Court File and Parties

COURT FILE NO.: 08-CL-7349 DATE: 20200102 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

ATLAS COPCO CANADA INC. Plaintiff/Moving Party – and – DAVID HILLIER, DIRK JOHANNES PLATE, LÉO CARON, JEANNETTE BOURQUE, MARIA VAN NOORDEN PLATE, PAUL ARMAND CARON, P.A. CARON, COUNTIER D’ASSUANCE INC., and 3870901 CANADA INC. Defendants/ Responding Parties

Counsel: Amanda C. McLachlan, for the Plaintiff/Moving Party Douglas M. Cunningham, for the Defendants/Responding Parties Dirk Johannes Plate and Maria Van Noorden Plate

HEARD: August 2 and 3, and October 3, 2019

Reasons for Decision

DIETRICH J.

Overview

[1] The plaintiff Atlas Copco Canada Inc. is a global manufacturer of industrial tools and operated a plant in Sudbury, Ontario. In May 2019, the plaintiff brought this motion for contempt of a Mareva injunction against the defendants Dirk Johannes Plate (“Mr. Plate”), a former senior employee, and his wife Maria Van Noorden Plate (“Mrs. Plate”).

[2] The Mareva injunction arose out of three orders of this Court made over eight years ago, on each of September 12, 2010 (per Newbould J.), December 9, 2010 (per Wilton-Siegel J.) and April 11, 2011 (per Mesbur J.) (collectively the “2010/2011 Orders”). The 2010/2011 Orders prohibit the disposal or further encumbrance by Mr. and Mrs. Plate of two real properties known as the Quebec properties and another in Leerdam, in the Netherlands.

[3] Mr. Plate worked for the plaintiff from 1997 to 2007. He started as an operations manager and was promoted to Vice President of Global Strategic Customers. Mr. and Mrs. Plate had come to Canada from the Netherlands specifically for Mr. Plate’s employment with the plaintiff.

[4] Sometime in 2001, Mr. Plate became aware of an ongoing scheme to overbill the plaintiff for employee benefits. He agreed to participate and share in the illicit funds gained. He did so until the scheme was discovered. The scheme had begun in the early 1990’s and in total the illicit funds defrauded amounted to more than $22 million dollars.

[5] In a subsequent jury trial, Mr. Plate was convicted for his participation in the fraud and was found to have benefited from illicit annuities and an insurance policy.

[6] Mr. Plate was sentenced to five years imprisonment. On October 26, 2016 Poupore J. made a restitution and forfeiture order against him. The restitution order was limited to the annuities and certain insurance benefits with a value of $77,930. Mr. Plate served his prison sentence in Canada and was subsequently deported to his home country, the Netherlands. Mrs. Plate returned to the Netherlands with her husband in November 2018.

[7] The plaintiff brought the within civil action in 2010 seeking damages against all the defendants including Mr. Plate and Mrs. Plate. Against Mrs. Plate, the plaintiff claims unjust enrichment.

[8] Mrs. Plate was never implicated in her husband’s fraudulent conduct. She was named as a sole or joint owner of certain of the illicit annuities and the beneficiary of the insurance policy. She co-operated by renouncing any interest in these investments.

[9] In the within civil action the plaintiff brought two motions, both heard by Dunphy J. The first was a motion to vary the Mesbur J. Order, heard on February 14, 2018. Without opposition, Dunphy J. issued an order that full ownership of the annuities and any income from the annuities that had been paid into court since 2010 be transferred to the plaintiff.

[10] The second motion, a motion for summary judgment in the action, was heard on March 5, 2018. Dunphy J. found Mr. Plate in breach of his fiduciary duties to the plaintiff for his participation in the scheme. On March 7, 2018, Dunphy J. issued a judgment in which Mr. Plate was found liable to the plaintiff for damages for breach of trust in the amount of $20 million. On appeal, the Ontario Court of Appeal set the summary judgment aside and ordered that a trial be held to determine the issues and awarded costs of $22,000 payable to Mr. Plate.

[11] Mr. Plate made a full restitution of the annuities, as ordered. The cash portion of the restitution and forfeiture order remains unfulfilled.

[12] For a period of nearly seven years the plaintiff appears to have neglected to perfect its court-ordered security over the real estate owned by Mr. and Mrs. Plate. The Mareva orders were not registered against the real properties and the plaintiff did not fulfill its own obligations under the 2010/2011 Orders.

[13] Shortly before the appeal was heard, in November 2018, Mrs. Plate sold the Quebec properties. These properties were the only remaining assets with any significant value owned by Mr. and Mrs. Plate in Canada.

[14] The Plate defendants bring a cross-motion seeking: a stay of the action against Mr. Plate; an order precluding the plaintiff from bringing any further proceeding against Mr. Plate; a dismissal of the action against Mrs. Plate; and an order dismissing the contempt motion against them; or, in the alternative, an order setting aside the 2010/2011 Orders.

[15] For the reasons that follow, I do not find Mr. Plate or Mrs. Plate in contempt of the Mareva injunction created by the 2010/2011 Orders.

[16] On the cross-motion, I decline to enter a stay of the action against Mr. Plate. I do not find that the plaintiff is precluded from bringing further proceedings against Mr. Plate, including this contempt motion. I would dismiss the action against Mrs. Plate.

Factual Background

The Quebec Properties

[17] Mr. and Mrs. Plate purchased a condominium property in Dorval, in the Province of Quebec on June 22, 1993 for $304,246. The purchase was made before Mr. Plate’s employment with the plaintiff and his subsequent alleged fraudulent conduct. On December 19, 2007, about one month after Mr. Plate’s dismissal by the plaintiff for cause, Mr. Plate transferred his interest in the Dorval property to Mrs. Plate.

[18] Mr. and Mrs. Plate purchased a second property, a vacant lot in Morin Heights, in the Province of Quebec. They purchased this property on November 2, 2005 for $157,357. At that time, Mr. Plate was earning a significant salary working for the plaintiff. On December 19, 2007, Mr. Plate transferred his interest in the Morin Heights property to Mrs. Plate.

[19] Once the plaintiff discovered that Mr. Plate had transferred his interest in the Quebec properties to Mrs. Plate, it brought a claim against Mrs. Plate. It alleged that she knew or was willfully blind to the continuing employment benefits fraud perpetuated by Mr. Plate, that she unjustly benefited from the fraudulent scheme, at the plaintiff’s expense, and there was no juristic reason for the enrichment. Subsequently the plaintiff conceded that it had no evidence to support the action against Mrs. Plate but it asserts that the transfers by Mr. Plate to Mrs. Plate form the basis for a constructive trust claim against her.

[20] Pursuant to the 2010/2011 Orders, Mrs. Plate was ordered, and she agreed, not to dispose of the Dorval property and the Morin Heights property pending the resolution of the civil action against Mr. and Mrs. Plate, among others, relating to the fraudulent scheme.

[21] On October 28, 2018, Mrs. Plate sold the Dorval property for $885,000. And, on November 9, 2018, Mrs. Plate sold the Morin Heights property for $198,000. Mr. Plate executed the transfer documentation as her spouse. The plaintiff was not advised of the sale of the Quebec properties.

Mareva Injunction Orders

[22] Through the 2010/2011 Orders, with Mrs. Plate’s consent or non-opposition, the plaintiff obtained a right to challenge Mrs. Plate’s ownership interest in the Quebec properties and the one in Leerdam, in the Netherlands.

[23] The 2010/2011 Orders provide that Mrs. Plate is enjoined from dealing with the real properties as follows (para. 3 of the Wilton-Siegel J. Order):

The proposed defendant Marie Van Noorden has agreed on consent to provide an undertaking (to be drafted by plaintiff’s counsel) not to further encumber or sell the real properties that were the subject matter of Justice Newbould’s order, dated September 13, 2010, and this Court so orders that the undertaking shall be provided. Further, the plaintiff may register on title to those properties in Quebec and in the Netherlands any notice in those jurisdictions that is the same or similar to a certificate of pending litigation in the Province of Ontario to give notice of the plaintiff’s claims against these properties while the plaintiff’s motion for a Mareva injunction is pending and that Maria Van Noorden has consented to the registration of such instruments on the following properties [description the Quebec properties and the Leerdam property, in the Netherlands omitted].

[24] The plaintiff neither drafted nor provided the undertaking to Mrs. Plate. It did not register a certificate of pending litigation or similar document on title to the real properties covered by the 2010/2011 Orders.

Position of the Parties

[25] The plaintiff asserts that a finding of civil contempt of the 2010/2011 Orders against Mr. and Mrs. Plate is appropriate, and that Mr. and Mrs. Plate should be sanctioned for flouting those Orders. It asserts that the contempt at issue arises from an intentional refusal to comply with a Mareva injunction. The plaintiff further asserts that Mr. and Mrs. Plate knowingly and intentionally breached the 2010/2011 Orders by selling the Quebec properties mere weeks prior to the appeal of a $20 million summary judgment awarded against Mr. Plate, and that they did so in a bid to frustrate any judgment awarded to the plaintiff in this case.

[26] The plaintiff further asserts that the appropriate remedies for their contempt are: i) an order requiring Mr. and Mrs. Plate to pay the proceeds of $1,083,000 from the sale of the Quebec properties into court; and ii) should Mr. and Mrs. Plate fail to pay the proceeds into court within thirty days of the order directing them to do so, an order striking Mrs. Plate’s statement of defence and Mr. Plate’s statement of defence, cross-claim and counterclaim.

[27] The plaintiff further asserts that if the court determines that the breach of the 2010/2011 Orders does not rise to the level of civil contempt, the court should strike Mrs. Plate’s statement of defence and Mr. Plate’s statement of defence, crossclaim and counterclaim pursuant to rule 60.12 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (the “Rules”).

[28] Mr. and Mrs. Plate assert that the contempt motion against them should be dismissed, because there was no intentional breach of the 2010/2011 Orders and, in fact, it was the plaintiff who breached the Orders. Mr. Plate further asserts that the plaintiff should be barred from bringing any further proceeding against him, including this contempt motion, because it has failed to pay $22,000 in costs awarded to Mr. Plate by the Court of Appeal when it set aside Dunphy J.’s summary judgment. Mr. Plate also asserts that the action against him should be dismissed, because it is brought with malice and bad faith in an attempt to starve Mr. Plate of the funds required to finance his defence.

[29] Mrs. Plate further asserts that the action against her should be dismissed, because the plaintiff no longer has any cause of action against her. Alternatively, Mrs. Plate asserts that any action against her should be dismissed, because the plaintiff has delayed in the prosecution of its case against her to her prejudice.

A. The Plaintiff’s Motion for Contempt

Are Mr. and Mrs. Plate in contempt of the 2010/2011 Orders?

Legal Principles

[30] Rule 60.11(1) of the Rules provides that a contempt order to enforce an order requiring a person to do an act may be obtained on motion to a judge in the proceeding in which the order to be enforced was made. In Carey v. Laiken, 2015 SCC 17 at para. 30, citing Pro Swing Inc v. ELTA Golf Inc., 2006 SCC 52, the Supreme Court of Canada held that this rule is akin to “a declaration that a party has acted in defiance of a court order.”

[31] To succeed in a motion for contempt, the moving party must establish, beyond a reasonable doubt, that: a) the order alleged to have been breached states clearly and unequivocally what should and should not have been done; b) the party alleged to have breached the order had actual knowledge of it; and c) the party allegedly in breach intentionally did the act the order prohibits or intentionally failed to do the act the order compels: Carey, at paras. 32-35. Courts exercise their discretion in making a contempt order cautiously and with great restraint.

[32] Upon a finding of contempt due to breach of an order, rule 60.11(5) of the Rules affords the court discretion in the enforcement of the order. The court may order the person in contempt to do or refrain from doing an act or comply with any other order a judge considers necessary.

[33] Rule 60.12 of the Rules affords the court a wide discretion to sanction breaches of interlocutory orders, including the discretion to strike a party’s defence. The rule may be used to avoid the undermining of public confidence in the capacity of the justice system to process disputes fairly and efficiently, which would result from a failure by the court to enforce its orders: 1196158 Ontario Inc. v. 6274013 Canada Ltd., 2012 ONCA 544 at para. 19.

Analysis

Breach of the 2010/2011 Orders

[34] The language in the 2010/2011 Orders is clear and unequivocal. The order of Wilton-Siegel J. was made with Mrs. Plate’s consent and reflected her agreement not to “further encumber or sell the real properties that were the subject of Justice Newbould’s order dated September 13, 2010”, which included the Quebec properties. Justice Mesbur’s order continued this order “pending trial of the within action or further order of the court.” Having consented to the order of Wilton-Siegel J., Mrs. Plate cannot be said to have not known what could and could not be done in relation to the Quebec properties. Both Mr. and Mrs. Plate had knowledge of the 2010/2011 Orders. Mr. Plate was represented by counsel who opposed the 2010/2011 Orders. Mrs. Plate consented to the relief sought as against her on the motion before Wilton-Siegel J.

[35] The plaintiff asserts that Mr. and Mrs. Plate intentionally breached the 2010/2011 Orders by selling the Quebec properties immediately prior to relocating to the Netherlands to frustrate the plaintiff’s recovery efforts. There is no evidence to suggest that they were compelled by law to sell the properties and they took no steps to vary the 2010/2011 Orders.

Breach by Mrs. Plate

[36] Mrs. Plate argues that, despite the clear language of the 2010/2011 Orders, it was the plaintiff that failed to comply with these Orders. It had an obligation to draft and send an undertaking to Mrs. Plate for her signature, which it did not do. While clearly authorized to register a certificate of pending litigation, or like document, against Mrs. Plate in the Province of Quebec, it did not. Nothing was done by the plaintiff with respect to the 2010/2011 Orders relating to the real properties once the 2010/2011 Orders were issued. Both Mr. and Mrs. Plate assert that the requirements to draft and deliver the undertaking were conditions precedent to any obligation on their part relating to the three properties included in the Orders.

[37] Further, as far as back as 2011, the plaintiff admitted at the discovery stage that it had no evidence that the interests held by Mr. and Mrs. Plate in the Quebec properties had been acquired with illicit funds. According to the record, the Quebec properties had been purchased by the defendant, Dirk Plate, prior to his participation in the fraudulent scheme. Further, based on the record, the purchase financing for each of the Quebec properties included substantial mortgages.

[38] Mrs. Plate was not added as a defendant to the civil action until July 2011 well after the first two Mareva-like orders had been made. By this time, the plaintiff knew it had no evidence to support a claim that any of the real properties had been purchased with funds fraudulently acquired from the plaintiff.

[39] Mrs. Plate was not added as a respondent to the summary judgment motion heard by Justice Dunphy on March 5, 2018 and the plaintiff did not advance any real property claims against Mrs. Plate. Nor did it seek any relief against Mrs. Plate relating to the real properties. An assertion of contempt must be founded on claims actually asserted and pursued in the action.

[40] Based on these facts, I cannot find, beyond a reasonable doubt, that Mrs. Plate intentionally breached the 2010/2011 Orders. She herself played no part in the slow-moving litigation until February 14, 2018 when the plaintiff obtained judgment against her with respect to the annuities, which her husband had obtained by fraud. The summary judgment of this Court did not encompass any relief against Mrs. Plate in respect of the Quebec properties or the real property in the Netherlands.

[41] I agree with the submissions of Mrs. Plate that the plaintiff’s contempt motion cannot succeed because the plaintiff itself is in breach of its obligations under the 2010/2011 Orders to draft and send an undertaking to Mrs. Plate.

[42] I am not persuaded that Mrs. Plate’s subsequent disposition of her interests in the Quebec properties was done in defiance or contempt of the 2010/2011 Orders or this Court’s processes. I do not find an intention on her part to breach the 2010/2011 Orders. I accept that she reasonably believed that the action against her had come to a conclusion when the plaintiff obtained a judgment on the annuities on February 14, 2018, and Mrs. Plate did not oppose the Order directing the annuities and income earned thereon to be paid out of court to the plaintiff. She was aware of the plaintiff’s admission that it had no evidence that any of the real properties had been purchased with monies fraudulently taken from the plaintiff; the factual findings of two Superior Court Justices (Poupore J. and Dunphy J.) that Mr. Plate had not received any unauthorized assets from the plaintiff other than the annuities and insurance policy benefits; and the failure of the plaintiff to pursue any real property claims from 2011 onwards. I accept that Mrs. Plate believed that the claim for unjust enrichment, being the only claim made against her, was finally determined on February 14, 2018.

[43] I do not find this to be an appropriate case in which to strike Mrs. Plate’s defence. I do not find that her actions in selling the Quebec properties undermine public confidence in the capacity of the justice system to process disputes fairly and efficiently. When Mrs. Plate acted with respect to the Quebec properties, the Mareva injunction had been obtained some seven years earlier and the plaintiff itself had not complied with the terms of the 2010/2011 Orders or taken any action in respect of the injunction.

Breach by Mr. Plate

[44] Mr. Plate argues that at no time after the 2010/2011 Orders were obtained did the plaintiff pursue any real property claims against Mr. and Mrs. Plate. When the plaintiff brought its motion for summary judgment on March 5, 2018 against Mr. Plate, identifying all the claims it was asserting against him in the action, the plaintiff made no claims relating to any real properties, including any alleged fraudulent conveyances of such properties.

[45] Where a party makes a claim for relief, e.g., the setting aside of a fraudulent conveyance, the party must clearly specify the nature of the claim, the relief sought and the statutory provisions in support of the same: rule 25.06(8) and (9) of the Rules.

[46] Mr. Plate argues that it was clear from the notice of motion for the March 5, 2018 summary judgment motion served on him in December 2017, and from representations by counsel for the plaintiff, that the motion would address all the claims that the plaintiff had against Mr. Plate and no relief was sought with respect to the real properties referenced in the 2010/2011 Orders.

[47] When that motion was heard, no real property claims, including any fraudulent conveyance allegations, were made against Mr. Plate. It was only after the Court of Appeal set aside the summary judgment against Mr. Plate, and ordered that the matter proceed to trial, that the plaintiff asserted that it would pursue claims, including a constructive trust claim, against the Quebec properties and that Mr. and Mrs. Plate were in contempt of the 2010/2011 Orders.

[48] The record shows that the plaintiff did not conduct any real property searches relating to the Quebec properties even when they knew that Mr. Plate would be deported. The plaintiff has adduced no evidence to show that the real properties were purchased with funds fraudulently obtained from the plaintiff.

[49] Based on these facts, it was not unreasonable for Mr. Plate to assume that the plaintiff was not interested in pursuing the real properties included in the 2010/2011 Orders some seven years earlier. I cannot find, beyond a reasonable doubt, that Mr. Plate intentionally breached the 2010/2011 Orders by facilitating the sale of the properties by Mrs. Plate. His role was limited to executing documents to correct title inaccuracies and to confirm that there was no pending family law claim relating to the Quebec properties.

[50] For the reasons noted above respecting Mrs. Plate’s defence, I do not find this an appropriate case in which to strike Mr. Plate’s defence, cross-claim and counterclaim.

B. The Cross-Motion

Should the plaintiff’s action be stayed as against Mr. Plate, and should the plaintiff be barred from bringing any further proceeding against Mr. Plate, including this contempt motion, because it has not paid the $22,000 costs order awarded to Mr. Plate by the Ontario Court of Appeal?

[51] When the Ontario Court of Appeal set aside the summary judgment that found Mr. Plate liable for $20 million in damages, it awarded Mr. Plate $22,000 in costs for the appeal. The plaintiff has refused to pay the costs and asserts that it is entitled to set this amount off against the $77,930 owing by Mr. Plate as part of the restitution order. The plaintiff argues that the $77,930 amount became payable in 2018 when the restitution and forfeiture order was made, and it has the right to set-off the costs award against it.

[52] Mr. Plate asserts that the Court of Appeal did not in any way qualify or restrict its order on costs and that plaintiff has not asked it to do so. Accordingly, he submits that the costs award is owing and payable to him immediately.

[53] Mr. Plate asserts that there can be no right of set-off because he does not owe any amount to the plaintiff presently. He submits that the $77,930 will become due and payable one year after the five-year warrant relating to his sentence expires, which will occur in October 2022. Mr. Plate relies on the advice of his criminal counsel in this regard. Mr. Plate further submits that the restitution amount already has non-payment sanctions attached to it. Should he fail to make this payment into court, he would be subject to a fine in the same amount payable within ten years, failing which, he would be re-incarcerated for a further five years. Mr. Plate also submits that he is not directed to pay the amount owing to the plaintiff, but, rather, to pay it into court.

[54] Mr. Plate further asserts that the Court would be justified in staying the plaintiff’s action against Mr. Plate because it is apparent that the plaintiff’s conduct is motivated by malice and designed to starve Mr. Plate of funds such that he will be unable to defend against further proceedings.

Legal Principles

[55] Subrule 57.03(2) of the Rules provides that when a party fails to pay a costs order arising from a motion, the Court may dismiss or stay the defaulting party’s proceeding, strike out the party’s defence or make such other order as is just.

[56] Rule 60.12 of the Rules also provides that when a party fails to comply with an interlocutory order, the Court may dismiss or stay the proceeding; dismiss the party’s proceeding or strike out the party’s defence; or make such other order as is just.

[57] In Brim IPCO Inc. v. Horbatiuk, [2019] ONSC 878, the defendants in two related actions brought successful motions against a plaintiff corporation that had failed to pay a series of court orders. In reviewing the jurisprudence, Emery J. considered the principles to be applied when the court is asking to stay, dismiss or strike a defence based on an unpaid costs award. Citing from Rana v. Unifund Assurance Company, 2016 ONSC 2502, Emery J. set out a number of principles, including: a) where there has been non-compliance with an order of the court, the court should be alive to the possibility that its process is being abused and failing to act may deprive the moving party of justice; b) the right of access to the courts must be accompanied by the responsibility to abide by the rules of civil procedure and to comply with orders of the court; c) the court ought not to sit in appeal of the prior costs awards; d) the court may have regard to a pattern of unnecessary and unreasonable steps taken in the proceeding, including appealing numerous orders without chance of success; e) if the orders of the court are “cavalierly ignored” and if a litigant “continuously fails to comply with her obligations as a litigant and then fails to abide by the costs consequences attendant upon that behaviour” the court is justified in bringing some finality to the action; f) impecuniosity is not a shield for unreasonable conduct of litigation and a dismissal order may be made even if it resolves the matter on procedural rather than substantive grounds; and g) costs themselves become an inadequate form of compensation for prejudice, especially where the party on whom they are imposed refuses to pay them.

Analysis

[58] I do not find Mr. Plate’s arguments that the plaintiff should be barred from continuing its action against him for failure to pay him the costs awarded to him by the Court of Appeal to be tenable. There is no evidence that the plaintiff is refusing to pay the costs and abusing the court’s process or that it is “cavalierly ignoring” the cost consequences of the appeal. The plaintiff is owed $77,930 from Mr. Plate, which he has not yet paid. That amount, irrespective of whether it is ordered to be paid into the Court in Sudbury, and irrespective of when he makes restitution, or is required to make restitution, the $77,930 will accrue to the benefit of the plaintiff. I find that it is not unreasonable for the plaintiff to set-off against the $77,930, which Mr. Plate is required to pay for the plaintiff’s benefit as part of the restitution order, the costs award payable by the plaintiff to Mr. Plate.

[59] Further, as held in Burman v. Rosin (1915), 26 D.L.R. 790 (Ont. S.C.), at p. 792: “There is, however, another equity which has sometimes been called “set-off”, which does not in any way depend upon the statute, which arises when the claims are upon the same contract or are so interwoven by the dealings between the parties that the Court can find that there has been established a mutual credit, or an agreement, express or implied, that the claims should be set one against the other.” Mr. Plate does not dispute that he is indebted to the plaintiff for the $77,930 as set out in the restitution order. This debt arose because of the alleged fraud committed by Mr. Plate on the plaintiff. The appeal of the summary judgment motion relates to the same allegation of fraud. I am satisfied that these matters are so interwoven as between the plaintiff and Mr. Plate that a mutual credit has been established. Accordingly, I find that the plaintiff is entitled to set off the amount owing to Mr. Plate for costs as against the greater amount owed to the plaintiff by Mr. Plate as restitution.

[60] When determining if an action should be dismissed where there is non-compliance with a costs order, the court must balance the competing interests of all parties and consider all relevant factors: Garett v. Oldfield, Greaves, D’Agostino, 2016 ONCA 424.

[61] I reject Mr. Plate’s argument that the plaintiff’s conduct is motivated by bad faith and malice, and designed to starve him of funds, compromising his ability to defend against further proceedings. I find no evidence of bad faith or malice. Further, there is no evidence before this Court that Mr. Plate is starved of funds. The evidence is that the Quebec properties alone sold for over $1 million. There is also no evidence before this Court to suggest that Mr. and Mrs. Plate no longer own the Leerdam property, in the Netherlands.

Should the action against Mrs. Plate be dismissed on the merits?

[62] In the cross-motion brought by Mr. and Mrs. Plate, Mrs. Plate seeks an order confirming that the action against her was concluded on February 14, 2018, when the plaintiff obtained judgment against her relating to the annuities. She asserts that any and all other damages claims against her merged with the court’s judgment on that day. Alternatively, she seeks that the action against her be dismissed for delay. In the further alternative, she seeks summary judgment against the plaintiff, because she asserts that it had no evidence that any interest that Mr. and Mrs. Plate had in the real properties in Quebec or in the Netherlands had been acquired with funds fraudulently acquired from the plaintiff.

Legal Principles

[63] The doctrine of merger, related to the doctrines of issue estoppel and res judicata, provides that a plaintiff who has been granted a judgment against a party is precluded from seeking a second judgment against the same party under the same cause of action: Moore v. Sweet, 2018 SCC 52 at paras. 89-91 and Peter v. Beblow, [1993] 1 S.C.R. 980 at para. 3.

[64] When different damages allegedly arise from the same cause of action, the doctrine of merger applies to preclude subsequent claims. Upon adjudication of a claim, the cause of action is exhausted, and it ceases to exist against the party; it cannot support further litigation: Sherwood Steel Ltd. v. Odyssey Construction Inc., 2014 ABCA 230 at paras. 14-22. The doctrine promotes the prevention of a multiplicity of proceedings.

Analysis

[65] In this case, the plaintiff only pleaded one cause of action, unjust enrichment, against Mrs. Plate. Mrs. Plate did not waive any application of merger and the plaintiff did not request judicial exemption from the doctrine to permit it to advance additional unjust enrichment claims against Mrs. Plate later in the proceeding.

[66] Even before Mrs. Plate was added as a party to the action, and prior to the plaintiff’s motion for a Mareva injunction, in 2010, Mrs. Plate consented to the orders of Newbould J. and Wilton-Siegel J. These orders required Mr. and Mrs. Plate to pay the annuities and the income earned thereon into court.

[67] Mrs. Plate submits that the order of Wilton-Siegel J. went on to provide that after the plaintiff complied with the order, restrictions would be placed on Mrs. Plate’s ability to deal with the real properties, based on the plaintiff’s stated intention to advance claims against those properties. Mrs. Plate consented to this order as well, pending the hearing of the motion for a Mareva injunction.

[68] In April 2011, having heard the Mareva injunction motion, Mesbur J. confirmed that the annuities would be paid into court and ordered that the 2010 orders (which included the requirement for the plaintiff to draft and provide an undertaking to Mrs. Plate) would continue regarding the real properties. The plaintiff never drafted or provided Mrs. Plate with the undertaking and never registered any notice on title to the real properties. No explanation has been given by the plaintiff as to why these steps were not taken.

[69] In July 2011, the plaintiff amended its claim and added Mrs. Plate. In the amended claim, the plaintiff did not allege that Mr. Plate had improperly conveyed his interest in the properties to Mrs. Plate in 2007, and it did not allege that such transfers were fraudulent, reviewable or voidable. The amended claim made no mention of the real properties. It was not until the plaintiff was being cross-examined in July 2019 that Mr. and Mrs. Plate learned that the plaintiff intended to advance claims against the real properties. The amended claim alleged that Mrs. Plate had been willfully blind to the fraud perpetrated by Mr. Plate and had benefited unjustly.

[70] Under cross-examination, the plaintiff admitted that it had no evidence that the three properties had been purchased with monies unlawfully taken from it and it stated that the only assets the plaintiff were actively pursuing were the annuities. The plaintiff claimed that it was relying on evidence and documentation of Mr. and Mrs. Plate to prove that the properties were acquired improperly, but the plaintiff failed to identify any such evidence.

[71] There is no evidence before the Court to show that any of the funds fraudulently taken from the plaintiff by Mr. Plate were invested in the real properties. Mr. and Mrs. Plate purchased the Dorval condominium property in 1993, and the Leerdam property in the Netherlands in 1999, well before the allegations of wrongdoing against Mr. Plate in the action. The Morin Heights property was purchased for $157,357 in 2005, at a time when Mr. Plate would have been earning a significant salary. Further, the real properties were purchased with considerable mortgage financing.

[72] At the same time, in 2011, the plaintiff testified that the focus of its claim against Mrs. Plate was on the annuities acquired by Mr. Plate from late 2003 to 2007, in which Mrs. Plate was either a sole or joint registered owner or a surviving beneficiary.

[73] Both Poupore J., who issued Mr. Plate’s sentencing order, and Dunphy J., in his March 7, 2018 summary judgment decision, concluded that there was no evidence that Mr. Plate had acquired any assets from the plaintiff apart from the annuities purchased between 2003 and 2007, and the insurance policy benefit.

[74] I accept Mrs. Plate’s argument that any claims against Mrs. Plate that were never pursued by the plaintiff during the litigation were merged in the judgment issued to the plaintiff on February 14, 2018.

[75] While the motion brought on February 14, 2018 was a motion to vary the order of Mesbur J. and related relief, in substance, it was a motion for summary judgment extinguishing any interest of Mr. and Mrs. Plate in the annuities and confirming the plaintiff’s ownership of them. Mr. Plate had already been ordered to make restitution of his interest in the annuities to the plaintiff as part of his sentence. Accordingly, only Mrs. Plate was affected by the order of Dunphy J. She did not oppose this order directing that the annuities and the income earned thereon, which had been paid into court pursuant to the 2010/2011 Orders, be paid to the plaintiff. This order was a judgment against Mrs. Plate constituting a final determination of any and all rights and interests she had in the annuities.

[76] At no time after the February 14, 2018 judgment of Dunphy J. did the plaintiff advise Mrs. Plate that it intended to pursue any other claim against her, and it did not ask the court to permit it to seek additional damage claims against her based on its singular and general unjust enrichment claim. The plaintiff refused on cross-examination to answer proper questions relating to the nature of its claim against Mrs. Plate and the evidence in support of it.

[77] I find that it was reasonable for Mrs. Plate to believe that the action against her had come to an end. She co-operated in the judgment made against her. No real property claims had been made against her. Further, the plaintiff had, some seven years earlier, been ordered to present to her an undertaking with respect to her actions relating to the properties, which it never did. Finally, no real property claims, including any allegation of fraudulent conveyance had ever been asserted against Mrs. Plate, including when the plaintiff amended its claim in July 2011.

[78] The plaintiff admitted that its claim against Mrs. Plate centred on the annuities and judgment was made against her by Dunphy J. on February 14, 2018. She co-operated and renounced any entitlement to the annuities and the income therefrom. Mrs. Plate did not oppose the payment of the annuities and income earned thereon into court. I am satisfied that all other damages claims, if any, merged with the court’s judgment on that day.

Should the action against Mrs. Plate be dismissed for delay?

[79] Had I not found all claims against Mrs. Plate merged with the judgment made against her by Dunphy J. on February 14, 2018, I would dismiss the action against Mrs. Plate for delay caused by the plaintiff.

Legal Principles

[80] The court may dismiss an action for delay pursuant to the Rules or pursuant to its inherent jurisdiction. Rule 24.01 provides that a defendant may move to have an action dismissed for delay where the plaintiff has failed to set the action down for trial within six months after the close of pleadings.

[81] In Langenecker v. Sauvé, 2011 ONCA 803 (“Sauvé”) at paras. 6-7, the Ontario Court of Appeal identified two situations in which a court should dismiss a claim for delay: (i) the delay is caused by the intentional conduct of the plaintiff or its counsel that demonstrates a disdain or disrespect for the court process; or (ii) the delay is inordinate and inexcusable such that it gives rise to a substantial risk that a fair trial of the issues in the litigation will not be possible because of the delay. In the case at bar, Mrs. Plate asserts that the delay is inordinate and inexcusable.

[82] Citing Szpakowsky v. Tenenbaum, 2017 ONSC 18 at para. 19, in Farmer v. 145 King Street West, 2017 ONSC 6003, Ferguson J. set out certain other principles to be applied on a motion to dismiss a claim for delay. These principles confirm that it is the responsibility of the plaintiff to move the action along, not a defendant; that the onus rests on the plaintiff to show that the delay was not intentional; that the plaintiff must rebut the presumption of prejudice arising from the unexplained delay by showing that documents have been preserved, and that the issues in dispute do not require the recollection of witnesses, or that necessary witnesses are available with detailed recollection of events. Also included is the principle that an inexcusable delay requires a determination of the reasons for the delay and an assessment of whether those reasons afford an adequate explanation for the delay. Explanations that are “reasonable and cogent” or “sensible and persuasive” will excuse the delay if dismissing the action would be inappropriate.

[83] This case involves allegations of fraud, in respect of which Mrs. Plate will be asked to testify. As recognized by the Ontario Court of Appeal in Ticchiarelli v. Ticchiarelli, 2007 ONCA 1 at para. 33, allegations of conspiracy, misrepresentation, unconscionability and undue influence succeed or fail largely on the viva voce evidence offered at trial. The Court of Appeal stated that the state of the witnesses was a key element for the motion judge in assessing prejudice.

Analysis

Has the delay been inordinate and inexcusable?

[84] To determine whether the delay has been inordinate, the court is required to consider the length of time between the commencement of the proceeding and the motion to dismiss. In this case, the plaintiff’s claim was commenced in 2008, nearly 12 years ago. While the plaintiff brought a motion for summary judgment, the Court of Appeal has ordered that the matter be tried. There is no evidence before this Court that the matter has been set down for trial. The plaintiff asserts that the delay was caused by Mr. Plate’s criminal trial and imprisonment, but this does not explain why the plaintiff could not have pursued its unjust enrichment claim against Mrs. Plate, who was not charged criminally. I find the delay in this case to be inordinate. It is the plaintiff’s responsibility to prosecute its case efficiently. As noted in Papp Plastics Distributing Ltd. v. Unity Insurance Brokers (Windsor) Ltd. 2018 ONSC 5009 at para. 57, the defendant is not obliged to take positive steps to move the action forward or assist a plaintiff in having the matter progress to trial.

[85] To determine whether the delay has been inexcusable, the court must assess the reasons for the delay and whether those reasons afford an adequate explanation for the delay. The Ontario Court of Appeal in Sauvé, at para. 9, confirmed that the explanations for the delay must be “reasonable and cogent” or “sensible and persuasive” at least to the extent that an order dismissing the action would be inappropriate. It further held, at para. 10, that in assessing the explanations offered, the court will consider not only the credibility of those explanations offered for individual parts of the delay but also the overall delay and effect of the explanations considered as a whole.

[86] The plaintiff has not provided a compelling reason for delay in the prosecution of its case that has spanned more than ten years. The delay is especially concerning in light of the plaintiff’s admission that it had no evidence to show that illicit funds had been used to purchase the real properties that are the subject of the 2010/2011 Orders.

[87] The plaintiff took no steps from 2011 to 2019 to advance a single claim against Mrs. Plate (or Mr. Plate for that matter) in respect of the real properties. Even after the plaintiff was advised, at the time of the appeal from Dunphy J.’s summary judgment dated March 9, 2018, that Mr. Plate had been deported and he and Mrs. Plate had left Canada, the plaintiff did not search the titles to the Quebec properties. It was not until the Court of Appeal released its decision setting aside the March 9, 2018 summary judgment that the plaintiff undertook title sub-searches of the real properties and then brought its motion for contempt.

[88] The plaintiff has not offered a persuasive explanation for its delay or its failure to pursue any claims regarding the real properties. I find the delay in this case to be inordinate and inexcusable with the result that a fair trial is no longer possible. Setting aside the fact that Mrs. Plate is 77 years of age and infirm, it is reasonable to infer that she will not be in a position to recall the facts with the same degree of accuracy as she would have been able to do nine or ten years ago when the 2010/2011 were made. Similarly, it would be challenging for Mrs. Plate to recall whether Mr. Plate contributed illicit funds taken from the plaintiff to real properties purchased 15 or 26 years ago.

Is there a substantial risk that a fair trial will not be possible?

[89] As held in Sauvé at para. 11, dismissal is appropriate where there is direct prejudice caused by the delay to the defence’s ability to put its case forward for adjudication on the merits. The Court went on to recognize that prejudice is inherent in long delays: “Memories fade and fail, witnesses become unavailable, and documents and other potential exhibits are lost. The longer the delay, the stronger the inference of prejudice to the defence case flowing from that delay.”

[90] An inordinate delay gives rise to a presumption of prejudice. The defendant is not required to show actual prejudice: Papp Plastics, at para. 60. The onus is on the plaintiff to rebut the presumption of prejudice arising from the unexplained delay by showing that documents have been preserved, and that the issues in dispute do not require the recollection of witnesses, or that necessary witnesses are available with detailed recollection of events: Farmer, at para. 31.

[91] I find that the plaintiff has not adduced sufficient evidence to show that no prejudice will be suffered by the delay. Mrs. Plate has testified that her memory is failing. She has also testified that she has no knowledge or information relating to the fraudulent scheme visited on the plaintiff, which was discovered over twelve years ago. I am satisfied that there is a fair presumption that her recollection would be significantly compromised by the passage of more than twelve years. It is unlikely that she would be able to offer reliable evidence at the time of the trial.

[92] The availability of the documents concerning the fraudulent scheme in and of itself does not equate to a finding by the court that a fair trial can still take place after many years: [Jacob, at para. 51]. Allegations such as fraud rely largely on viva voce evidence offered at trial: Ticchiarelli, at para. 33, and fading memories resulting from delay affect the veracity of testimony given at trial and the effectiveness of cross-examination, even when transcripts from discovery are available: [Algoma District, at para. 81]. Accordingly, I find that, in this matter, in which fraud is alleged against the defendants, and viva voce evidence will be critical, there is a substantial risk that Mrs. Plate, whose memory is failing, could not fairly present her case so long after the relevant events. The delay in the plaintiff’s prosecution could well mean that a fair trial is simply not possible for Mrs. Plate.

[93] I accept Mrs. Plate’s testimony that her memory of events has faded and her ability to concentrate has deteriorated since 2011. I am satisfied that Mrs. Plate has suffered prejudice as a result of this delay. She has severe arthritis and other health problems that would prevent her from travelling back to Canada alone. Because of his deportation, Mr. Plate would not be able to accompany her on the journey. Her costs of travel from the Netherlands to Canada, including health insurance, would be prohibitive. Further, she has already deposed in her examination for discovery that she has no knowledge of events or transactions with regard to the plaintiff’s operations.

[94] The plaintiff has adduced no evidence to contradict Mrs. Plate’s evidence of the prejudice to her caused by its delay. The onus is on the plaintiff to show why the action should not be dismissed for delay, to explain the delay to satisfy the court that there would be no prejudice to the aggrieved defendant. The plaintiff has not responded to the Mrs. Plate's motion to dismiss for delay other than by bringing its motion for contempt. I find that the plaintiff has not met its onus.

Disposition and Costs

[95] For the foregoing reasons, the plaintiff’s motion is dismissed. The cross-motion by Mr. Plate is dismissed and the plaintiff’s action against him is not stayed. The cross-motion by Mrs. Plate is granted and the plaintiff’s action against her is dismissed.

[96] The parties have submitted costs outlines of the motion and cross-motion. They have not yet had the opportunity to comment on the other’s costs. They are strongly encouraged to agree on the matter of costs of this motion and cross-motion in which success is divided. Should they be unable to agree, Mr. and Mrs. Plate shall serve and file written cost submissions not to exceed three pages (not including a bill of costs or costs outline and offers to settle, if any) within 14 days hereof and the plaintiff shall serve and file written costs submissions not to exceed three pages (not including a bill of costs or costs outline and offers to settle, if any) within 14 days thereafter. Reply submissions may only be made with leave.

Dietrich J.

**Released:** January 2, 2020

COURT FILE NO.: 08-CL-7349 DATE: 20200102 ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: ATLAS COPCO CANADA INC. Plaintiff/Moving Party – and – DAVID HILLIER, DIRK JOHANNES PLATE, LÉO CARON, JEANNETTE BOURQUE, MARIA VAN NOORDEN PLATE, PAUL ARMAND CARON, P.A. CARON, COUNTIER D’ASSUANCE INC., and 3870901 CANADA INC. Defendants/ Responding Parties REASONS FOR DECISION Dietrich J. Released: January 2, 2020