Court File and Parties
COURT FILE NO.: CV-20-00649470-00CL DATE: 2022/03/10 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Her Majesty the Queen in Right of Ontario, Plaintiff AND: Sanjay Madan (a.k.a. Sadanand Madan), Shalini Madan, Chinmaya Madan, Ujjawal Madan, Intellisources Inc., Newgen Solutions Inc. 10583570 Canada Ltd., 1846932 Ontario Inc., Vidhan Singh and Wang & Associates Professional Corporation, AVPS Holdings Inc., AVPS Recruiting Inc., AVPS Investments Inc., AVPS Properties Inc., 2305509 Ontario Inc., 1784357 Ontario Inc., 6875459 Canada Inc., Defendants
BEFORE: C. Gilmore, J.
COUNSEL: Christopher A. Wayland, Counsel for the Moving Party Plaintiff Christopher Du Vernet, Counsel for the Defendants Sanjay Madan (a.k.a. Sadanand Madan), Shalini Madan, Chinmaya Madan and Ujjawal Madan. Matt Maurer, Counsel for the Defendants Vidhan Singh, Wang & Associates Professional Corporation, AVPS Holdings Inc., AVPS Recruiting Inc., AVPS Investments Inc., AVPS Properties Inc., 2305509 Ontario Inc., 1784357 Ontario Inc., and 6875459 Canada Inc.
HEARD: February 16, 2022
Endorsement on motion to strike
Introduction
[1] The Queen in Right of Ontario (the “Crown”) brings this Rule 21 motion for an Order striking certain paragraphs in the Statement of Defence of Sanjay Madan (“Sanjay”), the Statement of Defence and Counterclaim of Shalini Madan (“Shalini”), and the Amended Statement of Defence and Counterclaim of Chinmaya and Ujjawal Madan (“Chinmaya” and “Ujjawal”) (collectively the “Madan pleadings” and the “Madan family”).
[2] Mr. Maurer on behalf of the Singh defendants was present at the motion but did not file material or make submissions.
[3] The Crown alleges that specific pleadings of the abovementioned Defendants are untenable at law as pleaded and/or frivolous or vexatious on various grounds. The orders sought in respect of the specific paragraphs of the Defendants’ pleadings are set out below:
An Order striking as untenable and/or as frivolous and vexatious the following paragraphs from the following pleadings, which contain pleadings of contributory negligence: (a) paragraph 9 and 12-16 of the Statement of Defence of Sanjay Madan ("Sanjay SOD"); (b) paragraphs 30-33 and 35 of the Statement of Defence and Counterclaim of Shalini Madan ("Shalini SODC"); (c) paragraphs 48-55 of the Amended Statement of Defence and Counterclaim of Chinmaya Madan ("Chinmaya SODC"); and (d) paragraphs 41-47 of the Amended Statement of Defence and Counterclaim of Ujjawal Madan ("Ujjawal SODC").
An Order striking as untenable and/or as frivolous and vexatious the following paragraphs from the following pleadings, which contain allegations as to the plaintiff's motivation for making the allegations contained in the Amended Statement of Defence: (a) paragraph 4 (second sentence) of the Sanjay SOD; (b) paragraphs 7 (second sentence) and 35 (third and fourth sentences) of the Shalini SODC; (c) paragraphs 9 (last sentence), 34 (last sentence), and 35 (last sentence) of the Chinmaya SODC; and (d) paragraphs 9 (last sentence), 27 (last sentence), and 28 (last sentences) of the Ujjawal SODC.
An Order striking as untenable and/or as frivolous and vexatious the following paragraphs from the following pleadings, all contain allegations as to manner in which the plaintiff is conducting the action: (a) paragraph 20 (last sentence) of the Shalini SODC; (b) paragraphs 36 and 37 (last sentence) of the Chinmaya SODC; and (c) paragraphs 28 and 29 (last sentence) of the Ujjawal SODC.
An Order striking as untenable and/or as frivolous and vexatious the following paragraphs from the following pleadings, which contain allegations amounting to collateral attacks on one or more court orders: (a) paragraphs 27-29 of the Shalini SODC; (b) paragraphs 45-47 of the Chinmaya SODC; and (c) paragraphs 37-40 of the Ujjawal SODC.
An Order striking the entirety of the counterclaims asserted by Ujjawal Madan, Chinmaya Madan, and Shalini Madan except the wrongful dismissal claim asserted by Shalini Madan;
[4] The Crown alleges that the Madan pleadings plead contributory negligence, make frivolous and vexatious allegations and assert claims in their Counterclaims which are either not tenable on the facts pled or not tenable in law.
[5] The Defendants submit that all of the pleas asserted are tenable and that this motion is an attempt at “reputation management” and should be dismissed.
[6] For the reasons set out below, the relief sought by the Crown is granted. The specified portions of the pleadings and counterclaims shall be struck without leave to amend.
Background Facts
[7] This case relates to allegations of two significant frauds which centre around the defendant Sanjay, formerly in a senior IT role in the Ontario Ministry of Education. He and his team ran a Ministry COVID relief program called the Support for Families Program (“SFFP”). The program was launched in April 2020 to assist families with the cost of at-home learning. The application was made by way of a simplified on-line process which Sanjay helped design and implement. The Crown alleges that Sanjay caused millions of dollars in SFFP payments to be deposited into accounts controlled by his family members.
[8] During the currency of the SFFP, Sanjay’s wife Shalini and his adult sons Chinmaya and Ujjawal were employed by the Crown. Ujjawal reported to a Programmer Analyst who in turn reported to Sanjay.
[9] The specifics of the alleged fraud are that Sanjay opened hundreds of bank accounts in his own name or the names of his wife and sons at multiple financial institutions. It is alleged he made thousands of SFFP applications in false names resulting in payments of over $11M to accounts held by him, his wife and sons.
[10] In the course of investigating the SFFP fraud, the Crown discovered information which has led to its claim that Sanjay perpetrated another fraud which had been going on for at least a decade. According to the Crown, Sanjay’s position permitted him to choose vendors to provide IT fee-for-service consultants. Sanjay caused the Crown to engage certain consultants for which he received a kickback. The Crown alleges that Sanjay received over $30M from this fraud over many years.
[11] The Crown further alleges that Sanjay’s wife and sons profited from both frauds in that Sanjay diverted the proceeds of the frauds to them directly or into assets they owned such that they were unjustly enriched. The Crown seeks repayment of all funds and the return of any tainted assets.
[12] Sanjay has admitted under oath to his role in the frauds. With respect to Shalini, Ujjawal and Chinmaya, the Crown alleges that they were part of the fraud and that they were unjustly enriched by the transfer of funds from Sanjay to them which allowed them to purchase real property and other assets.
[13] The Madan family has defended the claim. They have all pled, amongst other relief, that the Crown is contributorily negligent through its own acts and omissions by failing to implement sufficient safeguards within its software and hardware systems to prevent losses, and by hiring incompetent or marginal employees to staff the SFFP. The Madan family pleads that any damages awarded to the Crown should be reduced by its degree of proportionate fault.
[14] The Crown commenced this Action in October 2020 and immediately obtained an ex-parte Mareva injunction against all of the Defendants’ property and assets. The terms of the Mareva remain in effect.
The Specifics of the Alleged Untenable Pleadings
[15] Shalini, Chinmaya and Ujjawal advance Counterclaims in which they allege the following:
a. The Crown knew or ought to have known that its employees might commit acts of dishonesty and failed to properly supervise them; b. That the Crown owed a duty of care to individuals who might be affected by identity theft and fraud committed by its employees using their computer systems and that there was a relationship of proximity between each of them and the Crown because the Crown initiated transfers of money into their personal bank accounts. c. They identify in their Counterclaims certain Crown employees whom they allege acted negligently in failing to implement anti-fraud systems, failed to detect Sanjay’s fraud and that the Crown is vicariously liable for the negligence of those employees. d. They claim that the Crown is vicariously liable for the tort of intrusion upon seclusion as a result of Sanjay obtaining their personal information such as their dates of birth and SIN numbers.
[16] Shalini, Chinmaya and Ujjawal allege a relationship of proximity between them and the Crown as the Crown initiated transfers into their bank accounts which was caused by the Crown’s failure to implement robust anti-fraud measures. The Crown submits it did not owe private law duties of care to these Defendants.
[17] On the duty of care issue, the Defendants submit that this is not an analysis which should be undertaken on a Rule 21 motion because detailed findings of fact are required. In this case there are material facts in dispute and the law is not settled and as such, the Court is not able to make such a determination at this stage. Further, the Crown has conflated the duty of care analysis with the standard of care analysis. That is, the analysis must be focused on the Crown and the Defendants and not the Crown employee and the claimant. In this case, the Crown failed to monitor its own operations by failing to implement controls to prevent its employees from committing identity theft using its system to deposit funds.
[18] According to the Defendants, there are also policy reasons for allowing their claims to proceed where the pleadings put in issue the liability of organizations whose carelessness enabled identity theft. Shalini, Chinmaya and Ujjawal are the victims of institutional failure for which they should not be penalized.
[19] Further, the Madans plead that the Crown is vicariously liable for the tort of intrusion upon seclusion. The Crown’s position is that if Sanjay intruded upon his family’s seclusion by obtaining their personal information, he did so as their father or spouse and not as a Crown employee.
[20] The Defendants disagree. They have filed extensive pleadings which set out the specific acts by which a fellow employee was able to misuse Crown computer systems to commit identity theft and fraud. Sanjay abused his authority in order to transfer funds to his spouse and sons. As such, the Crown may be found to be vicariously liable for intrusions upon seclusion of an employee. It matters not that the employees were related to the person who abused their authority.
[21] The Madan pleadings make reference to the manner in which the Crown is conducting the within action. They allege that the Crown is being “reckless”, “disingenuous”, “malicious” and “incompetent” in pursuing its Action and that the Crown’s pleading is affecting public opinion. The Crown submits these allegations could be relevant to costs but are not proper pleadings. They should be struck as frivolous and vexatious.
[22] Finally, Shalini, Chinmaya and Ujjawal have mounted collateral attacks in their pleadings on the Mareva and Preservation Orders issued by this Court. They allege that the “Plaintiff” has frozen their bank accounts which is an abuse of court authority. The Crown submits that it did not freeze the accounts, the accounts were frozen by Court Order based on the Court being satisfied that such orders were just. In any event, the Preservation and Mareva Orders were made on consent.
Legal Analysis
Rule 21
[23] The test for Rule 21 is well-known and not contested on this motion. In order to strike pleadings, the moving party has the burden of establishing that it is plain and obvious that facts alleged in the pleading cannot succeed in establishing a claim or defence.
[24] It is similarly well-settled law that Defendants may plead whatever material facts they choose so long as they are relevant and not of marginal probative value.
[25] In Quizno’s Canada Restaurant Corporation v. Kileel Developments Ltd., 2008 ONCA 644, 92 O.R. (3d) 347, the Ontario Court of Appeal held that pleadings are not the stage at which the Court should be taking on the trial judge’s role in determining the admissibility of evidence for trial. A fair trial requires that a Defendant should be able to put forward a full, not just a reasonable defence: at para. 16. The Court explained that it is not at the pleadings stage for the Court to prune the defences to what the Court considers a “reasonable” defence: at para. 23. Whether the various allegations that are attacked on the motion to strike prevail at trial is not the point: at para. 29.
[26] In summary, this Court must take care to determine whether the impugned pleadings can be recognized at all given the current state of the law.
Issue #1 – Are the Pleas of Contributory Negligence Tenable?
[27] The Crown submits that the contributory negligence claim is only engaged in the event that it is successful in proving one or more of its claims against the Madan family. If the claims are dismissed, there is no reason for the Court to consider the claim of contributory negligence.
[28] The Madan family requests that if they are found to have committed any of the alleged torts, they should be entitled to “keep” a proportionate amount of the misappropriated funds due to the Crown’s failure to prevent the fraud, theft or conversion. The Crown submits that the defence of contributory negligence is not available in these circumstances as one cannot recover as the author of one’s own misfortune.
[29] Counsel for the Madan family does not disagree that the defence of contributory negligence is not available as a defence to fraud by the person committing the fraud. However, in this case, Shalini, Chinmaya and Ujjawal claim that Sanjay committed all of the torts without their knowledge. He used the authority he had been given by the Crown to transfer money into accounts he had created in their names without their knowledge or consent.
[30] As such, Shalini, Chinmaya and Ujjawal argue that the defence of contributory negligence is available to them. Their pleadings must be taken as true on a Rule 21 motion and given their denials, they are victims of Sanjay’s tortious actions. As such, this defence to tort claims and unjust enrichment remains available to them.
[31] In United Service Funds (Trustees of) v. Richardson Greenshields of Canada Ltd. (1988), 48 D.L.R. (4th) 98 (B.C.S.C.), an employee of the defendant advanced certain defences in response to claims of bribery, conspiracy, manipulation of market shares, fraud, breach of trust, breach of fiduciary duty and other claims. His defences included contributory negligence on the part of his employer for failing to protect itself from loss or damage and want of reasonable care. This defence was described by the Court as one unknown to the law and that “carelessness on the part of the victim has never been a defence to an action for fraud”: at para. 56. The Court went on, (as cited by the Crown) to say, at para. 64, as follows:
And, in my opinion, a good thing, too. There may be greater dangers to civilized society than endemic dishonesty. But I can think of nothing which will contribute to dishonesty more than a rule of law which requires us all to be on perpetual guard against rogues lest we be faced with a defence of "Ha, ha, your own fault, I fool you". Such a defence should not be countenanced from a rogue. [Emphasis added.]
[32] At para. 63 of Greenshields, the Court says that once a Plaintiff knows of a fraud it must mitigate. Before that, no issue of reasonable care arises. I agree with the Crown that it did not owe a duty to the Defendants to prevent them from defrauding the Crown. That argument, when broken down (as the Court in Greenshields did), results in an absurdity which would otherwise permit all “rogues” to blame their employer/superior or other entity for failing to prevent them from committing fraud. This pleading is untenable and must be struck.
[33] It is clear, then, that the defence of contributory negligence is not available to Sanjay, but what about the other Madans? Their counsel urges me to accept that since their pleadings must be taken to be true, they are victims of the alleged torts and not perpetrators. As such, they are entitled to plead the defence of contributory negligence.
[34] However, this argument cannot stand. That is, if the Madan family (other than Sanjay) insists they are victims, the claims against them would be dismissed and the defences of contributory negligence never engaged. However, if the Crown proves its claim, should the Madans be entitled to rely on that defence as a means to reduce any damage award? The clear answer must be no for the reasons articulated in Greenshields.
[35] There remains the issue of whether the defence of contributory negligence is available with respect to a claim for unjust enrichment. The Madan family says it is based on the logic articulated above. I disagree. In Wilson v. Fotsch, 2010 BCCA 226, 319 D.L.R. (4th) 26, the Court dealt with an appeal of an order for the payment of damages for unjust enrichment in a common law relationship. In doing so, the Court, at para. 11, canvassed the defences available to a claim of unjust enrichment. Those included a change of position, estoppel, laches, acquiescence and statutory defences. Notably absent is fraud.
[36] Given all of the above, it is clear that the claims of contributory negligence by the Madan family must be struck. Doing otherwise would be contrary to well-established law.
Issue #2 – Are the Counterclaims Untenable?
A. The Crown’s Immunity from Direct Tort Liability
[37] The Counterclaims allege that the Crown breached its duty of care in failing to detect and prevent the frauds. The Crown submits that it is immune to claims in direct tort liability and neither it nor its employees owed a private duty of care to the Madan family.
[38] The Crown’s immunity from all tort liability is clearly set out in the Crown Liability and Proceedings Act, 2019, S.O. 2019, c. 7, Sched. 17 (the CLPA). Specifically, s. 8 sets out as follows:
8 (1) Except as otherwise provided under this Act or any other Act, the Crown is subject to all the liabilities in tort to which it would be liable if it were a person,
(a) in respect of a tort committed by an officer, employee or agent of the Crown;
(2) For greater certainty, nothing in clause 1(a) above subjects the Crown to liability for a tort that is not attributable to the acts or omissions of an officer, employee or agent of the Crown.
(3) …no proceeding may be brought against the Crown in respect of an act or omission of an officer, employee or agent of the Crown if a proceeding in tort in respect of such an act or omission may not be brought against that officer, employee or agent or against his or her personal representative.
[39] In Hinse v. Canada (Attorney General), 2015 SCC 35, [2015] 2 S.C.R. 621, Mr. Hinse was wrongfully convicted of armed robbery and spent many years in jail. He settled out of court with the Attorney General of Quebec for over $5M. However, Mr. Hinse decided to go further and sue the Ministers who had declined his applications for mercy over the years. The Quebec Superior Court found that “institutional indifference” on the part of the federal government entitled Mr. Hinse to a further $5.8M in compensation. The Quebec Court of Appeal did not agree and found that the Ministers were protected by immunity. The Supreme Court upheld the Court of Appeal decision finding that such institutional indifference did not relate to the conduct of the individual Ministers reviewing the applications for mercy.
[40] The same principle is set out in Ontario v. Phaneuf, 2010 ONCA 901, 104 O.R. (3d) 392. In that case, the Appellant was arrested and ordered to undergo a psychiatric assessment. She was held in custody for 16 days pending availability of a hospital bed for the assessment. The Appellant claimed that the Crown had a duty to find her a bed immediately and not leave her in detention pending the assessment. The action targeted unnamed Crown officials who made funding decisions which led to insufficient facilities for immediate assessment.
[41] The Court held that underfunding was not a cause of action against the Crown and that the Appellant had not articulated an “arguable personal cause of action against identifiable defendants”: at para. 13. The Court held that the claim was properly struck.
[42] Hinse and Phaneuf therefore confirm that the Crown cannot be liable for what may be characterized as systemic negligence. Only individual Crown servants and employees can be liable and only so long as they owe a duty of care. The Crown submits that the individuals named in the Madan pleadings did not owe them a duty of care. Therefore, the pleading as framed cannot stand as the Crown is immune from tort liability as per Hinse and the CLPA.
B. Has the Defence Established a Private Law Duty of Care?
[43] The Madan family takes the position that the CLPA grounds their authorization for the Counterclaims in that tort claims are permitted under the CLPA where the tort is committed by an officer, employee or agent of the Crown. Such a claim can be brought against that agent personally where there is a relationship of proximity between the individual and the Crown employee or agent.
[44] The Madan family argues that such proximity is easily seen in this case. Sanjay, the father of Ujjawal and Chinmaya and the spouse of Shalini, while a Crown employee at the relevant time, transferred money into their bank accounts. The Crown employee (Sanjay) knew that money belonging to the Crown was being transferred to people with whom he had direct interaction. The Crown failed to monitor its own operations to ensure that such harm did not occur.
[45] The Defendants concede that there is no Canadian case law which confirms that the transfer of funds by one person to a specific account of another would result in a duty of care. Rather, the Defendants rely on several American cases. For example, in Murray v. Bank of America, 580 S.E. 2d 194 (S.C. Ct. App. 2003), the fraudster used the victim’s bank card to open an account in her name and then wrote $7,500 in fraudulent cheques on the account. At some point Ms. Murray found out about the fraud, went to the bank and demanded they close the account. The Bank agreed. She also reported the fraud to the police. However, the bank failed to close the account and Ms. Murray was arrested for writing fraudulent cheques. On appeal, the Court found that the Bank owed a duty of care to Ms. Murray because they had been informed of the fraud and requested to take steps by the victim and then failed to do so.
[46] Respectfully, I do not find that this American authority or the others cited are binding or applicable. As the Crown quite rightly points out, the duty of care in Murray only arose because the Bank was alerted to the fraud by the victim but took no steps.
[47] The Defendants also refer to Francis v. Ontario, 2020 ONSC 1644, for the proposition that the Court of Appeal rejected the Crown’s argument that a “proper claim of vicarious liability requires a pleading that: (a) identifies specific Crown actors owing a duty of care to the Class Members; (b) specifies the nature of such duty of care; and (c) specifies the alleged breaches of that duty”: at paras. 483, 485. The Defendants submit that the analysis must be focused on the relationship of proximity between the Crown and the Defendants. There is no requirement to establish a relationship of proximity between the Crown employee and the claimant at all: at para. 485.
[48] Respectfully, I disagree. Francis dealt with whether individual prison superintendents were negligent with respect to policies related to prisoner segregation. Ontario was held vicariously liable. Francis reinforces the principles in Phaneuf and Hinse that there must be a personal cause of action against an individual defendant. This necessitates a relationship of proximity.
[49] As I have already found, no such relationship existed here. Sanjay’s fraud was perpetrated allegedly without the knowledge of the rest of the Madan family and without the knowledge of the named Ministry employees. In cases such as Francis, for example, the Superintendents knew exactly who they were placing in administrative segregation as it was an operational matter within the institution. Those being placed there knew that it had been done on the direction of the Superintendent who had authority over them.
[50] In the end, the word “proximity” must be taken at its plain meaning. One cannot have proximity without there being some form of mutual connection. The connection here was only going one way; from Sanjay to the other Madans (without their knowledge). It cannot then be described as any form of specific interaction between the other Madans and Sanjay.
[51] In R. v. Imperial Tobacco Canada Ltd, 2011 SCC 42, [2011] 3 S.C.R. 45, the Supreme Court held that only where there is proximity from either a statute or direct interaction between the parties will such a duty of care be found: at para. 39. As the Madan family does not plead any statute, the duty of care could arise only by way of direct interaction with another Crown employee.
[52] In 1169822 Ontario Limited v. The Toronto-Dominion Bank, 2018 ONSC 1631, this Court dealt with the question of whether TD bank owed a duty of care to third parties to protect them from a Ponzi scheme fraud perpetrated on them by one of TD Bank’s own customers. The Court held that it did not. Importantly, the Court held that the Plaintiffs could not rely on TD Bank’s failure to protect itself from fraud as “grounding a relationship of proximity”: at para. 226.
[53] The Madan family urges the Court to accept that the banking cases relied upon by the Crown have no applicability here because the Bank was an intermediary between the fraudster and the victim. I disagree. The banking cases (the Crown cited several others) all came to the same conclusion with respect to the requirement of proximity in order to establish the requisite duty of care.
[54] The Crown submits that such a relationship cannot exist where the Crown or Sanjay is alleged to have initiated transfers of funds into bank accounts held in the name of the Madans. In both cases there is no relationship of proximity because the mere transfer of funds to an unknowing party does not rise to the level of creating such a relationship. I agree. There is therefore no tenable cause of action pleaded in the Counterclaims and they should be struck.
C. Intrusion Upon Seclusion
[55] As per Jones v. Tsige, 2012 ONCA 32, 346 D.L.R. (4th) 34, at para. 71, the elements of the tort of intrusion upon seclusion are: (1) intentional conduct by the defendant (which would include recklessness); (2) that invades, without lawful justification, the plaintiff's private affairs or concerns; (3) that a reasonable person would regard as highly offensive causing distress, humiliation, or anguish.
[56] The Madans allege their husband/father committed this tort upon them by stealing their personal information (bank cards and SIN numbers) and opening bank accounts in their names without their knowledge or consent. They claim that the Crown is vicariously liable for these acts.
[57] As per Bazley v. Curry, [1999] 2 S.C.R. 534, at para. 41, the Court must consider several criteria to determine if such a tort has been committed. Importantly, the Court must consider whether the wrongful act is sufficiently related to conduct authorized by the employer to justify vicarious liability. There must be a significant connection between the creation or enhancement of a risk including opportunity, vulnerability of the victims, the amount of power the employee had over the victim, the extent to which the act was related to friction or confrontation in the employer’s enterprise and the extent to which the acts furthered the employer’s aims.
[58] None of the personal information Sanjay obtained from his wife and sons fit into any of the abovementioned criteria. In obtaining this information, he was not exercising any power or authority related to his employment or granted to him by the Crown. He took the information because they were family members who trusted him. He then opened up bank accounts in their name without their authorization or that of the Crown. It may have been different if the information he used was obtained from a government database. That is not what is alleged.
[59] Shalini, Ujjawal and Chinmaya submit that their suffering was facilitated by the Crown in permitting Sanjay access to government computers and programs which permitted him to place money in their accounts. According to the Defendants, it is the placing of money in their accounts that completes the tort. Sanjay committed the tort by using tools provided to him by the government.
[60] Shalini, Ujjawal and Chinmaya rely on Evans v. The Bank of Nova Scotia, 2014 ONSC 2135. In that case, representatives of a class sued the bank for intrusion upon seclusion. A bank employee provided confidential customer information to his girlfriend who then gave it to third parties who used it to commit identity theft and fraud. The Court certified the class action and allowed a vicarious liability claim against the banks. It did so on the grounds that the Bank had created an opportunity for the employee to abuse his power by allowing him to have unsupervised access to customers’ private information without installing any monitoring system: at paras. 22, 23.
[61] I do not agree with Defendants’ reliance on Evans above. Sanjay committed identity theft by stealing personal information entrusted to him by family members and using it in order to further his fraudulent activities. He did not abuse his authority by stealing the private information of Crown employees by accessing their private information through a government database. The Crown was neither explicitly nor implicitly involved in the identity theft, the opening of bank accounts or in Sanjay passing himself off as his wife or sons. This claim must also be struck as untenable.
Pleadings Related to the Crown’s Conduct in this Litigation
[62] The Madans make certain allegations in their pleadings with respect to the Crown’s conduct. Shalini, for example, pleads that the Crown is reckless in pursuing claims she has denied, and in its refusal to withdraw such claims. Chinmaya and Ujjawal claim that the Crown’s claims are baseless and preposterous in the face of their denials and that the Crown’s claims are harming their public reputations.
[63] The Madans also claim that the Crown is being disingenuous in pursuing its claims against them and that in continuing to do so, the Crown is attempting to cover up its own negligence and engage in reputation management. They claim that the Crown over-seized their assets and has improperly frozen assets which were not the proceeds of the fraud. Finally, they submit that such pleadings should be allowed because of the Plaintiff’s undertaking as to damages.
[64] The Defendants’ pleadings in relation to the Crown’s conduct of this litigation are overreaching and improper for the following reasons:
a. There is well established authority that pleadings which go to a Plaintiff’s motive in bringing the action or the issue of costs are improper and must be struck: see Huachangda Holdings Inc. v. Solcz Group Inc., 2019 ONCA 649, 147 O.R. (3d) 644, at para. 15. b. An undertaking as to damages relates to damages payable by a Plaintiff in relation to the injunction in the event the Defendant is successful. There is no allegation that the injunction was improperly obtained or somehow permits pleadings related to the conduct of the Crown in the within litigation. c. A Mareva Order does not prevent the freezing of assets which may be unrelated to the fraud so that they can be available to satisfy an eventual judgment: see A.A.S. Zuckerman, “The Undertaking in Damages – Substantive and Procedural Dimensions” (1994) 53:3 Cambridge LJ546 at 561. d. The Crown did not freeze the assets. They were frozen by a properly obtained Court Order which was not appealed by the Defendants. The Defendants consented to the continuation of the Mareva Order until trial.
[65] Given all of the above, the pleadings related to the Crown’s conduct of the litigation must be struck.
Order and Costs
[66] Given all of the above, the relief sought by the Crown is granted in full.
[67] An amendment to the pleadings will not cure the deficiencies therein. Leave to amend is therefore denied.
[68] As to costs, the parties advised that an Offer to Settle had been presented. As such, written costs submissions of no more than three pages in length (not including any Bill of Costs or Offer to Settle) shall be provided on five-day turnaround commencing with the Crown five days after the release of these reasons. All case law and document references must be hyperlinked. Costs submissions are to be provided electronically to my assistant.
[69] If no costs submissions are received within 35 days of the release of these reasons, costs shall be deemed to be settled.
C. Gilmore, J. Date: March 10, 2022