Court File and Parties

COURT FILE NO.: 00-1433 DATE: January 9, 2019 ONTARIO SUPERIOR COURT OF JUSTICE

B E T W E E N:

Future Health Inc. o/a Trauma Services as continued on by its Trustee in Bankruptcy, Scott, Pichelli & Graci Ltd. Marek Z. Tufman, lawyer for Ellen Helden and Christina Helden Plaintiffs

- and -

The Economical Mutual Insurance Company and Noel Walpole and Insurance Crime Prevention Bureau and Rick DeGraff and Aubrey Dove and Jean-Claude Cloutier and George Sparts and Peter Borst and Howard Moran and Terry Boyle and Bruce MacDonald and Karen Loke and Robert Cooke and Robert Coughlin and Lewis Dunn James Riewald, Lawyer for Lexfund Inc. Defendants

Endorsement

INTRODUCTION:

[1] Lexfund Incorporated brings this motion in essence seeking a limited Mareva injunction whereby it asks to have funds currently standing in court in this particular action, protected from being disbursed without further order of the court and notice to it.

[2] Lexfund Incorporated requests that any further order from this court regarding release of the funds be delayed until its litigation with certain defendants in actions other than this one, are resolved.

FACTS:

[3] Lexfund advanced funds by way of loans to Lou Ferro, a solicitor in Hamilton, to assist in financing his personal injury practice.

[4] Mr. Ferro has died. I understand he leaves Ellen Helden and his daughter Christina Helden as next of kin.

[5] Ellen Helden operated Future Heath, operating as Trauma Services, which was intertwined in Mr. Ferro’s law practice.

[6] Mr. Ferro went bankrupt prior to his death.

[7] Future Heath has commenced legal proceedings in this action along with the trustee in bankruptcy seeking damages from the various defendants. Lexfund is not part of this litigation.

[8] I made a previous order in this action on consent, paying certain funds to the defendant Economical Insurance, with the balance of funds to be paid into court pending further order. I am given to understand that the balance of the Future Health action has resolved subject to the disposition of the funds remaining in court which I am advised are approximately $125,000.00.

[9] It is these funds currently standing in court that Lexfund wishes protected and not disbursed without further order of the court and notice to itself.

[10] Lexfund is clearly a creditor of Mr. Ferro’s estate.

[11] Lexfund has provided an extensive affidavit by Mr. Gregoire which has gone unchallenged. Mr. Gregoire appears to reside in Malta which is where he swore this affidavit. Counsel for the Heldens indicated that as such they could not cross examine him. I reject that argument as he clearly could have been cross examined if counsel so desired. In fact, counsel made no request to cross examine Mr. Gregoire.

[12] I also note Ellen Helden has provided no affidavit, although she was in court for the hearing of this motion. Her daughter has provided an affidavit which basically adds little to the narrative of the facts, other than her claim that she has no interest in the funds currently in court, and that she received money to buy the house in issue from her grandfather. I note she is a lawyer in England and likewise has not been cross examined. I am advised the house in issue has been sold, and pursuant to an order of Carpenter-Gunn, J., the surplus funds have now been paid into court.

[13] Lexfund has filed a draft report from an accountant setting out various irregularities and unaccounted transfers of large sums of money from the general account of Lou Ferro to Future Health.

[14] Counsel for the respondent argues I should give no weight to this report as it is based solely upon the affidavit of Mr. Gregoire, rather than any independent forensic examination.

[15] I reject that argument as the report documents various exhibits attached to Mr. Gregoire’s affidavit that appear to show irregularities in the transfer of funds, with no explanation. I also note that no explanation has been given by way of affidavit by Ellen Helden denying the conclusions drawn by this accountant based on his review of those various exhibits.

[16] Ellen Helden has filed a report of an accountant who also has not examined anything individually or in any forensic manner. He has simply criticized the report filed by Lexfund.

[17] I have also noted a long list of various emails between Lexfund, Mr. Ferro and Ellen Helden while the negotiations for these loans were ongoing and indeed once the negotiations were completed and the funds advanced. Examples of the various emails were also part of the record. I conclude that the loan by Lexfund to Mr. Ferro, which was substantial, was well known to Ellen Helden, especially the term of the loan that these funds could not be used to pay non arm’s length entities without the written consent of Lexfund. Such written consent was never given.

THE LAW:

[18] A Mareva injunction may be granted if the moving party establishes: A) A prima facie case. B) A risk that the respondent would dissipate its assets pending trial with the result of avoiding judgment. C) That the moving party has given their undertaking as to damages.

[19] I have concluded based upon the record before me that there is a strong prima facie case of fraud and conspiracy with regards to the Lexfund loan as outlined in the affidavit of Mr. Gregoire, the exhibits attached, and the analysis of those exhibits by the accounting expert of Lexfund.

[20] The cases of Sibley & Associates LLP v. Ross, 2011 ONSC 2951 at para. 63 and Raymond Motor Freight Systems Inc. v. R. M. Logistics Inc., 2015 ONSC 3139 at paras. 9 – 11, indicate that where there is evidence of fraud in a case, then the court may infer that there is risk of removal or dissipation of funds from the circumstances of the fraud itself. I so conclude in this case.

[21] I am satisfied based on the affidavit filed by Lexfund, whereby they have undertaken to pay damages if same occur as a result of this injunction. I reject the argument of the respondents that they have not tested Lexfund on whether in fact it does have the funds to pay damages. The respondents could have requested to cross-examine Lexfund on that affidavit even though the affidavit was filed late. They did not do so, nor did they ask for an adjournment of this motion to give them the ability to cross examine on the affidavit.

[22] Prejudice is not an essential element of the criteria required for a Mareva injunction, however both counsel have addressed it in their oral submissions. Lexfund basically argues that as the respondents filed nothing to indicate prejudice, that I should therefore conclude that there was none. I reject that argument.

[23] The evidence is clear from the submissions of counsel that a great deal of money from the estate and the respondents has been tied up by Lexfund through other actions in having those funds paid into court. The $125,000.00 at issue on this motion is a significant amount for any single individual. There is clearly some prejudice to the respondents if an order is made tying up all of these funds until other litigation is finalized. I note that other litigation is basically only at the pleadings stage and far from being concluded, although at the request of counsel, I have appointed myself the case manager on all of this other litigation to get it moving in a more expeditious fashion.

CONCLUSION:

[24] Counsel agreed that with a Mareva injunction I have the ability to exercise my discretion and tailor the terms of the injunction as I think fair to the parties based on all the circumstances and facts before me.

[25] I have concluded that the remaining funds in court in the above captioned action will stay there until further order of this court without prejudice to either party, upon notice to the other, seeking a release of the funds in the future.

[26] Of the funds remaining in court I order that $50,000.00 of those funds be paid out to counsel for Ellen Helden in trust for her benefit. The balance of the funds, plus accrued interest, will remain in court pending any further order by this court, upon notice to Lexfund.

[27] I appoint myself case management judge under Rule 37.15 of the Rules of Civil Procedure, regarding all of the Lexfund actions dealing with Mr. Ferro, his estate, the trustee in bankruptcy, the Heldens, and Future Health carrying on business as Trauma Services. Counsel in those cases will attempt to agree on a schedule, for my review, to move these matters forward in a more expeditious manner.

[28] Counsel have agreed that costs should be fixed at $5,000.00 inclusive of taxes and disbursements. There has been a mixed result of sorts in this motion and as such I order that costs in the amount of $5,000.00 shall be fixed for this motion and left to the discretion of the trial judge in the Lexfund actions as to how, and to who, those costs should be paid.

Arrell, J. Released: January 9, 2019