Court File and Parties

COURT FILE NO.: (Lieff v. Cohen) CV-21-00672984-0000

(MJM Capital Group Ltd. v. Cohen) CV-21-00672137-0000

DATE: 20220203

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: AARON LIEFF, ABRAHAM TOP, SHARON TOP, ALLAN MALTSEV, ARI EKSTEIN, QUALITY SEEDS LTD., DR. JONATHAN STUART RAPP, JOSH LIEFF, 2835559 ONTARIO INC., RENARD PATRICK, 2844120 ONTARIO LIMITED, SHAWN GREGORY HUTCHINGS, and URI CARNAT, Plaintiffs

AND:

MARK COHEN, GARY COHEN, 2763276 ONTARIO INC., 2860067 ONTARIO INC. and JOHN DOE, Defendants

AND BETWEEN:

MJM CAPITAL GROUP LTD., MARK SOER, MARAT RABINOVIC, MICHAEL KORAL, 2750388 ONTARIO INC., MICHAEL GERSHGORIN and FAIGA GERSHGORIN, Plaintiffs

AND:

MARK ELY COHEN aka MARK COHEN, 2763276 ONTARION INC., LOUIS JOSH LIEFF aka L. JOSH LIEFF aka JOSH LIEFF, 2835559 ONTARIO INC. o/a TARGA CAPITAL, GARY COHEN, DAVID COHEN, LEA COHEN, CARLY COHEN, JANNA DIVIN-LIEFF, SHAWN HUTCHINGS, ABRAHAM MURREY TOP aka AVI TOP, TOP LAW FIRM, LIOR LEVY, TRUSTER ZWEIG LLP, URI CARNAT, 2860067 ONTARIO INC., JOHN DOE, JANE DOE and JOHN DOE CORPORATION, Defendants

BEFORE: Justice Glustein

COUNSEL: Justin Anisman and Oscar Moody, for the plaintiffs in Court File No. CV-21-00672984-0000

Robert Karrass, for the plaintiffs in Court File No. CV-21-00672137-0000

Trung Nguyen, for the defendants Mark Cohen, 2860067 Ontario Inc., and 2763276 Ontario Inc. in both actions

HEARD: February 2, 2022 (by video hearing)

REASONS FOR DECISION

[ 1 ] The plaintiffs in Court File CV-21-00672984-0000 (the Lieff Action) and in Court File CV-21-00672137-0000 (the MJM Action) seek a Mareva injunction against the defendants Mark Cohen, 2860067 Ontario Inc. (286), and 2763276 Ontario Inc. (276) (collectively, the Mark Cohen Defendants).

[ 2 ] The present motion was brought on notice to all defendants. In his endorsement dated December 1, 2021, Justice Myers required such notice, while adjourning the ex parte motion for interim Mareva relief and freezing all accounts of SFO Capital Inc. owned or controlled directly or indirectly by any of the defendants Mark Cohen, 276, or Gary Cohen.

[ 3 ] The plaintiffs had also sought Mareva injunctive relief against the remaining defendants in both actions. That relief has been resolved by consent order.

[ 4 ] Despite the Mark Cohen Defendants being notified almost two months ago (following the endorsement of Justice Myers) of the Mareva relief sought, counsel for the Mark Cohen Defendants appeared at the video hearing and advised plaintiffs’ counsel and the court that he had only been retained 30 minutes prior to the hearing. This was the first time any counsel had appeared for the Mark Cohen Defendants, and none of the Mark Cohen Defendants participated personally after service.

[ 5 ] Further, counsel for the Mark Cohen Defendants advised the court that he had only been retained on a limited scope retainer to (i) seek an adjournment and (ii) consider the issues raised by the motions. He advised the court that he had not been retained as counsel of record and did not know whether he would be retained.

[ 6 ] Consequently, the issue before the court was whether the motion should be adjourned, and if so, on what terms.

[ 7 ] The order sought by the plaintiffs, filed with the court prior to the hearing, is based on the “standard” order as set out in 2092280 Ontario Inc. v. Voralto Group Inc., 2018 ONSC 2305 (Div. Ct.).

[ 8 ] The standard order for a Mareva injunction (i) freezes assets of the defendants in all hands, including financial institutions, (ii) requires the defendants to (a) provide an affidavit with a list of assets within seven days of service of the order and (b) submit to an examination under oath on the affidavit, and (iii) requires institutions with knowledge of the order to disclose records concerning the assets and accounts of the defendants.

[ 9 ] The Mark Cohen Defendants do not object to the standard order being issued against the corporate defendants 276 and 286, on an interim basis, until the return of the interlocutory motion for the Mareva injunction. Counsel for the Mark Cohen Defendants advises that neither 276 nor 286 have any assets.

[ 10 ] The Mark Cohen Defendants object to any order seeking relief against the personal defendant Mark Cohen.

[ 11 ] I find that the evidence before me supports interim Mareva relief in the standard form against all of the Mark Cohen Defendants, including Mark Cohen.

[ 12 ] As required under Voralto, I find that there is a strong prima facie case of fraud based on the evidence before me. The investment structure was represented to be a “pre-sold” arrangement under which the plaintiff investors would lend money to the defendants who would purchase used vehicles from car rental companies and sell them to pre-arranged dealers and/or individuals, with a return on investment for the amounts loaned for such purposes.

[ 13 ] However, there is evidence that:

(i) Mark Cohen was not properly licensed by the Ontario Motor Vehicle Industry Council under the Motor Vehicle Dealers Act, 2002, S.O. 2002, c. 30, Sch. B;

(ii) Individuals who were represented to be purchasers either did not exist or claimed to have not had any dealings with the defendants;

(iii) The defendants refused to provide accounting or other records to establish that the investment structure actually existed;

(iv) Mark Cohen provided pictures of cheques from car rental companies which did not correspond to the bank records of 276;

(v) In or around September 2021, Mark Cohen transferred all of the investors’ money out of 276’s bank account and left it with a zero balance;

(vi) Despite having a good relationship with his parents, on July 14, 2020 Mark Cohen’s parents bequeathed an early inheritance to their children but omitted Mark Cohen; and

(vii) In or around September 2020, Mark Cohen transferred his share in his matrimonial home in North York to his wife, with whom he remains married.

[ 14 ] The present motion will be returned to address the issue of interlocutory Mareva relief. At that time, the Mark Cohen Defendants will be able to file affidavit evidence to address the evidence presently in the record. However, waiting until 30 minutes prior to the hearing, and then seeking an adjournment without agreeing to any interim relief against Mark Cohen (when counsel for the Mark Cohen Defendants acknowledged that neither 276 nor 286 have any assets), does not protect the interests of the plaintiffs in light of the strong prima facie case of fraud. Interim relief is required.

[ 15 ] Further, the evidence supports the five-part test set out in Voralto, albeit on an interim basis. In particular:

(i) The Mark Cohen Defendants filed no evidence to suggest that the plaintiffs did not make full and frank disclosure;

(ii) The plaintiffs provided sufficient particulars of the claim against the Mark Cohen Defendants, with no explanation from the defendants for (a) the transfer of assets, (b) lack of documentation, (c) cheques without bank account confirmation, or (d) nonexistent purchasers;

(iii) There is evidence that the Mark Cohen Defendants transferred investor funds to SFO Capital Inc.;

(iv) Given the evidence of fraud, and the evidence of the transfer of assets and other steps which could defeat creditor recourse, the court can infer a risk of disposition of assets: Sibley & Associates LP v. Ross, 2011 ONSC 2951, at para. 40; and

(v) The plaintiffs have given an undertaking as to damages, the sufficiency of which is not challenged on the evidence before the court.

[ 16 ] At the hearing. counsel for the Mark Cohen Defendants made several submissions as to the scope of a Mareva order, if the court was inclined to grant it on an interim basis. I address these submissions below.

[ 17 ] First, counsel submitted that no relief should be ordered against Mark Cohen, but only against 276 and 286. I reject that submission as the evidence discloses a strong prima facie case of fraud against Mark Cohen for the reasons I discuss above.

[ 18 ] Second, counsel submitted that if an order was to be made against Mark Cohen, it should not include such standard terms as preparing a sworn statement of assets or attending at a cross-examination on his accounts. However, by choosing not to provide any evidence to the court, and by retaining counsel only 30 minutes before the hearing, the defendant Mark Cohen should not be able to benefit by his own conduct to avoid standard Mareva terms which protect the interests of the investors. The requirement to list assets or attend on cross-examination arises from the current state of the evidence before the court, which the Mark Cohen Defendants had a full opportunity to address upon notice of the relief sought.

[ 19 ] Third, counsel submitted that Mark Cohen should be permitted to withdraw, at his discretion, amounts he considers appropriate for living expenses, legal fees, and monies required for his “ordinary course of business”, which counsel submitted was the purchase and resale of used vehicles. Counsel submitted that the plaintiffs could monitor such withdrawals and return to court if the plaintiffs considered the withdrawals to be excessive. I do not agree with such an approach.

[ 20 ] Under the standard Mareva order, there is no provision permitting a defendant to withdraw amounts at the defendant’s discretion, for living expenses or legal fees. Rather, the practice is that a defendant must come to court and present a budget for living expenses and legal fees, for the court’s approval. I adopt the same approach in the present case, with a specific term added to the order at paragraph 10 (even if not necessarily required) stating explicitly that Mark Cohen can bring a motion for payment of living expenses and legal fees, on reasonable notice.

[ 21 ] Further, I do not agree that Mark Cohen can seek to use funds for what his counsel describes as the “ordinary course of business”, when it is the existence of that business which is challenged by the plaintiff investors and there is strong prima facie evidence of fraud. Consequently, I do not order such a term nor permit a term to vary the relief on such basis.

[ 22 ] For the above reasons, I grant the Mareva injunction in the standard form, as per the draft order provided at the hearing by plaintiffs’ counsel. I cannot remain seized of this matter for the return of the interlocutory motion. However, I will make myself available to counsel for any consent or unopposed orders which may be required under the interim Mareva injunction.

[ 23 ] Costs of this attendance reserved to the trial judge.

GLUSTEIN J.

Date: 20220203

COURT FILE NO.: (Lieff v. Cohen) CV-21-00672984-0000

(MJM Capital Group Ltd. v. Cohen) CV-21-00672137-0000

DATE: 20220203

ONTARIO

SUPERIOR COURT OF JUSTICE

AARON LIEFF et al.

Plaintiffs

AND:

MARK COHEN et al.

Defendants

AND BETWEEN:

MJM CAPITAL GROUP LTD. et al.

Plaintiffs

AND:

MARK ELY COHEN aka MARK COHEN et al.

Defendants

reasons for decision

Glustein J.

Released: February 3, 2022