ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: CV-14-500382
DATE: 20150721
BETWEEN:
Cache Metals RRSP Inc. and Cache Precious Metals Inc.
Plaintiffs
– and –
Atef Salama, Express Gold Refining Ltd. and Jeffrey Cuff
Defendants
AND BETWEEN:
Jeffrey Cuff
Plaintiff by Counterclaim
- and –
Cache Metals RRSP Inc., Cache Precious Metals Inc., Robert Rosenzweig and Thomas Green
Defendants by Counterclaim
John Philpott & Bryan Badali, for the Plaintiffs (Defendants by Counterclaim)
Andrea Sanche, for the Defendant (Plaintiff by Counterclaim)
HEARD: June 26, 2015
s.a.Q. akhtar j.
Factual Background
[1] The applicant and defendant in the main action, Jeffrey Cuff, brings this motion under Rule 59.06 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, to set aside the Mareva injunctions issued by Corbett J. on 19 March 2014. Further attempts to set aside the order were unsuccessfully made on 26 March 2014, 4 April 2014, and 15 June 2014.
[2] Cuff argues the orders were obtained as a result of fraudulent information provided by Robert Rosenzweig, one of the partners in the plaintiff company, and should therefore be set aside in their entirety. The respondent, Cache Metals RRSP Inc. and Cache Precious Metals Inc. (“Cache Metals”) ask for the application to be dismissed. They submit that no fraudulent representations were made and, further, the representations complained of were immaterial to the orders granted by Corbett J.
The Main Action
[3] Cache Metals are in the business of dealing in precious metals such as gold and silver. Cuff held the position of Vice President of Trading Operations from September 2009 to February 2014. He left the company amidst allegations of illicit misappropriation of monies and property belonging to the plaintiffs.
[4] Cache Metals allege that Cuff, using his position as VP Trading, sold metal belonging to them and directed proceeds of sales into his personal bank account. Cache Metals allege that Cuff committed these fraudulent acts on at least thirteen different occasions.
[5] Shortly after Cuff’s departure, things turned very sour for him. First, he was charged with the criminal offence of Fraud Over $5000. Then, Cache Metals applied to this court, ex parte, for a Mareva injunction, a Norwich order and a Certificate of Pending Litigation against Cuff’s house. The affidavit used in that motion was that of Thomas Green, President of Cache Metal. Green outlined in detail the transactions alleged to be fraudulent. The presiding judge, Corbett J. granted the application on 19 March 2014 (“the 19 March Order” or “the First Order”).
[6] Upon learning of this development, Cuff applied to have the orders set aside, struck or varied. Corbett J. dismissed his application on 16 June 2014. (“the 16 June Order” or “the Second Order”).
The Allegation of Fraudulent Representation
[7] Cuff returns to this court on a new basis: he claims that Rosenzweig, made fraudulent representations during Cache Metal’s application for the orders made by Corbett J. In order to understand Cuff’s allegations, it is important to revisit what transpired in the civil and criminal proceedings that Cuff faced.
(a) The Civil Proceedings: The Second Motion
[8] As part of his motion to strike the original orders made by Corbett J., Cuff swore an affidavit responding to Green’s allegations. He claimed that Green had misrepresented his relationship with Cache Metals and most importantly failed to disclose an agreement that he had made with Rosenzweig which authorised Cuff to hold and sell 5,000 ounces of silver a year for his personal benefit. This arrangement was a reflection of Cuff’s entitlement to 5% share in the net profits of Cache Metals’ business. To support his claim, Cuff attached an email (“the Partner email”) purportedly sent by Rosenzweig setting out the proposed terms of his employment which included the offer to award 5% stake in net profits with an option to increase that to 15% over a period of time.
[9] Cuff also claimed that Green and Rosenzweig always introduced him to business associates and prospects as “partner” in the business.
[10] Rosenzweig provided a further affidavit, a portion of which dealt specifically with Cuff’s assertion that he was a partner in the business.
[11] He stated that:
Cuff was never an owner of Cache Metals and it was never agreed that he could share in the profits of Cache Metals.
Any statements made by Cuff to the effect that he is a founder, owner, shareholder, officer, director of Cache Metals is categorically false. Equally false are any statements that I agreed to enter into any profit sharing arrangements with Jeff.
I have reviewed the email as Exhibit “A” of the Cuff Affidavit and can state that I have absolutely no recollection of its contents. Like the doctored mortgage documents attached above, my belief is that this email is a fabrication, either in part or in its entirety. For one, the language used is not how I typically communicate. Secondly, I have searched through my email history and have not been able to locate this email. I had Cache Metals’s information technology consultants see if any emails between me and Cuff can be located from this time period and they have been unable to retrieve any.
Most importantly regardless of the email itself, I have absolutely no memory of ever agreeing to provide Cuff with 5% of the total profits of Cache Metals or agreeing to give him the right to buy an additional 15%. Any such offer would have to be decided mutually between Thomas and me as 50/50 shareholders, and I have no memory of ever approaching Thomas regarding this.
[12] When cross-examined on 14 May 2014, Rosenzweig continued to deny claims that Cuff was a partner or shareholder and testified that the Partner email (“the Partner Email”) was “faked.” When asked to clarify his position on his email he answered in the following manner:
A. – – this email but I just don't see how these relate to each other, and there’s no words in here that I would use on a regular basis. That makes it really weird because I don't speak like this […] And just for your reference, Ms. Sanche, I am out of my wheelhouse when it comes to technology [...] I am out of my wheelhouse. I'm not in my expertise. But when I look at certain things like dates, I notice that there's a day and a month, but the other email has a month and a day, the way it’s referenced next to my name.
[13] These materials were before Corbett J. when he made the 16 June Order.
(b) The Criminal Proceedings: The Preliminary Inquiry
[14] Cuff’s criminal matters proceeded to a preliminary inquiry which commenced in January 2015. As part of its case, the Crown called Rosenzweig who restated his position that there was no agreement that Cuff was entitled to a 5% stake in net profits. He also maintained that he had never authored or sent the Partner email. In cross-examination, Cuff’s counsel pinned Rosenzweig to his position:
Q. …. If it turns out that, in fact, this was a document that you sent, you would have no explanation for it. Right, sir?
A. No explanation for it.
Q. Because that would be completely inconsistent with everything you said to this point in time in the civil proceedings and everything you said in the criminal evidence to this point in time. Is that fair?
A. That's fair.
[15] On 10 March 2015, the police obtained, as part of their criminal investigation, a production order from Johnson Matthey, the company that employed Cuff before he joined Cache Metals. Included in the production materials was a copy of the Partner email as well as other email correspondence discussing profit share of the business and base salary. These emails, which appear to be negotiations to attract Cuff to join Cache Metals are all admitted as authentic by Mr. Philpot, counsel for Cache Metals.
[16] On April 1, 2015, the Crown withdrew the criminal charges against Cuff on the basis of these emails.
The Position of the Parties
[17] Ms. Sanche, Cuff’s counsel, submits that the two orders made by Corbett J. were a result of fraud, i.e. Rosenzweig’s express denial of the Partner email subsequently found to be authentic, which was material and fundamental to both orders. Ms. Sanche argues the evidence demonstrates that not only were Rosenzweig’s statements untrue but that he knew them to be false when he made them. Ms. Sanche asks this court to conclude that Rosenzweig’s fraud may have affected the orders made by Corbett J. which, as a result, must be set aside.
[18] Mr. Philpot, for Cache, argues on three fronts: (1) Cuff is estopped from bringing this application; (2) there was no fraudulent representation as Rosenzweig’s statements were the result of an honest mistake; and (3) the Partner email played no part in the determination of the First and Second Orders. Accordingly, this court should dismiss the application.
The Legal Principles
[19] Since Cuff makes his application under Rule 59.06(2)(a) of the Rules, I turn to the principles governing that section.
Rule 59.06(2)(a)of the Rules of Civil Procedure
(2) A party who seeks to,
(a) have an order set aside or varied on the ground of fraud or of facts arising or discovered after it was made;
may make a motion in the proceeding for the relief claimed.
The Test for Fraud Under Rule 59.06
[20] In the leading case of 100 Main Street East Ltd v. Sakas (1975) O.R. (2d) 385, 1975 381 (ON CA), 58 D.L.R. (3d) 161 (C.A.), Estey J.A. set out the principles relating to the reliance on fraud to set aside a previous order or judgment. In reviewing the law, Estey J.A. observed at para. 16:
These authorities make it clear that the new evidence of fraud must relate to the “foundation” of the decision or be “material” to the claim or defence, but need not necessarily amount to a “determining factor in the result.”
[21] The criterion that the fraud be the foundation of or material to the order is found restated in subsequent case law: Intercontinental Corona Resources v. LAC Minerals Ltd. (1988), 1988 4534 (ON SC), 66 O.R. (2d) 610, 54 D.L.R. (4th) 647 (C.A.), at para. 44. The requirement has been modified to include “any fact that would have been weighed or considered by the motions judge in deciding the issues regardless of whether its disclosure would changed the outcome”: Forestwood Co-operative Homes Inc. v. Pritz, [2002] O.J. No. 550, 156 O.A.C. 359 (Div. Ct.), at para. 26.
[22] In Royal Bank v. Futurecom Inc., 2010 ONCA 63, Rouleau J.A., at para. 20, explained the manner in which Rule 59.06(2)(a) operated in the context of fraud:
Read in the context of the rule as a whole, it is clear that the reference to fraud is a fraud perpetrated in the way the judgment or order was obtained. [emphasis added]
The Issues Resolved
Does Issue Estoppel Apply?
[23] Mr. Philpot argues that Cuff seeks to re-litigate the Mareva injunction. He submits the material relied upon by Cuff was before Corbett J. who accepted there was evidence that Cuff was offered a 5% partnership share. I reject Mr. Philpot’s argument for the following reason.
[24] The pre-conditions for finding estoppel were set out by the Supreme Court of Canada in Angle v. Minister of National Revenue, 1974 168 (SCC), [1975] 2 S.C.R. 248, 47 D.L.R. (3d) 544):
- The same question has been decided;
- The judicial decision which is said to create the estoppel was final; and,
- The parties to the judicial decision were the same persons or parties to which the estoppel was raised.
[25] A court has discretion to not apply the estoppel even if the preconditions are met: Danyluk v. Ainsworth Technologies Inc., 2001 SCC 44, [2001] 2 S.C.R. 460, at para. 33.
[26] In Minott v. O'Shanter Development Co. (1999), 1999 3686 (ON CA), 42 O.R. (3d) 321, Laskin J.A. wrote, at p. 329:
Res judicata itself is a form of estoppel and embraces both cause of action estoppel and issue estoppel. Cause of action estoppel prevents a party from relitigating a claim that was decided or could have been raised in an earlier proceeding. [Emphasis added.]
[27] Similarly, McFarland J.A. in Earley-Kendall v. Sirard, 2007 ONCA 468, [2007] O.J. No. 2497, explained the rationale for the rule in the following way at para. 45:
Were it otherwise, a party who was unsuccessful the first time and where there has been no change in circumstance, could bring the same motion before any number of judges in an effort to find one who would grant the relief sought. Such multiplicity of proceedings is to be discouraged. [emphasis added]
[28] The test for estoppel dooms Mr. Philpot’s argument in the case at bar as the first pre-condition has not been met. Cuff does not seek to re-litigate a claim “that was decided” or contained “the same question,” i.e. should a Mareva injunction be granted? Instead, he asks this court to set aside the orders on the basis of fraud discovered after the orders were made. As such, issue estoppel does not apply.
Can Cuff Rely on the Defence of Honest Mistake?
[29] In making the argument that the Rosenzweig representations were simply an honest mistake, Mr. Philpot asks this court to read paragraph 13 of Rosenzweig’s affidavit through the lens of a person who is attempting to recall sending the email and attempting to help locate it.
[30] With respect, this paragraph does not assist Cache. Rosenzweig’s comments are not the words of a witness who might have been mistaken in his belief. His denial is accompanied by an accusation of fabrication. He further attempts to convince a court of his position by claiming the language contained in the email is not language that he uses. There is nothing in Rosenzweig’s testimony to suggest a failure of memory, only the appearance of a witness who wishes to distance himself from a damaging piece of evidence.
[31] I also reject Mr. Philpot’s submission that it would be reasonable for Rosenzweig to have a mistaken belief due to the period of time that had elapsed. In my view, an email offering a stake in one’s business – particularly if there is more than one email doing so – would not be something that Rosenzweig would have been likely to forget.
[32] It would not take too cynical an observer to conclude that Rosenzweig’s evidence on the Partner email went well beyond that of a witness who simply made an error. It is reasonable to conclude that Roznzweig testified with an intention to deceive the courts. In my view, Cuff has established, on a balance of probabilities, that in making the declarations that he did, Rosenzweig committed a fraud.
Was the Order Obtained by Fraud?
[33] That finding, however, does not end the matter. This case turns on whether the Partner email was a factor in Corbett J.’s decision to grant and maintain the order he made.
[34] Despite Ms. Sanche’s very able submissions I find her application to fail on this ground for the following reasons.
[35] The Partner email, at its highest, demonstrates that Cuff was offered a partnership stake in Cache Metals as an inducement to join the company. There is no evidence that this offer solidified into a formal agreement. Further, the relevance of the email becomes peripheral when one considers that Cuff does not rely upon the 5% stake as his defence to the action.
[36] At a hearing on 16 May 2014, Cuff was cross-examined on his affidavits. He disavowed the Partner email as the basis for his defence at trial. Instead, he chose to rely on another agreement – not documented – made between himself and Rosenzweig permitting him to take 5,000 ounces of silver as part of his remuneration. When questioned on this point, Cuff agreed that he was resting his defence on Cache’s agreement that he receive 5,000 ounces of silver rather than the 5% stake offered to him in the Partner email. This position substantially diminishes the importance of the Partner email.
[37] More significantly, I find nothing in Corbett J.’s Second Order endorsement placing any weight upon the validity or significance of the Partner email. Corbett J. was aware of both the email and the dispute between the parties over its authenticity and, at para. 7 of the order, acknowledged the fact that the Partner email lent support to Cuff’s position.
[38] Corbett J., however, disbelieved Cuff in three areas: (1) his assertion that the distributions or payments to his personal account were on the basis of his equity in Cache Metals; (2) that distributions based on his equity were not to be accounted for; and (3) that Cuff could make these distributions to himself on the strength of his own signature. In Corbett J.’s view, there was no material before him supporting Cuff’s position that he was authorized to take metal for his own benefit. Having read the greater volume of material, Corbett J. concluded that he had a “fair view” of the picture when granting the order and that nothing had changed.
[39] The Partner email and the question of Cuff’s status as a partner did not factor into Corbett J.’s reasons for his decision to issue the orders that he did. Even if Cache Metals had accepted the authenticity of the email prior to 16 June 2014, it would have been immaterial.
[40] For the reasons set out above, I dismiss Cuff’s application to set aside the orders made by Corbett J.
Costs
[41] At the conclusion of the hearing, both parties agreed that costs should be fixed in the sum of $7,000.00.
[42] Accordingly, I order that Cuff pay Cache Metals the sum of $7,000.00 within 30 days.
S.A.Q. Akhtar J.
Released: July 21, 2015
COURT FILE NO.: CV-14-500382
DATE: 20150721
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Cache Metals RRSP Inc. and Cache Precious Metals Inc.
Plaintiffs
- and –
Atef Salama, Express Gold Refining Ltd. and Jeffrey Cuff
Defendants
AND BETWEEN:
Jeffrey Cuff
Plaintiff by Counterclaim
- and –
Cache Metals RRSP Inc., Cache Precious Metals Inc., Robert Rosenzweig and Thomas Green
Defendants by Counterclaim
REASONS FOR JUDGMENT
S.A.Q. Akhtar J.