Trade Capital Finance Corp. v. Cook et al.

[Indexed as: Trade Capital Finance Corp. v. Cook]

Ontario Reports Ontario Superior Court of Justice, Emery J. May 8, 2017 137 O.R. (3d) 685 | 2017 ONSC 1857

Case Summary

Injunctions — Mareva injunction — Plaintiff obtaining Mareva injunction over defendant's assets — M Co. obtaining writs of seizure and sale to collect costs it was awarded against defendant in unrelated proceedings — Mareva injunction not operating as charge on defendant's assets and not giving plaintiff preference over rights of defendant's creditors — Injunction not preventing seizure of defendant's assets by M Co. under writs of seizure and sale.

The plaintiff was suing the defendants for damages for fraud and other causes of action. It obtained a Mareva injunction over the assets of certain defendants, including TCHI. In unrelated proceedings, M Co. was awarded costs against TCHI and obtained writs of seizure and sale to enforce the costs order. M Co. brought a motion under rule 37.14(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 as a person who was affected by the Mareva injunction to vary the order to permit it to seize funds in one of TCHI's bank accounts under the writs of seizure and sale.

Held, the motion should be granted.

A Mareva injunction does not operate as a charge or an instrument granting security against the assets of a defendant. It is an order inhibiting the defendant and any other party bound by the order from disposing of the assets by the transfer or removal of those assets from the jurisdiction. The injunction is not something that prefers the rights of the plaintiff as an otherwise unsecured creditor over the rights of all other creditors in the debt collection process. The order in this case contained no reference to any proprietary claim or presumption of ownership through a trust. It applied to all of the assets of each of the Mareva defendants. Given the broad reach of that order, it was unlikely that any other assets of TCHI fell outside of its scope to satisfy M Co.'s costs order. M Co. was lawfully entitled to enforce the writs of seizure and sale. Accordingly, it had met the test for varying the Mareva injunction.

Cases referred to

• A v. B (X intervening), [1983] 2 Lloyd's Rep 532 (Q.B.D.)
• Aetna Financial Services Ltd. v. Feigelman, [1985] 1 S.C.R. 2, [1985] S.C.J. No. 1, 15 D.L.R. (4th) 161, 56 N.R. 241, [1985] 2 W.W.R. 97, 32 Man. R. (2d) 241, 29 B.L.R. 5, 55 C.B.R. (N.S.) 1, 4 C.P.R. (3d) 145, J.E. 85-192, EYB 1985-150475, 29 A.C.W.S. (2d) 267
• Canadian Imperial Bank of Commerce v. Credit Valley Institute of Business and Technology, [2003] O.J. No. 40, [2003] O.T.C. 7, 119 A.C.W.S. (3d) 826 (S.C.J.)
• Elekta Ltd. v. Rodkin, [2012] O.J. No. 1439, 2012 ONSC 2062 (S.C.J.)
• Hans v. Volvo Trucks North America Inc., [2014] B.C.J. No. 1270, 2014 BCSC 1123
• iTrade Finance Holdings Inc. v. Webworx Inc., [2006] O.J. No. 3939, 151 A.C.W.S. (3d) 1168, 2006 CarswellOnt 5939 (S.C.J.)
• Lennox Industries (Canada) Ltd. v. R., 1987 CarswellNat 337
• Sadie Moranis Realty Corp. v. 1667038 Ontario Inc. (2012), 111 O.R. (3d) 401, [2012] O.J. No. 3029, 2012 ONCA 475, 22 C.P.C. (7th) 224, 294 O.A.C. 308
• Silver Standard Resources Inc. v. Joint Stock Co. Geolog, [1998] B.C.J. No. 2887, 168 D.L.R. (4th) 309, [1999] 7 W.W.R. 289, 115 B.C.A.C. 262, 59 B.C.L.R. (3d) 196, 84 A.C.W.S. (3d) 784

Statutes referred to

• Execution Act, R.S.O. 1990, c. E.24

Rules and regulations referred to

• Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rules 37.14, (1), 45

Counsel

• Peter W.G. Carey and Christopher R. Lee, for plaintiff.
• Laura Robinson, for defendant the Cash House Inc.
• Martin Sclisizzi, for non-party Maple Trust Company.

Endorsement

[1] EMERY J. : — Maple Trust Company raises a unique question on this motion: whether a Mareva injunction over the assets of a named defendant prevents the seizure of those assets by another creditor under writs of seizure and sale.

[2] Maple Trust is not a party to this action. Maple Trust obtained writs of seizure and sale to collect costs awarded under court orders it was awarded against the Cash House Inc. ("TCHI") in an unrelated proceeding.

[3] Trade Capital has brought this action to recover CDN$5,051,721.79 and US$1,479,515.12 against various defendants to recover funds it claims to have paid out under false pretences or as the victim of a fraud. Trade Capital alleges perpetrators or parties to a fraudulent scheme stole from, or defrauded, Trade Capital of those funds between 2011 and 2013. One of those defendants was TCHI.

[4] The bank accounts and other assets of TCHI are otherwise subject to a Mareva injunction obtained by Trade Capital in this action from Justice Ricchetti on May 6, 2015.

[5] In its motion materials and in submissions made to the court, Maple Trust emphasises a key distinction between the terms of reference it uses on the motion, and those used by Trade Capital:

(1) When Maple Trust refers to "The Cash House bank account", it is referring to a specific bank account as a defined term. That specific bank account is account number [number omitted] (the "701 account") at Buduchrist Credit Union ("BCU"). According to evidence filed on the motion, this account held a balance of approximately $590,000 when Justice Ricchetti's order was made on May 6, 2015.

(2) Where Trade Capital refers to the Cash House bank account, it is generally referring to all bank accounts in the name of the Cash House Inc. at any bank or credit union. Trade Capital takes the position that any cash on deposit in an account at any bank or credit union is bound by Justice Ricchetti's order and is subject to preservation for the purposes of proving and enforcing Trade Capital's claim.

[6] Maple Trust brings this motion under rule 37.14(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 as a person who is affected by the Mareva injunction obtained by Trade Capital without notice. Maple Trust seeks an order under rule 37.14(1) to vary Justice Ricchetti's order to permit BCU to respond to the legal process employed by Maple Trust in the form of writs of seizure and sale. Maple Trust requires this order to seize funds from the 701 account without breaching, or having BCU breach para. 7 of Justice Ricchetti's order.

Background

The fraud

[7] Trade Capital is a factoring company. Peter Cook was the president of Trade Capital between November 2011 and September 2013. Mr. Cook and Darcy Thompson, the chief executive officer of Trade Capital, managed Trade Capital's business from its inception until the fraud against Trade Capital was discovered.

[8] Mr. Cook has been accused of perpetrating a significant fraud against Trade Capital in concert with other people. Mr. Cook confessed to this fraud shortly after it was discovered in September 2013.

[9] Mr. Thompson has sworn an affidavit in which he describes how the factoring industry works. Factoring is a financial transaction in which the party (the "invoicer"), having generated an original invoice for providing goods or services to a customer (the "debtor"), "sells" that invoice under which amounts are owing by the debtor to a factoring company at a discount. The factoring company makes an advance, or funding, to the invoicer for approximately 70 per cent to 90 per cent of the face amount shown on the invoice it is purchasing. The factoring company becomes the owner of the invoice and is then entitled to collect the full amount of the invoice from the debtor. The factoring company may then pay the balance collected to the invoicer after deducting its commission and other charges, depending on the contract between them.

[10] Trade Capital usually enters into a general security agreement with the invoicer when it enters a factoring relationship with an invoicer. Trade Capital often will obtain personal guarantees from the principals of the invoicer as additional security.

[11] When an invoicer would approach Trade Capital to purchase an invoice prior to September 2013, it was Mr. Cook's responsibility to contact the debtor to determine whether the invoice was valid and genuine.

[12] Essentially, Trade Capital alleges that the fraud was perpetrated in the following manner:

(1) The defendants, Peter Cook, Thomas Barker, Marc D'Aoust, Todd Cadenhead, Alan Keery and/or others working with them would create a fictitious invoice.

(2) A notification sheet certifying the legitimacy of the invoice purportedly signed by an officer of the debtor would be provided to Trade Capital.

(3) Mr. Cook and his accomplices would take other steps to make it appear as though the invoice was legitimate, including

(i) making representations to officers of Trade Capital that the invoice was valid;

(ii) forwarding e-mails supposedly from a representative of the debtor confirming the validity of the invoice (Trade Capital now believes that most of these e-mails were actually drafted by the fraudsters);

(iii) making payments from a bank account controlled, either directly or indirectly, by the fraudsters;

(iv) using internet domain names and e-mail accounts that appear to belong to the supposed debtor; and

(v) having actual or apparent employees at major corporations (such as Wells Fargo, Enbridge and Bell) participate in confirming the validity of the invoices.

[13] From 2011 to 2013, Trade Capital was induced to advance CDN$5,051,721.79 and US$1,479,515.12 to purchase fraudulent invoices by way of

(1) 12 fundings to Virtucall Inc. ("Virtucall") in amounts ranging from US$77,000 to US$176,295.75;

(2) 16 fundings to Superior Medical Services Inc. ("Superior") (four of which Trade Capital was directed to advance to other parties) in amounts ranging from CDN$35,000 to CDN$292,456.69;

(3) ten fundings to Greenlink Canada Inc. ("Greenlink") (one of which were Trade Capital was directed to pay to LC Exchange) in amounts from to CDN$74,905 to CDN$375,504; and

(4) five fundings to 2339989 Ontario Inc. ("233") (two of which were Trade Capital was directed to pay to Millwalk Enterprises Inc.) in amounts ranging from CDN$125,000 to CDN$245,430.21.

[14] Trade Capital obtained a Norwich order from this court on October 28, 2013 to trace the transfer and migration of various funds it had advanced to certain parties. Trade Capital was entitled to obtain bank statements and back up documents related to TCHI accounts from major banks and from BCU under the Norwich order. This order allowed Trade Capital to determine where the funds had been paid, transferred or deposited, and to make further requests for documents.

[15] Trade Capital was able to trace its funds to a number of recipients to which invoicers had distributed funds received from Trade Capital. The evidence of Trade Capital shows that a significant portion of Trade Capital's funds was paid to the Cash House, which received $1,171,260.50 directly from the following entities:

(a) Superior -- $412,050;

(b) Greenlink -- $512,777.50; and

(c) 233 -- $246,435.

[16] According to Mr. Thompson's affidavit, Trade Capital traced further amounts from various fundings to a Canadian dollar bank account at the Toronto Dominion ("TD") bank open in the name of Virtucall (the "TD Virtucall Canadian Account"). Trade Capital's funds were difficult to trace in and out of the TD Virtucall Canadian Account given the number of transactions. However, transactions showed that after Virtucall received funds from other parties, who had received funds from Trade Capital, Virtucall transferred the funds to other defendants, including Cash House. Trade Capital claims that during the period of time that Trade Capital was defrauded, Virtucall transferred funds from the TD Virtucall Canadian Account to the Cash House bank account in the amount of $2,722,222.50.

The action

[17] On May 6, 2015, Trade Capital commenced this action in Brampton. The statement of claim was subsequently amended on May 31, 2016.

[18] In the amended statement of claim, Trade Capital seeks damages against Virtucall, Superior, Green Link and 2339989 Ontario Inc. in the amount of $20 million for civil fraud, fraudulent misrepresentation and negligent misrepresentation. Trade Capital also claims:

(a) a Mareva injunction restraining these defendants from disposing of assets;

(b) a declaration that they received funds belonging to Trade Capital that were fraudulently converted by some or all of the defendants;

(c) a declaration that the defendants received funds belonging to Trade Capital;

(d) a declaration that all money, property and other assets transferred to the defendants were held on a resulting and/ or constructive trust basis for Trade Capital;

(e) damages for breach of constructive trust or resulting trust; and

(f) other relief including various tracing orders against these few defendants, among many.

[19] Trade Capital has pleaded the following causes of action against some or all defendants, including TCHI:

(1) conspiracy;

(2) conversion;

(3) unjust enrichment;

(4) breach of trust;

(5) knowing receipt of trust funds;

(6) knowing assistance of breach of trust; and

(7) intentional interference with economic interests.

The Mareva

[20] On May 6, 2015, Trade Capital obtained the Mareva injunction from Justice Ricchetti on an ex parte basis. Justice Ricchetti made the following order against the Mareva defendants described in that order, including TCHI:

1. THIS COURT ORDERS that each Mareva Defendant and its servants, employees, agents, assigns, officers, directors, affiliates and anyone else acting on their behalf or in conjunction with any of them, and any and all persons with notice of this injunction, are restrained from directly or indirectly, by any means whatsoever:

(a) Selling, removing, dissipating, alienating, transferring, assigning, encumbering, or similarly dealing with any assets of any of the Mareva Defendants, that are located in Canada or the United States, including but not limited to the assets and accounts listed in Schedule "A" hereto;

(b) Instructing, requesting, counselling, demanding, or encouraging any other person to do so; and

(c) Facilitating, assisting in, aiding, abetting, or participating in any acts the effect of which is to do so.

[21] The order made by Justice Ricchetti also applied to "financial institutions" specified in that order that are not parties to the action. These financial institutions include banks and credit unions where any Mareva defendant had money on account. Paragraph 7 of the order made by Ricchetti J. reads as follows:

7. THIS COURT ORDERS that Toronto-Dominion Bank also known as TD Canada Trust, The Bank of Nova Scotia also known as Scotiabank, Canadian Imperial Bank of Commerce also known as CIBC, Royal Bank of Canada also known as RBC, Bank of Montreal also known as BMO, City Savings and Credit Union Limited and the Buduchrist Credit Union Limited (the "Financial Institutions") to forthwith freeze and prevent any removal or transfer of monies or assets of the Mareva Defendants held in any account or on credit or on behalf of any Mareva Defendant with the Financial Institutions, including but not limited to the accounts listed in Schedule "A" hereto.

[22] Justice Ricchetti ordered each Mareva defendant to provide a statement of assets to Trade Capital within ten days of the date his order was served. The financial institutions to which the Mareva order applied were also ordered to disclose and deliver up to Trade Capital any and all records held by them in any way related to the Mareva defendants. This order required the disclosure of information relating to assets and accounts held by or on behalf of the Mareva defendants other than those assets and accounts listed in Schedule "A" to the order.

[23] In the written reasons given for his decision to grant the Mareva injunction, Justice Ricchetti made the following findings on the evidence put forward by Trade Capital:

(a) Trade Capital has satisfied the court that a strong prima facie claim of fraud has been made out;

(b) the evidence established that each of the defendants, including Cash House, perpetrated, facilitated or received the proceeds of a fraudulent scheme against Trade Capital;

(c) this was a very complex fraud. The defendants went to great lengths to perpetrate the fraud; and

(d) unless the injunction was granted, there was a very real risk that the proceeds from the fraud would be disposed of or transferred beyond the jurisdiction of this court.

[24] The 701 account was not included in Schedule "A" to Justice Ricchetti's order. Nor did Trade Capital's responding material to the Maple Trust motion contain any evidence to link or connect the 701 account to any funds that could be traced from transactions involving any Mareva defendant.

The writs

[25] In a separate and unrelated action, TCHI had made a claim against Maple Trust and others as defendants. That action was dismissed against Maple Trust. On November 20, 2013, Justice Stinson awarded costs for that action to Maple Trust in the amount of $132,862.68, payable by TCHI.

[26] TCHI appealed the dismissal of its action against Maple Trust. The appeal was dismissed, with costs. The Court of Appeal awarded $17,000 to Maple Trust for those costs. Maple Trust filed writs of seizure and sale with respect to the costs awarded under the judgment of Justice Stinson, and the costs awarded by the Court of Appeal with the Sheriff's Office in Brampton and in Toronto.

[27] In order to facilitate settlement discussions between the parties, TCHI paid $40,000 on account of the costs orders, and agreed to pay the balance in instalments. As a result of this payment, the Sheriff's Office was instructed to stand down.

[28] The outstanding balance that TCHI therefore owes to Maple Trust pursuant to the costs orders is $120,396.90, together with interest from August 6, 2016.

Analysis

[29] Maple Trust intends to enforce the writs of seizure and sale against the 701 account. Maple Trust takes the position that it already has a judgment and is entitled to proceed with seizing funds in the 701 account under the Execution Act, R.S.O. 1990, c. E.24 to enforce that judgment.

[30] Maple Trust takes the fundamental position at law that a Mareva injunction is not proprietary in nature. It submits that Trade Capital obtained a Mareva injunction instead of a proprietary injunction. For that reason, assets of a Mareva defendant on deposit at a financial institution covered by the Mareva injunction must yield to another legal process that make those assets or funds on account payable to another party.

[31] Trade Capital takes the position that the Mareva injunction prohibits Maple Trust from enforcing its writs of seizure and sale. Trade Capital alleges that the 701 account is one of many that contains funds stolen from it through the fraud, and that it has a proprietary claim to those funds.

[32] In Canadian Imperial Bank of Commerce v. Credit Valley Institute of Business and Technology, [2003] O.J. No. 40, [2003] O.T.C. 7 (S.C.J.), Justice Molloy explains the difference between a proprietary injunction and a Mareva order [at para. 15]:

It is important at the outset to distinguish between the proprietary injunction and the Mareva injunction. A proprietary injunction is granted to preserve an asset in the possession of a defendant, which the plaintiff says belongs to the plaintiff, or is subject to a trust in favour of the plaintiff. It is typically sought in cases of alleged theft, conversion or fraud where the defendant, by some wrongdoing, comes into the possession of the plaintiff's property. The purpose of the injunction is to preserve the disputed property until trial so that the property will be returned to the plaintiff if successful at trial, rather than used by the defendant for his own purposes.

[33] At para. 16, Justice Molloy discusses the requirements for a Mareva injunction, and the test a plaintiff must meet to obtain that kind of order. The purpose and effect of a Mareva injunction becomes more apparent in this discussion [at para. 16]:

A Mareva injunction does not require the plaintiff to show any ownership interest in the property subject to the injunction and does not require the plaintiff to establish a case of fraud or theft. It is a recognized exception to the rule established in Lister v. Stubbs (1890), 45 Ch. D. 1 that the court has no jurisdiction to attach the assets of a debtor for the protection of a creditor prior to the creditor obtaining judgment. Because of the exceptional nature of the relief, the test on the merits for obtaining a Mareva injunction is more onerous than for other injunctive relief and requires that the plaintiff establish a strong prima facie case: Chitel v. Rothbart (1983), 39 O.R. (2d) 513 at 522 and 532 (C.A.). In addition to the other requirements for an injunction, the plaintiff must show that the defendant is taking steps to put his assets out of the reach of creditors, either by removing them from the jurisdiction of the court or by dissipating or disposing of them other than in the normal course of business or living: Chitel v. Rothbart at p. 532-533.

Position of Maple Trust

[34] Maple Trust argues that the injunction granted by Justice Ricchetti on May 6, 2015 was a Mareva injunction, and not a proprietary injunction. Mr. Sclisizzi makes the same distinction between the two kinds of injunctions on behalf of Maple Trust that Justice Molloy made in CIBC v. Credit Valley Institute of Business and Technology.

[35] Maple Trust submits that the order obtained by Trade Capital does not give it a priority or advantage over any other creditor of TCHI. While the Mareva injunction prevents TCHI from paying bona fide creditors of its own volition, the rights of bona fide creditors enforcing legal process to collect under judgments that would otherwise be enforceable against TCHI assets had no Mareva order been granted are not extinguished.

Position of Trade Capital

[36] Trade Capital argues that the Mareva injunction is an order designed to preserve assets for execution. The Mareva injunction is intended to freeze the assets of those defendants responsible for the fraud to enable Trade Capital to recover the money stolen from it. Trade Capital argues that the Mareva injunction it obtained in May 2016 protects funds that will be traced in the fullness of time into assets or funds on account at financial institutions in the names of Mareva defendants.

[37] Trade Capital argues that stolen funds or funds acquired by fraud are impressed with a trust and may be followed and recovered by its true owner: Lennox Industries (Canada) Ltd. v. R., 1987 CarswellNat 337. Trade Capital also relies on iTrade Finance Holdings Inc. v. Webworx Inc., [2006] O.J. No. 3939, 2006 CarswellOnt 5939 (S.C.J.) and Elekta Ltd. v. Rodkin, [2012] O.J. No. 1439, 2012 ONSC 2062 (S.C.J.).

[38] Mr. Carey was clear and unequivocal in his submissions that the proprietary claims made by Trade Capital in the statement of claim are sufficient to defeat Maple Trust's motion. He argues that these claims take precedence over the writs of seizure and sale of Maple Trust not because of the Mareva injunction, but rather by the nature of the proprietary claims and remedies pleaded in the amended statement of claim.

Discussion

[39] The Supreme Court of Canada commented on the position of a party who obtains a Mareva injunction relative to the creditors of a debtor in Aetna Financial Services Ltd. v. Feigelman, [1985] 1 S.C.R. 2, [1985] S.C.J. No. 1. Justice Estey, at pp. 25 and 26 S.C.R., as follows:

While the Mareva injunction is undoubtedly in personam, it matters not that on occasion the courts have classified it as in rem (see Cretanor Maritime Co. v. Irish Marine Management Ltd., [1978] 1 W.L.R. 966, at pp. 97475), because the injunction affords no priority to the potential creditor, for to do so would, in the words of Goff J., "rewrite the . . . law of insolvency": Iraqi Ministry of Defence v. Arcepey Shipping Co. S.A., [1980] 2 W.L.R. 488, at p. 494. Unsecured creditors holding a Mareva injunction cannot hold a preferred position over other claimants. Hence the practice of including in the order the right to meet legitimate debt payments accruing in the ordinary course of business.

[40] Obtaining a Mareva injunction against the assets of a defendant is an extraordinary remedy. However, it does not have an extraordinary effect on the rights of other bona fide creditors of the defendant as a debtor. Courts are generally reluctant to tie up the assets or funds of a defendant without first finding liability, or permitting what would in effect amount to execution before judgment.

[41] At para. 17 of CIBC v. Credit Valley, Justice Molloy explains the purpose of a Mareva injunction is a limited one:

The purpose of the Mareva injunction is a limited one. It is meant to restrain a defendant from taking unusual steps to put his assets beyond the reach of the plaintiff in order to thwart any judgment the plaintiff might eventually obtain. It is not meant to give the plaintiff any priority over other creditors of the defendant, nor to prevent the defendant from carrying on business in the usual course and paying other creditors. The nature of the Mareva is such that it is typically sought and granted, in the first instance, without notice to the defendant, but then is subject to a motion by the defendant to vary the injunction to permit payments in the usual course of business or living As was noted by the English Queen's Bench in Iraqi Minister of Defence v. Arcepey Shipping Co. S.A., [1980] 2 W.L.R 480 at 485-486:

. . . the point of the Mareva jurisdiction is to proceed by stealth, to pre-empt any action by the defendant to remove his assets from the jurisdiction. To achieve that result the injunction must be in a wide form because, for example, a transfer by the defendant to a collaborator in the jurisdiction could lead to a transfer of assets abroad by that collaborator. But it does not follow that, having established the injunction, the court should not thereafter permit a qualification to it to allow a transfer of assets by the defendant if the defendant satisfies the court that he requires the money for a purpose which does not conflict with the policy underlying the Mareva jurisdiction.

. . . For my part, I do not believe that the Mareva jurisdiction was intended to rewrite the English law of insolvency in this way. Indeed it is clear from the authorities that the purpose of the Mareva was not to improve the position of the claimants in an insolvency but to prevent the injustice of a foreign defendant removing his assets from the jurisdiction which might otherwise have been available to satisfy a judgment.

[42] The Mareva injunction is not a remedy that operates as a charge or an instrument granting security against the assets of the defendant. It is an order inhibiting the defendant and any other party bound by the order from disposing of the assets by the transfer or removal of those assets from the jurisdiction. The injunction is not something that prefers the rights of the plaintiff as an otherwise unsecured creditor over the rights of all other creditors in the debt collection process: See Silver Standard Resources Inc. v. Joint Stock Co. Geolog, [1998] B.C.J. No. 2887 and Hans v. Volvo Trucks North America Inc., [2014] B.C.J. No. 1270, 2014 BCSC 1123.

[43] Certain principles emerge from the authorities and as a matter of common sense to enable a creditor to enforce a judgment against assets otherwise subject to a Mareva order. In my view, those principles would include the following

(1) the creditor and related claim must be legitimate;

(2) the assets would be available for seizure and sale by an unsecured creditor but for the Mareva order;

(3) the Mareva order must not contain any term that gives it a proprietary character, or that recognizes the creditor has a legal claim to a specific fund otherwise covered by its language and purpose;

(4) the assets of the defendant are not subject to the protection of any federal or provincial statute that make seizure of those assets exempt or unenforceable at the time of the seizure; and

(5) there is no other juristic reason why the assets cannot be seized.

[44] It is para. 7 of the Mareva order that Maple Trust now seeks to vary to exempt the 701 account at BCU from its reach. The language in para. 1 of Justice Ricchetti's order against Mareva defendants provides the context for the nature and object of that order. The language in para. 7 prevents non-parties from permitting the removal or transfer of any funds or assets by the Mareva defendants. The order contains no reference to any proprietary claim or presumption of ownership through a trust. The language of the order clearly shows that the remedy granted is to prohibit the removal or transfer of money or assets by any Mareva defendant, not the recognition of a proprietary interest or a legal claim to a particular account, or to a specific fund.

[45] Trade Capital initially obtained a Norwich order against TCHI and other defendants to trace and identify assets into which Trade Capital funds had flowed. The 701 account was not disclosed in Trade Capital's motion materials on which Justice Ricchetti granted the Mareva injunction on May 6, 2016. If there was evidence to give, Trade Capital should have given it on the Mareva motion. The 701 account was not listed in the schedule to Justice Ricchetti's order on May 6, 2016, or any specific reference made to that account or funds held in that account. More to the point, Trade Capital provided no evidence on this motion that the funds held in the 701 account for TCHI came directly or indirectly from any fraud committed against it.

[46] The nature of the Mareva injunction against the assets of TCHI support the argument made by Maple Trust that Trade Capital did not obtain a proprietary injunction that would inhibit access to the 701 account through legal process to enforce the judgment of another creditor. Just because Trade Capital harbours a concern that insufficient funds will be available to collect on any judgment in the future does not give Trade Capital priority over any other unsecured creditors to which TCHI is indebted. Contrary to the submission made for Trade Capital, it is not sufficient to make proprietary claims or to claim a legal right to specific funds in the amended statement of claim. Fears are not enough.

[47] Trade Capital could have moved for an order for a proprietary injunction to preserve a proprietary claim it argues on this motion, or to make its claim to a legal interest in specific funds held in the 701 account under Rule 45: Sadie Moranis Realty Corp. v. 1667038 Ontario Inc. (2012), 111 O.R. (3d) 401, [2012] O.J. No. 3029, 2012 ONCA 475. When it did not do so under the guidance of seasoned counsel, I cannot help but conclude that it had no basis to seek either order in fact or in law.

[48] In the motion before this court, there is not even evidence to argue that funds belonging to or paid from Trade Capital were comingled with other funds belonging to TCHI in the 701 account. There is simply no connection between the claim made by Trade Capital for the general recovery of funds, and the specific funds held in the 701 account at BCU. For a proprietary claim to succeed on tracing funds from one source to a recipient, identification of the assets from one place to another is key.

[49] I agree with Justice Estey in Aetna Financial where he adopts the quote from Justice Goff in the Iraqi Ministry of Defence case that to accord the Mareva injunction holder a priority over a potential creditor would be to "rewrite the . . . law of insolvency". In my view, any other conclusion would lead to consequences the law did not intend.

Rule 37.14 factors

[50] Maple Trust bring its motion in essence to exempt BCU and its writs and seizure and sale from the Mareva injunction that Trade Capital obtained on May 6, 2015.

[51] In the event that Maple Trust seeks an order that actually varies the scope of the Mareva order, I consider that Maple Trust has met the test set out in A v. B (X intervening), [1983] 2 Lloyd's Rep 532 (Q.B.D.) (at para. 534). On a motion to vary a Mareva injunction under rule 37.14 , the court must consider the following factors when deciding whether to vary a Mareva injunction at the request of a creditor:

(1) Has the creditor established on the evidence that there are no other assets available to satisfy the debt other than those frozen by the injunction?

(2) Would the payment to the creditor normally have been made by the defendant?

(3) Does the payment defeat the purpose of the injunction?

[52] Justice Ricchetti's order dated May 6, 2015, applies to "all assets" of each of the Mareva defendants. Given the broad reach of that order, it is unlikely that any other assets of TCHI fall outside of its scope to satisfy the cost orders obtained by Maple Trust in its own litigation with TCHI from Justice Stinson and from the Court of Appeal.

[53] The payment of those costs orders would have normally been paid by TCHI as TCHI was bound to pay those cost orders. Maple Trust is lawfully entitled to enforce writs of seizure and sale for the non-payment of cost orders TCHI would have been compelled to pay those cost orders voluntarily or involuntarily through seizure of all funds in the 701 account in the absence of the Mareva order.

[54] For these reasons, the motion of Maple Trust to vary the Mareva injunction is granted. This order shall enable Maple Trust to seize the funds in account number 0066701 in the name of the Cash House Inc. under properly issued writs of seizure and sale for those funds to be remitted according to law.

[55] I encourage Maple Trust and Trade Capital to resolve the costs of this motion between them. However, if either party seeks its costs, that party shall make written submissions by May 22, 2017, and the other party shall file responding materials on costs by June 5, 2017. All costs submissions shall be no more than three double-spaced typewritten pages in length, not including any bill of costs or offer to settle. There shall be no reply submissions without leave. All written submissions may be filed by faxing them to my judicial assistant, Priscilla Gutierrez, at 905-456-4834 in Brampton.

Motion granted.

End of Document