in the BioUrja Judgment. I decline to do so in the absence of any indication in the record of the evidence before the Texas court and of the specific basis upon which the jury in that action found that there was a “fraudulent transfer” within the meaning of that term in the applicable statute.

[116] Second, the plaintiffs say the transfers from BTI to GLB were transfers by BTI to a related person. The basis of this conclusion is an allegation that Mazur controlled Verdeo, BTI and GLB during 2010 and 2011. Mazur did control BTI and Verdeo. However, it is not clear that he also controlled GLB, in which he was only one of several directors.

[117] Third, the plaintiffs say that the BTI investment in GLB was for no consideration. Insofar as this refers to the BTI loans to GLB that are recorded in the accounts of GLB and BTI, it has been addressed above. The plaintiffs also allege that a $5 million investment of BTI in the Plant has been removed from the assets of BTI without explanation. This is addressed further below. To the extent the plaintiffs are correct, it would constitute a “badge of fraud”. However, for the reasons set out below, I conclude that the plaintiffs have not established this allegation on a balance of probabilities.

[118] Fourth, the plaintiffs say that there was no valid transfer because the transferor remains in possession of the property for its own use after the transfer. As applied to Verdeo, this may well be accurate, as Mazur continued to control Verdeo through the Verdeo Management Agreement notwithstanding the sale of the shares of Verdeo to Ptushkin for $1.00. However, this consideration does not apply to any transfers from BTI to GLB.

[119] Fifth, the plaintiffs say the transfers from BTI to GLB occurred in 2010 and 2011 after the U.S. actions had been commenced and that the GLB issuance of shares to Orense occurred after Mazur was named in that litigation. In this respect, there is little doubt that significant transfers from Verdeo to BTI occurred after Verdeo incurred significant liabilities to the plaintiffs as well as other third parties. However, Einer, BTI and Mazur were not added to the Petro-Diamond action until May 8, 2012, Einer and BTI were not added to the BioUrja action until January 30, 2013, and Einer, BTI, Mazur and Ptushkin were not added to the Kolmar action until December 13, 2013. The alleged fraudulent transfers from Einer/BTI to GLB that are the subject of this action occurred in 2010 and 2011 before Einer and BTI were, however, added to these actions.

[120] Sixth, neither Verdeo nor BTI has any remaining assets. Both companies have ceased operations. However, it is unclear whether the absence of assets results from the payment of outstanding liabilities on a winding down of their operations or from the disposition of assets to related parties. As mentioned, the accounting information produced by the plaintiffs is not complete and does not adequately address these questions.

[121] Seventh, the plaintiffs allege that none of the payments made by BTI to GLB appear to have had any sound business or tax reasons for them. I do not accept this submission for the following reasons. The evidence strongly suggests that Einer/BTI was the vehicle by which the shareholders in Einer intended to invest in GLB. In addition, Patel’s uncontradicted testimony was that monies from the shareholder or shareholders flowed through BTI as an agent for these shareholders.

[122] Eighth, the plaintiffs say the Represented Defendants have provided inaccurate documents. This is correct in respect of Verdeo. However, I do not think that the plaintiffs have established any inaccurate documents in respect of BTI or GLB. Rather, the documentation provided to the Court is incomplete. What is less clear is whether the Represented Defendants have access to more complete documentation, particularly in respect of Orense.

[123] In this regard, however, as mentioned, Orense is not a party to this action. The plaintiffs suggest that Orense must be taken to have notice of this claim, with which I agree given that Orense is the sole shareholder of GLB. However, the plaintiffs also urge the Court to draw an adverse inference from the failure of Orense to provide evidence to establish the bona fide nature of the GLB share issuances to itself. I do not think this is appropriate. As a non-party, Orense has no obligation to participate in this proceeding, much less to assume the onus of disproving the plaintiffs’ allegations. The onus of establishing a strong prima facie case of a fraudulent conveyance from BTI to GLB rests with the plaintiffs.

[124] The foregoing demonstrates that there are several circumstances present that could be regarded as “badges of fraud” in respect of the alleged transfers of funds from BTI to GLB. However, there are three significant difficulties with the plaintiffs’ submission that the Court should find a fraudulent transfer in the amount of $12 million or $8 million occurred between BTI and GLB based on the existence of these “badges of fraud”.

[125] First, I do not think that the “badges of fraud” can be used in the manner implied by the plaintiffs’ submission. The plaintiffs cannot identify any particular transaction between BTI and GLB that constitutes a fraudulent conveyance for the purposes of s. 2 of the FCA. Instead, they argue that the Court should infer that one or more of such conveyances must have occurred by virtue of the presence of the “badges of fraud” discussed above. I do not think this is appropriate.

[126] Demonstration of the existence of “badges of fraud” cannot ground a finding that a transfer has occurred in the absence of any evidence of any such transfer. The existence of “badges of fraud” can only ground an inference that an identified transfer should be characterized as a fraudulent conveyance for the purposes of s. 2 of the FCA.

[127] Second, in the present circumstances, the particular “badges of fraud” are not persuasive. The issue of the $5 million asset allegedly on the books of BTI is addressed below and does not factor into the present consideration. A number of the alleged “badges of fraud” are purely speculative without any evidentiary support. The only other “badge of fraud” that has been established is therefore the timing of the alleged transfers relative to the assertion of claims in the U.S. actions against Einer, BTI and Mazur. It is the case that the alleged fraudulent conveyances from Einer/BTI to GLB occurred after the Kolmar action had been commenced. However, the little information available regarding the timing of the alleged transfers suggests that they occurred prior to the addition of BTI and Einer to the U.S. actions. In any event, the presence of a single “badge of fraud” is not enough to find that it is more likely than not that BTI fabricated the records of its loan to GLB.

[128] Third, any such inference must be made against the background of the Court’s determination regarding the Orense investment in GLB set out above. Even if the Court were able to rely on the “badges of fraud” upon which the plaintiffs rely, I would find, on a balance of probabilities, that the plaintiffs had failed to demonstrate the existence of any transfer that could constitute a fraudulent conveyance from BTI to GLB for the following reason. There is sufficient evidence supporting the alternative explanation for the funding of the Plant that, in my opinion, a court cannot find that there are unidentified transfers from BTI to GLB out of BTI’s assets based solely on the “badges of fraud.”

[129] Accordingly, I conclude there is no basis in the alleged “badges of fraud” alone for a finding that any transfer of funds occurred between BTI and GLB beyond the loans aggregating $4 million described above.

Submission Based on Patel’s Original Testimony

[130] The plaintiffs also argue that, based on Patel’s testimony, the Court should find that one or more fraudulent transfers occurred from BTI to GLB out of BTI’s assets based on Patel’s testimony. In making this argument, they submit that the Court should disregard his testimony in his affidavit of March 26, 2014 or, alternatively, that the testimony in that affidavit does not, in fact, change his original testimony.

[131] As mentioned, in the U.S. actions, Patel testified that approximately $20 million was invested through BTI in 2010 and 2011. In his original testimony, Patel suggested approximately $12 million came from BTI’s own funds derived from its trading activities, with the balance being funded by the shareholders. In his affidavit of March 26, 2014, Patel retracted this evidence and stated that, based on the records before him, only $4 million was loaned by BTI out of its own assets.

[132] The plaintiffs urge the Court to find that Patel’s original testimony was correct and to reject the evidence in his affidavit of March 26, 2014. They say the evidence demonstrates that, as of December 31, 2011, BTI had invested approximately $8 million in GLB. This amount includes the outstanding loan described above, which was $3.550 million at that date and an investment in the Plant in the amount of $5.136 million, which is shown in account # 1090 of BTI as of December 31, 2010 and reflected in BTI’s 2010 and 2011 tax returns.

[133] I confess to some difficulty in understanding the plaintiffs’ submission in this regard. I do not accept, however, that Patel’s evidence in his affidavit of March 26, 2014 should be rejected. There is no evidence before the Court that casts doubt on his credibility. In addition, and in any event, while the plaintiffs urge the Court to find that BTI loaned GLB approximately $12 million out of its own funds based on Patel’s testimony, they are, in fact, only able to identify a total investment of $8 million, of which $3.550 million was repaid according to the records of BTI and GLB.

[134] This submission does, however, raise the issue of whether the asset of BTI set out in its 2010 and 2011 tax returns reflects a fraudulent transfer.

[135] The BTI accounting records show a BTI investment of approximately $5 million in the Plant at the end of 2010 and 2011. There are also apparently-related references in the BTI tax returns for these years to an asset described as “plant” having an undepreciated capital cost of $5,107,389. The plaintiffs say, with justification, that this treatment is inconsistent with the treatment of BTI’s provision of loans to GLB in respect of the Plant and related equipment. Further, the apparent disappearance of this entry in the assets of BTI after 2011 without any sale, transfer or other disposition remains unexplained.

[136] I have considered whether the circumstances pertaining to this entry in the BTI tax returns, together with the other “badges of fraud”, are sufficient to demonstrate a strong prima facie case of a fraudulent conveyance in the amount of the entry in the tax returns. I conclude that it is not, however, for the following reasons.

[137] Apart from the evidence of the two tax returns, there is no other evidence pertaining to this treatment of some portion of the BTI advances to GLB. In particular, there are no other financial statements of BTI nor are there any cash flow statements during any of the relevant years. In addition, there are possible explanations for BTI’s removal of this asset from its books that are consistent with the position of the Represented Defendants that Orense funded all of the investment in the Plant. For example, it is possible that this asset has been rolled into the Orense loans that were made through BTI, that is, that it was accounted for as part of the Orense loans to GLB. Further, there is, as mentioned, evidence that is supportive of the allegation that Orense was the source of all monies that were invested in GLB.

[138] Given the foregoing, the Court cannot conclude that it is more probable than not that BTI invested approximately $5 million in the Plant and then simply removed the asset from its books without any consideration.

Possible Application of BTI Monies As Part of the Orense Loans to GLB

[139] The third, and most complicated, possibility is that BTI used the monies received pursuant to the Orense Transaction to make the Orense loans to GLB that flowed through BTI’s bank account that were apparently treated as separate from BTI’s assets.

[140] There is certainly a possibility that this occurred as a result of the sale arrangements between Orense and the other shareholders of Einer including Mazur. As discussed above, during 2010 and 2011, it appears that each of Orense, Mazur and Akulov had an interest in Einer and therefore, in BTI and GLB, which were wholly-owned subsidiaries of Einer. There is no evidence of any agreement between these parties regarding the treatment of any funds provided by them for investment in GLB. In addition, as mentioned, while it appears that Mazur, Akulov and the other unnamed shareholders of Einer sold their shares in Einer to Orense in or about April 2012, the sale arrangements are not before the Court. If BTI had assets at the time of the sale of the Einer shares to Orense from the Orense Transaction, it is possible that the sale arrangements resulted in such monies being left in BTI and used by Orense for its loans to GLB with knowledge of their source. In such event, it would be arguable that the loans referable to such monies constituted a fraudulent conveyance.

[141] However, in the absence of any documentation pertaining to such sale, this is pure speculation. It is equally possible that any such monies were paid out to Mazur and the other shareholders of Einer or were used to pay other liabilities of BTI when it was wound down. The evidence is not sufficient to establish the flow of funds out of BTI. It is therefore not sufficient to establish a strong prima facie case of a fraudulent conveyance from BTI to GLB.

Conclusions Regarding Allegations of Fraudulent Conveyances

[142] Based on the foregoing, I conclude that the plaintiffs have failed to establish on a strong prima facie basis the existence of any fraudulent conveyance from BTI to GLB for the purposes of s. 2 of the FCA. Accordingly, the plaintiffs’ motion for a Mareva injunction is denied.

[143] The plaintiffs also seek a Mareva injunction in respect of the assets of the other corporate defendants. However, in view of the acknowledged lack of assets of each corporation, there is no risk of dissipation of assets by any of such defendants. In other words, such an order would have no practical consequence. I do not think that a Mareva injunction would be appropriate in such circumstances. Accordingly, such relief is also denied.

[144] The Court has advised the parties that, in view of the fact that the submissions on the plaintiffs’ motions did not address the motion for injunctive relief against Mazur in any detail, the plaintiffs’ motions in this regard remain under reserve. The parties are to contact the Commercial list office to schedule a 9:30 am appointment to address possible further submissions regarding this matter.

Allegation Regarding Fraudulent Transfers of Shares By Orense

[145] The plaintiffs also argue that the issuances of shares to Orense constituted a fraudulent conveyance for purposes of s. 2 of the FCA. This submission has been specifically addressed above in connection with the analysis of the plaintiffs’ submissions that there were fraudulent conveyances from BTI to GLB. It is rejected for the reasons set out therein.

[146] In particular, I note the following. The plaintiffs are unable to establish a strong prima facie case that the source of the funding of the Plant and the related equipment was one or more fraudulent transfers from BTI. On the evidence, it is at least as probable that Orense provided such funding. There is uncontradicted specific evidence to this effect from Kramble. The share subscription documentation is supportive of this conclusion. The GLB financial statements are partially supportive. Patel’s testimony is also consistent with this conclusion even though he is not specific regarding the extent to which any of the Einer shareholders contributed monies to fund the BTI loans to GLB. The fact that the first share issuance to Orense is dated four days after the date on which Petro-Diamond added Einer to the Petro-Diamond action in the the United States, while it could constitue a “badge of fraud”, is not a sufficient basis to find that this share issuance was a fraudulent conveyance in the face of the foregoing evidence.

[147] As mentioned, there is a possibility that a portion of that funding was the result of fraudulent transfers from Verdeo to BTI in connection with the Orense Transaction and that the funds received by BTI remained in BTI at the time that Orense acquired all of the shares of Einer not previously owned by it. However, for the reasons set out above, I conclude that the plaintiffs are unable to establish a strong prima facie case to this effect on the evidence before the Court. In particular, as mentioned above, the evidence is insufficient to find that Orense and Mazur acted in concert to defeat the creditors of Verdeo.

[148] Accordingly, it is not possible to establish, on a balance of probabilities, that any of the subscription proceeds for the shares issued by GLB that diluted the interest of Einer were derived from monies that were the subject of a fraudulent transfer from Verdeo. In these circumstances, the Court cannot find that any of the share issuances constituted a fraudulent conveyance for the purposes of s.2 of the FCA.

[149] I would add that, insofar as it may be suggested that the share issuances were originally to Einer which then transferred the shares to Orense, there is no evidence of any debts or liabilities of Einer to the plaintiffs that were hindered or defeated by any such transfer. Nor is there any evidence of a transaction that was structured in this manner.

The Requirement of Establishing a Real Risk of Dissipation of Assets

[150] The plaintiffs say that the Court should infer a real risk of dissipation of assets, i.e. the Plant, based on the approach of Strathy J. (as he then was) in Sibley & Associates LP v. Ross, 2011 ONSC 2951, 106 O.R. (3d) 494, at para. 63:

[T]he 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 is not necessary to show that the defendant has bought an air ticket to Switzerland, has sold his house and has cleared out his bank accounts. 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.

[151] In this case, the plaintiffs say that the Court should find that the Represented Defendants would dissipate assets, if given the opportunity, based on the following factors: (1) concealment of the nature of the Orense Transaction; (2) the dilution of Einer’s shareholding in GLB; (3) the refusal to produce audited financial statements, the amendments to the Verdeo tax returns and an allegation of two sets of books for Verdeo; (4) the timing of Mazur’s resignation as a director of Einer and GLB in relation to Petro-Diamond’s amendment of its complaint to assert claims against Mazur; (5) the defendants’ delay of the U.S. actions to permit the disposition of the Verdeo assets and Mazur’s sale of his house; and (6) alleged deceitful conduct, including changing their evidence in the course of these proceedings, the finding of fraudulent transfers in the BioUrja Judgment and the circumstances of certain Verdeo loans to Mazur.

[152] Given the determinations above on the merits of the plaintiffs’ allegations of fraudulent transfers from BTI to GLB, it is not necessary to address this issue and I therefore decline to do so.

Conclusion Regarding the Plaintiffs’ Motion for a Mareva Injunction Based on the Allegations of Fraudulent Conveyances

[153] Based on the foregoing, I conclude that the plaintiffs have failed to establish on a strong prima facie basis the existence of any fraudulent conveyance from BTI to GLB, or of any fraudulent transfers in the form of issuances of shares by GLB, for the purposes of s. 2 of the FCA. Accordingly, the plaintiffs’ motion for a Mareva injunction is denied.

The Plaintiffs’ Motion for Injunctive Relief Based on the Oppression Claim

[154] In the alternative, the plaintiffs allege that the disposition of all of the assets of Verdeo and BTI constituted oppressive activity for purposes of s. 248 of the OBCA. They argue that such actions were contrary to the plaintiffs’ reasonable expectations. They seek injunctive relief of the nature of a Mareva injunction by way of interim relief under s. 248(3) of the OBCA.

[155] This claim is dismissed for two reasons.

[156] First, the plaintiffs’ oppression claim is asserted under ss. 248(2)(a) and/or (b). The claim relates to acts or omissions of a “corporation or its affiliates”. As set out above, by virtue of the share ownership of Verdeo, that corporation is not, and was not, an affiliate of BTI, Einer or GLB. Nor is it a corporation governed by the OBCA. Accordingly, there is no claim that can be asserted under s. 248 of the OBCA in respect of Verdeo, in particular, in respect of any transfers of monies from Verdeo to BTI.

[157] Second, while a claim could be asserted in respect of BTI and its affiliates, which include Einer and GLB, the plaintiffs are required to demonstrate a strong prima facie case of oppression, among other things, to obtain interim relief under s. 248. Specifically, to succeed in its oppression claim, the plaintiffs would have to establish that BTI disposed of its assets at an under value to GLB. Such a claim is, in effect, an alternative expression of the plaintiffs’ claim of fraudulent transfers to GLB.

[158] As the plaintiffs have failed to establish a strong prima facie case of fraudulent transfers from BTI to GLB, they are also unable to establish a disposition of BTI’s assets at an undervalue for purposes of their oppression claim on the same standard.

The Plaintiffs’ Motion for a Certificate of Pending Litigation

[159] In the alternative, the plaintiffs also seek leave to issue a certificate of pending litigation in respect of the Plant. This claim is based on a constructive trust which the plaintiffs assert arises by virtue of having established that Verdeo funds that should have been available for its creditors were transferred by fraudulent conveyances from Verdeo to BTI and from BTI to GLB.

[160] Based on the foregoing, the plaintiffs are unable to establish a strong prima facie case of a fraudulent conveyance, from BTI to GLB. I would also conclude that it is questionable whether the plaintiffs have established a prima facie case, although there can be no doubt that the plaintiffs have established a serious issue to be tried.

[161] Regardless of the applicable standard, however, I conclude that the balance of convenience favours denial of the requested relief for the following reasons.

[162] First, the plaintiffs’ allegation is that Verdeo funds have been converted into the Plant. If established, a constructive trust in part or all of the Plant might be imposed in favour of Verdeo or its creditors. However, there is no evidence of any intention of GLB to sell the Plant. While the Court has previously granted an order permitting a mortgaging of the Plant to secure working capital financing, there is no evidence of any real possibility of additional mortgage financing to monetize the remaining value of the Plant or of any proposed sale of the Plant.

[163] Second, the real issue is not a risk of monetization of the Plant but a wind-up and distribution of the assets of GLB. There is no evidence of any intention on the part of GLB or its shareholder to effect such a transaction. Insofar as the plaintiffs seek to prevent GLB mortgaging the remaining equity in the Plant in favour of Orense or other creditors, the plaintiffs will continue to have their rights as creditors if and when they obtain recognition of their respective claims in Ontario.

[164] Third, on the other hand, there is evidence that any uncertainty regarding GLB’s title to the Plant will adversely affect its business reputation and, thereby, its ability to compete in the international market.

[165] Fourth, based on the determinations above, the plaintiffs cannot establish a high probability that they will recover judgment in the action against GLB.

Conclusion

[166] Based on the foregoing, the plaintiffs’ motions for a Mareva injunction, for interim relief under s. 248 of the OBCA and for a certificate of pending litigation in respect of the Plant are dismissed.

[167] The Represented Defendants shall have 30 days from the date of these reasons to make written submissions with respect to the disposition of costs in this matter, and the plaintiffs shall have 15 days from the date of receipt of the such submission to provide the Court with any responding submission they may choose to make. Submissions seeking costs shall include the costs outline required by r. 57 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, as amended.

Wilton-Siegel J.

Date: May 23, 2014