COURT FILE NO.: CV-22-00003100-0000
DATE: 20221020
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: ALTEC GLOBAL INC.
AND:
AHMAD RASOULI A.K.A. RAY RASOULI, EZZIGROUP INC., NIKKAN CAPITAL INC., PADM MEDICAL INC., PRECISION ADM MEDICAL INC.
BEFORE: Verner J.
COUNSEL: Ken MacDonald, for the Plaintiff
HEARD: October 18, 2022 via Zoom
ENDORSEMENT
[1] The Plaintiff brings this motion for a Mareva injunction against three of the Defendants, namely Ahmad Rasouli (“Ray”), Ezzigroup Inc. and Nikkan Capital Inc. (together they are “the Defendants”) as well as for a Norwich order, all on an ex parte basis.
[2] At the hearing yesterday, I granted the motion with reasons to follow. These are those reasons.
Background
[3] Ezzigroup is a distribution company (and possibly a manufacturer) that at the peak of COVID-19 was distributing hand sanitizer, sanitizing wipes and face masks. On December 9, 2020, the Plaintiff loaned Ezzigroup $300,000. Interest payments were due monthly, and after multiple extensions given to the Defendant, the principal was eventually due in June 2022. Ezzigroup stopped making interest payments on the loan in April, 2022 and has not repaid any of the principal.
[4] According to the corporate profile and information given to the Plaintiff, Ray is the sole owner and sole directing mind of Ezzigroup.
[5] Ray is also one of two directors of the Defendant, Nikkan, the other director is his wife. Nikkan guaranteed the $300,000 loan.
[6] The Plaintiff is concerned that Ray is transferring property out of Ezzigroup to avoid repaying its debts, including the outstanding loan. That concern stems from inter alia the following:
(1) On September 8, 2022, Ray told the Plaintiff’s lawyer, Ken MacDonald, and the Plaintiff’s principal, Susan Gong, that Ezzigroup had transferred its trademarks to the Defendant, Precision ADM Medical Inc. These transfers were confirmed by trademark searches on the Canadian Trademarks Database.
(2) Ray also told Ken MacDonald and Susan Gong that he changed the contract he had with Defendants, Precision and PADM (both of whom sell Ezzigroup products), so that they pay Ray directly for Ezzigroup products, rather than pay Ezzigroup. The reason for the change in the contract was that a customer of Ezzigroup, namely Dempsey International Packaging, had started a lawsuit against Ezzigroup.
(3) One of the key reasons the Plaintiff agreed to extend the initial agreement was that Ray informed Susan Gong that Ezzigroup intended to distribute compostable and degradable face masks. However, the Plaintiff recently learned that those masks are not being distributed under the Ezzigroup name, but under the name of another corporation.
(4) Ray also informed Susan Gong that he was considering putting Ezzigroup into bankruptcy.
(5) And finally, Ezzigroup has refused to provide the Plaintiff with any recent financial statements, despite requests by the Plaintiff’s lawyer to do so, and at the same time Ezzigroup is asking the Plaintiff for more time to repay the loan.
[7] As for assets in Ontario, Ezzigroup’s headquarters are in Ontario and this is where they carry on business. The most recent financial statements suggest there is over $1,000,000 in shareholder equity. Nikkan is also based in Ontario and has shares in three companies (although the value of them is unclear). Ray has shares in both Ezzigroup and Nikkan, as well as real estate in Ontario (a condominium in Vaughan).
Mareva Injunction
[8] Before a Mareva injunction will be imposed, the Plaintiff must establish the following with respect to each Defendant named in the injunction:
(1) There is a serious issue to be tried;
(2) The Plaintiff will suffer irreparable harm if the injunction is not granted; and,
(3) The balance of convenience favours granting the injunction.
RJR-MacDonald Inc. v. Canada (Attorney General), 1994 CanLII 117 (SCC), [1994] 1 S.C.R. 311 at p.334.
[9] In fact, there needs to be more than a serious issue to be tried, there must be a strong prima facie case.
Aetna Financial Services Ltd. v. Feigelman(1985), 1985 CanLII 55 (SCC), [1985] 1 S.C.R. 2
[10] I must also consider whether the Plaintiff has demonstrated the following additional requirements:
(4) The Plaintiff has made full and frank disclosure of all material matters within its knowledge;
(5) The Plaintiff has given 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 them by the Defendant;
(6) The Plaintiff has provided grounds for believing that the Defendant has assets in the jurisdiction;
(7) The Plaintiff has provided grounds for believing that there is a real risk of the assets being removed out of the jurisdiction or otherwise dealt with so that the Plaintiff would be unable to satisfy a judgment awarded to them; and,
(8) The Plaintiff has given an undertaking as to damages.
[11] The evidence before me establishes a strong prima facie case against Ezzigroup for breach of contract and against Nikkan as the guarantor. Pursuant to a contract, the Plaintiff advanced $300,000 to Ezzigroup with the agreement that Ezzigroup would make interest payments monthly and would repay the principal by June, 2022. Interest payments have not been made since April and there has been no repayment of the principal. The contracts themselves were provided as evidence, as were email exchanges between Susan Gong and Ray, which reveal there has indeed been a breach of contract.
[12] I further find that there is a strong prima facie case against Ray personally for fraudulent conveyance. If correctly pleaded, Ray may be held personally liable for tortious acts he committed in his capacity as director for Ezzigroup (Ceballos v. DCL International, 2018 ONCA 49). According to the evidence before me, there is in fact a strong prima facie case that Ray, as the sole director of Ezzigroup, intentionally moved money out of Ezzigroup and dissipated its assets in order to avoid paying its debts and thus, Ray is fraudulently conveying Ezzigroup’s assets (see s.2 of the Fraudulent Conveyances Act R.S.O. 1990).
[13] The evidence shows that the Defendants all have assets in Ontario and there are grounds to believe, that Ray is dissipating Ezzigroup’s assets, and that he will dissipate the assets of all three responding parties, if he is aware they are all named in a lawsuit. If the Defendants do indeed dissipate their assets, the Plaintiff will not be able to recoup the large investment it made in Ezzigroup. There would be irreparable harm and, on the evidence before me, I find the balance of convenience weighs in favour of an injunction.
[14] Finally, I note that the Plaintiff has provided the necessary undertaking.
[15] Given the above, I granted the Mareva injunction against the Defendants, Ezzigroup, Nikkan and Ray on an ex parte basis until next Wednesday, when the matter is scheduled to return on notice to the Defendants.
Norwich Order
[16] The Plaintiff further seeks a Norwich order requiring all banks at which the three Defendants have accounts to provide bank account statements and cheques/transfer records in order to trace the movement of assets.
[17] In assessing whether to grant such an order, I must consider:
(1) Whether the Plaintiff has a valid, bona fide or reasonable claim;
(2) Whether the third party is somehow involved in the acts complained of;
(3) Whether the third party is the only practical source of information available;
(4) Whether the third party be indemnified for costs, and,
(5) Whether the interests of justice favour obtaining the disclosure.
[18] As I have already found, there is a strong prima facie case against all three Defendants. The Defendants’ banks (the third parties in this case) are necessarily involved in the movement of money of the Defendants and thus, involved in the acts complained of. Although the information sought may be provided by the Defendants, it is unlikely they will do so. Notably, Ezzigroup has failed to provide financial statements despite being asked for them, all while asking the Plaintiff for more time to repay. The Plaintiff is willing to cover the costs to the banks to fulfill the order. And finally, given my finding that there is a strong prima facie case Ray is fraudulently conveying assets to avoid paying its debts, the interests of justice favour the Plaintiff obtaining the information necessary to pursue this action.
[19] I therefore also grant the Norwich order.
[20] For these reasons, I signed the draft order with edits for a Mareva injunction and a Norwich order. Both are scheduled to return on notice to the parties next Wednesday, October 26, 2022 at 9:30 a.m. via Zoom.
[21] I note that the order does not allow for Ray to obtain funds for day-to-day living on 24 hours notice. After hearing submissions, I found that such a provision was unnecessary given the fact that the matter is back in court within five business days. However, if this motion was adjourned for a longer period, I would have had to hear further submissions on that issue.
The Honourable Madam Justice Catriona Verner
Date: October 20, 2022