Court File and Parties

Court File No.: CV-13-493855 Date: 20170425 Superior Court of Justice - Ontario

Re: Robert Kinal, plaintiff And: 1502851 Ontario Inc., 1502852 Ontario Inc., Joe Ferrier, Brent W. Swanick and Ronald Klayman, defendants

Before: Carole J. Brown, J.

Counsel: Robert Kinal, self-represented Feldman P. and Simpson B, for the defendants Feldman P., acting as agent for Brent W. Swanick

Heard: April 3, 2017

Endorsement

[1] The defendants bring this motion for dismissal of the plaintiff’s action as a nullity and an abuse of process.

[2] Pursuant to the evidence before this Court, this action was commenced by the plaintiff on November 29, 2013, while he was an undischarged bankrupt. His status at the commencement of the action and as at the time of the scheduled examinations for discovery in November 2016, was determined by counsel for the defendants on November 28, 2016, on the eve of the examinations for discovery, to be that of an undischarged bankrupt by a search of the Bankruptcy and Insolvency Records and a telephone call to the Trustee in Bankruptcy. The status was further confirmed by a review of the material documents from the Trustee. The plaintiff remains an undischarged bankrupt to this day.

[3] As a result, the defendants move to have the action dismissed, as the plaintiff had no legal capacity to commence this action.

[4] Section 71 of the Bankruptcy and Insolvency Act, RSC 1985, c B-3, states as follows:

[71] On a bankruptcy order being made or an assignment being filed with an official receiver, a bankrupt ceases to have any capacity to dispose of or otherwise deal with their property, which shall, subject to this Act and to the rights of secured creditors, immediately pass to and invest in the trustee named in the bankruptcy order or assignment, and in any case of change of trustee the property shall pass from trustee to trustee without any assignment or transfer.

[5] As stated by this Court in Vetro v Canadian National Exhibition Association, 2014 ONSC 4324 at paragraphs 34-35:

Any property in the licenses and/or their renewals that the plaintiff subsequently acquired automatically vested with the trustee in bankruptcy. The plaintiff’s right to deal with his property, including any cause of action that the plaintiff may have had against the defendant in relation to the termination of the licenses, also vested with his trustee in bankruptcy.

For these reasons, I conclude that the plaintiff had no capacity to commence or continue this action against the defendant. This action is a nullity and an abuse of process, and must be dismissed.

[6] In December of 2016, approximately one month after the undischarged status was discovered, Mr. Kinal’s then-lawyer wrote as regards the bankruptcy status, suggesting a stay of the bankruptcy. However, pursuant to the Bankruptcy and Insolvency Act, stays only apply to creditors in order to permit the trustee to collect the assets of the bankrupt. Stays do not apply to bankrupts such as the plaintiff. This was made clear in response from the defendants to the correspondence of Mr. Kinal’s lawyer.

[7] The legislation is clear and straightforward as is the case law regarding the Bankruptcy and Insolvency Act, section 71. An undischarged bankrupt cannot deal with property, including after-acquired property while he is an undischarged bankrupt. In this case, there is no defence that can be advanced to permit the plaintiff to maintain his action.

[8] Mr. Kinal sought an adjournment to obtain a new lawyer to oppose this application. The history of this case is that on the eve of examination for discovery on November 28, 2016, the undischarged bankruptcy status was discovered by the defendants. On that date, the defendants advised Mr. Kinal’s then-counsel of Mr. Kinal’s status, set forth the legislation and case law applicable and sought consent to a dismissal, failing which this motion would be brought. Mr. Kinal’s lawyer responded that the proposal was reasonable and indicated that he would seek Mr. Kinal’s instructions. Mr. Kinal’s lawyer attempted to get instruction from his client from early December 2016 onward, without success. The lawyer removed himself from the record on March 20, 2017 serving a Notice of Intent to Act in Person on behalf of Mr. Kinal.

[9] Given the issues involved in this case and the applicable legislation and case law, I am satisfied that there is no defence which can be mounted by the plaintiff to save this action, which was commenced when he was an undischarged bankrupt. Pursuant to section 71 of the Bankruptcy and Insolvency Act, the action is a nullity and, pursuant to Rule 21.01(3)(b) and (d) of the Rules of Civil Procedure, an abuse of process.

[10] Accordingly, I do not grant an adjournment which would only serve to prolong things unnecessarily. The defendants’ Order for dismissal of the action Court File No. CV-13-493855 is granted.

Costs

[11] The defendants seek their costs incurred in defending this action. As a general rule, costs are awarded to the successful party. In this case, the action commenced by the plaintiff claimed damages in the amount of $5 million for fraud, conspiracy and conversion, $5 million for unjust enrichment, and also sought punitive and aggravated damages. While the plaintiff alleged in the statement of claim, that he had had purchased shares from the defendants in the amount of $60,000 in 2002, a subsequent Affidavit of Documents did not show any evidence of payment. The lawsuit was brought against roofing companies, the principal of the companies, Joe Ferrier, lawyer Brent Swanick and accountant, Ronald Klayman. The allegations were all of a serious nature and put all of the defendants’ reputations at risk, requiring all to mount defences in order to defend their reputations.

[12] The pleadings closed as of March 2014, and the various defendants provided offers to settle shortly thereafter. Settlements were to be on the basis of a dismissal of the action by a specified date without costs. The offer to settle served by Joe Ferrier and his companies dated April 9, 2014 waived costs and interest to May 22, 2014. The offer to settle of Brent Swanick dated April 17, 2014 waived costs, including interest to May 22, 2014. The offer to settle served by Ronald Klayman dated April 10, 2014 waived costs to May 22, 2014. Attempts to settle on the basis of a withdrawal of the action on a without cost basis were renewed December 14, 2016. The plaintiff failed to accept any offers.

[13] Joe Ferrier seeks costs, including disbursements and HST, on a partial indemnity basis in the amount of $18,484.74 and on a substantial indemnity basis in the amount of $27,013.42. Brent Swanick seeks his costs, including disbursements and HST on a partial indemnity basis in the amount of $20,876.55 and on a substantial indemnity basis in the amount of $29,669.08. Ronald Klayman seeks his costs, inclusive of disbursements and HST in the total amount of $8,060.22. It is of note that the only defendant to have insurance and to be represented by counsel for the insurers is Mr. Klayman, which accounts for the lower fees sought.

[14] In determining costs, I take into consideration the amounts claimed, namely over $10 million, the defendants attempts at early settlement of this action just after pleadings had closed in March 2014, on a without costs basis, and their renewed attempts to settle this action as late as December 2016, all of which were rejected by the plaintiff.

[15] Costs awarded must be fair, reasonable and proportionate. Given the amounts of the claim and the serious nature of the allegations, and taking into consideration the factors set forth at Rule 57.01 of the Rules of Civil Procedure, I exercise my discretion and Order that the plaintiff pay to the defendants forthwith, on a partial indemnity basis, the following amounts:

1. to Joe Ferrier and his companies: $18,484.74;
2. to Brent W Swanick: $20,876.55 and
3. to Ronald Klayman the amount of $8,060.22

[16] Judgment to go as signed.

Carole J. Brown, J. Date: April 25, 2017