Court File and Parties

COURT FILE NO.: CV-21-00000766-0000 DATE: 20210305 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Dr. Gillian Stanley, Plaintiff / Moving Party AND: Fabrizio Lucchese, Fabco Holdings Inc., 2501500 Ontario Inc., Jaymor Securities Ltd., N. Dwayne Gray Jr. aka Dwayne Gray and Zimmerman, Kiser & Sutcliffe, P.A., Defendants / Respondents

BEFORE: V. Christie

COUNSEL: Jayson V. Thomas, Counsel, for the Plaintiff / Moving Party Richard Payne, Counsel, for the Defendants, Fabrizio Lucchese, Fabco Holdings Inc., 2501500 Ontario Inc., Jaymor Securities Ltd. (N. Dwayne Gray Jr. aka Dwayne Gray and Zimmerman, Kiser & Sutcliffe, P.A., were not served and took no part in this motion)

HEARD: March 4, 2021

Endorsement

[1] The Plaintiff has brought an urgent motion for an interim and interlocutory Mareva injunction, restraining the Defendants, Fabrizio Lucchese, Fabco Holdings Inc., 2501500 Ontario Inc., Jaymor Securities Ltd. (“the Defendants”), and anyone else acting on their behalf or in conjunction with any of them, from directly or indirectly, by any means whatsoever:

(i) selling, removing, dissipating, alienating, transferring, assigning, encumbering, or similarly dealing with any of the Defendants’ assets, wherever situated; or

(ii) instructing, requesting, counselling, demanding or encouraging any other person to do so; or

(iii) facilitating, assisting in, aiding, abetting or participating in any acts, the effects of which do so;

This motion does not involve or affect the assets of the other two Defendants, N. Dwayne Gray Jr. aka Dwayne Gray, or Zimmerman, Kiser & Sutcliffe, P.A.

[2] This motion initially came before this court, as an ex parte motion, on March 3, 2021. At that time, this court ordered that the motion must be served on the Defendants and adjourned to today’s date for an oral hearing, via Zoom.

[3] At today’s hearing, the Defendants were represented by counsel, who made submissions on their behalf. The Defendants did not file any written material given the timing of notice and this motion.

[4] The factual background is essential to a determination of this motion and it will be summarized as briefly as possible below. This factual background is based on affidavit evidence and supporting documentation provided by the Plaintiff only at this time, as the Defendants have not had the opportunity to present a fulsome account of their position.

[5] This action involves a substantial loan, in the sum of $1,800,000.00 advanced by the Plaintiff, Dr. Gillian Stanley, to the following non-party borrowers:

a. TI Project Limited Partnership (“TI Project LP”)

b. Sunny Shore Project Limited Partnership (“Sunny Shore LP”)

c. TI Project GP, Inc. (“TI Project GP”); and

d. South Beach Street Development Ltd. (“South Beach Street Ltd.”)

[6] The borrowers are all Florida-based entities. Mr. Lucchese is an officer and director of each of the borrowers. Dr. Stanley obtained corporate records from the Florida Secretary of State’s Division of Corporation which supports this position (See Exhibits A-D attached to the affidavit)

[7] The loan was purported to be secured in a number of ways:

a. A promissory note, dated January 18, 2018, was signed by “Fabrizio Lucchese, President” on behalf of each of the borrowers. The promissory note states in part:

2. This Note is secured by that certain (a) Third Mortgage, Assignment of Rents, Security Agreement, Fixture Filing, made by TI Project LP and Sunny Shore LP in favor of Payee, dated an even date herewith; and (b) Second Mortgage, Assignment of Rents, Security Agreement, and Fixture Filing, made by South Beach LP in favor of Payee, dated an even date herewith (collectively, the “Mortgage”). 2 (a) and (b) together with any document or instrument now or hereafter executed in connection with any obligation of Maker to Payee, the “Loan Documents”.

(See Exhibit E of Affidavit)

b. A Third Mortgage over property located in Volusia County, Florida, purportedly owned by TI Project LP and Sunny Shore LP, was prepared by Mr. Lucchese’s Florida attorneys at Zimmerman, Kiser & Sutcliffe P.A. (“ZKS”), a Defendant in this action, but not a Respondent on this motion. The “Third Mortgage” stated in part as follows:

This Third Mortgage, Assignment of Rents, Security Agreement and Fixture Filing is made as of the ___ day of January, 2018, by TI PROJECT LIMITED PARTNERSHIP, a Florida limited partnership, and SUNNY SHORE PROJECT LIMITED PARTNERSHIP, a Florida limited partnership (herein collectively referred to as “Mortgagor”) each with an address of 310 E. Jackson Street, Orlando, Florida 32801, and GILLIAN STANLEY, an individual (“Mortgagee”), whose address is 91 Kingscross Road, King, Ontario, Canada, L7B 1E6.

Section 3.1 Title to Real Property

Mortgagor (a) owns fee simple title to the Real Property, (b) owns all of the beneficial and equitable interest in and to the Real Property, and (c) is lawfully seized and possessed of the Real Property. Mortgagor has the right and authority to mortgage and convey the Real Property and does hereby mortgage and convey the Real Property to Mortgagee. The Real Property is subject to no Encumbrances other than the Permitted Encumbrances.

Section 5.1 Encumbrances

Mortgagor will not permit any of the Property to become subject to any Encumbrance other than the Permitted Encumbrances.

Exhibit “A” to the Third Mortgage provides the legal description of the land as being in three parcels, specifically Kikay Subdivision, W.W. Marshall Subdivision and Sears-Broadway Subdivision. The Third Mortgage was signed by Mortgagor – TI PROJECT LIMITED PARTNERSHIP – by Fabrizio Lucchese, President and witnessed by Gordon Steele and Judy Dias. The Third Mortgage is signed by Mortgagor – SUNNY SHORE PROJECT LIMITED PARTNERSHIP – by Fabrizio Lucchese, President, and witnessed by Gordon Steele and Judy Dias. Amanda Greenspan notarized the signature of Mr. Lucchese.

(See Exhibit F of Affidavit)

c. A Second Mortgage over property located in Volusia County, Florida owned by South Beach Street Ltd. was prepared by Mr. Lucchese’s Florida attorneys at ZKS. The Second Mortgage stated in part as follows:

This Second Mortgage, Assignment of Rents, Security Agreement and Fixture Filing is made as of the ___ day of January, 2018, by SOUTH BEACH STREET DEVELOPMENT, LTD., a Florida limited partnership (the “Mortgagor”), each with an address of 315 E. Robinson St., Suite 600, Orlando, Florida 32801, and GILLIAN STANLEY, an individual (“Mortgagee”), whose address is 91 Kingscross Road, King, Ontario, Canada, L7B 1E6.

Section 3.1 Title to Real Property

Mortgagor (a) owns fee simple title to the Real Property, (b) owns all of the beneficial and equitable interest in and to the Real Property, and (c) is lawfully seized and possessed of the Real Property. Mortgagor has the right and authority to mortgage and convey the Real Property and does hereby mortgage and convey the Real Property to Mortgagee. The Real Property is subject to no Encumbrances other than the Permitted Encumbrances.

Section 5.1 Encumbrances

Mortgagor will not permit any of the Property to become subject to any Encumbrance other than the Permitted Encumbrances.

Exhibit “A” to the Second Mortgage provides the legal description of the land as being in six parcels, as described in the document. The Second Mortgage is signed by Guarantor, Fabrizio Lucchese, and witnessed by Gordon Steele and Judy Dias on January 18, 2018. Amanda Greenspan notarized the signature of Mr. Lucchese.

(See Exhibit G of Affidavit)

d. A personal guarantee given by Mr. Lucchese, which, among other things, granted Dr. Stanley a lien upon title to, and a security interest in all of Mr. Lucchese’s property. The “Guaranty” is signed by Mortgagor – SOUTH BEACH STREET DEVELOPMENT – by Fabrizio Lucchese, President, and witnessed by Gordon Steele and Judy Dias. Amanda Greenspan notarized the signature of Mr. Lucchese.

(See Exhibit H of Affidavit)

[8] The terms of the loan required interest to be paid at the rate of 16% per annum. The maturity date of the loan was “January __, 2019” with no specific date filled in.

[9] Dwayne Gray and ZKS also undertook the role of “closing counsel” in connection with the loan. Exhibit J to the Affidavit is a “Loan Closing Statement and Disbursement Sheet” showing the breakdown and recipients of the $1,800,000.00 It is of note that the document references loan closing costs, fees and expenses, specifically recording and filing fees. The document is signed on behalf of all borrowers by Fabrizio Lucchese, President. This document also attaches a legal description of the property subject to the Third and Second Mortgage. (Exhibit J to the Affidavit)

[10] Further evidence of the understanding that closing counsel, Mr. Gray and his firm, were to record the Mortgages and pay all associated recording fees and taxes is evidenced by an email from Mark Vosylius of Kingscross Financial to Mr. Lucchese, Mr. Gray, the Plaintiff, and Ms. Greenspan dated January 11, 2018. This can be found at Exhibit K to the affidavit. It is important to note that Mr. Gray and ZKS acted as closing counsel on a prior mortgage which Dr. Stanley’s company advanced to South Beach Street Ltd, in August 2017, therefore, she had no reason to be concerned that proper recording would not be done in this case. (See Exhibit RR to the Affidavit) That mortgage was satisfied in full in or around February 2018.

[11] The amount of $1,800,000.00 was provided to Amanda Greenspan, counsel for the Plaintiff on this transaction, on January 11, 2018, as documented in Exhibit L to the Affidavit. The funds were then distributed as per signed directions, with net loan proceeds of $1,721,856.95 sent to Fabco Holdings Inc. (See Exhibit S to the Affidavit)

[12] The maturity date of the loan was later extended to May 18, 2019 (See Exhibit W to the Affidavit). In connection with the renewal, on January 18, 2019, Mr. Lucchese signed a Reaffirmation of Guaranty Agreement, under which he affirmed and ratified the Guaranty and acknowledged that its terms, covenants and conditions remained in full force and effect. The Reaffirmation is attached as Exhibit X to the Affidavit.

[13] No payments were ever made on this loan and it remains in default.

[14] The Plaintiff has commenced a lawsuit against the borrowers in Volusia County, Florida. A copy of the complaint filed in that lawsuit is attached and marked as Exhibit Y to the Affidavit.

[15] The Plaintiff submitted that the loan was procured by fraudulent representations and inducements in four ways as follows:

a. The legal description of the property contained in the Third Mortgage did not correspond to the property Dr Stanley was told she was receiving a mortgage on, which was marketed to her as a luxury resort being developed by Jaymor, a company owned and controlled by Mr. Lucchese. According to the Plaintiff, the Defendants promised a mortgage on a resort property. Mr. Lucchese, on his own behalf and on behalf of the Defendant, Jaymor, represented to Dr. Stanley that the loan was being advanced for Jaymor, through the Florida-based TI Project LP and TI Project GP, to develop a hotel and resort in Volusia County, Florida called “Treasure Island”, located at 2025 South Atlantic Avenue, Daytona Shores, Florida. The Plaintiff submits that this representation was false. Unbeknownst to Dr. Stanley, the legal description of the property set out in the Third Mortgage was for a property different than the Treasure Island Resort. Rather, the Third Mortgage contained a property description corresponding to the Treasure Island Property. According to the Plaintiff, she first learned that the Third Mortgage did not pertain to the Treasure Island Resort in the summer of 2020 when she learned that the Resort was in foreclosure proceedings with another lender. After the loan went into default, Mr. Lucchese advised that he was working on repayment and so Dr. Stanley held off on these proceedings. However, on June 27, 2020, she came across a news article about the Treasure Island Resort foreclosure. Ultimately, Dr. Stanley filed a motion to intervene in the Florida mortgage foreclosure case, believing that her Third Mortgage pertained to the Treasure Island Resort. The motion was denied on the basis that a title search of the Treasure Island Resort revealed the Third Mortgage was not recorded on that property, and Dr. Stanley came to learn that the mortgage she held was not in relation to the Treasure Island Resort.

b. The purported mortgagors on the Third Mortgage did not actually own the properties mortgaged to her, the Treasure Island Property, as security for the loan. In the Third Mortgage, TI Project LP and Sunny Shore LP represented themselves as the owners of the property legally described therein. Mr. Lucchese signed the Third Mortgage as President of the general partners of TI Project LP and Sunny Shore LP. On January 8, 2018, prior to the closing of the loan, the borrowers’ lawyer represented to Dr. Stanley’s Ontario lawyer that these entities owned the Treasure Island Property since 2017. In reality, the Treasure Island Property was never owned by TI Project LP and/or Sunny Shore LP, but rather was owned by Daytona Bluetide Group Limited Partnership, whose general partner was Daytona Bluetide Group, Inc. (Exhibit KK of the Affidavit) These Florida-registered entities were at all material times owned and controlled by Mr. Lucchese. Therefore, the borrowers, all controlled by Mr. Lucchese, purported to grant Dr. Stanley a mortgage over a property which they falsely represented belonged to them, when in fact it belonged to another Lucchese-controlled company.

c. Despite undertakings, Dwayne Gray never recorded / registered the Third Mortgage or Second Mortgage. Dr. Stanley did not discover this until December 2020 when title searches were performed.

d. With the Third and Second Mortgage unrecorded / unregistered, Mr. Lucchese was able to subsequently encumber both properties and extract a collective total of USD$9,000,000.00 from those properties. On February 15, 2018, less than one month after the loan advance, South Beach Street Ltd. granted a mortgage over the South Beach Street Property to US Income Partners, LLC in the amount of USD$2,000,000.00. Proof of this is attached at Exhibit NN to the Affidavit. On December 2, 2019, DBG LP granted a mortgage to TBG Funding, LLC in the amount of $7,000,000.00 over the Treasure Island property, documented in Exhibit OO to the Affidavit. Neither of these encumbrances would have been permitted by the mortgages but the mortgages were not recorded.

[16] Dr. Stanley recently learned that Jaymor has entered into an agreement to sell the property it owns at 105 West Beaver Creek, Units 9 and 10, Richmond Hill, Ontario. The sale is set to close on March 12, 2021. Dr. Stanley does not seek to stop the sale of the property, however, she seeks to have the net sale proceeds paid into court pending the trial of this action.

[17] Section 101 of the Courts of Justice Act and Rule 40.01 of the Rules of Civil Procedure empower the Court to grant an interlocutory injunction in the form of a Mareva order, restraining the disposition of a party’s property.

[18] In order for an interlocutory injunction to be granted, the moving party must meet the general test in RJR-MacDonald Inc. v. Canada, [1994] 1 S.C.R. 311, which is as follows:

a. The Plaintiff must put forward a claim which is not frivolous or vexatious, but which raises a serious question to be tried, or in some circumstances, a strong prima facie case;

b. The Plaintiff must establish irreparable harm, in other words, that damages would be an inadequate remedy if the Plaintiff succeeds; and

c. The Court must consider the balance of convenience, in other words, must consider which party will suffer the greater harm from the granting or refusing of the injunction.

See also: Aetna Financial Services Ltd. v. Feigelman, [1985] 1 S.C.R. 2.

[19] Further requirements for a Mareva injunction were stated succinctly in Sibley & Associates LP v. Ross, 2011 ONSC 2951 at para 11, are as follows:

a. The plaintiff must make full and frank disclosure of all material matters within his or her knowledge;

b. The plaintiff must give particulars of the claim against the defendant, stating the grounds of the claim and the amount thereof, and the points that could be fairly made against it by the defendant;

c. The plaintiff must give grounds for believing that the defendant has assets in the jurisdiction;

d. The plaintiff must give grounds for believing that there is a real risk of the assets being removed out of the jurisdiction, or disposed of within the jurisdiction or otherwise dealt with so that the plaintiff will be unable to satisfy a judgment awarded to him or her; and

e. The plaintiff must give an undertaking as to damages.

The Court also made it clear that the Plaintiff must demonstrate a strong prima facie case. Sibley, para 12

[20] In considering the factors stated above, this court finds as follows:

a. Dr. Stanley has established a strong prima facie case of fraud and deceit against the Defendants in procuring the loan proceeds her. The Third Mortgage was for a property different than what Dr. Stanley was led to believe. Also, the listed Mortgagors did not actually own the property being mortgaged. Further, neither Mortgage was ever recorded, which allowed for Mr. Lucchese to extract millions of dollars from the subject properties.

b. Dr. Stanley appears to have made full, frank and fair disclosure of all material matters within her knowledge. It should be noted that this factor is not as important given that notice was provided, albeit short notice.

c. The Plaintiff has given detailed particulars of her claim with supporting documentation. She has also fairly stated a number of points that the Defendants could raise in opposition to her claim.

d. The Defendants clearly have assets in Ontario, including real property. This does not appear to be in dispute, especially given the pending sale of the property in Richmond Hill.

e. Dr. Stanley has given an undertaking with respect to damages.

These factors would all point toward granting the relief sought.

[21] However, with respect to other factors to be considered, this court finds as follows:

a. This court is not satisfied that there is a real risk that the Defendants will remove or dissipate assets before Judgment. There is evidence of a fraud and deceit in this case. The court can draw an inference of asset dissipation based on the aforementioned proof of fraud. Sibley, para 63. However, in my view, the appropriate drawing of such an inference should depend on the nature of the fraud or deceit alleged. There is no evidence in this case of hiding or removing assets so as to lead this court to find that this will continue in the future. The Plaintiff accepts that the pending sale of the West Beaver Creek Property is a bone fide transaction. The Defendants have submitted that there will be no money flowing to them when this transaction is complete, as there are three outstanding mortgages to be satisfied, in addition to a writ of execution against the property. There is no reason for this court to believe otherwise. There is no reason to believe that the motivation behind this sale was to remove or dissipate assets.

b. Further, it is the view of this court that the Plaintiff has failed to establish that she will suffer irreparable harm if an injunction is not granted. The totality of the assets available to the Defendants is unknown to this court. There is no suggestion that the Defendants are seeking to dispose of any other assets besides the West Beaver Creek Property, which everyone agrees is a legitimate transaction.

c. Finally, in considering the balance of convenience, it is the view of this court that the Defendants will suffer the greater harm. While there are clear indications of fraud and deceit in this case, there is no suggestion that assets were, or are, being dissipated or hidden. If the Plaintiff is successful in this action, there could be a significant judgment in her favour. The Plaintiff submits that, without this Mareva injunction, any such judgment may amount to nothing more than a “paper judgment”. However, there is no evidence to support the suggestion that the Defendants will be unable to cover such a judgment if it is ordered. Further, the Defendants include many operating businesses that require access to assets to remain operational. If those businesses are unable to operate, everyone suffers, including the Plaintiff, if such a judgment is obtained.

[22] During oral submissions, counsel for the Plaintiff claimed that, contrary to the submission of the Defendants, this motion was not entirely motivated by the impending sale of West Beaver Creek. However, it is of note in the Affidavit of Dr. Gillian Stanley, in para 5, she stated, “I am respectfully requesting that this Honourable Court hear this motion on an urgent basis. I learned yesterday that Jaymor is selling real property it owns in Richmond Hill on March 5, 2021. Based on the fraud that I have uncovered, described in detail below, I fear that following this sale, Lucchese will remove the closing proceeds from the reach of the Court in an effort to avoid my attempts to satisfy a Judgment in this case.” The timing of this motion strongly suggests that it is primarily motivated by this impending sale – a sale which everyone agrees is a bone fide transaction.

[23] Having considered the entire circumstances of this case, this court is not satisfied that the Plaintiff has met the test for an interim Mareva injunction. The motion is, therefore, dismissed. Having said that, in his submissions, counsel for the Defendants took no issue with providing disclosure to the Plaintiff in relation to the proceeds from the impending sale of West Beaver Creek. Therefore, this court orders that:

1. These Defendants provide disclosure of the Payout Statements for the 1st, 2nd and 3rd Mortgages and a copy of the Writ of Seizure and Sale in connection with the sale transaction of the property at 105 West Beaver Creek Road, Units 9 and 10 within 24 hours of said sale.

[24] If the parties are unable to agree as to costs of this motion, the court will accept written submissions on costs, which shall be no more than five pages in length, including supporting documentation, and which shall be provided to the court office by email no later than March 12, 2021.

Justice V. Christie Date: March 5, 2021