SUPERIOR COURT OF JUSTICE – ONTARIO

COMMERCIAL LIST

RE: Indcondo Building Corporation, Plaintiff

AND:

Valerie Frances Sloan, David Robin Sloan and Cave Hill Properties Ltd., Defendants

BEFORE: D. M. Brown J.

COUNSEL: T. Nguyen, for the Plaintiff

P. Healey, for the Defendants

HEARING DATE: July 10, 2013

reasons for decision

I. Motions to amend a Statement of Defence, discharge certificates of pending litigation and issue a third party claim in a section 38 Bankruptcy and Insolvency Act fraudulent conveyance action

[1] The plaintiff, Indcondo Building Corporation, commenced this action on June 20, 2008, pursuant to s. 38 of the Bankruptcy and Insolvency Act. The defendants filed a Statement of Defence dated August 8, 2008. Since then, two prior decisions of this court have gone to the Court of Appeal.

[2] A case conference was held on April 30, 2013. As I wrote in the memorandum for that conference (2013 ONSC 2645):

As I indicated to counsel, the decisions of the Court of Appeal that this action was not statute-barred (2010 ONCA 890) nor was it an abuse of process or barred by res judicata or issue estoppel (2012 ONCA 502, leave to appeal to the Supreme Court of Canada dismissed January 10, 2013, No. 35013) signal to me that the time has come to put in place a timetable which pushes this action to a reasonably quick adjudication on the merits.

[3] At the case conference I gave directions for the scheduling of the present motion, which is one in which the defendants seek the following relief:

(i) Leave to amend their August 8, 2008 Statement of Defence;

(ii) Leave to issue a third party claim against Enzo DiIorio, Steeles-Jane Properties Inc., Conleo Holdings Limited, CIFU Safe Investments Limited, Carlo Rotundo, Leo Rinomato, Peter Czapka, executor of the estate of Anton Czapka, J.L. DiPaola Real Estate Limited and Semanon Investments Limited; and,

(iii) Orders discharging certificates of pending litigation registered in 2008 against the Hill “N” Dale Farms Property and the Riverside Property.

II. The action

[4] The consideration of the defendants’ motion must start with a clear understanding of the nature of the plaintiff’s action.

[5] The plaintiff issued its Statement of Claim on June 20, 2008 pursuant to an order obtained on April 6, 2006 under section 38 of the BIA. At the heart of this action lies requests for orders setting aside four transfers or conveyances as fraudulent conveyances:

(i) A transfer of 50% of the Riverside Property from Robin Sloan to his wife, Valerie Sloan, on July 8, 1992;

(ii) A July 8, 1992 vendor take back mortgage in the amount of $525,000 on the Riverside Property in favour of Robin Sloan (the “Riverside VTB”) which was assigned, on the same date, to 721312 Ontario Inc., now known, by virtue of an amalgamation, as Cave Hill Properties Ltd.;

(iii) A transfer of 50% of the Florida Property from Robin Sloan to Valerie Sloan on April 27, 1993. The Florida Property was sold on April 15, 1994 for $257,000. Incondo seeks to recover from Valerie Sloan the proceeds of that sale; and,

(iv) An April 6, 1989 vendor take back mortgage in the amount of $3,733,355.83 in favour of Cave Hill which was part of the consideration for Robin Sloan’s sale of the Hill ‘N’ Dale Farms Property to HTB Developments Inc. Sloan had directed that the Hill ‘N’ Dale VTB be made out in favour of 721312, now Cave Hill. The VTB was renegotiated for a lower amount in May, 1992 and, as a result of HTB’s default on the mortgage in November, 1994, Cave Hill foreclosed on the property. The plaintiff alleges that Cave Hill holds the property in trust for the benefit of Robert Sloan.

The plaintiff alleges that Robin Sloan improperly and fraudulently conveyed these real property interests to his wife and Cave Hill, a company in which it is alleged he was the sole director, officer and shareholders, “with the intent to defeat, hinder, delay and defraud his creditors, including Indcondo”. In his Statement of Defence Robin Sloan pleaded that his wife, Valerie, has been the sole shareholder of Cave Hill since its incorporation.

[6] Indcondo had commenced an action on May 21, 1992 against Robin Sloan and others (the “1992 Action”) seeking, as against Sloan, damages in the amount of about $4.576 million, and other relief, in respect of what was alleged to have been the failure to complete a buy-out of Indcondo’s shareholdings in Steeles-Jane Properties Inc. Eight of the defendants in that action, including Sloan, filed a Statement of Defence and Cross-claim dated July 6, 1992.

[7] As can be seen, in this action the plaintiffs have pleaded that three of the four impugned transactions post-dated the commencement of that 1992 Action, while the fourth gives rise to facts both pre- and post-dating the initiation of that action.

[8] A motion for judgment in the 1992 Action was heard by Malloy J. on December 10, 2001. She granted Indcondo Judgment against Sloan (and others) in the amount of $8,010,575.30, plus interest. What happened thereafter was described in the 2010 Reasons of the Court of Appeal in this action:

After obtaining a judgment against David Robin Sloan in 2001, the appellant commenced an action (the “First Fraudulent Conveyance Action”) against Mr. Sloan in 2002 to reverse the conveyance of his matrimonial home to his wife Valerie Frances Sloan for no consideration. The appellant subsequently discovered that other assets had been conveyed to Ms. Sloan and to a corporation owned by her. Mr. Sloan filed an Assignment in Bankruptcy on January 13, 2004, which had the effect of staying the First Fraudulent Conveyance Action. The appellant brought the alleged fraudulent conveyances to the attention of the Trustee in Bankruptcy in 2004. The Trustee did not proceed with an action. In 2005, Mr. Sloan was discharged from bankruptcy. On April 5, 2006, the First Fraudulent Conveyance Action was dismissed in accordance with s. 178(2) of the BIA. There is no outstanding right of appeal with respect to that decision.

On April 6, 2006, the appellant obtained an order under s. 38 of the BIA, permitting it to bring proceedings against the respondents that the Trustee was entitled to bring. Pursuant to its s. 38 order, the appellant commenced the within action (the “Second Fraudulent Conveyance Action”) in June 2008.[^1]

[9] The Court of Appeal, in its 2012 Reasons, went to some lengths to describe the nature of the action now brought by the plaintiff pursuant to BIA s. 38. It is worth reproducing portions of those Reasons because they inform, in part, the approach which must be brought to the defendants’ motions:

In this court, the respondents sought to support each of the reasons of the motion judge. In my view, their arguments cannot succeed. All rest on a faulty premise; namely, that in the 2008 action, the appellant is advancing claims identical to those it advanced in the 2002 action. This fails to recognize that, unlike the 2002 action, which the appellant brought on its own behalf, the 2008 action is brought pursuant to s. 38(1) of the BIA and the claim is that of the Trustee.

In Shaw Estate (Trustee of) v. Nicol Island Development Inc., 2009 ONCA 276, 51, C.B.R. (5th) at 12, this court set out the purpose of s. 38 of the BIA. Speaking for the court, Cronk J.A., at para. 37, cited with approval Toyota Canada Inc. v. Imperial Richmond Holdings Ltd. (1994), 1994 ABCA 261, 27 C.B.R. (3d) 1 (Alta. C.A.), at paras. 14-15, leave to appeal to S.C.C. refused, [1994] S.C.C.A. No. 346:

In my view, its primary purpose is to ensure that the bankrupt’s assets are preserved for the benefit of the creditors. It provides the mechanism for creditors to proceed with an action when the trustee refuses or fails to act; thereby ensuring that assets of the bankrupt (which may otherwise go unrecovered) are available to creditors willing to finance the litigation.

The secondary purpose, relating to notice, is to make sure the section operates fairly. While it is fair that those parties willing to accept the risks and costs of litigation receive a preference in terms of recovering their losses, the right to that preference must be shared with all creditors.

Cronk J.A. went on, at para. 72, to clearly describe the difference I have delineated:

A creditor obtaining a s. 38 order advances not his or her own cause of action but, rather, the trustee’s cause of action: Re Zammit (1998), 1998 CanLII 14901 (ON SC), 3 C.B.R. (4th) 193 (Ont. Gen. Div.), at para. 4. The proceeding authorized by a s. 38 order is brought on the basis that the trustee in bankruptcy has the right to bring the action, and the creditor with a s. 38 order is taking the action as if the creditor were the trustee. As the Motion Judge indicated, once a s. 38 order is made, the creditor to whom it is granted stands in the shoes of the trustee: see for example, Swerdlow, at para. 17. This accords with the intended purpose of s. 38(1) of the Act, namely, to ensure that the bankrupt’s assets are preserved for the benefit of all creditors.

This distinction is explicit in the s. 38(1) order obtained by the appellant. The order authorizes it to commence proceedings in its own name to set aside any fraudulent preferences involving the respondents, and for that purpose the Trustee is ordered to assign its right, title and interest in such claims to the appellant. The order provides that the appellant and such other creditors of the bankrupt as joined with it in contributing to the litigation, can claim any recovery to satisfy their claims in bankruptcy, but any surpluses must be paid to the Trustee in favour of the bankrupt’s estate.

In short, the proceeding authorized by this order is not an action by the appellant on its unsatisfied judgment. To paraphrase Cronk J.A. at para. 73 of Shaw Estate, in the s. 38 motion, the appellant was not seeking to pursue its own claim in bankruptcy based on its default judgment. Rather, it was seeking leave of the court to proceed with the Trustee’s claim against the respondents in relation to conveyances said to be fraudulent.

The 2008 action does not constitute a collateral attack on the discharge order. The appellant does not bring this action in its personal capacity. Rather, in bringing this action, the appellant is standing in the shoes of the Trustee. The Trustee is indifferent to the discharge order in that the bankruptcy continues despite that order. Moreover, the discharge order is not a bar to a subsequent s. 38 motion: see Shaw Estate, at footnote 5. As I have noted, the appellant does not argue that the Trustee could not bring such an action. Hence, by asserting the Trustee’s claim, the appellant can bring the action without indirectly attacking the discharge order by which it as creditor would be bound. That action is no more of an indirect attack on the discharge order than it would be if the Trustee brought it.

Moreover, I do not think that the release of the debt owed to the appellant renders the 2008 action an abuse of process. That action is not the assertion of the appellant’s claim in bankruptcy based on the debt owed to it, but the assertion of the Trustee’s claim based on alleged fraudulent conveyances.[^2]

III. Leave to amend the Statement of Defence

A. The existing Statement of Defence, proposed amendments and the governing principles

[10] The defendants filed a Statement of Defence dated August 8, 2008. In it the defendants pleaded a number of defences:

(i) The action was frivolous, vexatious, had no merit, was a nullity because of the dismissal of the pre-bankruptcy 2002 fraudulent conveyance action and was barred by res judicata and issue estoppel by virtue of the discharge order: Statement of Defence, paras. 6, 7, 9, 10, 11, 16 and 17. The Court of Appeal, in its 2012 Reasons, held that this action was not an abuse of process, did not constitute a collateral attack on the discharge order or the order dismissing the first fraudulent conveyance action, nor did res judicata or issue estoppel apply to this action either as a result of the discharge order or the order dismissing the first fraudulent conveyance action;

(ii) The action was statute-barred, was not commenced in a timely fashion and the defendants relied upon the Limitation Act: Statement of Defence, paras. 18 and 19;

(iii) The transactions with respect to the Riverside Property were not done with the intention to hinder, defeat and delay creditors: Statement of Defence, para. 8. All transactions were done for good and valuable consideration and none were done with the intention to defeat, hinder or delay creditors: Statement of Defence, paras. 12, 14 and 15; and,

(iv) The defendants relied on the doctrine of laches: Statement of Defence, para. 20.

[11] The defendants now move to make extensive amendments to their Statement of Defence. The final version of their proposed Amended Statement of Defence was filed as Tab 1A in their July 5, 2013 Supplementary Motion Record. All paragraph number references will be to that version.

[12] The principles applicable to motions to amend pleadings were summarized in Brookfield Financial Real Estate Group Limited v. Azorim Canada (Adelaide Street) Inc.[^3]

B. The unopposed amendments

[13] The defendants seek leave to amend their defence to amplify their pleading over to the fraudulent conveyance claim by offering more particulars of their defence to each transaction and, as well, to explain their defences to the related trust claims and expand their defence of laches: Proposed Amended Statement of Defence, paras. 1 to 9, 21 to 22, 47 to 66, 67 to 68, 69 to 72 and 91. The plaintiff does not oppose those amendments. Accordingly, leave is granted to the defendants to amend their Statement of Defence in those respects.

C. Proposed limitations defence amendments

[14] The defendants seek leave to amend to re-cast their limitations defence: Proposed Amended Statement of Defence, paras. 46 and 73 to 77. In its 2010 Reasons the Court of Appeal dealt with the defendants’ limitations defence by stating at paragraph 23:

The result in this case is that the creditor discovered the claim before the LA, 2002 came into force, at a time when there was no limitation period for a fraudulent conveyance action. Pursuant to s. 24(6), there is no limitation period for this action. Therefore, the action is not statute barred and the motion judge erred in dismissing the action on the basis of a limitation period. (emphasis added)

In light of that conclusion of the Court of Appeal, there is no basis for the defendants to re-jig their limitations defence and attempt to pitch it from a different angle. I do not grant leave to make those proposed amendments.

D. Proposed solicitor’s negligence amendments

[15] Next, the defendants seek leave to make a set of amendments which allege that their former solicitor, Enzo Di Iorio, was negligent: Proposed Amended Statement of Defence, paras. 83 to 90. Again, defendants’ counsel explained the purpose of these amendments as going to show the state of mind of Robin Sloan in respect of the alleged fraudulent conveyance transactions. As drafted, the proposed amendments deal with alleged conduct of Mr. DiIorio starting with advice he allegedly gave in respect of the 2001 Judgment and certain events thereafter.[^4] The proposed amendments contain no reference, whatsoever, to any role played by Mr. Di Iorio, as counsel or otherwise, in respect of the impugned transactions. Consequently, these proposed amendments do not contain material facts relevant to any defence to the causes of action alleged in this BIA s. 38 action; they have nothing to do with the pleaded claim. I therefore do not grant leave to make them.

E. Proposed “state of mind” amendments

[16] Finally, the defendants seek leave to amend their Statement of Defence to make extensive pleadings in respect of the 1992 Action (proposed paras. 10 to 20), the 2001 Judgment (proposed paras. 23 to 29 and 82), the 2002 Action (proposed paras. 30 to 27 and 45) and the bankruptcy proceedings, including the discharge hearing (proposed paras. 38 to 44), collectively the “State of Mind Amendments”. As drafted, one could certainly read those proposed amendments as constituting assertions by the defendants that they had good defences to the 1992 Action, the 2001 Judgment was wrong and should never have been granted, the dismissal of the 2002 Action really should have ended the plaintiff’s fraudulent conveyance claims, including this action, and the discharge order had wiped the slate clean.

[17] At the hearing of the motion defendants’ counsel stated that there were only two purposes in seeking to make those amendments. First, since the plaintiff had referred in its Statement of Claim to the fact of the 1992 Action (para. 8), the 2001 Judgment (para. 9), the 2002 first fraudulent conveyance action (paras. 35 to 37), and the bankruptcy proceedings (para. 38 to 41), then fairness dictated that the defendants be permitted to include in their pleading narrative in respect of each of those events. Second, the proposed amendments were intended to show the state of mind of Robin Sloan at the time of the impugned transactions in support of his defence that none of the transactions were done with the intent to defeat his creditors.[^5]

[18] I suppose that there is a certain logic of symmetry in the defendants’ first argument and, more importantly, there is no prejudice to the plaintiff because defendants’ counsel made it crystal clear at the hearing that the defendants were not founding any claim on the basis of pleading those narrative facts. As to the second argument, while the defendants certainly are entitled to plead the material facts to support their defence to the allegations of fraudulent conveyance, and that would include a pleading as to their state of mind, I would note that the following portions of the existing Statement of Defence already plead such state of mind:

8. In any event, the Defendants plead that the transactions with respect to the Riverside Property were not done with the intention to hinder, defeat and delay creditors. To the contrary, the transactions involving the Riverside Property were done for valuable consideration…

9. In any event, the Defendants plead that all the transactions were done for good and valuable consideration and none of the transactions were done with the intention to defeat, hinder or delay creditors.

10. The Defendants further plead that all of the transactions had a real and meaningful purpose behind them and none were done with the intention to defeat, hinder or delay creditors.

11. Furthermore, there were no creditors in the contemplation of the Defendants when the various transactions were completed.

In light of those existing pleadings, one could question the need for the proposed amendments.

[19] Also, the impugned transactions occurred in 1989, 1992, 1993 and 1994, as described in paragraph 5 above. I query what relevance the “state of mind” of Robin Sloan after 1994 would have to a defence to the fraudulent conveyance claims, and most of the proposed State of Mind Amendments deal with events well after 1994.

[20] That said, Rule 26.01 uses mandatory language – “shall grant leave to amend” – but qualifies that language by providing that a court may do so “on such terms as are just”. During the course of the hearing I indicated to defendants’ counsel that if the purpose of the proposed amendments was to set out the “state of mind” of Robin Sloan in defence to the allegations of fraudulent conveyance, then it would follow that there would be no need for the defendants to seek production from or examine the plaintiffs on those proposed amendments. Counsel agreed.

[21] Consequently, while I question the relevance of much of the detail in the proposed State of Mind Amendments, one factor I am taking into account in exercising my discretion with respects to terms of amendment is the fact that this far too old 2008 action must go to trial in the near future. Descending into the realm of just how much detail may be pleaded about narrative events by either party detracts from the objective of securing a timely adjudication on the merits of the allegations of fraudulent conveyance. Also, if the amendments are permitted, but on terms that the defendants may not make them the subject of production from or discovery of the plaintiff, then the only down-side to the plaintiff is that it might have to spend an hour or so at trial to cross-examine the defendant on the points, that is assuming that the trial judge even considers the matters to be relevant. Any such additional time can be compensated for by costs. Therefore, I grant leave to the defendants to amend their Statement of Defence to plead what I have defined as the State of Mind Amendments identified in paragraph 16, but subject to the following terms:

(i) The defendants cannot compel production of the plaintiff of any document relevant to those amendments;

(ii) The defendants cannot examine the plaintiff for discovery on any of those amendments;

(iii) The defendants may not seek the production from or discovery of non-parties on those amendments; and,

(iv) The parties must comply with the timetable for the completion of pleadings, productions and examinations for discovery set out in paragraph 34 below.

Those terms, in my view, will hold the defendants to the position they took at the hearing that those amendments go to the state of mind of Robin Sloan, and they will preclude the defendants from attempting to use those amendments to re-open issues already decided in terms of the significance and effect on this section 38 action of the 1992 Action, the 2001 Judgment, the 2002 Action and the Bankruptcy Proceedings.

IV. Leave to issue Third Party Claim

[22] The defendants sought leave to issue a Third Party against nine proposed third parties. Rule 29.01 of the Rules of Civil Procedure provides:

29.01 A defendant may commence a third party claim against any person who is not a party to the action and who,

(a) is or may be liable to the defendant for all or part of the plaintiff’s claim;

(b) is or may be liable to the defendant for an independent claim for damages or other relief arising out of,

(i) a transaction or occurrence or series of transactions or occurrences involved in the main action, or

(ii) a related transaction or occurrence or series of transactions or occurrences; or

(c) should be bound by the determination of an issue arising between the plaintiff and the defendant.

[23] The first proposed third party is the defendants’ former counsel, Mr. Di Iorio. The prayer for relief claims against Di Iorio damages “for professional negligence in the amount of any judgment awarded by this Honourable Court as against any of the defendants to the within action (the “Main Action”)” or, alternatively, contribution, indemnity and other relief over in respect of any amounts which may be awarded against any of the Defendants arising out the Main Action.

[24] The proposed Third Party Claim against Di Iorio does not plead any facts in support of the claim, save that the defendants repeat and rely upon allegations and assertions contained in the proposed Amended Statement of Defence. Putting to one side the sufficiency of such a pleading, as noted above the facts pleaded against Di Iorio in the proposed Amended Statement of Defence commenced with events surrounding the 2001 Judgment; they did not contain any factual or temporal nexus with the four transactions impugned in the plaintiff’s BIA s. 38 action. Consequently, the proposed Third Party Claim does not plead any facts against Di Iorio which would bring the claim within the ambit of Rules 29.01(a) or (b). Nor does Rule 29.01(c) have any application in the circumstances of this case. I therefore do not grant leave to the defendants to issue a third party claim against Di Iorio.

[25] As to the remaining proposed third parties, they were involved in the events surrounding the buy-out of Indcondo’s shares in Steeles-Jane. The heart of the proposed third party claim against them is set out by the defendants in paragraph 11 of their proposed Third Party Claim:

11. In the Main Action, Indcondo seeks, inter alia, to recover from the Defendants on a judgment that was issued against Robin, Carlo, Leo and the Estate of Anton Czapka, jointly and severally, in the amount of $8,010,575.30, on December 10, 2001 (the “Judgment”), plus post-judgment interest for the approximately eleven year period since the date of Judgment.

The defendants seek contribution and indemnity against those proposed third parties in respect of that described potentially liability.

[26] The defendants’ proposed third party claim against those third parties fundamentally ignores the nature of this BIA s. 38 action, as described in the portion of the Court of Appeal’s 2012 Reasons reproduced in paragraph 8 above, in particular the following passage which I reproduce yet again:

In short, the proceeding authorized by this order is not an action by the appellant on its unsatisfied judgment. To paraphrase Cronk J.A. at para. 73 of Shaw Estate, in the s. 38 motion, the appellant was not seeking to pursue its own claim in bankruptcy based on its default judgment. Rather, it was seeking leave of the court to proceed with the Trustee’s claim against the respondents in relation to conveyances said to be fraudulent. (emphasis added)

[27] The proposed Third Party Claim pleads no material facts which would support a claim against the proposed third parties under any of Rules 29.01(a), (b) or (c). The defendants simply seek to spread the pain resulting from the 2001 Judgment. That has nothing to do with this BIA s. 38 claim in terms of contribution and indemnity, nor does it constitute an independent claim arising from a transaction or occurrence involved in the main action. The defendants seek to sue these proposed third parties for events which have nothing to do with the alleged fraudulent conveyances. Accordingly, no basis exists to grant leave under Rule 29.01. Even if some basis had existed, Rule 29.09 – requiring the claim to proceed as a separate action – would clearly apply. This BIA s. 38 action should not be delayed or encumbered by unrelated claims.

[28] In sum, I dismiss the defendants’ motion to issue the proposed Third Party Claim.

V. Motion to discharge two certificates of pending litigation

[29] The defendants also move to discharge certificates of pending litigation registered against the Riverside Property and Hill ‘N’ Dale Farms Property on the basis that the plaintiffs failed to make full and frank disclosure of all material facts on the ex parte motion which secured those CPLs.

[30] Morawetz J. granted leave to issue the CPLs by order made June 27, 2008. In 2010 the defendants moved before Morawetz J. to discharge the CPLs. In his Reasons Morawetz J. stated:

Ms. Sloan and Cave Hill have brought a motion to set aside the CPLs, alleging that Indcondo failed to make full and frank disclosure to the court and knowingly gave a false and hollow undertaking as to damages in light of its knowledge and admission that both Indcondo and Mr. John DiPaola, its sole principal, were impecunious and had been impecunious since the late 1990’s.

Mr. Sloan, Ms. Sloan and Cave Hill also sought to set aside a s. 38 Bankruptcy and Insolvency Act (“BIA”) order obtained by Indcondo which permitted it to commence this action, on the basis that the s. 38 order was obtained improperly. The s. 38 order was made in Mr. Sloan’s bankruptcy proceedings. The defendants also seek related relief for an order dismissing this action on the basis that it is barred by res judicata, issue estoppel and the Limitations Act, 2002 and is an abuse of process.

Finally, the defendants have also brought a motion requesting that Indcondo post security for costs.

Argument was heard with respect to the s. 38 motion, and the motion to dismiss, on the basis that if successful, the mareva injunction and the security for costs motions would be moot.

For the following reasons, I have dismissed the action and discharged the CPLs. Accordingly, the mareva injunction and the security for costs motions are moot.[^6]

Morawetz J. concluded that this action was statute-barred and discharged the CPLs.

[31] The Court of Appeal granted an appeal from that order and set aside the order of Morawetz J.[^7] Paragraphs 5 and 6 of the Court of Appeal’s formal order dated December 22, 2010 ordered that the two CPLs “shall be reinstated by the Defendants at their expense and registered on title to the property”.

[32] Given that history, in particular that the present registration of the two CPLs has resulted from an order of the Court of Appeal, as a judge of the Superior Court of Justice I have no jurisdiction to vary or set aside that order absent express direction or authorization from the Court of Appeal. Consequently, I cannot consider the relief sought by the defendants. If they wish to vary the status of the CPLs, they must seek the appropriate relief from the Court of Appeal.

VI. Conclusion

[33] In paragraph 21 above I required, as a term of granting certain amendments to the Statement of Defence, that the parties comply with a timetable concerning further pre-hearing steps in this action. In my May 6, 2013 Case Management Memorandum I wrote:

Both parties agreed that this matter should go to trial in the first half of 2014. Numerous affidavits have been filed to date in this proceeding and a number of cross-examinations have been held. That background suggests to me that a hybrid trial would be appropriate and, to my ear, it sounds like 5-7 days would be sufficient for this trial which, in essence, is a fraudulent conveyance action. Therefore, my case management goal is to send this action to trial in the second quarter of 2014, with examinations for discovery to be completed by the end of November, 2013.

[34] Slightly over two months have elapsed in order to deal with this motion by the defendant, a motion which in very large part had little merit. Moreover, those amendments to the Statement of Defence for which I did grant leave on their face were based on information the defendants possessed at the time they filed their 2008 Statement of Defence in this action. There is an obligation on a defendant to make its initial pleading a fulsome one, not to throw in a skimpy initial defence and then delay the progress of the case by later seeking to include amendments dealing with facts already known. This motion has delayed the course of this action to trial. As a result, whereas in my Case Management Memorandum I stated that discoveries should be completed by the end of November of this year, as a condition of granting leave to amend the Statement of Defence I am moving the discovery completion date forward to the end of October, 2013. Accordingly, the conditions which I impose in respect of granting leave to amend the Statement of Defence also include the following:

(i) The defendants shall deliver their Amended Statement of Defence by July 19, 2013;

(ii) The plaintiff shall deliver any Reply by August 1, 2013;

(iii) The parties shall exchange affidavits of documents and productions no later than August 30, 2013; and,

(iv) Examinations for discovery shall be completed by October 31, 2013. The plaintiff’s examination for discovery of the defendants shall not exceed 10 hours; the defendants’ collective examination for discovery of the plaintiff shall not exceed 10 hours.

[35] Further to paragraph 4 my Case Management Memorandum I direct the parties, no later than July 31, 2013, to book a one hour case conference before me for the week of September 16, 2013 at which time I will inquire into the status of this action. I also remind the parties of paragraph 5(iv) of my Case Management Memorandum which provided:

In the event either party appeals an order made in this case management process, the process of preparing this case for trial will continue absent an express statutory stay of the order or an order of an appellate court staying the case management order.

[36] By way of summary, for the reasons set out above, I grant the defendants leave to deliver an Amended Statement of Defence containing the proposed amendments identified in paragraphs 13 and 16 above on the terms and conditions specified, I dismiss the balance of their motion to amend their Statement of Defence, and I dismiss those parts of the motion seeking leave to issue a Third Party Claim and to discharge the two certificates of pending litigation.

[37] I would encourage the parties to try to settle the costs of this motion. If they cannot, the plaintiff may serve and file with my office written cost submissions, together with a Bill of Costs, by August 2, 2013. The defendants may serve and file with my office responding written cost submissions by August 30, 2013. The costs submissions shall not exceed three pages in length, excluding the Bill of Costs.

­­­___________________

D. M. Brown J.

Date: July 12, 2013

[^1]: 2010 ONCA 890, paras. 6 and 7.

[^2]: 2012 ONCA 502, paras. 22 to 24, 26, 29 and 31, emphasis added.

[^3]: 2012 ONSC 3818, paras. 22 to 30.

[^4]: See also the admission as to 2001 being the applicable period of time in paragraph 23 of the defendants’ Factum.

[^5]: See also the admissions by the defendants as to the purpose of these amendments contained in paragraphs 16 and 19 of their Factum.

[^6]: 2010 ONSC 2473, paras. 8 to 12.

[^7]: 2010 ONCA 890