Superior Court of Justice
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
STEPHEN WALLACE and DENISE WALLACE
Plaintiffs
– and –
PRISTINE DEVELOPMENTS INC., FAZLI AJDAREVIC, also known as FAZLI AJDAREVIC, also known as FAZL AJDAREVIC, also known as FAZL AJDAREUIC, also known as FAZ AJ, also known as FAZLI HAJDARI, NAZLIJE AJDAREVIC and JOHN DOE, JANE DOE and DOE CORPORATION
Defendants
COUNSEL:
Norman Groot, for the Plaintiffs
Ronald Allan, for the Defendant, Pristine Developments Inc.
HEARD: In Writing
REASONS FOR JUDGMENT
Papageorgiou J.
1The plaintiffs brought a motion in writing for a Mareva injunction against the defendants Fazli Ajdarevic and his company Pristine Developments Inc. (the “Responding Defendants”) without notice, for broad injunctive relief, including the following:
(a) an interim and interlocutory Mareva injunction, restraining the Responding Defendants from disposing of or dealing with any assets, worldwide, that have a value up to $1,500,000, or engaging in any transaction that has the effect of transferring assets out of Ontario, or instructing anyone from doing so on his behalf;
(b) as an ancillary order to the Mareva injunction, that the Responding Defendants prepare and provide to counsel for the Plaintiffs, within seven days, a sworn declaration describing the nature, value and location of all their assets, worldwide;
(c) as an ancillary order to the Mareva injunction, that the Responding Defendants provide an accounting of the transfers affecting proceeds of the sale of 544 Marksbury Road, Pickering, on September 17, 2020, and 373 Dyson Road, Pickering, on November 13, 2020, within seven days, a sworn declaration describing the nature, value and location of all their assets, worldwide; and
(d) as an ancillary order to the Mareva injunction, that Mr. Ajdarevic appear on a date to be set by this Court to be examined, on his affidavits, or if he does not produce any, than on what has occurred to the proceeds of sale and mortgages on 544 Marksbury Road, Pickering, and 373 Dyson Road, Pickering; and
(e) orders for relief against non-parties.
2I ordered that the Responding Defendants be granted brief notice of this proceeding and that this motion continue today, March 9, 2021 at 9:00.
3The defendant Fazil Ajdarevic attended today in person and requested an adjournment to retain counsel.
The requirements for a Mareva Injunction
4Where a moving party seeks a Mareva injunction they must establish the following:
a. a strong prima facie case;
b. they would suffer irreparable harm if the injunction is not granted;
c. that the balance of convenience favours granting the injunction. Chitel v. Rothbart, 1982 1956 (ON CA), 39 O.R. (2d) 513 (Ont. C.A.); Petro-Diamond Inc. v. Verdeo Inc., 2014 ONSC 2917, 13 C.B.R. (6th) 211, at para. 25.
5Additionally, the moving party must show:
d. some grounds for believing the respondent has assets within the court’s jurisdiction; and
e. that the respondent is removing or there is a real risk that he or she is about to remove the assets from the jurisdiction, or that the respondent is otherwise dissipating or disposing of such assets in a manner clearly distinct from his or her usual or ordinary course of business or living, so as to render the possibility of future tracing of assets remote, if not impossible in fact or law: see Chitel.
6Because the motion is brought without notice, the moving part must also:
f. make full and frank disclosure of all matters in his or her knowledge which are material for the judge to know;
g. give particulars of the claim, state the grounds of it and the amount thereof, and fairly state the points made against it by the respondent; and
h. give an undertaking as to damages.
Strong Prima Facie Case
7In this case, the plaintiffs allege that the defendants have perpetrated a civil fraud and breach of trust in connection with a real estate development venture which they were involved in.
8The Plaintiffs Stephen (“Stephen”) and Denise Wallace (“Denise”) were introduced to the defendant Fazli Ajdarevic (“Faz”) and his company Pristine Developments Inc. (“Pristine”) through a non-party Antonella Verni (“Antonella”), whom Stephen has worked with for decades. The Plaintiffs engaged in three successful home flip investment projects with Faz and Pristine from 2015 to 2018. In each of the successful projects, the Plaintiffs contributed their investment funds to help finance the purchase, demolition, and re-construction costs of certain real estate properties. Faz contributed capital as otherwise required, as well as his labour and general contracting services for the projects. Upon sale of the properties, each of the investors were re-paid their capital investment, and the net-profits were divided between them.
9In each of these prior successful projects, the property was purchased by Antonella alone or as joint tenants with Faz.
10In each of these prior successful projects, the Plaintiffs received a full return of their investment capital, as well as a percentage of net-profits which worked out to approximately $60,000 per project. On average, the successful projects were completed and sold in the range of 18 months.
11In September 2018, Faz suggested that the Plaintiffs and Antonella invest in a project at 544 Marksbury Road, in Pickering, Ontario (“544 Marksbury Project”). The Plaintiffs contributed a total of $625,000 in capital investment to the 544 Marksbury Project. 544 Marksbury was purchased in Faz’s name alone because of the parties’ experience with subcontractors who wanted contracts and documents signed by the registered owner. Since Faz was on site directing the contractors it made sense to put the property in his name.
12In June 2019, Faz suggested that he and the plaintiffs take over a project from his brother-in-law located at 373 Dyson Road, in Pickering, Ontario (“373 Dyson Project”). The Plaintiffs contributed a total of $532,166.80 in capital investment into the 373 Dyson Project. Faz’s sister, Nazlije Ajdarevic (“Naz”) held title to 373 Dyson Road. Faz suggested that title remain in Naz’s name until the sale to avoid transaction costs and because of their relationship of trust, the plaintiffs agreed.
13Similar to the prior investments, designated bank accounts were opened for each project. The designated account for the 544 Marksbury Project was CIBC Account No. 65396 (the “CIBC Account No. 65396”) and the designated account for the 373 Dyson Project was CIBC Account No. 09296 (the “CIBC Account No. 09296”).
14The Plaintiffs obtained their capital for the 544 Marksbury Project and the 373 Dyson Project through their savings, a private mortgage on their personal residential home, as well as lines of credit.
15Throughout 2018 – 2020, Faz continually represented to the Plaintiffs that the projects were progressing as planned other than delays caused by the COVID-19 pandemic throughout 2020.
16Throughout, Faz represented that he would hold the properties for the benefit and in trust for all of the investors and that the proceeds from the sales of the properties would be used to repay the principal investments, plus net-profits. The parties agreed that when the properties were sold, the proceeds of the sale would be transferred from the lawyer closing the transaction into the jointly held CIBC accounts and disbursed from there.
17Unbeknownst to the plaintiffs, the defendants took out the following mortgages on the properties:
i. On March 16, 2020: $500,000 mortgage against 373 Dyson; and
j. On April 30, 2020: $1.5 million mortgage on 544 Marksbury.
18Unbeknownst to the plaintiffs, the defendants sold the properties as follows:
k. September 17, 2020: They sold 544 Marksbury to Kim and Murry McLean for $2,345,000. The transfer indicates that Faz’s address was 1741 Spruce hill Road, Pickering;
l. November 13, 2020: They sold 373 Dyson Road to Shqipe and Basil Elserawi for $2,250,000.
19It is important that the plaintiffs had been in regular communications with Faz and Pristine throughout the summer of 2020 about the potential sale of the properties. Further, in his affidavit Steven indicates that on October 14, 2020, he had a specific conversation with Faz about the closing date of the sale of 544 Marksbury at a price of $2,175,000 to be taking place on November 26, 2020. At that point, 544 Marksbury had already been sold and for more than the price that Faz disclosed.
20Faz has refused to speak to the plaintiffs about what has happened to these properties although the plaintiffs candidly advise in their materials that when Antonella confronted Faz about the undisclosed sale of 544 Marksbury, he told her that all the money was gone and that he used the proceeds of the sale of 544 Marksbury as collateral for 373 Dyson and that a private lender sold 373 through a power of sale without Faz’s knowledge.
21This explanation appears to be false. The Parcel register for 373 Dyson indicates that when Naz took title, she also took out a mortgage for $535,000 with Effort Trust Company. The Parcel Register does not indicate the Effort Trust mortgage was discharged with the November 13, 2020 conveyance and there is no evidence that there was a power of sale.
22The plaintiffs sent the defendants a demand letter on December 11, 2020 and they did not respond.
23On or about January 5, 2021, CIBC advised the plaintiffs that the joint bank accounts in respect of the projects had been closed; this had been done without their knowledge or consent. The CIBC advised that the only way this could have happened was if Faz—the only other signatory—had directed it and had another CIBC account open to transfer the remaining funds into. CIBC would not disclose where remaining funds were transferred.
24Importantly, Faz was present today and did not deny any of the factual assertions as to the joint investments made by the parties and the sales of these properties, although he did say that 373 Dyson was owned by his sister and not him. Even if this is true and, he does not deny that 544 Marksbury was owned and sold by him and that he received those proceeds.
25I am satisfied on the record before me that the plaintiffs have established a prima facie case that Faz and/or Pristine are liable for breach of trust and deceit in particular because:
m. the relationship between the plaintiffs and the defendants was one of trust and confidence. This trust was built up over time and because of the three initial and successful investment projects
n. the defendants changed the investment practice after the first three projects such that title to 544 Marksbury and 373 Dyson Road would be held by Faz and his sister
o. the defendants then used their position of control of these properties to obtain mortgages and sell these properties without any notice to the plaintiffs.
p. the defendants have failed to account for the proceeds of these projects;
q. the defendants have refused to communicate with the plaintiffs about these projects at all; and
r. the explanation given to Antonella that 373 was sold pursuant to a power of sale appears to be false on the record before me.
Serious Risk of Dissipation/Removal of Assets
26The risk of asset flight or dissipation can be reasonably inferred from the material facts supporting a strong prima facie case of fraud: Mills and Mills v. Petrovic et al., (1980), 1980 1871 (ON SC), 30 O.R. (2d) 238, 663309 Ontario Inc. v. Bauman, 2000, 22640 (SCJ) at para 41.
27In Shibley & Associates LP v. Ross, 2011 ONSC 2951, at para 63, Justice Strathy, as he then was, stated:
Rather than carve out an "exception" for fraud, however, it seems to me that in cases of fraud, as in any case, the Mareva requirement that there be risk of removal or dissipation can be established by inference, as opposed to direct evidence, and that inference can arise from the circumstances of the fraud itself, taken in the context of all the surrounding circumstances. It is not necessary to show that the defendant has bought an air ticket to Switzerland, has sold his house and has cleared out his bank accounts. It should be sufficient to show that all the circumstances, including the circumstances of the fraud itself, demonstrate a serious risk that the defendant will attempt to dissipate assets or put them beyond the reach of the plaintiff. [Emphasis added.]
28See also Woods v. Jahangiri, 2020 ONSC 7404, at para 29 where Justice Sanfilippo stated:
The risk of asset flight or dissipation can be reasonably inferred from the material facts supporting a strong prima facie case of fraud having been committed against the plaintiff: 663309 Ontario Inc. v. Bauman, 2000 22640, 190 DLR (4th) 491, at para. 41; Mills and Mills v. Petrovic, 1980 1871, 30 O.R. (2d) 238; Sibley & Associates v. Ross, 2011 ONSC 2951, at paras. 63-65. In the absence of any evidence of a means to satisfy any judgment if the single asset identified by the Plaintiff of sufficient value to meet her claim is transferred out of Ontario, the Plaintiff has, in my determination established irreparable harm through the serious risk of dissipation of the net sale proceeds from the sale of the Hensall Property.
29In my view, the facts here support the inference that there is a serious risk of dissipation if the Mareva injunction is not granted. I am particularly influenced by: the fact that the defendants have sold the properties some time ago; they have refused to communicate with the plaintiffs since the fall of 2020 about what has happened with the properties and/or the sale proceeds; they have closed the joint bank accounts where the proceeds of sale were supposed to be paid; as such they have already attempted to put monies to which the plaintiffs are entitled beyond their reach.
30Further, Faz attended here today and when questioned about where the proceeds went, he refused to provide any information.
31In my view, as in Sibley, at para “it is a reasonable inference from these circumstances, as well as the circumstantial evidence of fraud referred to earlier, that, knowing that the plaintiff may be on his trail, [the defendants are] likely to attempt other means to put the plaintiff’s money out of its reach.”
Irreparable Harm
32Irreparable harm is harm which either cannot be quantified in monetary terms or which cannot be cured, usually because one party cannot collect damages from the other: RJR-MacDonald at p. 341; Christian-Philip v. Rajalingam, 2020 ONSC 1925, at para 33-34.
33The probability of irreparable harm increases as the probability of recovering damages decreases. In the Mareva injunction context, in the absence of any evidence of a means to satisfy a judgment if the assets identified by a plaintiff were removed from the jurisdiction or dissipated, the plaintiff will suffer irreparable harm if they obtain judgment only to then learn that those assets had been removed or dissipated during the course of the litigation by the defendant. Christian-Philip v. Rajalingam, 2020 ONSC 1925, at para 33-34.
34In the recent decision of Ice District Development Partnership v Hahn, [2020] A.J. No. 1414, Justice Lema of the Alberta Court of Queen’s Bench relied on the decision of Justice Sanfilippo of the Ontario courts in the Woods v. Jahangiri case in the assessment of the requirement to show irreparable harm. In the Ice District case, the question was whether a Mareva injunction should issue against a realtor who diverted trust funds received from deposit payments on new condominium builds. Justice Lema found that “without the assistance of the requested injunction, it is not clear that ICE has any actual way of collecting an eventual judgment.” and therefore, ICE had cleared the irreparable harm hurdle.
35On the record before me, the defendants have already taken steps to remove funds from the plaintiffs’ reach and there is no reason to suppose that such attempts will not continue.
36I am satisfied that the plaintiffs will suffer irreparable harm if the injunction is not granted. Without this injunction, it is not clear to me that the plaintiffs will have any ability to collect an eventual judgment.
Full and Frank Disclosure/ Particulars of the Claim, Grounds/ Fairly State the Points Made Against it by the Respondent/Undertaking as to Damages.
37The record is very detailed, outlines what appears to be all aspects of the dealings between the parties and is supported by documentary evidence. The plaintiffs have provided an undertaking as to damages. It appears to me that the plaintiffs have complied with these obligations.
Reason to believe the defendants have assets in Ontario
38The projects in question occurred in Ontario and the defendants are residents of Ontario: in my view there is reason to believe the defendants have assets in Ontario.
Balance of Convenience
39In determining the balance of convenience, the Court will consider whether the benefit the claimant will gain from preliminary relief outweighs the inconvenience caused to the respondent by the granting of relief. The judge must determine which party will suffer greater harm from the granting or refusal of the injunction pending a final decision. In other words, the balance of convenience must be weighed: RJS-MacDonald at para 68.
40The Mareva injunction being sought is very broad. It relates to all of Faz’s and Pristine’s assets, not simply the proceeds of sale of the two properties in question, which I assume is because the properties have already been sold some time ago and the plaintiffs do not know where the proceeds are. However, as pointed out in my March 8, 2021 endorsement, the plaintiffs are seeking a broad order at this time only with the intention of finding out where the proceeds have gone, after which it will seek only to preserve these proceeds.
41Given that Faz attended today and refused to provide these details, I am satisfied that the broad order sought is necessary.
42The plaintiffs also seek certain ancillary orders including requiring Faz to provide a sworn evidence as to where the proceeds have gone and as to his worldwide assets.
43Courts have made held that such orders may be made pursuant to the Court’s inherent jurisdiction. Innovative Marketing Inc. v. D’Souza 2007 CarswellOnt 1131, at para 16. See also Payplus Corporation v. Caldarone et. al. CV-20-63807, at para 40.
44I see no reason why a similar order may not be made in this case on an interim basis. I am satisfied that the plaintiff has a prima facie case, that the defendants have the information sought, that there is a risk of dissipation and the interests of justice favour the immediate disclosure and examination to trace the plaintiffs’ funds and on the status of the defendants’ worldwide assets.
45In addition, the plaintiffs seek orders from the non-party, the CIBC, for information as to what has happened to the remaining funds in the CIBC joint bank accounts were transferred. I see no reason why this order may not be made on an interim basis.
46With respect to production from the non-party real estate counsel of reporting letters relating to the sale of the property at 544 Marksbury Road and 373 Dyson Road, I am ordering that the real estate counsel attend at the return of this motion on Friday March 12, at 12:00 pm.
47Order to go in the form attached.
48The plaintiffs shall serve the defendants with this Order. This matter is returnable before me at 12:00 pm on March 12, 2021 by video conference with the following zoom co-ordinates:
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Papageorgiou J.
Released: March 9, 2021