Court File and Parties

COURT FILE NO.: CV-24-00731174-00CL DATE: 20241210 ONTARIO - SUPERIOR COURT OF JUSTICE – COMMERCIAL LIST

RE: Trustar Underwriting Inc., Plaintiff AND: Daniel Alexander Moses, John Doe 1, John Doe 2, John Doe Corporation 1, John Doe Corporation 2, Defendants

BEFORE: Peter J. Osborne J.

COUNSEL: Eric Turkienicz and Maxwell Gill, for the Plaintiff

HEARD: December 10, 2024

Endorsement

[1] This matter returns to Court today. The Plaintiff, Trustar, seeks the continuation of previous Norwich relief granted, and also today moves for Mareva relief as set out in the Notice of Motion.

[2] Much of the background for this motion is set out in my earlier Endorsements made in this proceeding, and particularly my Endorsement of November 14, 2024. Since that time, the investigation of the Plaintiff has continued to progress and evolve.

[3] Today, the Plaintiff continues to rely on the earlier material filed and in addition, the affidavits of Ryan Seager sworn December 9 and 10, 2024, together with exhibits thereto. In particular, I note the undertaking of Trustar by its Chief Operating Officer with respect to damages, previously filed.

[4] The Seager affidavits, and particularly the affidavit of December 9, incorporate the information in the Affidavit of Sandy Boucher sworn November 22, 2024 (summarizing the investigation undertaken on behalf of the Plaintiff by Grant Thornton (“GT”) and the earlier affidavit of Seager November 12, 2024 that resulted in the order I granted on November 14, 2024.

[5] Since that time, the Plaintiff has uncovered evidence that the Defendant, Daniel Moses (Moses) has also apparently misappropriated insurance premiums, delivered Trustar invoices for unknown or nonexistent insurance policies, and redirected payments from Trustar to his personal bank account. That, in part, resulted in the motion for disclosure of banking information from RBC, granted on November 25, 2024.

[6] The evidence now discloses that Moses appears to have engaged in two separate but concurrent schemes to defraud Trustar.

[7] The first scheme involves his apparent selling of insurance policies to proposed policyholders, but in fact, failing to place those policies with any insurance company. Moses accepted the premiums, however, and notwithstanding the lack of any issued policy, accepted and then deposited the premiums into his personal bank account.

[8] A variation of this scheme is illustrated by additional circumstances in which Moses would sell a genuine insurance policy to a policyholder, and then misrepresent that the policy had been renewed, when it in fact had not, and appropriate the premiums for himself. The particulars of this first scheme are fully set out in the Boucher affidavit of November 22, 2024.

[9] The second scheme appears to involve Moses simply paying or causing to be paid funds from the trust account of Trustar into his own personal account or accounts, with transactions being masked or misrepresented so as to appear that they were being done for legitimate purposes and the funds directed to legitimate recipients.

[10] A number of transactions by Moses, and particularly those involving the RBC account 5047642, involve insurance premiums for an entity called Q2Hire. These are fully explained in the Grant Thornton report appended to the Boucher affidavit. In short, e-transfers were sent to an email address provided by Moses with the stated intention of paying for an insurance premium for Q2Hire. In the normal course, such premiums would not be paid by e-transfer and, moreover, would have been paid into the trust account of Trustar, to be later remitted to the appropriate insurer. As set out in the motion record, however, it appears that funds were deposited into the RBC account, and thereafter transferred into other accounts in Moses’ name, as fully described in the materials. There is no evidence that the funds were ever deposited into the trust account of Trustar (see affidavit of Seager of December 9, 2024 at paragraphs 11 – 20).

[11] In addition, there are numerous payments made by “Merlin Underwriting” to the same RBC account. Merlin is the former name of Trustar, and given that the current banking processes of Trustar predate its corporate name change, payments of premiums to insurers often reflect the old name. There are numerous transactions and transfers of funds from Merlin Underwriting to Moses’ RBC account (see Seager affidavit, paragraphs 21 - 28), none of which appear to have been properly authorized by Trustar or for its benefit.

[12] In addition to other specific transactions set out at paragraphs 22 – 66 of the affidavit, additional, newly identified suspicious transactions are set out at paragraph 67 and onward, together with corresponding exhibits. That reveals that Moses maintains bank accounts with, among other institutions, RBC, as discussed above, TD and BMO.

[13] Finally, the investigation revealed suspicious activity involving Trustar’s previous accounting firm, Stonehenge Accounting, and one of the accountants at that firm, Matthew Cassar. That firm ceased providing accounting work to Trustar in or around January, 2020 when Trustar transitioned its accounting work to MNP. It was the belief of Trustar’s Board, and Seager, that all work with Stonehenge ceased at that time.

[14] However, the investigation has revealed that Stonehenge was apparently doing work purportedly for Trustar, as directed by Moses, up to at least the end of 2023. According to information provided by Cassar, this included transaction entry work, reconciliations, bill payment processing and payroll management. The extent of the work, and the purpose for it, is not yet clear to the Plaintiff.

[15] However, while Cassar has agreed to Trustar’s request to provide it with all correspondence between Stonehenge and Moses from 2021 to 2023, Stonehenge has refused to provide its working papers in respect of accounting work purportedly done for Trustar.

[16] The test for a Mareva injunction is well established. This Court has jurisdiction to grant an interlocutory injunction, including a Mareva injunction, pursuant to section 101 of the Courts of Justice Act, where it appears just or convenient to do so. The order may include such terms as are just, and may be sought on motion made without notice for a period not exceeding 10 days.

[17] That said, the relief is extraordinary. As observed by Perell, J. in Wang v. Feng, 2023 ONSC 2315 at para. 129:

Since the general principle of the common law is that there shall not be execution before judgment, a Mareva injunction is both an exception to a general rule and an exceptional exercise of the court's jurisdiction to grant interlocutory relief. A Mareva injunction is granted only sparingly and in the clearest cases. A Mareva injunction is an extraordinary remedy because as a general policy of civil procedure, a remedy that allows prejudgment execution against the defendant's assets is not favoured, but where there is a strong case that the defendant has defrauded the plaintiff the law's reluctance to allow prejudgment execution yields to the more important goal of ensuring that the civil justice system provides a just and enforceable remedy against such serious misconduct.

[18] As numerous courts have observed, the harshness of such relief, usually issued ex parte, is mitigated or justified in part by the requirement that the defendant have an opportunity to move against the injunction immediately.

[19] The factors to be considered in determining whether to grant Mareva relief include whether the moving party has established the following:

a. a strong prima facie case; b. particulars of its claim against the defendant, setting out the grounds of its claim and the amount thereof, and fairly stating the points that could be made against it by the defendant; c. some grounds for believing that the defendant has assets in Ontario; d. some grounds for believing that there is a serious risk of defendant’s assets being removed from the jurisdiction or dissipated or disposed of before the judgement or award is satisfied; e. proof of irreparable harm if the injunctive relief is not granted; f. the balance of convenience favours the granting of the relief; and g. an undertaking as to damages.

See Aetna Financial Services Ltd. v Feigelman, [1985] 1 S.C.R. 2 at paras. 26, 30; Chitel v. Rothbart at para. 60; and Lakhani et al v. Gilla Enterprises Inc. et al, 2019 ONSC 1727 at para. 31.

[20] A strong case that a defendant has committed fraud against the plaintiff can be important evidence in support of the relief sought. The “reluctance” of the common law toward allowing execution before judgment has recognized exceptions, including circumstances where the relief is necessary for the preservation of assets, the very subject matter in dispute, or where to allow the adversarial process to proceed unguided would see their destruction before the resolution of the dispute. (See Aetna, at para. 9).

[21] The test as to whether a strong prima facie case exists has been expressed by the courts as the question of whether the Plaintiff would succeed “if the court had to decide the matter on the merits on the basis of the material before it”: Petro-Diamond Inc. v. Verdeo Inc., 2014 ONSC 2917 at para. 25.

[22] I am satisfied for the purposes of the relief sought today that the Plaintiff has a strong prima facie case.

[23] The particulars of the claim, setting out the basis for the relief sought, are set out in detail in the materials and described above. They continue to evolve as the investigation being undertaken by the Plaintiff continues. For the purposes of the relief sought today, however, it appears to show unauthorized transfers of the funds, to the accounts in respect of which the relief is sought. The unauthorized transfers and payments need to be explained.

[24] A party moving without notice must be fair, both to the absent opposing party and to the court hearing the request for extraordinary relief: Moses v. Metro Hardware and Maintenance Inc., 2020 ONSC 6684, at para. 26, leave to appeal denied, 2021 ONSC 877 (Div. Ct.). In United States v. Friedland, [1996] O.J. No. 4399 (Gen. Div.) at paras. 27-28, this Court described the duty on a party moving without notice as follows:

That party is not entitled to present only its side of the case in the best possible light, as it would if the other side were present. Rather, it is incumbent on the moving party to make a balanced presentation of the facts [and] law. The moving party must state its own case fairly and must inform the Court of any points of fact or law known to it which favour the other side. The duty of full and frank disclosure is required to mitigate the obvious risk of injustice inherent in any situation where a Judge is asked to grant an order without hearing from the other side.

If the party seeking [ex] parte relief fails to abide by this duty to make full and frank disclosure by omitting or misrepresenting material facts, the opposite party is entitled to have the injunction set aside. That is the price the Plaintiff must pay for failure to live up to the duty imposed by the law. Were it otherwise, the duty would be empty, and the law would be powerless to protect the absent party.

[25] The evidence clearly meets the requirement of showing some grounds for the belief of the Plaintiff that the Defendant has assets in Ontario. In this case, those assets are the accounts and property described above and in the materials.

[26] I am satisfied there is a risk of dissipation of assets. I observe that the still-evolving investigation of the Plaintiff has already revealed multiple transfers of funds from one account to another which will make tracing and recovery (if ultimately ordered) more difficult almost by the day. Different jurisdictions are, on the face of the evidence, involved.

[27] Proof of the risk of removal/dissipation may be inferred from the surrounding circumstances of the responding parties’ misconduct. (See Ontario Professional Fire Fighters Association v. Atkinson, et al, 2019 ONSC 3877 at paras. 6-8, quoting with approval from Sibley v. Ross 2011 ONSC 2951 at paras. 63, 64 and Amphenol Canada Corp. V. Sunadrum, 2019 ONSC 849). Again, the evidence uncovered to date by the Plaintiff here shows multiple transfers, and seemingly fraudulent and false documents and representations about insurance policies.

[28] I am satisfied that the requirement of irreparable harm is also met here. If the assets of the Defendant cannot be restrained, there will be no way for the Plaintiff to collect on a money judgment if obtained in the future. Irreparable harm, measured as against the risk that the Defendant will remove property or dissipate assets prior to judgment, is established.

[29] If the accounts are not frozen, the assets could very well be transferred or hidden again with the result that the probability of recovering on any damages award will be decreased significantly.

[30] The balance of convenience, or, in other words, the measurement of the relative harm to be suffered by the Plaintiff if the order is not granted as against the harm that will be suffered by the Defendant if it is granted, favours the Plaintiff, particularly given the short temporal duration of the order sought today. I observe that the draft order sought contemplates that the Defendants would be able to obtain a variation of terms or a discharge of the order, and/or to address requirements for ordinary living and legal expenses if necessary.

[31] Finally, the Plaintiff has provided an undertaking in damages.

[32] The scope of the draft order originally submitted by the Plaintiff was overly broad. In my view, certain of the accounts originally sought frozen were not sufficiently linked to the Defendants by the evidence disclosed to date. The scope has, accordingly been amended. I also observe that the order is, however, without prejudice to the right of the Plaintiff to seek further and other relief at a later time if and as necessary.

[33] The Plaintiff also seeks a continuation and modest expansion of the Norwich relief granted earlier. That relief is granted for the reasons set out in my earlier Endorsement, the additional evidence now discovered as summarized above and as more fully described in the Boucher report of GT and in the Seager affidavit.

[34] Finally, Matthew Cassar and Stonehenge Accounting are directed to produce their entire client files with respect to work done or purportedly done by or for the Plaintiff (and for greater certainty under its current name or its former name of Merlin Underwriters). All parties are in agreement that the work was done or purportedly done by and for the Plaintiff. In the circumstances where that work or some of it appears to have been directed by Moses, the Plaintiff is reasonably entitled to see that work and understand what was done, on whose instruction, why and to what effect.

[35] The order I have signed today has effect until December 20, 2024. This matter shall return before me (within 10 days) for a hearing to consider whether the order should be continued, amended or varied, or vacated, on December 20, 2024 at 10 AM.

[36] This endorsement shall be served on the Defendants, together with the order.

[37] Order to go in the form signed by me today which is effective immediately and without the necessity of issuing and entering.

Osborne J.