Reasons for Decision

Introduction

COURT FILE NO.: CV-25-00734810-00CL
DATE: 2025-05-23
SUPERIOR COURT OF JUSTICE – ONTARIO (COMMERCIAL LIST)

RE: Latif Nanji, Plaintiff
AND: Alykhan Karmali, Zaher Karmali and AK&H Ltd., Defendants

BEFORE: Jane Dietrich

COUNSEL:
J. Daniel McConville, Haya Sardar, for the Plaintiff
Michael Motala, for the Defendants

HEARD: 2025-05-06

Introduction

[1] This is a comeback motion on a Mareva injunction. I originally granted the Mareva injunction against the defendants, Alykhan Karmali and AK&H Ltd. (“AK&H”) on February 7, 2025. I also delivered a corresponding endorsement that day (the “February 7 Endorsement”).

[2] The original comeback on the Mareva injunction was scheduled for February 18, 2025. However, the defendants requested additional time to respond, and I scheduled the comeback hearing for March 24, 2025. The defendants requested further time to respond and on March 7, 2025, Justice Cavanagh made an endorsement scheduling the comeback hearing for May 6, 2025.

[3] The defendants oppose the continuation of the Mareva injunction claiming that the high threshold for such extraordinary relief has not been met in that the plaintiff has failed to establish a strong prima facie case and a genuine risk of dissipation of assets. Rather, the defendants say that the applicant, Mr. Nanji, engaged in a speculative, high risk investment venture with eyes wide open to its risks and that business difficulties which have been encountered have been mischaracterized as fraud.

[4] Terms used but not otherwise defined herein have the meaning provided in the factum of Mr. Nanji, filed on this motion.

[5] For the reasons set out below, the Mareva injunction is continued.

Background

[6] Much of the background was outlined in the February 7 Endorsement and will only be summarized here. However, certain facts have come to light since my February 7 Endorsement, and where relevant, they will be outlined here as well.

The Alleged Fraud

[7] Mr. Nanji and Mr. Karmali met in 2022. In November of 2022, Mr. Karmali invited Mr. Nanji to invest in his business.

[8] The original investment was represented by Mr. Karmali to be funding for a transaction involving the purchase and sale of $7.5 million worth of goods. Mr. Nanji invested $750,000 USD in November of 2022 and at the direction of Mr. Karmali, those funds were advanced into a US dollar account at a Royal Bank of Canada (“RBC”) branch in Toronto, Ontario with the account beneficiary named as AK&H.

[9] The day after this first advance, Mr. Karmali advised Mr. Nanji that he was short on the purchase price and needed another $350,000. Mr. Nanji requested access to the company's bookkeeping system, amazon, and apple accounts, however, other than one screenshot of a QuickBooks ledger, no documentation was provided.

[10] Mr. Nanji eventually agreed to provide the additional $350,000 USD at the end of December 2022. There was some confusion with wire transfers and two wire transfers of $350,000 were initiated for a total of $700,000 on January 3, 2023. Weeks later, Mr. Karmali returned $200,000 to Mr. Nanji – leaving Mr. Nanji with, at that point, a total investment of $1,250,000 USD.

[11] The bank account information obtained by Mr. Nanji contains no evidence of the purchase or sale of $7.5 million worth of goods in or around November of 2022. Despite many requests for Mr. Karmali to produce records supporting the purchase and sale – which he claims was profitable - none were produced.

[12] Mr. Karmali reported to Mr. Nanji that this $7.5 million purchase and sale of goods was successful and invited Mr. Nanji to roll his profit into another larger transaction. This next transaction was represented to be a purchase of electronics for $15 million, which he could then resell for approximately $35 to $40 million. Mr. Karmali claimed that if Mr. Nanji left in his profits from the initial deal and Mr. Nanji invested an additional 'few hundred' thousand, Mr. Karmali would have sufficient funds to complete the deal.

[13] Mr. Nanji advanced a further $200,000 on May 17, 2023. Mr. Karmali indicated that he was still short by $160,000, so Mr. Nanji convinced a friend to advance $100,000 and Mr. Nanji advanced another $60,000. Eventually, Mr. Nanji paid his friend the $100,000 and Mr. Nanji now includes that $100,000 amount in the total amount owing by Mr. Karmali and AK&H to Mr. Nanji.

[14] Over the next months, Mr. Karmali advised Mr. Nanji of a series of issues with the deal – sufficient funds to cover shipping costs were not obtained, however, eventually shipping was arranged at very punitive terms. Around this time, Mr. Karmali represented to Mr. Nanji that many of the issues involved business transactions with an individual referred to as Remtullah. Mr. Karmali has not provided Remtullah’s full name or contact information.

[15] Mr. Karmali advised Mr. Nanji that he was personally in a dire financial situation given the shipping delays – he could not make payroll or pay personal expenses like his mortgage, utilities, and insurance.

[16] Mr. Nanji asked for copies of relevant contracts, financial statements, shipping invoices and other documentation but was not provided with anything of substance. Eventually, he received a screenshot of a profit and loss statement in June 2023 that showed about $5 million in profit. Mr. Karmali has not produced any financial statements, general ledgers, or other documentation to support this alleged profit.

[17] Given Mr. Karmali's purportedly desperate situation, Mr. Nanji continued to advance additional funds such that by the end of July 2023, Mr. Nanji had advanced a total of $1,910,000 USD.

[18] For the remainder of 2023, Mr. Karmali recounted repeated problems with the transaction, trucks arrived late, product was 'locked' and could not be sold, creditors were demanding payments, and the commercial landlord was threatening to lock out Mr. Karmali. Eventually, Mr. Karmali advised Mr. Nanji that there was a buyer identified who was referred to as ‘Dustin’ who would assist in recouping losses, however, Mr. Karmali refused to let Mr. Nanji talk to Dustin, claiming he would only deal with Mr. Karmali. Mr. Karmali has not provided any evidence to support a transaction with ‘Dustin’ or even contact information for him.

[19] Mr. Nanji continued to advance funds to AK&H based on promises of the sale to be completed. By mid-January of 2024, Mr. Nanji had advanced $2,702,000 USD to AK&H. Smaller amounts were advanced for the remainder of 2024, such that the total advanced by Mr. Nanji was $3,044,777 USD and $22,800 CAD.

[20] The bank account information obtained by Mr. Nanji contains no evidence of the purchase or sale of $15 million worth of any goods in 2023 or 2024. Despite many requests for Mr. Karmali to produce records supporting the purchase and sale, none were produced.

[21] Certain concerns with the information provided by Mr. Karmali to Mr. Nanji came to light in early 2024. This included Mr. Karmali admitting to Mr. Nanji that he had lied to Mr. Nanji about the alleged warehouse's location. Mr. Nanji accepted Mr. Karmali's explanation at this point that Mr. Karmali was upset when asked for the location and so Mr. Karmali provided a fake location. Mr. Karmali then sent Mr. Nanji pictures of a warehouse lease claiming it was for the actual warehouse, however, when Mr. Nanji visited the new location in the summer of 2024, it was clear that an unrelated company was doing business at the premises, and no one there had heard of Mr. Karmali or AK&H.

[22] A demand for repayment was sent by Mr. Nanji to Mr. Karmali in October of 2024. No repayment has been received.

The Investment Documentation

[23] Initially, the investment was documented as 'Joint Venture Agreement’ entered into on or about November 8, 2022. Mr. Nanji (who is not a lawyer) drafted the contract. Similar contracts were entered into between the parties on December 29, 2023, January 11, 2024, and May 15, 2024.

[24] The contracts speak to the allocation of profit based on the amounts invested. The contracts also contained an entire agreement provision providing that “This Agreement contains the entire agreement and understanding between the Parties, superseding all prior contemporaneous communications, representations, agreements, and understandings, oral or written, between the Parties with respect to the subject matter hereof.”

The Warehouse

[25] Mr. Karmali now admits to lying to Mr. Nanji twice about the location of the warehouse. As noted above, Mr. Karmali admitted in early 2024 that he lied about the original warehouse location (6601 Lyons Rd), however, he then provided Mr. Nanji with a copy of a lease claiming that the ‘actual’ location was in the Pompano Business Park. Mr. Nanji now admits that second location was also a fabrication.

[26] Following the Order of Justice Cavanagh in March of 2025 that Mr. Nanji be permitted to inspect the ‘real’ warehouse, Mr. Nanji and a representative attended at this ‘new’ warehouse. After walking Mr. Nanji and his representatives through what appeared to be a T-shirt warehouse, Mr. Karmali presented them with one shelf with approximately 25 iPhones and 2 iPads on it. Mr. Karmali indicated that the remaining inventory was ‘on consignment’ and he would arrange for Mr. Nanji to inspect it, however, Mr. Karmali failed to arrange any further inspection.

[27] Mr. Karmali claimed that the business only began using the current warehouse in January of 2025. However, despite repeated requests, Mr. Karmali has not produced any evidence of a previous lease and on cross-examination, Mr. Karmali could not remember the address or even the street on which the previous warehouse was located.

[28] Additionally, although Mr. Karmali previously claimed that the warehouse rent was $16,000 per month, none of the bank account statements produced show payment of any such amounts.

The Invoices

[29] Mr. Karmali produced copies of three invoices which Mr. Karmali says show that approximately $10 million of goods are held on consignment. The first is an invoice from AK&H with a Bill To/Ship To address of Expedited Partners Limited, LLC located in Austin Texas dated October 11, 2024, for a total amount due of $3,318,000. The second is an invoice from AK&H with a Bill To/Ship To address of Romeo Valentino Investment Corp. located in Hallandale, Florida dated July 15, 2024, for a total amount due of $2,887,000. The third is an invoice from AK&H with a Bill To/Ship To address of Amazing Liquidation LLC in Miami Gardens, Florida dated July 25, 2024, for a total amount due of $3,670,000. No other supporting documentation was produced in respect of these consignment invoices.

[30] Mr. Karmali also produced copies of a number of invoices for smaller amounts from 2022–2024. Not all of the numbers are clear on the invoices, but there is no assertion that they support the purchases of $7.5 million and $15 million of goods referenced above. Rather, Mr. Karmali says they show some legitimate business was being conducted by AK&H.

Bank Account Records Produced

[31] Mr. Nanji obtained bank statements from RBC for a US Dollar account in the name of AK&H and a Canadian Dollar account in the name of AK&H. Mr. Karmali stated in cross-examinations that those are the only operational bank accounts used by AK&H.

[32] As noted above, those accounts do not show a purchase of $7.5 million of goods in late 2022 or early 2023, nor do they show any purchase of $15 million worth of goods in 2023 or 2024.

[33] What the bank accounts do show is that AK&H’s U.S. Dollar bank account at RBC had a balance of $1.02 immediately prior to the $750,000 USD deposit from Mr. Nanji on November 8, 2022. There were minimal additional credits into the account and by January 3, 2023, only $9,695.06 remained.

[34] The funds deposited by Mr. Nanji in November of 2022 were used, among other things, for:

• various cash withdrawals;
• an initial payment for a Porsche in the amount of $200,000 CDN;
• payments of approximately $70,000 USD to ‘Eric and Co Tra’ which is admitted by Mr. Karmali to be the business of Eric Mavani, a jeweller catering to celebrities in New York City;
• repayments to alleged creditors of Mr. Karmali (although no documentation was produced to support the loans being repaid); and
• for general living expenses.

[35] On January 6, 2023, the U.S. Dollar account in the name of AK&H at RBC received two deposits of $350,000 (for a total of $700,000) from Mr. Nanji. In the days following receipt of this $700,000 from Mr. Nanji, additional amounts are transferred to the RBC Canadian Dollar account to make a second payment on the Porsche (for a total of over $300,000 CDN). Other uses of the funds include additional transfers to friends of Mr. Karmali who he says are also creditors, more cash withdrawals, and an additional $60,000 to the business of Eric Mavani. By February 1, 2025, the U.S. Dollar account shows a balance of only $83,678.16.

[36] Following additional transfers from Mr. Nanji in May of 2023, Mr. Karmali admitted that he used funds deposited by Mr. Nanji to make deposits and a closing payment of over $400,000 for the purchase of a house at 1820 N. Baypoint Circle, Parkland Florida. The house was purchased by Mr. Karmali on May 31, 2023, for $1,298,000 with a mortgage of $973,500. Mr. Karmali also admitted that despite previous statements to Mr. Nanji regarding the inability to pay his mortgage etc., this was in fact the first house that Mr. Karmali had owned. Funds were also used to pay for various contractors who did work on the home.

Affidavit of Assets

[37] As contemplated by the February 7, 2025, Order, Mr. Karmali swore a statement of assets of both himself personally and of AK&H on February 24, 2025. Mr. Karmali swore that along with $30,000 of cash, he held minimal amounts in bank accounts and the real property mentioned above in Florida. He also swore that he held equity in AK&H and AK&H LLC along with a 2023 Porsche Taycan Cross Turismo and a 2015 BMW M6. He also stated that the assets were subject to certain credit card liabilities and the real property mortgage mentioned above. Mr. Karmali also swore that approximately $12,386,450 USD worth of inventory was ‘on hand or on consignment’.

[38] In cross-examination, it became clear that despite his reference to the assets being subject to certain limited liabilities, the full amount of Mr. Karmali and AK&H’s liabilities were not included – Mr. Karmali now advises that a second mortgage has been taken out on the real property and amounts are owed to others including family and friends.

Issue

[39] The issue to be decided on this motion is whether a Mareva injunction should be continued.

Analysis

[40] As a comeback hearing on the original February 7, 2025, Order, the test for a Mareva injunction remains unchanged.

[41] The test for a Mareva injunction requires the plaintiff to establish (1) a strong prima facie case; (2) particulars of its claim against the Defendants, including the grounds of its claim and the amount, and fairly stating the points made against it by the Defendants; (3) grounds for believing that the Defendants have assets in Ontario; (4) grounds for believing that there is a risk of the Defendants’ assets being removed from Ontario, dissipated, or disposed of before a judgment or award is satisfied; and, (5) an undertaking as to damages; see Sibley & Associates LP v. Ross, 2011 ONSC 2951, para 11, citing Chitel v. Rothbart. The burden of proof rests on the Plaintiff to fully satisfy the court that these criteria are met. As a Mareva is an injunction, irreparable harm and the balance of convenience must also be considered.

Strong Prima Facie Case

[42] Mr. Nanji has filed a statement of claim against Mr. Karmali, AK&H and Mr. Karmali's father, Zaher Karmali seeking damages for breach of contract, breach of fiduciary duty, fraudulent misrepresentation, conversion, unjust enrichment, conspiracy, knowing assistance and knowing receipt.

[43] A cause of action in civil fraud (or fraudulent misrepresentation) is made out where four elements are established on a balance of probabilities: (1) a false representation by the defendants; (2) some level of knowledge of the falsehood of the representation on the part of the defendants (whether knowledge or recklessness); (3) reliance by the plaintiff on the false representation which caused the plaintiff to act; and (4) a resulting loss: see Hryniak v. Mauldin, 2014 SCC 7, para 87.

[44] In my February 7 Endorsement, I found that based on the affidavit evidence of Mr. Nanji, Mr. Karmali repeatedly lied to Mr. Nanji and misled him. At that time, I found Mr. Karmali's entire narrative relating to the business venture appeared to be a fabrication, and most significantly Mr. Karmali lied twice about the location of the warehouse (it does not appear to exist), misrepresented that he was in financial hardship when he was actually purchasing and renovating a home, and told Mr. Nanji that AK&H was a profitable going concern when it had failed to have filed annual returns since 2021 (leading to its dissolution). I also found that Mr. Nanji's evidence was that if not for Mr. Karmali’s misrepresentations and falsehoods, Mr. Nanji would not have advanced money to AK&H. Accordingly, I found that Mr. Nanji had established a strong prima facie case against Mr. Karmali and AK&H.

[45] Mr. Karmali takes issue with the finding of a strong prima facie case stating that there is now evidence before me that the entire business venture is not a fabrication – certain invoices showing some levels of legitimate business have been provided. The invoices and bank statements together do show some level of business activity, but they do not support the purchase and sale of the initial $7.5 million transaction or the later $15 million transaction that were specifically represented to Mr. Nanji. The three consignment invoices are not supported by purchase documents or bank account transactions to support the acquisition of the relevant goods. Nor was Mr. Nanji able to inspect the goods on consignment.

[46] Much of the back and forth between Mr. Karmali and Mr. Nanji occurred via WhatsApp messages. Many of the messages by Mr. Karmali do not appear to be truthful. As just one example, on November 4, 2022, Mr. Karmali, in respect of the $7.5 million transaction wrote to Mr. Karmali: “I mean truthfully I could do it all myself. No issues. I’d just need to sell some stock and pull from line and the house. I have over 5 liquid...”. Despite being asked to explain this statement on cross-examination no explanation as to what assets were available in November of 2022 was provided. Mr. Karmali did not own a house at that time. He produced no documentation to show he had over $5 million in liquid assets. The RBC U.S. Dollar account shows a balance at that time $1.02, and the RBC Canadian Dollar account shows a balance of $1,984.81.

[47] Mr. Karmali takes the position that the joint venture investment agreements contain entire agreement provisions and as such, none of the representations by Mr. Karmali regarding the $7.5 million purchase, the $15 million purchase, the warehouse, or anything else matters – only what is contained in the contract is relevant. As noted by the Ontario Court of Appeal in 10443204 Canada Inc. v. 2701835 Ontario Inc., 2022 ONCA 745, para 25, entire agreement clauses cannot be read as denying a remedy for fraudulent misrepresentation. Accordingly, I cannot accept Mr. Karmali’s submission that the entire agreement clause is determinative.

[48] Mr. Karmali also argues that Mr. Nanji accepted this was a high-risk investment (and that risk justified the potentially large returns). Fraudulent misrepresentations, however, stand outside of any potential business risk. Similarly, I do not find Mr. Karmali’s arguments that somehow Mr. Nanji’s experience level with investments, his lack of due diligence, or his potential drug use are relevant to a claim of fraudulent representation by Mr. Karmali.

[49] Finally, Mr. Karmali argues that the ‘fraudulent’ transactions alleged by Mr. Nanji include payment of amounts consistent with business practice and are bona fide in nature. To support this, Mr. Karmali submits that it is clear from Mr. Nanji’s own evidence that he expected Mr. Karmali to use certain of the funds he advanced to satisfy personal living expenses. It may be that Mr. Nanji advanced certain the funds when Mr. Karmali indicated he had no way of paying his mortgage (on a house that didn’t exist), insurance or other living expenses. However, that is not an answer to using funds advanced by Mr. Nanji to purchase a Porsche for over $300,000, make a downpayment on a home for over $400,000 or paying hundreds of thousands of dollars for renovations to the home. Contrary to Mr. Karmali’s submissions, these types of expenses are not ‘par for the course’.

[50] I also do not accept Mr. Karmali's submissions that because no forensic accountant expert report has been provided a prima facie case cannot be established at this stage. There are many situations where a forensic report may be helpful, however, it is not a requirement that one be provided.

[51] I remain of the view that Mr. Nanji has established a strong prima facie case for, at the very least, fraudulent misrepresentation.

Full Disclosure of the Case

[52] I am not persuaded that there was any material non-disclosure by Mr. Nanji in obtaining the February 7, 2025, Order.

[53] Mr. Nanji acknowledged in his initial material that the 'joint venture agreements' were not well drafted. However, Mr. Nanji's claim was not solely based on breach of contract, but importantly on fraudulent misrepresentation, unjust enrichment, and conversion as well.

Grounds for Believing the Defendants have Assets in Ontario

[54] The Mareva injunction is only against Mr. Karmali and AK&H. Mr. Karmali admits that he and AK&H have assets in Ontario although he claims the value of the assets in Ontario is nominal.

[55] Nothing has come to my attention that changes the analysis set out in the February 7, 2025, Endorsement in this regard.

Risk of Dissipation of Assets

[56] The risk of dissipation may be inferred by evidence suggestive of the defendants' fraudulent conduct (Sibley & Associates LP v. Ross, 2011 ONSC 2951, para 64). As in Sibley, here it is a reasonable inference given the evidence of Mr. Nanji referred to above, including the numerous misrepresentations and falsehoods of Mr. Karmali, that Mr. Karmali is likely to attempt other means to put money out of the reach of Mr. Nanji.

Undertaking

[57] Mr. Nanji has provided the required undertaking as to damages.

Irreparable Harm & Balance of Convenience

[58] An analysis of the irreparable harm and the balance of convenience is also required given the injunctive nature of the relief requested. Irreparable harm is harm which either cannot be quantified in monetary terms or which cannot be cured, usually because one party cannot collect damages from the other. RJR-MacDonald Inc. v. Canada (Attorney General), [1994] 1 SCR at 341.

[59] In cases where a strong prima facie case for fraud has been established, it has been recognized that if the assets of the defendant are not secured, the plaintiff will likely not be able to collect on a money judgment, if successful. In this case, Mr. Nanji has established irreparable harm by virtue of the nature of the alleged fraud and the conduct of Mr. Karmali.

[60] As well, where a strong prima facie case of fraud and irreparable harm have been demonstrated, as in this case, the balance of convenience favours granting the requested order.

[61] Mr. Karmali has indicated that the Mareva injunction was preventing the receipt of amounts by AK&H. However, he also says that difficulty (which was not based on the words of the Order) has now been worked out.

[62] Although Mr. Karmali claims ongoing prejudice to his business, no particulars of what the business actually is or what specifically is needed for the business to operate and funds to flow have been provided.

[63] The existing order provides that if Mr. Karmali’s or AK&H’s assets in Ontario exceed the sum of $3,060,000 USD, the defendants may deal with any assets over that value. The value of the alleged consignment inventory exceeds $10 million USD. Accordingly, I am not persuaded that AK&H would suffer material prejudice by either retaining $3,060,000 USD in Ontario or arranging for the payment into Court of such amount. On the defendant’s evidence, AK&H can continue to use the remaining value of the consignment inventory (approximately $7 million) in the ordinary course.

Disposition

[64] Accordingly, the Mareva injunction currently in place as embodied in the terms of the February 7, 2025, Order, as previously extended will remain in place at this time.

[65] The parties exchanged outlines of costs following the hearing. If the matter of costs cannot be agreed upon based upon this decision, Mr. Nanji may email a costs submission of no more than three double-spaced pages to the Commercial List office within 10 days of the date of this decision. The defendants may deliver responding submissions of no more than three double-spaced pages within 10 days following the delivery of the Mr. Nanji’s submissions. No reply submissions are to be delivered without leave. It would be helpful for the parties to address the appropriateness of an award of costs at this time, taking into account the interim nature of the Mareva injunction.

Jane Dietrich
Date: 2025-05-23