Court File and Parties

Court File No.: CV-24-00722934-00CL Date: 2025-08-29 Superior Court of Justice – Ontario (Commercial List)

Re: Crowe Soberman Inc., in its capacity as Proposal Trustee of Noir Property Management Ltd., Noir Property Management (Durham) Ltd., Noir Real Estate Inc., 2664566 Ontario Inc., 2689014 Ontario Inc., Noir Product Trading Ltd., Cora Boutique Design Inc. and Noir Design Consulting Inc., Applicants

And: Noir Property Management Ltd., Noir Property Management (Durham) Ltd., Noir Real Estate Inc., 2664566 Ontario Inc., 2689014 Ontario Inc., Noir Product Trading Ltd., Cora Boutique Design Inc., and Noir Design Consulting Inc., Respondents

Before: Justice J. Dietrich

Counsel:

Timothy R. Dunn, Alexandra Teodorescu, for the Applicants
Kyle Corbin, for the Respondents

Heard: August 11, 2025

Reasons for Decision

Introduction

[1] Jamal Newman seeks an order releasing funds to him in the amount of $449,881.87 (the "Holdback Funds") held by Crowe Soberman Inc. in its capacity as court-appointed interim-receiver (the "Interim Receiver") of Noir Property Management (Durham) Ltd. ("Noir Durham") and certain related companies (the "Noir Group").

[2] The Interim Receiver, by cross-motion, seeks an Order authorizing the release of the Holdback Funds to be added to the Proposal Fund as defined in the Amended Proposal filed under the Bankruptcy and Insolvency Act, R.S.C., 1985, c. B-3 ("BIA") for distribution among the creditors of the Noir Group in accordance with the priorities established therein.

[3] Mr. Newman claims the Holdback Funds on the basis that (i) he is a secured creditor of Noir Durham by way of a mortgage/charge he registered (the "Mortgage") on title to the property municipally known as 5321 Old Brock Road, Pickering, Ontario (the "Property"); and (ii) alternatively, that the Holdback Funds are held in trust for him by virtue of a constructive trust.

[4] It is undisputed that the Mortgage was discharged prior to the appointment of the Interim Receiver.

[5] The Interim Receiver disputes Mr. Newman's claims and seeks an order that the Mortgage constituted a fraudulent conveyance under the Fraudulent Conveyances Act, R.S.O. 1990, c. F.29 ("FCA") and an unjust preference under the Assignments and Preferences Act, R.S.O. 1990, c. A.33 ("APA") and should be set aside.

[6] For the reasons set out below, the motion of Mr. Newman is dismissed, and the motion of the Interim Receiver is granted.

[7] Defined terms not otherwise defined herein have the meaning provided to them in the factum of the Interim Receiver dated August 1, 2025.

Background

[8] The Noir Group is a group of related Ontario companies with their head office located in Pickering, Ontario. Edward Lu was the principal of the Noir Group. The Noir Group has operated in the construction management industry since approximately 2012.

[9] In or around 2015, the Noir Group adopted a business model whereby it entered into agreements with various lenders (the "Lenders") to obtain short-term, unsecured construction loans to fund renovation and/or construction costs at properties that were owned by the Noir Group or its clients.

[10] In or around 2021, the Noir Group further evolved its business model by entering into agreements with certain Lenders referred to as Corporate Strategic Partners ("CSPs"). These CSPs, in turn, entered into sub-agreements with third parties whom they identified as their group members ("Group Members").

The Original Loans by Mr. Newman

[11] Between January 17 and May 2, 2022, Mr. Newman advanced a total of $276,920 to the Noir Group through five separate loan agreements (collectively, the "Loan Agreements") with a CSP known as 10418943 Canada Inc. ("Tycoon"). Mr. Newman provided his funds to Tycoon, who then remitted the funds to the Noir Group.

[12] The details of the Loan Agreements are as follows:

(a) a loan in the principal amount of $55,000, advanced on January 17, 2022, bearing interest of 9.4%, and related to a construction project known as 662 Raglan Rd, with a term ending June 15, 2022;

(b) a loan in the principal amount of $35,690, advanced on April 4, 2022, bearing interest of 13%, and related to a construction project known as 10 Bushbury Dr, North York, with a term ending October 5, 2022;

(c) a loan in the principal amount of $40,990, advanced on May 2, 2022, bearing interest of 7.4%, and related to a construction project known as 791 Davis Dr, Uxbridge, with a term ending August 8, 2022;

(d) a loan in the principal amount of $61,330, advanced on May 2, 2022, bearing interest of 8.5%, and related to a construction project known as 662 Raglan Rd, with a term ending August 18, 2022; and

(e) a loan in the principal amount of $83,910, advanced on May 2, 2022, bearing interest of 16%, and related to a construction project known as 662 Raglan Rd, with a term ending January 1, 2023.

[13] At the time Mr. Newman made the advances pursuant to the Loan Agreements, the advances were unsecured, and the Loan Agreements do not contemplate any form of security for the advances.

The Noir Group's Financial Troubles

[14] The Noir Group's business operations were significantly and negatively impacted by the COVID-19 pandemic, which led to widespread supply chain disruptions, labour and staffing shortages, and construction delays. In addition, rising interest rates impaired the Noir Group's ability to complete projects and meet its loan repayment obligations, resulting in severe cash flow issues, including difficulty meeting payroll, rent, and mortgage payments.

[15] By mid-2022, the Noir Group had defaulted on several of its payment obligations, including loan agreements with one particular CSP, Gray Miles & Asante Investment Holdings Inc. ("GM&A") totaling over $3,000,000.

[16] Between late 2022 and early 2023, several of the Lenders, including CSPs and others, began threatening Mr. Lu with litigation and demanding repayment of their outstanding loans.

[17] The Interim Receiver is of the view that the Noir Group was insolvent by the end of 2022. Mr. Newman submits that he was not aware of the insolvency of the Noir Group at that time, relying on a corporate certificate and statutory declaration provided by Noir Durham in March of 2023 stating that no insolvency proceedings had been commenced against Noir Durham nor had any actions been commenced against Noir Durham or the Property. Although these documents may speak to a lack of formal proceedings, those documents do not speak the actual financial situation of Noir Durham or the Noir Group. Based on the record before me, I accept the Interim Receiver's analysis that the Noir Group was insolvent by the end of 2022.

The Mortgage

[18] On November 24, 2022, Mr. Lu sent a letter to Mr. Newman explaining that the Noir Group was experiencing financial difficulties and "treading unchartered waters." In the letter, Mr. Lu proposed a repayment date of no later than March 31, 2023, or the option for Mr. Newman to register security in respect of the advances under the Loan Agreements.

[19] On April 1, 2023, Mr. Lu sent a letter to the CSPs which again addressed the Noir Group's financial challenges and provided the option for Lenders with loans in the principal amount over $100,000 to register mortgage security on the condition that: (i) each Lender would be responsible for paying their own legal fees; and (ii) the Noir Group retained the right to determine which asset the collateral would be registered against. Based on the record before me, it is not clear when Mr. Newman became aware of the April 1, 2023, letter.

[20] From February to July 2023, Mr. Lu granted three charges over the Property and one charge over the property municipally known as 4956 Old Brock Road, Pickering ("4956 Old Brock") in favour of certain Lenders (collectively, the "Disputed Charges"):

(a) on February 15, 2023, a charge (the "Morningstar Mortgage") on the Property, in the amount of $250,000 was granted in favour of Shanicia Henry, Ryan Daley and Morningstar Printing Inc. ("Morningstar Claimants");

(b) on April 20, 2023, the Mortgage in favour of Mr. Newman was granted;

(c) on July 12, 2023, a charge (the "Black Mortgage") on the Property, in the amount of $47,000 was granted in favour of Ava Black ("Black"); and

(d) on May 5, 2023, a charge on 4956 Old Brock, in the amount of $180,000 was granted in favour of Shanicia Henry, Ryan Daley and Morningstar Printing Inc.

[21] In August and September 2023, the Noir Group granted similar charges to GM&A on three properties to further negotiations toward a settlement of the GM&A Action (collectively, the "GM&A Charges").

[22] Mr. Lu advised the Interim Receiver that he granted the Mortgage to Mr. Newman in an effort to dissuade him from commencing legal actions against the Noir Group. Mr. Newman does not dispute that at the time the Mortgage was granted, he did not advance any new funds.

[23] The Mortgage and the commitment underlying the Mortgage do not specify the applicable interest rate, repayment terms, or payment schedule, but both set a maturity date of April 30, 2023.

[24] The Mortgage in the principal amount of $314,257.07 was registered on title to the Property on April 20, 2023. Noir Durham defaulted under Mortgage on April 30, 2023, approximately ten days after the Mortgage was granted.

The Discharge of the Mortgage

[25] Starting in or about July 2023, some of the CSPs, Lenders and others commenced proceedings against the Noir Group seeking repayment of their loans (the "Creditors' Actions").

[26] On October 12, 2023, upon application by the Noir Group, Justice Akbarali issued an order (the "Akbarali Order") directing a reference (the "Reference") to an Associate Justice for various questions, including the consolidation of the Creditors' Actions.

[27] Prior to the issuance of the Reference and the Akbarali Order, the Noir Group had entered into agreements of purchase and sale to sell two properties – including the Property. A motion was scheduled before Associate Justice La Horey on December 8, 2023 (the "La Horey Hearing") to address the registrations on these two properties prior to their contemplated sales.

[28] However, on December 5, 2023, before the La Horey Hearing, GM&A and Tycoon delivered a Motion Record seeking a declaration that the Disputed Charges were invalid under the APA and/or the FCA. GM&A consented to the removal of the GM&A Charges in the context of its motion against the Disputed Charges.

[29] Associate Justice La Horey issued the Endorsement and Order dated December 8, 2023 (the "La Horey Order") directing the discharge of the Disputed Charges (including the Mortgage) upon the sale of the Property, and that the proceeds from the sale be held in trust by either the Court or Mr. Qasim Ali, the real estate solicitor acting for Noir Durham on the sale transaction, until the determination of validity and priority of the Disputed Charges.

[30] The Disputed Charges were subsequently discharged from title to the Property when the sale of the Property closed on April 8, 2024. However, the sale did not yield any net proceeds after paying off the encumbrances and the closing costs of the sale transaction.

[31] Mr. Newman takes the position that, but for the following payments (the "Impugned Payments") made by Noir Durham upon the sale of the Property, there would have been sufficient proceeds to pay the Disputed Charges:

(a) $300,000 paid for the purchaser's upgrades as per the agreement of purchase and sale;

(b) $200,000 paid to Pardeep Grewal in connection with a writ; and

[32] Despite his allegation that Noir Durham made the Impugned Payments in violation of La Horey Order, Mr. Newman acknowledged that the Court had not made any determination that the Impugned Payments were invalid. Mr. Newman has not started any claim against the recipients of the Impugned Payments and that matter is not before me.

The NOI Proceedings, the Interim Receiver, and the Holdback Funds

[33] On June 24, 2024, the Noir Group filed Notices of Intention (the "NOIs") to make a proposal under the BIA.

[34] By Justice Kimmel's Order dated July 24, 2024 (the "IR Order"), Crowe was appointed the Interim Receiver over all the assets, undertakings, and properties of the Noir Group under s. 47.1 of the BIA.

[35] On July 30, 2024, funds in the amount of $2,220,744.23 were transferred from the trust account of the Noir Group's lawyer to the Interim Receiver's trust account pursuant to the IR Order (the "Trust Funds"). These funds were derived from the sale of a separate property (not the Property) that closed in January 2024, prior to the filing of the NOIs and the issuance of the IR Order.

[36] On the application for the appointment of the Interim Receiver on July 24, 2024, counsel for Mr. Newman sought an Order to have the funds allegedly owed to Mr. Newman under the Mortgage (being $449,881.87) paid into Court. At that time, the Interim Receiver agreed to set aside the Holdback Funds from the Trust Funds until a further determination could be made regarding Mr. Newman's claims. However, the July 24, 2024, Order did not in itself provide Mr. Newman with any substantive claims to the Holdback Funds.

The Claims Process

[37] On October 10, 2024, the Court approved a Claims Procedure Order approving a claims process for determining all claims against the Noir Group and its directors and officers (the "Claims Process").

[38] Mr. Newman filed a Proof of Claim within the Claims Process, which was reviewed by the Interim Receiver. A Notice of Disallowance was issued on February 12, 2025, disallowing Mr. Newman's secured claim in respect of the Mortgage but admitting Mr. Newman's full claim of $314,257.07 as an unsecured claim.

[39] Similarly, the Morningstar Claimants and Black also filed claims in the Claims Process relating to their respective Disputed Charges. Their secured claims have also been disallowed by the Interim Receiver and the full amounts claimed were allowed on the unsecured basis.

The Noir Group Proposal

[40] An amended, consolidated Proposal (the "Amended Proposal") received the approval of the requisite double majority of the creditors at the creditors' meeting held on December 23, 2024. The Amended Proposal was approved by the Court on March 26, 2025.

[41] The Amended Proposal contemplates that the Noir Group would develop the properties it currently owns within 20 months of Court approval of the Amended Proposal, and sell each of the properties at a profit, with the net proceeds being distributed to the unsecured creditors with proven claims.

Issues

[42] The Issues to be decided on the two motions before me are whether:

(a) Mr. Newman continues to hold a security interest notwithstanding the discharge of the Mortgage;

(b) the registration of the Mortgage on title to the Property constitutes a fraudulent conveyance under the FCA;

(d) the Holdback Funds are impressed with a constructive trust in favour of Mr. Newman.

Analysis

Issue 1: Does Mr. Newman hold a secured interest notwithstanding the discharge of the Mortgage?

[43] Mr. Newman submits that his status as a secured creditor of the Noir Group remained unaltered following the discharge of the Mortgage by the La Horey Order because he claims that Noir Group deliberately and flagrantly breached the La Horey Order by making the Impugned Payments which were not contemplated by the La Horey Order.

[44] I do not agree. The discharge of the Mortgage extinguishes the security interest: see Land Titles Act, R.S.O. 1990, c L.5 at ss.102(1). The Property, over which the Mortgage was granted, is no longer owned by Noir Durham. There are also no proceeds of sale from the Property which continue to exist.

[45] If the Mortgage was fraudulently or unlawfully discharged, it may form the basis of a claim for unjust enrichment and a constructive trust (which is also claimed by Mr. Newman), however, the discharge of a mortgage, even if in error, discharges the security interest: see National Trust Company v. Newmaster, [2003] O.J. No. 3830, at paras. 9, 14-16.

[46] Here, the Mortgage was discharged as contemplated by the La Horey Order. Mr. Newman may have claims that the Mortgage was discharged based on false representations of the Noir Group, however, that does not reinstate or continue the Mortgage.

[47] Accordingly, I am not persuaded that Mr. Newman has a secured claim as against Noir Durham.

Issue 2: Was the registration of the Mortgage a Fraudulent Conveyance under the FCA?

[48] Sections 2, 3 and 7(2) of the FCA provide:

Every conveyance of real property or personal property and every bond, suit, judgment and execution heretofore or hereafter made with intent to defeat, hinder, delay or defraud creditors or others of their just and lawful actions, suits, debts, accounts, damages, penalties or forfeitures are void as against such persons and their assigns.

Section 2 does not apply to an estate or interest in real property or personal property conveyed upon good consideration and in good faith to a person not having at the time of the conveyance to the person notice or knowledge of the intent set forth in that section.

(2) No lawful mortgage made in good faith, and without fraud or covin, and upon good consideration shall be impeached or impaired by force of this Act, but it has the like force and effect as if this Act had not been passed.

[49] The Ontario Court of Appeal has emphasized the remedial nature of the FCA, stating that it should be given a fair, large, and liberal interpretation that best achieves its purpose. Namely, to strike down all conveyances of property made with the intention of delaying, hindering, or defrauding creditors and others except for conveyances made for good consideration and bona fide to persons not having notice of such fraud see: Stevens v. Hutchens, 2022 ONCA 771, 3 C.B.R. (7th) 312, at para. 18.

[50] It is not necessary that the Interim Receiver be able to identify a particular creditor that the Noir Group sought to defeat at the time of the conveyance to plead a fraudulent conveyance under the FCA. It is enough to plead facts that support the allegation that, at the time of the conveyance, the Noir Group perceived a risk of claims from a general class of future creditors and conveyed the property with the intention of defeating such creditors should they arise. The types of facts that can support an inference of such an intention to convey property away from creditors – present or future – are often described as "badges of fraud" see: Ontario (Securities Commission) v. Camerlengo Holdings Inc., 2023 ONCA 93, 478 D.L.R. (4th) 185, at para. 11.

[51] The badges of fraud noted at para. 12 of Camerlengo include:

(a) the debtor's financial state at the time of the transaction was precarious, including deficiencies in income, assets, solvency, and an inability to pay debts;

(b) the existence of a family or close relationship between the parties to the transaction;

(d) the transfer had the effect of defeating, hindering, delaying, or defrauding creditors;

(e) there was evidence of haste in making the transaction;

(f) there was evidence of secrecy, fabrication, falsehood, destruction or loss of documents, or suspicious circumstances in the making of the transaction;

(g) the transaction occurred near in time to notice of debts or claims against the debtor;

(h) the consideration for the transfer did not correspond to the value of the property;

(i) the absence of a business purpose or other justification for the transaction;

(j) the transferor retained possession or use of the property;

(k) the transferor retained a benefit or an ownership interest in the property.

[52] Proof of one or more badges of fraud does not compel a finding of a fraudulent conveyance, however, it may raise a prima facie case which it would be prudent for the defendant to rebut: see Camerlengo at para. 13 and Indcondo v. Sloan, 2014 ONSC 4018, 121 O.R. (3d) 160, at para. 53.

[53] Here, several badges of fraud are present with respect to the granting of the Mortgage to Mr. Newman. At the time of registering the Mortgage, Noir Durham was already insolvent or on the eve of insolvency. The Mortgage had the effect of granting Mr. Newman a preferential position over other unsecured creditors, despite Mr. Newman belonging to the same class of creditors. The Noir Group had offered collateral security only to Lenders with loans over $100,000, thereby offering preferential treatment to larger unsecured creditors over other Lenders that were otherwise in the same position. The Mortgage was registered at a time when Noir Durham was aware of, and anticipated, potential legal proceedings by various creditors of the Noir Group. Finally, the Mortgage was registered without fresh and valid consideration – this is especially evident considering the Mortgage matured just 10 days after it was registered.

[54] I am satisfied that sufficient badges of fraud are present to presume the Mortgage was made with the intention to defeat the unsecured creditors of Noir Durham and the Noir Group.

[55] The question then becomes, is the Mortgage saved under the exceptions set out in ss. 3 and 7 of the FCA (i.e. was the Mortgage made in good faith and upon good consideration).

[56] The Interim Receiver argues that Mr. Newman had knowledge of the existence of other Lenders to the Noir Group as set out in the November 2022 correspondence from the Noir Group and in various discussions Mr. Newman had with Tycoon, a CSP he invested with/in originally.

[57] Mr. Newman alleges that he did not receive the April 1, 2023, correspondence from Noir Group until after the Mortgage was registered. Although the April 1, 2023, correspondence provides additional information, it is consistent with the message provided in the November 2022 correspondence, which Mr. Newman admits he received. Further on cross examination, Mr. Newman admitted that he was aware of other creditors and that he understood the Mortgage would provide him with the priority of a secured creditor – a status he did not originally hold. As such, I am not persuaded that the Mortgage was made in good faith and that Mr. Newman did not know of Noir Durham and the Noir Group's fraudulent intent to defeat other creditors. Like in Stevens v. Hutchens at para. 23, this finding is rooted in Mr. Newman's evidence that he understood the Mortgage would get him a priority over other unsecured creditors, among other factors.

[58] Having found the Mortgage was not made in good faith, it is not necessary to consider whether good consideration was provided. I note that it may be that forbearance from enforcement amounts to good consideration in certain circumstances, however, given the Mortgage matured just 10 days after it was registered and no fresh funds were advanced in connection with the granting of the Mortgage, I am not persuaded that good consideration was advanced in these circumstances such as to satisfy the exceptions set out in ss. 3 and 7 of the FCA.

[59] Accordingly, I am satisfied that the Mortgage should be set aside as requested by the Interim Receiver under the FCA.

Issue 3: Was the registration of the Mortgage a Preference under the APA?

[60] Sections 4(1), 4(2) of the APA are the relevant sections for determining whether the Mortgage constitutes a preference under the APA:

4(1) Subject to section 5, every gift, conveyance, assignment or transfer, delivery over or payment of goods, chattels or effects, or of bills, bonds, notes or securities, or of shares, dividends, premiums or bonus in any bank, company or corporation, or of any other property, real or personal, made by a person when insolvent or unable to pay the person's debts in full or when the person knows that he, she or it is on the eve of insolvency, with intent to defeat, hinder, delay or prejudice creditors, or any one or more of them, is void as against the creditor or creditors injured, delayed or prejudiced.

4(2) Subject to section 5, every such gift, conveyance, assignment or transfer, delivery over or payment made by a person being at the time in insolvent circumstances, or unable to pay his, her or its debts in full, or knowing himself, herself or itself to be on the eve of insolvency, to or for a creditor with the intent to give such creditor an unjust preference over other creditors or over any one or more of them is void as against the creditor or creditors injured, delayed, prejudiced or postponed.

[61] The test for a preference under the APA requires the moving party to show that: (i) the security was granted when the debtor was insolvent, or unable to pay debts in full, or knew it was insolvent, or on the eve of insolvency; and (ii) the debtor intended to defeat, hinder, delay or prejudice creditors: see Harry Snoek Limited Partnership (Re), 2011 ONSC 6667, 85 C.B.R. (5th) 128, at para. 34, affirmed in Harry Snoek Limited Partnership (Re), 2012 ONCA 765, 5 C.B.R. (6th) 140.

[62] If this burden is met by the Interim Receiver, then the onus shifts to the responding party to show (i) the security was granted for a present actual advance of money under s. 5(1) of the APA; or (ii) the security was granted for a pre-existing debt and the responding party made an advance in money to the debtor in the belief that the advance would enable the debtor to continue its business and pay its debts in full under ss. 5(5)(d) of the APA: see Harry Snoek at para. 35. In the present case, counsel to Mr. Newman confirmed during submissions that Mr. Newman does not rely on the saving provisions set out in ss. 5(1) or 5(5)(d), as no present actual advance of money was provided when the Mortgage was granted.

[63] As noted above, the Noir Group, including Noir Durham, was insolvent prior the granting of the Mortgage.

[64] As for intent, Mr. Newman argues that under s. 4(2) of the APA, the Noir Group must have intended to prefer Mr. Newman as a creditor over others, and Mr. Newman must also have intended to receive a preference over other creditors: see Krates v. Crate, 2018 ONSC 2399, 59 C.B.R. (6th) 208 at para. 28.

[65] In Krates v. Crate, the recipient of the mortgage in question was a law firm and the Court found the intention was not to prefer the law firm over other creditors, but to secure continuing legal representation: see Krates v. Crate, at paras. 36 and 37.

[66] However, in the present case, I am not persuaded that Mr. Newman, or the Noir Group had an intent other than to prefer Mr. Newman over other creditors. Rather, the facts before me are in large part consistent with those in Harry Snoek at paras. 27-42. The Mortgage was granted by Noir Durham when it was insolvent and unable to pay its debts in full, and when Noir Durham had knowledge of its insolvency. Similar to the Court's finding Harry Snoek, the Noir Group and Noir Durham's decision to disregard the demands of other creditors can only be seen as an intention to prefer certain creditors over others who were similarly situated and applying equal pressure for repayment.

[67] Accordingly, I am satisfied that the granting of the Mortgage was a preference under s. 4 of the APA.

Issue 4: Are the Holdback Funds impressed with a Constructive Trust in favour of Mr. Newman?

[68] The court may impose a constructive trust as a remedy in a case of unjust enrichment. To do so, three elements must be present: (1) the enrichment of the defendant; (2) the corresponding deprivation of the plaintiff; and (3) the absence of a juristic reason for the enrichment: see Soulos v. Korkontzilas, [1997] 2 S.C.R. 217.

[69] Mr. Newman submits that the Impugned Payments enriched the Noir Group and its unsecured creditors because they received the funds in Breach of the rules of priorities – in that the Mortgage had priority over the unsecured creditors.

[70] I am not persuaded by Mr. Newman's submission for two reasons.

[71] First, having found that the Mortgage is to be set aside under the FCA and APA, I am not persuaded that the elements of unjust enrichment have been satisfied – without the Mortgage, there is no legal basis for Mr. Newman to claim deprivation.

[72] Second, for a Court to order a constructive trust remedy in a bankruptcy case, there must be a close and causal connection between the property over which the party seeks the constructive trust, and the misappropriated trust property: see Kingsett Mortgage Corp et al v. Stateview Homes et al., 2023 ONSC 2636, 11 C.B.R. (7th) 165 at para. 76.

[73] Mr. Newman claims that the funds he advanced are directly traceable to the Property over which he was granted a Mortgage. He relies on a letter dated May 19, 2023, from Mr. Lu which indicated that the funds Mr. Newman originally advanced in 2022 were 'to complete a residential rebuild' of the Property. I do not find this argument persuasive. Mr. Lu did not provide his letter in connection with the original loans made by Mr. Newman, and it is not clear to whom he addressed the letter. However, even if I accept that the funds Mr. Newman advanced were used to rebuild the Property, the Holdback Funds are not proceeds of the Property. Rather, the Holdback Funds are proceeds of sale of separate property known as 0 Donald Cousens Parkway which was owned by a member of the Noir Group known as Noir Terrace (not Noir Durham). Accordingly, Mr. Newman not only seeks a constructive trust over proceeds of a different property – but of a property owned by a different corporate entity. I am not persuaded that such a constructive trust should be ordered in the circumstances. This lack of traceability distinguishes the present case from the case Mr. Newman relied on, Credifinance Securities Limited v. DSLC Capital Corp., 2011 ONCA 160, 277 O.A.C. 377.

[74] Accordingly, I dismiss Mr. Newman's request for a declaration that the Holdback Funds are subject to a constructive trust in his favour.

Disposition

[75] For the reasons set out above, Mr. Newman's motion is dismissed, and the Interim Receiver's motion is granted.

[76] If the parties are not able to resolve costs of this matter, the Interim Receiver may email costs submissions of no more than three double-spaced pages to the Commercial List office within 15 days of the date of this endorsement. Mr. Newman may deliver responding submissions of no more than three double-spaced pages within 15 days following the delivery of the Interim Receiver's submissions. No reply submissions are to be delivered without leave.

The Honourable Justice J. Dietrich

Date: August 29, 2025

Crowe Soberman Inc. v. Noir Property Management Ltd., 2025 ONSC 4954

Case Summary