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Court extends Mareva order against properties

Disciplined real estate lawyer fights back
|Written By Neil Etienne

Toronto real estate lawyer Oscar Choi-Wah Wong, who was found by a Law Society of Upper Canada disciplinary tribunal in 2012 to have improperly abdicated his responsibilities to his real estate clients, has successfully extended a Mareva injunction against a real estate agent allegedly involved in the matter.

Joel Watson says ‘a Mareva injunction can be a powerful tool, particularly in fraud matters.’

Justice Robert MacKinnon of the Ontario Superior Court of Justice announced the ruling just prior to the new year, providing what some lawyers call an “extraordinary” and infrequent measure to bar the real estate agent from transferring, encumbering, or otherwise dealing with seven listed properties without expressed written consent of Wong or leave of the court.

Ross Macdonald, defence counsel for real estate agent Grace Lee, has filed a notice of motion for leave to appeal the injunction to Divisional Court. He says that the court erred by not taking into account that Lee had purchased property in 2015, selling four or five condos and purchasing another four, meaning she had about 15 condo properties in her name.

“I was absolutely flabbergasted by the order that was made,” Macdonald says.

 “My thought was, in view of that, granting a Mareva injunction on the basis of dissipating assets is completely out of the ballpark.”

Joel Watson, partner with Shibley Righton LLP, says a Mareva injunction can be a powerful tool, particularly in fraud matters when a court finds sufficient evidence that an asset might be liquidated, even if ultimately it is determined at trial that no wrongdoing had occurred.

“Mareva, like an Anton Piller [order], is an extreme order of the court; it’s an intrusion on somebody’s property before trial has happened,” Watson says.

Watson speculated that the injunction and process to this point is an attempt by Wong to mitigate his role in his disciplinary matter.

“[The judges] were convinced that there’s something going on here, something worth keeping the property from being disposed because, once it’s gone, the plaintiff would be left with nothing more than a paper judgment.”

In the disciplinary action by the LSUC against Wong, he was ultimately ordered to pay costs of $50,000 and served a four-month suspension after admitting to the panel he failed to be on guard against being duped and abdicated his professional responsibilities by failing to supervise his real estate law practice in connection with12 transactions spanning 2003 to 2007. Wong further admitted he failed to disclose material facts to his lender and purchaser clients by failing to make reasonable inquiries regarding unusual features of the transactions and by failing to review or follow express lender instructions. In writing its disciplinary penalty decision in 2013, the tribunal, chaired by lawyer Mark Sandler with Paul Dray, Seymour Epstein, Susan McGrath, and Judith Potter agreeing, stated, “It was undisputed that Mr. Wong did not knowingly assist in the frauds.”

The agreed statement of facts detail that in eight transactions, the purchaser contributed no or nominal funds to the purchase. In seven transactions, surplus mortgage proceeds were disbursed back to the purchaser or a third party. Ten of the transactions included credits for unaccounted-for deposits. Ten of the transactions involved a flip or resale of the property at a significantly higher purchase price than the initial purchase price.

In four transactions, Wong acted for the vendor, purchaser, and the lender, the agreed statement of facts state, as well he did not advise the lender or purchaser of the potential conflict and did not disclose material information that was relevant to the transactions. In his defence, Wong argued that members of his staff concealed the relevant information from him and conspired in part with Lee. He launched action against those employees and Lee in 2011, and the Mareva injunction is part of that continuing action.

In August of 2015, Wong successfully had an ex parte Mareva injunction placed against Lee, who he alleges was involved in at least one of the transactions in question. He alleges she conspired with members of his staff to perpetrate the supposed frauds, and he pleaded a modus operandi to her scheming, asserting she used “other persons as puppets” to purchase properties in their names when, he alleges, the assets were actually being purchased by Lee, either for herself or for relatives.

Justice MacKinnon wrote in his December decision that there was affidavit evidence from Wong that he monitored some of the movements in Lee’s real estate holdings and discovered she sold five condominium units between February and October 2014. Wong swore to the court he feared the five condo sales were not consistent with the normal pattern of her real estate dealings.

Lee’s counsel argued that Wong was aware of seven other condo units that she owned and made no effort to sell, contradicting the claim she was trying to liquidate assets. Macdonald further argued she also purchased four other units in the eight months leading up to the first Mareva injunction. Macdonald called the allegations “frivolous” and that Wong did not proceed expeditiously and requested the injunction be struck.

In extending the injunction, MacKinnon wrote that Lee failed to deal with specific allegations against her, gave inconsistent testimony, failed to co-operate in scheduling of questioning,  and that, in turn, Wong had established a strong prima facie case.

“I am required on this motion to consider all the evidence before Sutherland J. [in the August 2015 injunction hearing] as now amplified before me,” MacKinnon wrote. “Her real estate activity in 2014 together with her failure in 2015 to timely focus herself on this litigation leads me to objectively infer in all of the circumstances that there existed and still exists a significant risk of removal or dissipation of her assets.”

Macdonald says MacKinnon made errors in fact, missing a full affidavit, and that Lee “very clearly and explicitly” addressed specific allegations against her.

In his motion for leave to appeal, Macdonald argues evidence was misconstrued and that Lee moved with all possible speed to address the allegations.

The motion for leave to appeal further states that continuation of the injunction “is contrary to the existing legal principles for granting such relief and unsupported by the acknowledged facts before the court.”

Brian Radnoff, partner with Lerners LLP, says approval of such an injunction is fairly infrequent and one not granted by the court without a strong prima facie case. He says, as such, appeals of Mareva injunctions can be a difficult task.

“You’re essentially getting execution before judgment, so there’s a fairly stringent test,” he says. “If the judge is wrong and the evidence is different, then that’s a good ground for appeal, but if the judge is correct in his observations of what the record was, it is a very difficult appeal.”

Counsel for Wong could not be reached for comment by press time.

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