Court File and Parties
Court File No.: CV-18-595574 Date: 2018-11-13 Superior Court of Justice - Ontario
Re: Erickson Donis, Plaintiff And: Paragon International Wealth Management Inc., James Gagliardini, Maryanne Terzis, Ronald Kleinberg, Michael Shumak, Edward Rosenberg and Antonio Palazzola, Respondents
Before: A.J. O’Marra, J.
Counsel: Matthew Stroh, for the Plaintiff Anisah Hassan, for the Respondent, James Gagliardini and Paragon International Wealth Management Inc. Daniel McConville, for the Respondent, Maryanne Terzis Liam McNeely, for the Respondent, Ronald Kleinberg Alexandra Grishanova, for the Respondent, Michael Shumak Brendan Monahan, for the Respondent, Antonio Palazzola
Heard: November 13, 2018 - Given orally.
Endorsement
Overview and Background
1Eric Donis seeks a worldwide Mareva injunction to freeze the assets of the respondents and/or in the alternative, an order for interim possession of a “jewellery set”, which was comprised of identified diamonds to be held by the Toronto Police Service pending the conclusion of outstanding criminal matters involving the respondents, with the exception of the corporate entity Paragon International Wealth Management Inc. (“Paragon International”) and Maryanne Terzis, alleged to have committed multiple counts of fraud involving transactions of coloured diamonds.
2James Gagliardini made an assignment into bankruptcy on December 18, 2017 and requests that the Mareva injunction application be adjourned as against him, pending a determination as to whether the plaintiff can obtain a declaration to lift the stay that prevents a creditor to recover a claim provable in bankruptcy, pursuant to ss. 69.3 and 69.4 of the Bankruptcy and Insolvency Act RSC 1985, c. B-3.
3Only Paragon International, James Gagliardini and Maryanne Terzis have responded to the application with materials and facta. However, the other respondents have appeared and have adopted their position opposing the Mareva injunction and order for interim possession of the jewellery set, with the exception of Maryanne Terzis who took no position with respect to the latter application.
4The action commenced by Mr. Donis alleges that through fraudulent misrepresentation by the respondents, with the exception of Terzis, he invested $99,169.00 in pink diamonds, and agreed through a series of trades involving different coloured diamonds of higher value to increase his investment, such a “cross-trade with an Asian investor” and creation of a “jewellery set” to be presented at auction, he has been left with neither his original investment or the diamonds said to have comprised the jewellery set.
5The jewellery set consisted of a number of identified diamonds; 1.53 karat yellowish/green diamond valued at $275,400.00 USD, a 2.74 karat yellow/green diamond and 2.75 karat yellow/green diamond valued at $796,050.00 USD, for a purported combined total value of $1,071,450.00, based on the documentation provided by the respondents to the applicant.
6Mr. Donis claims that the respondents, using aliases (with the exception of Maryanne Terzis, who became a director of Paragon), advised him that they were attempting to sell his diamond set at auction with reserved prices ranging from $195,000.00-$300,000.00 USD, including an auction in Hong Kong. The jewellery set was not auctioned. Subsequently, the plaintiff sought to have the jewellery set delivered to him. After a period of time, the respondents ceased all communications with him. He learned that the respondents, with the exception of Paragon International and Maryanne Terzis, were arrested and charged with fraud by the Toronto Police Service. The media released referred to a number of the respondents and the aliases they were alleged to have used in their dealings with the public.
7The plaintiff sought to have included in the materials on the application documents issued by the court, informations, setting out the charges that allege fraud on the part of the respondents, with the exception of Paragon International and Maryanne Terzis, and the media report. The respondent, Gagliardini initially objected on the basis that the documents were inadmissible hearsay, but accepted them as admissible business records with the limited purpose of establishing that allegations of fraud against the respondents have been made. Beyond that the documents were not prohibitive of any issues in consideration on the Mareva injunction application or request for an interim possession order of the “jewellery set”.
8On the application, the plaintiff referred to a number of matters he relied on as evidence of fraud. He had taken possession of the diamonds on the original purchase, but on the representation of the respondents, who unknown to him at the time were using aliases, turned over the diamonds back to them to allow for the suggested trades to occur, which ultimately led to the creation of the jewellery set. Further, in March 2018 when he sought possession of the jewellery set, not having been auctioned successfully, the initial non-responsiveness of the respondents was said to have been as a result of an I.T. meltdown at Paragon. However, at the time, based on the media report, and further communications with the lead investigator of the TPS Financial Crimes Unit the police had at that time raided the premises of Paragon International. Further to the Toronto Police Service investigation, it was confirmed that the FBI in the United States was investigating the alleged fraudulent actions of the respondent, Paragon International and its coloured diamonds investment scheme.
Mareva Injunction
9The issuance of a Mareva injunction is an extraordinary remedy which would freeze the assets of the responding party to ensure availability for execution on satisfaction of any future judgment. However, the test for obtaining such an order is high. The plaintiff must show:
(a) a strong prima facie case that he is “clearly right and almost certain to succeed at trial”, (see Lee v. Chang, 2018 ONSC 930 at para. 45);
(b) that there is a real and genuine risk that the defendant will remove or dissipate his assets before judgment, (see Furrow Systems International Ltd. v. Island Pools and Landscaping Ltd., 2014 ONSC 1428 at para. 9);
(c) the plaintiff will suffer irreparable harm if the injunction is not granted, (see Aetna Financial Services v. Feigelman, [1985] 1 SCR 2); and
(d) the balance of convenience favours the plaintiff, (see Aetna Financial Services v. Feigelman, supra).
10Based on the affidavit evidence of Mr. Donis as to his dealings with certain of the respondents by aliases (as referred to in the media report) through the corporate entity Paragon International and the loss of almost $100,000.00 and/or the diamond equivalent, there are reasonable grounds to believe that a fraud had been perpetuated. However, I am unable to conclude that it is a strong prima facie case, “almost certain to succeed at trial” as to each of the named respondents. Moreover, there is a paucity of evidence that there is a real risk of dissipation of the respondents’ assets. Further, there is no evidence as to what the respondents’ assets are available to freeze, or in the absence of an order that the plaintiff will suffer irreparable harm.
Interim Possession
11In terms of interim possession request, under Rule 44.01 of the Rules of Civil Procedure such an order may be granted where supported by affidavits setting out:
(a) a description of the property sufficient to make it readily identifiable;
(b) the value of the property;
(c) that the plaintiff is lawfully entitled to the possession of the property;
(d) the property was unlawfully taken or detained by the defendant; and
(e) the facts and circumstances give rise to an unlawful taking or detention.
12Here, there is a specific description of the jewellery set, which is outlined in Paragon International Metals Inc.’s documentation contained in Exhibit “V” of the plaintiff’s affidavit. Similarly, the value of the diamonds which comprise the jewellery set is also set out in Paragon International’s documentation and the Saxon-Kruss material as to the jewellery set composition at Exhibit “V” of the plaintiff’s affidavit. Also, Paragon International’s documentation and communications makes reference to the plaintiff being the jewellery set owner. The plaintiff signed Permission to Sell forms as provided by Paragon International. On failing to have been successfully auctioned, he was advised by email on December 19, 2017 that “your item did not sell at auction”, (see Exhibit “AA” of Donis’ affidavit). Mr. Donis made multiple requests for possession of his item, which did not occur. The facts and circumstances give rise to a prima facie case that the property is being unlawfully detained.
13I am satisfied that the criteria for an interim order of possession have been met.
Disposition
14The respondents, are jointly and severally ordered to produce the jewellery set diamonds as particularized in Exhibit “V” to the affidavit of Erickson Donis, dated June 15, 2018 into the possession of the Toronto Police Service, attention Detective Constable Kevin Williams, Financial Crimes Unit, to be held by the Toronto Police Service pending the conclusion of the outstanding criminal matters in which Erickson Donis is a complainant.
15In this instance, I exercise my discretion under Rule 44.03 of the Rules of Civil Procedure not to order the plaintiff to pay into court security for the property at issue.
Costs
16If the parties are unable to resolve the issue of costs as between themselves they may make written costs submissions, no more than 4 pages in length inclusive of the outline of costs within 15 days of this endorsement.
A. O’Marra J.
Date: November 13, 2018