Court File and Parties

COURT FILE NO. : CV-22-00683894-0000 DATE : 20230605 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Albert Carbone and Cathy Horvath Plaintiffs AND: Salvatore Boccia, Rosanna Boccia, 215 Holding Corp., Jane Doe, David Shpilt, John Doe, and Doe Corp. Defendants

BEFORE: Justice Chalmers

COUNSEL: H. Richards, and D. Milton, for the Plaintiffs No one appearing for the Defendants, although properly served

HEARD: June 2, 2023 via videoconference

Endorsement

Overview and Factual Background

[1] In early 2021, the Plaintiffs, Albert Carbone and Kathy Horvath were introduced to the Defendant, Salvatore Boccia. He was seeking investors for his cannabis business, Sustainable Growth Strategic Capital Corp. Mr. Boccia stated that the company was producing cannabis creams and oils for pain relief. The Plaintiffs were told that Sustainable was owned by 215 Holding Corp. The president and sole director of 215 Holding Corp. is Mr. Boccia’s mother, the Defendant, Rosanna Boccia.

[2] In February/March 2021, Mr. Boccia took steps to convince the Plaintiffs that Sustainable was a valid and legitimate business. He produced several documents, including a contract to sell his product to a Veterans organization in Nova Scotia.

[3] The Plaintiffs provided several payments to Mr. Boccia. On February 12, 2021, the Plaintiffs provided a cheque in the amount of $60,000. On March 21, 2021, a cheque in the amount of $290,000 was paid to the Defendants. The Plaintiffs also made two loans to the Defendants in the amount of $175,000 on March 23, 2021 and $250,000 on May 2, 2021. The Plaintiffs were assured that the two loans would be repaid by the end of May 2021.

[4] The loans were not repaid. The Plaintiffs contacted the Defendants for the repayment of the loan. Despite request, none of the funds were returned to the Plaintiffs or accounted for in any way. The Plaintiffs brought an action in fraud, fraudulent misrepresentation, conversion and unjust enrichment as against Mr. Boccia, his mother, 215 Holding Corp. and any unidentifiable parties.

[5] The Plaintiffs brought a motion for a Mareva injunction and Norwich Order. The motion was heard by Justice Morgan. By endorsement dated November 30, 2022 (2022 ONSC 6528), he granted the injunction and Norwich Order.

[6] In the course of enforcing the order, the Plaintiffs determined that David Shpilt was involved in this matter. As noted above, one of the documents produced to the Plaintiffs to convince the Plaintiffs that Sustainable was a legitimate business was the contract with the Veterans Association. The Plaintiffs were advised that a short-term loan was required to fulfill the contract. When the loan was not repaid despite request, Mr. Carbone attended at the Sustainable address. There he met Mr. Shpilt. Mr. Shpilt assured Mr. Carbone that Sustainable was a legitimate business.

[7] When the loan continued to be unpaid notwithstanding the ongoing requests, the Plaintiffs carried out further investigations into the Veterans contract. The contract was purportedly executed on behalf of the association by Fabian Henry. Mr. Henry was contacted. He denied knowing anything about the contract. He denied signing the contract and stated that it was a forged document.

[8] The Plaintiffs conducted a r. 39 examination of Mr. Shpilt. He admitted on the examination that he drafted the forged documents. The exchange on the examination was as follows:

Q. There was never a Veterans Contract, correct? A. Well, I mean, there was the piece of paper, the contract there, right? Q. It was a forgery. There never was an actual deal with Fabian Henry? A. I guess there wasn’t a deal with Fabian Henry. … Q. Well, there was no…Fabian Henry did not sign a contract, correct? A. I guess not, no. … Q. Okay. So, did you create this contract and hand it to Sal? A. I am trying to find the…as we speak, I am trying to find the…I don’t think they are backed up, the discussions around this. So, let’s say yes, I…I created this… Q. Not “let’s say”. I want to know, yes or no. This is not a hypothetical. A. Yes, I created this contract.

[9] The Defendants had suggested that the actual company the Plaintiffs were investing in was Farma C, which was a company operated by Mr. Shpilt. On the r. 39 examination, Mr. Shpilt admitted that Frama C. never bought or sold any product and in fact never operated anything.

[10] On the examination, Mr. Shpilt was asked if he has any knowledge of where the Plaintiffs’ invested funds went. The evidence was as follows:

Q. It is fair to say you don't know where a single dollar of Al Carbone's money went, correct? A. I can speculate, and I can...I can surmise that, you know, dollars went towards rent. That is what I would...you know, just, objectively speaking, just know that the rent and the other costs of the facility were paid with some money. I don't know if it was Al who knows, whatever.

[11] Pursuant to the Norwich Order, the Plaintiffs obtained information as to the distribution of the Plaintiffs’ funds. It was determined that the initial payment in the amount of $60,000 was deposited at the Royal Bank of Canada. The rest of the funds were deposited to 215 Holdings Corp.’s account at the Bank of Nova Scotia, (“BNS”) (No. 81372 01874 10). As of March 1, 2021 the balance in the BNS account was nil. Between March 2, 2021 and May 3, 2021 there were only four deposits made into the account. Three of the deposits were from the Plaintiffs totaling $715,000. During this timeframe, Mr. Shpilt received a wire transfer of $5,000 on April 1, 2021 and $90,000 on May 3, 2021 from the account. He also received additional transfers totaling $15,520 in wire transfers. A total of $110,520 was received by Mr. Shpilt.

[12] Based on the banking information received in compliance with the Norwich Order, I am satisfied that Mr. Shpilt’s evidence that he did not know where the money went is untrue, at least to the extent of the payments he received in March and May 2021.

[13] On January 30, 2023, the Plaintiffs brought a motion on an ex parte basis to add Mr. Shpilt as a Defendant to the action. Justice Pollak ordered that the motion be brought on notice to the proposed Defendant. Notice was provided to Mr. Shpilt. The Plaintiffs and Mr. Shpilt attended at civil practice court on February 22, 2023 to obtain a date for the motion. Justice Ramsay ordered that the motion to add Mr. Shpilt as a Defendant and to amend the pleadings be brought before an associate judge before the motion for the Mareva injunction and Norwich Order is heard.

[14] On April 12, 2023, the Plaintiffs were successful in obtaining an order to add Mr. Shpilt as a Defendant and to amend the Statement of Claim. The Plaintiffs now bring this motion for a Mareva injunction and Norwich Order. The motion is brought on notice to Mr. Shpilt. He did not respond to the motion and did not attend the hearing.

Analysis and Discussion

Mareva Injunction

[15] A Mareva injunction 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. A Mareva injunction is sometimes called a “freezing injunction” or a freezing order.

[16] For a Mareva injunction, the plaintiff must establish the following: (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: Neville v. Sovereign Management Group Corp., 2022 ONSC 3466, at para. 30.

[17] A strong prima facie case is one that will probably prevail at trial or is likely to succeed at trial. 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. 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: Bruno Appliance and Furniture Inc. v. Hryniak, 2014 SCC 8.

[18] I am satisfied that the Plaintiffs have established a strong prima facie case as against Mr. Shpilt in fraud and fraudulent misrepresentation. He admitted on the r. 39 examination that he drafted the fraudulent Veterans contract and forged the signature of Mr. Henry. This contract was prepared by Mr. Shpilt for the purpose of having the Plaintiffs’ loan $175,000. There is also evidence obtained pursuant to the Norwich Order that Mr. Shpilt received over $110,000 from the money the Plaintiffs paid to Boccia.

[19] I am also satisfied that there is a serious risk that Mr. Shpilt will dissipate assets and as a result, the Plaintiffs will suffer irreparable harm. As noted in Neville v. Sovereign Management Group Inc.:

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: at para. 31.

[20] As noted above, there is a strong prima facie case of fraud as against Mr. Shpilt. The assets that can be dissipated are liquid and easily transferrable. Also, he has demonstrated dishonest behaviour in forging the Veterans contract and misrepresenting the Plaintiffs that Sustainable was a legitimate business. He lied under oath about where the Plaintiffs’ money went, and he accepted money from the 215 Holdings Corp.’s bank account.

[21] If the order is not granted, there is a concern that the Defendant might dispose of or dissipate his assets which would result in the Plaintiffs losing the ability to execute on an eventual judgment. This is a form of irreparable harm: Noreast Electronics Co. Ltd. v. Danis, 2018 ONSC 879, at para. 37.

[22] The balance of convenience favours granting the injunction. If the injunction is not granted the funds may be dissipated preventing the Plaintiffs from executing on an eventual judgment. Mr. Shpilt received notice of the motion however he did not attend court or provide any evidence setting out any harm that he will suffer if the injunction is granted: OPFFA v. Paul Atkinson, 2019 ONSC 3877, at para. 19.

[23] The Plaintiffs have provided an undertaking as to damages.

[24] I am satisfied that the Plaintiffs have established the elements for a Mareva Injunction.

Norwich Order

[25] Under a Norwich Order, a plaintiff may obtain discovery from a person including a person against whom there is no cause of action in order to identify a wrongdoer and to obtain information about wrongdoing so that the plaintiff may bring proceedings or at least consider whether to bring proceedings.

[26] The requirements for a Norwich Order are: (1) the plaintiff must have a bona fide claim or potential claim against a wrongdoer; (2) the defendant to the Norwich proceeding must have a connection to the wrong beyond being a witness to it; (3) the defendant to the Norwich proceeding must be the only practical source of the needed information; (4) the interests of the party seeking the disclosure must be balanced against the interests of the defendant to the proceeding, including his or her interest in privacy and confidentiality, and any public interest that would justify non-disclosure; interests of justice must favour obtaining the information. The fundamental principle underlying the Norwich Order is that the party against whom the order is sought has an equitable duty to assist the applicant in pursuing its rights: GEA Group AG v. Ventra Group Co., 2009 ONCA 619, at paras. 75, 91.

[27] The Plaintiffs must provide sufficient evidence of a valid, bona fide or reasonable claim against Mr. Shpilt. I am satisfied that the Plaintiffs have done so. As noted above, I find that the there is a strong prima facie evidence of fraud. The reasonable claim standard threshold is lower than the threshold of a strong prima facie case: Isofoton SA v. Toronto Dominion Bank, 2007 ONSC 14626 (ON SC) at paras. 46-47.

[28] There is evidence of a relationship between the financial institutions and the fraud. The Bank of Nova Scotia received the Plaintiffs’ money, and a portion of those funds was paid out to Mr. Shpilt’s account with the TD Bank. I am satisfied that the Norwich Order is necessary to allow the Plaintiffs to trace their funds.

[29] I am satisfied that the Norwich Order is the only practicable source of the information. Mr. Shpilt has previously agreed to produce documentation but failed to do so. Given the evidence of his involvement in a fraud, it is unreasonable to expect he will provide the information requested: Isofoton SA v. Toronto Dominion Bank, at paras. 46-47.

[30] The Plaintiffs have agreed to indemnity the third party for the costs associated with complying with the order and also provided an undertaking as to damages to ensure the financial instructions can be indemnified for costs they may be exposed to because of the order.

[31] Finally, the interests of the Plaintiffs in disclosure far over balances the interests of Mr. Shpilt including his interest in privacy and confidentiality. The public interest justifies disclosure and the interests of justice favours obtaining the information in the circumstances.

[32] I am satisfied that the Plaintiffs have established the elements for a Norwich Order.

Disposition

[33] For the above, reasons, the Mareva injunction and Norwich Order shall be granted as requested.

[34] The Plaintiffs were successful on this motion and is entitled to their costs. I award costs of the motion to the Plaintiffs, payable by Mr. Shpilt fixed in the amount of $8,500. The costs are payable within 30 days of the date of this endorsement.

[35] I have signed the draft Order.

Date: June 5, 2023