COURT FILE NO.: CV-22-00681526-0000
DATE: 20220608
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
RICHARD NEIL NEVILLE, SACHA PLOTNIKOW, NORCANA SERVICES LTD. and BRIAN MACKENZIE DUNN
Plaintiffs
- and -
SOVEREIGN MANAGEMENT GROUP, CORP., SOVEREIGN HOLDING GROUP INC., SOVEREIGN MARKETING ENTERPRISES INC., NEXTGEN ASSET MANAGEMENT INC., EUROFIRST TRADING, LTD., RONALD KOPMAN, IRA HOWARD MORRIS, and JOSEPH MERRILL
Defendants
John J. Pirie, Michael Nowina, and Ben Sakamoto for the Plaintiffs
Dihim Emami for the Ontario Securities Commission
Ira Howard Morris, self-represented Defendant
HEARD: June 8, 2022
PERELL, J.
REASONS FOR DECISION
A. Introduction
[1] The Plaintiffs Richard Neil Neville, Sacha Plotnikow, Brian MacKenzie Dunn, all of whom reside in Fort St. John, British Columbia, and Norcana Services Ltd., which is the wholly-owned corporation of Mr. Plotnikow, bring a motion – on notice - for a Mareva injunction against the Defendants Joseph Merrill, Ronald Kopman, Ira Howard Morris, Sovereign Management Group Corp., Sovereign Holding Group Inc., Sovereign Marketing Enterprises Inc., Nextgen Asset Management Inc., and Eurofirst Trading Ltd.
[2] The motion was served on all the Defendants save Mr. Merrill and Eurofirst Trading.
[3] For the reasons that follow, the motion is granted on an ex parte basis as against Mr. Merrill and Eurofirst Trading and on an on-notice basis against the other Defendants.
B. Facts
[4] On February 25, 2016, Sovereign Management was incorporated. Its registered address was 57 Millerdale Road, Richmond Hill. Its sole director is Ira Morris, whose address was also 57 Millerdale Road. (In 2022, the adult resident of 57 Millerdale Road advised a process server that he had purchased the property in July 2021 and the resident said he had no knowledge of the Defendants.)
[5] On December 18, 2017, Nextgen Asset Management was incorporated. Its registered address was 57 Millerdale Road, Richmond Hill. Its sole director is Ira Morris, whose address was also 57 Millerdale Road.
[6] On July 28, 2021, Sovereign Marketing was incorporated. Its registered address was 57 Millerdale Road, Richmond Hill. Its sole director is Ronald Kopman, whose address was also 57 Millerdale Road. The same day Sovereign Holding was incorporated. Its registered address was 100 King Street West, 2600, Toronto. Its sole director is Ira Morris and his address was 100 King Street West, 2600, Toronto. However, Sovereign Holding’s address is false; 100 King Street West, 2600, Toronto is the address for the Canadian Investor Protection Fund.
[7] The Defendants used the business names "Sovereign MEI" and "Sovereign Trust Metals". However, Canadian corporate searches have not revealed corporations with these names.
[8] There is no record of Eurofirst Trading being an incorporated entity.
[9] In April 2018, Brian Dunn met Joseph Merrill, who held himself out as a Senior Trading Strategist and Senior Commodity Strategist for Eurofirst Trading. This contact led to Mr. Dunn opening a SovereignPro trading account.
[10] In December 2020, Brian Dunn introduced Sacha Plotnikow to Mr. Merrill. Mr. Plotnikow also opened a SovereignPro trading account.
[11] In October 2021, Brian Dunn introduced Richard Neville to Mr. Merrill, and Mr. Neville also opened a SovereignPro trading account.
[12] Mr. Merrill orally and with various online materials and documents represented that the plaintiffs' funds would be deposited in SovereignPro trading accounts and invested in options, futures, or forex. One of the defendants' websites "sovereignmei.com" states:
Sovereign MEI is one of Canada’s leading leveraged precious metals brokers, investing in Gold, Silver, Platinum and Palladium. Our customers, whether institutional or private, take advantage of our extensive, up-to-the-minute high quality information, research, and proprietary analysis. In such rapidly moving markets there is no room for error. This is why we are committed to giving all our customers our undivided attention every step of the way. We extend a highly personal service to every customer. This combination of service, technology, flexibility and experience makes our service second-to-none.
[13] None of the plaintiffs signed any written agreements or completed written forms to create their SovereignPro accounts. Rather, they spoke with Mr. Merrill over the phone.
[14] The plaintiffs transferred a total of $313,086.90 CAD and $522,749.30 USD to the defendants between September 2018 and April 2022 to bank accounts for Sovereign Marketing, Sovereign Management, Sovereign Holdings, and Nextgen at branches in Richmond Hill, Ontario.
a. Mr. Neville transferred $407,000 USD to the defendants between October 14 and December 9, 2021. The most recent available report on his purported investments states that they have a liquidation value of $1,847,171.00 USD.
b. Mr. Plotnikow and Norcana transferred $191,995.50 CAD and $5,008 USD to the defendants between February 1, 2021 and March 31, 2022. The most recent available report on his purported investments states that they have a liquidation value of $1,012,929.60 USD.
c. Mr. Dunn transferred $121,091.40 CAD and $110,741.30 USD to the defendants between September 17, 2018 and April 18, 2022. The most recent available report on his purported investments states that they have a liquidation value of $714,740.00 USD.
[15] In early May 2022, access to the Plaintiffs’ account information was shut down and the Plaintiffs were unable to contact the Defendants. On May 3, 2022, the Plaintiffs noticed that the defendants' website was down. On May 4, 2022, they made numerous attempts to contact Mr. Merrill and were unsuccessful.
[16] On May 5, 2022, Mr. Merrill advised each of the Plaintiffs by email that "[a]s you probably know the site(s) are down" and that "the servers are going through unexpected maintenance" that "should take a few days".
[17] The Plaintiffs continued to attempt to contact Mr. Merrill and the corporate defendants by phone and email, but they were unsuccessful. Mr. Merrill's phone number and email address have now been disconnected or discontinued.
[18] On May 5, 2022, Mr. Neville reported his concerns about recovering his funds to the RCMP.
[19] On May 13, 2022, the Plaintiffs learned that the Ontario Securities Commission (“OSC”) had charged Messrs. Morris and Kopman with fraud and trading securities without registration in June 2021.
[20] The OSC alleges that individuals invested money with Morris and Kopman’s companies under the promise that their funds would be used to trade options and foreign exchange instruments. The OSC further alleges that the funds were not used in accordance with the investors' understanding of their investment. Instead, most of the funds were diverted to the benefit of Morris, Kopman and their associates. The allegations against Morris and Kopman implicate Nextgen, Sovereign Management, and Sovereign Marketing.
[21] The Plaintiffs sent a letter to the defendants (via email to Kopman, Morris and Merrill) demanding the return of their investments in their SovereignPro accounts. They have not received a response to this demand.
[22] On May 24, 2022, the Plaintiffs commenced this action by Notice of Action.
[23] On June 6, 2022, the Plaintiffs filed a Statement of Claim.
[24] In this motion, the Plaintiffs seek a Mareva injunction freezing the Defendants’ assets. In support of their request for a Mareva injunction, the Plaintiffs have provided an undertaking as to damages.
[25] As noted above, all of the Defendants with the exceptions of Mr. Merrill and Eurofirst Trading were served with notice of the motion for a Mareva injunction. There is some reason to believe that neither of these Defendants exist or that they are the imposters of the other Defendants.
[26] Mr. Morris appeared as a self-represented litigant at the return of the motion. Having filed no responding material, he was not in a position to oppose the Mareva injunction motion. He advised the court that he had sought but been unable to retain a lawyer.
[27] I reviewed the proposed Mareva injunction Order with Mr. Morris.
[28] I advised the parties that I was granting the motion subject to issuing formal Reasons for Decision and reviewing the form and content of the Order.
C. Discussion and Analysis
[29] Section 101 of the Courts of Justice Act[^1] provides the court with the jurisdiction to grant interlocutory injunctions including Mareva injunctions. Section 101 states:
Injunctions and receivers
101 (1) In the Superior Court of Justice, an interlocutory injunction or mandatory Order may be granted or a receiver or receiver and manager may be appointed by an interlocutory Order, where it appears to a judge of the court to be just or convenient to do so.
Terms
(2) An Order under subsection (1) may include such terms as are considered just.
[30] For a Mareva injunction, the plaintiff must satisfy the requirements for an interlocutory injunction as set out in in RJR-MacDonald Inc. v. Canada (Attorney General)[^2] and typically a plaintiff must also establish: (1) a strong prima facie case; (2) irreparable harm if the remedy for the defendant’s misconduct were left to be granted at trial; (3) the balance of convenience favours granting an interlocutory injunction; (4) the defendant has assets in the jurisdiction; and (5) that there is a serious risk that the defendant will remove property or dissipate assets before judgment.[^3] Absent unusual circumstances, the plaintiff must provide the undertaking as to damages normally required for any interlocutory injunction.
[31] The risk of removal or dissipation of assets can be established by inference and the defendant’s prior fraudulent activities and improper conduct and the circumstances of the fraud itself including concealment, deception, evasion, and clandestine behaviour may support an inference that the defendant will remove or dispose of property.[^4]
[32] A Mareva injunction is an extraordinary remedy because as a general policy of civil procedure, a remedy that allows prejudgment execution against the defendant’s assets is not favoured, but where there is a strong case that the defendant has defrauded the plaintiff the law's reluctance to allow prejudgment execution yields to the more important goal of ensuring that the civil justice system provides a just and enforceable remedy against such serious misconduct.[^5]
[33] A strong prima facie case is one that will probably prevail at trial or is likely to succeed at trial.[^6] In the immediate case, the Plaintiffs have established strong prima facie cases of fraud, conspiracy, breach of trust, breach of fiduciary duty, knowing assistance, and conversion.
a. To defraud a person is to deprive a person dishonestly of something which is his or of something to which he is or would or might but for the perpetration of the fraud, be entitled.[^7] The elements of a claim of fraudulent misrepresentation are: (1) a false statement by the defendant; (2) the defendant knowing that the statement is false or being indifferent to its truth or falsity; (3) the defendant having an intent to deceive the plaintiff; (4) the false statement being material and the plaintiff having been induced to act; and, (5) the plaintiff suffering damages.[^8]
b. The elements of a claim of civil conspiracy are: (1) two or more defendants make an agreement to injure the plaintiff; (2) the defendants: (a) use some means (lawful or unlawful) for the predominate purpose of injuring the plaintiff, or (b) use unlawful means with knowledge that their acts were aimed at the plaintiff and knowing or constructively knowing that their acts would result in injury to the plaintiff; (3) the defendants act in furtherance of their agreement to injure; and, (4) the plaintiff suffers damages as a result of the defendants' conduct.[^9]
c. The elements of a claim for breach of trust are: (a) a trust relationship; and (b) a breach of the terms of the trust.[^10]
d. The elements of a claim for breach of fiduciary duty are: (1) a fiduciary relationship: (2) a fiduciary duty; and (3) breach of the fiduciary duty.[^11]
e. The elements of a claim for knowing assistance are: (1) the plaintiff is the beneficiary of a trust or fiduciary relationship; (2) the trustee or fiduciary fraudulently or dishonestly breaches his or her equitable duty; (3) the defendant has actual knowledge of the misconduct; and, (4) the defendant assists in the fraudulent or dishonest design.[^12]
f. The elements of a claim for conversion are: (1) the plaintiff has an immediate right to possession of personal property; (2) the personal property is identifiable or specific; and (3) the defendant takes, uses, or destroys the goods or interferes with the plaintiff’s right of possession.[^13]
D. Analysis and Discussion
[34] For all practical purposes, the motion proceeded as an ex parte application as against the Defendants Mr. Merrill and Eurofirst Trading, and as an unopposed motion as against the other Defendants.
[35] In the circumstances of the immediate case, it is just and convenient to grant a Mareva injunction against all the defendants. The Defendants have not returned the Plaintiffs’ money nor provided any information to suggest that the investment funds are currently secure or available. The Ontario Securities Commission is alleging serious misconduct. The uncontradicted evidence on the motion suggests that the Plaintiffs have been defrauded and that the Plaintiffs have strong prima facie cases for the pleaded causes of action. There are strong reasons to infer that assets will be dissipated if they have not already been dissipated. A review of the uncontested evidence shows that all the factors that would justify a Mareva injunction are satisfied in the immediate case.
E. Conclusion
[36] For the above reasons, the motion for a Mareva injunction against all the Defendants is granted with costs to the Plaintiffs in the cause. I shall review the Order for issuance in accordance with these Reasons for Decision and with the changes to the draft Order discussed during the hearing of the motion.
Perell, J.
Released: June 8, 2022
COURT FILE NO.: CV-22-00681526-0000
DATE: 20220608
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
RICHARD NEIL NEVILLE, SACHA PLOTNIKOW, NORCANA SERVICES LTD. and BRIAN MACKENZIE DUNN
Plaintiffs
- and -
SOVEREIGN MANAGEMENT GROUP, CORP., SOVEREIGN HOLDING GROUP INC., SOVEREIGN MARKETING ENTERPRISES INC., NEXTGEN ASSET MANAGEMENT INC., EUROFIRST TRADING, LTD., RONALD KOPMAN, IRA HOWARD MORRIS, and JOSEPH MERRILL
Defendants
REASONS FOR DECISION
PERELL J.
Released: June 8, 2022
[^1]: R.S.O. 1990, c. 43.
[^2]: 1994 117 (SCC), [1994] 1 S.C.R. 311.
[^3]: SFC Litigation Trust (Trustee of) v. Chan, 2017 ONSC 1815 (Div Ct.); United States of America v. Yemec (2005), 2005 8709 (ON SCDC), 75 O.R. (3d) 52 (C.A.); DeMenza v. Richardson Greenshields of Canada Ltd. (1989), 1989 4138 (ON SC), 74 O.R. (2d) 172 (Div. Ct.); Aetna Financial Services Ltd. v. Feigelman, 1985 55 (SCC), [1985] 1 S.C.R. 2; Chitel v. Rothbart (1982), 1982 1956 (ON CA), 39 O.R. (2d) 513 (C.A.).
[^4]: Riar v Khudal, 2020 ONSC 6238 at para 11; Electromart (Ontario) Inc v Fabianiak, 2016 ONSC 5266; Sibley & Associates LP v. Ross, 2011 ONSC 2951 at paras 63-64.
[^5]: 2092280 Ontario Inc v. Voralto Group Inc, 2018 ONSC 2305(Div. Ct); SFC Litigation Trust (Trustee of) v. Chan, 2017 ONSC 1815 (Div Ct); Aetna Financial Services Ltd v. Feigelman, 1985 55 (SCC), [1985] 1 SCR 2.
[^6]: Modry v. Alberta Health Services, 2015 ABCA 265 at para. 37.
[^7]: Scott v. Commissioner of Police for the Metropolis, [1974] 3 All E.R. 1032 at p. 1038 (H.L.).
[^8]: Bruno Appliance and Furniture Inc. v. Hryniak, 2014 SCC 8; Parna v. G. & S. Properties Ltd. (1970), 1970 25 (SCC), 15 D.L.R. (3d) 336 at p. 344 (S.C.C.); Derry v. Peek (1889), 14 App. Cas. 925 (H.L.).
[^9]: Pro-Sys Consultants v. Microsoft, 2013 SCC 57; Dale v. Toronto Real Estate Board, 2012 ONSC 512; Normart Management Ltd. v. West Hill Redevelopment Co. (1998), 1998 2447 (ON CA), 37 O.R. (3d) 97 (C.A.); Knoch Estate v. John Picken Ltd. (1991), 1991 7320 (ON CA), 4 O.R. (3d) 385 (C.A.); Hunt v. T & N plc, 1990 90 (SCC), [1990] 2 S.C.R. 959; Canada Cement Lafarge Ltd. v. British Columbia Lightweight Aggregate Ltd., 1983 23 (SCC), [1983] 1 S.C.R. 452.
[^10]: OPFFA v. Paul Atkinson et al. 2018 ONSC 1207 at para. 92.
[^11]: Galambos v. Perez, 2009 SCC 48 at para. 37; Hodgkinson v. Simms, 1994 70 (SCC), [1994] 3 S.C.R. 377; Lac Minerals Ltd. v. International Corona Resources Ltd., 1989 34 (SCC), [1989] 2 S.C.R. 574; Frame v. Smith, 1987 74 (SCC), [1987] 2 S.C.R. 99; Canadian Aero Services Ltd. v. O'Malley, 1973 23 (SCC), [1974] S.C.R. 592 at p. 616.
[^12]: Caja Paraguaya de Jubilaciones y Pensiones del Personal de Itaipu Binacional v Garcia, 2020 ONCA 412; Citadel General Assurance Co. v. Lloyds Bank Canada, 1997 334 (SCC), [1997] 3 S.C.R. 805; Air Canada v. M & L Travel Ltd. 1993 33 (SCC), [1993] 3 S.C.R. 787; Gold v. Rosenberg, 1997 333 (SCC), [1997] 3 S.C.R. 767.
[^13]: BMW Canada Inc. (Alphera Financial Services Canada) v. Mirzai, 2018 ONSC 180 at para. 21; Kayani v Toronto-Dominion Bank, 2014 ONCA 862 at paras 27-28; UBS Wireless Services Inc. v. Inukshuk Wireless Partnership, [2008] O.J. No. 1704 (S.C.J.); 373409 Alberta Ltd. (Receiver of) v. Bank of Montreal, 2002 SCC 81; Boma Manufacturing Ltd. v. Canadian Imperial Bank of Commerce, 1996 149 (SCC), [1996] 3 S.C.R. 727; McLean v. Bradley (1878), 1878 22 (SCC), 2 S.C.R. 535.