COURT FILE NO.: CR-20-10000053-0000

DATE: 20240610

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

HIS MAJESTY THE KING

– and –

KAREEM BIKHIT

Defendant

Renna Weinberg for the Crown

Daniel Michael and Kabir Sharma for the Defendant

HEARD: January 8-9, 15-18, 22-26, 29-31, February 1-2, 5-9, March 20-21, 2024

N. Spies J.

REASONS FOR JUDGMENT

Introduction

1The defendant, Kareem Bikhit, was arrested on January 30th, 2018 and charged with 38 counts of fraud over $5,000, contrary to s. 380(1)(a) of the Criminal Code, with respect to 19 individual complainants and the 19 incorporated companies of those individuals, in addition to one count of possession of proceeds obtained by crime over $5,000, contrary to s. 354(1) of the Criminal Code, and one count of conspiracy to commit fraud over $5,000 with Micheal Youssef contrary to 465(1)(c) of the Criminal Code. During the trial, count # 33, with respect to Salman Amin, and count # 34, with respect to his corporation, Investment Solutions Inc., were withdrawn at the Crown’s request. This left 18 individual complainants and their 18 corporations.

2A warrant for Michael Youssef’s arrest in relation to the charges before this court is currently outstanding; however, his current whereabouts are unknown. Mr. Youssef is Mr. Bikhit’s first cousin. He is married to Ravinder Grewal, who was a co-accused and charged with defrauding one of the 19 complainants. The charges against her were withdrawn at the Crown’s request on December 20, 2023, following a restitution payment of $17,797.50.

3Mr. Bikhit re-elected trial by judge alone and pleaded not guilty to all charges.

Overview of the Alleged Fraud

4The fraud is alleged to have occurred between July 2014 and December 2016. However, it could only have begun as of January 28, 2015, when Iris Software Solutions Inc. (“Iris”) became an approved vendor for the Bank of Montreal (the “BMO”). Iris entered into contracts with each of the complainant’s numbered companies so that they could work in various capacities for the BMO on a foreign exchange currency project (the “Project”) as independent contractors through their numbered companies.

5Most of the complainants worked alongside Mr. Bikhit, who was the Project Manager, on the ninth floor of the BMO offices in the bank’s Foreign Exchange Department at 302 Bay Street, Toronto. There were about 30 people working on this floor, including Iris contractors, contractors working for other recruiting companies and BMO employees. The complainants were to be paid for their hours worked for the BMO based on approved weekly time sheets. The complainants were to submit the time sheets as invoices to Iris, typically on the last day of each month. The complainants’ individual contracts specified terms as to when those invoices would be paid. Iris then invoiced the BMO monthly for the amount owing to all the contractors working on the Project, based on the amount of their monthly invoices plus a mark-up as compensation for Iris’ services in finding the people the BMO needed for the Project. The mark-up varied from as little as $3 to $42 per hour among the contractors who are complainants. On receipt of Iris’ invoices, the BMO paid an intermediary agency: Allegis Global Solutions (“Allegis”). Allegis then paid Iris the amount owing on the invoices, subject to its fee. After the first three months of payments, Allegis paid Iris via a factoring company.

6The Crown is relying on a number of different theories of fraud, but they all stem from the principal submission that Mr. Bikhit is alleged to have knowingly made misrepresentations to many of the complainants at various times as to why payment of their invoices were delayed and eventually remained unpaid. It is also alleged that when Iris received the payment of invoices from the BMO, instead of paying the complainant’s invoices for their services, the money was misappropriated by Mr. Bikhit, Ms. Grewal and Mr. Youssef. The Crown alleges that Mr. Bikhit was responsible for this happening or at least failed to advise the complainants that Iris had in fact diverted the money received for payment of their invoices for other purposes, risking the complainants remaining unpaid. Instead, the complainants continued to work for the BMO despite delays and eventual non-payment of their invoices because of excuses and promises Mr. Bikhit made. The Crown alleges he knew or was wilfully blind and ought to have known these excuses were false. The Crown alleges that the total amount not paid to the complainants is the same as their loss as a result of this fraud.

7Much of Crown’s evidence is not contested. The Crown called each of the complainants and other witnesses to confirm when and how payments were made by the BMO to Allegis and Iris and later to the factoring company. In addition, the parties filed three Agreed Statements of Fact (“ASFs”) setting out various admissions, including admissions concerning the authenticity of voluminous bank records and other documents. Detective Constable (“DC”) Ruth Moran testified and introduced various charts, either reviewed for accuracy or prepared herself, that set out various dates and monetary amounts. She took these amounts from the bank records, including the amounts of the complainants’ invoices, dates of when they were paid by Allegis to Iris or the factoring company, when Iris paid the complainants, the invoices that remain unpaid and what happened to the funds once they were paid to Iris. Mr. Bikhit’s counsel worked diligently with Crown counsel and DC Moran and was able to agree on the accuracy of those charts. This eliminated a great deal of trial time and narrowed the factual issues considerably. A fourth ASF was then filed setting out the charts that were agreed upon, as well as other admitted facts.

8Mr. Bikhit elected to call evidence, and he testified on his own behalf. He also called his father Ehab Bikhit as a witness. In this decision, when necessary, I will refer to them by their first names to avoid confusion. Where I use the name Mr. Bikhit, I am referring to Kareem Bikhit.

The Issues

9The Crown alleges that each of the 18 complainants were not paid on time for many of their invoices to Iris and that some of their invoices were never paid. Mr. Bikhit admits the amount never paid to all but two of the complainants. The Crown alleges that the total amount Iris owes to all 18 complainants is about $958,000.

10Through a variety of admissions covered in the ASFs and summaries of the documentary evidence, the defence has narrowed the nature of this court’s inquiry. The Crown and defence do not disagree on one central point about Mr. Youssef – despite never working at BMO – he benefited by receiving at least $2,171,344.38. The defence conceded the bulk of the complainants’ evidence. I accept that the complainants have been defrauded of the payments they allege are owed by Iris and that the money was misappropriated by Mr. Youssef and his wife Ms. Grewal, who were stripping Iris and Iris Solutions of funds for their own personal gain.

11The defence concedes that Mr. Bikhit’s representations to the contractors about delays in payments resulting from the failure of the BMO or Allegis to pay Iris is sufficient to make out the actus reus of fraud because those representations were false. The documentary evidence establishes that the payments to Allegis were made largely on time, and the complainants’ evidence is that they continued to work on the Project relying on those representations.

12The Crown, Ms. Weinberg, submitted in her closing submissions that in addition to the alleged deceit and lies Mr. Bikhit made to the contractors, he committed other fraudulent acts. Those allegations are contested.

13The main issue in this case is whether the Crown has proven the mens rea of fraud beyond a reasonable doubt. Mr. Bikhit’s position is that he was not aware at the time that the representation he made concerning delayed payments was false, nor was he wilfully blind to the fraud perpetrated by Mr. Youssef and Ms. Grewal.

The Crown’s Similar Fact Application

14The Crown brought a “count-to-count” similar fact application that everyone agreed should be argued and decided at the end of the case. During closing submissions, defence counsel Mr. Michael conceded the application and advised that I could consider all the evidence on each of the counts as the defence has done the same.

The Evidence and Preliminary Findings of Fact

Admissions

15As I have stated, there were four ASFs filed during the trial, setting out formal admissions pursuant to s. 655 of the Criminal Code, which greatly shortened the time needed for the trial. The first ASF sets out an overview of the relevant parties and confirms that all of the banking documents the Crown produced from various bank accounts are authentic. That ASF also confirmed that there are no issues with identity, and it was admitted that the defendant before the court, Kareem Bikhit, is the individual that various complainants dealt with and referred to in their emails and chats. Similarly, it is admitted that the defendant Kareem Bikhit is the person referred to in various bank records, namely Iris’ bank accounts, TD Account 1020 5470939 (“TD 939”) and TD Account 1020 5484891 (“TD 891” or “Lockbox Account”).

16Similarly, the identity of Ravinder “Ruby” Grewal as the individual referred to by the complainants in their statements, emails and chats is admitted. It is also admitted that Ms. Grewal is the sole account holder of a personal banking account TD 1228 6025905 (“TD 905”) and the sole owner of 2414764 Ontario Inc, a corporation she used for the purposes of her work as a contractor, and that she was the account holder for that corporation’s TD Business Account TD 11045283660 (“TD 660”). Similar admissions were made with respect to Michael Youssef and certain of his accounts.

17The additional ASFs confirmed the authenticity of all the other documents relied upon by the Crown. In addition, when each of the complainants and other witnesses were called by Ms. Weinberg, defence counsel confirmed that there was no issue with the authenticity of any of the documents, subject to what might arise during the course of the witness’ evidence. On a couple of occasions, issues were found to exist, and I have ignored those documents. By authenticity, it was agreed that all the documents in document books put together by Ms. Weinberg were what they purported to be and as such were admissible as exhibits. There was no agreement as to the truth of the contents of any of these documents.

The Relationship Between Michael Youssef and Ehab and Kareem Bikhit

18The relationship between Mr. Youssef and Ehab and Kareem Bikhit is important to understand the background of the case, including why Iris was formed and to what extent it was reasonable for Kareem to rely on representations Mr. Youssef made to him. In this regard, I accept the unchallenged evidence of Kareem and his father Ehab about Mr. Youssef and their relationship.

19I have no direct evidence about Mr. Youssef’s background. The defence submits that although the evidence about Mr. Youssef’s background from Ehab and Kareem is hearsay, it is admissible to the extent Kareem relied on that information, as this is relevant to the reasonableness of his reliance and state of mind regarding Mr. Youssef’s representations. I agree.

20Ehab is 76 years old. He immigrated to Canada with his family in 1974 from Egypt. He was a professional engineer and worked for Atomic Energy Canada, retiring in 2010 as a senior director on the managing team after a 30-year career.

21Ehab has known Mr. Youssef since he was born in 1971. Mr. Youssef is his sister’s son. He did not see Mr. Youssef as much once he came to Canada in 1974, but as of the 1980s, he went back to Egypt for visits. Mr. Youssef moved from Egypt to Canada in 1996 at the age of 25. Ehab picked him up at the airport, and Mr. Youssef moved in with him, his wife, daughter and Kareem.

22According to Ehab, Mr. Youssef graduated as a computer engineer in Cairo, Egypt and started working as a contractor for banks upon his arrival in Canada. Kareem testified that Mr. Youssef was a software developer in Egypt and that once he was in Canada, he moved up the ranks as a developer and became a technical architect, which is a more senior role. According to Kareem, Mr. Youssef also worked as a project manager.

23At the time Mr. Youssef arrived, Kareen was 14 years old – he was born in June 1982. Mr. Youssef became part of the family, and Ehab testified that he treated him like a son. Despite the significant age difference between Kareem and Mr. Youssef, both Ehab and Kareem testified that the two spent a lot of time together during Kareem’s teenage years. They became quite close. Both Ehab and Kareem described their relationship as one of brothers/family. Kareem was Mr. Youssef’s best man at his wedding.

24Kareem testified that he completed a five-year program majoring in economics and computer science at the University of Western Ontario. Mr. Youssef influenced his decision to pursue computer science. During the summers, Mr. Youssef helped him get jobs at the Canadian Imperial Bank of Commerce (the “CIBC”), where Mr. Youssef was working as a contractor. When Kareem graduated from university in 2005, Mr. Youssef helped him get his first contract job as a business analyst with the CIBC, where he worked for a couple of years. After leaving the CIBC, Kareem obtained a contract to work as a junior project manager, but his contract was terminated in 2008 due to the economic downturn. Kareem testified that he worked on various freelance projects thereafter, and then in early 2010 Mr. Youssef helped him get an interview with the BMO, where he obtained a contract as a junior project manager. In 2012, Mr. Bikhit was asked to join another CIBC project in foreign exchange (“FX”). At the end of 2012, when this project was completed, Kareem testified that he was offered a renewal or full-time employment with the BMO. He consulted with Mr. Youssef, who by this time was an approved vendor through a company he had started called Iris Solutions Inc. (“Iris Solutions”), for TELUS, Bell Canada and the BMO. At Mr. Youssef’s suggestion, Kareem continued working in the FX area for the BMO but as a contractor with Iris Solutions. During the cool down period, required as a contractor with the BMO, Kareem worked on Iris Autograph (“Autograph”) doing sales presentations to potential clients and managing internal releases on the software. Autograph was a propriety software that Iris Solutions was developing for digitized signatures.

25The defence describes Mr. Youssef as a mentor to Kareem, and in my view, that is an appropriate characterization of their relationship based on the uncontested evidence. Given their close family relationship, the fact that Mr. Youssef was older, experienced in the areas that Kareem wanted to work in and apparently a successful businessman, his influence over Kareem came naturally. Based on the evidence, they have very different personalities. Mr. Youssef was aggressive with contractors, whereas Mr. Bikhit treated them as colleagues and friends. It appears Mr. Bikhit was generally cordial and never aggressive. Nevertheless, there was familial trust between them, as well as with Ehab.

The Note and Warrant Subscription Agreement

26Ehab identified a Note and Warrant Subscription Agreement that he signed on July 2, 2014 confirming his investment in Iris Solutions in the amount of $625,000. It was to mature on July 2, 2016. He referred to it as a “coupon”. I will refer to it as a promissory note.

27Ehab testified that after Mr. Youssef formed his company Iris Solutions, he told Ehab that he wanted to develop a new application for digitized signatures called Autograph. Mr. Youssef was raising money to expand the company. Ehab testified that he invested his own money to help Mr. Youssef and to assist his son Kareem in his career. Kareem was aware of this investment, but Ehab did not give him a copy of the promissory note. Ehab viewed Mr. Youssef at the time as being very successful with good contacts, and Mr. Youssef had a big team working for him. At the time, Kareem was working with Iris Solutions as a contractor. Ehab testified that before he made the investment, he asked Mr. Youssef to find opportunities for Kareem to progress and get more face time with clients. Ehab thought and hoped that Kareem might land a permanent, senior position at a bank. Ehab testified that there was no formal agreement, but that they had an understanding to this effect.

28Mr. Bikhit testified that he knew at the time that his father had made this investment. His understanding was that Mr. Youssef was raising capital to add enhancements to Autograph as well as for sales and marketing activities for Autograph. He testified that other family members also invested in the project. At the time, Autograph’s e-signature platform was live and already in use with some clients. He did not discuss the repayment of the note with his father until towards the end of 2016.

29Some of the complainants, including Anslie Shum and Sergi Rodovinsky, also purchased promissory notes. Their notes were not repaid, nor was Ehab’s.

Iris Solutions Inc.

30ASF #2 sets out admitted facts with respect to Iris Solutions. It was incorporated on December 4, 2008 by Mr. Youssef, and the directors of the company are Mr. Youssef and Ms. Grewal. Additionally, it is admitted that Mr. Youssef is the company’s President, Secretary and Treasurer, as well as holding himself out to be Iris Solutions’ Chief Executive Officer (“CEO”). There is no evidence as to the shareholders of Iris Solutions at the relevant time.

31Mr. Bikhit testified about the operational team at Iris Solutions. Mr. Youssef was in charge of the company and “wore many hats”, as did Ms. Grewal. She later became a contractor for the BMO. Alexandra Nesterchouk, who joined initially as Mr. Youssef’s executive assistant, climbed through the ranks to become the Business Operations Manager. There were a couple of people working in recruiting and human resources, but there was a bit of a turnover in that area according to Mr. Bikhit. Mr. Bikhit was not sure when, but at some point, Ekaterina Manollenko was hired to be part of the operations team as Mr. Youssef’s assistant. Mr. Bikhit testified that he believed that this occurred when Ms. Nesterchouk went on a short maternity leave at the end of 2015 or the beginning of 2016. None of this evidence was challenged in cross-examination, and it is corroborated by various documents from Iris Solutions. These documents also state the positions I have referred to for Mr. Youssef, Ms. Nesterchouk and Ms. Manollenko. I find on the evidence that Mr. Youssef, Ms. Grewal, Ms. Nesterchouk and Ms. Manollenko were the people in charge of operating Iris Solutions, and I will refer to them collectively as the “operations team”.

32Some of the complainants testified about, and in some cases produced, their contracts with Iris Solutions for working as contractors for other corporations, such as Bell Canada, or directly for Iris Solutions on the Autograph project. In addition, some of the complainants began as contractors for the BMO pursuant to contracts they had with Iris Solutions.

Iris Solutions’ TD Bank Account

33In ASF #2, it is admitted that the bank account for Iris Solutions, an account with the Toronto Dominion Bank (the “TD”), account number 1020 5004625 (“TD 625”), was opened on January 28, 2015. The account noted Ravinder Grewal as the company’s President and Michael Youssef as the company’s director. Both Ms. Grewal and Mr. Youssef had signing authority over the company. Mr. Bikhit did not have signing authority on Iris Solutions’ account, TD 625. Iris Solutions also had a U.S. account with the TD that Mr. Bikhit had no signing authority over. Mr. Bikhit testified that he never had access to these accounts. I note that the fact Ms. Grewal was stated to be the President of Iris Solutions is inconsistent with the admission that Mr. Youssef was the President, but the discrepancy is not material. On the evidence, Mr. Youssef was clearly in charge of Iris Solutions.

Iris Software Solutions Inc. and the Equity Based Sales Performance Agreement

34Both Kareem and Ehab testified about how Iris came about. In the late summer or early fall of 2014, the BMO was introducing a new vendor management company, Allegis. Allegis would coordinate the payment of Iris Solutions invoices to the BMO. Mr. Youssef told Mr. Bikhit that he was thinking of setting up a subsidiary to interface with the BMO, and this is when Mr. Bikhit first heard about Iris. At this time, Mr. Bikhit’s cool down period had ended, and he was going back as a contractor with the BMO to work on FX projects. He understood that the negotiations between Iris Solutions and Allegis were taking some time. Towards the end of 2014, Mr. Youssef told him that he thought it would be a good idea if he, Mr. Bikhit, headed up Iris. Mr. Youssef told Mr. Bikhit about the discussions he had had with Ehab about giving Mr. Bikhit a bigger role. Mr. Bikhit testified that he had already asked Mr. Youssef if there was a path for equity ownership in Iris Software. Mr. Youssef proposed that based on on Mr. Bikhit’s efforts to help grow Iris, he could earn equity in Iris Solutions, which owned Autograph. According to Mr. Bikhit, Autograph was Iris Solutions’ major asset.

35Ehab identified an agreement titled, “Equity Based Sales Performance Agreement” (the “Equity Agreement”). The Equity Agreement is between Iris Solutions, the parent company, and Iris, the subsidiary company. It was signed on February 1, 2015. Mr. Youssef signed on behalf of Iris Solutions, and Kareem on behalf of Iris. Ehab was present and witnessed both signatures. He testified that this agreement was basically the framework he had discussed a few months earlier with Mr. Youssef when he invested in the promissory note. Mr. Bikhit testified that he did not really negotiate the terms of this agreement, which Mr. Youssef had prepared, but they did discuss the terms. Mr. Bikhit was happy with the agreement, as it meant he was in a more senior position to interface with the BMO and it was a path to equity in Iris Solutions.

36Mr. Bikhit testified that there was also a Shareholders Agreement that he does not have a copy of. It set out that Iris Solutions owned 60 percent of Iris, and the 40 percent balance of Iris’ shares were in the name of Mr. Bikhit’s holding company. Mr. Bikhit testified that he does not have a lot of documents from his time at Iris Solutions/Iris. The Crown did not tender the results of any searches related to Iris’s incorporation and did not challenge Mr. Bikhit’s evidence that he only owned 40 percent of Iris’ shares.

37The term of the Equity Agreement is from February 1, 2015 to February 1, 2017. Mr. Bikhit testified that at the end of the two-year agreement, based on Iris’ cumulative billing, the 40 percent of shares he owned through a holding company would be swapped for a certain percent in the parent company. According to the terms of the Equity Agreement, in consideration of Iris achieving and exceeding sales targets, Iris Solutions agreed to grant Iris equity in Iris Solutions as specified in an attached schedule. The agreement specified an equity grant in Iris Solutions as high as 12.5 percent, depending on Iris’ cumulative billing.

38Mr. Bikhit testified that either he or someone else at Iris Solutions incorporated Iris and that it became active in about November 2014 when Mr. Youssef reached an agreement with Allegis and the BMO. He was not involved in those discussions. As I will address, Mr. Youssef signed the agreement with Allegis on January 28, 2015 as the President and CEO of Iris. This was only a couple of days before he signed the Equity Agreement. Mr. Youssef was also stated to be the President and CEO of Iris in offer letters dated before the end of January 2015, for example in the offer letter to Fattanah Akhavan dated January 29, 2015.

39A key term of the Equity Agreement is in paragraph 4, which sets out the roles and responsibilities of both corporations. Iris Solutions agreed to provide Iris with confidential information as specified and:

permission to operate as the “Parent Company’s agent as an approved vendor for the … BMO for the duration of this Agreement.

The Subsidiary Company agrees to operate under the direction of the Parent Company for the duration of this Agreement.

During the term of this Agreement the Parent Company shall make available to the Subsidiary Company certain management, administrative and corporate (“Services”) and facilities and equipment (“Facilities”) mutually determined to be appropriate for the Parent Company to provide to assist the subsidiary in conducting its operations.

The Services may include, but are not limited to, management, supervision, financial, accounting, investment, procurement, human resource services, information systems, communications, payroll and other services that the parties may agree to from time to time.

The Facilities may include, but are not limited to, office floor space, telephones, furniture, building maintenance and cleaning services and other Facilities as the parties may agree to from time to time.

In consideration for access to the Parent Company’s Confidential Information and the provision of Services and Facilities to support the Subsidiary Company’s operations, the Subsidiary Company agrees that all profits will be under the purview of the operating budget of the Parent Company to support its activities.

The Subsidiary Company further agrees to access to any credit facilities, loans or other financial instruments to support the operations of the Parent Company and/or Subsidiary Company during the course of this Agreement. [Emphasis added]

40Other key terms of the Equity Agreement are in paragraph 7, which states that contact with the Parent Company will be through Mr. Youssef, and in paragraph 8, which states that contact with the Subsidiary Company will be through Mr. Bikhit. Paragraph 8 goes on to state: “Mr. Bikhit shall report to the Parent Company representative in accordance with the roles and responsibilities outlined herein for the duration of the Agreement” (emphasis added).

41The Equity Agreement does not set out what title Mr. Bikhit would have at Iris, but Mr. Bikhit testified that his official title was CEO, and his role was to essentially be the point person for the BMO. He was also working at the BMO as a contractor. Mr. Bikhit’s evidence is confirmed by the documentation. Most correspondence after the end of January 2015 stated his role to be the President and CEO of Iris.

42Mr. Bikhit testified that Mr. Youssef’s official role with Iris was Chief Financial Officer (“CFO”). The Crown did not challenge Mr. Bikhit’s evidence that Mr. Youssef was the CFO of Iris, and Mr. Bikhit’s evidence is corroborated by other evidence. Mr. Youssef signed some documents as CFO of Iris, for example the complainant Ahmed El Khayat’s offer letter, dated December 2, 2015. In addition, affidavits prepared by several of the complainants for the police investigations all state that Mr. Youssef was the CFO of Iris. When cross-examined on the issue, witnesses either adopted this statement or could not recollect.

43Mr. Bikhit testified that because Mr. Youssef was the CFO of Iris and also the CEO of Iris Solutions, he had more authority over Iris. This evidence is consistent with the terms of the Equity Agreement. Mr. Bikhit testified that overall strategic tactical decisions, for example when Iris entered negotiations with Allegis and later Procom Consultants Group Ltd. (“Procom”), were not made by him, but rather by Mr. Youssef at the parent company.

44Mr. Bikhit testified that his understanding of the Equity Agreement was that Iris would be the company interfacing with the BMO in terms of the contractors, projects and client management. Iris Solutions, as the parent company, would provide Iris with all the operational support already in place at Iris Solutions. This meant that the operations team and resources at Iris Solutions would support Iris so that Iris did not have to secure a new team to fulfil operational roles.

45Mr. Bikhit testified that Mr. Youssef’s role was to be responsible for budgets, finances, revenue and expense allocation. Ms. Nesterchouk, as part of Iris Solutions’ operations team, was responsible for contracts, invoices, payroll and those sorts of functions for Iris. Mr. Bikhit testified that he had no role in the finances. Mr. Bikhit testified that he had no role in calculating any payments to the contractors. Mr. Bikhit did not engage an accountant for Iris, as that was the responsibility of the operations team at Iris Solutions. Mr. Bikhit testified that he relied on the operations team at Iris Solutions for matters of this nature. This is supported by the fact that the same invoice template, letterhead, website, address and email domain used by Iris Solutions was used by Iris.

46Mr. Bikhit was not able to identify Iris’ year end when he was asked in cross-examination. Mr. Bikhit sent a text message to Matthew Scarrow that states that Iris’ year end was October 31, but he was not asked about that. I accept that given the passage of time, Mr. Bikhit could have forgotten the year end date. Mr. Bikhit testified that he never saw financial statements for Iris, and he never thought about whether he should have seen some.

47Mr. Bikhit’s evidence is consistent with the terms of the Equity Agreement. All administrative and corporate services were contractually obligated to be handled by Iris Solutions. This included financial, accounting and payroll services. The terms of the Equity Agreement required Mr. Bikhit to leave the management and finances of Iris under the complete control of Mr. Youssef at Iris Solutions and his operations team. The Equity Agreement clearly benefited Iris because it lowered Iris’ overhead and made the most efficient use of company resources.

48Mr. Bikhit admitted that he did not tell any of the contractors, Allegis or the BMO about the Equity Agreement.

Iris’ Bank Account at the Toronto Dominion Bank

49ASF #2 sets out certain admitted facts with respect to Iris’ TD bank account number 1020 5470939 (“TD 939”).

50The primary bank account for Iris Software Solutions, TD 939, was opened on February 2, 2015, with Mr. Bikhit noted as the primary account holder and holding signing authority.

51On February 17, 2015, Michael Youssef (“Business Partner”) and Alexandra Nesterchouk (“Business Operations Manager”) were added to the TD 939 account to authenticate wire payments through the wire payment service. They did not sign signature cards. (I note that this was before Iris received any payments or contractor invoices became due).

52On April 13, 2016, Ravinder Grewal was given full access and signing authority over the account under the title of “manager.”

53Mr. Bikhit testified that these other people were added to the TD 939 account at Mr. Youssef’s request because they were on Iris Solutions’ operations team. There were processes in place around invoicing, contracts etc., and so this just made sense to him. When asked why he added Ms. Grewal to the account, Mr. Bikhit testified that he was not given a reason when he was asked to add her, but he assumed it was because she was helping the operations team.

54When asked why Mr. Youssef as CFO did not open the account, Mr. Bikhit testified that he did not recall if Mr. Youssef was in the country at the time or not, but Mr. Youssef had asked Mr. Bikhit to open the account. In cross-examination, he admitted that the others would not have been added to the account without his consent. He believes he could also have taken steps to take away their access to the account.

55Mr. Bikhit admitted that large amounts of money were transferred from Iris to the Iris Solutions bank account and that he had no access to the Iris Solutions’ account. The banking summaries show that $2.9 million was transferred from the Iris bank account to the Iris Solutions’ account. Mr. Bikhit testified that he understood this money was to be used by the parent company for operations, payments to the contractors and profit. By operations, Mr. Bikhit was referring to the operations of the parent company that were supporting Iris, such as staff salaries, rent, accounting, insurance and things of that nature. Iris was not entitled to profit until the end of the Equity Agreement. Mr. Bikhit testified that even he needed instructions from the operations team at Iris Solutions to transfer money from Iris to his own contractor company to pay his invoices.

56Mr. Bikhit testified that he would sometimes receive an email asking him to stop into the bank on his way to the BMO or while on break to transfer money to Iris Solutions. Mr. Bikhit also testified that he knew Iris Solutions was paying the contractors because sometimes he would be given an itemized list of the payments that needed to be made with the contractor’s corporation number, the amount and the payment method. He did not know how the contractors wanted to be paid or why he was asked to get drafts instead of the contractors being paid electronically. He did not think to ask why. He admitted that this would take time, depending on the number of drafts.

57At the time, Mr. Bikhit did not ask why he was being asked to do this, as opposed to payments being made by direct deposit. Mr. Bikhit would follow the instructions and pick up the drafts at the bank and give them to the contractors in question. When asked in cross-examination why he followed these instructions, Mr. Bikhit testified that his belief at the time was that the contractors were being paid by both the 939 and the 625 accounts. Representations were made to him that a number of contractors who had worked for Iris Solutions set payment up there before they were transitioned to Iris.

58Mr. Bikhit testified that Mr. Youssef was the one allocating funds. Mr. Bikhit was not given specific reasons for individual drafts he signed from Iris to Iris Solutions. Mr. Bikhit admitted that although contractors were inquiring about when they would get their payments, he was transferring large amounts of money from the Iris account to the Iris Solutions’ account. He testified that “when I’d receive instructions …, on payments or, moving funds, I would do as told.” He did not understand this to be done at random, rather there was a process behind it. He believed the operations team was managing the budget. He did not keep track to see if payments from Iris to Iris Solutions followed any pattern. Mr. Bikhit explained that his belief was that payments were being made from both accounts to the contractors, and pursuant to the Equity Agreement, the parent company was entitled to money for operations and profit.

59Mr. Bikhit admitted, based on a summary in one of the ASFs, that he personally signed bank slips sending over $870,000 to the TD 625 account. He admitted that he was getting complaints that contractors were not getting paid. Mr. Bikhit testified that he was not concerned about sending large amounts from the Iris account to the Iris Solutions account when he was getting complaints about payments because contractors were getting paid from both accounts. When he got the drafts from the bank, the balance in the Iris account would usually be set out. He noticed that these transactions would reduce the balance to zero, so he assumed that payments were being made to the contractors.

The Relationship Between Iris Solutions and Iris with the BMO

60ASF #3 sets out the admitted facts concerning the relationship between Iris Solutions and Iris with the BMO as follows.

61In August 2013, Iris Solutions was one of the BMO’s approved vendors and began providing services to the BMO’s Capital Market group via its own sub-contractors.

62Prior to 2014, all payments to vendors were handled by the BMO directly; however, in 2014, the BMO began using an additional intermediary, Allegis, to manage the relationships with approved vendors, including contractual disputes and payments.

63On January 28, 2015, Iris became one of the BMO’s approved vendors and signed a Service Provider Agreement with Allegis to provide technical services via its contractors (“Allegis Agreement”). The Allegis Agreement was signed by Mr. Youssef as President and CEO of Iris on January 28, 2015. The agreement confirmed that Allegis had been “selected to provide centralized supplier management services” to the BMO in connection with its use of “temporary contract workers”. I note that this was only a couple of days before the Equity Agreement was signed.

64According to ASF#3, Allegis is a Master Service Provider that provides management of temporary staffing suppliers on behalf of corporate clients. In doing so, Allegis acts as an intermediary between its clients and their external vendors and/or their related workforce for the purposes of payment. From January 28, 2015 to September 26, 2016, Iris was an approved vendor/supplier to the BMO and Allegis was responsible for managing Iris and their related contractors.

65Essentially, the Allegis Agreement inserted Allegis between Iris and the BMO. Iris would send the contractor invoices with the markup that Iris was entitled to monthly to Allegis, and Allegis would send those invoices to the BMO for payment. The BMO would then pay Allegis for the invoices, and Allegis would pay Iris. Allegis charged Iris a fee that depended on the hours worked by the contractors.

66Mr. Bikhit testified that Mr. Youssef managed the relationship between Allegis and Iris at the executive level, and Ms. Nesterchouk did so at the more operational level. This evidence was not challenged.

67Mr. Bikhit was shown an exhibit that proves that Allegis was paying Iris monthly and only withheld one payment in July 2016. He admitted that he discovered later that Iris received all the money owing to them from Allegis by October 25, 2016. When it was put to him in cross-examination that he was telling contractors in August and September of 2016 that they would be paid, but they were not, Mr. Bikhit testified that his belief at the time was that the money was going to payment for the contractors. He believed that the people who had access to web banking and who had been doing the payment process for the previous year and a half, namely Mr. Youssef, Ms. Grewal and Ms. Nesterchouk, were making the payments.

Mr. Bikhit’s Role at the BMO

68Mr. Bikhit testified that his role at the BMO was Project Manager. He was to manage the collection of projects within the bank’s FX portfolio. The BMO has offices all over the world, specifically in foreign exchange, and the team was quite large. In addition to the Toronto office, there were offices in Montreal, New York, Chicago, Dublin, London, Hong Kong, Singapore, Guangzhou, Shanghai and Beijing.

69Antonio Espinoza was an employee of the BMO and the senior technology officer for part of the FX portfolio. He had a team of two floors of contractors and BMO employees, with 25-30 people per floor. He also had peers in some of the BMO offices.

70Mr. Bikhit testified that at any given time, there were at least a dozen larger projects and many smaller projects on the go. As Project Manager, his role was to be the hub of communications between the project stakeholders – namely the different functions of the bank, such as traders. He was also responsible for coming up with a schedule. The schedule depended on the stakeholders’ requirements and the project’s technical resources, namely the contractors and the BMO employees, around 70-80 people. Mr. Bikhit testified that the entire group he coordinated with, including the stakeholders, consisted of about 110-120 people. During his evidence, Mr. Bikhit referred to a chart that he had created to assist in understanding the complex nature of the project and his role. When asked in cross-examination, most of the contractors agreed that Mr. Bikhit’s role as Project Manager was highly demanding.

71Mr. Bikhit testified that he received hundreds of communications each day and would often be in back-to-back meetings throughout the day in his role as Project Manager for the BMO. He testified that a relatively small portion of these communications dealt directly with Iris payment issues. Mr. Bikhit said that long working hours for him were not uncommon.

72Mr. Bikhit testified that he also had significant international obligations. He was required to travel extensively for the BMO because of the global nature of the collection of projects he was managing. He travelled to most of the BMO’s offices in North America, the United Kingdom and Asia. On occasion, he would be out of the office for weeks at a time. During his evidence, Mr. Bikhit referred to a chart he created that outlined his travel. This chart sets out the dates he was travelling, where he travelled to, and if he travelled for personal or work purposes. Mr. Bikhit testified that the graph was not complete. It only includes that travel dates for which Mr. Bikhit had supporting documentation in the form of booking confirmations, boarding passes or itineraries from his personal Gmail account. He said that there would have been more supporting documentation for other work-related trips; however, Mr. Youssef took down the Iris Solutions domain in 2017, and Mr. Bikhit lost all his emails in addition to his files and folders. Furthermore, Mr. Bikhit no longer had access to his BMO or IrisSolutions.com email to confirm other trips, nor was this information collected by the police. He did not reach out to the BMO for his emails on their system.

73In addition to supporting documentation, Mr. Bikhit’s required travel is corroborated by several Crown witnesses, including Ms. Shum, Vishal Bangia and Mr. Khayat. The Crown did not challenge the contents and accuracy of the travel chart and supporting material in cross-examination.

Iris’ Agreement with FundThrough

74On June 15, 2015, Iris entered into a Master Purchase and Sale Agreement with a factoring company called FundThrough Inc. (“FundThrough”). Mr. Bikhit signed the agreement on behalf of Iris. In addition, various other documents were executed to provide security to FundThrough.

75ASF#3 states that FundThrough is a factoring company that specializes in providing upfront capital to its clients by purchasing outstanding invoices in advance of their payment due date. FundThrough provides a percentage of the outstanding invoice upfront to qualifying clients and requires its clients to sign an agreement that future invoice payments will be made into an account controlled by FundThrough, known as a “Lockbox” account. While the “Lockbox” account is opened in the client’s name, sole signing authority is given to FundThrough to ensure repayment of the loan.

76The ASF goes on to state that in order to apply for funding, clients are required to use FundThrough’s online platform and upload the respective invoices for approval. Once approved, payment is forwarded to the client electronically to their designated account. For every funded invoice, the client is required to agree that the entire payment of the invoice is placed into the “Lockbox” account. Following payment, FundThrough withdraws the principal loan amount along with associated fees before the remaining amount (if any) is remitted back to the client.

77ASF#2 states that on June 15, 2015, the Iris bank account # 1020 5484891 (“TD 891” or the “Lockbox account”) was opened by Mr. Bikhit. Steven Uster, the co-founder and CEO of FundThrough, had sole signing authority over the Lockbox account.

78On June 15, 2015, Ms. Nesterchouk provided Allegis with a change in Electronic Fund Transfer instructions that stated any and all payments should be placed in the Lockbox account effective immediately. On June 16, 2015, Allegis confirmed receipt of the change in payment information, and Ms. Nesterchouk sent confirmation to FundThrough regarding the change.

79Mr. Bikhit testified that around May/June 2015, Mr. Youssef told him that there were problems related to fees with Allegis and the BMO stemming from some of the contract negotiations from the previous year. As a result, there could be delayed payments or payments held back between the BMO, Allegis and Iris. The issue as Mr. Bikhit understood it was that before, without Allegis, there were no fees, and now Iris had to pay fees to Allegis. Mr. Bikhit testified that he understood the delay in payments would go on for a few months.

80Mr. Youssef proposed that Mr. Bikhit find financing to ensure that the operations could continue, and Mr. Youssef suggested that they use a factoring company. Mr. Bikhit testified that Mr. Youssef asked him to go to FundThrough and set things up, as Mr. Youssef was in Egypt at the time.

81Mr. Bikhit testified that initially he was on calls with FundThrough, Mr. Youssef and Ms. Nesterchouk. Once the details were worked out, Mr. Bikhit went to the FundThrough office to meet with Mr. Uster and sign the Master Purchase and Sale Agreement. He and Mr. Uster then opened the Lockbox account. Ms. Nesterchouk was the one dealing with the operations side of FundThrough. Mr. Bikhit testified that he did not have any role in the administration of the money that was coming in by FundThrough. He did, however, sign a PPSA contract with FundThrough that made him personally liable, not Iris or Mr. Youssef. Mr. Bikhit did not testify about this, but it does show the influence Mr. Youssef had over him.

82Mr. Bikhit testified that his understanding was that the money advanced by FundThrough would support the operations of the business as a whole and that it would also be used to pay the contractors. Mr. Bikhit understood that FundThrough was only lending a portion of the outstanding payments and that there would be interest owing depending on the length of the loan and FundThrough’s fee. FundThrough would recoup the loan with interest when the payment was deposited into their Lockbox account. He did not recall the specific amount of the fee, as this was administered by Ms. Nesterchouk, who was logging into the FundThrough portal. Mr. Bikhit was not sure if he had access to this portal. It is possible, but he never used it because there was an operations team in place for this. Mr. Bikhit testified that his understanding was that FundThrough did not require payment of prior invoices to the BMO before extending further credit on other outstanding invoices.

83Mr. Bikhit testified that he had no access to the Lockbox account, and he was not notified when funds from FundThrough came into the Iris bank account. He admitted that he could have looked at Iris’ bank account to see this; however, he did not look at the account very often. He explained that he was “heads down” in his work at the BMO. He did not have the capacity or the time to do anything on the operational side, and there was already a team in place that had established processes for a number of years. He did admit that in retrospect, knowing what he knows now, he should have looked at the account. When Ms. Weinberg put to Mr. Bikhit that he did not even take a minute to check the 939 TD account when all the contractors were complaining about delayed payments, Mr. Bikhit responded, “I absolutely should have. I, I don’t disagree. I should have”.

84Mr. Bikhit admitted, but based on the records we have now, that even when Allegis withheld the payment to Iris in July 2016, FundThrough still advanced loans to Iris in the same month. He admitted that FundThrough kept funding Iris from June 2015 to October 2016. He also admitted that he does not believe that he told the contractors anything about FundThrough.

85Although Mr. Uster came to court to testify on behalf of the Crown, I was advised that counsel had agreed that instead of him testifying viva voce, the parties wanted to file on consent his evidence from the preliminary inquiry given on November 13, 2019. The exhibit of text messages between Mr. Bikhit and Mr. Uster that was entered at that time. As stated on the record, Mr. Bikhit expressly agreed to proceed this way. In light of the agreement, I excused Mr. Uster, and the preliminary hearing transcript of his evidence was entered into evidence in this trial.

86A book of FundThrough emails was entered as an exhibit at trial. During my deliberations, I realized that some of the documents referred to in Mr. Uster’s preliminary hearing evidence were not entered as an exhibit at trial. This did not adversely impact my deliberations, as I was able to consider the relevance of the documents that were admitted into evidence.

87Mr. Uster described FundThrough as a tech-enabled invoice factoring company. As a factoring company, FundThrough purchased the invoices Iris issued to the BMO right after they were issued, so that Iris did not have to wait for payment from the BMO. FundThrough charged a fee for its service and waited for payment of the invoices from the BMO. He testified that the agreement with Iris was essentially a loan agreement to fund the invoices to the BMO.

88Mr. Uster testified that often his clients did not want their customers to know that they were using a third-party service. When they did not care, FundThrough would arrange for the customer to change their payment details, and instead of sending it to the FundThrough client, they would send it to FundThrough directly. When they did care, they would set up a Lockbox account. Neither Mr. Uster nor Mr. Bikhit were asked if they discussed why a Lockbox account was set up. Mr. Uster did testify that Mr. Bikhit told him that the reason he needed to use a factoring company was that his business was growing so quickly that his biggest constraint was finding contractors, and he was using the money to advertise on Linkedin and other places to recruit more contractors. Mr. Uster was not asked when Mr. Bikhit told him this, and Mr. Bikhit was not asked about this evidence.

89When asked if he remembered Mr. Bikhit, Mr. Uster testified that he very much remembered him, and that they had lots of interactions. He described Mr. Bikhit as a “high maintenance client”. In particular, Mr. Uster testified that Mr. Bikhit would often call asking about funding, which he said is not unusual in itself, but it became “much more often”. Mr. Bikhit also often came by their office on his own without an appointment, which was very unusual as they are an online business. Mr. Uster spoke to Mr. Bikhit directly as did others from FundThrough.

90According to Mr. Uster, Mr. Bikhit would come in if FundThrough did not respond quickly enough and he wanted to fund invoices, or if he wanted to explain to FundThrough why they were wrong in their analysis of what was available to be funded and he would look for reconciliations. Mr. Bikhit also interacted online, for example by providing time sheets. Mr. Uster was not asked about the timing of these interactions in his evidence in chief, and in fact when asked specifics, he was taken to the emails Mr. Bikhit sent him during the period from August 23, 2016 to November 9, 2016.

91In cross-examination, Mr. Uster was asked if it was only in a specific time frame that Mr. Mr. Bikhit was at his office on a regular basis. Mr. Uster responded that counsel was testing his memory; certainly towards the end of the relationship he was there more often, and the characterization of “all the time” was not correct. He recalled it happening “at the end” but could not recall how many times. He stated again that they did not have clients coming in, as they were an online business, and that especially towards the end of their relationship, they had meetings set up with Mr. Bikhit to do a workout plan with him or understand what was going on. He was not asked what this “workout plan” was. However, this may have been a reference to evidence he gave about the fact that at the very end of the relationship they lost money due to unpaid invoices and were working with Mr. Bikhit on that.

92Mr. Uster gave evidence about an email from Mr. Bikhit to Marina Montero that he was copied on, dated August 24, 2016. In that email, Mr. Bikhit stated that they had received confirmation that the June payment was deposited the day before, and he asked, “please confirm asap on your end that it is in your Lock Box”. Mr. Uster testified that there was nothing particularly odd about this email. All it meant was that the funds from Allegis were on the way. Ms. Montero advised Mr. Bikhit by email dated August 24, 2016 that the funds were in the Lockbox, and he responded eight minutes later that this was excellent news and that “things are back to normal”. Mr. Bikhit asked how much would be remitted from the June payment and asked that it be processed the same day. Mr. Uster testified that suddenly payments had stopped for several weeks over the summer, whereas before payments came regularly. He believed that this is what Mr. Bikhit was referring to when he stated things were back to normal. Mr. Bikhit was not asked about this email in cross-examination.

93Mr. Uster identified an email Ms. Montero sent to Mr. Bikhit dated August 24, 2016, which set out the details of the funding that day of $191,159.26. The email sets out $265,101.35 as the total of the invoices and $1,988.26 as a transaction fee (.0075% of amount advanced). Mr. Uster explained that FundThrough did not fund 100 percent of the invoice amount because a further fee accrued every day until they were paid the full amount of $265,101.35. They held back 10 percent to cover the further fees.

94In an email from Mr. Bikhit to Ms. Montero, copied to Mr. Uster and dated August 29, 2016, Mr. Bikhit asked: “please process last weeks’ time sheets for same day funding”. Mr. Uster explained that FundThrough had agreed that they would not fund invoices until they were approved in the Allegis system because that way they knew that they would be paid. As soon as they were made aware that the invoice was approved, it was eligible for funding. The funding could be done the same day, depending on what time of day they were notified.

95There are a number of additional emails from Mr. Bikhit to FundThrough starting at the end of August 2016, around the time of the transition to Procom. Mr. Bikhit was asked in cross-examination if he was asking FundThrough to fund specific dollar amounts, but he did not recall. The emails suggest that Mr. Bikhit was getting quite involved in the payments by Allegis, but Ms. Weinberg did not ask him about the details of any of the emails or even generally why he was doing so. As this email exchange only occurred at the end of August 2016, it could have only been because of the transition to Procom. These emails are not evidence that Mr. Bikhit communicated with FundThrough about the timely payment of invoices at any earlier time, nor do they impact on his knowledge of what happened to the money from Allegis once it was paid into the Lockbox. Certainly, given the vagueness of Mr. Uster’s evidence as to the timing of his contact with Mr. Bikhit, his evidence does not contradict Mr. Bikhit’s.

96In addition, a short text exchange between Mr. Bikhit and Mr. Uster in early July 2015 and then again in August 2016 was admitted as authentic. It was not referred to in Mr. Uster’s evidence at the preliminary hearing, so I have no evidence from him about this. The July 2015 messages are following up on the timing of funding, and Mr. Bikhit was not asked about that. On August 11, 2016, Mr. Uster messaged Mr. Bikhit expressing concern about “this lack of payment. Way out of the norm timeframe. Should I be concerned”. Mr. Bikhit responded that they were working on getting a date, presumably for payment. I presume this was a reference to when Allegis stopped the July 2016 payment because of contractor complaints, but Mr. Bikhit was not asked about this.

The Contracts

97The ASFs include admission of the identity of each of the complainants and their corporations and the authenticity of their bank records. In addition, as each complainant testified, the authenticity of the documents they provided to the Crown that were entered into evidence was admitted, even though not all contracts produced were signed.

98It is not necessary to summarize each of the complainants’ evidence, as much of the contractual arrangements with Iris were the same. Some of the complainants were already working for the BMO through Iris Solutions. The complainant Mr. Scarrow’s first contract was with Iris Solutions, and when its term ended, an offer letter came on January 29, 2015 from Mr. Youssef as President and CEO of Iris. No mention was made in the offer letter about the change in Iris. Where there are contracts between the contractors and Iris Solutions or Iris, like for Mr. Scarrow, the contracts are virtually identical.

99Those that worked for both Iris and Iris Solutions testified generally that they did not notice the difference in who they contracted with, as the people they were dealing with, like Ms. Nesterchouk, were the same. They were still working for the BMO, and their invoices were processed in the same way. In fact, some of the complainants who had worked for Iris Solutions continued to address their invoices to Iris Solutions even once they were contracted with Iris. Those that worked originally for Iris Solutions admitted that they experienced delays in payment then as well, although it was not a big issue.

100Each of the contracts between the complainants and Iris provided that Mr. Bikhit was the Iris Representative in the following terms:

Iris Software Solutions Inc. Representative

Throughout the conduct of this assignment, the Contractor’s contact with Iris Software Solutions Inc. will be Mr. Kareem Bikhit, or any other Iris Software Solutions Inc, employee or contractor assigned from time to time by Mr. Bikhit.

The Contractor will report to the Iris Software Solutions Inc. Representative for the duration of the agreement.

101The contract offers from Iris in January 2015 were on behalf of Mr. Youssef as the President and CEO of Iris, but after that Mr. Bikhit was stated to be in that role. This is consistent with the signing date of the Equity Agreement. Some of the contracts were sloppy, as Iris Solution was mistakenly left in the offer as the corporation’s name. Mr. Bikhit testified that he did not prepare the contracts; they were prepared by either the Business Operations Manager, Ms. Nesterchouk, or Ms. Manollenko. This evidence was not challenged. He did admit that he signed many contracts with the contractors.

102Mr. Bikhit’s evidence was corroborated by some of the complainants, who produced communications with Ms. Nesterchouk about contract negotiations. Mr. Scarrow produced an email from Mr. Youssef dated February 15, 2015, which was copied to Ms. Nesterchouk and Mr. Bikhit, in which he referred to a meeting he had had with Mr. Bikhit and his request for two changes to his contract. Mr. Youssef responded to those requests. He confirmed that Mr. Scarrow would not receive an increase in pay and that he needed a final answer on whether he was going to sign the new contract. I note the email came from Mr. Youssef’s email account at Iris Solutions. I note that in this email Mr. Youssef also stated, “As you are well aware, there has been some recent delays from BMO paying us”. Mr. Bikhit was not asked about this exchange, which was very soon after the signing of the Equity Agreement, but it does confirm Mr. Youssef’s continued role in the negotiation of the terms of the contracts. It also confirms that Mr. Youssef had the final word and that the BMO was delaying in making payments, both of which corroborate the Mr. Bikhit’s evidence. Mr. Bangia similarly testified that when he asked for a raise, it was Mr. Youssef who said no.

103The complainants were contracted through their personal corporations to provide various professional services. Some were business analysts who would take stakeholders’ requirements and translate them into technical specifications. Some were software developers who would take those specifications and configure a software system to them. This group included senior developers known as technical solutions architects, business solutions architects who knew the business requirements, software and systems to design business solutions, web developers, senior and junior project managers, and an environment manager.

104The length of contracts varied, as did the payment terms. In the case of Gregory Johnson, for example, the offer letter dated October 2, 2015 simply stated he would be paid monthly. In other cases, the contract provided that the contractor would be paid monthly “within three business days of Iris receiving the full payment of the invoice by BMO provided the timesheets attached have been approved by the Iris …” This is the language that was used in some of the earlier agreements the complainants had with Iris Solutions. In the case of Andy Kalpakis, his offer letter stated that he would be paid on a monthly basis “generally within 45 days of invoice submission-but depends on receiving the actual payment from BMO”.

105As for when the BMO was expected to pay Iris, Ms. Akhavan testified that Mr. Bikhit told her that the BMO paid in 20-25 days and that they would try to pay her within 30 days of the invoice. Mr. Bikhit testified he did not know at the time how quickly the BMO paid Iris. He denied that the contracts stating that the contractors would be paid within three days of the BMO paying Iris were worded deliberately so that he could later use the excuse that the BMO had not paid Iris. He did not know why the payment terms varied in different contracts. He did not know if Mr. Youssef or someone else in the office drafted the contracts. He never asked anyone why there were different terms. It was not something he was responsible for.

106Some of the offers in late 2015 and 2016 provided that the hourly rate would be paid “on a monthly basis … to your business bank account”, see for example the offers to Mr. Khayat and Leon Rodovinski. The same terms appeared in their renewals in August 2016. The same applies to Mr. Bangia, save that his August 2016 renewal provided that his hourly rate would be paid “on a monthly basis, 45 calendar days after your invoice is submitted to us …”.

107For many of the renewals after January 2016, the payment terms were expressed as “within 30 calendar days of receipt of your invoice and in the event payment is not made within these 30 days of receipt of your invoice, payment will be made within 90 calendar days of receipt of your invoice, with a 5% premium on the invoice amount”. Other renewals simply stated payment would be monthly and that the original agreement was extended on the “same terms and conditions”.

108The first renewal for the complainant Ms. Shum, dated January 31, 2016, stated that the original agreement would be extended but that the invoices would be paid monthly “within 30 calendar days of receipt of your invoice. In the event payment is not made within these 30 days of receipt of your invoice, payment will be made within 90 calendar days of receipt of your invoice, with a 5% premium on the invoice amount”. Ms. Shum testified that she had made the 5 percent deal when her payments were late. She wanted this language in her renewal to avoid having to continue following up about the late payments. Millie Samanski’s renewal dated May 30, 2016 had the same language.

109Ms. Weinberg argued that Mr. Kalpakis’ contract dated November 19, 2015 provided that his hourly rate would be paid on a monthly basis, either by cheque or direct deposit to his business account “generally within 45 days of invoice submissions – but depends on receiving actually payment from BMO.” No one else had a contract with this wording, and Ms. Weinberg argued that this wording contemplated Iris not paying him. That term, however, was not any different from others that tied payment to when Iris received payment from the BMO. I do not accept the submission that this was done so that Iris may not pay a contractor.

110Some of the complainants signed their contracts with Ms. Nesterchouk, who was represented to be the Business Operations Manager. Based on her email address, her role was on behalf of Iris Solutions, although she also was clearly involved in the operations of Iris, consistent with the terms of the Equity Agreement.

111Some of the complainants produced an email from Ms. Nesterchouk explaining the Iris/BMO billing procedures and the 45 days net term and providing information as to when Iris expected payment from the BMO. The email also explained how to prepare time sheets and stated in part:

Just as indicated in your contract, the payment is made within 3 days after we received the payment from BMO. We are on Net45 terms with BMO, meaning they are paying us within 45 days after they receive the invoices, although they typically pay us a bit earlier-within 5-6 weeks or so. So to give you an example: the payment for your invoice submitted on September 1st will be issued first or second week of October, or sooner. [the dates of the specific examples changed in various emails]

112Ms. Manollenko produced similar emails, explaining:

The payment is made on Net45 terms – on average within 45 days of receipt of your invoice. So to give you an example: the payment for your invoice submitted on November 1st will be issued in second week of December, or sooner.

113These emails from Ms. Nesterchouk and Ms. Manollenko demonstrate that they were part of the Iris Solutions’ operations team that was managing the contractors for Iris, as Mr. Bikhit testified to. They also show that Iris Solutions/Iris was forthcoming as to when Iris expected payment from the BMO. Although I do not have these types of emails from all the complainants, it is likely this type of information was communicated to them, as these emails included information on how to bill Iris.

114In cross-examination, Mr. Bikhit was asked about the fact that the banking records show that, notwithstanding the payment terms in individual contracts, payments were made on an irregular basis. Some contractors were paid early and others late. Mr. Bikhit testified that he was not keeping track of this at the time.

115Mr. Bikhit admitted that he had an incentive to grow Iris. He also admitted that Iris benefitted from markups on the hours billed by the contractors. He did not know, however, what the markup amount was for each contractor. That evidence was not challenged.

116Mr. Bikhit testified that he was not able to ask the BMO to hire more contractors, nor did he do so. If work was to be done, he identified the resources or type of skills needed and then the BMO would decide whether to allocate inside resources or have Iris hire more contractors. Mr. Bikhit denied that he was able to suggest that any contractor work overtime, but he did communicate to a contractor that he or she could work overtime when it was approved by the BMO. Mr. Bikhit denied that he suggested to anyone that they bill overtime that they had not in fact worked. He testified that there was never any discussion to bill work that was not done.

117Mr. Bikhit testified that he did not have a written contract with Iris like the other contractors did, but he entered the hours he worked in the same way, and his time was invoiced to the BMO. Mr. Bikhit admitted that he was fully paid for his work for the BMO, but he testified that he did not have an understanding with Mr. Youssef as to when or how often he would be paid. His payment was factored into the list of payments that Iris Solutions was managing. He did not know if he was paid on a regular basis, and he never spoke to Mr. Youssef about his payments being late. As I have said, he testified that he even needed instructions from the operations team at Iris Solutions to transfer money from Iris to his own contractor company to pay his invoices. This evidence was not challenged.

Relationship of the Complainants with Mr. Bikhit

118Mr. Bikhit admitted that he asked two of the contractors to come work for the BMO through Iris, Mr. Cheung and Mr. Michailidis, but he testified that there was a recruiting function at Iris –I assume he meant Iris Solutions –where jobs were posted. His evidence is corroborated by emails either Ms. Nesterchouk or Ms. Manollenko sent to the contractors at Iris, which stated that Iris was growing, they were looking for people for various positions at the BMO and that their preferred route was “for referrals from our existing team”. I therefore do not accept the Crown’s submission that Mr. Bikhit was responsible for recruiting contractors for Iris.

119Most of the contractors worked in a cubicle on the ninth floor of the BMO at 302 Bay Street, Toronto. Mr. Bikhit as the Project Manager was also in a cubicle on the ninth floor. It seems that everyone had a good relationship with him, although not all worked closely with him as that depended on what their role was. Mr. Bikhit testified that he had a good working relationship with the contractors, and they saw each other frequently. It was easy to communicate issues when he was present and not travelling. The complainants also testified that they communicated with Mr. Bikhit via email using the BMO internal system and Mr. Bikhit’s Iris email account. Some used WhatsApp. Ms. Shum was a personal friend of Mr. Bikhit’s; she was invited to his wedding, although she was unable to attend.

Discussions About Delays in Payment: The Complainants’ Evidence

120Most but not all of the complainants testified that they spoke to Mr. Bikhit about delays in the payment of their invoices. Not surprisingly, the complainants could not be specific about when they spoke to him or what was said unless they happened to still have a copy of an email or other type of communication.

121Most of those conversations took place on the ninth floor at the BMO, as they were working side by side. Some testified to meeting Mr. Bikhit once or twice at the Iris office on Bay Street. Some of the complainants testified that the delay in payments began as early as June 2015. Typically, they would speak to Mr. Bikhit about it. Instead of a 30-day delay, the payments started coming later. The general experience was that after speaking to Mr. Bikhit, they would receive payment within a few days.¹

122As for what Mr. Bikhit told them when he was asked about delayed payments, not all complainants could remember what he said. To the extent they did remember, the complainants generally admitted that Mr. Bikhit told them he would check and get back to them.

123To the extent the complainants recalled Mr. Bikhit giving reasons for late payments, Ms. Akhavan testified that Mr. Bikhit told her that Allegis was late in making payments or the BMO was not paying. He said this fairly often for probably six months or more in the latter part of 2015. In the beginning of 2016, she recalled that Mr. Bikhit said that they were working on a new payroll system for Iris. Charles Chung testified that the main excuse Mr. Bikhit gave him was that Iris was not getting paid by Allegis, the payment processor, or the BMO. Ms. Samanski testified that Mr. Bikhit told her that payments were late because the BMO paid late and that she spoke to him about this monthly. If he said the BMO was late in paying, he would typically give a specific time for when to expect payment. Some of the complainants testified that Mr. Bikhit blamed some of the delays on statutory holidays.

124Some of the complainants produced email exchanges with Mr. Bikhit. When questioned, Mr. Bikhit’s response was generally to state that he would check, or “let me see whats [sic] up”. In some cases, Mr. Bikhit made it very clear he had to check with someone one else, as he would respond that he would check again “cause they told me it was processed” or that he was “waiting to get an answer” or that these were the “dates given by the processing company”.

125Ms. Shum testified that all her discussions about late payments were with Mr. Bikhit, but there are messages in her document book following up on payment with Mr. Youssef when Mr. Bikhit was in Italy for his wedding in July 2016. She did not think she was ever paid without going to Mr. Bikhit first. Ms. Shum testified that she would ask Mr. Bikhit about payment, and he would tell her not to worry about it. He gave various reasons for delay, including generic logistical explanations and bank delays. After her memory was refreshed from her evidence at the preliminary inquiry, she recalled that Mr. Bikhit gave the following reasons for late payments: the BMO paid Allegis late, Iris was paid late, someone was on holiday, direct deposit was not set up correctly and had to be redone or the cheque had to be sent. In cross-examination, she admitted that she did not have a timeframe for the various reasons given. Ms. Shum testified that one reason Mr. Bikhit gave was that the account was frozen, but in cross-examination, Mr. Bikhit denied saying this.

126Ms. Shum also produced WhatsApp Chats between June 22, 2016 and September 19, 2016. She did not download earlier chats, as she did not think them relevant. The chats started after Ms. Shum left Iris. She started off by stating that 90 days from March 31 is June 29 and asking, “are we going to be good”? She also asked about her $50,000 promissory note. Mr. Bikhit responded that all should be good but “I’m not AP [accounts payable] so will check for u all the details”. After some personal back and forth chitchat, Mr. Bikhit stated, “I confirmed for you. Your March 31 + 5% is on track”. Mr. Bikhit was not asked about this communication.

127Ms. Shum asked Mr. Bikhit in a WhatsApp message she sent on July 2, 2016 if while he was away for his wedding, she should contact Mr. Youssef. Mr. Bikhit responded, “Yes all has been handed over to him for this week” and that “He’s here until Friday to handle all this stuff”. Mr. Bikhit not asked about this.

128Ms. Shum sent a message to Mr. Bikhit on the WhatsApp Chat on July 15, 2016 while Mr. Bikhit was in Italy for his wedding asking him what was going on. Mr. Bikhit stated that “for BMO payments there are delays and I will personally make sure u get additional interest for every day that’s delayed because you have never caused an issue for iris or complained and will be compensated for it. You will be payed [sic] Shum don’t worry. I mean that”. Ms. Shum responded that she was worried about various things including bankruptcy. Mr. Bikhit responded that she did not need to worry and that she should cut off communication with Iris people at the BMO and that: “March 31 + 5% is on trac”. Mr. Bikhit may have given this detailed response while he was in Italy because Ms. Shum was a close friend, but he was not asked about this response.

129The complainants all testified that they believed what Mr. Bikhit told them about why the payments were delayed, although some admitted doubts. They all testified that if they had been told that Iris was getting paid but Iris was not going to pay them, they would not have continued working on the BMO projects because, as one complainant put it, “no one works for free unless they are volunteering”.

130Some of the complainants also emailed Ms. Nesterchouk about payment delays. For example, Mr. Chung emailed her asking when his September 2015 invoice would be paid. In another email he produced, Ms. Nesterchouk advised that she had just heard back from “my finance team – the deposit should go into your account by this Friday”. Mr. Chung admitted that Ms. Nesterchouk was initially his point of contact for delayed payments but later when he approached Mr. Bikhit, Mr. Bikhit’s general response was “let me check”.

131Mr. Scarrow produced email chains with Ms. Nesterchouk from early February 2015, late March 2015 and the end of June into early July 2016 asking about the timing of payments. These emails and her responses were not copied to Mr. Bikhit. In an email to Mr. Scarrow dated March 16, 2015, Ms. Nesterchouk stated that payment would not take much longer and that she would get back to him as soon as she received confirmation of the “fund transfer from our finance team”. Presumably that was a reference to Mr. Youssef as the CFO. There is no evidence of any other Iris or Iris Solutions’ employee as being on a “finance team”. In a subsequent email to Mr. Scarrow on June 4, 2015, Ms. Nesterchouk stated that the “public holiday in US resulted in unexpected delays for AGS[Allegis]/BMO in paying the vendors”. She gave the same reason for a delay in an email to Mr. Scarrow dated July 2, 2015.

132Mr. Scarrow must have followed up with Mr. Bikhit at the end of the year, as Mr. Bikhit sent an email to Mr. Scarrow on December 29, 2015 stating that he was “not involved in running the business as much as people think – just one of the original founders but always here to help when things aren’t going smooth like this case”. Mr. Bikhit responded on the same date and said that he had received his message and “followed up for you” and that Mr. Scarrow’s pay was “processed within the holidays. With the holidays, I’m guessing it will be anytime in the next two days.”

133In addition, some of the complainants produced emails to and from Ms. Manollenko about timing of invoice payment. In her replies advising when payment would be received, Ms. Manollenko’s email stated that she was an Executive Assistant, I presume to Mr. Youssef, as she worked for Iris Solutions at least as of December 2015. Her email address was for Iris Solutions, like Ms. Nesterchouk’s.

134In her closing submissions, Ms. Weinberg submitted that Mr. Bikhit continually promised to pay the complainants. She also submitted that Mr. Bikhit promised some of the complainants that if they remained and worked but accepted their money later than contracted, they would get an additional five percent bonus. Whether the complainants accepted the offer or not, they still did not get paid or continued to be paid late. The defence submissions did not deal with the submission that Mr. Bikhit made promises to pay, no doubt because that was not what the Crown’s case was about. The central allegation of fraud was that Mr. Bikhit told the complainants that the reason for the delay in their payment was that the BMO had not paid Iris, and that he knew this reason was false.

Discussions About Delays in Payment: Mr. Bikhit’s Evidence and the Five Percent Bonus

135Mr. Bikhit testified that he first started hearing from the contractors about delays in payments towards the end of 2015 when he returned from a trip to Asia that was from November 29 to December 13, 2015. Many conversations were either in passing or at the tail end of other meetings. I don’t believe his evidence of the timing was challenged, but it is not material in any event.

136Mr. Bikhit testified that the questions he was receiving from the contractors were “where is my payment?”, or “when will I receive it?” When told there was an issue, he told the contractor in question that he would check and pass the information on to the office, namely the operations team. He would then pass on the information he received from the operations team to the contractor. Sometimes, he would refer a contractor to Ms. Nesterchouk or Ms. Manollenko. He explained that the operations team had processes that had been established for years and the same people had been doing payroll for years. He personally did not have the time or capacity to get involved. When asked why he did not personally issue a cheque to a contractor, Mr. Bikhit testified that he was not managing the finances. I have already dealt with some of this evidence when discussing the set-up of Iris and the Equity Agreement.

137Mr. Bikhit testified that what he told the contractors about the reasons for delays in payment was information he received from Mr. Youssef. He was told and believed that there were contractual issues between Iris, Allegis and the BMO. As a result, there was a delay in payments by the BMO to Allegis, and Allegis would not pay until the BMO paid. He admitted that many times he told the contractors that the reason for the delay in payment was that the BMO was not paying Iris, although he did not recall over what time period of time he said this or who he said this to. He also admitted that on occasion he told contractors the delay was due to a long weekend or something about currency exchange, but that is what he was told. He assumed that the contractors believed what he told them.

138When asked about how frequently contractors inquired about late payments, Mr. Bikhit testified that these inquiries were just another kind of communication that would come his way throughout the day. He did not discern a pattern given the volume of his work and the other communications he was dealing with. Many of these conversations were in passing, and he would hand off the question to someone on the Iris Solutions operations team and ask them to take care of it. In cross-examination, Mr. Bikhit testified, “now that we see everything, and we hear everything, I wish I had done thing differently, but the finances were not my responsibility. And, I, I should have done things differently”.

139Mr. Bikhit testified that he spoke to Mr. Youssef about the delays in payment at the end of 2015. He told him that there needed to be a solution because things were going well at the BMO. Everyone was happy and working hard, and they needed to keep morale up. He asked him to resolve the issue. Mr. Youssef told him that when he came to Egypt for Christmas, they would talk; things were getting resolved, and he had a solution. Mr. Bikhit went to Egypt for Christmas 2015 and discussed the issue of delayed payments with Mr. Youssef. Mr. Youssef told him that there had been a resolution in the dispute with the BMO and Allegis and that things would be back on track soon. Based on what Mr. Youssef told him, Mr. Bikhit believed that there would be a catch-up period for the money owed to Iris. The money would be paid in several installments, and things would be back on track by June 2016. Mr. Bikhit’s evidence in this regard was not challenged directly in cross-examination.

140Mr. Youssef suggested that to keep the contractors happy, they pay them a five percent bonus in exchange for agreeing to delay the payment of their invoice by one payment cycle. Mr. Bikhit also testified that Mr. Youssef told him that this five percent bonus had been used in the past when there were payment delays with the BMO before Allegis was involved. Mr. Bikhit testified that he understood payment was to be net 45 days. Therefore, the payment would be due net 90 days, and there would be a five percent bonus for that agreement.

141Mr. Bikhit testified that he had about one and a half weeks to communicate this offer to the contractors in January 2016 before he had to travel again. Many contractors testified that they accepted this offer, and there is no dispute that they received the five percent bonus on the delayed payments they received. Mr. Bikhit shared the names of the contractors who did not accept the five percent offer with Mr. Youssef. Mr. Youssef told him not to worry about those contractors, as they would be taken care of in their regular terms.

142Mr. Bikhit testified that after he proposed the five percent bonus to the contractors, he would still get questions, but it seemed like the volume of conversations about delayed payments decreased. Mr. Bikhit testified that he did not realize the delay in contractors being paid was getting longer and longer because he was not tracking it. He volunteered in cross-examination, without being asked, that in retrospect, after hearing the evidence of the complainants, perhaps there was a pattern to the delays, or something more occurring than he understood or perceived at the time. He continued to either refer them to someone in the office – he believed Ms. Nesterchouk was on maternity leave at this time, so Ms. Manollenko – or he would raise the query with Mr. Youssef. In cross-examination, Mr. Bikhit admitted, “in retrospect, now that we have everything in front of us, it does appear that, you know, I could have done more, I should have done more.”

143Ms. Samanski produced a series of WhatsApp Chats with Mr. Bikhit dated May 27 to 28, 2016. The Crown argues that Mr. Bikhit went into great detail about how much money Ms. Samanski was going to get, the billing cycle, catch up payments, the new wage and signing the renewal. He was very involved. Mr. Bikhit was not asked about these messages, but they are consistent with his evidence. When Ms. Samanski asked Mr. Bikhit for an update on May 27, he responded five minutes later. He said that her February payment with the five percent bonus was already processed and that he “was told” the March and April invoices would not be paid this week, but he was “trying to get the exact dates for your catchup”. In a further exchange, Mr. Bikhit said that he was “heading to Iris after BMO today and will sit down with people and see what’s going on”. Clearly Mr. Bikhit did not know the cause of the delay, and he needed to check what was going on.

144In email exchanges in June 2016, Ms. Samanski and Mr. Bikhit discussed the five percent bonus. However, Mr. Bikhit was not asked about these exchanges, so I am unable to determine if he was checking with Mr. Youssef about the details. Ms. Samanski testified that in her email to Mr. Bikhit dated June 2, 1016, she told him that he had put aside any concerns she had about Iris’ solvency. She was referring to a conversation when he told her that she should not be concerned about Iris’ ability to pay. She wanted to document that conversation. Mr. Bikhit was not asked about this conversation, and so I do not rely upon this, as I do not know what his position would be.

145I note as well that the June 2, 2016 email exchange was forwarded to Mr. Youssef on June 4, 2016. Mr. Youssef responded by email on the same day, stating that the position on renewal was clear and Ms. Samanski was to advise if she wanted to reconsider the renewal. Ms. Samanski responded by email on June 6, 2016, with a copy to Mr. Bikhit. This last exchange with Mr. Youssef makes it clear that Mr. Youssef was the one making the final decision on contract terms.

146Mr. Bikhit testified that notwithstanding complaints from the contractors, he believed Mr. Youssef that payments were being made. He was not tracking when contractors were paid, but generally the contractor would tell him shortly after inquiring that they had received their payment. This solidified his belief that payments were taking place. Mr. Bikhit did not know if his prompting resulted in the payment, only that the payment was made. Mr. Bikhit also testified that it was not that he did not believe the contractors that there were delays in payments. Rather, he was asked to go to the bank and get drafts, and this would basically empty the Iris account. This informed his assumption that payments were being made. In cross-examination, Mr. Bikhit testified that he believed what he was being told, namely that payments were processed from multiple bank accounts and that the process was working.

147Mr. Bikhit admitted that in fact the BMO was paying Allegis save for July 2016, but that admission was based on trial records. At the time, he relied on the process in place, believed what he was being told and relied on that information.

148Mr. Bikhit testified that his understanding was that the loans from FundThrough had kept the business running. The loans had been used to pay contractors, and the priority was to repay the loans and interest and catch up with the contractors on payments. I asked Mr. Bikhit at the completion of his evidence how it could be that there was a delay in payment as a result of the BMO not paying Iris since FundThrough was advancing loans. If the BMO was late, that would only impact the amount of interest owing. Mr. Bikhit agreed that in retrospect it shouldn’t have mattered if payments from the BMO were late, but he did not think this at the time because he was so busy at the BMO and he was not looking at the account. Neither counsel asked follow-up questions.

149With respect to the issue of payments to the contractors, Mr. Bikhit was not asked in cross-examination about the complainants’ evidence in any detail. He admitted that at least 13 of the contractors complained to him directly when they did not get their money because they worked on the same floor. Some complained to him numerous times. When asked if some of the contractors complained to him at least ten times, Mr. Bikhit testified that it did not seem like it at the time because these conversations were not happening daily. He could not recall if some contractors complained as often as monthly. In cross-examination, Mr. Bikhit admitted that it was possible that the 13 contractors complained to him at least five times over an extended period. Ms. Weinberg put to him that on that math, there would have been 65 complaints to him about not getting paid. Yet, he didn’t have time to look in the Iris bank account to see if the money was there? Mr. Bikhit responded:

Yeah. I mean, absolutely. And, in hindsight – you know, hindsight being 20/20, there is definitely more I should have done when this was happening, but the context at the time as well is, there was a team in place, and process in place for this. When - as soon as I heard the complaints, I would take in the information, ask the question, and I would pass it on to the responsible folks, and said, take care of this. And, in many cases, it appeared like it did.

150Ms. Weinberg responded that it was “your bank account” and despite being asked many times about payment, he gave information to the contractors without looking at the bank account to see if it was true. Mr. Bikhit answered that this was “absolutely possible”.

Some of the Complainants Seek Legal Advice and Take Action

151Ms. Samanski testified that she asked Tish King from the BMO about the timing of payments and that she was told that the BMO was paying on time. This evidence was of course hearsay, but it set in motion a series of actions that Ms. Samanski took involving some of the complainants.

152In June 2016, Ms. Samanski and some of the other complainants sought legal advice and exchanged emails about it. Ms. Samanski retained a lawyer for an opinion about the delay in Iris payments, and she sent some of the other complainants a copy of the opinion on June 24, 2016. A number of the complainants were supportive, and some contacted their own lawyers.

153Ms. Samanski sent an email to Mark Dawidowicz at Allegis on June 21, 2016, alleging breach of contract by Iris and requiring his immediate attention. She stated that several months of wages were outstanding and owed by Iris. Ms. Samanski also referred to an investigation that Allegis had started, and she asked for an update. Mr. Dawidowicz responded on the same date and stated that Ms. Samanski’s email supported the escalation of the complaint. The next day, Ms. Samanski responded stating that they “have all individually reached out to Kareem Bikhit, President and CEO of Iris Software Solutions Inc., and continue to do so …. We have received repeated excuses such as that (a) either BMO/ALLEGIS payments to Iris is delayed, or (b) that there was an issue with Iris payments”. By email to Ms. Samanksi and others on June 25, 2016, Mr. Dawidowicz stated that Allegis had taken all steps to ensure that payments had been released to Iris and he directed further contact to be with Iris as her employer.

154Mr. Dawidowicz was not called as a witness, but documents that he produced from Allegis were marked as an exhibit and agreed to be authentic. Mr. Dawidowicz was notified in mid-June about an anonymous complaint by Matthew King, the Operations Manager at the BMO. In an email dated June 16, 2016, Mr. King suggested he contact Ms. Nesterchouk or “the owner Michael Youssef, but I don’t know him to be honest”. Mr. King was not called as a witness. Mr. Dawidowicz sent an email about the complaint to Mr. Youssef advising that he now had an official complaint from ten contractors.

155Mr. Bikhit testified that Mr. Youssef told him that a number of contractors had emailed Allegis stating they had payment issues, and Mr. Youssef had received an email from Allegis about the complaint. Mr. Youssef, who he described as being livid, told him that some contractors needed to be terminated and that the BMO and Allegis had to be sued. He also told Mr. Bikhit to keep conversations about payments with the contractors to a minimum. Mr. Youssef retained lawyers, who became involved.

156Mr. Bikhit testified that he was nervous about the situation and that the spring of 2016 was a very, very busy time for him. The BMO projects had some very big milestones coming up and the amount of his travel was increasing. In addition, he was getting married in July 2016, and it was to be a destination wedding in Italy that required time for planning. Mr. Bikhit testified that he tried to calm Mr. Youssef down and told him that they needed to come to an agreement with the contractors. He asked Mr. Youssef who was in Egypt at the time to come and take care of this.

157On June 22, 2016, Mr. Youssef sent an email to the contractors headed: “Urgent and Highly Confidential – your immediate attention is required”. The email was copied to Mr. Bikhit. In the email, Mr. Youssef stated that the contractors had expressed concerns with payment and had complained to BMO/Allegis or threatened to do so. Mr. Youssef threatened the contractors alleging they had made false statements and had breached the confidentiality terms of their agreements with Iris and advised that there would be a mandatory team meeting on June 27 at the Iris office to “discuss remediation”. Mr. Youssef stated that everyone was required to attend in person, or they could be terminated. He added that that after the meeting, there would be one-on-one meetings to discuss individual resolutions.

158Mr. Dawidowicz received an email from Mr. Youssef dated June 23, 2016 that was not copied to Mr. Bikhit. Mr. Youssef stated that “at first glance the claim appears to be unsubstantiated given that we have evidence all our subcontractors have been getting paid regularly on a monthly basis” (emphasis in original). Mr. Youssef promised to provide evidence of a cure of the default of the contract with Allegis within 15 days. That did not occur. Mr. Dawidowicz and Mr. Youssef continued to communicate about the complaints from some of the contractors and the fact Iris started to terminate the contracts of some contractors for alleged breach of contract, as set out below.

159Because of the dispute, Allegis withheld payment of the invoice dated July 13, 2016 to FundThrough and Iris. Mr. Bikhit signed an Indemnity Agreement between Iris and Allegis dated August 19, 2016 to permit the release of payment for that invoice. Mr. Bikhit was not asked about this agreement.

160Mr. Youssef went to Toronto in June, and he arranged a group meeting with the contractors. Mr. Bikhit also attended this meeting. Mr. Bikhit testified that in advance of the meeting, he told Mr. Youssef that there was a resolution to be had. The contractors wanted a resolution, and terminating contracts or suing people was not the right course of action because the contractors actually wanted to finish the work.

The Group Meeting on June 27, 2016

161A recording of the group meeting Mr. Youssef held on June 27th, 2016 was entered into evidence. Mr. Youssef did most of the talking. He had a very aggressive tone as he spoke to the contractors. Mr. Bikhit was seated next to him. He apparently did say something briefly at one point, but Ms. Weinberg did not ask any of the witnesses or Mr. Bikhit to identify his voice or what he said. Mr. Bikhit testified that he did not like the meeting and was not happy with how it was conducted. He felt it was a bit too harsh and that Mr. Youssef was trying to bully the contractors. He was still optimistic at the time that a resolution could be had and that the work could continue. It was also a very stressful time for him as it was one week before his wedding. He had already cancelled family events and his bachelor party because he thought this was so important. He knew that the majority of contractors, who were his colleagues at the time, wanted to finish the project because they were all really into the work. Mr. Bikhit took solace from the fact that the outcome of the meeting was to have one-on-one meetings with the contractors to identify a resolution plan. He hoped the resolution plan would bring things back on track so they could salvage the project.

162Mr. Youssef’s relevant statements, in terms of what Mr. Bikhit may have relied upon, are as follows:

What we want is to make sure we keep you and we keep you happy, that's all, absolute, most desirable outcome.

One group that agreed to do modified payment terms and the modified payment terms means they get paid normally later than usual, quite a bit later and they get compensated for it and those discussions that happened, happened individually, everyone inquired over the last few months and the people that have agreed to it have been receiving those additional compensations and the payments have been made on those dates, plus or minus one or two days.

Some people during the course of negotiations have requested to make it in writing and we did, not all of you know that cause I respect people's confidentiality, some people didn't, they just trusted us and we've been paying that, some people even said one more day after that day you pay me extra interest, we said okay, no problem and we've been paying them.

Some people didn't agree at the beginning, and they joined later, like Catia and we said okay, no problem.

You are a company that has a contract with us and that contract has terms and if your payments are late, the legal law in Canada usually goes for interest payments, that is not breach of contract.

If we do stop payments, that is a breach of contract, which we've never done.

Why in the next two days everyone agrees on something, whatever it is, we'll likely honour it and of course by the end of the week it would be like we have agreements, or we have two week notice, it's a very simple process.

You 're a supplier, a supplier has certain lines that never crosses, complaining to one of our clients, is a line, BMO is not your client, despite all what you want to think, BMO is our client, you are not entitled to that, what you are entitled to do is give us two weeks' notice, you are entitled to get your lawyer to take actions against us, you are entitled to walk away.

I can't name a client that was never late because guess what, I'm not the employee, I'm a supplier and suppliers run into these things.

If you do show up to the meeting tomorrow and I hope you all do, this arrangement will not change overnight, it will change to your interest.

If you want to cancel it, we will have to work out a good reasonable timeline and your next payment will happen on time as planned.

Hopefully in the majority of the cases it will be resolved, we get it in writing, and I will tell you in writing what the remedies will be if we don't meet our side. I hope that's clear, so then there'll be no room for misinterpretation.

If you think that you don't have it in writing, just so you know verbal agreements are biding in Canada and that the proof of payment that we've given you over the last few months, compare it with your invoice does show that you have been receiving a significant additional compensation for the delay, that is in our proof for us that this deal has been made.

There will be a very quick catch-up period, … however, for you to receive this catch up period you have to come up with one thing with us, the remedy for late payments is interest.

There's people that do leave us, this is no one course of life, we will pay you every penny we owe you and we'll say goodbye.

You guys have not agreed to the 5% list, we understand that and the catch up will be very quick.

Anyone who sent us an invoice with reasonable, within the law interest on due, on date invoices, we actually paid it.

I've never said to anyone that you will not receive additional compensation.

One of the contractors’ states: “There is 11 people, one of them left, which is Matthew, there is 10 active people in writing saying they’re not getting paid”. Youssef responds: “The legal, … the verbal agreement is binding and the proof that you have been receiving in bank drafts or direct transfer, additional compensation every month over your invoice which we have shows that you have agreed to the deal.

One of the contractors, Catia, states: “This is what I agreed to Karim. Youssef responds: No, I was on the call with you. So this was not a call with Karim, this, I was calling from Egypt and Karim was on the call and I remember it was after midnight and I have a call with you. Catia: “Yes and at that point I did not agree to any 5% offer”. Youssef: “Then Catia, you sit down with us individually tomorrow and i… if you don't, give us your two weeks' notice”.

I have, we are sticking to the additional compensation agreement that 8 people in this room have agreed to.

One of the contractors states: “when Karim told us each individually for 5%, he said eventually it's gonna increase or improve…. So now it's June, it hasn't improved” … I believe it's after two months of 90 days it's gonna change from 60 days of 45 days as per the contract”. Youssef responds: “That's what I said, I can tell you, I can tell you because I know some people in this room that have agreed to me on a specific timeline”,.

The people that did not agree to the 5% will get paid very quickly and I'll tell them alone when the deed is, the people that did the 5%.

Of course we owe some money, … BMO owes us some money, everyone, no one pays the same day.

Yes, of course I owe some money, now is the money overdue? Nope, not from my point of view.

If you're willing to meet then let's sit down and discuss it, I'll give you dates, I'll give you remedies, if we don't meet those dates and you take it and you say I accept it or I don't accept it. I think that's very reasonable, that's called good faith in negotiation.

The verbal agreement you made with Karim is binding and it's documented through the over payments.

One of the contractors states: “There's no guarantee that going forward you're going to keep your word that this the timeframe that you need to get paid and you will pay us, there's no guarantee of that. Youssef responds: “There is guarantee that you will get tomorrow, individually… I'm gonna grey out the one person that was smart enough to ask for it in writing, I'm gonna grey out the name and the amount and I'm willing to show it to you tomorrow, it matches exactly from four months ago, she signed with us what we've been doing, we haven't failed once. You match it with what you're getting without numbers and you see that the deeds on the spot, this is exactly. A contractor responds: “That's not true”, Youssef replies: “They're … actually gonna get paid.”

I flew halfway across the world to have this meeting, I'm gonna have a piece of paper with every single one of you on with the company’s name with remedies that payments will come as soon as possible, there's no more guarantees, I don't know what guarantee you want.

One of the contractors, Joseph states: “Payments getting delayed 30 days, add that, add in 45 days, 75 days that is really unprofessional”, Youssef responds: “Joseph. … getting your payment tomorrow. … if you don't like the payment terms and the guarantees, the answer is not to complain anymore, you're actually in a unique position, your contract is up, you have renewal paper in your hand, your way to protest is to not sign, your way to protest is to not force my hand into payment terms I don't want because that is a business relationship not an agree relationship. Do you think I'm happy with the payment terms I have with BMO and Telus? They went out of their way for the sake of going out of their way to make us on a net 65 days payment term, …”

Listen to what I have to say tomorrow, have it, think it, I'm gonna write how you're gonna get paid, when you're gonna get paid and what happens if you don't get paid.

I'm telling you right now, there is nothing terribly wrong, if you believe me, go for it, if you don't believe me, go”.

I don't think that I'm forcing you to do anything here but I'm not gonna agree to terms, I don't want to agree to, just like you don't have to agree to terms you don't agree to, what, we're prepared to lose half our business, are you prepared to lose your contract tomorrow, that is your question. We've already factored there losing half our business, very unfortunate but reality. [Emphasis added]

163Everything that Mr. Youssef said to the contractors in Mr. Bikhit’s presence is consistent with what Mr. Bikhit testified to understanding at the time. It is important to note that at this point the meeting was about delays in payment and how the contractors would be compensated, and Mr. Youssef was assuring everyone that they would be paid with interest.

The Individual Meetings That Followed the Group Meeting

164Mr. Bikhit testified that he participated in a couple of the one-on-one meetings, and for those it seemed like there was a resolution or action plan put in place. Some contractors had given their two-week notice, but Mr. Youssef was still committing to paying them. Mr. Bikhit testified that from the meetings he did attend, it seemed that they were making progress.

165Ms. Akhavan testified that she and her husband had a meeting with Mr. Youssef and Mr. Bikhit about a week after the group meeting. Mr. Bikhit was trying to be friendlier and wanted to move forward.

166Ms. Samanski met with Mr. Youssef and Mr. Bikhit after the group meeting. She testified that Mr. Bikhit did not do much talking. She submitted her resignation afterward because she was not getting paid. She was concerned that she was working for free and would never see the money.

Mr. Bikhit’s Absence Due to his Wedding

167Mr. Bikhit left for Italy for his destination wedding at the end of June or the beginning of July, and he was gone for about one month. Mr. Youssef had stayed back and told Mr. Bikhit that he was going to handle the situation while he was away. By now, Mr. Youssef was involved in individual negotiations with the contractors.

168Mr. Bikhit testified that while he was away there were not as many inquiries, but there were a couple. He did his best to answer them but directed them to Mr. Youssef, as he was in Toronto. For example, in an email dated July 4, 2016 to Mr. Bikhit, Mr. Chung referred to changes that Mr. Youssef had told him he would make with the payment schedule. Mr. Chung asked if the schedule was still coming because he thought it would be part of his renewal contract. Mr. Bikhit responded that it would come that week as a separate document, but when Mr. Chung replied with further questions, Mr. Bikhit advised that he was in Italy and “so been away from it all. Let me find out for u”.

169While he was still away, in a message dated July 22, 2016, Mr. Bikhit told Ms. Shum that he had been advised by legal not to make any commitments with past or present subcontractors and that there was no breach of contract due to delay in payment. He told her he was back the following week. She was not treated like other Iris people, and “I assure you that your payments are not at risk”. Mr. Bikhit was not asked about this message, but in any event, Ms. Shum had terminated her contract before the group meeting, so this statement could not have caused her to act to her detriment.

Iris Retains a Lawyer

170Mr. Bikhit testified that when he returned to Toronto at the beginning of August 2016, the payment issue seemed to be a disaster on all fronts. It was worse than when he left. On the BMO side, the project work had piled up, and they were asking him to travel again right away. Mr. Bikhit was still focused on successfully delivering the project.

171On the Iris side, Mr. Bikhit understood from Mr. Youssef that a law firm had been engaged and that payments to contractors had been frozen again by the BMO. He also found out that Mr. Youssef had been terminating contractors and was threatening to sue the BMO and Allegis. Mr. Youssef was putting contractors into two groups: one group was those who, in his opinion, had breached their contract and the others who had not. Mr. Youssef told him that things were getting sorted out and letters were going out from the lawyers. Mr. Youssef told him not to pay any of the contractors. Mr. Bikhit testified that he understood this was based on what Mr. Youssef was being told by the lawyers. He believed the money coming in was going to the lawyers. Mr. Bikhit told Mr. Youssef that he was not happy that lawyers were involved. Mr. Bikhit testified that he felt a bit overwhelmed, but he still believed that was a way to salvage the work at the BMO and come to a resolution with the contractors. Mr. Bikhit testified that in retrospect, he was perhaps naïve.

172Mr. Dimitry Gordon produced brief messages with Mr. Bikhit from early August 2016. Consistent with his evidence, Mr. Bikhit said he would check on the outstanding payment and then a few hours later, he passed on the information that he had. In a message on August 3, 2016, Mr. Gordon referred to what Mr. Youssef had told him in his one-on-one meeting with him that Mr. Bikhit did not attend. In his emails, Mr. Bikhit also asked Mr. Gordon for the name of his lawyer and said that the Iris lawyer and his lawyer would be connected. Mr. Gordon testified about a couple of telephone calls that he had with Mr. Bikhit after this exchange, which he recorded. Mr. Bikhit admitted that on August 9, 2016, he told Mr. Gordon that the reason for the delay in payment was that the BMO had not paid them. In that call, Mr. Bikhit also told Mr. Gordon that Iris worked closely with Allegis and the BMO to make sure everyone was paid. He was checking for him and that “The second I know I will tell you. I’m not trying to hold onto it”. Mr. Bikhit also stated that he could not promise payment. It is unclear whether Mr. Bikhit was referring to all the outstanding invoices, but Mr. Gordon’s last unpaid invoice is dated August 24, 2016, so that is when he must have stopped working through Iris.

173Jonathon Baker, litigation counsel for Iris, emailed some of the contractors on August 15, 2016. The email stated that because of complaints, Allegis had refused to release payments to Iris for services rendered “past current and future” and that until Allegis released those payments to Iris, Iris would not issue any payments. Mr. Baker went on to state that Iris felt obligated to point out that past and current work might not be “paid in a timely manner or at all” and that as a result, Iris was not compelling the contractors to continue working for the BMO. However, he also stated that Iris was not releasing any contractors and that they were still subject to the restrictive covenant.

174A further email from Mr. Baker dated August 22, 2016 stated that on late Friday, August 19, Iris and Allegis had reached an agreement with respect to the dispute. Iris was awaiting funds from Allegis and hoped for an “expeditious regularization of business operations”.

175Some of the complainants received letters alleging breach of contract as a result of their communications with Allegis and the BMO. Mr. Scarrow’s letter was signed by Mr. Youssef as the Co-President of Iris. Some contracts were terminated, and Mr. Dawidowicz complained to Mr. Youssef about this, as it had an adverse impact on the BMO project.

176Mr. Bikhit testified that the lawyers advised that given they were still evaluating if there were breaches or not, he was not to commit to any payments at that time. He believed the money coming in was going to the lawyers – he referred to this as part of the funds being frozen, so I presume the payments were held in trust, but there is no clear evidence on this.

Renewals After the Group Meeting

177Ms. Akhavan renewed her contract on August 2, 2016, to end on February 2, 2017, on same terms as before. Her offer letter was from Mr. Bikhit as President and CEO of Iris. When asked why she renewed at this time, she said that she was negotiating with Mr. Youssef to ensure payments were going to be made and she retained a lawyer to review the contract. She kept working for the BMO as she wanted to get her work done and she believed that things would get resolved. There were discussions with Mr. Youssef to see what he could do to get payment, but by mid-September they were moved to Procom. Mr. Bikhit was not asked about this, and given Ms. Akhavan’s evidence, her decision to continue to work for Iris at that point was not in reliance on anything Mr. Bikhit told her.

178Mr. Bangia renewed his contract on August 2, 2016. He was not asked about any negotiations or reasons why he did so. Ms. Weinberg submitted that the renewal itself was fraud because Mr. Bikhit testified that he believed that the money was all frozen by the BMO. If he believed that, he should not have signed a contract with someone he could not pay. Mr. Bikhit was not asked about this. I therefore do not accept this submission, as I do not know how he would have responded. Like Ms. Akhavan, it may have been only Mr. Youssef dealing with Mr. Bangia. Furthermore, contractors were paid after Mr. Bikhit testified that the funds were frozen with the lawyers, and he was not asked how that could have happened.

The Assignment to Procom Consultants Group Ltd.

179Mr. Bikhit testified that toward the end of August, Mr. Youssef told him that he had discussed a plan with Allegis and the BMO, where contractors would be transitioned to Procom and would be able to work for the BMO. This would resolve the issue. Mr. Bikhit testified that he believed Mr. Youssef.

180Mr. Bikhit was not involved in the negotiations to reach an agreement on the transition. It is significant, however, that ASF #3 admits that during the Procom transition, Mr. Bikhit signed a “The Defence and Indemnity Agreement” between Iris and Allegis on August 19, 2016. Once signed, whatever payments were frozen were to be released. Mr. Bikhit testified that he signed the indemnity agreement at Mr. Youssef’s instruction. As the defence submits, the signing of this indemnity agreement lends support to Mr. Bikhit’s evidence and belief that Iris had not done anything wrong.

181Once the agreement was negotiated, Mr. Youssef asked Mr. Bikhit to work with Procom and ensure that the transition went smoothly. It took a couple of weeks to get the paperwork done, but it was successful. Mr. Bikhit’s contract with the BMO was also transitioned to Procom.

182The complainants still working for Iris in mid-September 2016 received emails from Mr. Bikhit in the middle of the month that their contracts had been assigned to Procom effective September 19, 2016. In the email, Mr. Bikhit stated: “all outstanding payments for time accrued and services rendered up to and including September 18, will be paid by Iris-until all outstanding payments are fully paid”. Mr. Bikhit was not asked about this statement, but I presume if he had been, he would have testified that this is what Mr. Youssef told him.

183Mr. Bikhit signed the assignment agreements on behalf of Iris as President and CEO. The complainants testified that once their contracts were assigned to Procom, they were getting paid every week.

184Ms. Weinberg submitted that Mr. Bikhit negotiated that the markup Iris was receiving would continue to accrue to Iris, but he did not give that evidence. He testified that Mr. Youssef negotiated the transition, and all he did was implement it. Mr. Bikhit testified that Mr. Youssef had told him that as a result of the earlier complaint, the payments were frozen, and that they remained frozen until the agreement to transition to Procom was reached. Mr. Bikhit believed that as a result of that agreement, a few months of payments were “un-frozen” and that they would be paid out over the next couple of months. I assume this was a reference to the fact the July payment was frozen by the BMO, but that was not clear.

185Mr. Bikhit believed that Iris was able to continue operations when the payments were frozen because of the loans from FundThrough, which he believed were made every month. In addition, he relied on what Mr. Youssef told him about the payments once the agreement with Procom was signed.

186Mr. Bikhit testified that Mr. Youssef asked him at the end of August to connect with FundThrough to see if there was room left on the loan. Since they did not have access to the Lockbox account, Mr. Youssef asked him to check with FundThrough to see if payments had been received from Allegis. Mr. Bikhit testified that at the end of August, once there was an agreement between Mr. Youssef, the BMO and Allegis on the transition to Procom, he communicated with FundThrough. He was not asked about the various emails he sent to Mr. Uster that I have referred to, but presumably he sent them at the time.

Communications Between the Complainants and Mr. Bikhit after the Assignment to Procom

187Ms. Akhavan produced emails to Mr. Bikhit commencing October 3, 2016 when she asked for a payment schedule for her invoices from May to September 2016. Mr. Bikhit responded the next day that they were working on a new payment schedule given the transition and that he would get back to her. She followed up by email on October 6 and 11, but Mr. Bikhit did not respond further.

188Mr. Chung produced an email chain with Mr. Bikhit commencing on September 30, 2016, when he asked Mr. Bikhit for a payment schedule. Mr. Bikhit responded on October 3 stating that they were working out the new payment schedule given the transition. On October 4, Mr. Bikhit stated that payment was hopefully coming “very soon” and that they were “[j]ust closing off the transition. Not done yet if u can believe it”. On October 20, Mr. Bikhit told Mr. Chung that he was working on getting him a payment. Mr. Chung sent further emails for updates on October 27 and 28, but Mr. Bikhit did not respond further. Mr. Bikhit was not asked about these emails, but Mr. Chung was no longer billing Iris in October 2015. His last outstanding invoice is dated September 26, 2016, and so Mr. Bikhit’s statements do not support the charges.

Mr. Bikhit’s Evidence Concerning the Aftermath

189According to Mr. Bikhit, Mr. Youssef left Toronto for Egypt at the end of August 2016, and he has not returned. At this time, the legal issues were not finished. Mr. Bikhit testified that perhaps naively, he still believed that the contractors could get back to work and complete the BMO project, which was so close to finishing. He hoped that at least his reputation could be salvaged in terms of everything he had worked toward over the past few years. However, about one week later, his contract with the BMO came to an end, and they did not renew the contract.

190Mr. Bikhit testified that at this point he realized that everything that he had worked toward from a reputation perspective was gone. The six years he had spent at the BMO building his name and making good relationships was gone. The people who he had worked with and were his colleagues and friends were quite upset and were saying that they had been missing payments for a period of time. Lawsuits were starting to come in from the contractors, and another law firm was retained to respond. This was not the firm Mr. Youssef retained earlier to sue contractors, Allegis and the BMO, although that firm was still involved with Mr. Youssef.

191Mr. Bikhit testified that he still believed the contractors would be paid because Mr. Youssef told him so, and he believed that there were still payments that were going to be coming in from the BMO as part of the delayed payments after the agreement with Procom – the catch-up period.

192Mr. Bikhit testified that he was able to communicate less and less with Mr. Youssef, and more things were being put on him. He did not have a job. Legal fees were coming in. Mr. Youssef was the person he had always contacted to resolve issues, and he was not answering him as frequently. By Christmas, family members who had put money into promissory notes were asking him when they would be paid. Mr. Bikhit testified that his level of stress was higher than ten, and he felt as though he was drowning. He could barely keep his head above water. At this point, he was 34 years old.

193The lawyers told Mr. Bikhit that he should look at bankruptcy proceedings. Iris Solutions/Iris was petitioned into receivership in early 2017, and the bankruptcy occurred shortly thereafter. Mr. Bikhit testified that through that process, he discovered that there was no more money. He also discovered that the operations team at Iris Solutions had not been keeping up with the tax filings for Iris, and Iris owed a significant amount in taxes. This had not been his responsibility. Mr. Weinberg took issue in her submissions that Mr. Bikhit would not agree to the amount of the tax liability. I did not find this to be an issue since a lot of time has passed, and she was putting a specific number to him without supporting documentation.

194Mr. Bikhit testified that as a result of the bankruptcy of both companies, he lost everything. He no longer had a career. Bay Street is a small place. Capital Markets is even a smaller place, and technology in Capital Markets is even smaller, and so word got around very quickly. He was able to get some contracts, but not many, through people who still believed in him. However, once he was charged in 2018, he could not get any work in Canada at all. His wife got an opportunity outside the country, and they left Canada. Mr. Bikhit testified that in January 2018 he was in London, United Kingdom when he received a voicemail from Detective Moran. He retained a lawyer, who contacted the officer, and he flew back to Toronto and turned himself in.

195When asked in cross-examination if he ever questioned anything Mr. Youssef did, Mr. Bikhit testified that in retrospect there was a lot he should have questioned, but at the time he believed everything he was doing. Mr. Bikhit testified that he never intentionally misled any of the contractors about their payments. He hoped that the contractors would be paid and still does.

The Payments to the Contractors

196Until the early spring of 2016, the complainants’ issue was that payments were late. The complainants are owed money dating back to invoices as early as March 31, 2016, although most date back to June and July. Given that most agreed to the 5 percent bonus, the issue of non-payment would not have arisen until 90 days from the date of the invoice. This timing is consistent with the fact that in June the complaint was still about delayed payments.

197Mr. Bikhit received almost $579,000 in payments from Iris or Iris Solutions. There is no evidence to suggest that he received more than he was entitled to as a contractor for the BMO, and given his travel expenses, he may well be out of pocket. There is no evidence as to whether Mr. Bikhit was paid on time. He was not asked if he knew why he was fully paid when the other contractors were not.

Relevant Law

The Elements of the Offence of Fraud s. 380(1)(a)

198Counsel agree on the law of fraud as set out in the Crown’s written submissions. The actus reus of the offence of fraud will be established by proof of:

1. the prohibited act, be it an act of deceit, a falsehood or some other fraudulent means; and

2. deprivation caused by the prohibited act, which may consist in actual loss or the placing of the victim’s pecuniary interests at risk.

199Correspondingly, the mens rea of fraud is established by proof of:

1. subjective knowledge of the prohibited act; and

2. subjective knowledge that the prohibited act could have as a consequence the deprivation of another (which deprivation may consist in knowledge that the victim’s pecuniary interests are put at risk): R. v. Théroux, 1993 CanLII 134 (SCC), [1993] 2 S.C.R. 5, at p. 20; R. v. Zlatic, 1993 CanLII 135 (SCC), [1993] 2 S.CR. 29 at p. 43.

200As already stated, the defence concedes that Mr. Bikhit representations to the contractors that delays in payments resulted from the failure of the BMO or Allegis to pay Iris were in fact false. The representations are thus sufficient to make out the of the actus reus of fraud. The issue is whether the Crown has proven the mens rea of fraud beyond a reasonable doubt to the extent it relies on deceit and lies by Mr. Bikhit.

201The Crown submitted in her closing submissions that in addition to deceiving and lying to the contractors, Mr. Bikhit committed fraud by “other fraudulent means”. In Théroux, at p. 25, the Court held that it is necessary for the Crown to prove under this third head of the actus reus of the offence that the impugned act is one which a reasonable person would see as dishonest. The defence disputes those allegations.

202With respect to the mens rea, the defendant need not subjectively appreciate the dishonesty of his acts but must knowingly undertake the conduct which constitutes the dishonest act and must subjectively appreciate that the consequences of such conduct could be causing another to lose his or her pecuniary interest in property or in placing that interest at risk: Zlatic, at p. 49.

203Regardless of the avenue through which the Crown seeks to establish criminal liability for the prohibited act – whether by deceit, falsehood or, “other fraudulent means” – the defendant’s subjective awareness is an essential element of the offence. The fact that a defendant may have hoped that the deprivation would not take place provides no defence: Théroux, at p. 19.

204The defence submits that the Supreme Court’s intent in restricting the mens rea to a purely subjective standard was to draw a bright line between conduct that falls within the purview of criminal law from that which is properly left to civil courts. To avoid interpreting the offence of fraud too broadly, the Court recognized that criminal conduct lies in the individual’s intent and not solely on the loss or the creation of an exact standard of conduct. As such, the Court was clear that a mere “negligent misrepresentation” or “statement made carelessly, even if untrue” would not meet the high threshold required under the Criminal Code: see Théroux, at p. 26.

The Law on Wilful Blindness

205Both counsel provided decisions from the Court of Appeal for Ontario on the test for whether Mr. Bikhit was wilfully blind.

206The Crown relies on R. v. Lights, 2020 ONCA 128, 149 O.R. (3d) 273, where the court stated, at paras. 51 and 52, as follows:

51We define knowledge as true belief: United States of America v. Dynar (1997), 1997 CanLII 359 (SCC), 33 O.R. (3d) 478, [1997] 2 S.C.R. 462, [1997] S.C.J. No. 64, at para. 41. It includes not only actual knowledge but also wilful blindness. [Emphasis in original.]

52Wilful blindness involves a degree of awareness of the likely existence of the prohibited circumstances together with a blameworthy conscious refusal of self-enlightenment. A person, aware of the need for some inquiry, who declines to make that inquiry because they do not wish to know the truth, is wilfully blind. [Citations omitted; Emphasis added.]

207The defence referred to R v. LaGace, (2003), 2003 CanLII 30886 (ON CA), 181 C.C.C. (3d) 12, a much earlier decision from the Court of Appeal. Justice Doherty defined wilful blindness, at paras. 28 and 29, as follows:

28… Culpability on the basis of wilful blindness rests on a finding of deliberate ignorance. An accused who suspects that property is stolen but declines to make the inquiries that will confirm that suspicion, preferring instead to remain ignorant is culpable. Where an accused makes some inquiry, the question remains whether that accused harboured real suspicions after that inquiry and refrained from making further inquiries because she preferred to remain ignorant of the truth. Where some inquiry is made, the nature of that inquiry will be an important consideration in determining whether the accused remained suspicious and chose to refrain from further inquiry because she preferred to remain deliberately ignorant of the truth. For example, a finding that an accused took all reasonable steps to determine the truth would be inconsistent with the conclusion that the accused was wilfully blind. [Citations omitted.]

29I, of course, do not suggest that there is any onus on the accused to demonstrate that all reasonable steps were taken. In any case where the Crown relies on the doctrine of wilful blindness and some inquiry has been made, the trier of fact will have to decide whether the Crown has proved beyond a reasonable doubt that despite that inquiry the accused remained suspicious and refrained from making any further inquiry because she preferred to remain ignorant of the truth. As I read the trial judge’s reasons, he held that the appellant’s inquiry did not remove his suspicion and that no further inquiry was made because the appellant chose not to confirm his suspicion, preferring ignorance over the truth. [Emphasis added.]

208The Court of Appeal in R. v. Thompson, 2021 ONCA 559, approved of the test set out in Legace, stating, at paras. 17 and 19:

17… The trial judge set out the correct definition of wilful blindness as articulated by this court in R. v. Lagace (citations omitted). Accordingly, when she twice in her reasons stated that the appellant was, in the alternative, wilfully blind, there is no doubt she was using the term as described in those cases – that the appellant was culpable because he actually suspected drugs but declined to make inquiries sufficient to allay those suspicions because he preferred to remain ignorant of the truth: see, for example, Lagace, at para. 28. The trial judge did not proceed on the erroneous basis that all that was required was that the appellant should have been suspicious.

19As Lagace makes clear, wilful blindness may be found even where an accused who held a suspicion made some inquiry. In determining whether an accused who made some inquiry remained suspicious and deliberately refrained from further inquiry to avoid the truth, “the nature of that inquiry will be an important consideration ... For example, a finding that an accused took all reasonable steps to determine the truth would be inconsistent with the conclusion that the accused was wilfully blind”: at para. 28.

209The Supreme Court of Canada in R. v. Sansregret, 1985 CanLII 79 (SCC), [1985] 1 S.C.R. 570, at p. 584, put the test this way:

… wilful blindness arises where a person who has become aware of the need for some inquiry declines to make the inquiry because he does not wish to know the truth. He would prefer to remain ignorant. The culpability in recklessness is justified by consciousness of the risk and by proceeding in the face of it, while in wilful blindness, it is justified by the accused’s fault in deliberately failing to inquire when he knows there is reason for inquiry.

210In the same paragraph, the Court went on to adopt a passage from Glanville Williams, the criminal law scholar, which puts this concept in careful and appropriate language:

The rule that wilful blindness is equivalent to knowledge is essential, and is found throughout the criminal law. It is, at the same time, an unstable rule, because judges are apt to forget its very limited scope. A court can properly find wilful blindness only where it can almost be said that the defendant actually knew. He suspected the fact; he realized its probability; but he refrained from obtaining the final confirmation because he wanted in the event to be able to deny knowledge. This, and this alone, is wilful blindness. It requires in effect a finding that the defendant intended to cheat the administration of justice. Any wider definition would make the doctrine of wilful blindness Indistinguishable from the civil doctrine of negligence in not obtaining knowledge. [Emphasis added.]

The Law with Respect to Circumstantial Evidence

211The defence argued that the Crown’s case relies on circumstantial evidence and referred to the Supreme Court of Canada’s decision in R v. Villaroman, 2016 SCC 33, [2016] 1 S.C.R. 1000. However, in my view, the law of wilful blindness applies. Villaroman did not change the law. It is largely a restatement of the traditional test from Hodge’s Case: see R. v. S.B., 2018 ONCA 807, 143 O.R. (3d) 81, at para. 122. That rule is now said to apply only to the actus reus of an offence. It does not apply to the mens rea or the intent of an offence, which is the main issue remaining in this case; see for example R. v. Robinson, 2017 BCCA 6, 344 C.C.C. (3d) 176, at para. 24, aff’d 2017 SCC 52, [2017] 2 S.C.R. 382, and the cases referred to therein.

Analysis and Conclusions

W.(D.)

212In making my decision, given Kareem Bikhit and his father testified, the principles set out in W.(D.) v. The Queen, 1991 CanLII 93 (SCC), [1991] 1 S.C.R. 742, apply. I must acquit him if I believe their evidence or, even if I do not believe their evidence, I am left in a reasonable doubt by it. If I am not left in doubt by their evidence, then I must ask myself whether, on the basis of the evidence, which I do accept, I am convinced beyond a reasonable doubt by that evidence of Kareem Bikhit’s guilt. In my analysis, I am not bound by the strict formulaic structure set out in W.(D.), but rather must adhere to the basic principle underlying the W.(D.) instruction that the burden never shifts from the Crown to prove its case beyond a reasonable doubt.

213In considering the evidence, I am entitled to believe all, some or none of each witness’ evidence. Further, in assessing the evidence of Mr. Bikhit and his father, I am entitled to consider it in the context of all the other evidence.

Reliability and Credibility Assessments

214The defence submits that I should consider the reliability of the complainants’ evidence and the possibility of collusion. In assessing the credibility and reliability of all the witnesses, I have considered the fact that the events they gave evidence about occurred a number of years ago. It is natural that memories fade, particularly if no documents exist. I accept that the complainants gave evidence at the preliminary hearing, which occurred in late 2019, and that they had a chance to refresh their memories from that evidence and to be impeached to the extent their evidence at trial differed.

215To the extent there was no documentation to support the evidence of a complainant, however, there is a concern of the reliability of their evidence. In addition, the evidence is clear that many of the complainants discussed the issue of delayed payments at the time, and so collusion is also a possible concern. Given Mr. Bikhit’s admissions, I have concluded that these possible concerns do not impact my general assessment of the evidence. When Ms. Weinberg put to him that a particular witness had testified to a particular fact, he generally accepted it as true even if he could not recall that fact. I therefore generally accept the evidence of the complainants.

216The one exception is that to the extent the complainants testified about conversations they had with Mr. Bikhit that were not recorded in emails or texts, they were naturally unable to be very specific as to the words spoken or the timing of the conversations given the passage of time. Furthermore, that is where the concern of collusion arises because they talked the reasons Mr. Bikhit gave for delayed payments.

217One difference between the evidence of the complainants and Mr. Bikhit is about when they started to complain to him about delayed payments. The complainants generally said it was June 2015, whereas Mr. Bikhit said it was late 2015. I prefer the evidence of Mr. Bikhit, as he was able to tie his recollection of timing to his trip to Asia at the end of December 2015. This makes his evidence more reliable than the complainants, particularly given they had discussed their memory of events amongst themselves. That said, I will consider the possibility he was mistaken.

218Ms. Weinberg made a couple of specific submissions challenging Mr. Bikhit’s credibility. Although Mr. Bikhit testified that he thought the money from the BMO was frozen in the summer of 2016 when the lawyers got involved, over $90,000 was transferred to Mr. Bikhit’s company between June 30, 2016 to November 4, 2016. She submitted that Mr. Bikhit must therefore have known that the accounts were not frozen. Although I accept that as a fact these payments were made, Mr. Bikhit was not asked about this, and so I am not able to say that this adversely impacts on his credibility. I note that other contractors were paid in this period as well and that at this time Mr. Youssef was in Toronto and very actively involved in the business of Iris.

219Ms. Weinberg also submitted that it was irregular that Iris did not pay taxes given Mr. Bikhit has a degree in economics. She argued that Mr. Bikhit did know the year end date at the time, based on a text message he sent to Mr. Scarrow. If he knew it was October 31, he knew that taxes were due. As I have already stated, Ms. Weinberg did not put this text to Mr. Bikhit. She also relied on the fact Mr. Bikhit was unable to say how much in taxes were due when Iris Solutions/Iris went bankrupt and that he would not admit it was $4 million. Instead, she submitted that Mr. Bikhit kept responding that it was a “high number” and that he was “purposely vague on that issue”. I do not accept that submission. I do not understand why, after the passage of almost eight years, Mr. Bikhit should be expected to remember a relatively precise number. I do not accept that this exchange undermines Mr. Bikhit’s credibility.

220I found Mr. Bikhit to be a very fair witness. He was not evasive in any way in answering questions put to him in cross-examination. At times, he did ask for clarification, but to be fair I did as well, as often Ms. Weinberg’s questions were not clear, or she corrected herself part way through a question. His evidence was internally consistent, and as I have set out on more than one occasion in my review of the evidence, even when he was not responding to a question, Mr. Bikhit volunteered that in retrospect he should have done more. He did not have to give that evidence, as the questions were never put to him in that fashion.

221On its face, considering only Mr. Bikhit’s evidence, I believe that he never intentionally misled any of the contractors about their payments and that he hoped that the contractors would be paid and still does. I will, however, consider his evidence in the context of all the other evidence and the Crown’s submissions as to what he knew and whether he was wilfully blind to the fraud perpetrated by Mr. Youssef and Ms. Grewal.

Has the Crown Proven Some or All of the Over $5,000 Fraud Charges, Contrary to s. 380(1)(a) of the Criminal Code?

Has the Crown Proven Beyond a Reasonable Doubt that Mr. Bikhit had Actual Knowledge of the Fraud?

222I turn to the first issue: has the Crown proven beyond a reasonable doubt that Mr. Bikhit had actual knowledge of the fraud?

223As I have stated, to prove the mens rea of fraud, the Crown must establish that Mr. Bikhit had subjective knowledge of the fraud and subjective knowledge that the fraud could have deprived another. This may consist in knowledge that the complainant’s pecuniary interests are put at risk. In this case, with respect to the second branch of the test, the defence does not dispute the Crown’s position that if the complainants had known that Iris had received payment of their invoices and that some of their invoices were not going to be paid, they would not have continued to work for the BMO. The issue then is whether the Crown proven beyond a reasonable doubt that Mr. Bikhit either deliberately lied to the complainants or that he was wilfully blind when he gave them reasons for the delays in payments to, as the Crown put it, string them along so they would continue to work on the project and Iris would receive its mark-up.

224I find that there is no evidence that Mr. Bikhit actually knew that the reasons he received from Mr. Youssef, which he was passed on to the contractors, were in fact false. It was not even put to him directly that he knew or must have known that those reasons were false, nor was his evidence that he believed the reasons Mr Youssef gave him ever directly challenged. The Crown simply submits that I should disbelieve Mr. Bikhit when he testified that he did not know what was going on.

225In fact, Mr. Michael argued that the Crown has breached the rule in Browne v. Dunn, (1983) 1893 CanLII 65 (FOREP), 6 R. 67. He relies on R. v. Quansah, 2015 ONCA 237, 125 O.R. (3d) 81, leave to appeal refused, [2016] S.C.C.A. no. 203, where Justice Watt, speaking for the court stated, at para. 79:

Failure to cross-examine a witness at all or on a specific issue tends to support an inference that the opposing party accepts the witness’ evidence in its entirety or at least on the specific point. Such implied acceptance disentitles the opposing party to challenge it later or, in a closing speech, to invite the jury to disbelieve it. [Citations omitted.]

226In this case, the Crown did not call any evidence that directly contradicted Mr. Bikhit’s evidence that he believed what he was told as to the reasons for delay. The only way his evidence could have been directly attacked was by cross-examining him further. I will deal with that issue when I deal with the issue of wilful blindness.

227I therefore conclude that the assertion that Mr. Bikhit had actual knowledge that what he was telling the contractors was false is just that – an assertion.

228The Crown has raised a number of other arguments in support of the submission that Mr. Bikhit’s failure to advise the contractors of various facts amounted to “other fraudulent means”. These submissions are made not only in support of the Crown’s submission that Mr. Bikhit committed fraud but also, in the alternative, that Mr. Bikhit was wilfully blind. These further submissions are as follows.

(a) The Equity Agreement

229The Crown’s theory is that Iris was set up as a company designed to perpetrate this fraud from the very beginning. It was designed to divert money owed to the contractors, resulting in the contractors being paid late, and eventually not at all. In her reply submissions, Ms. Weinberg argued that the parent-subsidiary relationship was fabricated to justify the fraud and that the Equity Agreement was to incentivize Mr. Bikhit to bring in more money and thus provide him with a motive for fraud. However, she also conceded that it was not the Equity Agreement that resulted in the deprivation but the failure of Mr. Bikhit to tell the complainants that he was “giving their money to his cousin”.

230There are two problems with this submission. First, there was no suggestion nor any evidence that Mr. Bikhit had any knowledge at the time that money Iris was required to transfer to Iris Solutions pursuant to the terms of the Equity Agreement was then being misappropriated by Mr. Youssef with the assistance of Ms. Grewal. Second, Ms. Weinberg never challenged the legitimacy of the Equity Agreement when she cross-examined Ehab or Kareem Bikhit. When I put this to her during closing submissions, she submitted that the Equity Agreement is a sham on its face.

231In my view, the Equity Agreement is a crucial piece of evidence when considering Mr. Bikhit’s evidence. I have already set out the Equity Agreement’s key terms, so I will not restate them here. The terms corroborate Mr. Bikhit’s evidence. Mr. Bikhit was the CEO and President of Iris, but the Equity Agreement made it clear that Iris was to operate under the direction of the parent company, Iris Solutions and namely Mr. Youssef. It makes sense because Iris Solutions already had an operations team in place for their role as a vendor for the BMO. Iris did not duplicate the role with its own office space and personnel, as that would incur unnecessary costs. In practice, the evidence makes it clear that Mr. Youssef was in charge overall and that the operations team for Iris was the same as for Iris Solutions, namely Ms. Nesterchouk and Ms. Manollenko.

232Ms. Weinberg submitted that the Equity Agreement did not include any specifics as to how Iris Solutions was to get money from Iris, for example, that Iris Solutions get money based on a percentage of what the BMO paid. On this basis, she argued that the agreement was “nothing more than a pretense to divert monies from ISS [Iris] to Iris Solutions”. Ms. Weinberg did not put this to Mr. Bikhit either, but he did agree that he was not told specifically or in any detail what the money that was being transferred from Iris to Iris Solutions was being used for. To the extent he was asked to go to the bank to facilitate transfers, they appeared to be random. He did, however, testify that he knew the terms of the agreement and why money was due to Iris Solutions for its operation and profit. He also testified that he knew that some of the contractors were being paid by Iris Solutions.

233The Equity Agreement does in fact set out what the money Iris received from the BMO is to be used for and the consideration passed from parent to subsidiary to justify the monies paid by Iris to Iris Solutions. In my view, it was not necessary to include any further details since the agreement provided that Iris was to operate at the direction of Iris Solutions and that “all profits will be under the purview of the operating budget of the Parent Company to support its activities”. There is no evidence that Iris had any sources of income beyond the contractor invoices to the BMO. The only evidence of assets was that Iris was acting as agent for Iris Solutions as an approved vendor for the BMO, subject to Iris complying with the Equity Agreement. Iris did not have expenses, like rent or employees, as Iris Solutions was providing the operations team. As such, its profits would equate to the payments of the contractor invoices by the BMO. Similarly, when this issue was raised during Mr. Bikhit’s cross-examination, he pointed to this provision of the agreement as governing the financial arrangement and transfers between the parties.

234To the extent Ms. Weinberg did cross-examine Mr. Bikhit on areas impacted by the Equity Agreement, she did not appear to understand it in several respects. First, she put to Mr. Bikhit that Iris was “his company”. On one occasion, he agreed with that, although I do not take that as an admission given his unchallenged evidence that he only owned 40 percent of the shares in Iris. Furthermore, he was very clear that he understood the terms of the Equity Agreement to mean that he was completely subject to the direction of Mr. Youssef and Iris Solutions and that all profits belonged to Iris Solutions.

235I find that the Equity Agreement was a legitimate agreement that was entered into between Mr. Bikhit and Mr. Youssef. I accept the evidence of Mr. Bikhit, which was not challenged, as to how it came to be, and the evidence of Ehab Bikhit, who witnessed his son and Mr. Youssef executing the agreement. I also find that it was an agreement that made commercial sense given I accept Mr. Bikhit’s evidence that he wanted to earn an equity position in Iris Solutions, and this was what Mr. Youssef came up with. If Mr. Youssef and Ms. Grewal intended to defraud the contractors of some of their payments as early as when Iris was set up, they could just as easily have carried out that plan through Iris Solutions. Essentially, what the Equity Agreement did was continue Iris Solutions’ operations as an approved vendor with the BMO through its agent, Iris. Nothing really changed from the perspective of the BMO and the contractors who had transitioned to Iris. The only purpose of setting up Iris that Mr. Bikhit could reasonably have thought of at the time was a legitimate one – to give him more seniority to impress the BMO and an opportunity to earn an equity interest in Iris Solutions.

236Ms. Weinberg argued that Mr. Bikhit had an obligation to tell the contractors about the Equity Agreement. In her reply submissions, she conceded that the financial terms did not have to be disclosed, but the fact money was being transferred to the parent company should have been disclosed. She provided no expert evidence nor any law on the point. I do not accept that submission. As the defence submits, the parent-subsidiary relationship is a common business practice and cannot properly be categorized as dishonest. Following the Crown’s line of reasoning would require that every company advise anyone with any pecuniary interest in the viability of a business to be entitled to disclosure of all financial dealings that may put their pecuniary interests at risk. Furthermore, there is no evidence that had the complainants been told of the relationship between Iris and Iris Solutions, it would have made any difference to them. Those who had been contracted through Iris Solutions did not even appreciate the distinction at the time.

237The Crown also submitted that Mr. Bikhit failed to tell the complainants that he only followed orders from Mr. Youssef and did not have final control over payments. Again, there is no expert evidence or any law that required Mr. Bikhit to advise the contractors of this aspect of the Equity Agreement. To the extent there is evidence of what the complainants knew, they all testified that they were aware that Mr. Youssef was in business with Mr. Bikhit – some thought as co-owners. None of the complainants testified that if they had known that Mr. Youssef was really in charge that it would have made any difference to them at the time.

(b) Adding Members of the Operations Team to Iris TD 939 Account

238Ms. Weinberg repeatedly put to Mr. Bikhit that the Iris TD 939 bank account was “his” account because he was the only one who opened it initially. One of the Crown theories is that the money that was supposed to be paid to the contractors went instead to the TD 929 account and was then misappropriated by Mr. Bikhit, Mr. Youssef and Ms. Grewal. This theory is based on the fact that Mr. Bikhit had “allowed” Mr. Youssef and Ms. Grewal to have access to “his” bank account because he was the one who opened the account and had signing authority over it. Mr. Bikhit did admit in cross-examination that he could have gone to the bank to remove access the others had to the account, although I only have his evidence of what he believed on that point. That evidence was not corroborated by any evidence from the bank as to their practice.

239As I have said, it appears now that funds Iris received in payment of invoices to the BMO were misappropriated by Mr. Youssef, with the help of Ms. Grewal, for his personal benefit. However, I do not accept the submission that the Iris account belonged to Mr. Bikhit and that it was part of the alleged fraud when he added the others to the account. Iris was its own legal entity, and while an individual is required to open a bank account on the company’s behalf, this does not equate to unfettered use of or ownership of the account. The Crown submitted that Mr. Bikhit opened the account despite Mr. Youssef being in Canada at the time. That was not Mr. Bikhit’s evidence. He was unsure where Mr. Youssef was. In any event, in my view there is no evidence that it matters to a bank which person opens a corporate account provided they have some authority to act on behalf of the company. The TD 939 account belonged to Iris, not Mr. Bikhit. Even if Mr. Bikhit was able to take steps to remove the others from having access to the account, if he did so for the purpose of preventing payments from Iris to Iris Solutions that were not in payment of contractor invoices, that would have put Iris in breach of the Equity Agreement.

240I accept Mr. Bikhit’s evidence that Mr. Youssef told him to add him and the others to the Iris TD 939 bank account and that he would not have had any reason to question that at the time or thereafter. The Equity Agreement required Iris Solutions to provide operations support to Iris and all profit to go to Iris Solutions. As I have said, there is no evidence that Iris had any operating costs, and on the evidence, its only income was funds received in payment of the invoices for the work done by to the contractors for the BMO. The funds Iris received were to cover the cost of the operations and the operations team at Iris Solutions, who were providing services to both companies. Therefore, the only way the operation team at Iris Solutions could easily cover the cost and provide the Services and Facilities it was required to provide to Iris would be to give the operations team access to the Iris account. Furthermore, since Iris Solutions was entitled to all Iris’ profit, it makes sense to transfer the funds Iris received to Iris Solutions. I do not see why this should have caused Mr. Bikhit to have any concerns, even when he started hearing about delays from the contractors.

(c) Mr. Bikhit Knew Money Was Being Transferred from Iris to Iris Solutions

241Ms. Weinberg takes issue with the fact that Mr. Bikhit was aware that Iris funds were being transferred to Iris Solutions, and that on occasion he actually went to the bank to facilitate this. I do not find that Mr. Bikhit did so to facilitate fraud. I accept his evidence that to the extent he did go to the Iris bank and deal with payments from the TD 939 account, he was following direction from Mr. Youssef or others on the operations team at Iris Solutions and that this would not have raised any concerns. I accept his evidence that Mr. Youssef was the one allocating funds. I find that Mr. Bikhit did as instructed because he believed the operations team was managing the budget, that payments were being made from both accounts to the contractors, and pursuant to the Equity Agreement, that the parent company was entitled to money for operations and profit.

242In the same vein, the Crown argued that the transfer of money to Iris Solutions was simply “giving” Mr. Youssef money. As I have already stated, the Equity Agreement provided for the fact money was to be transferred from Iris to Iris Solutions, and this was not a case of simply “giving” Mr. Youssef money.

243Mr. Bikhit testified that he does not have emails to show that he was given instructions to go to Iris’ bank from time to time as he testified to, as the emails were on Iris’ email server. Ms. Weinberg argued the following:

Although the onus is always on the Crown and Mr. Bikhit does not have to prove anything, it is submitted that the fact that Mr. Bikhit was unable to come up with any proof of his orders from Mr. Youssef is telling. We have seen Mr. Bikhit communicate with others by text and WhatsApp. Mr. Youssef and Mr. Bikhit are cousins and Mr. Bikhit has known Mr. Youssef all of his life. Mr. Bikhit has a Gmail account. Yet there is not a single communication that supports Mr. Bikhit’s testimony.

244I do not accept this submission for a number of reasons. First, Mr. Bikhit’s evidence that he was no longer able to communicate with Mr. Youssef at the end of 2016 was not challenged. Secondly, there is no reason to think that communications from Mr. Youssef and the others at Iris Solutions would not have been on the Iris Solutions email account. Likewise, Mr. Bikhit no longer has access to his communications on the BMO email account. I therefore do not find that his evidence is undermined by his inability to provide copies of emails.

245I should note here that although the absence of evidence is a problem for the Crown, not the defence, I am baffled by the fact that DC Moran did not interview a number of people, including Ms. Nesterchouk and Ms. Manollenko. Given their involvement with Iris Solutions, their evidence would have been extremely helpful in determining for example, reasons for the delays in payments to the contractors. The contractors produced a few communications from them that set out why payments were delayed. These support Mr. Bikhit’s evidence. In any event, their evidence could have helped the Crown or the defence. The defence submits that the police failed to pursue additional crucial evidence that was both easily accessible and self-evident from the information provided by even a cursory review of the evidence collected. I agree, but I cannot rely on the absence of evidence unless it raises a reasonable doubt.

246I do agree with the defence that the transfers Mr. Bikhit did at the bank support the proposition that he believed he was acting within the confines of the Equity Agreement and that the transfers were for a bonafide business purpose. I accept Mr. Bikhit’s evidence that he was not concerned about sending large amounts from the Iris account to the Iris Solutions account even when he was getting complaints about delayed payments because contractors were getting paid from both accounts. When he noticed that these transactions reduced the balance in the Iris account to zero, he reasonably assumed that payments were being made to the contractors.

247In any event, there is no evidence that if the complainants had been told these transfers would occur, they would have decided not to sign up with Iris. Iris Solutions had already been a vendor with the BMO without incident, save for minor issues with delayed payments.

248The defence also argues that total transfers Mr. Bikhit made from Iris to Iris Solutions were below what Iris Solutions’ entitlement was in accordance with the Equity Agreement. The Iris profits totaled $2,433,642.42, and Mr. Bikhit is alleged to have transferred a total of $870,064.58 from the Iris account (TD 939) to the Iris Solutions account (TD 625). This amount was well below the amount Iris Solutions was entitled to, as the subsidiary’s profits accounted for monies after all the contractors were paid. The transfers Mr. Bikhit made from the Iris account to the Iris Solutions’ account therefore did not risk deprivation. I agree with this submission, although it would be different if I had found that these transfers should have made Mr. Bikhit suspicious that something was amiss.

249Ms. Weinberg argued that the payments for the contractors were to come from the Iris account, but there is no basis for that submission. Although the BMO made the invoice payments to Iris, there is no reason why payments to the contractors could not come from either the Iris or Iris Solutions bank accounts, particularly given the terms of the Equity Agreement. Iris Solutions was already an approved vendor for the BMO at the time in question, and a few of the complainants contracted with the BMO through Iris Solutions. On the evidence, contractors were paid from both the Iris and Iris Solutions’ account. Some complainants even directed their invoices to Iris Solutions.

(d) Mr. Bikhit Did Not Tell the Contractors That Money Was Being Transferred from Iris to Iris Solutions

250Ms. Weinberg argues that another fraudulent “omission” was that Mr. Bikhit did not tell any of the contractors that he had an agreement with Iris Solutions “to divert money, including money that was intended for their pay, to a company owned by Mr. Youssef. Had he told subcontractors that he had to give the money to Mr. Youssef instead of paying them, they would not have kept working for ISS, [Iris] and the fraud could not have continued.”

251I have already dealt with certain aspects of this argument. This question was not asked of the contractors, and so there is simply no evidence to support this submission. In fact, some of the contractors had in fact worked for the BMO through Iris Solutions without incident, save for some delays in payment that were not considered problematic. As Ms. Weinberg submitted, seven of the contractors – Ms. Akhavan, Mr. Johnson, Mr. Scarrow, Mr. S. Rodovinsky, Aaravind Ceyardass, Winston Wen and Ms. Shum – worked for Iris Solutions before they signed onto Iris. They had all been fully paid for the hours billed when they worked at Iris Solutions. Furthermore, none of the contractors who had worked for Iris Solutions seemed to be aware of the distinction between Iris Solutions and Iris. Although their contracts after February 1, 2015 were with Iris, they dealt with personnel from Iris Solutions in terms of submitting invoices, receiving payments etc. They also received emails from Mr. Nesterchouk and/or Ms. Manollenko. Nothing really changed from their perspective.

(e) Failure to Disclose the FundThrough Agreement

252Ms. Weinberg also argued that Mr. Bikhit had an obligation to tell the contractors about the FundThrough agreement and that his failure to do so was “other fraudulent means” because FundThrough extended a loan to Iris.

253Again, the Crown did not provide any expert evidence nor any law on the point. I do not accept this submission. Ms. Weinberg’s own witness, Mr. Uster, testified that a Lockbox account is used when the client does not want the payor to know the client is using a factoring company. That evidence suggests this is a legitimate business practice. The real issue is whether the fact FundThrough was providing loans to Iris impacts whether Mr. Bikhit ought to have known that the main reason he was giving the contractors for nonpayment, namely that the BMO had not paid, was false, a question I will come to.

(f) Irregularities in the Contractor Contracts

254Ms. Weinberg submitted that the differences in the contracts with respect to payment terms:

may have been worded that way as a future excuse for Mr. Bikhit: if questioned about non-payment, he could tell the subcontractors that BMO did not pay. That would absolve him of any responsibility from late payment. It was BMO’s fault. All they had to do was look at their contract, and Mr. Bikhit was off the proverbial hook. BMO is a big bank; the subcontractors would think. Of course, BMO is going to pay.

255Mr. Bikhit testified that the contracts were drafted by the operations team. There is no evidence to support the assertion that Mr. Bikhit was responsible for drafting the contracts that set out differences in the payment terms save for the fact that Mr. Bikhit signed most of the contracts. I note that some of the contractors signed their contract in the presence of Ms. Nesterchouk or Mr. Youssef.

256Mr. Nesterchouk provided Mr. Scarrow a copy of his contract for signature on February 4, 2015. Mr. Bikhit was not copied on the email. This corroborates Mr. Bikhit’s evidence that the operations team drafted the contracts. There is also evidence that when the payment terms were negotiated, this was done directly with Mr. Youssef or had to be approved by him. This is clear for example, in Mr. Scarrow’s evidence and the correspondence he had with Ms. Nesterchouk and Mr. Youssef regarding his contract renewal in February 2015.

257I have considered the differences in the payment terms of the various contracts. Some may be related to the timing of the contract or specific negotiations, but not all. In any event, I do not accept the suggestion put to Mr. Bikhit, which he denied, that the wording was deliberate, to allow for false excuses for delayed payments. In fact, many contractors received an explanatory email from Ms. Nesterchouk or Ms. Manollenko as to when to expect payment of their invoices.

258For these reasons, I accept Mr. Bikhit’s evidence that he did not draft the contracts and that he relied on the operations team at Iris Solutions to prepare the contracts for the contractors.

(g) Irregular Payments

259Ms. Weinberg argued that there was selective and irregular payment of late accounts. She submitted that six contractors were paid earlier than they were promised at the beginning of their contracts with Iris and that “[e]arly payment would give confidence to people who were so paid, leading them to think that ISS [Iris] was a legitimate and trustworthy employer. Subcontractors were paid, when they were paid, from 17-144 days after the submission of invoices”. It is true that there was irregularity in the timing of payments, and Mr. Bikhit accepted this was so, to the extent this was put to him. However, it was not suggested to him that this was deliberately done by him or to his knowledge to give contractors confidence in Iris.

260I do not accept this submission. There is no evidence that the timing had anything to do with Mr. Bikhit save possibly for when he made inquiries about late payments. On the evidence and in accordance with the Equity Agreement, the operations team was deciding when to send payments. The differences in timing could just as easily have been due to the operations team’s poor business practices.

(h) Overtime

261In the same vein, Ms. Weinberg argued that Mr. Bikhit was encouraging contractors to work overtime even when they were not being paid on time. She argued that the more they billed, the more money Iris received because of the mark-up. It is true that Iris benefitted financially from overtime, but Mr. Bikhit testified that the BMO had to approve overtime and when they did, he communicated that to the contractors. Although they might have interpreted this as Mr. Bikhit “encouraging” them to work overtime, as Mr. Johnson testified, it was not suggested to Mr. Bikhit that he did this deliberately as part of a fraud, and I do not make such a finding. I accept his evidence, which was not challenged, that overtime had to be approved by the BMO before the hours were worked.

(i) Mr. Bikhit’s Friendship with Tony Espinoza

262It was argued that Mr. Bikhit knew what was happening with payments because he was a good friend of Mr. Espinoza. There is, however, no evidence to support the proposition that Mr. Espinoza had any information about the timing of payments by the BMO. I accept Mr. Bikhit’s evidence that he did not talk to Mr. Espinoza about the issue of delays in payments.

(j) The Reasons Mr. Bikhit Gave for Delays in Payment

263The Crown alleges that Mr. Bikhit held himself out as being in charge and knowing why there were delays in payment – in other words, that he did not have to inquire with the operations team as he testified he did. The evidence does not support this submission. In each case where there is any specific evidence, either in the complainants’ viva voce evidence or their written exchanges with Mr. Bikhit, there is no occasion when he immediately responded with a reason for the delay in payment. Generally, Mr. Bikhit said he would look into it and get back to the complainant in question. I do not accept the submission that Mr. Bikhit had to tell everyone he was not in control, as it was obvious in his responses that he did not know, without checking, what the reason for delay was in any particular case.

264As I have already stated, there is also no evidence that Mr. Bikhit actually knew at the time that the reasons he gave to the contractors for the delay in payments was false.

265Ms. Weinberg also argued that the reason Mr. Bikhit falsely told some of the complainants that the reason for the delay in payment was that the BMO had not paid Iris was that since the BMO is a large bank, the complainants would stay working because they would expect the BMO to eventually pay. This was not put to Mr. Bikhit, and if it had been, I am sure he would have denied this suggestion, just as he did the suggestion that the payment terms in the contracts were deliberately worded to give him the excuse that the BMO did not pay. In cross-examination, Ms. Weinberg did not challenge Mr. Bikhit suggesting, for example, that he was not told that the bank’s failure to pay was a reason for delayed payments and instead he made it up and knew it was a false statement.

266For these reasons, I conclude that none of these additional submissions establish that Mr. Bikhit’s actions or failure to advise the contractors of various facts amounted to “other fraudulent means”.

Has the Crown Proven That Mr. Bikhit was Wilfully Blind to the Fraud?

267I come then to what in my view is the central issue in this case: was Mr. Bikhit wilfully blind when he told the contractors the reasons for the delays in payment were a result of the failure of the BMO or Allegis to pay Iris? The defence admits that this reason was not true at the time but submits that Mr. Bikhit was not aware of that, nor was he wilfully blind to that fact.

268The Crown alleges that as the CEO of Iris, Mr. Bikhit had a responsibility to ensure that payments to the contractors were on time and that they were in fact paid. Ms. Weinberg argues that Mr. Bikhit’s failure to address payment issues is sufficient to establish criminal liability. The defence argues that the necessary implication of the Crown’s argument is that the CEO of a subsidiary is not entitled to rely on the representations of his CFO, his operations team or of the CEO of his parent company.

269Given my finding that the Equity Agreement was a legitimate agreement, in my view Mr. Bikhit was entitled to take the various actions that the Crown alleges he should not have, such as adding Mr. Yousef to the Iris account. I also agree that given the terms of the Equity Agreement, Mr. Bikhit was entitled to rely on the reasons Mr. Youssef and the operations team gave him unless the Crown has proven beyond a reasonable doubt that despite the responses to his inquiries, Mr. Bikhit was suspicious about whether the reasons were true and he refrained from making any further inquiry because he preferred to remain ignorant of the truth: see LaGace, at para. 28. If the Crown has proven this, then I must find that Mr. Bikhit was wilfully blind to the fraud perpetrated by Mr. Youssef and Ms. Grewal and guilty as charged on counts 1 and 2.

270The most important fact that supports Mr. Bikhit’s position is that for virtually the entire period in question, the issue that the contractors raised with him was only that payments were delayed. The Crown argues now that certain invoices were not paid, but the issue is what Mr. Bikhit knew at the time. Before the summer of 2016, when contractors questioned Mr. Bikhit about delays in payment, he always told them that he would have to check it out and get back to them. This corroborates his evidence that he was not involved in payments and therefore would not otherwise know the reason for the delay. I accept Mr. Bikhit’s evidence that he then made inquiries of Mr. Youssef and the operations team as to why payments to the contractors were delayed. He passed on what he was told to the contractor in question. The fact that those payment were then paid, and that he was often told this by the contractor, would naturally have reinforced his view that all was in order. This is a very significant fact in my view.

271Mr. Bikhit testified that he first heard about complaints of delayed payments when he returned from Asia in late 2015. I have explained why I accept that evidence and prefer it to the complainants’ general evidence that it was earlier. If Mr. Bikhit is mistaken and there were complaints earlier, that is consistent with when FundThrough was engaged. That would have given Mr. Bikhit some confidence that Mr. Youssef was concerned about possible delays in payments to the contractors, given what Mr. Youssef told him as to why a factoring company was needed.

272It is important to note that when the contractors raised this concern with Mr. Bikhit in the fall of 2015, he acted to the extent that he could. He expressed his concerns about delayed payments to Mr. Youssef, who then agreed that he offer the contractors a five percent bonus for delaying payments for one more payment period, or 90 days from the invoice date. Mr. Bikhit then spoke to the contractors as Mr. Youssef instructed, explaining how to obtain their agreement.

273I note as well that Mr. Bikhit testified that around May/June 2015, Mr. Youssef told him that there were problems related to fees with Allegis and the BMO stemming from some of the contract negotiations from the previous year, and as a result there could be delayed payments or payments held back between the BMO, Allegis and Iris. When Mr. Bikhit spoke to Mr. Youssef about delays in payments at the end of 2015, Mr. Youssef again told him that the delays in payments were a result of contractual issues between Iris, Allegis and the BMO. Mr. Bikhit believed this to be true. That information was not true, but there was no suggestion that Mr. Bikhit knew this. In addition, Mr. Youssef told Mr. Bikhit in July 2016 that payments from Allegis stopped for what turned out to be only one month. These statements from Mr. Youssef were relevant to Mr. Bikhit’s belief that what he was telling the contractors was true.

274The Crown argued that Mr. Bikhit heard that the contractors were not getting paid on time at least 65 times, but as he testified to, this was not all at once. Complainants made most of these comments at various times over the end of 2015 and into the spring of 2016. In addition, the comments were usually made in passing, as the complainants only produced a few written exchanges. I accept Mr. Bikhit’s evidence that he did not discern any pattern. In fact on the evidence and as Ms. Weinberg argued, there was no pattern – the payments were made with irregular timing.

275Mr. Bikhit testified that he continued to believe that payments would be made to the contractors. He would not have known at the time that this was not true. For the contractors that agreed to the five percent bonus and the 90 days for payment, the earliest date for unpaid invoices is March 31, 2016, for Mr. Scarrow. His last unpaid invoice is dated June 2, 2016, which was before the 90 days for payment of his March 31 invoice was due. In other words, he had stopped working for Iris before he could be sure that he was not going to be paid for the March 31 invoice. Most of the complainants’ invoices were in fact paid until the end of May, June or July, and so the payments for invoices would not have been considered late until later in the summer of 2016. This is consistent with the fact that Ms. Samanski took action and made a complaint to Allegis towards the end of June 2016 and not before.

276As it happens, however, by the end of June 2016, Mr. Bikhit was about to head off to Italy for one month for his wedding. I accept the defence submission that Mr. Bikhit’s travel to Italy for his wedding is significant because then the complaints about delayed payments were to go to Mr. Youssef and not him. He asked Mr. Youssef to come to Toronto to take care of the issue of delayed payments and that is again consistent with the terms of the Equity Agreement. Mr. Youssef did return to Toronto to deal with the matter. There is no doubt that at that point Mr. Youssef was in direct contact with the complainants when the group meeting was held on June 27, and he arranged to meet with contractors individually. Given the terms of the Equity Agreement, this made sense, and it was a reasonable step for Mr. Bikhit to take. Once Mr. Bikhit went to Italy, the contractors who were looking for payment had to have known that it was Mr. Youssef that they needed to deal with, not Mr. Bikhit.

277Mr. Bikhit testified that he was not happy about how Mr. Youssef was handling the situation, as he hoped to salvage the project, but that was not his call to make. There is no evidence to suggest that Mr. Bikhit had any direct involvement in the discussions of any payments or payment issues with the complainants during July 2016. Save for a couple of minor exceptions, Mr. Bikhit conveyed messages from the contractors about delayed payments to Mr. Youssef. It was Mr. Youssef who had to deal with the matter.

The Crown alleges that the fraud continued to the end of 2016, but I do not see how any statements that Mr. Bikhit made once he was back from his wedding could reasonably have been relied upon by any of the contractors given Mr. Youssef’s involvement. Furthermore, the email from Mr. Baker, Iris’ litigation counsel, that was sent to some of the complainants on August 15, 2016 made it clear that they continued to work for the BMO risking that they might not be paid at all. To the extent Mr. Bikhit made any statements after his wedding, the causation element of the alleged fraud would not have been proven.

278In any event, Mr. Bikhit said very little to the contractors once he was back, on the advice of Mr. Youssef and the lawyers Mr. Youssef had retained. Furthermore, the evidence is not at all clear that any of the complainants continued to work at that time because of anything Mr. Bikhit said to them. Mr. Bikhit had perhaps even more reason to believe that the reason that payments were not being made was true, albeit for only one month.

279The defence makes additional submissions in support of their position that Mr. Bikhit did not know about the fraud perpetrated by Mr. Youssef and Ms. Grewal. I have accepted a number of those submissions as follows.

280On the evidence as a whole, I find that Mr. Bikhit was given a lot of responsibility by Mr. Youssef at a very young age, but those responsibilities all related to his role as Project Manager for the BMO. He had his own contract with the BMO and was responsible for the performance of the other contractors. He was not required to be involved in the day-to-day recruiting or payment to the contractors, and I accept his evidence that he would not have had the time to do so.

281I accept Mr. Bikhit’s evidence that while working at the BMO for Iris as the Project Manager, he was the hub of communication between approximately 110 to 120 people for a dozen or so large to medium projects, in addition to several smaller projects in the foreign exchange portfolio. I also accept his evidence about the travel that he had to undertake as Project Manager and that long working hours were not uncommon. I also accept his evidence, which was not challenged, that he received hundreds of communications, was often in back-to-back meetings throughout the day and that a relatively small portion of these communications dealt directly with Iris payment issues.

282As his time was dedicated to the BMO Project, Mr. Bikhit did not have the time to monitor the status of payments, especially when there were staff tasked with that responsibility. This evidence explains why it made sense that the Equity Agreement provided that Iris Solutions’ operations team would provide operations support to Iris, including handling payments to the contractors. Mr. Bikhit was needed as a contractor for the BMO – that is where he had skills. Furthermore, as the defence submitted, there is no evidence to support the Crown’s suggestion that Mr. Bikhit could simply have issued the cheques to the contractors on a regular basis to pay their invoices. While the Crown has attempted to paint this as a simple process, it did not call evidence that explained the payment process at Iris or Iris Solutions, evidence, for example, from Ms. Nesterchouk.

283David Johnson of Allegis testified. He outlined the process of Allegis issuing payments to Iris. As the defence points out, Mr. Johnson said it required the full-time efforts of an individual whose job it was to undertake all bookkeeping responsibilities and issue payments. Although the Allegis system was fully integrated with the BMO to streamline this process, it still took several days to process payments, and at times, even Allegis’ payments were not entirely consistent. Unlike Iris, Allegis only had to issue a single lump sum payment.

284The defence submits that the amount of time Mr. Bikhit spent travelling, along with the demanding nature of his role as Project Manager, contributes to a lack of subjective awareness that a fraud was taking place. Even apart from his reliance on the terms of the Equity Agreement, Mr. Bikhit did not have the time to manage and/or monitor the payments to contractors himself. Mr. Bikhit was immersed in his role as Project Manager to ensure that the BMO project was successful.

285I accept these submissions, but it would not amount to a defence save for my finding that pursuant to the Equity Agreement, Mr. Bikhit was entitled to delegate the task of making payments to the contractors to the Iris Solutions operations team. He could rely on the team to perform this task without having to directly supervise each transaction. Had that not been the case, it could be argued that Mr. Bikhit had some responsibility to directly supervise staff. In other words, it cannot be a defence to say that you are too busy, but in this case it is a defence to say that payments to contractors were not your responsibility.

286The issue of Mr. Bikhit’s gain (if any) from the fraud is not a determinative factor. It is, however, a strong piece of evidence that corroborates the defence position that Mr. Bikhit had no reason to suspect that anything was wrong. The defence argues that there was nothing in it for him and he had everything to lose.

287I accept that Mr. Bikhit benefited the more Iris billed the BMO because it increased what he stood to earn in equity interest in Iris Solutions. However, I accept the defence submission that that does not mean he would have turned a blind eye to the fraud being perpetrated by Mr. Youssef and Ms. Grewal, as it would have been obvious to him that it would put the entire Project at risk as well as his potential equity interest in Iris Solutions.

288There is no doubt that the Crown has not proven that Mr. Bikhit received any financial gain from the fraud. Pursuant to ASF #4, the amount of money Mr. Bikhit was entitled to for his time spent on the Project was $563,377.23, and the money he received was $578,432.68, leaving a surplus of $15,055.45. The surplus Mr. Bikhit received, however, did not account for the travel and ancillary expenses he incurred. The complainants’ evidence and corresponding invoices corroborated Mr. Bikhit’s evidence that paying out of pocket for expenses and being reimbursed was standard practice at Iris. I accept the defence submission that Mr. Bikhit was entitled to reimbursement for his expenses.

289Mr. Bikhit provided uncontested evidence on the issue of his travel expenses, including supporting documentation. While not exhaustive, this evidence provided a minimum amount of reimbursement to which he was entitled that exceeds the surplus. It demonstrates that any surplus received after accounting for his contractor work actually puts Mr. Bikhit at a loss when his expenses are factored into the total amount.

290I also accept the defence submission that knowing participation in the fraud or wilful blindness also ran contrary to Mr. Bikhit’s interest because it rendered Iris and Iris Solutions valueless. Given the contents of the Equity Agreement and the contributions he made to both companies via sweat equity, driving both companies into bankruptcy would clearly be contrary to his own interests. Ms. Weinberg’s counterargument that Mr. Bikhit simply wanted to give his cousin, Mr. Youssef, money is non-sensical.

291Finally, I accept Mr. Bikhit’s evidence that the fraud damaged his reputation. It led to him losing not only l his title as Project Manager at the BMO, something he had worked years to cultivate, but also any future employment opportunities as a contractor, at least in Canada.

292I agree that these risks to Mr. Bikhit’s pecuniary interests would have been self-evident to him at the time. They would have naturally deterred him from knowingly participating in or turning a blind eye to the commission of the fraud we now know was being perpetrated by Mr. Youssef and Ms. Grewal.

293Mr. Bikhit admitted that he told many of the complainants, numerous times, that the reason for delayed payments was that the BMO and/or Allegis had not paid Iris. He admitted that he knows now that, in fact, the BMO and Allegis paid on time, except for the month of July 2016 when Allegis withheld payments to Iris as they investigated complaints of non-payment. I accept Mr. Bikhit’s evidence that he made inquiries of Mr. Youssef and that he believed what he was told as the reason for the delay in payment. I do not find that he ever deliberately gave a reason to a complainant for delay that he knew to be false. I also find his reliance on the operations team was reasonable and in accordance with Iris Solutions’ role according to the Equity Agreement.

294Mr. Bikhit stated he obtained his information from Mr. Youssef. However, to the extent he sent contractors to Ms. Nesterchouk or Ms. Manollenko to follow up, he would have had no reason not to believe the reason Ms. Nesterchouk or Ms. Manollenko told them for the delay. If the information came from Mr. Youssef, I find that he also would have believed him. Not only was Mr. Youssef the CFO of Iris and managing the parent company, Iris Solutions, Mr. Youssef was Mr. Bikhit’s older cousin and like an older brother to him. As I have found, Mr. Youssef had been a mentor to Mr. Bikhit for almost 20 years. Mr. Youssef had not only given him advice on courses to take at university, but also helped him find work in his early career. Mr. Youssef was prepared for Mr. Bikhit to earn a significant share in the equity of Iris Solutions.

295Mr. Bikhit readily and repeatedly admitted that in retrospect he should not have accepted what Mr. Youssef told him, but I accept his evidence that at the time he believed what he was told. This evidence is corroborated by Ehab Bikhit, who also trusted Mr. Youssef when he made a considerable financial investment in Iris Solutions, as had other members of Mr. Bikhit’s family.

296There is as well the fact that Mr. Bikhit was quite young, and this was the first time he was involved in managing a business. When he first became the President and CEO of Iris, he was 33 years old and living in his parents’ home. Up to that point, Mr. Bikhit had only been employed as a contractor – in the same capacity as all the complainants. Even with the Equity Agreement in place, he was not really managing Iris. His main role was the Project Manager for the BMO Project. The Equity Agreement’s terms gave Mr. Youssef the power to manage and control Iris, and he exercised that power in not only negotiating the terms of the agreements with Allegis, FundThrough and Procom, but also directing how Iris’ funds would be allocated, among other things. Mr. Bikhit operated as the President and CEO of Iris, but at the direction of the parent company and Mr. Youssef. I have found the Equity Agreement to be a legitimate agreement that made commercial sense, and that what Mr. Bikhit experienced with Mr. Youssef in control is what he would have expected. His experience was consistent with his understanding of the agreement. His reliance on Mr. Youssef, as a result, was both reasonable and to be expected.

297Ms. Weinberg made a number of submissions with respect to the Iris TD 939 account that I will come back to. Mr. Bikhit’s only involvement with Iris’ finances was obtaining bank drafts or transferring funds to Iris Solutions at the instruction of the operations team. I have already found that it was reasonable for Mr. Bikhit to believe that the transfer of funds from Iris to Iris Solutions was for a bonafide business purpose in accordance with the terms of the Equity Agreement.

298Ms. Weinberg argued that Mr. Bikhit should have been more diligent in following up on delayed payments to the contractors. Her position is that it is not believable that Mr. Bikhit did not know what was going on because he was too busy. Ms. Weinberg spent a lot of time in cross-examination reviewing what Mr. Bikhit was doing with his time, including his preparations for his destination wedding in Italy in July 2016 and the times when he went to the bank in person and waited at length for bank drafts. Ms. Weinberg cross-examined Mr. Bikhit at length suggesting that he could have found the time to go into the bank, check the Iris account and make payments to contractors when they complained they had not been paid.

299I do not accept that submission. As I have already stated, it was not Mr. Bikhit’s role to actually make payments to the contractors or anyone else. The fact that he did help out in that regard when asked does not change that. Pursuant to the Equity Agreement and consistent with his tile of President and CEO of Iris, he was entitled to rely on the operations team at Iris Solutions. There is no evidence, for example, of Mr. Bikhit going to the bank and checking if there were funds to make a particular payment or making a payment to a contractor without being directed by someone at Iris Solutions to do so. As the defence submits, the fact that Mr. Bikhit signed various bank drafts directly related to the payment of contractors equally supports his belief that the contractors were being paid and he was taking active steps to pay them.

300The Crown asserts that Mr. Bikhit could have taken a moment when he attended the bank to check the balance of the Iris account. I accept that Mr. Bikhit could have found time to check the Iris bank account, but I also accept Mr. Bikhit’s evidence as to why he did not. As he put it, it was not part of his responsibility. When asked about payments, he gave a conditional response – he would check – and that he then made inquiries of Mr. Youssef and passed on the information he was told. On occasion, he referred the contractor to follow up directly with the operations team.

301I also find that if Mr. Bikhit had checked the Iris account as submitted by the Crown, it would not have given him any indication that Mr. Youssef and Ms. Grewal were siphoning off money for their own purposes. In fact, when Mr. Bikhit obtained drafts in favour of the contractors, he expected them to empty the account. Checking the Iris bank account more carefully would only have shown him that money was being transferred to Iris Solutions, which as I have already said, was consistent with the terms of the Equity Agreement and with what he knew.

302I did have a concern about the fact that once FundThrough was in place, Mr. Bikhit would have known that even if the BMO was paying late, loans would still be made to Iris. The Crown submitted that it was dishonest of Mr. Bikhit to tell the contractors that payment had not been received from Allegis/BMO despite the fact Iris was receiving loans. Ms. Weinberg submitted that not only was it not true, but in the circumstances, it was doubly deceitful because Mr. Bikhit knew that Iris had contracted with FundThrough to get paid based on the approved invoices. He knew that payment for the contractors’ invoices was sent to Iris even before BMO/Allegis paid and the BMO was paying regularly. She submitted that the fact that there was no truth to Mr. Bikhit’s assertion that BMO did not pay did not matter to Mr. Bikhit. He chose not to look into it, and that is wilful blindness.

303Ms. Weinberg established that Mr. Bikhit was aware FundThrough was loaning money to Iris based on the approved invoices to the BMO. However, she did not cross-examine him on how and why he should have connected that fact to what he was telling the contractors, and thus concluded that what he was telling them may be false, sufficient to require him to make further inquiries. Had she done so, I would have been able to assess whether Mr. Bikhit was suspicious and should have questioned what he was told.

304Although not really a question of clarification, I asked Mr. Bikhit how it could be that a delay in payments to the contractors could be due to the BMO not paying the Iris invoices since FundThrough was advancing loans. If BMO was late, that would only impact the amount of interest owing. Mr. Bikhit agreed that in retrospect it shouldn’t have mattered if payments from the BMO were late, but he did not think at the time that this reason Mr. Youssef gave him did not make sense because he was so busy at the BMO and he was not looking at the account. I accept that evidence, and in any event, it was not my place to pursue this line of questioning. Counsel did not ask any follow up questions.

305The defence submitted that the FundThrough loans were extended based on a portion of the contractors’ invoices and subject to a further holdback amount to secure FundThrough’s interest. As a result, Iris never received full payment for the contractors’ invoices. Furthermore, Iris’ financial obligations extended beyond simply paying contractors. As I have already said, the terms of the Equity Agreement contractually required Iris to remit funds to Iris Solutions, and as Mr. Bikhit testified to, all decisions about the allocation of funds coming into Iris were Mr. Youssef’s responsibility as the CFO of Iris and the person in charge of Iris Solutions.

306I accept Mr. Bikhit’s evidence about his understanding that the money advanced by FundThrough would support business operations. He understood that FundThrough was only lending a portion of the payments outstanding and that there would be interest owing depending on the length of the loan and FundThrough’s fee. Accordingly, I find that decisions about how to use the FundThrough loans would have been outside of Mr. Bikhit’s responsibility. This is the type of evidence Mr. Bikhit might have repeated if he had been challenged by the Crown on why he should have known the reason Mr. Youssef gave for delayed payments could not be true.

307Furthermore, although Mr. Bikhit did not give this evidence in connection with this issue, I accept that he believed Mr Youssef’s explanation that the use of a factoring company like FundThrough was to secure Iris’ ongoing operation and it was an effort to secure payments for contractors rather than defraud them. Again, this is the type of evidence Mr. Bikhit might have repeated if he had been challenged by the Crown on this point.

308For these reasons, I find that Mr. Bikhit’s evidence, which I accept, supports the defence submission that he would not have had reason to believe or suspect that the reason he was given for the delays in payment was false. I find that Mr. Bikhit’s reliance on Mr. Youssef was both reasonable in the circumstances and supports a finding that Mr. Bikhit did not know or consider that the reason he was giving the contractors for delayed payments could not be true.

309The defence also submitted that the reliance on FundThrough loans necessarily led to the need to determine which financial obligations could be met and which would need to be deferred. Most importantly, contractor payments were being made throughout the period FundThrough loans were issued, up until mid 2016. The defence submits that, as it relates to Mr. Bikhit’s understanding, the decision between competing financial obligations would be properly categorized as a bonafide business purpose and does not attract criminal liability. To suggest otherwise implies that a company that has access to a loan and chooses to pay one debt over another may be subject to criminal sanction. Even when assessed on objective standards of dishonesty, the defence submits that the conduct does not meet the threshold required under “other fraudulent means.” I accept this submission in the alternative to my finding that Mr. Bikhit was required and entitled to rely on Mr. Youssef’s decision as to how to allocate the funds received by Iris, including the FundThrough loans.

310I accept that the complainants have been defrauded of the payments they allege are owed. I do not accept that Mr. Bikhit was aware of what we now know, namely that Mr. Youssef and his wife Ms. Grewal were stripping Iris and Iris Solutions of a substantial amount of money for their own personal gain. I also agree that Mr. Youssef was the “organizing mind and puppet master” of Iris, as submitted by the defence, but that was to be his role given the terms of the Equity Agreement.

311Although the complainants were led to believe that they would be paid and that was at least a part of the reason why they continued to work despite nonpayment, I do not find that Mr. Bikhit knew they would not be paid. He was not, as the Crown alleges, stringing them along so that they would continue working on the Project and Iris would continue to receive its mark up. Furthermore, it was not really known that the payments would stop until three months had passed after the invoice was submitted.

312In summary, the fact Mr. Bikhit was operating Iris at Mr. Youssef’s direction is consistent with the terms of the Equity Agreement and the evidence I accept. Mr. Youssef was the one who signed the Allegis Agreement. He was the one who directed Mr. Bikhit to find a factoring company, and he was involved in the negotiations that led to the FundThrough Agreement. Mr. Youssef was also the one who negotiated the transition to Procom. All the evidence with respect to those agreements is consistent with Mr. Bikhit simply following through on instructions from Mr. Youssef. As the defence submits, Mr. Bikhit’s evidence that he relied on representations by others regarding the status of payments to the contractors is consistent with his role as CEO. I do not accept the Crown’s rebuttal that this requires expert evidence. A CEO is entitled to hire staff to whom he can delegate certain tasks.

313Mr. Bikhit made certain admissions with the benefit of hindsight when he testified. However, he can only be guilty of being wilfully blind to the fraud if I find that the Crown has proven that after the inquiries he made for any delayed payments, he harboured any suspicions and refrained from making further inquiries because he preferred to remain ignorant of the truth. The Crown has not proven that he harboured any suspicions that what he was telling the complainants was false and that they would not be paid. I find that Mr. Bikhit did not deliberately chose to remain ignorant of the truth. I also find that Mr. Bikhit believed and reasonably relied on what Mr. Youssef told him until the bankruptcy proceedings, when the true state of Iris’ accounting came to light.

314For the reasons given, I find that the Crown has not proven that Mr. Bikhit is guilty of counts 1-32 and 35-38, the charges of fraud over $5,000, contrary to s. 380(1)(a) of the Criminal Code.

Has the Crown Proven the Charge of Possession of Proceeds Obtained by Crime Over $5,000, Contrary to s. 354(1) of the Criminal Code?

315For the reasons given, I find that the Crown has not proven that Mr. Bikhit is guilty of count 39, the charge of possession of proceeds obtained by crime over $5,000, contrary to s. 354(1) of the Criminal Code.

316I should add that even if I had found Mr. Bikhit guilty of fraud, I would have dismissed this charge, as there is no evidence that Mr. Bikhit received any money over and above what he was entitled to as a contractor for the BMO for hours worked and expenses for travel. In fact, as I have set out, he may not have received all the funds he was entitled to, as a result of the fraud committed by Mr. Youssef and Ms. Grewal.

Has the Crown Proven the Charge of Conspiracy to Commit Fraud over $5,000 with Micheal Youssef, Contrary to 465(1)(c) of the Criminal Code?

317The Crown’s position is that Mr. Bikhit conspired with Mr. Youssef to commit fraud. She relies on the evidence of their relationship and submitted that they “were in this together”. I have considered the relationship between Mr. Bikhit and Mr. Youssef, but as I have explained, the relationship supports Mr. Bikhit’s evidence that he reasonably relied on what Mr. Youssef was instructing him to do. In particular, he relied on Mr. Youssef’s reasons for delays in payment. Having found Mr. Bikhit not guilty of fraud, it necessarily follows that he did not conspire to commit fraud with Mr. Youssef.

318For the reasons given, I find that the Crown has not proven that Mr. Bikhit is guilty of count 40, the charge of conspiracy to commit fraud over $5,000, contrary to s. 465(1)(c) of the Criminal Code.

Disposition

319Mr. Bikhit, for the reasons I have given, I find you not guilty on all counts.

N. Spies J.

Released: June 10, 2024 Edited Reasons released: June 21, 2024

COURT FILE NO.: CR-20-10000053-0000

DATE: 20240610

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

HIS MAJESTY THE KING

– and –

KAREEM BIKHIT

Defendant

REASONS FOR JUDGMENT

N. Spies J.

Footnotes

1. 1Mr. Bikhit testified that he did not receive complaints about delays in payment until late 2015. I accept, however, that he may be mistaken given what he was told by Mr. Youssef at this time with respect to the need to find a factoring company. This discrepancy is not material to my deliberations.