Meridian Credit Union Limited v. Rymer

Court File No.: 11678/17 Date: 2018-05-08 Superior Court of Justice – Ontario

Re: Meridian Credit Union Limited, Plaintiff and Defendant by counterclaim And: Rymer Bros. Limited and Roy Rymer, Defendants and Plaintiffs by counterclaim (11678/17) Niagara Composites International Inc., Defendant and Plaintiff by counterclaim (11679/17) Progressive Machinery Inc. and Roy Rymer, Defendants and Plaintiffs by counterclaim (11680/17) Blu-Rabbit Ltd and Roy Rymer, Defendants and Plaintiffs by counterclaim (11991/18) And: Anthony Rufrano, Kyle Rufrano and 2391637 Ontario Inc., Defendants by counterclaim

Before: Mr Justice Ramsay

Counsel: J. Ross Macfarlane for the Plaintiffs David House and Adam J. Stewart for the Rymer Defendants Jeff Warwick for the Rufrano Defendants

Heard: May 8, 2018 at Welland

Endorsement

[1] Meridian Credit Union Limited (the plaintiff) moves to strike the amended statements of defence and counterclaim in these four actions, with leave to amend.

[2] The plaintiff has instituted four actions for repayment of loans against four companies controlled by Roy Rymer. In three of the files Mr Rymer is being sued on his guarantee. Rymer and his companies (the defendants) have counterclaimed against the plaintiff and have claimed against Anthony Rufrano, a former employee of the plaintiff, his wife Kyle Rufrano and their company (the Rufrano defendants by counterclaim).

[3] The plaintiff claims approximately $100,000 in the Rymer Bros. Limited file, $73,000 in the Niagara Composites International Inc. file, $100,000 in the Progressive Machinery Inc. file and $24,000 in the Blu-Rabbit Ltd file.

[4] The defence is based on misconduct by Anthony Rufrano, the plaintiff’s account manager, who has since been fired and charged with fraud. Today, with the Attorney General’s consent, I ordered production of the police file to the parties.

[5] The Rules of Civil Procedure provide:

25.06 (1) Every pleading shall contain a concise statement of the material facts on which the party relies for the claim or defence, but not the evidence by which those facts are to be proved. R.R.O. 1990, Reg. 194, r. 25.06 (1).

(2) A party may raise any point of law in a pleading, but conclusions of law may be pleaded only if the material facts supporting them are pleaded. R.R.O. 1990, Reg. 194, r. 25.06 (2).

(3) Allegations of the performance or occurrence of all conditions precedent to the assertion of a claim or defence of a party are implied in the party’s pleading and need not be set out, and an opposite party who intends to contest the performance or occurrence of a condition precedent shall specify in the opposite party’s pleading the condition and its non-performance or non-occurrence. R.R.O. 1990, Reg. 194, r. 25.06 (3).

(4) A party may make inconsistent allegations in a pleading where the pleading makes it clear that they are being pleaded in the alternative.

(5) An allegation that is inconsistent with an allegation made in a party’s previous pleading or that raises a new ground of claim shall not be made in a subsequent pleading but by way of amendment to the previous pleading. R.R.O. 1990, Reg. 194, r. 25.06 (5).

(6) Where notice to a person is alleged, it is sufficient to allege notice as a fact unless the form or a precise term of the notice is material. R.R.O. 1990, Reg. 194, r. 25.06 (6).

(7) The effect of a document or the purport of a conversation, if material, shall be pleaded as briefly as possible, but the precise words of the document or conversation need not be pleaded unless those words are themselves material. R.R.O. 1990, Reg. 194, r. 25.06 (7).

(8) Where fraud, misrepresentation, breach of trust, malice or intent is alleged, the pleading shall contain full particulars, but knowledge may be alleged as a fact without pleading the circumstances from which it is to be inferred. O. Reg. 61/96, s. 1.

(9) Where a pleading contains a claim for relief, the nature of the relief claimed shall be specified and, where damages are claimed,

(a) the amount claimed for each claimant in respect of each claim shall be stated; and

(b) the amounts and particulars of special damages need only be pleaded to the extent that they are known at the date of the pleading, but notice of any further amounts and particulars shall be delivered forthwith after they become known and, in any event, not less than ten days before trial. R.R.O. 1990, Reg. 194, r. 25.06 (9)

25.07 (1) In a defence, a party shall admit every allegation of fact in the opposite party’s pleading that the party does not dispute. R.R.O. 1990, Reg. 194, r. 25.07 (1).

(2) Subject to subrule (6), all allegations of fact that are not denied in a party’s defence shall be deemed to be admitted unless the party pleads having no knowledge in respect of the fact. R.R.O. 1990, Reg. 194, r. 25.07 (2).

(3) Where a party intends to prove a version of the facts different from that pleaded by the opposite party, a denial of the version so pleaded is not sufficient, but the party shall plead the party’s own version of the facts in the defence. R.R.O. 1990, Reg. 194, r. 25.07 (3).

(4) In a defence, a party shall plead any matter on which the party intends to rely to defeat the claim of the opposite party and which, if not specifically pleaded, might take the opposite party by surprise or raise an issue that has not been raised in the opposite party’s pleading. R.R.O. 1990, Reg. 194, r. 25.07 (4).

(5) Where an agreement is alleged in a pleading, a denial of the agreement by the opposite party shall be construed only as a denial of the making of the agreement or of the facts from which the agreement may be implied by law, and not as a denial of the legality or sufficiency in law of the agreement. R.R.O. 1990, Reg. 194, r. 25.07 (5).

(6) In an action for damages, the amount of damages shall be deemed to be in issue unless specifically admitted. R.R.O. 1990, Reg. 194, r. 25.07 (6).

[6] Looking only at the pleadings and the documents to which they refer, the plaintiff’s case is based on the advance of the amounts in question based on a credit agreement and general security agreement, and in three of the files a guarantee, all purporting to be signed by Roy Rymer. The documents were signed by Anthony Rufrano and his supervisor on behalf of the plaintiff.

[7] The defence and counterclaims are based on these points:

a. Rufrano negotiated the loan on behalf of the plaintiff and told Rymer that the loan would be secured by a life insurance policy so that the companies could continue “if something were to happen to Rymer”;

b. Rufrano stole money from the defendants’ accounts, causing them loss;

c. Rufrano forged Rymer’s signature on “financing documents”; and

d. Rufrano promised to procure other financing at a lower rate, but did not complete the transaction.

[8] The defendants are required to plead with sufficient particularity to give notice to the other parties of the case to be met, to assist the court in understanding the factual and legal issues and to allow the parties and the court to determine the relevance of evidence on discovery and at trial: Balanyk v. University of Toronto, 1999 CanLII 14918 (ON SC), [1999] O.J. No. 2162 (Cameron J.). Where fraud, misrepresentation, breach of trust, malice or intent is alleged, the pleading shall contain full particulars: Rule 25.06 (8). In the present circumstances the defendants are not required to provide particulars of facts that are not within their knowledge: Bank Leu AG v. Gaming Lottery Corp., [1997] O.J. No. 3403 (Feldman J.). Pleadings are to be construed generously: Rausch v. Pickering (City), 2013 ONCA 740, para. 94-95.

[9] It would be practicable for the defendants to plead that Rufrano undertook to give them advice as a fiduciary, that he gave them bad advice, what it was and how that hurt them. They know whether Mr Rymer’s signature on the bank documents is a forgery or not. If it is not a forgery, they should admit that. They are entitled to plead that Mr Rymer did not sign the documents or that he signed them by reason of Rufrano’s misconduct. Although mutually inconsistent, they could plead both in the alternative if they make it clear that they are pleading in the alternative. They could plead that Rufrano stole from their accounts and that the plaintiff has not accounted for the loss, and that as a result any debt they owe on the loans has to be set off. They have not, however, done that.

[10] Instead they make sweeping conclusory allegations that are to a great extent devoid of supporting facts. I shall give some examples of specific problems with the pleadings:

a. The defendants claim that Rufrano forged finance documents, but not which ones. There are only two or three per file, all of which are in the defendants’ knowledge.

b. The counterclaim alleges fraud committed by the Rufranos and their company, but not the plaintiff, while in the concluding paragraphs of the pleadings the defendant claims against the plaintiff damages for fraud, among other things.

c. The defence alleges negligence by the plaintiff for Rufrano’s alleged intentional misconduct without any coherent facts or theory of liability.

d. The defence claims that Rymer would not have agreed to the loans if he had known that they were not going to be secured by a life insurance policy that would let the companies continue “if anything were to happen to Rymer.” This claim as pleaded cannot succeed on its face. A life insurance policy could not secure the loans. As pleaded, it was meant to secure the companies. If the plaintiff meant to give the loans without other security the parties would not have executed the guarantees and general security agreements.

e. The defence claims that Rufrano made unauthorized withdrawals, but also admit that the plaintiff has corrected its records. So has the plaintiff accounted for their funds or not?

f. There is no allegation that would say how the defendants were damaged by Rufrano’s defalcation beyond the amount stolen. Such facts would be in the knowledge of the defendants.

g. The defendants claim the benefit of ex turpi causa, but the underlying transaction was not illegal: it was a series of commercial loans.

h. The defendants claim interference with economic relations, but there is no third party with whom their affairs are said to have been disrupted.

i. They claim negligent misrepresentation without saying what misrepresentation was negligent. Any representation made to Rymer is within the defendants’ knowledge.

j. If as alleged Rufrano promised to provide further funding at a lower rate, no facts are pleaded that would connect this promise to the loans on which the plaintiffs seek judgment.

[11] The overall problem with the defence pleadings is that they do not identify the case to be met and as they stand they would allow the parties to romp unrestrained on discovery and at trial through two years of activity on four revolving lines of credit.

[12] The appropriate remedy is to strike the statements of defence and counterclaim with leave to amend. The plaintiff has no standing to ask to strike the counterclaim against the Rufranos and their company, but the pleadings cannot be conveniently separated and the pleadings against the Rufrano defendants are similarly deficient. I note that the pleadings are entirely devoid of facts to substantiate a claim against Kyle Rufrano. Since the defendant has to re-draft its pleadings in any event I consider it the fairest and most proportionate course of action to strike the claims against the Rufranos and their company with leave to amend, which I do of my own motion.

[13] The defendants should have time to review the police file before filing amended pleadings. They shall have 90 days to file an amended statement of defence and counterclaim, or such longer period as may be agreed among the parties.

[14] The parties agreed at the hearing that the successful party should have $3,500 costs of the motion. Accordingly the defendants are ordered to pay that amount to the plaintiff within 30 days.

J.A. Ramsay J.

Date: 2018-05-08