Court File No.: CV-15-537434
SUPERIOR COURT OF JUSTICE
ALEXEY KONDRATIEV and SMART GAMES CANADA, INC.
- and -
STATEMENT OF CLAIM
TO THE DEFENDANT
A LEGAL PROCEEDING HAS BEEN COMMENCED AGAINST YOU by the plaintiff. The claim made against you is set out in the following pages.
IF YOU WISH TO DEFEND THIS PROCEEDING, you or an Ontario lawyer acting for you must prepare a statement of defence in Form 18A prescribed in the Rules of Civil Procedure, serve it on the plaintiff's lawyer or, where the plaintiff does not have a lawyer, serve it on the plaintiff, and file it, with proof of service, in this court office, WITHIN TWENTY (20) DAYS after this statement of claim is served on you, if you are served in Ontario.
IF YOU ARE SERVED in another province or territory of Canada or in the United States of America, the period for serving and filing your statement of defence is forty (40) days. If you are served outside Canada and the United States of America, the period is sixty (60) days.
INSTEAD OF SERVING and filing a statement of defence, you may serve and file a notice of intent to defend in Form 18B prescribed by the Rules of Civil Procedure. This will entitle you to ten (10) more days within which to serve and file your statement of defence.
IF YOU FAIL TO DEFEND THIS PROCEEDING, JUDGMENT MAY BE GIVEN AGAINST YOU IN YOUR ABSENCE AND WITHOUT FURTHER NOTICE TO YOU. IF YOU WISH TO DEFEND THIS PROCEEDING BUT ARE UNABLE TO PAY LEGAL FEES, LEGAL AID MAY BE AVAILABLE TO YOU BY CONTACTING A LOCAL LEGAL AID OFFICE.
IF YOU PAY THE PLAINTIFF'S CLAIM, and $5,000 for costs, within the time for serving and filing your statement of defence, you may move to have this proceeding dismissed by the court. If you believe the amount claimed for costs is excessive, you may pay the plaintiff's claim and $400.00 for costs and have the costs assessed by the court.
TAKE NOTICE: THIS ACTION WILL AUTOMATICALLY BE DISMISSED if it has not been set down for trial or terminated by any means within five years after the action was commenced unless otherwise ordered by the court.
Address of Court Office:
393 University Avenue, 10th Floor
TO: OLEG BOYKO
Stroiteley ul, dom 13
korp. 5 kv. 8
Moscow, Russian Federation
1. The Plaintiff claims:
(a) Damages in the amount of $10,000,000.00 on the basis of misappropriation, wrongful conversion, unjust enrichment/quantum meruit, interference with contractual relations and inducing breach of contract;
(b) Punitive and moral damages in the amount of $1,000,000.00;
(c) Pre_judgment interest in accordance with section 128 of the Courts of Justice Act, R.S.O. 1990, c. C.43, as amended;
(d) Post_judgment interest in accordance with section 129 of the Courts of Justice Act, R.S.O. 1990, c. C.43, as amended;
(e) The costs of this proceeding on a substantial indemnity scale, plus HST; and
(f) Such further and other relief as to this Honourable Court may deem just.
I. The Parties
2. The Plaintiff Smart Games Canada, Inc. ("SGC") is an Ontario corporation, carrying on business as a designer, developer and fabricator of electronic gambling machines and related software. SGC also provides consulting services related to electronic gambling machines and software.
3. The Plaintiff Alexey Kondratiev ("Kondratiev") is an Ontario resident and the sole officer and director of SGC.
4. The Defendant Oleg Boyko ("Boyko") is an individual residing in Moscow, Russia. He is the owner, founder, Chief Executive Officer, President and Chairman of Finstar Financial Group, a private equity firm that has a number of subsidiary businesses, including Finstar Financial Group LLC.
II. Background to Claim
5. The Plaintiffs are also the Plaintiffs in Court File No. CV-09-385909, in which related claims are advanced against Eugene Chayevsky ("Chayevsky"), Adenilton Cezar Xavier ("Xavier"), Cadillac Jack, Inc. ("Cadillac Jack"), Finstar Financial Group LLC ("Finstar") and Tilley International & Associates Inc., carrying on business as Tilley Entertainment ("Tilley"). There is also a further action, Court File No. 08-354560 in which the Plaintiffs are Defendants to an action brought by Arcadia Participacoes Ltda. ("Arcadia"). Those actions were the subject of an order from Master Haberman dated March 6, 2014, which consolidated the two actions.
6. From 1999 to 2008, Kondratiev, independently, and then subsequently through SGC, provided consulting services to Boyko and his companies. Boyko's company - Finstar Financial Group - at all material times owned and held all and/or a significant portion and controlling interest of Finstar, Cadillac Jack and Arcadia. Due to his ownership position and the offices he holds, Boyko is the controlling and directing mind of Finstar Financial Group and its subsidiaries, including the Defendant Finstar. At all material times, except where specifically stated otherwise, Boyko directed the activities of Chayevsky for his own personal benefit.
7. Specifically, Kondratiev would travel around the world and research and/or evaluate companies in the gambling software industry that Boyko was considering purchasing.
8. As President of Finstar since 2004, and a director and CEO of Cadillac Jack, Chayevsky directly reported to Boyko and was responsible for Boyko's interests - either personally or through his various companies in Brazil, Mexico and other parts of Latin America.
9. As president of Arcadia, Xavier directly reported to Chayevsky.
10. In December 2006, the Plaintiffs were retained by Chayevsky and Xavier on behalf of Cadillac Jack and Arcadia to assist an existing team of software programmers located in Brazil to develop a new software platform to be used in electronic bingo gambling machines (the "Initial Machines and Software") (the "Brazil Project").
11. The Brazil Project was created by Boyko and was a joint venture between Cadillac Jack and Arcadia, which was being led by Chayevsky and Xavier under Boyko's authority.
12. The Initial Machines and Software were originally to be installed in various gambling establishments located in Brazil, but due to regulatory issues in Brazil, the project was relocated to Mexico in or around April, 2007
13. The Brazil Project was never completed, as the existing team of software programmers was unable to develop the Initial Machines and Software.
14. In or around September 2007, Boyko advised Kondratiev that he was contemplating the termination of the Brazil Project as a result of the difficulties and delays in completing said project and that the Brazil Project was on hold.
III. Basis of Claim
15. As Chayevsky and Xavier were in control of Cadillac Jack and Arcadia, Boyko would hold them personally responsible for failure of the Brazil Project. In order to preserve and/or elevate their standing with Boyko, they both needed the Brazil Project to continue and succeed.
16. Chayevsky and Xavier entered into an arrangement whereby they agreed to tell Kondratiev that Boyko had instructed them to continue with the Brazil Project, retain and use the Plaintiffs services to successfully complete the project and then take credit for the success of the project.
17. Chayevsky and Xavier proceeded to advise Kondratiev that Boyko had advised them to continue with the Brazil Project on a pilot basis provided that the bingo machines with new software were installed at the Bingo Ra by November 2007 with positive financial results by December 2007.
18. Further, Chayevsky and Xavier advised Kondratiev that Boyko wanted the Plaintiff to design and build the prototype bingo machines and software (the "SGC Machines and Software") on a pilot basis to demonstrate the financial viability of the project. Chayevsky and Xavier told Kondratiev that if they liked the SGC Machines and Software, then Cadillac Jack or Arcadia would purchase the SGC Machines and Software, failing which the SGC Machines and Software would be returned back to the Plaintiffs.
19. Chayevsky and Xavier advised Kondratiev that during the pilot test period, the SGC Machines and Software would be used for testing purposes only and not commercially.
20. Initially, Boyko had no knowledge of Chayevsky's and Xavier's plan and representations to Kondratiev.
21. Based upon and in reliance of Chayevsky and Xavier's representations as described herein above, the Plaintiffs agreed to design and build the SGC Machines and Software and provide it to Cadillac Jack/Arcadia on a pilot basis ("Pilot Project").
22. The Plaintiffs proceeded to write the majority of the computer code for the software and designed and manufactured the hardware and accessories for the SGC Machines and Software.
23. When the SGC Machines and Software was completed, Xavier arranged to have them shipped from Ontario to Bingo Ra in Mexico. Xavier confirmed to Kondratiev his and Chayevsky's previous representations that the SGC Machines and Software would be used for testing purposes only and would not be used for commercial purposes.
24. The Plaintiffs state that at all material times they remained the owners of the SGC Machines and Software.
25. On or about December 20, 2007, the SGC Machines and Software arrived in Mexico City. By December 22, 2007, they had been installed and were successfully operating in the Bingo Ra.
26. Contrary to the representations made by Chayevsky and Xavier, the Plaintiffs subsequently learned that Chayevsky and Xavier had, either personally or on behalf of the companies they represented, and without the Plaintiffs' consent, authorization or knowledge, misappropriated and wrongfully converted the SGC Machines and Software for their own use and possession by entering into an agreement with Tilley ("Tilley Agreement") - to provide Tilley with the SGC Machines and Software for Tilley's use in the Bingo Ra for commercial purposes.
27. The Plaintiffs stated that Boyko subsequently learned of the misrepresentations made by Chayevsky and Xavier to the Plaintiffs and the misappropriation and wrongful conversion of the SGC Machines and Software and not only approved of said conduct, but (as described herein below) authorized and funded the wrongful and illegal duplication of the Plaintiffs' intellectual property.
28. The Plaintiffs state that upon learning that Tilley had been given the SGC Machines and Software for commercial use, Kondratiev confronted Boyko, Chayevsky and Xavier, personally and on behalf of their companies and a) asked for an explanation and b) demanded the return of the SGC Machines and Software if they were not going to pay for it.
29. In response, Boyko, Xavier and Chayevsky denied that the Plaintiffs were the owners of the SGC Machines and Software, claimed that machinery and software belonged to them and their companies and refused to give the SGC Machines and Software back or pay for them.
30. Further, Kondratiev put Tilley on notice that the SGC Machines and Software belong to the Plaintiffs, and requested that Tilley immediately cease using and return the SGC Machines and Software. Tilley ignored Kondratiev's notice and continued (and may continue) to use and benefit from the use and possession of some and/or all of SGC Machines and Software.
31. The Plaintiffs subsequently learned that as part of the Tilley Agreement or an additional agreement between the parties, Cadillac Jack and Arcadia had to provide Tilley with a further 200 gaming machines. The Plaintiffs state that Cadillac Jack and Arcadia, under the direction of Chayevsky and Xavier, and with Boyko's knowledge, consent and direction, proceeded to replicate and duplicate the software used in the SGC machines to be used in Cadillac Jack and Arcadia's own gaming machines that were to be sold to Tilley and other gaming operators.
32. To that end, Finstar, at the direction of Boyko, contributed some and/or all of the monies towards the development cost to duplicate SGC's software, including paying former and (at the time) current staff members of SGC to assist Cadillac Jack and Arcadia in the replication and duplication of SGC's software. The replicated software was used in bingo machines that were delivered to Tilley by Cadillac Jack and Arcadia.
33. The Plaintiffs state that as the sole or majority owners of Cadillac Jack and Arcadia, Finstar and therefore Boyko personally profited from the replication and commercial use of SGC's intellectual property used in the SGC Machines and Software.
34. The Plaintiffs state that, to date, they have not received the return of the SGC Machines and Software, nor received any payment for the SGC Machines and Software.
i. WRONGFUL CONVERSION AND MISAPPROPRIATION
35. The Plaintiffs claim and seek from the Defendant the return of the SGC Machines and Software and/or payment for said SGC Machines and Software on the basis of wrongful conversion and misappropriation. The Plaintiffs state that the Defendant was aware, at all material times, that the Plaintiffs were the sole and legal owners of the SGC Machines and Software and without the Plaintiffs knowledge, consent or authorization, intentionally, illegally, and tortiously interfered with, misappropriated and/or wrongfully converted the SGC Machines and Software for his own use, benefit and profit, including but not limited to the sale/licensing, commercialization, use and the replication of the SGC Machines and Software.
36. The Plaintiffs state that they remain the true owners of the SGC Machines and Software. The Plaintiffs seek the return of the SGC Machines and Software or payment from the Defendant, or entities which he controls and directs, for the value of said Machines and Software, including the development costs.
ii. UNJUST ENRICHMENT AND WAIVER OF TORT
37. In the alternative, the Plaintiffs claim damages from the Defendant on the basis of unjust enrichment/quantum meruit. The Plaintiffs state that the Defendant has been unjustly enriched as a result of his conduct as described herein above at the expense of the Plaintiffs, as he has misappropriated and/or wrongfully converted the SGC Machines and Software for his own profit and use and the Plaintiffs have suffered a corresponding deprivation. There is no juristic reason for the Plaintiffs to be deprived of the SGC Machines and Software and/or payment for said machines and software and the Defendant's enrichment at their expense.
38. In the alternative, the Plaintiffs claim a waiver of tort of any one or more of the torts referred to herein above and an accounting and disgorgement by way of payment to them all revenues derived by the Defendant from his possession and/or use of the SGC Machines and Software and/or the use of said machines by an entity which he directs and/or controls.
iii. DISSOLUTION OF FINSTAR
39. The Defendant, as the controlling and directing mind of Finstar Financial Group, directed that Finstar be dissolved at least in part to frustrate the Plaintiffs' claims against Finstar in Court File No. CV-09-385909, and to avoid the obligation to produce documents related to his direct involvement in the subject matter of this action. Boyko was and remains directly and personally involved in directing the action against the Plaintiffs and in defending Court File No. CV-09-385909. He has closely monitored the status of the action and has provided direction to Chayevsky throughout its existence. The Plaintiffs first learned about the dissolution of Finstar at the direction of Boyko in or about October 2013. The Defendant's conduct in ordering and directing the dissolution is interference with contractual relations, betrays the Plaintiffs' reasonable expectations, and involves inducing Finstar to breach its contractual obligations to the Plaintiffs.
iv. PUNITIVE, AGGRAVATED AND EXEMPLARY DAMAGES
40. The Plaintiffs state that the conduct of the Defendant has been vexatious, oppressive, wrongful, malicious and deserving of an award of punitive, aggravated and/or exemplary damages in the amount of $1,000,000.00.
41. The Plaintiffs allege that the claim herein involves damages for economic loss sustained in Ontario, declaratory relief sought with respect to property and interests in Ontario, and against non-residents of Ontario who carry on business in Ontario and/or who are otherwise necessary and proper parties to the within proceeding in Ontario. The Plaintiffs rely on Rules 17 .02 (g) (h) (o) and (p) of the Rules of Civil Procedure, to permit service without the necessity of a court order.
42. The Plaintiffs request that the trial of this action take place in the City of Toronto.
September 29, 2015
CAVALLUZZO SHILTON McINTYRE CORNISH llp
Barristers & Solicitors
474 Bathurst Street, Suite 300
Toronto, ON M5T 2S6
Wright, LSUC No. 32522T