COURT FILE NO.: CV-12-00009864-00CL

DATE: 20151023

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Christine Marie Haunert-Faga, Plaintiff

AND:

Giuliana Caprara in her personal capacity and in the capacity of Estate Trustee without a Will of the Estate of Bruno Caprara, deceased, Stephen Leonardo Glen Faga, Marco Caprara, Christian Caprara, Faga Group Limited, Faga Group Construction Limited, Domenico Faga, Rhodena Macdonald and Presta Caparrotta LLP, Defendants

BEFORE: Penny J.

COUNSEL:
Robert Reuter and Sara J. Erskine for the Plaintiff

Maurice J. Neirinck for the Defendants, Giuliana Caprara, in her personal capacity and in the capacity of Estate Trustee without a Will, of the Estate of Bruno Caprara, deceased, and Faga Group Construction Limited

Sean Lawler for the Defendant, Presta Caparrotta LLP

HEARD: August 10 and October 8, 2015

ENDORSEMENT

Overview

[1] This is a motion for summary judgment by certain defendants seeking an order dismissing this action as having been commenced after the expiry of the applicable limitation period. The motion arises in the context of a fraudulent conveyance action commenced by a court-appointed receiver in aid of execution of a $4.5 million divorce judgment which the plaintiff, Christine Haunert-Faga obtained against her husband, Stephen Faga.

[2] The claim alleges that Giuliana Caprara, in her personal capacity and as estate trustee of her deceased husband, Bruno Caprara, Faga Group Construction Limited (FGC) and Presta Caparrotta LLP, accountants for the defendant corporations, knowingly assisted in breach of trust, knowingly received trust funds in breach of trust and knowingly aided in fraudulent conveyances with the intent to defeat Christine’s claims.

[3] The essential issue on the motion is when the plaintiff, or her professional advisers, knew, or ought reasonably to have known, of the facts which underpin the claims made against Giuliana, FGC and Presta Caparrotta in this action.

[4] For reasons that follow, the motion is dismissed.

Background

[5] Christine and Stephen were married in 1993 and separated in 2003. The plaintiff commenced family law proceedings against her husband. Stephen and his family ran a successful construction business, Faga Group Limited (FG).

[6] Determining Stephen’s income and net worth proved to be a difficult task in the matrimonial proceedings. Stephen failed to provide a valuation of his business interests. The FG accountants, Presta Caparrotta, participated in transactions that resulted in FG’s income being significantly understated. Forensic accountants retained by the plaintiff in the matrimonial proceedings determined that Stephen’s net worth was about $4.6 million. In 2007, the Superior Court of Justice granted a divorce and ordered Stephen to pay the plaintiff about $4.4 million for support and equalization of net family property.

[7] Numerous efforts were made by the plaintiff to execute on her Judgment against Stephen’s assets. These efforts were substantially unsuccessful. The Sheriff could find little in Stephen’s name. The Family Responsibility Office obtained an order to enforce the terms of the Judgment. Stephen was found to be in default of that order. A warrant for committal was issued and Stephen was taken into custody in November 2010.

[8] Eventually, having been frustrated at every turn in her efforts to collect on the Judgment, the plaintiff brought an application on the Commercial List for the appointment of an equitable receiver in aid of execution of her Judgment. On December 8, 2010, A. Farber & Partners Inc. was appointed as equitable receiver in aid of execution over all the past and present assets, income and property of Stephen.

[9] The Receivership Order empowered the Receiver to initiate legal proceedings to recover, among other things, the value of assets that may have been transferred by Stephen to third parties as fraudulent conveyances or preferences.

[10] This action was commenced by the Receiver on October 5, 2012.

[11] In 2013, the Receiver took the position that it would not proceed with the action unless it was granted a protective costs order. The Receiver’s motion seeking a protective cost order was, however, dismissed.

[12] Because the Receiver was not prepared to proceed with the action, the plaintiff brought a motion to lift the stay of proceedings under the Receivership Order. Newbould J. granted the order in August 2013. The plaintiff then obtained a bankruptcy order against Stephen. This action was then assigned to the trustee in bankruptcy. By subsequent order of this court, the plaintiff was authorized to take proceeding in her own name and the trustee in bankruptcy was, pursuant to s. 38 of the Bankruptcy and Insolvency Act, directed to execute an assignment of its interest in the action. This was done on September 22, 2014. The order to continue this action in the plaintiff’s name was granted on September 25, 2014.

The Issues

[13] The essence of the moving defendants’ position is that, as a result of expert accounting advice obtained by the plaintiff from Kenneth Froese in 2007, the plaintiff had enough facts to conclude there had been a fraudulent conveyance and knew the details of the alleged involvement of Presta Caparrotta, Giuliana and Bruno Caprara and FGC in that fraudulent conveyance. With the exercise of reasonable diligence, they argue, the plaintiff could have discovered the specific facts upon which she bases her present claim against the moving defendants. Since that claim was not commenced until 2012, the moving defendants say the action against them is out of time.

[14] Giuliana raises a secondary issue concerning her disputed role as estate trustee of her late husband’s estate.

[15] The issues on this motion therefore are :

1. Are the plaintiff’s claims against Giuliana, the estate of Bruno Caprara, FGC and Presta Caparrotta statute barred? and;

2.(a) Is the action against Bruno’s estate properly constituted; and if not

(b) Should Giuliana be appointed as litigation administrator with or without terms?

Events Leading to the Receivership Order

[16] To conduct an analysis of the defendants’ position, and the plaintiff’s response, it is necessary to review in some detail the facts known to the plaintiff’s forensic expert in 2007 and the course of the matrimonial proceedings.

[17] Mr. Froese was retained by the plaintiff in 2004. In 2007 he swore an affidavit in support of the plaintiff’s contention that Stephen had, in conjunction with his former co-owner (Bruno, Stephen’s brother in law), concealed assets, misreported business income, siphoned revenues from their companies, participated (with Presta Caparrotta) in a scheme to overpay accounting fees and receive the overpayments back and used other fraudulent means to conceal his income. The plaintiff also contended that the concealment and deception in financial transactions and reporting was aided by Presta Caparrotta, Giuliana or Bruno and that the extent of this concealment and deception made it likely that Mr. Froese was unable to identify all transactions potentially relevant to determining Stephen’s income and assets.

[18] Specifically, Mr. Froese deposed in 2007 to the following:

• on the date of separation Stephen owned through a holding company 50% of the shares of FG

• FG transferred all of its operations to a new entity in October 2003. This new entity was not included in Stephen’s listing of assets. This resulted in a material understatement of the value of Stephen’s property held on the date of separation

• the new entity was FGC. Giuliana Caprara, not Stephen, owned the shares of FGC (which had passed to Giuliana upon the death of her husband Bruno)

• Presta Caparrotta improperly wrote off the goodwill of Stephen’s holding company and wrote off the value of FG’s net assets to cost of sales

• Presta Caparrotta helped FG to reduced its income artificially by rendering improper invoices and redistributing the funds back to Bruno

• the appointment of a court-appointed monitor should be sought to obtain enforceable and unfettered access to the accounting and financial records of Presta Caparrotta concerning the affairs of FG and FGC and to determine what assets and/or funds had been removed from FG for the benefit of Stephen or Bruno

[19] The plaintiff and Mr. Froese were both cross-examined for this motion. Mr. Froese admitted that by 2007 he knew:

• the assets of FG had been written down and removed from FG’s records

• all of the assets of FG had been reduced to zero

• the assets of FG had been transferred to FGC

• nothing in the FG trial balance indicated any consideration paid to FG for its assets

• the implication from the timing of the transfer of assets was an attempt to move assets of FG to FGC

• the effect of this these transfers was the disappearance of $1,980,000 of value from Stephen's 50% interest in FG

• if FG’s assets were transferred for no consideration, this would have been improper

• Presta Caparrotta’s writing down of the value of FG and its invoice rebates to Bruno formed the basis of a complaint lodged by Mr. Froese, with his client’s knowledge and concurrence, against Presta Caparrotta to the Institute of Chartered Accountants for Ontario in 2007

• no inquiries were made before 2010 to determine if Stephen had any shareholding in FGC

[20] The plaintiff admits that she was informed by Mr. Froese of all this information in 2007.

[21] On May 9, 2007 the Superior Court of Justice granted a divorce judgment in favor of Christine requiring Stephen to pay $4,434,825.47 for child support, spousal support, section 7 expenses, costs and equalization of net family property.

[22] Christine made extensive efforts to execute against Stephen’s assets. Numerous attempts were made by the Sheriff to seize money in Stephen’s bank accounts and share certificates of corporations. After Christine’s attempts to seize Stephen’s property through the Sheriff’s office failed, the Family Responsibility Office obtained several orders against Stephen and registered a writ of execution against Stephen in 2008.

[23] In the meantime, Stephen brought a motion to have the Judgment set aside. This motion was heard on August 27, 2009 by McEwen J. In dismissing Stephen’s motion, McEwen J. made seriously adverse findings against Stephen’s lack of candor in providing financial information. He wrote:

The respondent at seemingly every turn in the litigation willfully ignored numerous orders of the court. He failed to cooperate in any meaningful way with the applicant in her attempt to obtain monies she was entitled to and provide information so that proper calculations could be made concerning the respondent’s support obligations to the applicant. As a result, it would be completely unfair to the applicant to find that she would be responsible for advancing the respondent’s case to the court in circumstances where he has refused to meaningfully participate in the process. For the respondent to refuse to provide the applicant with producible and relevant documentation and, thereafter, attack the validity of the assumptions of her experts is absurd.

[24] On October 6, 2010, FRO obtained an order to enforce the terms of the Judgment. A term of the order was that a warrant for committal would go out for Stephen’s incarceration for a period of 30 days in the event that he defaulted on any of the payments under the order. Stephen failed to make the payments under the order and he was incarcerated in November 2010.

[25] Christine’s efforts to collect on her Judgment resulted in a recovery of a mere $61,000 (in addition to a transfer of shares valued at $686,000).

[26] It was only then, following her unsuccessful attempts to seize Stephen’s property through normal methods of execution, that Christine sought from the court the appointment of an equitable receiver in aid of the execution of her Judgment. That appointment was made on December 8, 2010.

[27] The Receivership Order entitled the Receiver to examine the books and records of various parties including Giuliana, FG, FGC and Presta Caparrotta. The order entitled the Receiver to make inquiries to determine whether Stephen’s assets have been transferred to others and also required Stephen and Giuliana to provide affidavits to the Receiver and to submit to examination under oath.

Information Obtained After the Receivership Order

[28] Mr. Froese was retained by the Receiver’s counsel to assist the Receiver with investigations into and a tracing of Stephen’s property. The evidence is that prior to this time, Mr. Froese had not been privy to any evidence concerning the operations, management accounting or disposal of assets of FGC. Further, it is Mr. Froese’s evidence that he had insufficient access to books and records of the various companies in the Faga family business to determine which company ultimately received the financial benefit of the assets and liabilities moved out of FG. This is because all of Mr. Froese’s prior requests for information relating to the operations of the Faga family’s construction business after the date of separation were refused.

[29] Mr. Froese conducted a search, pursuant to the Receivership Order, of the FGC offices on December 9, 10 and 14, 2010. The documents collected during that search revealed, among other things:

• the assets and liabilities of FG were transferred to FGC on December 8, 2003 for no consideration; and;

• evidence of fraudulent intent behind the transfer of assets from FG to FGC. An invoice from Presta Caparrotta detailed a meeting with Stephen and Bruno for the purpose of determining which assets should be “deferred” for Stephen’s matrimonial financial statements and the transferring assets to FGC “pursuant to Stephen’s matrimonial status.”

[30] The information contained in the Presta Caparrotta invoice, first obtained in December 2010, was directly contrary to information which had been provided to Mr. Froese by Frank Presta on May 15, 2006.

[31] As required by the Receivership Order, Stephen swore an affidavit on November 22, 2011. In that affidavit he deposed that his father, Bruno and Giuliana decided to move all of the business assets of FG to a new company in order to prevent Christine from obtaining any ownership interest in FG. Stephen’s affidavit disclosed, for the first time, that Giuliana held a 50% beneficial interest in FGC for him and that, despite his request that she pay him for this 50% interest, she has refused to do so.

[32] At para. 22 of his January 4, 2007 affidavit, Mr. Froese provided a summary of information which he had requested but which was never provided. In particular, Mr. Froese requested, but was not provided with, any information as to the Faga group of companies’ operations after the date of separation. This included any information pertaining to FGC. Although he knew that the assets and operations of FG had been transferred to FGC, he was not provided with any information concerning FGC that would enable him to understand the nature of the transfer or whether there had been any consideration paid for the transfer.

[33] Prior to the seizure of documents from the FCG offices in December 2010, the information available to Mr. Froese, received from Frank Presta at Presta Caparrotta, was that the inflated retainer invoices paid and refunded by Presta Caparrotta was done for tax purposes and had nothing to do with Stephen’s matrimonial situation: “Frank Presta was adamant that he did not do this for Stephen’s matrimonial matter as he was not aware of the issues at the time. Rather, it was done solely for tax purposes.” This was directly contradicted by invoices seized under the authority of the Receivership Order from Presta Caparrotta’s offices which described a meeting with Stephen and Bruno for the purpose of determining which FG assets should be “deferred” for Stephen’s matrimonial financial statements and the transfer of assets to FGC “pursuant to Stephen’s matrimonial status.”

[34] Mr. Froese also deposed in 2007:

Although I made several requests of Frank Presta and Presta Caparrotta LLP for records pertaining to post-October 8, 2003, none were provided to me for Faga Group Construction Ltd. In response to my requests, Frank Presta advised me by correspondence on February 22, 2006 that Presta Caparrotta LLP would provide me with documentation requested for the period ended May 31, 2004 except for companies where Stephen was not a shareholder or where the company was owned by Giuliana Caprara.

The information which Presta Caparrotta refused to provide, therefore, included all information relating to FGC.

[35] These prior refusals to provide information lay at the heart of the application for the appointment of an equitable receiver in aid of execution of the Judgment. Mr. Froese deposed, in his 2015 affidavit sworn for this motion:

25. At paragraph 27 through 45 of my December 2, 2010 Affidavit I set out the facts known to me at that time relating to the transfer of assets from Stephen to his brother-in-law Bruno Caprara and his sister Giuliana Caprara. At this time I knew that the assets and operations of Faga Group Ltd. had been transferred to Faga Group Construction Limited and that Faga Group Ltd. was involuntarily dissolved, leaving Stephen’s 50% share interest in the company worthless.

26. However, to this point I had not been provided with any of Faga Group Construction Ltd.’s records. As such, in paragraph 45 of my Affidavit I deposed that an equitable receiver appointment was necessary to investigate the transaction and to determine whether the receiver has a reasonable cause of action to pursue in aid of execution of the Divorce Judgment.

27. Further according to an affidavit sworn by Giuliana Caprara in February 2007 (sworn in response to my May 5, 2006 affidavit in support of appointing a receiver over Delzap and 1493118 Ontario Inc.) Giuliana stated that Bruno Caprara held 100% of the shares of Faga Group Construction since its incorporation until his death on October 29, 2005, when his interest passed to his widow, Giuliana Caprara.

28. As of December 2, 2010 I did not have sufficient access to the books and records of the various companies in the Faga Group of Companies, and in particular no access to the Faga Group Construction Ltd. records, to determine which company ultimately received the financial benefit of $1.4 to $2 million in assets that were moved out of Faga Group Ltd. into Faga Group Construction or into other companies that formed part of the Faga Group of Companies. I required the investigative powers set out on the proposed receivership order to obtain the information necessary to determine what happened to the financial benefit of Faga group Ltd.’s assets and Stephen’s 50% interest in those assets. I had requested this information earlier from Presta Caparrotta LLP (see my correspondence with Frank Presta in January and February 2006 attached as Exhibit “E”). As set out in Mr. Presta[s] letter of February 22, 2006, they refused to provide this information to me.

[36] As required by the Receivership Order, Giuliana swore an affidavit in December 2010. In that affidavit, Giuliana asserted, for the first time, that FGC was incorporated in November 2003 with herself as the sole shareholder. This was contrary to her affidavit sworn in February 2007. Her 2010 affidavit also states that Stephen does not have and has never had any interest in the shares and ownership of FGC. This is contradicted by the affidavit evidence of Stephen, who says Giuliana holds 50% of FGC beneficiary for him.

[37] It was only after FGC’s records were produced by virtue of the Receivership Order that Christine and Mr. Froese learned that the net book value of assets were all transferred from FG to FGC for no apparent consideration and learned of the conflicting evidence concerning ownership of FGC.

The Present Claim

[38] The claims against Presta Caparrotta and its partners relates to their conduct in:

(a) fraudulently conveying Stephen's 50% beneficial interest in FGC to Bruno and/or Giuliana;

(b) knowingly assisting Bruno and Guiliana in the dissipation of funds and assets of FGC, thereby reducing the value of Stephen’s 50% beneficial interest in the company;

(c) knowingly receiving payments from FGC totaling approximately $2.6 million of funds impressed with trust which they knew they were not entitled to, and in derogation of the interests of the rightful beneficial owner, Christine; and

(d) preparing year-end financial statements for FGC which concealed the payments of approximately $2.6 million to Presta Caparrotta and wrongfully recorded these payments as ordinary operating expenses of FGC.

[39] All of the facts giving rise to these claims were discovered after December 8, 2010 when Mr. Froese received, for the first time, the books and records of FGC.

[40] Similarly, the claims against Bruno relate his conduct in:

(a) improperly removing funds from FGC for personal benefit and for the benefit of Stephen in breach of trust and fiduciary duty owed by to FGC;

(b) the diversion of FGC funds and accounts receivable to Stephen for the purpose of concealing Stephen’s income and assets from Christine and dissipating the value of FGC; and

(c) authorizing and/or acquiescing in the payment of approximately $2.6 million to Presta Caparrotta thereby wrongfully diverting funds from FGC.

[41] All of the facts giving rise to these claims were also discovered after December 8, 2010 when Mr. Froese received the books and records of FGC.

[42] The claims against Giuliana personally follow a similar pattern. Christine only became aware of Giuliana’s alleged status as the original and only shareholder of FGC when she provided her affidavit as required by the Receivership Order in December 2010.

Analysis

The Test for Summary Judgment

[43] The test for summary judgment is not in controversy on this motion. Both sides agree that all the evidence necessary for the resolution of the points in issue is before the court. Both sides also agree that a trial judge will be in no better position to decide the issue than I am on the current record.

When were the Present Claims “Discovered”

[44] The essence of the defendants’ position turns on s. 5(1)(b) of the Limitations Act, 2002. It provides that a claim is “discovered” when the plaintiff “first ought to have known of the claim.” First ought to have known means “would have found out had they used reasonable diligence.” Accordingly, the defendants argue, Christine had to commence her claims within two years of when the material facts on which the claim is based ought to have been discovered by the exercise of reasonable diligence.

[45] Determining whether a person has either discovered a claim or ought, through the exercise of reasonable diligence, to have discovered a claim is a fact-based analysis. Does the prospective plaintiff have enough facts on which to base a claim against the prospective defendant? Certainty of the defendant’s responsibility for the act or omission is not a requirement. It is enough to have prima facie grounds to infer that the acts or omissions were caused by the party or parties identified. Where the plaintiff relies on her failure or inability to learn all of the fact she deems necessary to start a claim, the onus is on the plaintiff to lead cogent evidence to the effect that reasonably diligence did not require her to investigate further during the life of the limitation period, Lima v. Moya, 2015 ONSC 324; Tender Choice Foods Inc. v. Versacold Logistics Canada Inc., 2013 ONSC 80, aff’d 2014 ONCA 474.

[46] In its motion, Presta Caparrotta argues that at least by January 2007, as a result of Mr. Froese’s January 2007 affidavit, Christine had sufficient facts to conclude there had been a fraudulent conveyance of assets of FG to FGC for the purpose of enabling Stephen to defeat Christine’s matrimonial claims. Christine also had sufficient facts to conclude that Presta Caparrotta had assisted Stephen in that fraudulent conveyance.

[47] Thus, Presta Caparrotta argues, Christine was put on notice and reasonable diligence was required to pursue any additional facts upon which to found a claim. Christine failed, they say, to exercise reasonable diligence (particularly where Mr. Froese recommended seeking a court-appointed monitor of FG), by waiting almost four years before seeking the appointment of a receiver to trace Stephen’s interest in FG and the disposition of its assets.

[48] The argument of FGC and Giuliana in her personal capacity is similar to Presta Caparrotta’s. Christine knew assets had been transferred from FG to FGC. $1.98 million of value of Stephen’s 50% interest in FG disappeared. Christine knew these transfers were improper. She authorized a complaint to be made against Presta Caparrotta to the Institute of Chartered Accountants of Ontario. Thus, these defendants argue, the material facts of the fraudulent conveyance-related claims were known. Even if all the necessary facts were not known, there were sufficient facts available to put Christine on inquiry; the exercise of reasonable diligence was required. Christine failed to exercise reasonable diligence. Mr. Froese recommended seeking a court-appointed monitor in 2007 yet Christine unaccountably waited almost four years before seeking that type of remedy.

[49] In my view, the defendants’ arguments must fail for essentially two reasons:

(1) the appointment of an equitable receiver was not, as the defendants imply, there for the asking just because Mr. Froese recommended the appointment of a monitor of FG in 2007; and

(2) the essential facts upon which the present claims are based were not known until after the Receiver conducted its investigation, using the extraordinary powers conferred by the court in the Receivership Order. The reason these facts were not know was the result of the defendants’ prevarication and refusal to make appropriate disclosure.

[50] The law is clear that the appointment of an equitable receiver in aid of execution is only available where special circumstances exist which would render the normal methods of execution ineffective or impractical. The appointment of a receiver by way of equitable execution assumes that all ordinary remedies to collect have been exhausted, Weig v. Weig, 2012 ONSC 7262 at para. 18.

[51] On the undisputed facts, Christine tried diligently to enforce the Judgment through normal methods of execution. This included multiple attempts at execution through the Sheriff and through the FRO. Stephen’s commitment to evasion of execution on the Judgment went so far as to suffer 30 days’ incarceration. It was only as a result of Christine’s extensive but unsuccessful collection efforts that it became clear that Stephen had placed all of his assets beyond the reach of his creditors through complex corporate structures which were not directly owned by him. I agree with the submission of counsel for Christine that it was only through the exhaustion of “normal” methods of execution that Christine found out that Stephen had created the necessary legal impediment to normal execution by putting his assets and income out of the reach of creditors.

[52] Two other factors are highly relevant. First, the mere fact that Stephen caused assets to be transferred to others, even without consideration, does not, taken alone, make those transfers improper or liable to being set aside as a fraudulent conveyance. The critical issue is whether the transfers were done with the requisite intent – the intent to defeat his creditors. One of the factors (or “badges of fraud”) used to determine whether a transaction was done with the requisite intent is whether the conveyance formed part of a pattern of conduct which resulted in essentially all of the debtor’s assets being placed beyond the reach of his creditors, Incondo v. Sloan, 2014 ONSC 4018, 2014 ON SC at 4018 paras 79-83. In essence, therefore, Christine had to determine whether she could execute on her Judgment in spite of the known transfers before being able to attack those transfers as fraudulent conveyances. By the same token, Christine had to exhaust her “normal” remedies for execution before turning to the equitable remedy of a court-appointed receiver in aid of execution.

[53] The second and related consideration is that in 2007, Christine was neither a creditor nor shareholder of FG or FGC. Her Judgment was against Stephen only. Regardless of any knowledge that FG may have transferred assets to FGC, Christine simply did not have standing to bring a claim against FG or FGC.

[54] The Receivership Order removed the legal impediment of Christine’s lack of standing and specifically authorized the Receiver to bring legal proceedings to recover the value of all assets and property that may have been indirectly transferred by Stephen to third parties.

[55] Once appointed, through its investigations the Receiver uncovered documents revealing evidence of fraudulent intent behind the transfer of assets from FG to FGC. The Receiver also learned of these defendants’ alleged actions in facilitating the fraudulent transfers. Prior to this, both Presta Caparrotta and Giuliana had denied any fraudulent intent in transferring the assets and liabilities from FG to FGC.

[56] It was the Receiver, not Christine, that commenced these proceedings. Importantly, Christine only became the plaintiff after the Receiver was denied a protective order as to costs and it became clear that the Receiver was not prepared to proceed with the litigation.

[57] The evidence on this motion supports the conclusion that the material facts giving rise to the claims against Presta Caparrotta, FGC and Giuliana for knowing assistance, knowing breach of trust and knowing receipt were first discovered during the Receiver’s investigation when the Receiver compelled production of the books and records of FGC. Prior to the Receiver exercising its power under the Receivership Order to obtain the books and records of FGC, the defendants had refused to disclose them. This refusal concealed from discovery the transactions giving rise to the current claims. It does not lie in the defendants’ mouth to conceal requested information by refusing to produce it (and, in fact, denying that the known transfers had anything to do with Stephen’s matrimonial proceedings when concealed documents later obtained during the Receiver’s investigation appear to show that the avoidance of Stephen’s matrimonial obligations was precisely why the transfers were undertaken) and then say that the plaintiff failed to be reasonably diligent in pursuing her remedies.

[58] Considerable weight was placed by the defendants on the fact that Christine authorized Mr. Froese to file a complaint with the ICAO relating to Presta Caparrotta. The defendants argue that Christine therefore must have known that Presta Caparrotta’s involvement in the transfers of assets from FG to FGC was improper.

[59] The complaint refers to accounting entries by Presta Caparrotta by which all of the net assets and liability of FG was deducted from sales, resulting in a write-down of FG’s assets and liability to zero. This aspect of the complaint concerns the improper accounting practice of writing everything off as sales within the financial records of FG and has nothing to do with FGC.

[60] The balance of the complaint relates to payments made by FG through Presta Caparrotta using fictitious invoices and expenses. Again, this aspect of the complaint concerned improper transfers to Presta Caparrotta for the purposes of reducing FG’s net book value, and had nothing to do with FGC.

[61] All the claims for damages in the present action relate to funds siphoned from FGC and arise from information discovered after the appointment of the Receiver in December 2010.

[62] The ICAO complaint, therefore, does not assist the defendants in their argument that the limitation “clock” started to run in January 2007.

[63] For these all reasons, I reject the argument that Christine failed to exercise reasonable diligence in “discovering” the facts giving rise to the present claims. Christine exercised reasonable diligence, exhausted her “normal” remedies and then turned to other means. It was the appointment of a Receiver (an application which was opposed, I might add) which lead to the discovery of the material facts giving rise to this action. The Receiver commenced the action within two years of discovering these material facts.

Bruno’s Estate

[64] Giuliana, named in this action as an alleged estate trustee of the estate of Bruno, also moves for an order dismissing the action against her in that capacity.

[65] It is clear on the evidence that Giuliana was at no time an estate trustee of Bruno’s estate. There are no trustees of Bruno’s estate.

[66] This fact was conceded by Christine’s counsel when, shortly before argument of the main motion in August 2015, he sought an order appointing Giuliana as litigation administrator of Bruno’s estate. That issue was adjourned to permit Mr. Neirinck to respond to this new development. The estate trustee/litigation administrator issue was argued before me on October 8, 2015. Both parties filed supplementary material and factums.

[67] I agree with Giuliana’s counsel that there is no basis for Christine to sue Bruno’s estate in the name of Giuliana as estate trustee. This is because, on the undisputed evidence, Giuliana is not and has never been Bruno’s estate trustee. The plaintiff has effectively conceded the point.

[68] However, in a cross motion the plaintiff now seeks the appointment of Giuliana as litigation administrator of Bruno’s estate under Rule 9.03(2). Rule 9.03(2)(b) provides in relevant part:

A proceeding commenced against the estate of a deceased person in which the wrong person is named as the personal representative shall not be treated as a nullity but the court may order that the proceeding be continued against a litigation administer appointed for the purpose of the proceeding and the title of proceedings shall be amended accordingly.

[69] Mr. Neirinck argues against the appointment on the basis that rule 9.03(2) has no application. The “wrong person” was not named, he argues; there is no legal representative of Bruno’s estate at all. Accordingly, it is argued that the plaintiff should have moved at the outset of the proceeding for the appointment of a litigation administrator and, by failing to do so, the claim is now a nullity. Any attempt to resurrect the claim against Bruno’s estate would be barred by the expiry of the two year limitation period.

[70] I am unable to agree with this argument. It takes, in my view, an overly technical interpretation of the Rule and produces a result which is in direct contradiction of the clear intent and purpose of the Rule. Mis-naming the required representative of a deceased person’s estate “shall not be treated as a nullity.”

[71] Mr. Neirinck also argues that by using the permissive “may,” the court has a discretion whether to make the appointment or not. Because 10 years has gone by since Bruno’s death and because the evidence is that Bruno’s estate has no assets, among other things, Giuliana says the order ought not to be granted.

[72] Again, I am unable to agree. No prejudice has been shown to the estate as a result of the alleged delay. There is a viable cause of action pleaded against Bruno’s estate. The estate is a necessary and proper party.

[73] I grant Giuliana’s motion for an order that she is not the estate trustee and that, there being no estate trustees, the estate cannot be sued in the person of such a trustee.

[74] I also grant the plaintiff’s motion for an order that Giuliana be appointed litigation administrator for purposes of suing the estate in this litigation.

[75] Mr. Neirinck seeks terms of that appointment. The plaintiff opposes terms. In view of the fact that the evidence, today at least, is that the estate is without assets, I find that it is an appropriate term of my order that, solely in her capacity as litigation administrator of Bruno’s estate, Giuliana should be indemnified by the plaintiff for her costs of defending on Bruno’s behalf.

[76] Given that Giuliana is already a personal defendant (in which capacity this indemnity does not apply), it would seem to me that only modest incremental cost would be associated with her role as litigation administrator. Nevertheless, to the extent there are unique costs associated with her role as litigation administrator of Bruno’s estate, there is no reason she should bear the burden of those costs personally. She will, therefore, in the first instance at least, be indemnified in respect of those costs by the plaintiff.

Conclusion

[77] In a result, the moving defendants’ motion for an order dismissing the action against them as statute barred is dismissed.

[78] Giuliana’s motion concerning her status as estate trustee is granted.

[79] Christine’s motion appointing Giuliana as litigation administrator of the Bruno’s estate is also granted, subject to the condition that Christine must indemnify Giuliana for her incremental, reasonably incurred costs, qua litigation administrator, of defending the claims against Bruno’s estate.

Costs

[80] I encourage the parties to seek an accommodation on the disposition of costs of the motion. Failing agreement, any party seeking costs may do so by filing a written brief not to exceed two typed, double-spaced pages, together with a Bill of Costs and any other relevant documents, within two weeks of the release of these reasons. Any party wishing to respond to a request for costs may file a response, subject to the same page limit, within a further 10 days.

Penny J.

Date: October 23, 2015