ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: 01-CV-17449
DATE: 20121015

BETWEEN:

SUZANNE CLEMENT, in her capacity as TRUSTEE OF THE ESTATE OF JEAN CLEMENT (DECEASED)
Plaintiff

– and –

THE ATTORNEY GENERAL OF CANADA and MARK GALLANT
Defendants

Robert P. Hine and Stephany Mandin, for the Plaintiff

Peter Nostbakken, for the Defendants

HEARD: August 16, 2012

REASONS FOR JUDGMENT

J. Mackinnon J.

Introduction

[ 1 ] This is a motion by the defendants requesting an order pursuant to rule 20 of the Rules of Civil Procedure , R.R.O. 1990. Reg. 194, (the “ RCP ”) dismissing the plaintiff’s claim as it relates to damages for injury to property and striking the words “and to his businesses, his net worth and his income past and future” from paragraph 39 of the Fresh as Amended Statement of Claim, without leave to amend. In addition, the defendants seek an order pursuant to rule 21.01(1)(b) striking paragraphs 41 and 42 of the Fresh as Amended Statement of Claim on the grounds that the alleged breaches of the Canadian Charter of Rights and Freedoms , Part I of the Constitution Act, 1982 , being Schedule B to the Canada Act 1982 (U.K.), 1982, c. 11, cannot be pursued by the Estate of Jean Clement.

[ 2 ] The main issue in the motion for summary judgment is the legal capacity of the plaintiff to bring the claim as it relates to damages for injury to property. The defendants say that the cause of action disclosed in the Statement of Claim arose during the period of time before Mr. Clement’s discharge from bankruptcy and, accordingly, neither he nor his estate have standing to assert a claim for recovery of damages for injury to property. The defendants say that claim may only be pursued by the Trustee in Bankruptcy. Mr. Clement was petitioned into bankruptcy on September 2, 1999, discharged from bankruptcy on December 9, 2000, and commenced this action on June 4, 2001.

[ 3 ] The plaintiff submits that the claim, as it relates to damage to property, did not exist prior to Mr. Clement’s discharge from bankruptcy and therefore, did not vest in the Trustee. Alternatively, if it did vest in the Trustee, the court should exercise its discretion under s. 40(2) of the Bankruptcy and Insolvency Act , R.S.C. 1985 c. B-3, (“ BIA ”), to assign it to the plaintiff nunc pro tunc. Either way, the plaintiff submits that the claim, as it relates to personal damage, is properly brought and the plaintiff is entitled to rely on an expert report outlining economic damages as a measure of damages for that claim.

Background

[ 4 ] The late Jean Clement (“Clement”) owned the King George Hotel in Cornwall, Ontario through his ownership of a corporate entity. On February 14, 1997, fire destroyed the hotel. It was insured against loss due to fire. However, the Fire Marshall issued a report that the cause of the fire was “undetermined” and the insurers refused to pay under the policy. On July 4, 1997, Clement commenced an action against the insurers. The defence alleged that the fire had been intentionally started by Clement.

[ 5 ] The trial of the insurance action was set to commence on September 21, 1998. In the meantime, the police had been investigating Clement. In July 1997, during the course of the police investigation, Constable Racine (“Racine”) was in contact with Mark Gallant (“Gallant”), an employee with Canada Revenue Agency (“CRA”), about the financial status of Clement. No order or consent existed permitting either to obtain or disclose Clement’s confidential taxpayer information. The plaintiff alleges that Gallant revealed confidential taxpayer information including that Clement had been reassessed with respect to the 1995 to 1997 taxation years and owed approximately one million dollars in income taxes. With this information in hand, the Cornwall police charged Clement with arson on September 16, 2008. The insurance action was stayed pending the resolution of the criminal charges.

[ 6 ] As it turned out, the income tax reassessments were vacated in Clement’s favour in November 1998.

[ 7 ] The plaintiff alleges that, as a result of the arson charge, financial institutions and business associates refused to provide Clement further credit and called their loans as soon as they could. Clement’s properties were sold in power of sale proceedings because of mortgage defaults triggered by his inability to obtain financing or insurance. On September 2, 1999, he was petitioned into bankruptcy by the Bank of Nova Scotia. The effective date of his bankruptcy was March 8, 2000.

[ 8 ] In September 1999, the Crown brought a motion to remove Clement’s counsel of record in the criminal proceedings. The Crown relied on an affidavit deposed by Constable Bissonnette, who was one of the investigating officers in the arson case. The affidavit’s admissibility was opposed on the basis that it attached, as Exhibit A, a synopsis Bissonnette had prepared of the entire investigation against Clement, including steps taken and information received by others in addition to those steps he took himself. The judge admitted Exhibit A for the limited purpose of giving context to the position of the Crown on the motion to remove counsel and not as proof of any specific matter referred to in it.

[ 9 ] During that motion, Bissonnette was cross-examined in court by Clement’s counsel. In response to questions put to him, Bissonnette testified that Racine had met with CRA agent Gallant in July 1997, who told Racine that Clement had been audited and reassessed more than one million dollars in back taxes. Bissonnette confirmed that Racine had no authorization to make these inquiries and that normally CRA would not release such information. Clement’s counsel asked Bissonnette if he knew that it was against the law for Gallant to have given that information to Racine. Bissonnette replied that he did not know that. Counsel also asked him whether this evidence was going to be part of the Crown’s case for motivation. Bissonnette did not answer the question because Crown counsel intervened to say that he had instructed the police to endeavour to obtain the information legally and that the defence would be kept informed if they did so.

[10] The defence brought a motion on December 4, 2000 seeking a stay of the criminal charges by reason of alleged abuse of process. Although not directly relevant to the motion at hand, during the investigation of Clement, the police had accepted payment from his insurers in order to fund wiretap surveillance. The abuse of process motion relied on this and on two particular requests for disclosure that were still outstanding: (1) who had authorized acceptance of monies from Clement’s insurers to fund the wiretaps; and (2) who had authorized the release of information from CRA to the police officials. Racine was cross-examined at this hearing on December 12, 2000. Racine testified that, on July 22, 1997, he went to see Gallant who provided him with information about Clement’s taxes, that he had no warrant or other legal authority to obtain confidential taxpayer information and that he had omitted Gallant’s name from his police notes to protect him since he was providing Racine with information which may get Gallant into trouble.

[11] Gallant also testified at the hearing on December 15, 2000. He said that he met Racine on July 22, 1997, but that he was only there to listen to information being provided to Racine by the insurance investigator, Wendy Walker. Gallant specifically denied that he released any information or that he had told Racine that Clement owed one million dollars in taxes.

[12] On January 23, 2001, Wendy Walker testified. She described Gallant’s testimony denying he released information to her and Racine as an “absolute lie” and testified that he had given information about Clement’s tax situation to both her and Racine at the meeting.

[13] The Reasons for Judgment on the abuse of process hearing were delivered on February 21, 2001. The judge did not stay the proceedings but did find an abuse of process for reasons related to the funding of the wiretaps and the omission of that detail from the material provided to the court that granted the permission for the wiretap surveillance. As it relates to the factual context of this motion, he stated:

16 Constable Racine obtained tax information relating to Mr. Clement’s corporate activities. He gained this through conversations with Mark Gallant of Revenue Canada. Racine was introduced to him by Wendy Walker, an agent of Kingsway. She had secured a signed release to disclose from Mr. Clement. The consent did not authorize what Mr. Gallant said to Constable Racine, but I’m not persuaded that this rises to the level of an abuse of process. It may well be that the evidence so obtained will be the source of further objections, but this conduct does not fall within the context of abuse of process.

[14] The criminal trial went forward and for reasons I am not aware of, did not conclude until January 19, 2004. On that day, the Crown declined to call further evidence and announced that it was not seeking a conviction. The Crown had obtained an additional report from the Fire Marshall on January 16, 2004 which concluded that an accidental fire could not be ruled out.

[15] On January 28, 2005, the insurance action was settled for approximately $3 million. Clement did not receive any of those funds because he had sold his ownership interest in the company that owned the hotel and the insurance policy to his son-in-law, by two transactions which took place in May and in September 1998.

[16] The within action against Gallant and the Attorney General of Canada (“AGC”) had been commenced by Clement on June 4, 2001. [1] A Statement of Defence was delivered, a partial settlement was reached pursuant to which Gallant was released from the action and the AGC agreed to assume any liability Gallant may be found to have, Affidavits of Documents were exchanged and Examinations for Discovery conducted. Clement died on January 30, 2008. In June 2008, an order to continue the action was obtained by Suzanne Clement in her capacity as Trustee of the Estate. In September 2008, an order was obtained on consent that the two actions were to be tried together or one after the other as directed by the trial judge. As part of her documentary disclosure in 2008, Suzanne Clement produced the petition to put Clement into bankruptcy, the Receiving Order made against him in March 2000, his Statement of Affairs prepared for the bankruptcy and the Certificate of Discharge. Later, in 2010, she produced the Trustee’s entire file in respect to Clement’s bankruptcy. The trial of the action was scheduled for March 2012 but was adjourned to May 2013 given the late completion of the plaintiff’s expert report. That report by FTI Consulting is dated April 9, 2012. It provides opinions on the quantification of the plaintiff’s economic damages.

[17] No version of the Statement of Claim in this action refers to the bankruptcy of Clement. Neither did the original Statement of Claim in the police action. The earliest reference in that action to Clement’s bankruptcy appears in the Fresh as Amended Statement of Claim filed on April 7, 2005. In August 2005, leave was granted to further amend and the Fresh Fresh as Amended the Statement of Claim in the police action also pleads the discharge from bankruptcy.

... (continuing exactly as in the source through paras [18]–[67] and the closing text) ...

J. Mackinnon J

Released: October 15, 2012

COURT FILE NO.: 01-CV-17449

ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: SUZANNE CLEMENT, in her capacity as TRUSTEE OF THE ESTATE OF JEAN CLEMENT (DECEASED) Plaintiff – and – THE ATTORNEY GENERAL OF CANADA and MARK GALLANT Defendants REASONS FOR JUDGMENT Mackinnon J.

Released: October 15, 2012

[1] In August 2001, he also commenced action against the police (“the police action”)