Court File and Parties
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: S. Cohen Inc., Plaintiff
AND:
FD Apparel Limited, V & A Apparel Limited and Amrik Johl, Defendants
BEFORE: Carole J. Brown, J.
COUNSEL: Garland M., for the Plaintiff
HEARD: May 2, 2017
Endorsement
1The plaintiff brings this ex parte motion for a Mareva injunction, enjoining the defendants from removing, dissipating, transferring or similarly dealing with any of certain funds currently held in two bank accounts at the Royal Bank of Canada.
2The motion rises as a result of a business relationship between the plaintiff and the individual defendant, Amrik Johl (“Johl”), through his company, FD. FD acted as a broker between the plaintiff and a third party supplier. The relationship operated as follows: the plaintiff would place an order for men’s apparel with FD and pay FD for that order. FD would place the plaintiff’s order with the third party supplier and would pay that supplier. The goods paid for by the plaintiff would be released upon payment by FD to the supplier.
3During the course of the business relationship, the plaintiff transferred $72,770.34 USD to FD in reliance on Johl’s representation that, upon payment made to Johl by the plaintiff, Johl would make payment to the third party supplier for the ordered goods.
4The evidence contained in the Motion Record establishes that FD failed to make a payment to the supplier and the plaintiff was forced to pay the supplier directly in order to have the goods released. The defendants have failed to repay the funds despite repeated requests from the plaintiff. As a result, the plaintiff retained a private investigation company to investigate the defendants, Johl and FD and were advised by said investigator that the day after transfer of the funds from Cohen to FD, FD had transferred the funds to an account in the name of V & A, another company of which the defendant, Johl, was the sole shareholder, and with which the plaintiff has had no business dealings.
5All of the relevant facts have been set forth in the factum of the plaintiff at paragraphs 7 through 34, supported by the documentation contained in the Motion Record..
Mareva Injunctions: The Law
6Interlocutory injunctions are meant to protect plaintiffs who might suffer irreparable harm before a trial, and be left with a meaningless remedy thereafter. They are granted with a view to preserving the status quo, ensuring that the subject matter of the litigation is not destroyed or irreversibly altered before trial, protecting the right of the plaintiff from being defeated by some pretrial act of the defendant: Chitel et al.v Rothbart et al, (1982) 30 9OR (2d) 513 (CA) p. 28, citing Third Chandris Shipping Corp. et al v Unimarine S. A. [1979] 2 All E.R. 974, at p. 978.
7A Mareva injunction restrains the defendant from dissipating assets or conveying property pending the court’s determination of the proceeding. It is an exception to the general rule that parties to a proceeding may not obtain execution before judgment: O2 Electronics Inc. v Sualim, 2014 ONSC 50-50, para 66-67.
8To succeed on a Mareva injunction, the moving party must establish that:
It has a strong prima facie case against the defendant;
The balance of convenience favours the granting of the injunction;
It will suffer irreparable harm if the injunction is not granted;
It has made full and frank disclosure of all matters in its knowledge which are material for the judge to know, and it has given particulars of its claim against the defendant, stating the grounds of its claim and the amount thereof, and fairly stating the points made against it by the defendant;
It has given some grounds for believing that the defendants have assets here and that there are some grounds for believing that there is a risk of the assets being moved before the judgment or award is satisfied; and
It has given an undertaking as to damages.
See: McClellan v Longlad, 2014 ONSC 1092 para 7; Chitel et al.v Rothbart et al, supra.
9In the circumstances of this case, and based on all of the evidence before me, I am satisfied that the plaintiff has established the necessary criteria for issuance of a Mareva injunction.
10The evidence establishes a very strong prima facie case of breach of contract. These facts are set forth at paragraph 42 of the factum and supported by the documentary evidence. The evidence further establishes a strong prima facie case that the defendants were unjustly enriched, given that they received the benefit of the funds from the plaintiff but did not use them for the purpose agreed upon, namely payment to the third party supplier. As a result, the plaintiff suffered a corresponding deprivation and there is no juristic reason for the defendants to have retained the funds. There is also a strong prima facie case for fraudulent conveyance of the funds by FD to V & A. Documentary evidence indicates that the funds were surreptitiously transferred from the FD account to the V & A account on March 22, 2017 immediately after FD had received the funds from the plaintiff. The circumstances surrounding the transfer of the said funds to the V & A account display many of the indicia of the “badges of fraud” identified in DBDC Spadina Ltd. v Walton, 2014 ONSC 3052 paras 66-67. These badges of fraud are set forth at paragraph 48 of the plaintiff’s factum. There is a strong inference that the transfer of funds to the V & A account was made with the intent to defeat and defraud the plaintiff’s rights to said funds. Based on all of the above, I am satisfied that a strong prima facie case against the defendant has been made out.
11I am further satisfied that the balance of convenience in this case favours the plaintiff. Were the relief not granted, the plaintiff would have no real ability to recover the funds or collect damages. There is no evidence to indicate that Johl continues to operate either FD or V & A, nor that they are solvent. The investigative report indicates that only nominal amounts remain in the FD account. FD does not keep any stock or inventory and likely has no assets as Johl/FD act as “middlemen” and only hold funds for short periods of time before transferring them to suppliers. It is likely that the defendants have little or no assets with which to satisfy a judgment. Further, there is some evidence that Johl is or has been a transient businessman who conducts business in multiple jurisdictions, including Florida and the UK. The corporate information for the UK companies list Johl as having British nationality and there is a history of his operating companies under various names including Fair Deal iin multiple jurisdictions, as set forth in the evidence and as summarized at paragraph 53 of the factum. There is further evidence that these companies are generally dissolved after several years which further increases the potential risk that the plaintiff will not realize on any final judgment of the court in these proceedings.
12There is no discernible loss that the defendants would suffer since the funds that were unlawfully transferred by the defendants from the FD account to the V & A account had been provided by the plaintiff to FD solely for the purpose of purchasing the goods for the plaintiff from the third party supplier. The funds were provided for no other purpose and were never transferred by FD to the supplier.
13I am satisfied that the balance of convenience favours the plaintiff, given that it will likely suffer irreparable harm if the relief sought is not granted in order to preserve the funds which it transferred to FD and which were never used for the purpose transferred: Eli Lilly Canada Inc. et al Novopharm Limited, 2010 FC 241.
14FD is a middleman without assets. It holds funds for only a short period. The funds in question were transferred from FD to another account, controlled by Johl. There is evidence that Johl is transient businessman with companies in various jurisdictions which are variously incorporated and dissolved. The likelihood of recovering the funds sought in this claim, without a Mareva injunction is questionable. The balance of convenience favours the plaintiff.
15In this case, the plaintiff quantified its damages with particularity, being the funds transferred by it to FD for payment to the third party supplier, were which were never used for that purpose, but rather were transferred fraudulently to V & A, a company with which the plaintiff had not done business; Johl and FD acted as “middlemen” and do not hold stock or inventory; FD currently has only nominal funds in the FD account based on the evidence before the court; it is unlikely that the defendants have any assets in Ontario (other than the funds held in the V & A account as of April 25; and there is evidence that Johl has a history of conducting business in multiple jurisdictions by incorporating and subsequently dissolving businesses in those jurisdictions, including dissolving and then reinstating V & A, the company holding the funds in question.
16I have reviewed the supporting affidavit and appended documentation and am satisfied that the plaintiff has made full and frank disclosure and provided particulars of its claim, as is its obligation: Chitel et al.v Rothbart et al. it has further raised and addressed issues which may be raised by the defendant, thus making full and frank disclosure of material matters.
17I find that there is a serious risk of dissipation and removal of the assets by the defendants in the amount of $72,770.34 USD, which are currently in this jurisdiction, having been transferred from the FD account to an account held by V & A, a business with which the plaintiff has not had dealings: see Sibley & Associates LP v Ross, 2011 ONSC 2951;. O2 Electronics Inc. v Sualim, supra. In this case, the dissipation of assets may be inferred from the nature of Johl’s fraudulent activity and history of surreptitious transfer of the funds to V & A at a time when he had falsely misled the plaintiff by suggesting that he had paid the funds to the supplier but that the supplier had refused to release the bill of lading, which was not the case.
18As to the final criterion for granting of a Mareva injunction, the plaintiff has agreed to provide an undertaking as to any damages that the court may make impose, on a determination of the proceedings, in the event that it is found that the order caused damage to the defendants.
19Based on all of the foregoing, I grant the Mareva injunction, restraining the defendants from dealing in any way with the assets of the defendants up to the amount of $72,770.34 USD and that the Royal Bank of Canada freeze and prevent the removal or transfer of any monies or assets of the defendants held in any account or on credit on behalf of the defendants until further order of this court, including, but not limited to the FD and V & A accounts.
20Order to go as signed.
Carole J. Brown, J.
Date: May 2, 2017