Court File and Parties
COURT FILE NO.: CV-20-00649470-00CL DATE: 2020-12-24
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Her Majesty the Queen in Right of Ontario, Plaintiff AND: Sanjay Madan (a.k.a. Sadanand Madan), Shalini Madan, Chinmaya Madan, Ujjawal Madan, Intellisources Inc., Newgen Solutions Inc., 10583570 Canada Ltd., Vidhan Singh and Wang & Associates Professional Corporation, Defendants
BEFORE: Dietrich J.
COUNSEL: Christopher A. Wayland and Amy Then, for the Plaintiff Christopher Du Vernet and Carlin McGoogan, for the Defendants
HEARD: December 16, 2020
ENDORSEMENT
1The plaintiff alleges that the Crown is the victim of a massive fraud perpetrated by the defendants, who obtained at least $11 million from a government program intended to help families affected by the COVID-19 health pandemic.
2The government program, known as “Support for Families Program” (“SFFP”), was aimed at defraying the costs of at-home learning through one-time payments of $200 or $250 per eligible child.
3The plaintiff employed the defendants Sanjay Madan (“Madan”), his wife, Shalini Madan, and their two sons, Chinmaya Madan and Ujjawal Madan in Information Technology roles. It is alleged that these defendants opened thousands of bank accounts at Ontario financial institutions and then fraudulently diverted at least $11 million in SFFP payments into accounts they controlled.
4On October 19, 2020, the plaintiff obtained an ex-parte Mareva injunction against the defendants. The Mareva injunction applies to all of the defendants’ assets situated in Ontario. These assets include the sale proceeds of a property municipally known as 5 Deerling Crescent, North York, Ontario (the “Deerling Property”). Madan purchased the Deerling Property on January 12, 2016, with his own funds, and sold it on September 29, 2020, before the Mareva injunction was granted.
5In addition to the Mareva injunction, the plaintiff obtained an interim preservation order under the Civil Remedies Act, 2001, S.O. 2001, c. 28 to preserve the defendants’ property, situated in Ontario, to ensure that it is not dissipated pending the outcome of a forfeiture hearing. The interim preservation order freezes, among other things, the contents of safety deposit boxes and all bank accounts, and other investments in Canadian or other securities held by financial institutions in Ontario.
6No criminal charges have been laid against the defendants at this time, although an investigation is underway.
7Madan brings this motion to vary the Mareva injunction to grant him and his wife, Shalini Madan, and their two sons, Chinmaya Madan and Ujjawal Madan access to funds to retain criminal and civil counsel. These defendants, other than Ujjawal Madan, who is residing and employed in the United States, also seek funding for their personal expenses. Specifically, the moving party seeks access to the Deerling Property proceeds of $911,486.32 held in the trust account of KS Legal. The plaintiff accepts that these proceeds are non-proprietary.
8The defendants seek access to these proceeds to pay retainers to criminal counsel in the range of $315,975 to $591,600, not including HST or the costs of attendance at four criminal trials. They seek $315,270 to pay counsel in this civil proceeding, in addition to the amount already permitted to be paid to counsel, for a total of $453,270.
9In addition, the moving party seeks living expenses for himself of $7,000 per month for “home”, “utilities”, “car”, “internet/phones”, and “groceries and food.”
10The plaintiff opposes the motion on the basis that the defendants have not discharged their onus to show that they have no assets, other than the frozen assets, available to pay their expenses. The plaintiff further submits that even if the defendants had met their evidentiary burden, they would only be entitled to reasonable legal and living expenses, and the expenses they seek are not reasonable or supported by evidence.
11On the evidentiary record, I am satisfied that the defendants have not discharged their onus to show they have no assets, other than the frozen assets, to pay their expenses. Accordingly, the motion is dismissed.
Positions of the Parties
12The defendants assert that the proceeds from the sale of the Deerling Property should be available to them for their legal and living expenses because the plaintiff has already frozen at least $11 million worth of assets, not including the Deerling Property, and the plaintiff accepts that these proceeds are non-proprietary.
13The defendants further assert that the defendants’ assets outside of Ontario are of no assistance to the defendants because, in their view, the Mareva injunction would operate to freeze those assets as soon as they became situated in Ontario for the purposes of paying debts in Ontario. In other words, the terms of the Mareva injunction are so broad that they cover all of the defendants’ assets wherever situate.
14The plaintiff asserts that the defendants have not adduced evidence to show that they do not have other assets, apart from the frozen assets, in order to pay their expenses. Further, the plaintiff submits that the moving party has not come to court with clean hands, and he has not answered all of his undertakings.
Law
15The test to be applied on a motion to vary a Mareva injunction is the test articulated by Molloy J. in Canadian Imperial Bank of Commerce v. Credit Valley Institute of Business and Technology, 2003 CanLII 12916 (ON SC), [2003] O.J. No. 40 (Sup. Ct.), at para. 26:
Accordingly, the test to be applied is as follows:
i) Has the defendant established on the evidence that he has no other assets available to pay his expenses other than those frozen by the injunction?
ii) If so, has the defendant shown on the evidence that there are assets caught by the injunction that are from a source other than the plaintiff, i.e. assets that are subject to a Mareva injunction, but not a proprietary claim?
iii) The defendant is entitled to the use of non-proprietary assets frozen by the Mareva injunction to pay his reasonable living expenses, debts and legal costs. Those assets must be exhausted before the defendant is entitled to look to the assets subject to the proprietary claim.
iv) If the defendant has met the previous three tests and still requires funds for legitimate living expenses and to fund his defence, the court must balance the competing interests of the plaintiff in not permitting the defendant to use the plaintiff's money for his own purposes and of the defendant in ensuring that he has a proper opportunity to present his defence before assets in his name are removed from him without a trial. In weighing the interests of the parties, it is relevant for the court to consider the strength of the plaintiff's case, as well as the extent to which the defendant has put forward an arguable case to rebut the plaintiff's claim.
16The parties seeking to vary a Mareva injunction have the onus of proving that they have no other assets available for legal fees or living expenses: Waxman v. Waxman, 2007 ONCA 326, at para. 39.
17In meeting this onus, the parties are expected to be candid about their ability to obtain funds from various sources. The Court of Appeal for Ontario, in Waxman, held that a defendant will not meet his onus if he refuses questions related to potential sources of income; and an adverse inference will be drawn if the defendant refuses to answer questions about his or her ability to finance living and legal expenses from other sources: paras. 41-43. If the defendants fail to provide evidence, they cannot discharge their onus.
18In asking the court to exercise its discretion to give the moving party access to frozen funds, he is required to make full disclosure of all assets and liabilities: Trade Capital v. Peter Cook, 2015 ONSC 7776, at para. 41.
19As noted in International Offtake Corp. v. Incryptex Ltd., [2017] OJ No. 6600 (SCJ), at para. 44, the availability of assets from corporations with which the moving party has a relationship is relevant; and failure to disclose assets from corporate entities owned or controlled by the moving party can be a factor weighting against access to frozen assets.
Analysis
20Based on the evidentiary record, the moving party has made no attempt, in any of three affidavits he relies on in support of his motion, to describe any of his assets outside of Ontario. On November 6, 2020, the moving party swore an affidavit stating that he had no funds, and that he had not been able to pay bills since October 19, 2020.
21The November 6, 2020 affidavit was false. The record shows that the moving party withdrew in excess of $84,000 from the CIBC between July and September 2020, and the moving party admitted that he withdrew significant cash. He also admitted that he used this cash to pay hydro bills and to buy food. As of December 9, 2020, he admitted to still having about $20,000 in cash in his possession.
22The moving party also admitted that he personally ferried between $21,000 and $30,000 to India in September 2020 and left it there with relatives. He also sent relatives, who were visiting Canada from India in September 2020, back to India with large bundles of cash estimated to be worth about $18,000. It is reasonable to infer that he was sending money offshore to avoid detection and possible seizure as proceeds of crime. The moving party failed to disclose any of this information in his affidavits in support of this motion. Further, although the moving party undertook to provide the contact information of these key witnesses who ferried the bundles of cash to India in September 2020, he has failed to do so.
23The record includes several examples of the moving party’s refusal to answer questions on his worldwide assets and to disclose assets and income:
- He is a citizen of India but has refused to disclose his assets there.
- He was granted permanent residency in Panama, but has refused to disclose his assets in Panama or elsewhere.
- He owns two 30-unit student residences and has two tenants living in his home, but has not disclosed the rent paid by the students or the tenants. He states that the rent from the student residences is being held for him by the property management company.
24Chinmaya Madan is employed at Microsoft in the United States and owns two condominiums, one of which is rented out. Chinmaya has provided no information regarding rental income. The moving party testified that Chinmaya’s annual salary, estimated to be USD130,000-140,000, is deposited into Chinmaya’s bank account, but then “taken away.” Through the moving party’s answer to an undertaking, the plaintiff learned that Chinmaya’s wages are deposited into a U.S. bank account, which is not subject to the Mareva injunction or the preservation order.
25Ujjawal Madan is a graduate student in the U.S. He has a U.S. bank account, which is not subject to the Mareva injunction or the preservation order.
26In the moving party’s affidavit of December 4, 2020, sworn in support of this motion, he states that the Mareva injunction freezes the assets of his wife and his sons, and that none of them has any funds. However, none of Shalini Madan, Chinmaya Madan, Ujjawal Madan has filed an affidavit in respect of their assets, income, and ability to pay expenses.
27None of Shalini Madan, Chinmaya Madan or Ujjawal Madan has provided any evidence to demonstrate that he or she has no assets that are not subject to the Mareva injunction and the preservation order from which they can pay expenses.
28Notwithstanding the significant lack of disclosure and the failure of the moving party, his wife and his two sons to demonstrate that they do not have assets, other than those that have been frozen, to pay their expenses, the moving party argues that the evidence of their inability to pay is the Mareva injunction itself.
29The Mareva injunction provides, in part, as follows:
THIS COURT ORDERS that the defendants, and its servants, employees, agents, assigns, officers, directors 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 the defendants, wherever situated in Ontario, including but not limited to the assets listed in Schedule “A” hereto.
30The moving party relies on Nordheimer J.A.’s endorsement in Caja Paraguaya de Jubilaciones Y Pensiones del Personal de Itaipu Binacional v. Obregon, 2019 ONCA 198 (C.A.) in support of his position that the onus of showing that he, his wife and his sons have no assets to pay any expenses can be satisfied without any evidence at all, by demonstrating that the terms of the Mareva injunction are so broad that they must cover all the defendants’ assets.
31A key distinction between the wording in the Mareva order in Caja Paraguaya and the order in the case at bar is that the former order restrained the applicants from “selling, removing, dissipating … or dealing with any assets, wherever situated in the world …”: Caja Paraguaya, at para. 3; whereas the Mareva order in this case retrains the defendants from dealing with their assets “wherever situated in Ontario.”
32In Caja Paraguaya, Nordheimer J.A. held that the non-dissipation order was “as broad an order as could be envisaged” and “covers all of the applicants’ assets” such that the evidence of their assets was irrelevant. No matter what the asset, if it was situated in the world, it was restrained. The terms of the Mareva order in this case are not nearly so broad or restraining.
33In submitting that Ujjawal Madan does not need to access the frozen funds for living expenses because he has a U.S. bank account, which is not covered by the preservation order, the defendants acknowledge that the Mareva injunction does not restrain them from dealing with their assets outside of Ontario.
34In my view, Caja Paraguaya does not assist the moving party to discharge his onus to demonstrate that he has no assets, apart from the frozen assets, to pay his legal expenses and those of his wife and two sons and to pay his living expenses. The moving party is also not excused from the requirement to make full disclosure of all his assets and liabilities. As in Waxman, I draw an adverse inference from his refusal to answer questions about his ability to finance legal and living expenses from other sources.
35I find that Shalini Madan, Chinmaya Madan, Ujjawal Madan have offered no evidence whatsoever in support of their request for access to the frozen assets, which would justify a grant of legal or living expenses to them.
Disposition
36The moving party’s motion is dismissed.
Costs
37The parties are strongly encouraged to agree on the matter of costs. If the parties cannot agree, the plaintiff may make written costs submission, not exceeding three pages in length (excluding a costs outline) within 21 days of this endorsement. The moving party may make responding submissions, not exceeding three pages in length, within ten days of having received the plaintiff’s submissions.
Dietrich J.
Date: December 24, 2020