Wide et al. v. Toronto-Dominion Bank, 2012 ONSC 4039

COURT FILE AND PARTIES

COURT FILE NO.: CV-11-433385
COURT FILE NO.: 09-8373-00CL
DATE: 20120710

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: MARCUS WIDE OF GRANT THORTON (BRITISH VIRGIN ISLANDS) LIMITED, AND HUGH DICKSON, OF GRANT THORTON SPECIALIST SERVICES (CAYMAN) LTD., ACTING TOGETHER HEREIN IN THEIR CAPACITIES AS JOINT LIQUIDATORS OF STANFORD INTERNATIONAL BANK LIMITED, Plaintiffs (Moving Parties)

AND:

TORONTO-DOMINION BANK, Defendant (Responding Party)

AND RE: DYNASTY FURNITURE MANUFACTURING LTD., SHAFIQ HIRANI, HANIF ASARIA, DINMOHAMED SUNDERJI AND 2645-1252 QUEBEC INC., Plaintiffs (Moving Parties)

AND:

TORONTO-DOMINION BANK, Defendant (Responding Parties)

BEFORE: CUMMING J.

COUNSEL:
L. Caylor and N. Shaheen, for the Plaintiffs/Moving Parties

Geoff R. Hall and Junior Sirivar, for the Defendant (Responding Party)

HEARD: JULY 3, 2012

ENDORSEMENT

Background to the Motions

1Messrs. Marcus A. Wide of Grant Thornton (British Virgin Islands) Limited and Hugh Dickson of Grant Thornton Specialist Services (Cayman Islands) Ltd., were appointed as the joint liquidators (the “Joint Liquidators”) of Stanford International Bank Limited (“SIB”), by order of the Eastern Caribbean Supreme Court dated May 12, 2011.

2On August 19, 2011, the Superior Court of Quebec (Commercial Division) authorized and empowered the Joint Liquidators to institute proceedings against The Toronto-Dominion Bank (“TD Bank”) in such jurisdiction as seen to be appropriate.

3The Joint Liquidators commenced an action as plaintiffs in Quebec against TD Bank (the “Creditors Quebec Action”) on August 22, 2011.

4The background to the action relates to the collapse of SIB, based in Antigua, consequential to an alleged fraudulent $7 billion Ponzi scheme and looting by SIB’s principal, Robert Allan Stanford and a small cabal of other insiders. This involved thousands of creditor investors of SIB who purchased so-called certificates of deposit. SIB’s net capital deficit is some US $4.4 billion.

5The Joint Liquidators’ claim alleges actionable wrongs or omissions on the part of TD Bank to the detriment of SIB and its creditors in connection with TD Bank’s provision of corresponding banking services.

6The Joint Liquidators also issued a Notice of Action on August 22, 2011, and filed a Statement of Claim on September 21, 2011, in the Superior Court of Justice in Ontario (the “Creditors Ontario Action” or “Placeholder Action”), being Court File No. CV-11-433385, which raises the same asserted cause of action against TD Bank as made in the Creditors’ Quebec Action. However, neither the Notice of Action nor the Statement of Claim in the Placeholder Action have been served upon TD Bank.

7There is also an action in Ontario, being Court File No. CV-09-8373-00CL, commenced on August 26, 2009, brought by a small group of five creditors of SIB led by Dynasty Furniture Manufacturing Ltd. against TD Bank (the “Dynasty Creditors Action”) claiming damages in the amount of CDN $17.5 million.

8The plaintiff, Joint Liquidators, have chosen Quebec as their preferred venue asserting that Quebec is the appropriate jurisdiction given the connecting factors to that jurisdiction; hence, the commencement of the Creditors Quebec Action. They say they filed the Placeholder Action in Ontario (the filing of the Notice of Action being the same day as the filing of the Creditors Quebec Action in Quebec) simply out of an abundance of caution to protect any applicable limitation period in the event the Quebec court declines to hear the case commenced in that jurisdiction.

9The detailed Amended Motion to Introduce Proceedings in the Quebec Creditors Action is before Mr. Justice Auclair of the Quebec Superior Court as case management judge and reportedly he will likely hear the jurisdiction and forum motions during the week of October 15, 2012. TD Bank has informed Mr. Justice Auclair that TD Bank intends to dispute whether Quebec has jurisdiction to hear the Quebec Creditors Action and that TD Bank will also argue, if necessary, that Quebec is not the convenient forum to hear such claims.

The Motions at Hand

The Joint Liquidators Ontario Creditors Action or Placeholder Action

10Some four months after TD Bank was served with the stay motions at hand, and some two weeks after the motions were scheduled, TD Bank served a Notice of Intent to Defend the Placeholder Action. TD Bank takes the position that, by Rule 16.01(2) of the Rules of Civil Procedure, TD Bank is deemed to have been served with the Statement of Claim in the Ontario Creditors Action. However, the Joint Liquidators submit that even if this means that they cannot seek an extension of the time for service of the Statement of Claim in the Ontario Creditors Action, they alternatively seek an interim stay of the Placeholder Action.

11The Joint Liquidators seek to preserve the status quo in Ontario pending a decision of the Quebec Superior Court regarding jurisdiction and choice of forum. Accordingly, the Joint Liquidators seek an extension of time for service of the Statement of Claim in the Placeholder Action or alternatively, an interim stay of the Placeholder Action. The plaintiffs in the Dynasty Creditors Action also seek an interim stay of that action.

12There is recognition of the appropriateness of parallel proceedings in some circumstances as “…it may be necessary to commence protective actions in the various possible fora pending the confirmation that one of them will exercise jurisdiction”. Professor Janet Walker, Canadian Conflict of Laws, 6th ed. (Markham, Ontario: LexisNexis Canada, 2005) at s. 13.6; Canadian National Railway Co, v. Scott Steel Ltd., [2001] A.J. No. 560 (A.B.Q.B.) at para. 23.

13In the situation at hand, the plaintiff, Joint Liquidators, prudently seeks as a precautionary measure to preserve any limitation period that may be applicable in Ontario pending a determination as to whether the Quebec Superior Court will agree to hear on its merits the case initiated in Quebec. The explicit language of the Placeholder Action pleading in Ontario makes it clear that it was commenced for the purpose of preserving any limitation period in Ontario.

14Given that the very issues seen in the Placeholder Action are already underway in Quebec through the Quebec Creditors Action, there is no prejudice to TD Bank in staying the Ontario Creditors Action until a determination is made by the Quebec Superior Court as to whether the Quebec Creditors Action can properly proceed in Quebec. TD Bank has informed Mr. Justice Auclair that it intends to dispute in Quebec that Quebec has jurisdiction and, if necessary, intends to assert that Quebec is not the convenient forum to hear the Joint Liquidators’ claim.

15In my view, the good management of both the Quebec Creditors Action and the Placeholder Action in Ontario requires an interim stay of the Placeholder Action pending a determination as to whether the Quebec Superior Court will hear the Quebec Creditors Action. The two actions have questions of law and fact in common and similar claims for relief arising out of the same series of transactions. It makes sense to order the Ontario proceeding stayed at the request of the Joint Liquidators until after the determination of the contest in Quebec as to whether the Quebec proceeding will continue. In my view, the good management of the concurrent proceedings requires this Court to find that an interim stay of the local proceedings is properly to be granted. See Arab Monetary Fund v. Hashim, [1992] O.J. No. 1330 (Gen. Div.) at pp.6 and 7.

16A temporary stay will also prevent unnecessary and costly duplication of judicial and legal resources and will not result in any injustice to TD Bank. If the Quebec Creditors Action is allowed to proceed by the Quebec Superior Court it will render the Ontario Creditors Action moot.

The Dynasty Creditors Action

17I turn now to the request for a stay in respect of the Dynasty Creditors Action, commenced on August 26, 2009. The situation is, in my view, very different in respect of the Dynasty Creditors Action from that discussed above in respect of the Quebec Creditors Action. In my view, put briefly, the five Dynasty Creditors Action plaintiffs have attorned to Ontario as the jurisdiction to hear their claims against TD Bank.

18The pleadings in the Dynasty Creditors Action are closed. The parties originally agreed to exchange affidavits of documents on December 2, 2011 but TD Bank requested an extension of time. A discovery agreement was negotiated after a case conference with Mr. Justice Campbell of the Ontario Superior Court of Justice (Commercial List) and entered into October 11, 2011.

19The Quebec Creditors Action by the Joint Liquidators involves some 21,000 creditors of SIB. The Dynasty Creditors Action involves only five creditors i.e. 0.002% of the total SIB creditors.

20The Dynasty Creditors request a stay saying that their claims can be subsumed within the Quebec Creditors Action if it proceeds. The Dynasty Creditors have assigned their right to receive any proceeds that may arise under the Quebec Creditors Action to the Joint Liquidators.

21However, the Dynasty Creditors Action plaintiffs sued in Ontario after first initiating an action in Alberta seeking a Norwich order for production of documents and ultimately seeking an order declaring that TD Bank holds all or some portion of the monies held as a corresponding bank for SIB in trust for the Dynasty plaintiffs.

22On April 24, 2009, the Attorney General of Ontario brought a civil forfeiture application under the Civil Remedies Act, 2001 with respect to these funds and, on consent, they were deposited with the Ontario Superior Court of Justice where they continue to be held. On June 24, 2009, the Alberta Court of Queen’s Bench stayed the action brought in Alberta on the basis that Ontario was the proper forum. The Dynasty Creditors Action was commenced in Ontario on August 26, 2009.

23The Dynasty Creditors Action plaintiffs were then met with a motion to strike in Ontario by TD Bank. The Ontario Superior Court on January 21, 2010 narrowly circumscribed their cause of action which decision was upheld on appeal on July 20, 2010. The Dynasty Creditors had pleaded that TD Bank had both actual and constructive knowledge of the fraud. That is, they claimed TD Bank was liable both because it knew and because it ought to have known of the fraud and had failed to do anything about it. Mr. Justice Wilton-Siegel struck the allegations of constructive knowledge from the pleadings of negligence and knowing assistance. The knowing receipt claim was also struck on the basis that such cause of action is only made out if a defendant accepts funds in its personal capacity and it had not been alleged that TD Bank had done so.

24Much of TD Bank’s argument in respect of the motions for stay under present consideration alluded to the speculative accusation that the Joint Liquidators are forum shopping. TD Bank’s counsel expresses the view that the Joint Liquidators want to proceed with the Quebec Creditors Action in Quebec rather than with the identical action in Ontario because of the impact of the successful motion to strike in narrowing the scope of the action against TD Bank in the parallel Dynasty Creditors Action. TD Bank says that the present motion for a stay should not be granted because “Ontario is the proper forum” in respect of any action brought by the Joint Liquidators. However, whether or not Quebec is the proper forum is a matter solely for the Quebec court to determine and I do not, of course, make or imply any comment as to what that decision should be.

25Moreover, there would seem to be no a priori reason why any plaintiff should not be allowed to sue in the jurisdiction seen as most favourable to it in advancing its claim, assuming of course that the locale chosen has a recognized basis in accordance with accepted normative principles of law for assuming jurisdiction over the claim. One might speculate that TD Bank favours Ontario as the jurisdiction to deal with the Ontario Creditors claims because Quebec has a three-year limitation period whereas Ontario has only a two-year limitation period and hence, TD Bank’s possibility of a successful defence is more favourable in the jurisdiction it favours, i.e. Ontario.

26However, in my view, for the reasons expressed above, the evidentiary record is clear that the Dynasty Creditors Action plaintiffs have attorned to Ontario as the jurisdiction to determine their claim against TD Bank.

Disposition

27For the reasons given, the Joint Liquidators motion is granted for an Order staying the Placeholder Action until such further order which this Court may grant after the Quebec Superior Court has made its determination with finality as to whether the Quebec Creditors Action is to be heard in Quebec.

28The motion is granted for an Order temporarily staying the Dynasty Creditors Action until such further order which this Court may grant after the Quebec Superior Court has made its determination with finality as to whether the Quebec Creditors Action is to be heard in Quebec. The very limited purpose of this Order is to hold the Dynasty Creditors Action in abeyance pending the determination in Quebec as to whether the Joint Liquidators can continue to pursue the claims advanced in the Quebec Creditors Action. If TD Bank is successful in disputing Quebec’s jurisdiction or, alternatively, is successful in an argument as to Quebec not being the forum conveniens, then the continuation of the Ontario Creditors Action (i.e. the Placeholder Action) should be case managed in tandem with the Dynasty Creditors Action. Conversely, if TD Bank is unsuccessful in disputing Quebec’s jurisdiction in the Quebec Creditors Action, then while the Placeholder Action is moot, the Dynasty Creditors Action shall proceed in Ontario.

29Costs should properly follow the event. I fix costs, inclusive of fees, disbursements and applicable taxes, at $20,000 on a partial-indemnity scale in favour of the moving party, Joint Liquidators, which amount is payable forthwith by the defendant TD Bank to the plaintiff Joint Liquidators. No costs are awarded to the moving party Dynasty Creditor Action plaintiffs.