B.C. businessman committed civil fraud, must pay company $72K, court rules

A file photo shows a statue inside the B.C. Supreme Court in Vancouver, B.C.

A B.C. man and his company have been ordered to pay more than $72,000 after a judge found he had breached his fiduciary duty and committed civil fraud.

Nicolai Ianovici and his firm Trustin Construction Ltd. must pay the penalty after losing against his business partner Roman Portnoy and Brave Construction Ltd. in a court decision issued earlier this week. 

Both Ianovici and Portnoy are directors of Brave, which Ianovici incorporated in 2016, according to the decision.

Ownership questions resolved

While it wasn't initially part of the lawsuit, the question of who owns Brave became a subject of disagreement during court proceedings, Justice Peter H. Edelmann notes in his decision.

Ianovici claimed to be the sole owner of the company, which is the default arrangement when an individual incorporates a company in B.C.

However, Edelmann ruled that Ianovici holds 50 per cent of the company's shares in trust for Portnoy, noting that the pair had signed an "ownership attestation" declaring that they each owned half of the business when opening a bank account.

Moreover, the company's accountant, bookkeeper and office manager each testified that they understood the two men to be joint-owners.

The judge found Ianovici's explanation for signing documents presenting Portnoy as a 50-per-cent owner and making him a director of the company unbelievable.

"Mr. Ianovici testified that he did not review the banking documents but just signed what was put in front of him," Edelmann's decision reads.

"I found Mr. Ianovici’s selective level of sophistication remarkably disingenuous. When it suits him, Mr. Ianovici presents as an educated, sophisticated individual, which is consistent with his legal training, work in banking and ability to supervise large construction projects. However, when it suits him, he pretends not to understand even the most basic of legal or corporate concepts."

Secret corporate credit card

Edelmann was similarly skeptical of the arguments Ianovici made when defending himself against the civil fraud accusation.

Portnoy brought the lawsuit against his business partner after discovering, in February 2019, that the Brave bank account – which he expected to have at least $250,000 in it – was nearly empty.

"It was at that point Mr. Portnoy learned that Mr. Ianovici had been e-transferring money and had set up a company credit card in his name," Edelmann's decision reads.

"In November 2017, Mr. Ianovici had applied for a Brave company credit card and I find that he deliberately did not inform Mr. Portnoy about the credit card. In total, Brave paid some $235,916.44 on the credit card."

According to the decision, Ianovici further defrauded Brave by incorporating a separate company – Trustin – that charged Brave a monthly fee for "estimating and project management," while also completing subcontractor work on Brave's jobs. This work was hidden by attributing it to a third company – Artebuz Holdings.

Ianovici "initially feigned not to recognize the name Artebuz Holdings," but later acknowledged the company during his testimony, according to the decision.

"Mr. Ianovici explicitly said that at no point did Artebuz transfer any money to Trustin," the decision reads. "This was clearly a lie. On April 21, 2018, Artebuz invoiced Brave $4,410.00 for installation of waterproof membrane and six new showers. Brave paid Artebuz by cheque on July 25, 2018. The next day, Trustin invoiced Artebuz $4,410.00 for 'estimating and project management.'"

The decision lists another transaction that followed the same pattern, this time involving nearly $12,000 in May 2018.

"In addition to the transparent nature of the artifice deployed by Mr. Ianovici, I would note that 'estimating and project management' is what he (through Trustin) was also being paid $4,000 per month to do on these very projects for Brave," the decision reads.

"I have little hesitation in finding that the elements of civil fraud have been made out on the evidence before me. Mr. Ianovici made numerous false representations to Brave, its employees and his co-director Mr. Portnoy."

Fiduciary duty and damages

Having found that Ianovici committed civil fraud, Edelmann found the was "little question" that he had also breached his fiduciary duty as a director of Brave.

"Even if his actions had not been outright fraudulent, his failure to disclose the relationship between Trustin and Artebuz was a clear breach of his fiduciary duties and placed him in a clear conflict of interest when approving purchase orders and payments to Artebuz," the judge's decision reads.

Edelmann awarded Brave the $72,509 it and Portnoy sought as damages, representing the profit Trustin and Ianovici made between December 2017 and November 2019.

The judge found the amount was "likely a very conservative assessment" of Trustin's net income during the period.

He also awarded court costs to Brave.