Court File and Parties
DIVISIONAL COURT FILE NO.: 672/19
SUPERIOR COURT OF JUSTICE – ONTARIO
DIVISIONAL COURT
RE: AMPHENOL CANADA CORP., Plaintiff (Respondent)
-and-
NANDAKUMAR SUNDARAM et al., Defendants (Moving Parties)
BEFORE: F.L. Myers J.
COUNSEL: Nikolay Y. Chsherbinin, for the Moving Parties
Brendan Wong, for the Respondent
HEARD at Toronto: January 15, 2020
ENDORSEMENT
The Motion
1Two defendants only, Nandakumar Sundaram and Sundev Technologies Inc., move for an extension of time to seek leave to appeal to this court from the order of Faieta J. dated July 15, 2019.
2Although extensions of time are routinely granted, every case turns on its facts. In this case, in my view, balancing all of the relevant considerations, the justice of the case weighs against granting the extension sought.
3The motion is therefore dismissed.
The Facts
4The plaintiff alleges that it has been defrauded by the defendants.1 The defendant Sundaram was an employee of the plaintiff. The defendant Devappa is his spouse. Sundev Technoloogies Inc. is their corporation.
5The plaintiff alleges that the defendants carried out a fraudulent scheme that resulted in the profits from surreptitious sales of the plaintiff’s products going to the defendants’ company Sundev Technologies and other intermediaries instead of the plaintiff.
6On January 15, 2019, Akbarali J. granted the plaintiff an ex parte Mareva injunction freezing the defendants’ assets for up to ten days. Para. 14 of the order allows interested parties to move to vary or discharge the order “at any time” on four days’ notice to the plaintiff and its counsel.
7The plaintiff brought a motion to continue the Mareva injunction on notice to the defendants. The continuation motion came before Glustein J. on January 23, 2019. Glustein J. recited that counsel attended for the defendants to oppose the Mareva injunction. However, the court had not properly scheduled the motion hearing. It was therefore necessary for Glustein J. to adjourn the motion for five days to January 28, 2019. Glustein J. continued the Mareva injunction in the interim and imposed time limits for filing affidavit material, a factum, and book of authorities on the defendants Sundaram, Devappa and Sundev, all of whom were represented by the same counsel.
8The continuation motion was heard by Faieta J. on January 28, 2019. A factum was filed on behalf of the defendant Devappa although counsel is described on the cover as being the lawyer for Sundaram, Devappa, and Sundev Technologies. In the factum, the defendants argued for an order releasing Devappa’s personal bank account and accounts of a company that she incorporated called Radiant Tools Ltd. from the Mareva injunction.
9Paragraph 2 of the factum contains the submissions that “it is clear that Ampherol cannot establish a strong prima facie case of fraud nor Devappa’s participation in it.” After making submissions concerning Devappa’s lack of involvement in any improper acts, para. 17 of the factum makes arguments that there is no fraud because Sundaram was not precluded from doing outside work while employed by the plaintiff. Sundev, they submitted, was his vehicle for the work that he performed outside of his employment. The factum explained how Devappa’s funds became comingled with those of Sundev and submitting that there was no basis to continue a Mareva injunction against her.
10Under “Order Requested” the factum sought an order dismissing Amphenol’s motion to extend its Mareva injunction.
11By reasons dated February 4, 2019, Faieta J. continued the Mareva injunction against Sundaram, Devappa, and Sundev Technologies although he required that the Plaintiff allow Devappa to access her salary. After discussing the detailed and voluminous records and expert evidence before him, Faieta J. found:
…Sundaram did not file evidence nor does he seek to have the Mareva Injunction set aside as against him or Sundev. Based on the record before me, I accept that Sundaram and Sundev undertook the Fraudulent Scheme as outlined in the Fishbein affidavits.
I reject Devappa’s suggestion that Amphenol Canada’s claim against her is based solely on the fact that she was the Treasurer of Sundev. Devappa was actively involved in its fraudulent business activities as reflected by the emails and the spreadsheets described above. I find that Amphenol Canada has established a strong prima facie case against Devappa.
12By a notice of motion dated eleven days later, on February 15, 2019, the defendants Sundaram, Devappa, and Sundev Technologies moved to set aside the Mareva injunction granted by Akbarali J. as it pertains to the accounts of Sundaram and Sundev Technologies. They also sought to set aside the order of Faieta J. continuing the injunction as it pertained to Devappa. The notice of motion lists all of the material that was before the prior two judges plus other affidavits to be sworn and transcripts of examinations of witnesses to be held. Among the grounds relied upon was the submission that Sundaram was entitled to operate a side business so that there was no strong case of fraud against him.
13The plaintiff moved to quash the new notice of motion as a repeat of the motion already decided by Faieta J. The motion to quash was heard by Faieta J. on April 5, 2019. He released reasons granting the motion on July 15, 2019.
14At para. 15 of his July reasons, Faieta J. noted that during the hearing of the prior motion to continue the Mareva injunction, counsel for the defendants not only denied Devappa’s participation but also denied “that there was a strong prima facie case of fraud against Sundaram and Sundev.” As a result, Faieta J. had already found in February that there was a strong prima facie case of fraud against Sundaram and Sundev Technologies as discussed above.
15Faieta J. addressed the defendants’ argument that only Devappa had moved for relief, with Sundaram and Sundev Technologies waiting to develop further evidence before they brought their motion. Faieta J. wrote at para. 19 of the July 15, 2019 ruling:
The orderly administration of justice dictates that none of [Sundaram, Devappa, and Sundev Technologies] should have put into issue whether there was a strong prima facie case against any one of them if it was their intention to eventually bring the Set Aside Motion. Given that Devappa did so, the Set Aside Motion constitutes a second “bite at the cherry”.
16Under the heading “Abuse of Process” Faieta J. held:
In my view, [Sundaram, Devappa, and Sundev Technologies], by design or otherwise, split their case and seek to re-litigate the issues that were determined on the Continuation Motion.”
17Faieta J. therefore granted the plaintiff’s motion to quash the new motion to set aside the Mareva injunction. The formal order provides that the notice of motion is quashed and the motion to set aside portions of the order of Akbarali J. as continued by Faieta J. is permanently stayed.
18Counsel for the defendants says that he formed the view that the order quashing the motion and holding that issue estoppel applied was a final order because it prevents any future variation or discharge of the Mareva injunction. If that were correct, the order would be problematic. The Mareva injunction itself provides that it can be varied or discharged at any time. However, that is not what Justice Faieta’s order did. Faieta J. found that the motion brought to set aside the order on the basis that there was no prima facie case against the defendants Sundaram and Sundev Technologies amounted to re-litigation of the issue of whether the plaintiff had proved that there was a strong prima facie case to justify the initial continuation of the Mareva injunction. Nothing in Justice Faieta’s July 15, 2019 order prevents anyone from moving to vary of discharge the order on any ground other than its initial propriety that has already been upheld. If the plaintiff prosecutes too slowly or if a defendant can show that the order is freezing too many assets compared to the value of the case as the facts are developed over time, for example, nothing in Faieta’s J.’s order prevents such motions.
19The defendants brought an appeal from Justice Faieta’s July 15, 2019 order to the Court of Appeal. Their notice of appeal was delivered on August 12, 2019 which was within the 30 day appeal period for the Court of Appeal but beyond the 15 day period to seek leave to appeal to the Divisional Court if such was desired.
20On receiving the notice of appeal, counsel for the plaintiff advised counsel for the defendants that the appeal had been brought in the wrong court. Discussion ensured in which counsel for the plaintiff provided case law to counsel for the defendants showing that appeals from Mareva injunction orders are interlocutory and come to this court with leave. Counsel for the plaintiff noted that the appeal would be the third contested hearing in the case and urged the defendants to adopt an orderly and more cost-efficient process rather than proceeding with serial contested motions.
21Counsel for the defendants insisted that the appeal lay to the Court of Appeal on the basis that the order made by Faieta J. denied his clients Sundaram and Sundev Technologies the procedural right to challenge the Mareva injunction and it was therefore a final order.
22The plaintiff then moved to the Court of Appeal to quash the appeal. By order dated November 26, 2019, the Court of Appeal agreed and quashed the appeal without prejudice to the defendants’ right to seek leave to appeal to this court.
23The Court of Appeal disagreed with the defendants’ argument that the order quashing the motion to challenge the Mareva injunction was a final order because it had deprived Sundaram and Sundev Technologies of a substantive right. The court held that where the merits of the dispute remain in issue then orders relating to collateral matters are interlocutory. That is, because Justice Faieta’s order dated July 15, 2019 did not decide the merits of the plaintiff’s claim that the defendants defrauded it, the order is interlocutory for the purposes of appeal. The Court of Appeal relied on its well-established test set out in Hendrickson v Kallio, 1932 123 (ON CA), [1932] OR 675 at p.4.
24The defendants’ counsel puts much stock in a recitation in the Court of Appeal’s endorsement that on the return of the first motion to continue the Mareva injunction on January 28, 2019, the two appellants did not oppose the continuation and only Devappa did so. Counsel takes this to mean that Sundaram and Sundev Technologies have not had their chance to challenge the Mareva injunction as yet.
25On December 10, 2019 these two defendants brought this motion to extend the time for them to seek leave to appeal to this court.
The Law and Analysis
26In The Catalyst Capital Group Inc. v Moyse, 2016 ONSC 554, at para. 2, Swinton J. set out the test that applies on a motion to extend the time to seek leave to appeal to this court:
In granting an extension of time, the court considers four factors. The overarching consideration is the justice of the case. Those factors are:
whether the moving party formed an intention to appeal within the relevant period;
the length of the delay and the explanation for it;
prejudice to the responding party; and
the merits of the appeal.
Intention to Appeal
27On the first issue, the moving defendants appealed to the Court of Appeal within the applicable time limit but after the expiry of the 15 day period applicable to this court. There is no evidence as to whether they formed an intention to appeal within the initial 15 day period. However, as they plainly did so very shortly afterward, I view this factor as largely satisfied;
Length and Explanation of Delay
28On the question of the length and explanation of the delay in seeking leave to appeal, the moving defendants brought this motion on December 10, 2019, some 4 ½ months after the decision of Faieta J. that they wish to challenge.
29In Catalyst, Swinton J. was confronted by a situation that was very similar to the facts of this case. The order which the plaintiff sought to appeal was dated July 7, 2015. The plaintiff delivered its notice of appeal to the Court of Appeal 15 days later. The responding party’s lawyer advised the appellant’s lawyer that he had brought his appeal in the wrong court within days. The appellant persisted. The Court of Appeal quashed the appeal on November 17, 2015. A motion to extend the time to seek leave to appeal to this court was served on November 27, 2015 and was heard by Swinton J. on January 21, 2016. While 4 years earlier, the timeline matches the dates in this case within a few days.
30At para. 6 of Justice Swinton’s reasons, she found:
The delay in this case has been lengthy. A motion for leave to appeal an interlocutory order must be brought within 15 days of the date of the order.
31Interlocutory appeals interrupt a case. Given the current focus on efficiency and affordability in civil litigation and the 5 year presumptive timeline, a delay of almost one-half of a year is significant.
32Like this case, counsel in Catalyst argued that counsel’s mistake as to the jurisdiction of the Court of Appeal was a valid justification for the delay. Swinton J. questioned the validity of that submission as follows:
Catalyst is represented by experienced litigation counsel. With respect to the Imaging Order, Catalyst knew that the order was interlocutory and was advised on July 24, 2015 that jurisdiction was an issue. There is a long line of cases in the Court of Appeal applying s. 6(2), which permits an appeal to the Divisional Court to be joined with an appeal to the Court of Appeal when an appeal “lies to the Divisional Court.” If the order under appeal is interlocutory, leave to appeal must first be obtained from a Superior Court justice (see, for example, Albert v. Spiegel, [1993] O.J. No. 1562 (C.A.) and Waldman v. Thomson Reuters Canada Ltd., 2015 ONCA 53 at para. 17). Even if counsel did not know of this line of cases, it had notice by early September 2015 and still continued in the Court of Appeal.
33Counsel for the moving defendants argues that this case is different because in Catalyst there was clear authority holding that appeals from contempt orders are interlocutory for the purposes of appeal. The authority is less clear for motions to quash a motion to discharge a Mareva injunction. I disagree. As discussed by Swinton J. at para. 11 of her decision:
Moreover, the decision of the Court of Appeal in the present proceeding applied the well known test for determining if an order is final or interlocutory found in Hendrickson v. Kallio, 1932 123 (ON CA), [1932] O.R. 675. The Court of Appeal concluded that on that test, “there can be no doubt that the dismissal of the contempt motion is interlocutory” (The Catalyst Capital Group Inc. v. Moyse, 2015 ONCA 784 at para. 11).
34This is in fact the very same reason and precedent relied upon by the Court of Appeal to quash the appeal in this case as discussed above.
35Accordingly, the proposed appellants have not made out the second factor. I do not view this factor as determinative. But it will weigh in the balance below.
Prejudice
36Mr. Wong concedes that there is no prejudice to the plainitff that cannot be compensated in costs. His client was awarded $2,500 in costs by the Court of Appeal. However, in a case of fraud, where a strong prima facie case has been shown on a voluminous documentary record, Mr. Wong submits that it is fair for the plaintiff to be concerned about the enforceability of a costs award.
37It must be recalled that the defendants’ ability to pay is very much a part of the interlocutory injunction calculus. In the seminal case of American Cyanimid Co. (No. 1) v Ethicon Ltd., at p.4 of his speech, Lord Diplock wrote:
If damages in the measure recoverable at common law would be adequate remedy and the defendant would be in a financial position to pay them, no interlocutory injunction should normally be granted, however strong the plaintiff’s claim appeared to be at that stage. [Emphasis added.]
38Similarly, in 2092280 Ontario Inc. v. Voralto Group Inc., 2018 ONSC 2305, at para. 28, this court wrote:
Judgments for damages cannot reasonably be expected to be affordable or collectable against fraudsters.
39Akbarali J. found that the defendants presented a risk of dissipation of their assets before a judgment is satisfied. See: 663309 Ontario Inc. v Bauman, 2000 CarswellOnt 2479 at para. 41. In face of that finding flowing from the nature of the fraud and the efforts by the defendants to conceal their scheme, in my view, further expensive steps in the proceeding do create a significant risk of prejudice and irreparable harm to the plaintiff in unrecoverable costs. It is always open to the defendants to dispel this concern by offering to post cash or cash equivalents for security in place of the assets frozen by the Mareva injunction.
The Merits of the Proposed Motion for Leave to Appeal
40The moving defendants argue that they have been denied their entitlement to challenge the initial validity of the Mareva injunction. They argue that only the defendant Devappa challenged the injunction before Faieta J. and they rely on the recital of this fact by the Court of Appeal. However, they ignore a number of factors:
a. The order of Glustein J. required all of the defendants to deliver their affidavits, factum, and authorities before the return of the motion to continue on January 28, 2019;
b. Their factum was delivered by counsel for all the defendants and sought an order dismissing the plaintiff’s request to extend the injunction in full. While the factum was entitled a factum of Devappa, it contained arguments and relief applicable to all of them which were made by counsel to all of them. Faieta J. found expressly that counsel had made the argument that there was no strong prima facie case against Sundaram and Sundev Technologies;
c. In his July decision, Faieta J. held that he had already ruled on the issue of a strong prima facie case and that the defendants were splitting their case.
41The defendants’ argument is based on the flawed premise that each of them was entitled to take a separate run at the initial Mareva injunction at a time of his, her, or its own choosing. That is the least efficient, most expensive manner of proceeding. Glustein J. made an obvious case management order to ensure that all related issues were brought together efficiently. Counsel says that Glustein J. knew that only Devappa was opposing the continuation of the Mareva injunction at that time and his order ought to be read to apply only to her. There is no evidence before me on this point. However, if it is the case, it was incumbent on counsel to ensure that the order of Glustein J. was corrected and that counsel made plain to the judge that he was intending to move against the Mareva injunction on behalf of each defendant one after the other. If this would have been allowed by Glustein J. (and that is dubious) it would have been highly relevant to the scheduling order that he made.
42In any event, as counsel for all defendants, Mr. Chsherbinin made arguments for Devappa that there was no strong prima facie case against Sundaram and Sundev Technologies. Those defendants were represented by the same counsel and chose to take no part in that argument. Justice Faieta’s conclusion that they are bound by the outcome by issue estoppel and that their subsequent attempt to raise the same issue again is an abuse of process appears to be unassailable. Devappa is a director and officer of Sundev Technologies and spouse and coventurer with Sundaram. They are clearly privies to whom issue estoppel applies and sufficiently related as to be bound not to re-litigate issues.
43Had Faieta J. barred all future efforts to vary or set aside the Mareva injunction, the merits analysis could be different. But that is not what he did. Parties can move against the order on new bases and they can challenge the fraud at trial. But no one is entitled to bring a motion that is an abuse of process or if they are estopped from doing so. The moving parties provided no case law to show that related parties are entitled to move seriatim to challenge the same order on the same ground as was argued previously by the same counsel. Moreover, I am aware of no cases that support this proposition and many that undermine it.
44As part of establishing that the proposed motion for leave to appeal has merit, the moving defendants also need to deal with the element of the leave to appeal test that considers whether the issue for appeal is of sufficient general importance (under Rule 62.02(4)(b)) or it is desirable (under Rule 62.02(4)(a)) that leave to appeal should be granted. These tests exist because proposed interlocutory appeals generally do not raise issues of such import to justify stopping a case in its tracks for a year or more for an appeal. By definition, interlocutory appeals do not deal with the principal merits of the parties’ real dispute. In my view, arguments addressing the question of general importance or the general desirability of an interlocutory appeal under Rule 62.02(4)(a) and (b) ought to address expressly the question of why it is preferable to deal with a procedural matter for another year or more on appeal rather than moving the case forward to a resolution on the merits as quickly and affordably as possible.
Decision
45In my view, the justice of the case favours the refusal of the extension of time sought. Whether the defendants went to the wrong court by innocent error or by design is not the issue. Akbarali J. and Faieta J. have found that the plaintiff has established a strong prima facie case of fraud against them. The decision of Faieta J. was based on a full record and on notice to the defendants. The defendants’ approach has bogged the matter down in serial contested motions. If they always intended to try to bring numerous, independent challenges to the ex parte Mareva injunction, they did not articulate that in any transparent manner that can be seen now. They persisted with an appeal to the wrong court despite notice from the plaintiff together with case law showing the error of their ways. Moreover, they propose to appeal on a basis that mis-reads the order of Faieta J. It is a “straw man” argument that if the order bars all future motions to vary or discharge the Mareva injunction, then it is in error. But the premise is not correct. The order does not bar subsequent efforts to vary or discharge the order in accordance with its terms. Faieta J. found only that, like all motions, the defendants are subject to being stopped if they propose steps that amount to an abuse of the court’s process.
46In my view the motion for leave to appeal has very little chance of success. As noted above, the findings on issue estoppel and abuse of process appear unassailable. In addition, there is no issue of general importance in how serial motions to attack an order are scheduled or case managed. I see no basis to delay the action for another year and much basis to push the parties forward on the merits.
47In a action for fraud with a Mareva injunction outstanding, it is important that the case move forward toward trial or other resolution quickly. If the defendants have good defences, it is important to end their jeopardy and release them from pre-judgment execution as soon as possible. If the plaintiff is able to prove its allegations that the defendants have engaged in a fraudulent scheme, it is equally important that the civil law provide a meaningful remedy and not one that is so long and expensive in the making as to render it toothless.
48Here, this action has already been outstanding for a year and it is still mired in the challenge to the initial ex parte injunction. Rather than addressing the merits, the defendants have brought serial motions and now serial appeals. The tactic of trying to have one spouse address the other spouse’s liability before moving on behalf of that other spouse is laced with tactics. The plaintiff fairly raises a concern that the defendants may be adopting a scorched earth approach.
49Balancing the defendants’ tactical delays, the lack of merit in the proposed appeal, and the risk of prejudice to the plaintiff, in my view the motion to extend the time must be denied.
50I can say it no better than Swinton J. in Catalyst:
[31] West Face argues that it has suffered prejudice because of the delay in this litigation and its potential impact on proceedings on the Commercial List concerning the sale of WIND Mobile. I accept that there is some prejudice, because the delay impedes the progress of the present litigation and, in turn, may affect litigation on the Commercial List.
[32] Given the delay in this case, the explanation for it, the prejudice (particularly to Mr. Moyse) and, most importantly, the lack of merit to the proposed motions for leave to appeal, the justice of the case does not require an extension of the time to bring a motion for leave to appeal. Accordingly, the motion for an extension of time to file the motion for leave to appeal is dismissed.
51The motion is therefore dismissed.
52The parties agreed that costs on a partial indemnity basis of approximately $7,000 - $7,500 would be awarded to the successful party. The plaintiff’s Costs Outline seeks costs of $6,960.28. In my view this is a reasonable amount and the defendants Sundaram and Sundev Technologies are therefore jointly and severally liable and are ordered to pay to the plaintiff its costs of this motion on a partial indemnity basis fixed at $6,960.28 forthwith.
F.L. Myers J.
Date: January 16, 2020