Humberto Carvalho et al, 2015 ONSC 202
COURT FILE NO.: 10-8625-00CL
DATE: 20150112
SUPERIOR COURT OF JUSTICE – ONTARIO
COMMERCIAL LIST
RE: Portuguese Canadian Credit Union Limited, by its Liquidator, Deposit Insurance Corporation of Ontario
Plaintiff
- and -
Humberto Carvalho, Antonio Carvalho, David Rendeiro, Rick Belsby, Rick Belsby & Associates Inc., David Wrong, John Santos and Emanuel De Melo
Defendants
BEFORE: JUSTICE NEWBOULD
COUNSEL: Jason Wadden & Daniel Block, for the Plaintiff
S.L. Secord, for the Defendants, Rick Belsby and Rick Belsby &Associates
HEARD: January 8, 2015
ENDORSEMENT
[1] Deposit Insurance Corporation of Ontario, the liquidator of the Portuguese Canadian Credit Union Limited (DICO) moves under rules 21.01(1)(b) and 25.11 to strike from paragraph 36 of the statement of defence of the Belsby defendants the allegation that “the claim has been commenced for an improper purpose”.
[2] No motion by the plaintiff to strike was bought after the statement of defence was delivered in June, 2010. A reply and defence to counterclaim was filed by the plaintiff and since then there has been production and extensive discoveries. The claims against the remaining defendants have been settled.
[3] Belsby says the motion should be dismissed because it is now far too late. A trial date of March 30, 2015 has been set.
[4] Whether the motion should be dismissed as being out of time is a discretionary matter. In this case, I would not dismiss it on the grounds of delay. The pleading in question, to be sure, is a bald pleading that could have been struck from the outset, but no motion was bought and no request for particulars was made.
[5] It was only in August, 2013 during the examinations of Mr. Belsby that the facts to support the plea were disclosed. DICO says that the facts all go to allegations of improper motive of DICO which do not raise any valid defence. When the representative of DICO, Mr. Poprawa, was examined for discovery on September 14, 2014, objection was taken to questions relating to the allegations of Mr. Belsby and some were answered under reservation of rights under rule 34.12(1).
[6] Thus the facts became known only in August, 2013 and were the subject of discovery of DICO in September, 2014. Any delay in this case, since then, with what all that has gone on, is not sufficient to dismiss the motion in this case, particularly when the allegations that are being made are considered and the effect on a trial they would have.
[7] The fact of a looming trial date could in many cases be a determining factor. However in this case, and considering the practices in the Commercial List, I do not think it is. Justice Morawetz has been case managing this matter. In May, 2013 Mr. Wadden for DICO asked at a case conference for a further case conference sometime before October, 2013 to set a trial date. Eventually on June 27, 2014, a trial date of February 16, 2015 was set by Morawetz J. At that time there were several matters still to be done, including discoveries of DICO. That is quite common in the Commercial List, as will be discussed, and it gives the parties, and the court, a timeline to get things done. On December 2, 2014, Morawetz J. rescheduled the trial date to March 30, 2015. He noted that the plaintiff was bringing this motion to strike and he scheduled it to be heard on January 8th.
[8] The Belsey defendants also say that leave is required for this motion to be brought.
[9] Rule 2.02 requires leave of the court to attack an irregularity if the motion is not brought within a reasonable time after the moving party knows of the irregularity or if the moving party has taken any further step in the proceeding after obtaining knowledge of the irregularity.
[10] What the plaintiff attacks in this case is not based on the fact that the pleading is a bald pleading, but rather is based on the facts as disclosed on discovery which the plaintiff says reveals that that the plea is one of improper motive that is impermissible. The plaintiff did not know of this irregularity at the time it pleaded to it. I have already held that the motion was brought within a reasonable time after the discoveries when the irregularity became known. I do not think leave is required under rule 2.02, but in any case would grant leave if it were required.
[11] Rule 48.04(1) provides that a party who has set an action down for trial shall not initiate or continue any motion without leave. In this case, as in all trials in the Commercial List, actions are not “set down for trial” under rule 48. Trial dates are obtained informally from the team leader of the Commercial List, or in this case from Morawetz R.S.J., without any trial record being filed. Trial dates are most often scheduled in the Commercial List before all interlocutory steps have been taken by plaintiffs and defendants. This case is no exception. One of the advantages of the Commercial List is that procedural formalities in the rules are dispensed with in the interest of a timely, efficient and more cost effective way of proceeding. Case management without all of the formalities is central to this.
[12] The notion in rule 48.07 that once an action is placed on the trial list, the parties are deemed to be ready for trial, is not applicable to the Commercial List as actions are not “placed on the appropriate trial list by the Registrar 60 days after the action is set down for trial” under rule 48.06(1) and rarely, if ever, is an action “set down for trial by serving and filing a record” under rule 48.02(1). Trial records are filed in the Commercial List normally long after a trial date has been scheduled.
[13] I do not see rule 48.04(1) as having any applicability to the way trials are scheduled in the Commercial List. In the circumstances, no leave is required for this motion under rule 48.04(1). If leave were required, I would grant it.
[14] The evidence supporting the impugned portion of paragraph 36 of the statement of defence is summarized in paragraph 7 of the DICO factum and paragraphs 70, 71, 73, 75-79 and 80 and 81 of the Belsby factum.
[15] A defence can be struck if it is plain and obvious that taking the facts pleaded as proven the pleading discloses no defence. See Hunt v. T & N plc, 1990 CanLII 90 (SCC), [1990] 2 S.C.R. 959.
[16] Here, no facts have been pleaded in paragraph 36. It is only a conclusory assertion that the claim was commenced for an improper purpose. I will assume for this motion that the allegations set out in the paragraphs in the facta to which I have referred are the pleaded facts.
[17] Ms. Secord has referred to case authorities dealing with the tort of abuse of process, such as Westjet Airlines, v. Air Canada, [2005] O.J. No. 2310 which requires a threat of an act outside the ambit of the action. I do not see this line of cases as directly relevant, as the tort of abuse of process has not been pleaded as a claim.
[18] There is a pleading in paragraph 28 of the statement of defence that “in light of the circumstances hereinbefore set out … the claim is an abuse of process”. None of the allegations raised in the paragraphs of the facta referred to were pleaded “hereinbefore”, or after for that matter, and no motion to strike that plea from paragraph 28 has been brought.
[19] In Westjet, Justice Nordheimer articulated a difference between purpose and motive. That may be a valid distinction but would require a careful assessment of the particular allegations. While the plea in the statement of defence is a plea of improper purpose, the DICO factum refers to the defence at paragraph 70 as a defence that the action was commenced “in whole for an improper motive” and at paragraph 72 as a defence that the action was commenced “as a result of an improper motive and fad faith.”
[20] The case law establishes two propositions:
The motive of a plaintiff in bringing an action, however improper, is not a defence. See E.O.E. Group Inc. v. Konica Minolta Business Solutions (Canada) Ltd., 2012 ONSC 197 at paras. 7 and 9.
A claim or defence may be struck where the sole purpose of the pleading is an improper purpose. See Whitcombe v. Manderson, [2009] O.J. No. 5482 per Hourigan J., (as he then was), at para. 18; Poulton v. Metropolitan Toronto Shinglers Association, [2008] O.J. No. 2977 per Ferguson J. at paras 45-46, who stated:
I have been directed to no case where the court halted a proceeding as an abuse of process when an apparently meritorious claim (which had not previously been litigated) was brought partly for a collateral propose.
I note that from a practical standpoint if a claim is apparently meritorious in the sense that the pleaded facts constitute a ground for a legal remedy, it would be difficult to find that the only purpose of the action is a collateral purpose.
[21] I will review the various allegations made as referred to in the facta.
[22] The evidence of allegations contained in paragraph 7 of the DICO factum are all allegations of motive, and thus improper.
[23] The allegation in paragraphs 70 and 71 of the Belsby factum, although stated to be motive, could be construed as going to the purpose for commencing the action, namely to prevent Mr. Belsby from providing service to credit unions in Ontario. The fact that the allegation rests on the terms of settlements made with the other defendants four years after the litigation commenced appears to be rather weak evidence of a purpose at the commencement of the action, but that would be for the trial judge.
[24] The evidence of the allegation in paragraph 73 of the Belsby factum is clearly an allegation of motive, and thus improper. So too the evidence of the allegations in paragraphs 75 to 79.
[25] The allegations in paragraphs 80 and 81 are not allegations of motive or purpose. They amount to a pleading of an implied admission of fact. It certainly cannot be said to be a plea that the action was commenced for the purposes of anything set out in those paragraphs. These allegations in paragraphs 80 and 81 are not proper allegations.
[26] For a defence of improper purpose to succeed, the improper purpose must be the sole purpose of commencing the action, not just one of the purposes of commencing the action. Paragraph 36 of the defence does not plead that the improper purpose was the sole purpose of commencing the action. However, giving the pleading a large and liberal reading, I will read it as pleading that the sole purpose in commencing the action was an improper purpose.
[27] I recognize that Ferguson J. in Poulton v. Metropolitan Toronto Shinglers Association stated that from a practical standpoint if a claim is apparently meritorious in the sense that the pleaded facts constitute a ground for a legal remedy, it would be difficult to find that the only purpose of the action is a collateral purpose. In this case there are facts pleaded in the statement of claim that constitute a ground for a legal remedy. However, I think it a matter better left to the trial judge if there is a plea of improper purpose and facts to support it.
[28] This trial should not be cluttered with evidence that will not support a valid defence. The costs and time wasted for that should be avoided.
[29] I am asked by the plaintiff to rule the evidence contained in the paragraphs supporting an improper motive defence as being inadmissible. I am satisfied that I have jurisdiction to do so, recognizing that courts are reluctant ahead of time to do so in less than clear cases. The cases relied on by DICO on this point relate to motions prior to the hearing of an application to strike portions of affidavit evidence that allegedly is inadmissible. See Lockbridge v. Director, Ministry of the Environment, 2012 ONSC 2316 and Chopic v. Mitsubishi Paper Mills Ltd., (2002), 26 C.P.C. (5th) 104. I see no difference in principle between applications and trials so far as this is concerned, particularly now with the procedure to be streamlined as per Hryniak v. Maudlin, 2014 SCC 7, [2014] 1 S.C.R. 87.
[30] Taking into account the circumstances, I make the following order:
(i) The plea in paragraph 36 of the statement of defence may stand only on the basis that the allegation in paragraphs 70 and 71 of the Belsby factum are the only grounds relied on to support it.
(ii) The evidence referred to in paragraph 7 of the DICO factum and paragraphs 73, 75 to 79 and 80 to 81 of the Belsby factum are ruled inadmissible evidence for the purposes of the trial.
[31] The plaintiff is entitled to its costs of the motion. If costs cannot be agreed, brief written submissions along with a proper cost outline may be made by the plaintiff within 10 days and brief written reply submissions may be made within a further 10 days.
NEWBOULD J.
Date: January 12, 2015