1999269 Ontario Limited v. Aguiar, 2024 ONSC 5858

Court and Parties

DATE: 2024-07-30 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

1999269 ONTARIO LIMITED and 1999267 ONTARIO LIMITED Plaintiffs

– and –

GONZALO RAUL GADEA AGUIAR a.k.a GONZALO RAUL AGUIAR GADEA, A.D. GROUP OF COMPANIES INC., ROXANA GUADALUPE MARROQUIN DONAN, ANDREE ALEJANDRO AGUIAR DONAN a.k.a ANDREE ALEJANDRO DONAN AGUIAR, ADRIAN AGUIAR DONAN a.k.a ADRIAN DONAN AGUIAR, A.R.A. GROUP OF COMPANIES INC., OPTIMA CAULKING INC., MARIE DEL CORVO, JOHN DOE, JANE DOE AND DOE CORPORATION Defendants

COUNSEL: Norman Groot and Ashley Ferguson, for the Plaintiffs Roxana Guadalupe Marroquin Donan in person Marie Del Corvo in person

HEARD: July 30, 2024

BEFORE: Papageorgiou J.

Reasons for Judgment

Overview

1In this case, the Plaintiffs allege that the defendants Gonzalo Raul Aguiar Gadea (“Aguiar”), along with his corporate alter ego A.D. Group of Companies Inc. (“A.D Group”), and the other defendants, have engaged in a significant and prolonged fraud related to investments that were supposed to be made in the cannabis industry in Uruguay.

2On January 31, 2023, Perell J. granted a worldwide Mareva injunction up to the amount of $25,000,000. On March 3, 2023, Chalmers J. granted an Anton Pillar Order. On March 10, 2023, Koehnen extended the Mareva injunction.

3On December 15, 2023, the plaintiffs moved for default judgment against A.D. Group and Aguiar. At that time, A.D. Group had not filed a Notice of Intent to Defend or Statement of Defence. Aguiar had also failed to deliver either a Notice of Intent to Defend or a Statement of Defence.

4Aguiar attended with a lawyer Ricardo Rachetti, his Uruguayan-based counsel. He requested an adjournment. A.D. Group did not attend at that time, although properly served.

5Aguiar advised that he had not filed a defence because he could not afford to as his assets were frozen. He also said he had been dealing with the proceedings in Uruguay. He said that he and his lawyers had provided sufficient evidence to the court in Uruguay regarding the way the funds at issue were dispersed, and that he wanted an opportunity to file evidence in these proceedings.

6I adjourned the matter to February 7, 2024, with a timetable.

7On February 7, 2024, A. D. Group again failed to appear although properly served.

8Aguiar attended with Mr. Rachetti again. He uploaded a document called a Statement of Defence to Caselines. It was not in a proper form and did not properly respond to the Statement of Claim, and was unintelligible, but the Plaintiffs withdrew their motion for default judgment against Aguiar in light of his filing of this document. As against Aguiar they sought only an Order that Aguiar provide a proper Statement of Defence which I ordered was to be provided within 60 days.

[9] I noted in my February 7, 2024 endorsement that Aguiar remained in breach of court orders including: a) An Order that he provide an accounting of the Funds in question; b) An Order that he provide a sworn asset declaration; and c) An Order that he provide particulars of his legal and living expenses.

10I ordered that Aguiar comply with these Orders immediately.

11However, I granted default judgment as against A.D. Group.

12On February 26, 2024, Aguiar was killed in a shooting incident in Uruguay.

13The death and surrounding circumstances are being investigated in Uruguay.

14On March 28, 2024, I granted an Order to Continue the action as against the Estate of Aguiar and set a timetable for the plaintiffs’ motion for summary judgment.

15At the case conference Aguiar’s family members/co-defendants indicated an intention to obtain the appointment of an estate trustee on behalf of the Estate of Aguiar.

16As of today, no estate trustee has been appointed and the plaintiffs have not received a Statement of Defence from the Estate of Aguiar in accordance with my Order. The time to serve the Statement of Defence in accordance with my February 7, 2024 Order has expired. It is unknown as to whether Aguiar filed the Statement of Defence that did not comply with the rules of pleading. If he did, I am striking that Statement of Defence and noting Aguiar in default.

17The plaintiffs served their motion on all the defendants even though they only seek judgment as against Aguiar.

18Thus, this matter proceeded before me against the Estate of Aguiar as a partial default judgment motion even though it had been brought as a summary judgment motion.

19It is partial because the plaintiffs have not yet discovered the full extent of their damages claim; there may be additional consequential damages related to profits that could have been earned had the defrauded funds been advanced and used for the purposes intended by the business in Uruguay. The action is still proceeding against the other defendants.

20I also note that even if the Estate of Aguiar was not in default and this motion proceeded as a motion for summary judgment, there is sufficient evidence before me to award the plaintiffs summary judgment as against the Estate of Aguiar, who did not file any materials in response to the comprehensive materials before me.

Decision

21For the reasons that follow, I am granting the plaintiffs default judgment in the amount set out at the conclusion of this decision.

The Issues

[22] In arriving at my decision, I have considered the following issues:

• Issue 1: Do the materials provide a basis for a finding of liability?
• Issue 2: If so, what are the damages to which the plaintiffs are entitled?
• Issue 3: Should the Mareva injunction be continued?

Analysis

Issue 1: Do the materials provide a basis for a finding of liability?

Consequences of noting in default

23The test on a motion for default judgement was set out in Elekta Ltd. v. Rodkin, 2012 CarswellOnt 2928 (ONSC) as follows: A. What deemed admissions of fact flow from the facts pleaded in the Statement of Claim? B. Do those deemed admissions of fact entitle the plaintiff, as a matter of law, to judgement on the claim? C. If they do not, has the plaintiff adduced admissible evidence which, when combined with the deemed admissions, entitled it to judgement on the pleaded claim?

24See also the recent case of Paul’s Transport Inc. v. Immediate Logistics Limited, 2022 ONCA 573 at para 77, where the court stated that conclusions of law and mixed law and fact are not deemed admitted where a defendant has been noted in default and that if the facts pleaded do not support the conclusion of law pleaded, the motion judge may decline to grant judgment despite the failure of the defendant to defend the action.

[25] I am satisfied that the deemed admissions in the Statement of Claim and significant affidavit evidence before me entitle the plaintiffs as a matter of law to judgment as against the Estate of Aguiar. These show that:

• The plaintiffs 1999269 Ontario Limited (“269 Ontario”) and 1999267 Ontario Limited (“267 Ontario”) are Ontario corporations.
• Throughout 2019 – 2022, Aguiar solicited funds from investors for specific purpose investments and represented to the investors that their funds would be used for each specific investment related to the production of cannabis.
• The investors directed these funds to the plaintiffs for the purpose of these investments.
• The investor funds were to be managed by an appointed agent the defendant Aguiar and his corporation A.D. Group.
• The reason that Aguiar and A.D. Group were appointed to manage the investments in Uruguay was because Aguiar, born in Uruguay, initially proposed the investments and solicited the funds. He represented to the plaintiffs that as someone who spoke the language and had local expertise and connections to deploy for the benefit of the investments, he was well suited to the position. Aguiar also had prior business relationships and experience with some of the investors.
• The investors directed US $27,349,435 and CAD $500,000 to the plaintiffs who then directed these funds to A.D. Group (the “Funds”) as a result of Aguiar’s representations.
• Aguiar is the alter ego of A.D. Group.
• The Funds were initially deposited into a USD TD Canada Trust bank account of A.D. Group located in Toronto (“TD Bank Account”).
• Aguiar travelled back and forth from Ontario to Uruguay, purportedly operating the Uruguayan business financed by the plaintiffs.
• Aguiar, through the use of his corporation A.D. Group, and various corporations in Uruguay, represented to the investors and the plaintiffs that he was managing and growing the investments in Uruguay. He provided status updates and various requests for additional funding. He represented that he had in fact created and established the represented investments in Uruguay and that these investments had resulted in an established and profitable business enterprise in Uruguay.
• In or around January 2023, directors of the plaintiffs travelled to Uruguay to investigate Aguiar’s purported actions and the use of the investors’ funds. He discovered that many of Aguiar’s representations, including the requirement for the use of the investors’ funds, were false. He discovered that Aguiar had not used a significant amount of the investment funds for the purposes for which they were advanced and/or otherwise misappropriated and embezzled investor funds.
• A.D. Group’s books and records only account for US $15,536,948.00 as properly utilized funds for the specific purpose for which the Funds were advanced.
• The remainder of the investment funds are unaccounted for (the “Defrauded Funds”) and were not used for the specific purpose for which the Funds were advanced.
• Aguiar, through his control of A.D. Group, directed the disbursement of the Defrauded Funds to his own benefit.
• The Mareva Injunction order required document production intended and required to give effect to the Mareva injunction. It required Aguiar and A.D. Group to produce worldwide asset declarations, accounting documentation to trace and account for the funds at issue, and to produce expenditure logs showing the source and use of funds by the defendants while subject to the Mareva injunction.
• To date, Aguiar and A.D. Group have failed to comply with these orders.
• There was also a Norwich Order made in respect of TD Bank Account. The records produced by TD Bank show that there were significant transfers out of the TD Account to unknown entities unconnected to the investments in Uruguay.
• In particular, Aguiar directed significant funds to be transferred to various recipients through what has been referred to as an “Exchange house” whereby the Defrauded Funds were transferred to individuals and entities located or connected to China, for unknown and unauthorized purposes. He used these individuals to launder the Defrauded Funds and disturb the plaintiffs’ ability to trace the funds.
• When Aguiar’s wife, the defendant Roxanna Donan was examined as a result of the Mareva injunction, she indicated that Aguiar had directed her to transfer money, through bank accounts of A.D. Group, to various individuals and businesses, mostly located in Hong Kong, China, India and Columbia and that the funds would then be accessible to Aguiar in Uruguay through the use of these “Exchange Houses”.
• Thus, Aguiar used the “Exchange Houses” to obtain the Defrauded Funds to carry out embezzlement and theft without a paper trail.
• The plaintiffs have identified and traced the Defrauded Funds into certain personal assets purchased by Aguiar in Uruguay and have discovered that Aguiar funded an opulent lifestyle using the Defrauded Funds.
• The most significant personal asset purchased by Aguiar with the Defrauded Funds is an opulent mansion/estate in Punta Del Este of Uruguay which he purchased for $4 million and which is currently listed for sale for US $6 million.
• There is also a proceeding in Uruguay. The plaintiffs took control of the Uruguayan companies in order to secure the businesses and any assets for the benefit of the investors/plaintiffs through an Intervention which is similar to the appointment of a Receiver in Ontario. The Intervenor reported to the Uruguayan Court that Aguiar had purchased personal assets using the Defrauded Funds and has also misused them.
• Additionally, a commission of the Uruguayan Senate has been assembled to investigate Aguiar’s actions in the country.

[26] I am satisfied that the plaintiffs have made out a case in: a) civil fraud as per the requirements set out in Bruno Appliance and Furniture v. Hyrniak, 2014 SCC 8 at para 21 and Performance Industries Ltd. v. Sylvan Lake Golf & Tennis Club Ltd., 2002 SCC 19 at para 39. In that regard, the plaintiffs have established: (1) false representations made by Aguiar; (2) knowledge of the falsehood of the representation and/or that the representations were made recklessly; (3) the false representation caused the plaintiffs to act; and (4) the plaintiffs’ actions resulted in losses. b) conversion which consists of the wrongful interference with the ownership or title to another’s chattel, which in this case is the Defrauded Funds: Boma Manufacturing Ltd. v. Canadian Imperial Bank of Commerce, [1996] 3 S.C.R. 727 at para 31. c) unjust enrichment which involves an enrichment of the defendant, a corresponding detriment to the plaintiff and an absence of juristic reason for the enrichment: Pacific National Investments v. Victoria, 2004 SCC 75 at para 14.

27As already noted, Perell J. found that the Plaintiffs had made out a strong prima facie case in fraud when he granted a Mareva injunction in January 2023.

28I am not as yet finding that Aguiar breached a fiduciary duty based upon the material and arguments before me; the plaintiffs have reserved their rights with respect to this issue and may raise it at a later point.

Issue 2: What are the damages to which the plaintiff is entitled?

29The plaintiffs advanced $27,349,435 US and $500,000 CAD.

30Only US $15,536,948.00 of the money advanced has been accounted for.

31The difference between the money advanced and the money that appears to have been properly invested is $11,812,487 (USD) and $500,000 (CAD).

32The plaintiffs provided evidence of the following recoveries in Ontario: US $90,816 and CAD $269,934.81.

33Thus, I am satisfied that the plaintiffs are entitled to default judgement in the amount of $11,721,671 and $CAD $230,065.19:

Item	USD Amount	CAD Amount
TOTAL Investment	$27,349,435.00	$500,000.00
Less (-) Accounted for / properly utilized investment funds	$15,536,948.00
Subtotal	$11,812,487	$500,000.00
Less recoveries:	$90,816	$269,934.81
Total owed	$11,721,671	$230,065.19

34The plaintiffs have asked that costs be reserved until the completion of this matter.

Issue 3: Should the Mareva injunction be continued?

35As set out by Dunphy J. in Canadian Premier Life Insurance Company v. Ho, 2016 ONSC 496, a Mareva injunction is an interlocutory order made to preserve property prior to judgment. Interlocutory orders normally merge with a judgment once granted. See also B & M Handelman Investments Ltd. v Curreri, 2011 ONCA 395 at para 3 and Coast to Coast Against Cancer v. Sokolowski, 2016 ONSC 170.

36However, as noted, this is only a partial default judgment against the Estate of Aguiar in respect of the Defrauded Funds. The plaintiffs still have a claim for consequential loss and punitive damages as against the Estate of Aguiar and as noted, the action is still proceeding against the other defendants.

37There remains significant outstanding withdrawals and expenditures of the plaintiffs’ Defrauded Funds to trace. It is just and convenient in the circumstances to continue the Mareva injunction against the Estate of Aguiar, to restrain the Estate of Aguiar, and/or other third parties with knowledge of the Order, from dissipating any assets pending execution of the judgement itself, or at least conclusion by the plaintiffs that all ill-gotten gains of the Estate of Aguiar have been identified, preserved and/or liquidated for the plaintiffs benefit: Canadian Premier Life Insurance Company v Ho, 2016 ONSC 496; Coast to Coast Against Cancer v Sokolowski, 2016 ONSC 170.

Conclusion

[38] Therefore, I Order as follows:

• Partial Default Judgment against the Estate of Aguiar in the amount of US $11,721,671 and CAD $230,065.19.
• An Order extending the Mareva Injunction as against the Estate of Aguiar and the other defendants.

Papageorgiou J.