Fraud continues to be the big factor in granting (and continuing Mareva injunctions). Fraud needs to be pleaded.
The Ontario Superior Court in Trade Capital Finance Corp. v. Cook, [2019] O.J. No. 4924 continued a four-year continuing Mareva against the various defendants. According to the numerous motion judges who have spoken on this, there is sufficient evidence that the defendants were involved in a complex fraud. So the Mareva injunction continues notwithstanding the whining of the defendants.
Trade Capital, a respectable receivables-financing company, was run by Peter William Cook. Cook pleaded guilty to fraud and is serving a penitentiary sentence (para. 4).
When your employer is a receivables-finance company, what better way to rob your employer than to extend finance, on behalf of your employer (Trade Capital), to phony borrowers, with phony trade payables.
Company A buys goods from producer X, producer Y and producer Z, in the ordinary course. Merchants never pay cash upon delivery. An invoice is sent from X, Y and Z, to A, usually within 30 days of delivery.
As such, Company A has three ‘trade-payables’. Company A has three invoices in hand. Often Company A goes to a bank, or in this case Trade Capital Finance Corp. and asks for a line of credit to pay off these trade-payables, pending sale revenue from selling products X, Y and Z.
The fraud occurs where company A never received any product from X, Y or Z. But fake invoices are produced on a computer and presented to Trade Capital Finance Corp. so that Company A can use the line of credit to pay out to X, Y and Z.
The fraud in the Trade Capital case was even more involved. Once fake company X, Y and Z got their trade-payable cheques from Trade Capital they all rushed over to The Cash House (owned and operated by Carlo Vincent de Maria), who obligingly cashed the cheques.
Always best to avoid actual banks when you are a fake company issuing fake invoices. The Cash House is the way to go.
Carlo Vincent de Maria under the guise of The Cash House, duly negotiated the cheques. sent them back to the Trade Capital bank for payment, received payment and presto! Those monies were instantly funneled out of the Cash House into 1160376 Ontario Limited, being Carlo’s little personal piggy bank.
Nevertheless Carlo thought he would take a run a getting the Mareva injunction set aside. Penny J. assessed the test for setting aside a Mareva:
The Motion to Set Aside the Mareva Injunction
12 The Mareva order in issue was granted by Mr. Justice Ricchetti on an ex parte basis on May 6, 2015. A motion to set aside the Mareva order was heard on a full record and subsequently dismissed by Ricchetti J. in an Endorsement of June 10, 2015. A further motion to vary the Mareva order was brought by the Defendants and The Cash House in December 2015. This too was dismissed by Ricchetti J. in an Endorsement of December 11, 2015. No appeals were taken from these decisions.
13 The parties agree that the test on a motion to vacate a Mareva order is set out in the case of Jack Digital Productions Inc. v. Comex Foreign Exchange Inc., [2007] O.J. No. 3994 (Ont. S.C.J.), where the Court considered several factors including:
(a)whether there has been inordinate delay in advancing the claim;
(b)harm to the defendant;
(c)whether the present facts are substantially different from the facts upon which the original order was given; and
(d) the balance of convenience.
14 A plaintiff who obtains a Mareva order is required to advance the case expeditiously to trial. As Justice Sharpe wrote in Injunctions and Specific Performance (Toronto: Thomson Reuter, 2017) at para. 2.940:
It has been said that a plaintiff who obtains a Mareva order is obliged to proceed as rapidly as possible with the action so that, if the defendant does succeed, the disadvantage will be minimized.
15 Justice Himel also wrote in Jack Digital, however, that a motion to reopen, vary or dissolve a Mareva order is itself a request for extraordinary relief, the burden of proof of which is on the moving party.
Conclusion:
Needless to say, Penny J. was having none of the defendant’s crocodile tears about the burden of the injunction or the delay in prosecution.
Take-away #1
The key take-away here is that a four-year injunction will be continued if there is good reason to suspect fraud.
Take-away #2
Fraud goes generally unpunished in Canada because of the lack of comprehension of police authorities, (unless there is a confession, as in this case). It is the Ontario Superior Court which plays the vital role of assisting in the rooting out of fraud.
