Court File and Parties
Court File No.: CV-25-00001003-0000 Date: 2025-07-29 Ontario Superior Court of Justice
Between:
Zhiyuan Xiao, Yupei Wang, and 1000715652 Ontario Inc., Plaintiffs
– and –
Qiang He, Defendant
Counsel:
- Ran He, for the Plaintiffs
- Rebecca Huang, for the Defendant
Heard: June 27, 2025
Reasons for Decision
Justice R.E. Charney
Introduction
[1] The Plaintiffs bring this motion for an Order extending the Mareva injunction issued on an ex parte basis by Lack J. on April 23, 2025. The Defendant brings a cross-motion to discharge the Mareva injunction.
[2] Pursuant to Rule 40.02(1) of the Rules of Civil Procedure, the injunction was scheduled to return for a review on May 14, 2025, after notice was given to the defendant, in order to consider the merits of the motion with the benefit of evidence and argument from both sides. For reasons not relevant to my analysis, the return of the motion was adjourned until June 27, 2025.
[3] The April 23, 2025 Order was amended on consent on May 14, 2025 and again on May 28, 2025.
[4] The May 14, 2025 Amended Order varied the April 23, 2025 Order by granting the Defendant access to $5,000 per month from his bank account for his and his family's living expenses, plus access to his and his family's bank account to pay his mortgages, plus access to his and his family's bank accounts for normal business activities, including the operation of his restaurant business. The Amended Order also granted the Defendant access to his and his family's bank account for up to $120,000 for legal expenses.
[5] Finally, the Defendant was granted leave to arrange for refinancing of his mortgages on two properties as follows:
a. The Defendant is allowed to arrange for refinancing of the mortgages on 119 Oxford Street, Toronto and access a total amount of $2,950,000, with the balance (if any) be remitted to Weintraub Huang LLP [the Defendant's lawyer] in trust, to be held in trust prior to the hearing of the motions and subject to orders of the court;
b. The Defendant is allowed to arrange for refinancing of the mortgages on 437 Bathurst Street, Toronto and access a total amount of $1,200,000, with the balance (if any) be remitted to Weintraub Huang LLP in trust, to be held in trust prior to the hearing of the motions and subject to orders of the court.
[6] The Plaintiffs became aware that the Defendant sought to borrow these funds as a result of the Mareva injunction and Norwich order granted by Lack J. on April 23, 2025.
[7] The May 28, 2025 Amended Order unfroze and removed any restrictions from four of the Defendant's bank accounts.
[8] As I understand the effect of these amendments, the Mareva injunction has been effectively removed except for approximately $500,000 "surplus funds" borrowed by the Defendant when refinancing the Oxford Street and Bathurst Street properties as per the May 14, 2025 amendment. This "balance" is held in trust by the Defendant's lawyer as per that Order.
[9] Finally, following the parties' appearance before me on June 27, 2025, the parties consented to a third amendment to the Order on July 3, 2025, authorizing the release of $50,000 from the funds held in trust by the Defendant's lawyer to pay the invoices of the Defendant's lawyer.
Facts
[10] The Plaintiffs, Zhiyuan Xiao ("Xiao") and Yupei Wang ("Wang") reside in the City of Markham. Wang is the sole shareholder and, until August 2024, the director of the corporate Defendant, 1000715652 Ontario Inc. ("652 Inc.").
[11] Xiao alleges that the Defendant represented to him that he was engaged in the business of private currency exchange between Chinese currency (RMB) and Canadian Dollars. Relying on this representation, Xiao transferred a total of RMB 9,983,309 (equivalent to CAD $1,862,557.65), to the Defendant's designated bank account in China between April 10 and April 14, 2024.
[12] However, contrary to the agreement, the Defendant did not remit the corresponding Canadian Dollars to the Plaintiffs. Instead, the Defendant proposed to the Plaintiffs that he would "borrow" the funds and repay it later.
[13] Xiao negotiated with the Defendant and the Defendant signed a Borrowing Commitment Letter on May 15, 2024. In this letter, the Defendant acknowledged his indebtedness in the amount of CAD$1,362,557.65 and agreed to repay the funds to the Plaintiffs by May 30, 2024. The Defendant also agreed to be responsible for all costs, interest, and refinancing expenses incurred due to his failure to fulfill the original agreement. Each of the Plaintiffs is referenced in this Borrowing Commitment Letter.
[14] The Plaintiffs allege that the Defendant breached the May 15, 2024 commitment and has only repaid a total of $544,000 (i.e., $500,000 on May 10, 2024 and $44,000 on June 6, 2024). The outstanding balance in the amount of $1,318,557.65 remains outstanding.
[15] As a result of the Defendant's default and nonpayment, the Plaintiffs were forced to refinance a vendor take-back mortgage (VTB) twice and incurred a total cost of at least $451,898.23 in lender's fees, brokerage fees, legal fees, and interest.
[16] On August 6, 2024, the Defendant executed a second Borrowing Commitment Letter, acknowledging his default and agreeing to cover all costs and interest associated with the refinancing of the VTB. In this letter, the Defendant acknowledged total indebtedness of approximately $1.8 million, comprising the Outstanding Funds, accrued interest, and refinancing costs (collectively, the "Unreturned Funds").
[17] On August 12, 2024, the parties executed a Forbearance Agreement under which the Defendant confirmed his total unreturned Funds to the Plaintiffs as $1,800,000 and agreed to repay by February 17, 2025. He further agreed to secure the indebtedness against three properties he owned: two in Toronto and one in Markham.
[18] When the parties signed the Forbearance Agreement, the Plaintiffs conducted a preliminary due diligence and confirmed that each of the Properties is registered under the name "Qiang He."
[19] After the parties executed the Forbearance Agreement, the Defendant began a pattern of persistent delay in registering the Agreement against the Properties. While the Plaintiffs initially regarded this as a mere stalling tactic, they later discovered that the Defendant's refusal to cooperate in the registration process was intended to conceal the fact that the Markham property was not owned by the Defendant, but by another unrelated person with the same name. The Plaintiffs allege that the Defendant deliberately and fraudulently misrepresented it as his own for the purpose of offering collateral to induce the Plaintiffs into entering into the Forbearance Agreement. The Defendant's equity in the two Toronto properties is not sufficient to cover the amount borrowed.
[20] The Defendant denies that he ever offered the properties as collateral, and denies that he ever claimed to own the Markham property.
Mareva Injunction
[21] A Mareva injunction freezes a defendant's assets pending the court's determination of a proceeding where there is a genuine risk that a defendant will remove property or dissipate assets prior to trial in order to avoid judgment. To support a Mareva injunction, a plaintiff must show a strong prima facie case, a real risk of dissipation of assets, and a balance of convenience favouring the plaintiff.
[22] The test for granting a Mareva injunction was summarized by Perell J. in O2 Electronics Inc. v. Sualim, 2014 ONSC 5050, at para. 67:
Because procedural law disfavours pre-judgment execution, to obtain a Mareva injunction, a plaintiff must satisfy the normal criteria for an injunction and also several additional criteria. For a Mareva injunction, the moving party must establish: (1) a strong prima facie case; (2) that the defendant has assets in the jurisdiction; and (3) that there is a serious risk that the defendant will remove property or dissipate assets before the judgment. A Mareva injunction should be issued only if it is shown that the defendant's purpose is to remove his or her assets from the jurisdiction to avoid judgment. The moving party must also establish that he or she would suffer irreparable harm if the injunction were not granted and that the balance of convenience favours granting the injunction. Absent unusual circumstances, the plaintiff must provide the undertaking as to damages normally required for any interlocutory injunction.
[23] A strong prima facie case is one in which there is "a substantial likelihood of success in the action that justifies extraordinary relief at the very commencement of the proceeding" (See: Factor Gas Liquids Inc. v. Jean, 2010 ONSC 2454, 264 O.A.C. 46 (Div. Ct.), at para 42). It is not enough to establish that the case will succeed on a balance of probabilities; the plaintiff must establish that he or she is "clearly right and almost certain to be successful at trial" (Barton-Reid Canada Ltd. v. Alfresh Beverages Canada Corp., at para. 9; Accreditation Canada International v. Guerra, 2016 ONSC 3595, at para. 41; Mondee, Inc. v. Voyzant Inc., 2025 ONSC 2226, at para. 53).
[24] Rule 39.01(6) of the Rules of Civil Procedure imposes "full and fair disclosure" obligations on a party that brings a motion without notice. The rule provides:
Where a motion or application is made without notice, the moving party or applicant shall make full and fair disclosure of all material facts, and failure to do so is in itself sufficient ground for setting aside any order obtained on the motion or application.
[25] In R. A. Fox v. R.S. Fox, 2014 ONSC 1135, the Divisional Court outlined the reason for Rule 39.01(6), at paras. 11-13:
The reason for requiring such disclosure is based on the recognition that the judicial officer hearing a motion has only the moving party or their counsel before him. There is usually no opponent present who can file opposing evidence and make opposing submissions. Accordingly, there is a heavy burden on a moving party to tender evidence that he might prefer not to tender so the judicial officer can obtain a reasonably balanced view of those facts that might reasonably affect the outcome of the motion.
[26] That said, the duty of full and fair disclosure recognizes that ex parte motions prepared on an urgent basis may suffer from imperfections that should not necessarily defeat the continuation of the injunction. In Boal v. International Capital Management Inc., 2018 ONSC 2275, Perell J. summarized the factors to be considered, at para. 62:
The court has some discretion and may continue the interlocutory injunction if the undisclosed facts were not material or the non-disclosure was not intentional. In exercising its discretion to continue the injunction in circumstances of non-disclosure, the court should consider: (a) the practical realities that there is often urgency or an emergency that explains why the motion is made without notice; (b) whether facts were intentionally suppressed or whether simple carelessness or ignorance was the cause of the non-disclosure; (c) the pervasiveness of the non-disclosure; (d) the difficulty of determining what is a material or an immaterial non-disclosure; and (e) the significance to the outcome of the motion of the matters that were not disclosed to the court.
[27] In the present case, counsel for the Defendant argued that the Plaintiffs failed to make full and fair disclosure of all material facts, and the Mareva injunction should be set aside on that ground alone. As I will discuss below, it is my view that the Plaintiffs' material did fairly disclose all the material facts and the non-disclosure or errors made by the Plaintiffs were not material to the outcome of the motion.
[28] The Rules require a full review of the original ex parte order because this is the first opportunity the court has to hear the other side. As Mesber J. stated in Promo-Ad v. Keller, 2013 ONSC 1633, at para. 55:
Another issue is the general role of the judge reviewing the original order, but with the benefit of a full evidentiary record from all parties. Ordinarily, the court would be bound by a prior decision of a judge of the same court. Since, however, the original orders were made without notice, the court reviewing the ex parte order must hear the matter de novo.
Analysis
[29] The Plaintiffs allege that the Defendant has engaged in a pattern of fraudulent actions for the purpose of defrauding the Plaintiffs and misappropriating their money. At the beginning, the Defendant misrepresented to the Plaintiffs that he could do a currency exchange. After the Plaintiffs paid him funds in Chinese currency equivalent to more than $1.8 million Canadian Dollars, the Defendant refused to remit Canadian Dollars in Canada and forced the Plaintiffs to convert the money exchange into a loan, which caused significant damages to the Plaintiffs as they required the funds in Canada to pay off a commercial mortgage.
[30] The alleged fraud continued when the Defendant tried to induce the Plaintiffs into a Forbearance Agreement for the purpose of extending the loan by offering to secure the $1.8 million debt with three properties under his name, but refused to close the transaction and register the charge. The Plaintiffs subsequently found that the most valuable collateral offered by the Defendant to secure the debt - the Markham Property - was a house owned by a different and unrelated person with the same name.
[31] The evidence adduced by the Plaintiffs in this motion shows that the Defendant acknowledged his obligation to repay the Plaintiffs and executed multiple agreements confirming his commitment to repay the debt.
[32] Based on the evidence provided by the Plaintiffs at the original ex parte motion, Lack J. held that the Plaintiffs met each of the criteria for obtaining a Mareva injunction: (1) a strong prima facie case; (2) that the Defendant has assets in the jurisdiction; and (3) that there is a serious risk that the Defendant will remove property or dissipate assets before the judgment.
[33] With respect to the third criteria, the Plaintiffs' allegation that there is a serious risk that the Defendant will remove property or dissipate assets before the judgment is based primarily on the allegation that the Defendant has engaged in a pattern of deceitful and fraudulent actions.
[34] In the case of Sibley & Associates LP v. Ross, 2011 ONSC 2951, Strathy J. (as he then was) reviewed the cases related to interim Mareva injunctions and allegations of fraud. He stated (at paras. 62–63):
[T]he law has sought to draw a fair balance between leaving the plaintiff with a "paper judgment" and the entitlement of the defendant to deal with his or her property until judgment has issued after a trial. In my respectful view, a plaintiff with a strong prima facie case of fraud should be in no more favoured position than, say, a plaintiff with a claim for libel, battery or spousal support. On the other hand, there may be circumstances of a particular fraud that give rise to a reasonable inference that the perpetrator will attempt to perfect the deception by making it impossible for the plaintiff to trace or recover the embezzled property. To this extent, it seems to me that cases of fraud may merit the special treatment they have received in the case law.
Rather than carve out an "exception" for fraud, however, it seems to me that in cases of fraud, as in any case, the Mareva requirement that there be risk of removal or dissipation can be established by inference, as opposed to direct evidence, and that inference can arise from the circumstances of the fraud itself, taken in the context of all the surrounding circumstances. It is not necessary to show that the defendant has bought an air ticket to Switzerland, has sold his house and has cleared out his bank accounts. It should be sufficient to show that all the circumstances, including the circumstances of the fraud itself, demonstrate a serious risk that the defendant will attempt to dissipate assets or put them beyond the reach of the plaintiff.
[35] In the present case, I am prepared to find that the Defendant's pattern of fraudulent actions does give rise to an inference that there is a serious risk that the Defendant will dissipate assets if the Mareva injunction (in its present form) is lifted. This is supported by the Defendant's efforts to borrow approximately $500,000 more than needed when he refinanced the two Toronto properties. The May 14, 2025 Amending Order requires that this additional money remain in the Defendant's lawyer's trust account. There is no indication in the Defendant's material as to why these additional funds were borrowed, or why they are needed at this time.
Defendant's Position
[36] The Defendant alleges that the Plaintiffs failed to disclose material facts.
[37] The Defendant argues that the Plaintiff's affidavit misrepresented the date Xiao first met the Defendant. I agree with the Plaintiff that this was an inadvertent error in the background narrative. Whether they first met in 2019 or 2024 was not material to the underlying allegations in the Plaintiffs' claim or the Defendant's repeated acknowledgments of debt. It does not affect any of the material facts that gave rise to the Mareva injunction.
[38] The Defendant asserts that the Plaintiff, Xiao, was not a party to the loan documents, because the Chinese name on the Chinese loan documents was the Plaintiff's younger brother. The Defendant asserts that the English pronunciation of the two brothers' names is the same, but the two names are represented by two different Chinese characters, and the brother's name appears in the Chinese version of the agreements.
[39] The Plaintiff explained that the Chinese name of Xiao's younger brother was put on these documents by mistake. Both brothers have the English name "Zhiyuan Xiao". There is no dispute that the Defendant signed the documents in favour of the Plaintiff, Xiao, and continued to treat him as the lender throughout the relevant period. The Defendant did not meet or know Xiao's younger brother and did not have any legal relationship with him. There is no suggestion that the Defendant ever thought he was dealing with the Plaintiff's younger brother.
[40] This naming error was not known to the Plaintiffs when the original Mareva injunction motion was brought, and I am satisfied that the naming error on the Chinese version of the agreements is immaterial to the underlying action. There is no real dispute that the Plaintiff, Zhiyuan Xiao, was the party to the agreements and that his younger brother had nothing to do with and was not a party to the agreements.
[41] The Defendant also argues that the Plaintiffs failed to disclose certain family law proceedings between Mr. Xiao and his former spouse. These proceedings were settled before the original Mareva injunction motion was brought, and are, in any event, immaterial to the action between the Plaintiffs and the Defendant. The absence of reference to that proceeding does not amount to a breach of duty of full, fair, and frank disclosure.
[42] The Defendant's affidavit in support of his position asserts that the Plaintiff used the services of a third party – Xujun Zhang – to transfer funds from China to Canada. Zhang "disappeared" and failed to return the funds. The Defendant asserts that he did not receive any of the funds, either directly or indirectly. His only involvement was to introduce Mr. Xiao to Zhang.
[43] That said, the Defendant acknowledges signing the Borrowing Commitment Letter of May 15, 2024. He does not recall or understand why he signed it, but "believes" that he did so because he "felt guilty" since he is the person who introduced Xiao to Zhang, and was under "great pressure" from Xiao to sign. He "never thought that signing it would have serious legal consequences".
[44] The Defendant does not recognize any of the other documents relied on by the Plaintiffs, and denies that he would have offered to mortgage any properties as collateral. He also denies ever representing to the Plaintiff that he owned the Markham property.
Conclusion
[45] Even if I accept the Defendant's assertions, the Plaintiffs have presented a strong prima facie case based on the loan documents signed by the Defendant.
[46] I am satisfied that the balance of convenience still favours the Plaintiffs in this case. As indicated, most of the broad terms of the Mareva injunction has been amended, and what remains appears to be the requirement that the surplus funds borrowed after the Mareva injunction was initially granted remain in the Defendant's lawyer's trust account. The Defendant has not provided any explanation for why he borrowed these surplus funds or how the retention of these funds in his lawyer's trust account prejudices him.
[47] Accordingly, the Plaintiffs' motion for an Order extending the Mareva injunction (in its current amended form) is granted, and the Defendant's cross-motion to discharge the Mareva injunction is dismissed.
[48] If the parties are not able to agree on costs, the Plaintiffs may deliver costs submissions of no more than 3 pages, plus costs outline and any offers to settle, within 30 days of the release of this decision, and the Defendant may deliver costs submissions on the same terms within a further 20 days.
Justice R.E. Charney
Released: July 29, 2025