COURT FILE NO.: CV-91-CQ073146-0000, CV-92-CQ-022112-0000 DATE: 2023-08-22
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: The Brawinger Group Limited et al. v. Harold Spring et al.
BEFORE: ASSOCIATE JUSTICE D. MICHAEL BROWN
HEARD: 2023-04-25 (in person)
COUNSEL: C. Somerville for the moving parties/plaintiffs J. Contini, for the defendant, Harold Spring N. De Stefano for the non-party, Grant Thornton LLP Canada
E N D O R S E M E N T
[1] The plaintiffs are judgment creditors of the defendant, Harold Spring. The plaintiffs bring this motion seeking 1) an order under Rule 60.18(6) for the examination in aid of execution of a non-party and the production of documents from other non-parties and 2) an order under Rule 60.08(2) for leave to issue a notice of garnishment more than six years after the date of judgment. For the reasons that follow, the motion is granted.
Background
[2] In 1991 and 1992 the plaintiffs obtained judgments totaling over $4 million against the defendant, Harold Spring (“Spring”) for damages they suffered as victims of Spring’s fraudulent schemes. Spring was charged and convicted on multiple counts of criminal fraud in relation these fraudulent schemes and was sentenced to four and a half years in prison. To date, the judgments obtained by the plaintiffs remain unpaid.
[3] In June 2018, Justice McEwan of this court made an order declaring that the plaintiffs’ judgments survived Spring’s earlier bankruptcy pursuant to the Bankruptcy and Insolvency Act. Since then, the plaintiffs have been actively pursuing enforcement of the judgments. On June 14, 2018, on an ex parte motion, the plaintiffs obtained an order from Associate Justice (then Master) McAfee granting leave to issue alias writs of seizure and sale against Spring pursuant to Rule 60.07(2), and granting leave to issue notices of garnishment under Rule 60.08(2) directed to a number of different garnishees, including Bayfield Realty Advisers Inc. (of which Spring is the founder, president and CEO) and the Royal Bank of Canada where Spring has maintained a bank account.
[4] The steps to enforce the judgments have largely been conducted by the plaintiff, Brawer Enterprises Inc. (“Brawer”). Brawer conducted the first of two examinations in aid of execution of Spring on January 18, 2019. Spring refused to answer more than 40 of the questions put to him on the examination. On August 20, 2020, Brawer brought a motion before Associate Justice (then Master) Brott, seeking an order compelling Spring to answer the questions he refused. Associate Justice Brott ordered Spring to answer all but two of the refused questions and further ordered that Spring provide all existing bank records and income tax records from 1991 to present (as requested of Spring in the notice of examination) on a best efforts basis, within 90 days of the date of the Order. As reflected in her endorsement on the motion, Associate Justice Brott’s decision was based in part on a finding that the questions ordered to be answered and the documents ordered to be produced related to matters that fell within the scope of an examination in aid of execution in accordance with Rule 60.18(2).
[5] Notwithstanding Associate Justice Brott’s ruling, Spring has failed to answer fully several of the questions that were ordered to be answered. Many of the answers subsequently provided are non-responsive to the question that was asked. Further, Spring’s efforts to produce bank statements and income tax records as ordered, resulted in the production of only a few select documents over a limited date range.
[6] Brawer conducted a second examination in aid of execution of Spring on June 29, 2022. At that examination, Spring refused or took under advisement 22 different questions. Spring has subsequently provided answers to five of those questions. Leaving aside whether those five answers are responsive, the balance of the questions refused or taken under advisement remain outstanding. The plaintiffs have not moved on the refusals from the second examination in aid of execution.
Non-party examination and production under Rule 60.18(6)
[7] The plaintiffs seek to obtain from non-parties information and documents that Spring has refused or failed to provide on his examinations in aid of execution, including information and documents that Spring has been ordered to provide by Associate Justice Brott. Specifically, the plaintiffs seek:
a) an order granting Brawer leave to examine Spring’s spouse, Franceschina Trotta (“Trotta”), in aid of execution as against Spring;
b) an order that the Royal Bank of Canada and the Canadian Imperial Bank of Commerce each produce to Brawer all bank statements for all accounts held solely or jointly in the name of Harold Spring from 1991 to present or for the longest period of time they are available, or in the alternative, grant leave to examine RBC and/or CIBC for the limited purpose relating to these documents;
c) an order that Grant Thornton LLP produce to Brawer within 60 days of the Order all personal income tax information regarding Spring from 1991 to present or for all years where this information is available to Grant Thornton, or in the alternative, grant leave to examine Grant Thornton for the limited purpose relating to this information;
d) an order that Sprintro Management and Holding Corp. (“Sprintro”) produce to Brawer all documents in its minute books relating to Spring, or in the alternative, grant leave to examine Sprintro for the purpose of obtaining its minute books relating to Spring.
[8] Rule 60.18(6) provides:
Examination of Person other than Debtor
(6) Where any difficulty arises concerning the enforcement of an order, the court may,
(a) make an order for the examination of any person who the court is satisfied may have knowledge of the matters set out in subrule (2); and
(b) make such order for the examination of any other person as is just. R.R.O. 1990, Reg. 194, r. 60.18 (6).
[9] The Rule gives broad discretion to the court to order an examination. If there is any difficulty enforcing an order, a court may make an order under (a) for the examination of any person who may have knowledge of the matters set out in subrule (2). See Waxman v. Waxman, 2015 ONSC 1353 at para 35.
[10] The court’s primary concern in exercising its discretion on a motion under Rule 60.18(6) is the impact of the proposed order on the non-party to be examined. As the Court of Appeal held in CIBC v. Sutton (dealing with the predecessor to Rule 60.18(6)), the court should be cautious in its exercise of discretion to insure that persons who are strangers to the litigation are not unduly harassed by examinations. In this case, the impact of the non-parties is less of a concern given that, with one limited exception, none of the non-parties sought to be examined or from whom production is sought have opposed this motion.
[11] RBC and CIBC have confirmed they do not oppose the motion. Grant Thornton does not oppose the primary relief of the production order (subject to being reimbursed for its reasonable costs of such production) but does oppose the alternative request for leave to examine Grant Thorton. Trotta and Sprinto have been properly served with the motion record on this motion but have not responded to the motion and did not appear at the hearing. This lack of opposition by the non-party respondents to the motion is a significant factor in favour of granting the relief sought. If the non-parties were of the view that the requested order constituted undue harassment, they would have opposed the motion.
[12] On the record before me, I am satisfied that the plaintiffs have met the first requirement under Rule 60.18(6) in that “difficulty” has arisen in enforcing the judgments. Despite active enforcement efforts over the past five years, the plaintiffs have failed obtain any amounts on the judgments. Further, the plaintiffs’ efforts to obtain relevant information and documents have been stonewalled by Spring’s refusals on the examinations in aid of execution, which stonewalling has continued to a degree notwithstanding Associate Justice Brott’s order that the documents and information be provided.
[13] Spring submits that the difficulties faced by the plaintiffs do not meet the threshold under Rule 60.18(6) as established by the case law. Spring relies the Court of Appeal’s direction in CIBC v Sutton that “the relatives of a judgment debtor or a stranger should not be ordered to be examined unless the judgment creditor has exhausted all means available before resorting to an application of this kind.” Notwithstanding the examination in aid of execution and the subsequent motion on refusals, Spring argues that the plaintiffs have not exhausted all means of obtaining the information because they have not pursued a motion for contempt against Spring for his failure to comply with Associate Justice Brott’s order.
[14] The quote from CIBC v Sutton which Spring relies on must be read in the context of the Court of Appeal’s caution against the undue harassment of strangers to the litigation. It is a condition precedent meant to protect the stranger, not the judgment debtor. It does not lie in the mouth of a judgment debtor who is in breach of a production order to demand that he be found in contempt of that order before the judgment creditor be permitted to seek the documents or information elsewhere. As noted above, the non-parties in this case have not opposed the motion. I find that Spring lacks standing to oppose the motion based on a failure “to exhaust all available means”.
[15] In the event I am wrong, and Spring has standing to make this argument, I find that in requesting the information and documents from Spring on examination and then obtaining the order of Associate Justice Brott requiring answers to the questions refused, the plaintiffs have exhausted all available means of obtaining the requested information as contemplated in CIBC v Sutton. In my view, “all available means” does not require the judgment creditor to take the additional step of bringing a contempt motion against a judgment debtor who has failed to comply with a production order.
[16] The second requirement for an order under Rule 60.18(6), is that person to be examined may have knowledge of the following matters set out in Rule 60.18(2):
(2) A creditor may examine the debtor in relation to,
(a) the reason for nonpayment or nonperformance of the order;
(b) the debtor’s income and property;
(c) the debts owed to and by the debtor;
(d) the disposal the debtor has made of any property either before or after the making of the order;
(e) the debtor’s present, past and future means to satisfy the order;
(f) whether the debtor intends to obey the order or has any reason for not doing so; and
(g) any other matter pertinent to the enforcement of the order. R.R.O. 1990, Reg. 194, r. 60.18 (2).
[17] The knowledge of the person to be examined is specific to that person. I will address the requests with respect to each non-party separately.
Examination of Franceschina Trotta
[18] Trotta is the wife of Spring. Based on the record before me I find that Trotta is likely to have knowledge of Spring’s assets and income. Spring’s evidence on his examinations is that his lifestyle, which includes a luxury vehicle, condominiums used by the couple in downtown Toronto and Boca Raton, Florida, and memberships at private golf clubs in both locations, is largely funded by Trotta. Many of the questions refused by Spring on his examinations in aid of execution, including some questions ordered to be answered by Associate Justice Brott, relate to matters that would likely be within the knowledge of Trotta. For example, Spring continues to refuse to provide the address of the condominium used by the couple in Florida despite being ordered to do so by Associate Justice Brott.
[19] Trotta is also likely to have knowledge of Spring’s business affairs. Trotta is the current president of Sprintro and has been its only director and shareholder other than Spring and the Spring and Trotta Family Trust. According to tax documents provided by Spring, Spring declared income from Spintro between 2015 and 2021 totaling over $2.1 million. Spring claims that this income was allocated to him for bookkeeping purposes only and that he never received this income. However, Spring has failed or refused to provide information as to who decided to allocate this income to Spring or specifically why it was done. As president of Sprintro, Trotta should have knowledge of these matters.
[20] All of the forgoing information relates to one or more of the matters listed in subrule 60.18(2). I am therefore satisfied that Trotta will likely have knowledge of the matters listed in the subrule and I exercise my discretion to grant the plaintiff’s motion as it relates to Trotta and order that she be examined by Brawer pursuant to Rule 60.18(6). For greater certainty, the scope of the examination of Trotta shall not be limited to the information that was sought from Spring but refused. Brawer may examine Trotta on any matters that fall within Rule 60.18(2).
[21] I note that in his affidavit sworn on this motion, Spring states that his wife is in fragile health due to recent treatment for cancer and “should not be subjected to the rigours of an examination.” I agree with the plaintiffs that this evidence is uncorroborated hearsay. Trotta has been served with motion and has not responded. If she wished to be precluded from examination for medical reasons, she could have put that evidence in herself. In any event, any accommodations in relation to the examination for Trotta’s health conditions will be a matter for discussion between the Brawer’s counsel and Trotta or her lawyer. If Trotta and Brawer are unable to come to an agreement on such accommodations, either of them may request a case conference before me to address this issue by email to my Assistant Trial Coordinator, David Backes, at David.Backes@ontario.ca.
Production of bank statements from RBC
[22] Although Rule 60.18(6) deals specifically with the examination of non-parties, the Supreme Court of Canada has confirmed the jurisdiction of the courts to make orders directly for the production of documents under Rule 60.18(6), including production orders against banks. Royal Bank of Canada v. Trang, 2016 SCC 50, [2016] 2 SCR 412 at para 32. The plaintiffs seek production from RBC of all bank statements for all accounts held solely or jointly in the name of Harold Spring from 1991 to present or for the longest period of time they are available. Spring has already been ordered to produce these documents by Associate Justice Brott. Spring has failed or refused to produce the documents, in part because he says he has been frozen out of one RBC account because of a previous garnishment order.
[23] In making the order for production against Spring, Associate Justice Brott has already determined that the RBC account statements fall within the scope of matters listed in Rule 60.18(2), so that issue is res judicata. In any event, the requested bank statements clearly relate to the property of Spring and his present, past or future means to satisfy the judgements pursuant to subrules 60.18(2) (b) and (e). As noted above, RBC does not oppose the order for production. The plaintiff’s motion for production of documents from RBC is granted.
Production of bank statements from CIBC
[24] Similar to the production sought from RBC, the plaintiffs seek production from CIBC of bank statements from 1991 to present for all accounts held jointly or solely by Spring. Spring has not produced the CIBC bank statements despite Associate Justice Brott’s order to do so. CIBC does not oppose the production. As with the RBC bank statements, the CIBC statements clearly fall within the scope of Rule 60.18(2). The plaintiffs’ motion for production of documents from RBC is granted.
Production of documents from Grant Thornton
[25] Grant Thorton LLP is Spring’s tax accountant. The plaintiff seeks production from Grant Thornton of all personal income tax information regarding Spring from 1991 to present or for all years where this information is available. Spring was ordered by Associate Justice Brott to produce these documents on a best efforts basis. In response Spring has produced selected tax returns and notices of assessment for certain years. He has not produced all of the supporting documents for those years. For example, Spring has produced a tax return showing income of $384,373.52 in 2020, but he has not produced any supporting documentation for that return that would identify the source of this income.
[26] Based on the record before me, I find that Grant Thornton is likely to have documents in its possession that fall within scope the documents ordered to be produced by Associate Justice Brott, including documents so ordered that Spring has so far failed or refused to produce. I find that these documents fall within the scope of matters listed in Rule 60.18(2). As noted above, Grant Thornton does not oppose the motion for production subject to reimbursement of costs of such production. The plaintiffs’ motion as it relates to the production of documents from Grant Thornton is granted. The plaintiffs (or Brawer) shall pay to Grant Thornton its reasonable costs associated with such production.
Production of documents from Sprintro
[27] Associate Justice Brott ordered Spring to produce the contents of the Executive Minutes Books of Sprinto “relating” to Mr. Spring. The plaintiffs now seek an order that such documents be produced by Sprintro. In response to Associate Justice Brott’s order, Spring has produced only a shareholder’s ledger which lists Spring as a shareholder of Sprintro. When the plaintiffs complained that this was not in full compliance with the order, Spring’s counsel responded “We have provided you with the contents of the Sprintro minutes book relevant to Mr. Spring, including a copy of the shareholders’ ledger which confirms, among other things, that Mr. Spring has held only Class A Special shares (which have no exigible value) of Sprintro since 2006.”
[28] I am not satisfied on the record before me that the Spring’s production of the share ledger fully complies with Associate Justice Brott’s order for the production of any contents of the Minute Books that “relate” to Mr. Spring. One would expect that there would be further contents relating to Mr. Spring, particularly given that he is currently the Secretary of the company and until January 2, 2019 was the President and sole director before those positions were assumed by Trotta. At very least, one would expect that those changes to the officers and directors of the company would be reflected in the Minute Books. Further, as noted above, Spring has declared significant income from Sprintro on his tax returns for the past several years which may be addressed in the Minute Books may be reflected in the Minute Books of the company.
[29] Sprintro has not responded to or opposed this motion. Associate Justice Brott has already determined that the Minute Book contents that were ordered fall within the scope of Rule 60.18(2). I concur with that finding. The plaintiff’s motion as it relates to production from Sprintro is granted. For greater certainty, the contents of the Spintro Minute Books “relating” to Spring shall include any contents of the Minute Books that refer to Spring directly by name or by the position he held with the Company at the time. For example, contents of the Minute Books referring to or dealing with the President of Sprintro prior to January 2, 2019 are “related” to Spring for the purpose of this decision.
Garnishment of Sprintro
[30] The plaintiffs seek leave to issue a notice of garnishment on Sprintro as garnishee. Given that six or more years have elapsed since the plaintiffs’ judgments, Rule 60.08(2) requires the plaintiffs to obtain leave to issue a notice of garnishment. A plaintiff seeking leave under Rule 60.08(2), should adduce evidence explaining the delay such that the court may conclude that the plaintiff has not waived its rights under the judgment or otherwise acquiesced in non-payment of the judgment. Royal Bank of Canada v Correia, [2006] OJ No 3206 at para 6. The judgment debtor may raise other grounds to convince the court that it would be inequitable to enforce the claim. For example the judgement debtor could demonstrate that they have relied to their detriment or changed their financial position in reliance on reasonably perceived acquiescence resulting from the delay. The onus is on the judgment debtor to adduce evidence of such reliance and detriment. Ibid, at para 6.
[31] The Court of Appeal in Ontario has confirmed that “a very low evidentiary threshold applies to a judgment creditor who requests leave and that it is a rare case where a judgment creditor cannot meet the test.” Achtem v Boese, 2021 ONCA 284 at para 4.
[32] In this case the plaintiffs have been actively pursuing enforcement of the judgments since 2018. The evidence of Spring on this motion focuses on the delay in enforcement leading up to 2018. In my view, Spring has lost his opportunity to challenge enforcement based on that delay. Although the 2018 Order of Associate Justice McAfee for leave to issue notices of garnishment and alias writs of seizure and sale was obtained without notice, it was made expressly without prejudice to Spring’s right to bring a motion to set it aside. Spring has never brought a motion to set aside the order of Associate Justice McAfee and those earlier notices of garnishment and writs of seizure and sale remain in force. Spring has also not challenged the order of Justice McEwan declaring that the plaintiffs’ judgments survived Spring’s earlier bankruptcy. In that sense, it is Spring that has acquiesced in these enforcement proceedings.
[33] In any event, based on the record before me, I find that the plaintiffs have not waived their rights under the judgments or otherwise acquiesced in non-payment of the judgments. Further, Spring has not provided any evidence that he relied to his detriment or changed his financial position in reliance on any perceived acquiescence resulting from the plaintiff’s delay in enforcement.
[34] I also find that there is good reason to believe that Sprintro may be indebted to Spring now or may become indebted to Spring in the future. As noted above, tax documents provided by Spring show significant declared income from Sprintro over the past several years. Spring’s evidence that he has not been paid any of this income raises the possibility that some of this past income might still be payable by Sprintro.
[35] The plaintiff’s motion for leave to issue a notice of garnishment on Sprintro is granted.
Disposition
[36] The plaintiffs motion is granted and an order shall go as follows:
a) The plaintiff, Brawer, is granted leave to examine Franceschina Trotta in aid of execution as against Spring (subject to Trotta’s ability to seek accommodations for the examination due to health issues, as provided in my endorsement, above);
b) RBC shall produce to Brawer within 60 days of the Order all bank statements for all accounts held solely or jointly in the name of Harold Spring from 1991 to present or for the longest period of time they are available;
c) CIBC shall produce to Brawer within 60 days of the Order all bank statements for all accounts held solely or jointly in the name of Harold Spring from 1991 to present or for the longest period of time they are available;
d) Grant Thornton shall produce to Brawer within 60 days of the Order all personal income tax information regarding Harold Spring from 1991 to present or for all years where this information is available to Grant Thornton. Brawer shall pay to Grant Thornton its reasonable costs of such production;
e) Sprintro shall produce to Brawer within 60 days of the Order all contents in its minute books relating to Harold Spring; and
f) Brawer is granted leave to issue a Notice of Garnishment directed to Sprintro in respect of the plaintiffs’ judgments.
Costs
[37] The plaintiffs were entirely successful on this motion and should have their costs against Spring as the only party opposing. The plaintiffs seek costs of the motion on a partial indemnity scale in the amount of $24,382.39. Spring filed a costs outline quantifying his partial indemnity costs at approximately $8,000, but indicated that he would not be seeking costs if successful on the motion. Given the complexity of the motion, the volume of materials, the length of the argument and the importance of the issues to the parties, I find that he costs sought by the plaintiffs are within the reasonable expectations of the parties. Spring shall pay to the plaintiffs their costs on the motion, fixed in the amount of $24,382.39, and payable within 30 days.
D. Michael Brown, Associate Judge DATE: August 22, 2023