Court File and Parties

COURT FILE NO.: CV-23-00693905-0000 DATE: 20230201 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: AVANEW INC., AVANEW SINGLE FAMILY RENTAL MANAGEMENT INC., AVANEW MANAGER GP INC., AVANEW MANAGER LP, AVANEW SINGLE FAMILY RENTAL GP INC., AVANEW SFR SP GP INC., AVANEW SFR SP LP, AVANEW SINGLE FAMILY RENTAL LP, AND CORE DEVELOPMENT GROUP LTD.

AND:

JENNIFER HOSSAIN, FOYSOL AHMED, MOHAMMAD ZAKIR HOSSAIN, KHOSHNAHAR BEGUM, MOON TRADING COMPANY, LAWNCARE GUYS AND CO., 14093976 CANADA INC. AND 13461025 CANADA INC. O/A SAFE WATERPROOFING

BEFORE: Justice Chalmers

COUNSEL: R. Agarwal, N. Holmberg, T. Macintosh Zheng, for the Plaintiffs

HEARD: In Writing, without notice February 1, 2023

Endorsement

Introduction

[1] The Plaintiffs, move without notice, and in-writing for an urgent interim Mareva injunction and ancillary orders against the Defendants. For the reasons that follow, I grant the Mareva injunction and ancillary relief as requested.

Factual Background

[2] The facts for this urgent motion without notice are derived from the affidavit of Marc Orticello, sworn January 31, 2023. Mr. Orticello joined Core Development as a Construction Manager on March 21, 2022. In December 2022, Core Development transferred him to Avanew as Director of Construction. In January 2023, his role expanded to property management. In that capacity he oversees and manages Avanew’s ongoing construction projects.

[3] Avanew operates a residential property business. Avanew is a wholly owned subsidiary of Core Developments. The Avanew entities own, maintain and operate over 500 units and 300 properties in Ontario (the “Properties”).

[4] Jennifer Hossain was the Director of Property Management at Core Development from June 2021 to January 2022. She was transferred to Avanew and worked as Director Property Management from January 2022 until January 2023, when she resigned. In that role, she was solely responsible for, among other things, managing the Properties approving vendors for work to be performed at the Properties and for reviewing and approving invoices provided by vendors. She was permitted to approve invoices of up to $5,000 without the need for any approvals from her superiors.

[5] Mr. Orticello deposes that Ms. Hossain exploited her position with Avanew and participated in a fraudulent scheme with the other Defendants, in that:

(a) hundreds of invoices were generated for services purportedly provided at the Properties between November 2021 and December 2022 that were never actually performed, or were performed by other individuals/entities;

(b) fraudulent invoices were rendered on behalf of companies that the Avanew Entities have no relationship with and appear to have been created solely for perpetrating the Fraudulent Scheme;

(c) the payment of the fraudulent invoices by the various Avanew Entities were authorized using Hossain’s role and access to the Plaintiffs’ accounting systems;

(d) ensured that all of the fraudulent invoices were $5,000 or less, falling within Hossain’s discretionary limit and not requiring Hossain to seek approvals for payment from anyone else at the Avanew Entities (more than 100 of the invoices are for precisely $5,000); and

(e) transferred the misappropriated funds from the Avanew Entities to bank accounts owned and/or controlled by the Defendants (the “Fraudulent Scheme”).

[6] The general process for payment of vendors is for the vendors to submit their invoices to a centralized e-mail account. Avanew’s finance department saves the invoice into the system and flags it for approval by the responsible individual. For property maintenance invoices, the Director of Property Management is to review and approve the payment. Ms. Hossain was the Director of Property Management from January 2022 to January 2023 and was responsible for reviewing and approving for payment all invoices tagged as property management. Invoices over $5,000 required approval from Hossain and her supervisor. Ms. Hossain could approve on her own, invoices that were less than $5,000. Once approved, the finance department paid out the invoice to the bank account recorded on the invoice.

[7] Mr. Orticello replaced Ms. Hossain as the Property Manager in January 2023. He reviewed the past approved invoices to better understand the relationship between Avanew and its vendors. In doing so, he found reference to Moon Trading Company which rendered invoices of over $756,000 for providing staging services at many of the Properties. Mr. Orticello had never heard of Moon Trading. Avanew did not have physical staging of the Properties. It only does computer generated virtual staging. The computer-generated staging is provided by Corey Beazer and Creative Virtual Tours Inc.

[8] On January 26, 2023, Mr. Orticello contacted Ms. Hossain to discuss the Moon Trading invoices. She stated that the company provides physical staging on the units. When Mr. Orticello stated that Avanew does not use physical staging, Ms. Hossain said she would call him back. She did not do so.

[9] Mr. Orticello deposes that between December 2021 and December 2022, Moon Trading received $756,140 through 174 separate transactions. None of the invoices were for more than $5,000. Moon Trading is registered by Ms. Hossain’s father, Mohammad Zakir Hossain.

[10] Mr. Orticello carried out further investigations. In addition to Moon Trading, he discovered that there were four other questionable vendors; LawnCare Guys and Co., GTA Restorations, 14093976 Canada Inc., and 13461025 Canada Inc. o/a Safe Waterproofing. No one at Avanew had heard of Moon Trading or the other four vendors. Mr. Orticello has not been contacted by these vendors since assuming his duties as Director of Property Management.

[11] LawnCare received $203,406.40 from Avanew through 502 separate transactions. All invoices were for $5,000 or less. The invoices were for gardening and snow removal services. Avanew did not retain a company to provide these services. For occupied Properties, the tenants are responsible for these services. For unoccupied properties, Avanew retrained another company to look after the properties until they are occupied. LawnCare is registered to Ms. Hossain’s husband, Foysal Ahmed.

[12] GTA Restoration received a total of $502,560.00 from Avanew through 113 separate transactions. All invoices were for $5,000 or less. Most of the invoices related to driveway extensions. Avanew retains Shammy Construction to perform driveway extension at its Properties. One of the invoices from GTA Restoration asks for payment to be made to an account that belongs to Ms. Hossain.

[13] 14093976 Canada Inc. received $80,132.25 from Avanew through 89 separate transactions. All invoices were for less than $5,000. Most of the invoices were for painting, cleaning and miscellaneous maintenance work. The corporation was registered by Mr. Ahmed, Ms. Hossain’s husband. It has the same address as LawnCare.

[14] 13461025 Canada Inc. o/a Safe Waterproofing received $179,155 from Avanew through 18 separate transactions. Most of the invoices are for waterproofing services. Safe Waterproofing is registered by Mohammad Hossain. Safe Waterproofing has the same address at Moon Trading.

[15] Konrad Bald, is an IT project Manager at Avanew. He swore an affidavit in which he deposed that he discovered four bank statements in a folder saved on Ms. Hossain’s company computer. The statements are for a joint bank account with TD Canada Trust and list Khoshnahar (Hossain’s mother), Mohammad (Hossain’s father) and Hossain as joint account holders. The account is associated with Moon Trading and has the same home address as Ms. Hossain. The bank statements contain the same banking information as on the Moon Trading invoices.

[16] According to Mr. Orticello, Avanew has discovered that Ms. Hossain has been using the back accounts associated with the Defendants to pay for properties in her name and the names of her relatives.

Discussion and Analysis

Notice to the Defendants

[17] The Plaintiffs bring this motion without notice to the Defendants. The Plaintiffs state that if notice is provided to the Defendants, the assets may be dissipated. This is based in part on the reaction of Ms. Hossain to Mr. Orticello’s enquiries about Moon Trading. The Plaintiffs also take the position that given the nature of the fraudulent scheme that she is likely to have taken evasive action to transfer the funds out of the accounts in question.

[18] The purpose of proceeding with a Mareva injunction without notice is to ensure that an order is obtained before those responsible for a fraud become aware of the action and dissipate assets. As noted in 2092280 Ontario Ltd. v. Voralto Group Inc., 2018 ONSC 2305 (Div. Ct.):

[28] [….] Fraud is a serious crime which threatens unwitting victims with substantial and often devastating financial losses. The Mareva injunction is an important tool for Plaintiffs to try to recover their losses due to fraud or theft. A requirement to notify the perpetrators of a fraud in advance of an impending Mareva injunction would significantly water-down an important remedy for protecting innocent victims. Judgments for damages cannot reasonably be expected to be affordable or collectable against fraudsters. If funds cannot be frozen in advance, a vital arrow in the civil law’s quiver to address serious fraud will be lost. [….]

[19] Here, the Plaintiffs allege that they were the victim of a complex fraud committed by the Defendants, which resulted in a loss of over $1.7 million. The Plaintiffs state that if notice is provided to the Defendants, there is a risk that the Defendants’ assets will be put beyond the Plaintiffs’ reach. I am satisfied that in the circumstances of this case, it is appropriate that the motion proceed on a without notice basis.

Mareva Injunction

[20] A Mareva injunction is an extraordinary remedy. It is an injunctive order that restrains the defendant from dissipating assets or from conveying away his or her own property pending the court’s determination in the proceedings. Mareva injunctions are an exception to the general principle that a party cannot obtain execution over another’s assets before judgment: Aetna Financial Services v. Geifelman. A Mareva injunction may be warranted to prevent fraud on the court and on the plaintiff and where there is a real or impending risk of dissipation of assets: Chitel v. Rothbart, (1982), 30 C.P.C. 205 (ON CA), at paras. 52, 56-58.

[21] For a Mareva injunction, the plaintiff must satisfy the requirements for an interlocutory injunction as set out in RJR-MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311. Typically, a plaintiff must 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. Absent unusual circumstances, the plaintiff must provide the undertaking as to damages normally required for any interlocutory injunction.

[22] It is a condition precedent to the order that the plaintiff demonstrate a strong prima facie case: Sibley & Associates LP v. Ross, 2011 ONSC 2951, at para. 12. The requirement to establish a strong prima facie case is more rigorous than a “serious issue to be tried”. This requires the plaintiff to establish that it would likely succeed if the court was required to decide the action on its merits based on the materials filed in support of the motion: 1910878 Ontario Inc. v. 2551204 Ontario Inc., 2020 ONSC 3415, at para. 15.

[23] I am satisfied that the Plaintiffs have established a strong prima facie case of fraud. Based on the evidence before me on this motion, Ms. Hossain, in her position as Director of Property Management, approved invoices from five companies that did not provide services to the Plaintiffs. There is considerable evidence that Ms. Hossain and members of her family participated in the fraudulent scheme.

[24] The Plaintiffs must establish that the Defendants have assets in the jurisdiction and the assets are being, or will be, dissipated and will not be available for execution after judgment. In cases involving allegations of fraud, the real risk of the removal or dissipation of assets can be established by inference, as opposed to direct evidence: Sibley & Associates LP v. Ross, at para. 63. As stated by Strathy J. (as he then was):

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 a 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: at para. 63.

[25] The Defendants have bank accounts and real property in Ontario. I am satisfied that the Defendants have assets in the jurisdiction. There is no direct evidence that the Defendants’ assets are being dissipated or will be dissipated. The Plaintiffs ask that I infer from the circumstances of the fraud that there is a serious risk the Defendants will attempt to dissipate their assets.

[26] As noted earlier, I am satisfied that there is a strong prima facie case that the Defendants participated in a complex scheme to defraud the Plaintiffs. Ms. Hossain has recently been confronted about the Moon Trading invoices. She likely suspects that the Plaintiffs are aware of the fraud. I conclude that the pattern of prior fraudulent conduct supports a reasonable inference that there is a real risk the conduct will continue, and the Defendants will attempt to hide or dissipate their assets. The assets primarily in issue are the Defendants’ bank accounts which are liquid and easily transferrable: Sibley & Associates v. Ross, at para. 66. I am satisfied that based on the circumstances of the fraud itself, and the prior conduct of the Defendants, there is a real risk that the assets will be disposed of or put out of reach of the Plaintiff before the trial of this action.

[27] I am satisfied that a risk of dissipation of assets is a factor with respect to the potential for irreparable harm. If the Defendants’ assets are not secured, it is unlikely the Defendants will have the means to satisfy the judgment: OPFFA v. Paul Atkinson et al., 2019 ONSC 3877, at para. 25.

[28] A party seeking a Mareva injunction must provide an undertaking as to damages. The Plaintiffs have provided the necessary undertaking.

[29] I am satisfied that the balance of convenience favours the granting of the Mareva injunction. The Defendants will not suffer any harm by the order. The order gives the Defendants the ability to unlock assets for legal fees and necessities. If the Defendants suffer harm as a result of the injunction, the Plaintiffs have provided a joint and several undertaking as to damages. On the other hand, if the injunction is not granted there is a real risk that the Defendants will place their assets out of reach of execution.

[30] I find that the Plaintiffs are entitled to a Mareva injunction. The motion was made without notice to the Defendants and therefore the injunction will be in place for a period not exceeding 10 days.

Ancillary Relief

[31] Mareva injunctions may be coupled with ancillary disclosure orders to make the remedy meaningful and effective. It is often the case that a motion for a Mareva injunction is made on incomplete information about the nature, extent, location and value of the assets and funds which the defendant may have, and to prevent injustice to the plaintiff ancillary orders may be made in order to require full disclosure of the nature, location and value of assets and funds and disclosure of the defendants’ dealings with them: Innovative Marketing Inc. v. D’Sousa, 2007 CarswellOnt 1131.

[32] The Plaintiffs seek an order that the Defendants submit sworn statements concerning their assets and to produce documents relating to those assets. I am satisfied that the Plaintiffs are entitled to this relief: Yan v. Chen, 2014 ONSC 267, at paras. 20-25.

[33] The Plaintiffs also seek an order that the Defendants preserve the information of their electronic devices so the information may be produced in the normal course of the lawsuit. The Plaintiffs argue that the best source of real information about the Defendants’ activities will be found in their electronic devices. I agree. I find that the Plaintiffs are entitled to this relief.

Conclusion

[34] For the above reasons, the Mareva injunction, and the ancillary relief shall be granted as requested.

[35] I am not seized of the matter. I set February 10, 2023, as the return date for the Defendants to attend via video hearing for the Plaintiffs’ motion for an extension of the Order made on this motion without notice.

[36] The Order shall go in accordance with the draft order filed and signed by me.

Chalmers J

Date: February 1, 2023