Court File and Parties

COURT FILE NO.: CV-20-647366

DATE: 20200928

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: TRACY HUI and JOJO HUI (Personally and Representing the interests of The Enforcement Committee of the Debenture Holders), Plaintiffs

AND:

CIM INTERNATIONAL GROUP INC., BAYVIEW CREEK (CIM) LP, CIM BAYVIEW CREEK INC., JIUBIN FENG (a.k.a. JERRY FENG), ZHANG DIAN YUAN, DAN FUOCO, ROBERT PARENT, MEHDI SHAFIEI, CIM MACKENZIE CREEK INC., CIM MACKENZIE CREEK LP, GRAVITAS SECURITIES INC. and AMANDA ZHAO, Defendants

BEFORE: Paul B. Schabas

COUNSEL: Jonathan Barr and Amiri Dear, for the Plaintiffs

Ronald Lachmansingh and Katherine Lee, for the Defendants

Lawrence Hansen for Duca Financial Services Credit Union Ltd.

Robert Choi, for Bryton Capital Corp.

HEARD: September 28, 2020

ENDORSEMENT

[1] This matter came before me as an ex parte application for injunctive relief on September 18, 2020. At that time I granted the relief sought stating the following in my Endorsement:

This motion for a Certificate of Pending Litigation, a Mareva injunction and the appointment of an Investigative Receiver, came before me by conference call this morning.

Mr Barr advised of recent developments arising from his contacts with the real estate agent and the lawyer for the defendants on the proposed sale of the Bayview property on September 17, 2020, including his notice to them of this motion, and specifically to the defendant Jerry Feng last night that this motion would be proceeding this morning and to provide contact information if he wished to participate. Mr Barr provided me with a chain of emails that were exchanged on September 17 documenting these contacts.

I am satisfied that interim orders should be made granting the relief sought by the plaintiffs, and have signed the orders which are effective immediately.

This matter shall be adjourned for further consideration by me to Monday September 28, 2020 at 10AM. Subject to any requests for an in-person hearing, the matter shall be heard by Zoom technology, and the coordinates for the hearing shall be provided by the Court in advance of the hearing. Should the defendants not have filed an appearance or response, the plaintiffs shall be responsible for advising the defendants of the Zoom coordinates for the return of the motion.

[2] The matter came before me again today. Counsel for the defendant Bayview Creek (CIM) LP moved to have the injunction set aside on the basis that there had been a failure by the plaintiffs to make full and fair disclosure of all material facts, and that the court had been misled. While counsel also took the position that the Mareva injunction, appointment of an Investigative Receiver and the Certificate of Pending Litigation (“CPL”) were not justified on the basis of the evidence that had been put before me on September 18, 2020, his argument today was based on the failure to make full and frank disclosure. No other defendants were represented.

[3] Counsel also appeared for the mortgagees of the first and second mortgages on the property that is the subject of the dispute. They advised that the issuance of the CPL put those mortgages in default and that they intended to bring enforcement proceedings on the Commercial List.

[4] I also had before me the Investigative Receiver’s First Report to Court, dated September 25, 2020, although this had come from counsel for the plaintiffs and had not been provided to other counsel.

[5] In light of the complex nature of this dispute, with various commercial interests involved and the need for expeditious resolution and/or direction from the court, this matter is to be transferred to the Commercial List and counsel are directed to contact the Commercial List office immediately to obtain an appointment with a judge as soon as possible and in any event no later than October 13, 2020. At that appointment the continuation of the relief granted in my Order of September 18, 2020, may be addressed, and the parties shall be prepared to do so at that time, including having filed evidence on the issue. Should the mortgagees wish to take enforcement proceedings that should be done together with this proceeding so that all matters can be addressed by the same judge as efficiently as possible.

[6] The Orders of September 18, 2020 shall be extended to Tuesday, October 13, 2020.

[7] I was asked by counsel for Bayview Creek to address the issue of full and fair disclosure, as I was the judge who heard the ex parte application and, it was submitted, would be in a better position to address that issue than a judge of the Commercial List. Counsel for the plaintiffs also urged me to address that issue now. I agreed and stated orally that I was not satisfied that there has been material non-disclosure or a failure to make full and frank disclosure that would warrant setting aside the Order.

[8] The defendant’s argument is essentially an assertion that the plaintiffs ought to have explicitly drawn my attention to terms of the agreements that provided that the plaintiffs had not relied upon any oral or written representations, and that a sale of the property was not prohibited. However, the plaintiffs’ evidence relied on terms in the Term Sheet which appeared to have been breached relating to failure to secure the loan by CIM to Bayview Creek, and included evidence that the plaintiffs had been lied to by the principal of Bayview Creek, and of CIM International Group Inc., about the rationale for a lack of a mortgage on the property. While I was not taken to every part of the Subscription Agreement at the ex parte application, I would not expect to be either, and I find no material non-disclosure or lack of full disclosure or frankness having regard to the allegations claimed by the plaintiffs.

[9] Bayview Creek also argues that there was a misrepresentation about the payment of interest, as CIM Group had made interest payments in June and December 2018 and in June 2019. I accept Mr. Barr’s explanation that there was a misunderstanding in the wording of his client’s affidavit on this point, which states, correctly, that no interest was paid in December 2019. The reference to “other payments” was not intended to refer to previous payments. In this regard, it does not seem to be in dispute that the June 2020 interest payment has also not been made. The point is that the defendant is in breach by having failed to make interest payments, and there has been no lack of full disclosure or misleading of the court on that issue.

[10] A further point raised at the hearing today is that one of the plaintiffs is non-resident, and therefore security for costs should be ordered. There was no material before me seeking security for costs, although the non-residency was raised as an issue regarding any undertaking as to damages. Further, counsel for the plaintiffs pointed out that one of the plaintiffs is a resident of Ontario. In the circumstances, I declined to make any order on this issue and leave that for another day.

Paul B. Schabas J.

Date: September 28, 2020