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Ontario court grants employer interim recovery of funds in alleged six-figure fraud case

by HR Law Canada

The Ontario Superior Court of Justice has issued an order for the interim recovery of funds in a case involving Covenant Group Ltd. and an alleged fraudulent incident.

The ruling came after a Norwich Order was issued, directing the Royal Bank of Canada (RBC) to provide information about an account associated with the alleged fraud.

The case revolves around SC, a former employee of Covenant Group Ltd., a company that places temporary and permanent workers with employers in Ontario. On Sept. 28, 2022, someone created a domain name similar to Covenant’s legitimate domain and used SC’s work email address to send correspondence to one of Covenant’s clients.

The client was directed to send a payment of $108,198.09 to an alternate bank account with RBC, which was not associated with Covenant.

SC denies any involvement in the incident, and the current motion was brought forth as she sues Covenant for wrongful dismissal. The court made no findings on her alleged connection to the fraud.

After the Norwich Order was issued, Covenant discovered that the account in question was held by an individual — OS — residing in Winnipeg, Manitoba. Covenant also learned that a portion of the funds had been transferred to another account held by OS, referred to as the “Second Account.”

In the recent motion, Covenant sought interim recovery of the funds held in both accounts. The court analyzed the situation and applied the test for interim recovery of personal property, as outlined in the Rules of Civil Procedure.

The court found that Covenant met all aspects of the test, including the identification of the funds and evidence that they were unlawfully diverted from Covenant. Additionally, Covenant received confirmation from RBC regarding the account holder’s identity, and subsequent attempts to contact OS yielded no response or claim to the funds.

As a result, the court granted an order for the interim recovery of personal property, allowing Covenant to reclaim the funds held in the accounts. At the time of the ruling, the initial account held $21,292.62, while the Second Account held $51,703.87.

The decision emphasizes the discretionary nature of the order and the requirement for the moving party to demonstrate substantial grounds for the relief sought. In this case, the court found that Covenant presented a high degree of assurance that they would succeed at trial, supporting the granting of the interim recovery order.

The ruling serves as a significant step in Covenant’s efforts to recover the funds associated with the alleged fraudulent diversion, providing a legal basis for the company to proceed with the recovery process.

For more information, see Calisto v Covenant Group, 2023 ONSC 4016 (CanLII)

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