Court File and Parties

COURT FILE NO.: CV-15-521498 MOTION HEARD: 21042017 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Qincome Services Corp. in its capacity as Trustee of Qincome Finance Trust, Plaintiff AND: Joe Magnet, Defendant

BEFORE: Master P. T. Sugunasiri

COUNSEL: A. Lokan, Counsel, for the Defendant/Moving Party T. Carsten, Counsel, for the Plaintiff/Responding Party

HEARD: April 21, 2017

REASONS FOR DECISION

Overview:

[1] This action arises out of loan documents and promissory notes alleged to have been executed by the Defendant in the course of his participation in a tax shelter referred to as the “EquiGenesis 2003 Preferred Investment LP Program” (the “EQ 2003 Program”). The EquiGenesis 2003 Program was created by EquiGenesis Corporation, the principal of whom is Mr. Ken Gordon (“Gordon”). The Plaintiff was incorporated on October 2003 for the purpose of supporting the EquiGenesis programs including holding the loans relating to the programs.

[2] On February 6, 2015, the Plaintiff issued a Statement of Claim (“Claim”) against the Defendant to collect on the loans. Rather than serving the Claim on the Defendant, the Plaintiff obtained two ex parte orders extending the time to serve it until December 30, 2016. The Claim did not come to the Defendant’s attention until January 12, 2017. The primary basis for the extension of time was to allow for the resolution of a related tax appeal concerning the reassessment of a tax shelter similar to the EQ 2003 Program.

[3] In addition to the Defendant’s motion, the Plaintiff brings a motion to extend the time to serve the Claim, having not personally served the Defendant by December 30, 2016, and/or validating service. Due to the time spent on the primary motion, the parties agreed to the Plaintiff’s motion being determined in writing.

[4] There are two issues to be resolved in the present motions. First, should the orders of Master Abrams dated August 4, 2015 and April 11, 2016 be set aside on the basis that the Plaintiff failed to make full and frank disclosure? Second, if they should be set aside, what is the appropriate remedy?

[5] The Defendant takes the position in this motion that the ex parte orders should be set aside and the action dismissed on the basis that the Plaintiff failed to make full and frank disclosure to the Court as required on an ex parte motion. In particular, it failed to disclose, among other things, the fact that the Defendant had counsel, that the relationship between the parties was acrimonious prior to the issuing of the claim, that the Defendant had potentially contradictory evidence in the tax case which he might have offered to the Crown if he knew of the lawsuit, and that in at least one other contemporaneous case the defendant had been duly served within 6 months of issuing the Statement of Claim as required by the Rules of Civil Procedure. The Defendant claims significant prejudice as a result of the Plaintiff’s ex parte extension to serve the claim more than two years from the date of issue.

[6] The Plaintiff contends that it provided the Court with the appropriate level of disclosure, and that there is no prejudice to the Defendant in having obtained the extensions ex parte. The Plaintiff seeks by way of its own motion, to further extend the time for service of the Claim nunc pro tunc to January 12, 2017 and validate service.

[7] For the reasons that follow, the motion to set aside the ex parte orders is granted but service of the Claim is hereby extended nunc pro tunc and validated as of January 12, 2017. While I find that the Plaintiff failed to provide full and frank disclosure to Master Abrams in obtaining an extension of time to serve its Claim, the appropriate remedy in this unique case is for this Court to grant an extension of time nunc pro tunc to serve the Claim, and validate service as of January 12, 2017 when the Defendant acknowledged receipt of the Claim. The just resolution of this dispute requires that it be adjudicated on its merits and I do not find that the Defendant suffers any material or significant prejudice from the delay in service.

Facts:

The EQ 2003 Program

[8] According to the Defendant, he was introduced to the EQ 2003 program through his accountant. The structure of the program is complex and is not necessary to describe in full for the purpose of this motion. Suffice it to say that to participate, the Defendant was required to make an initial cash investment, and arrange for a ten-year loan from the Plaintiff towards the purchase of partnership units (“Unit Loan”), and to support a pledge made by each investor to make a charitable donation to a Canadian registered charity (“Donation Loan”). Participation in the program allowed the Defendant to make charitable donation and other claims in his 2003 tax return that gave rise to significant tax savings. There were similar programs in 2004 and 2009 (“EQ 2004 Program” and “EQ 2009 Program” respectively) that the Defendant did not participate in.

CRA Reassessments

[9] In 2007 and 2008, the CRA began to issue Notices of Reassessment denying all donation credits and income tax deductions in connection with the EQ 2003 Program. EquiGenesis challenged the reassessments on behalf of the participants. The Defendant’s liability pursuant to the tax reassessment was approximately $500,000.

[10] In 2010 the Defendant was sent some amending documents to the EQ 2003 Program to restructure the program. The Defendant retained Pamela Cross from Borden, Ladner Gervais, LLP as tax counsel to advise on how the restructuring might affect his interests. I accept the Defendant’s evidence that between March 2010 and July 2013, Ms. Cross was in contact with both Gordon and his counsel on various issues including the restructuring and the tax reassessment.

[11] By letter dated April 5, 2012, the CRA provided its position on the objection to the reassessments of the EQ 2003 and 2004 Program including the restructuring that was done in 2010. Among other things, the CRA took the position that the taxpayers (including the Defendant) were not entitled to the donation tax credits because significant benefits flowed to the taxpayers in return for the alleged donations and that either directly or indirectly, the taxpayers received consideration for the amounts paid. The CRA was also of the view that “the taxpayers entered into a series of transactions made up of the subscription for units of LP’s, signing a pledge to one or more of a list of particular Charities, applying for the donation loan, directing that the donation loan be paid to Charities. The series of transactions were part of a larger group of transactions which constituted a series of interrelated and predetermined steps and transactions resulting in a circular flow of funds. There was no purpose for this arrangement other than to obtain the tax benefit; the donation tax credits… The preordained circularity of the cash resulted in the donation being self-funding as the donated funds essentially paid for the long term financing.”

EQ 2003 Programs Loans called and CRA Class Action Launched

[12] By letter dated December 31, 2012, the Plaintiff informed the Defendant (and the other participants of the EQ 2003 Program) that the Unit Loan and Donation Loan was maturing on February 15, 2013 and that he would be required to pay approximately $1 million as repayment of the loans. EquiGenesis Corporation sent a second letter dated January 15, 2013 calling the loan and giving the Defendant the option of paying, refinancing through a lender arranged through the program, or making his own refinancing arrangements.

[13] Despite the fact that this loan was being called, I accept the evidence that it was the Defendant’s understanding that the Unit Loan and Donation Loan would not in fact be called because of the circular structure of the program and the Defendant would only in act be at risk for his cash investment and any potential tax costs should the CRA disallow the program. I do not make any finding on whether or not this understanding was reasonable or correct. There is competing evidence on the record on this point and I need not resolve it for the purposes of this motion. For my purposes, it simply reflects that fact of a growing dispute between the parties, as early as 2013. Further the former issue will be before this Court with the benefit of a full evidentiary record when the matter proceeds to trial, and the latter issue is currently before the Tax Court of Canada.

[14] In March of 2013, Gordon informed the EQ 2003 Program participants that EquiGenesis had commenced a class action against the Canada Revenue Agency. Of note is paragraph 79 of that claim which refers to the fact that loans were being enforced against defaulting lenders. Joseph Groia of Groia & Company Professional Corporation was retained as counsel for EquiGenesis. Paragraph 79 was clearly contrary to the Defendant’s understanding of the program and he retained Paliare Roland Rosenberg Rothstein LLP to make inquiries with Gordon about the nature of these alleged claims that had been made against other investors. Among other things, the Defendant also objected to Gordon as a representative Plaintiff and Mr. Vern Krishna acting as counsel for the EQ2003 Program.

[15] Gordon and counsel from Paliare Roland exchanged emails in this regard until July 12, 2013, when Mr. Lokan from Paliare Roland formally informed Mr. Groia that his firm had been retained to advise and represent the Defendant “with respect to his litigation options arising from the EquiGenesis investments.” Mr. Lokan continued in his letter that “litigation appears to be inevitable, and we are certainly in no position to rule out litigation by Professor Magnet against your clients EquiGenesis and Mr. Gordon.”

[16] The context of Mr. Lokan’s letter was that the Defendant was still considering whether or not he wanted to continue to participate in the EQ 2013 program with the ten-year mark refinancing option. Ms. Cross was in contact with Gordon to obtain information and documentation in that regard, and the Defendant was given until the end of July to execute refinancing documents. Ms. Cross received some information for Gordon by way of email dated July 18, 2013. Mr. Lokan followed up on Ms. Cross’s requests in his July 12, 2013 and I accept the Defendant’s evidence that he did not receive a fulsome response by either Gordon or Mr. Groia. The Defendant indicates in his affidavit that after this time, he elected to decline the refinancing option.

Radio Silence Between the Parties

[17] From the record before me, it appears that there was no further communication between the parties until mid-December of 2016. Between July 2013 and December 2016, no further demand was made for payment on the loans and the Defendant believed that it was “quite possible” that no further steps would be taken on the loans. During this time, the 2009 program came before the Tax Court of Canada. The Defendant also stayed silent during this time but for some inquiries made, through counsel, on the status of the tax proceeding.

The Ex Parte Orders

The Haberman Order dated July 28, 2015

[18] The Plaintiff issued its Claim against the Defendant on February 6, 2015 but did not serve it. Instead, on July 28, 2015 the Plaintiff brought an ex parte motion before Master Haberman seeking an extension of time to serve the Claim to April 16, 2016. The basis for the motion was that:

a. The plaintiff claims payment of loans evidenced by loan agreements and promissory notes related to an investment and donation program called EQ 2003; b. It is expected that the defence will involve the allegation that the EQ 2003 Program did not “provide the benefits contemplated by the defendant and, as such, the Loan Agreements and Promissory Notes are not enforceable”; c. The validity of the EQ 2003 Program was currently the subject of Objections filed with the CRA; d. The validity of a substantially similar program, EQ 2009 was currently before the Tax Court of Canada commencing September of 2015 and slated to end October 16, 2015; e. The legal and factual determinations in that trial may resolve the material issues in the current claim; f. The Plaintiff issued its claim at the latest possible time within the limitation period to preserve its rights; g. A decision in the EQ 2009 Program case was expected four to six months from the close of trial and any such decision may permit a resolution of matters relating to the enforceability of the Loan Agreements and Promissory Notes; h. It is premature for issues raised in this Claim to be judicially determined; i. An extension of time would save considerable time, expense and judicial resources; j. An extension of time would reduce the risk of inconsistent findings between the Tax Court and the Superior Court of Justice; and k. The extension would not prejudice the defendant.

[19] Master Haberman dismissed the motion noting in her endorsement that the Plaintiff was effectively seeking a stay pending the resolution of the related matter and that it did not meet the criteria for an extension. Master Haberman also indicated that she did not see why the Claim could not be served and there be a waiver of the usual timelines for a defence. The dismissal of the motion was without prejudice to the Plaintiff moving again with better evidence.

The Abrams Orders Dated August 4, 2015 and April 11, 2016

[20] On August 4, 2015 the Plaintiff brought a motion before Master Abrams with identical evidence, seeking an extension of time to serve the Claim to April 16, 2016. Master Abrams granted the order which she further varied on April 11, 2016 to extend service of the Claim to December 30, 2016.

Analysis:

Issue #1 - The Ex Parte Orders Abrams Should be Set Aside

[21] Ex parte orders are governed by Rule 39.06(6) of the Rules of Civil Procedure which requires a moving party to make full and fair disclosure of all material facts. As noted by Master Dash in Fimax Investments Group Ltd. v. Grossman:

The test under Rule 39.01(6) to set aside an ex-party order obtained where there has been a failure to make full and fair disclosure is not whether the order would or would not have been made, but rather whether or not disclosure of the omitted or misstated information “might have had an impact on the original granting of the order” in that it could be said that “the order may well have not been made if proper disclosure had been given.” [1]

[22] In the present case, I find that the Plaintiff failed to disclose relevant information to Master Abrams which may have impacted on her decision to allow the Plaintiff an extension of time to serve the Claim.

Failure to Disclose that the Defendant was Represented by Counsel

[23] The Defendant argues that the Plaintiff failed to disclose that the Defendant was, and had been represented by Ms. Cross and Ms. Lokan in years prior, and that this alone is a basis to set aside the Abrams orders.

[24] The Plaintiff suggests that it was unclear that the Defendant was represented by counsel between August of 2013 and the time the ex parte orders were sought in 2016. In any event the Plaintiff contends that any such failure would have had no impact on Master Abrams.

[25] On balance, I do not find the Plaintiff’s point of view persuasive. It was clear in July of 2013 that Mr. Lokan had been retained to act for the Defendant “with respect to his litigation options arising from the EquiGenesis investments.” The fact that there was radio silence between the parties since that time does not suggest that Mr. Lokan was no longer retained. Further, the Plaintiff’s own evidence is that it attempted to have Mr. Lokan accept service of the Claim when the extended time for service was coming to an end in December of 2016. Conveniently, when it was to the Plaintiff’s benefit, it was prepared to at least entertain the possibility that Mr. Lokan was acting for Defendant.

[26] As noted above the Defendant would argue that this failure alone disqualifies the Plaintiff from the ex parte orders. I agree, but not for the reasons usually articulated in the jurisprudence. While in many cases the existence of counsel might materially affect the Court’s determination in an ex parte motion because counsel would have an opportunity to test evidence and make submissions, as for example, in injunction cases, the mere fact of the existence of counsel in a motion to extend the time to serve a claim is not as significant. This is because motions to extend time are inherently ex parte. Notice of the motion to extend time to serve is tantamount to giving notice of a Statement of Claim. If in this case Mr. Lokan had been told of the motion, the motion would be moot.

Failure to Disclose the Defendant Had a Different Understanding of the Enforceability of the Loans

[27] The issue in this case, then, is not the mere failure to disclose counsel. It is the failure to disclose the extensive involvement of counsel and the acrimony that had developed between the parties as early as 2013. In obtaining the extension orders, the Plaintiff provided a 12 paragraph affidavit sworn primarily on information and belief by contract counsel to the Plaintiff’s lawyer at the time, Mr. Winkler. The essence of the affidavit was that the Defendant would take issue with the enforceability of the loans because he did not receive the expected benefits from the EQ 2003 Program.

[28] In my view, and with the benefit of a full record that Master Abrams did not have, this is a vast understatement of the Defendant’s position. The record, presented to her, did not disclose the extent of counsel involvement, as it should have. Most importantly, it did not reveal that Mr. Lokan had advised Plaintiff’s counsel in July of 2013 that litigation between the parties seemed inevitable in terms of the enforceability of the loans and that the Defendant was contemplating his own options in pursing the Plaintiff and Gordon. Given the history of the parties, the evidence before Master Abrams on this point was entirely bald and misleading.

[29] If Master Abrams had known of this history, it might have impacted on her decision to grant the extension. Master Abrams might not have allowed an extension of time if she knew the extent of counsel involvement in the past, caused by mistrust and acrimony between the parties. She might, instead, have dismissed the motion and required the Plaintiff to serve the Claim and seek a stay based on the ongoing tax proceeding.

[30] I also accept the Defendant’s submissions that rules of civility require counsel to inform opposing counsel of fresh steps. While the rules are meant to govern the relationship amongst members of the bar and do not dictate what information should be disclosed to the Court in litigation, cooperation, civility and common sense are core to the administration of justice. This principle seems to have evaded the Plaintiff in this case, perhaps for the tactical reasons alleged by the Defendant.

[31] Given the history between the parties, the Plaintiff’s choice of pursuing an extension rather than seeking a stay is, at the very least, curious, especially in light of the fact that there is at least one other claim that was issued and served in relation to the 2004 program. The Defendant claims that the choice is an indicator of the Plaintiff trying to game the administration of justice. Perhaps the strategy was, as the Defendant says, to single him out as a bad apple, and a liability to the tax case, or to prevent the Defendant from having the information he needed to calculate whether it was more financially advantageous to support the CRA’s assessing position or dispute it (this is discussed in greater detail below). There is no need for me to decide this at this juncture though I agree with the Defendant that there is certainly an air of gaming in the Plaintiff’s conduct. What is clear is that Master Abrams was not given the opportunity to consider any of these issues before making her decision, and she may very well have decided differently had she been given the same history of the parties’ interaction that I have before me.

[32] On this ground alone, the ex parte orders must be set aside.

Issue #2 – The Action Should Be Allowed to Proceed

[33] Having set aside the ex parte orders of Master Abrams extending the time for the Plaintiff the serve its Claim to December 30, 2016, the issue remains as to whether or not the Plaintiff should be granted an extension, nunc pro tunc. With a full record before me, I have the information and discretion to allow the Plaintiff to proceed, notwithstanding the setting aside of the Abrams orders. The applicable Rules are Rules 1.04, 2.01, 3.02 and 14.08(1) of the Rules of Civil Procedure. In considering this question, I am also guided by the Ontario Court of Appeal in Chiarelli v. Wiens who held that “the basic consideration… is whether the [extension of time] will advance the just resolution of the dispute, without prejudice or unfairness to the parties.” [2]

[34] The Defendant identifies the following reasons to support its request for the action to be dismissed:

a. The length of the required extension would be 2 years; b. The delay has caused severe prejudice to Magnet in that he could not participate in the tax proceeding, he lost the opportunity to negotiate a resolution to bring himself back into good standing, the Defendant’s liability has increased by $160,000 between the time the Claim was issued and the Plaintiff’s first attempt to notify the Mr. Lokan of the claim, the Defendant has potentially lost the opportunity to make third party claims, and since the limitation period has elapsed, the Defendant organized his affairs assuming that he would not be sued; c. The original requests were not sought for a proper purpose; and d. The original extensions may affect the administration of justice by calling into question the integrity of the Tax Court findings (because the Defendant did not testify on the assumption that there was no claim for the loans).

The Length of the Required Extension is not prima facie prejudicial

[35] In Chiarelli, supra, the Court of appeal held that each case must be decided on its facts, focusing in particular on prejudice to the Defendant. In the present case, as in Chiarelli, the length of time of the extension is not prima facie prejudicial. In argument, the Defendant submits that it is prejudicial because memories fade and witnesses are lost. There is no evidence that witnesses are lost. In fact the evidence suggests that the existence of the ongoing tax proceedings have served to preserve documents, witness names, and material evidence. With respect to fading memories, it is clear from the fulsome record provided by the Defendant including notes made contemporaneously during phone calls with various EquiGenesis representatives that the Defendant’s records are intact. In my view, nothing turns on the length of the extension required.

Inability to Participate in the Tax Proceeding was the Defendant’s choice

[36] In 2015 and 2016, the EQ 2009 Program was before the Tax Court Canada as a test case of sorts. The Plaintiffs evidence to Master Abram was that the Tax Court case could impact on the enforceability issue in the current action. The Defendant was not a participant in the 2009 program but it had the same structure as the EQ 2003 Program. Gordon testified on behalf of EquiGenesis at the Tax Court of Canada. One of the Defendant’s main complaints is that by not having notice of the Claim, he did not know what was happening with the tax case and was deprived of the opportunity to contradict Gordon in the tax case.

[37] This argument is problematic in several ways. If Master Abrams had been provided with all of the available evidence, she may have dismissed the motion and the Plaintiff would have had to serve the Claim in 2015. However, service of the Claim in 2015 would not have given the Defendant information about the tax case. In other words, The Defendant’s complaint about keeping him in the dark about the tax case would not have been cured by timely service. The Defendant would have still had to take steps to find out the status of the tax case if the information was not forthcoming from the Plaintiff.

[38] What in fact the Defendant is saying is that had he known he was being sued, he would have the final piece of the equation he needed to decide whether or not he was going to offer evidence to the CRA that might support its assessing position. To offer evidence, or not, was a financial calculation. Whether the Defendant was going to be sued on the loans or not, was a factor in that equation.

[39] Strategically, the Defendant’s approach makes sense. To bring the consideration to bear in these proceedings, however, offends the Court’s sensibilities. The bona fide collectability of the loan is central to the CRA’s assessing position. Among other things, it was taking the position that the loans were not payable due to the circular structure of the scheme and that such a scheme offended Income Tax Act anti-avoidance and other provisions. The Defendant tendered evidence in this motion about conversations that he allegedly had with EquiGenesis representatives including Gordon, confirming the circularity of the scheme and indicating that he would not be sued on the loans. There is debate as to the correctness of the Defendant’s understanding and I do not wish to make findings of fact in that regard, given that this matter is to proceed and that this very issue is before the Tax Court. However, I can conclude that the Defendant’s understanding is contrary to at least some of Gordon’s testimony in the Tax Court on those issues.

[40] In the absence of a Claim by the Plaintiff, the Defendant made a tactical decision not to offer his evidence to the CRA, because it was financially advantageous for him if the Tax Court concluded that the loans were bona fide. He would then receive the tax savings originally contemplated by the EQ2003 Program and not have had to pay the loans due to private reassurances alleged to have been given to him, unbeknownst to the CRA. If he had known that he was going to be sued on the loans as he is now, the Defendant might have offered his evidence to the CRA to support its assessing position. If sued on the loan, the CRA’s assessing position was financially better for the Defendant than having to pay the loans. The CRA liability is $500,000. Liability on the loans is in excess of $1 million.

[41] Given the foregoing, I do not accept the Defendant’s argument that the Plaintiff deprived the Defendant of the opportunity to offer evidence. The Defendant made that calculated decision himself, based on the “possibility” that the Plaintiff would not sue. He could have offered his testimony at any time. He could have called the Department of Justice. He could have called the Tax Court to find out the status of the public proceedings. He could have contacted the CRA directly to indicate that he had material evidence. The Defendant hedged his bets and chose to stay silent.

Any Improper Purpose of the Plaintiff Ought Not be Countered by Further Impropriety

[42] If the Plaintiff can be accused of gaming the administration of justice, [3] so then can the Defendant. The Court will not be the joystick for these tactical moves. As Justice Meyers recently stated, the answer to inappropriate tactics is not more inappropriate tactics. [4] Truth is the cornerstone of our justice system and no interest of justice is served in rewarding the gaming of it. With tax counsel and litigation counsel by his side, it is unimaginable that the Defendant could not have found a way to provide his evidence to the CRA or determine the status of a public proceeding, if he wanted to. If the Plaintiffs made a deliberate choice to keep the fact of the Claim from the Defendant, The Defendant made a deliberate choice not to offer what he claims to be material and important evidence, because staying silent was financially advantageous. Neither party ought to succeed in this game. For this reason alone, having the action proceed allows for the just resolution of the dispute.

The Opportunity to Negotiate a Resolution is not Lost

[43] I am not persuaded by the submission that the Defendant has lost an opportunity to negotiate a resolution of the loans. As litigation proceeds, negotiation is always encouraged and the opportunity remains to negotiate the loans, including the $160,000 increase in the Defendant’s alleged liability. In 2013 the Defendant chose not to refinance the loans after being given the option of paying or refinancing. He crossed his fingers and sat silent, hoping for the best in the CRA case and banking on what he referred to as the “possibility” of not being sued. Opportunity was at least in part, lost by the choices of the Defendant.

The Opportunity is Not Lost to Make Third Party Claims

[44] The limitation period for a third party claim is generally triggered upon service of the main Claim on the Defendant. In this case, the limitation period would commence January 12, 2017 when the Defendant wrote a letter acknowledging the Claim. There is no prejudice here.

Insufficient Evidence on Organization of the Defendant’s Affairs After the Expiration of the Limitation Period

[45] The Defendant argues that after the expiry of the limitation period, he organized his affairs on the assumption that he was not being sued on the loans. This is always a concern when actions come to the attention of a party after the expiration of a limitation period. I agree that there may be some prejudice, but there was insufficient evidence before me to know the extent of this prejudice and what type of reorganizing the Defendant did. I am not prepared to dismiss this action on the basis of the Defendant’s bald statement, especially in light of my discussion above. It does not advance the just resolution of the dispute to simply dismiss the action now. It is unclear, due to the relationship between this case and the tax case, whether or not this action will even advance or what the relative positions of the parties might be. I am advised that the Tax Court has not yet rendered its decision. If the Tax Court finds, for example, that the EQ 2009 structure is a sham (assuming the 2003 participants agree or have agreed to be bound by such a decision), then the Defendant may have a strong argument that the loans are not payable. Dismissal at this stage is premature.

[46] In sum, the just resolution of the present dispute between the parties requires an extension of time, nunc pro tunc, for the Plaintiff to serve the Claim. Service of the Claim is extended to January 12, 2017 and validated as of that date.

Costs:

[47] In my view, the parties’ success is divided. While I have allowed Defendant’s motion to set aside the ex parte orders, I have not, dismissed the action as requested by the Defendant. Instead, I have allowed the Plaintiff’s motion to extend the time to serve its Claim and have validated service. The parties shall therefore bear their own costs.

[48] I thank counsel for their very helpful materials and submissions.

Disposition:

[49] I order as follows:

a. The ex parte orders of Master Abrams dated August 4, 2015 and April 11, 2016 are set aside; b. The Plaintiff is granted an extension of time to serve its Statement of Claim issued February 6, 2015 to January 12, 2017; c. Service of the Statement of Claim is validated as of January 12, 2017; and d. The parties shall bear their own costs.

“Master P. Tamara Sugunasiri”

Date: July 24, 2017

[1] Fimax Investments Group Ltd. v. Grossman, 2012 ONSC 2436, 2012 CarswellOnt 4984 at para. 10 (Master). [2] Chiarelli v. Wiens, 2000 CarswellOnt 280 at para. 12. [3] With respect to this allegation, there is insufficient evidence to make a proper determination of it or draw a clear inference that the Plaintiffs acted improperly. The Plaintiff’s conduct does have an air of impropriety but there is conflicting evidence on this point and I am reluctant to make any findings given that this matter is to proceed to trial. This issue can be properly canvassed in the fullness of time. For the time being, I acknowledge from the evidence that there may be a number of reasons why the Plaintiff chose to keep the Claim from the Defendant. It could be that the Plaintiff wanted to support paragraph 79 in its class action Statement of Claim and issued the claim for that purpose with no intention of pursuing it. It could have been for the other tactical reasons enumerated by the Defendant. It could be that the intention is just as the Plaintiff claims; to collect on the loans in the absence of refinancing, as contemplated by the loan documents. I also note that Master Abrams had enough information to question the Plaintiff on why it chose the route it did. On the other hand, I was advised in clear submissions and it is eluded to in Mr. Magnet’s evidence that it was indeed a financial consideration for the Defendant whether or not he wanted the CRA to succeed in its assessing position. The evidentiary record shows that his exposure if the CRA’s assessing position is upheld is approximately $500,000, with $100,000 of it already being paid. According to the claim and loan documents, his liability on the loans is over $1 million. [4] Western Steel and Tube Ltd. v. Technoflange Inc., 2017 ONSC 2697 at p. 7.