Court File and Parties
COURT FILE NO.: CV-16-11576-00CL DATE: 20180706
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
JEAN-MARC RIDEL, NADINE SUZANNE JOSEPHINE RIDEL, and MARC H. RIDEL Plaintiffs – and – ROBERT GOLDBERG Defendant
Counsel: Philip Anisman, for the Plaintiffs Niklas Holmberg and Breeana Needham, for the Defendant
HEARD: March 29 and April 20, 2018
Reasons for Decision
MR. JUSTICE T. MCEWEN
1The plaintiffs Jean-Marc Ridel, Nadine Suzanne Josephine Ridel, and Marc H. Ridel (the “Ridels”) bring a motion for summary judgment against the defendant Robert Goldberg. Mr. Goldberg also brings a motion for summary judgment against the Ridels dismissing their claim on the basis that it was commenced outside of the two year limitation period provided for in the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B.
Overview
2These motions arise out of a long-standing and convoluted dispute between the Ridels, Mr. Goldberg, e3m Investments Inc. (“e3m”) and a broker employed by e3m, Armando Cassin. Mr. Goldberg was the founder, CEO, president, and director of e3m.
3In 2006 the Ridels brought another action (the “Prior Action”) against e3m and Mr. Cassin. As part of the Prior Action, the Ridels alleged that e3m had failed to supervise Mr. Cassin’s handling of their investment accounts.
4After a 10 day trial, Justice Pepall (as she then was) found Mr. Cassin negligent in his handling of the Ridels’ investment accounts. Justice Pepall also found e3m vicariously liable for Mr. Cassin’s conduct and directly liable for its failure to supervise him. [1]
5Justice Pepall’s reasons included comments critical of Mr. Goldberg’s conduct including his failure to properly supervise Mr. Cassin.
6e3m appealed Justice Pepall’s decision. The appeal was dismissed with reasons being delivered on November 3, 2014. [2]
7e3m filed for bankruptcy on January 20, 2015. The Ridels, pursuant to the judgment, became creditors in the bankruptcy claiming $1,036,245.85. They ultimately recovered $437,997.61 from Mr. Cassin on July 21, 2016.
8On October 25, 2016, more than three years after Justice Pepall delivered her reasons, the Ridels obtained an order to commence this action pursuant s. 38 of the Bankruptcy and Insolvency Act, R.S.C. 1985, c B-3 (“BIA”). The Ridels, as creditors of e3m, now bring this action in the place of e3m’s trustee in bankruptcy. They assert that Mr. Goldberg is personally liable to e3m for damages that the corporation incurred in the Prior Action.
9In their motion for summary judgment the Ridels rely almost entirely on Justice Pepall’s findings in the Prior Action. As mentioned, Justice Pepall found e3m directly liable for breach of contract and negligence regarding the corporation’s failure to supervise Mr. Cassin. Several paragraphs of Justice Pepall’s reasons focused on Mr. Goldberg’s conduct.
10Based on the findings of Justice Pepall, the Ridels assert that there is no genuine issue requiring a trial regarding Mr. Goldberg’s personal liability to e3m.
11First, the Ridels submit that Mr. Goldberg is estopped from re-litigating the findings of Justice Pepall. They allege that Mr. Goldberg’s interests in the Prior Action were identical to e3m’s and that as the president and CEO of e3m he was a privy to the corporation. They also point to the fact that he participated fully in the trial, which included retaining and instructing counsel. They claim that part of this defence was instructing counsel to argue that e3m’s supervision of the Ridels’ accounts was satisfactory.
12Second, the Ridels assert that Justice Pepall’s reasons also support a finding of liability against Mr. Goldberg under s. 134 of the Ontario Business Corporations Act, R.S.O. 1990, c. B.16 (“OBCA”). While the Prior Action only dealt with Mr. Cassin and e3m’s liability, they assert that Justice Pepall’s factual findings are also dispositive of their allegation that Mr. Goldberg breached his duties to e3m under s. 134 of the OBCA. In their submission, the facts required for a finding of liability have been conclusively decided by Justice Pepall and there is therefore no genuine issue requiring a trial. The Ridels’ statement of claim in this action is short and to the point. There are three pages of actual pleadings. For the most part it relies upon the findings of Justice Pepall in the Prior Action and s. 134 of the OBCA.
13Mr. Goldberg argues, amongst other things, that the decision in the Prior Action cannot be used as a finding of personal liability against him. He claims that he was not a party to the Prior Action and that he did not mount a defence regarding his personal liability. His personal liability therefore remains a genuine issue requiring a trial. He further submits that the action is out of time since it was commenced beyond the two year limitation period.
14For the reasons below I dismiss the Ridels’ motion for summary judgment and grant Mr. Goldberg’s motion for summary judgment dismissing this action.
The Prior Motion to Strike
15It bears noting that in January 2017 Mr. Goldberg brought a motion pursuant to Rule 21.01(1)(a) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 to similarly have this action dismissed as being barred by the provisions of the Limitations Act, 2002. The motion was granted by the motions judge by way of endorsement dated February 28, 2017. The Ridels appealed. The Court of Appeal overturned the motions judge citing the “limited record” and found that it would not be appropriate for this court to rule on the issues pursuant to Rule 21. The court found that a more complete record was required in order to determine the issues raised by the parties concerning the limitation period issue.
16Interestingly, despite the comments of the Court of Appeal, the Ridels have not filed any materials in support of their defence of Mr. Goldberg’s motion to have the action dismissed.
1. The Ridels’ Motion for Summary Judgment
17The Ridels move for summary judgment on the basis that Mr. Goldberg’s interest in this action is identical to e3m’s interest in the Prior Action, in which Mr. Goldberg fully participated as president, CEO, and majority shareholder of e3m.
18It is undisputed that Mr. Goldberg was e3m’s representative at discovery and trial. He also retained and instructed e3m’s trial and appeal counsel. As a result, the Ridels argue that the findings at trial are binding on him and that he is estopped from denying them. In these circumstances the Ridels therefore submit that there is no genuine issue requiring a trial and summary judgment must follow in accordance with Rule 20.04(2)(a) of the Rules of Civil Procedure.
19The Ridels’ argument is based on the following three submissions:
a) Mr. Goldberg is bound by the findings of Justice Pepall, as a privy of e3m;
b) on the basis of those reasons Mr. Goldberg, as a director and officer of e3m, has been shown to have breached his duty of care to e3m and his fiduciary obligation to act in e3m’s best interest, contrary to s. 134(1) of the OBCA; and
c) Mr. Goldberg has provided no evidence of a genuine issue requiring a trial. In this regard the Ridels submit that he did not review his files as required or produce the required documents for this motion, and that his statement of defence requires a repetition of the previous trial to no end.
20Mr. Goldberg, on the other hand, submits that the findings of Justice Pepall do not support a finding of liability against him. In particular, he submits that his defence establishes a ‘real chance of success’ or that there is a genuine issue requiring a trial. In this regard, Mr. Goldberg points to e3m’s corporate by-laws and various provisions of the OBCA which he claims either absolve him of liability or entitle him to indemnity.
21He further submits that the action should be dismissed as an abuse of process since the Ridels had every opportunity to sue Mr. Goldberg in the Prior Action, but chose not to. I will deal with all of the aforementioned arguments below.
Analysis
Are Justice Pepall’s findings dispositive of the current action?
22No doubt Justice Pepall’s comments concerning Mr. Goldberg were unflattering. Amongst other things, she found that he failed to comply with e3m’s compliance manual; failed to adequately supervise Mr. Cassin; failed to identify or ignored “know your client” documentation; and, in a number of instances, acted contrary to the regulatory requirements. The criticisms of Mr. Goldberg are contained, primarily, in paragraphs 222-227 of her reasons.
23In this action, however, the claim of e3m, as advanced by the Ridels against Mr. Goldberg, is distinct from the claim that was pursued in the Prior Action.
24In the Prior Action the Ridels pursued e3m and Mr. Cassin for negligence, breach of contract, and breach of fiduciary duty.
25In this action the Ridels have stepped into the shoes of e3m and are pursuing e3m’s alleged claim against Mr. Goldberg. The Ridels concede that the Prior Action did not address Mr. Goldberg’s duties under the OBCA.
26For the reasons that follow, I find that Justice Pepall’s findings against e3m and Mr. Cassin do not translate into a finding of personal liability against Mr. Goldberg.
27First, I accept Mr. Goldberg’s submissions that while Justice Pepall’s reasons for decision are admissible, they are not determinative of the issues between e3m and Mr. Goldberg.
28As noted, the causes of action in the Prior Action are different than those in this action. Mr. Goldberg’s liability was never engaged by the issues of the Prior Action. He was not and could not have been directly impacted by that judgment, therefore, he ought not to be bound the findings in the Prior Action.
29In this regard I rely upon the decisions of the Supreme Court of Canada in British Columbia (Attorney General) v. Malik, 2011 SCC 18, at paras. 38-48 (“Malik”), and the Ontario Divisional Court in Groia v. Law Society of Upper Canada, 2015 ONSC 686 (Div. Ct.), at para. 125, reversed on other grounds, 2018 SCC 27 (“Groia”).
30In Malik, the Supreme Court held that prior reasons are admissible in a subsequent proceeding but their use must be determined on a case by case basis. Justice Binnie, writing for the court, confirmed that a judge may admit reasons, but can only use them to the extent that they are relevant to the current proceeding. At para. 48, Justice Binnie wrote:
48 Once admitted, the weight to be given to the earlier decision in subsequent interlocutory proceedings will rest not only on the identity of the participants, the similarity of the issues, the nature of the earlier proceedings and the opportunity given to the prejudiced party to contest it but on all “the varying circumstances of particular cases” (Del Core, at p. 22).
31In Groia, the Divisional Court held that comments made about Mr. Groia’s conduct in a prior proceeding did not amount to factual findings that could be relied upon in a subsequent professional misconduct hearing. It came to this conclusion largely on the basis that Mr. Groia was not a party to the previous proceeding and that subject matter of the two proceedings was different. Despite being a participant, and much of his conduct forming the factual background, Mr. Groia’s conduct was not at issue in the prior proceeding nor did he have the opportunity to make submissions on his behalf. For the Divisional Court, it was therefore inappropriate to use these comments as finding in the context of a distinct subsequent proceeding.
32In my view, the same situation essentially exists in this case. The plaintiffs are different. The defendants are different. Despite the fact that Mr. Goldberg participated in the prior proceeding, it was Mr. Cassin and e3m’s liability that was at issue. Mr. Goldberg was not called upon to defend himself regarding his personal liability under the OBCA. As such, I am not prepared to take Justice Pepall’s reasons and transfer them to a novel ground of liability that was not at issue during the Prior Proceeding.
Is Mr. Goldberg a “privy”?
33I also disagree with the Ridels’ submission that Mr. Goldberg falls within the definition of ‘privy’ as articulated in Re EnerNorth Industries Inc., 2009 ONCA 536 (“Re EnerNorth”) and Bank of Montreal v. Maple City Ford Sales (1986) Ltd. (2000), 51 O.R. (3d) 523 (Sup. Ct.) (“BMO”). In both those cases, the court held that directors were a privy on the basis that they had either stepped into the shoes of the corporation through an assignment (BMO) or were effectively advancing an argument aligned with the corporation’s interests (Re EnerNorth). This is distinct from a situation such as the case at bar where the corporation is advancing an argument in opposition to the interests of its own director. Justice Gillese (as she was then), explained this distinction in BMO:
In these four actions where David McKeand and Malger [are] standing in the shoes of Maple City as assignees, and where David and Paul McKeand come to this court as directors and officers of Maple City, they do so as privies. Where they come under their separate legal identities, there is not a sufficient degree of identification to make it just that the determinations made in the bankruptcy proceedings between the bank and Maple City ought to be binding against them.
The essence of the concept of privity is designed to catch Maple City or those standing in the shoes of Maple City. To view the McKeands and Malger as before the court in these four actions only on behalf of Maple City is to ignore the fact that they appear in two distinct capacities. It cannot be that the concept of privity is meant to operate to conflate their two roles or to take from the McKeands the right, as persons, to have a full and fair trial of their claim.
34As mentioned above, the interests of e3m in the Prior Action and Mr. Goldberg’s personal interests are distinct. To bind Mr. Goldberg to the finding of liability against e3m would effectively permit the Ridels to sidestep the principle of corporate separateness without having provided him an opportunity to defend himself.
35Given the above, I do not believe the doctrine of res judicata applies as submitted by the Ridels. Mr. Goldberg’s personal liability under the OBCA was never engaged in the Prior Action. As noted, he was not a party to the Prior Action and could not have been directly impacted by the judgment. Therefore, the findings made by Justice Pepall are not dispositive of Mr. Goldberg’s liability.
Is the Ridels’ action an abuse of process?
36In this same vein, however, I do not accept Mr. Goldberg’s submission that this action ought to be dismissed as an abuse of process. Although the Ridels could have added Mr. Goldberg as a defendant to Prior Action, for that matter e3m could have also done the same, I do not believe that it is an abuse of process to now pursue him in this action.
37It is not surprising that the Ridels did not add Mr. Goldberg to the Prior Action. The action was pursued against Mr. Cassin and e3m. In the usual way the judgment would have been satisfied and the matter would have come to an end. It was only when Mr. Cassin was unable to satisfy the full amount of the judgment and e3m went bankrupt that the judgment went unsatisfied. I do not find it offensive that the Ridels have now chosen this method to pursue Mr. Goldberg.
38The same rings true with respect to e3m.
39Even though there were other directors of e3m, there is no dispute that Mr. Goldberg was the directing mind and at the time of the Prior Action was the sole director and in charge of e3m’s defence. In these circumstances I cannot conclude that it is an abuse of process to allow the action to proceed against him at this time. It is hardly surprising that Mr. Goldberg did not authorize e3m to pursue a lawsuit against himself.
40Second, it is also not surprising that e3m did not pursue Mr. Goldberg for breaching his obligation to supervise since it would have run contrary to the defences the corporation was raising, at Mr. Goldberg’s direction, against the Ridels’ claim.
41I also do not accept Mr. Goldberg’s argument that there is a profound unfairness to him if this action was allowed to proceed. Notwithstanding that the Ridels have recovered funds from the estate of e3m and Mr. Cassin, there is still a shortfall. Furthermore, I do not accept Mr. Goldberg’s argument that it is manifestly unfair that he may be found entirely responsible as a result of one alleged breach. Obviously, the trial judge will have to consider how to treat the previous monies received from the Prior Action. I see no unfairness here.
42The regime set out in the BIA specifically allows for these types of actions to be brought and I see nothing with either the Ridels’ or Mr. Goldberg’s submissions that preclude this case from being heard on the merits with respect to the specific claims of e3m against Mr. Goldberg.
Is there a genuine issue requiring a trial?
43I pause momentarily to address the arguments made by each party regarding the merits of the underlying action. Rule 20.04(2)(a) provides that the court shall grant summary judgment if there is no genuine issue requiring a trial. In response, the respondent is obliged to put forth affidavit or other evidence demonstrating that there is a genuine issue requiring a trial that cannot be resolved using the enhanced fact finding powers set out in rule 20.04 (2.1) and (2.2). As stated in the case law, both parties are obliged to put their best foot forward and the court is likewise entitled to presume that all evidence needed to dispose of the issue is in front of them (see: Sweda Farms Ltd. v. Egg Farmers of Ontario, 2014 ONSC 1200, at paras. 26 and 33; Paramandham v. Holmes, 2015 ONSC 1903, at paras. 37 and 40). It is insufficient to simply rest on allegations or denials contained in the pleadings without advancing evidence demonstrating why these positions either dispose of the issue, or demand a trial.
44In this case, the moving party plaintiffs rely almost entirely on Justice Pepall’s reasons. Their position is that her findings are dispositive of Mr. Goldberg’s liability under the OBCA. As I have found, this is insufficient to dispose of the issue.
45The responding defendants, on the other hand, have pointed to corporate by-laws and provisions of the OBCA which they claim either absolve Mr. Goldberg of liability or indemnify him. The Ridels, in reply, submit that these defences are not available given the factual findings of Justice Pepall.
46I agree with the plaintiffs that simply pointing to potential defenses is insufficient to demonstrate that there is a genuine issue requiring a trial. In the transcript of Mr. Goldberg’s examination, when asked what more he could have done to defend himself that was already done to defend e3m, the question was refused. In my view, this is not an example of a party ‘putting their best foot forward.’ As mentioned by Sharpe J.A. in Transamerica Life Insurance Co. of Canada v. Canada Life Assurance Co. (1996), 28 O.R. (3d) 423 (Gen. Div.), the defendant is not “entitled to sit back and rely on the possibility that more favourable facts may develop at trial.”
47The court is therefore left in a situation where neither party has effectively advanced evidence sufficient to dispose of the action. Without the decision of Justice Pepall, the plaintiffs have no evidence disposing of Mr. Goldberg’s liability under the OBCA. Mr. Goldberg has likewise provided little evidence to the contrary demonstrating why he is entitled to rely on the particular provisions cited in his statement of defence. Mr. Goldberg has, however, raised the issue of the corporate by-laws providing indemnity.
48In light of the above, it is not possible to determine the issue of Mr. Goldberg’s liability. It should be dealt with on a full record, in a contextualized fashion, which would include viva voce evidence. Further, at that time the issue of Mr. Goldberg’s alleged lack of production can be dealt with. It was simply not possible to properly do so at the hearing at the motion in any meaningful way.
49The Ridels’ claim for summary judgment is therefore dismissed as they have not proven that there is no genuine issue requiring a trial. Further, the action should not be dismissed as an abuse of process.
2. Mr. Goldberg’s Motion for Summary Judgment
50As mentioned, Mr. Goldberg brings a cross-motion seeking summary judgment on the basis that the Ridels’ action was commenced outside the two year limitation period provided for in the Limitations Act, 2002. In essence, Mr. Goldberg submits that all parties to the Prior Action knew, or ought to have known, all the required material facts necessary to commence a claim against Mr. Goldberg as early as July 2006, or alternatively on December 13, 2006 when the claim was commenced, or at the very latest when Justice Pepall released her decision on April 17, 2013.
51This action was commenced on October 25, 2016.
52The Ridels, on the other hand, submit that the action was commenced within the two year limitation period. They submit that the limitation period only began when the Court of Appeal released their decision upholding Justice Pepall on November 3, 2014. At no time before then could they or e3m have discovered that a proceeding would have been an appropriate method to remedy e3m’s damages.
The Legislative Framework
53In order to analyze the limitation period defence a review of Rule 20 and the applicable legislation is in order.
54As mentioned, Rule 20.04(2)(a) states that the court shall grant summary judgment if it is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence. In doing so, the court is entitled to assume that the parties have put forth all available evidence that is required to resolve the dispute. Furthermore, Rule 20.02(1) allows the court to draw an adverse inference from a party’s failure to deliver evidence while having personal knowledge of the contested facts.
55Insofar as the limitation period itself is concerned, s. 38 of the BIA allows a creditor to take over a proceeding in their own name, expense and risk. The Ridels have done so in this instance.
56It is not disputed that the two year limitation period contained in the Limitations Act, 2002, applies in this case.
57Section 5 of the Limitations Act, 2002 deals with the discovery of claims and provides, in part, as follows:
Discovery
5 (1) A claim is discovered on the earlier of,
(a) the day on which the person with the claim first knew,
(i) that the injury, loss or damage had occurred,
(ii) that the injury, loss or damage was caused by or contributed to by an act or omission,
(iii) that the act or omission was that of the person against whom the claim is made, and
(iv) that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it; and
(b) the day on which a reasonable person with the abilities and in the circumstances of the person with the claim first ought to have known of the matters referred to in clause (a). 2002, c. 24, Sched. B, s. 5 (1).
Presumption
(2) A person with a claim shall be presumed to have known of the matters referred to in clause (1) (a) on the day the act or omission on which the claim is based took place, unless the contrary is proved. 2002, c. 24, Sched. B, s. 5 (2).
58Of specific interest is s. 12(1) of the Limitations Act, 2002, which specifically deals with claims such as this one, where the Ridels are claiming under s. 38 of the BIA. Section 12(1) provides:
Successors
12 (1) For the purpose of clause 5 (1) (a), in the case of a proceeding commenced by a person claiming through a predecessor in right, title or interest, the person shall be deemed to have knowledge of the matters referred to in that clause on the earlier of the following:
The day the predecessor first knew or ought to have known of those matters.
The day the person claiming first knew or ought to have known of them. 2002, c. 24, Sched. B, s. 12 (1).
59Based on the wording of s. 12(1) I accept that the limitation period runs from the earlier of either: the date that the Ridels’ first knew or ought to have known of the material facts required to commence a claim against Mr. Goldberg or the date that e3m first knew or ought to have known.
60In addition, Mr. Goldberg submits that as a claim for contribution and indemnity, the Ridels’ current action (as advanced through e3m) is governed by s. 18 of the Limitations Act, 2002. As such, the date that e3m (the predecessor under s. 12 of the Limitations Act, 2002) is deemed to have discovered the claim against Mr. Goldberg is the date that the statement of claim was initially served on them in the Prior Action. Section 18 reads as follows:
Contribution and indemnity
18 (1) For the purposes of subsection 5 (2) and section 15, in the case of a claim by one alleged wrongdoer against another for contribution and indemnity, the day on which the first alleged wrongdoer was served with the claim in respect of which contribution and indemnity is sought shall be deemed to be the day the act or omission on which that alleged wrongdoer’s claim is based took place. 2002, c. 24, Sched. B, s. 18 (1).
Application
(2) Subsection (1) applies whether the right to contribution and indemnity arises in respect of a tort or otherwise. 2002, c. 24, Sched. B, s. 18 (2).
61This would start the limitation period for e3m’s claim against Mr. Goldberg at or around December 13, 2006 when the Statement of Claim was initially served on the corporation. e3m, via the Ridels, is then required to rebut this presumption by demonstrating that they did not discover the claim until a later date (see: Mega International Commercial Bank (Canada) v. Yung, 2018 ONCA 429, at paras. 72-74).
62As will be discussed below, in my view, it is immaterial as to which test I apply as both the Ridels and e3m are out of time. Regardless of the presumed start date, I find that the Ridels and e3m both discovered the claim more than two years before the current claim was commenced on October 25, 2014.
Analysis
When did the Ridels discover the matters contained in s. 5(1)(a)?
63Insofar as the Ridels are concerned, I believe it is reasonable to admit the reasons of Justice Pepall as evidence as to when they discovered the claim or whether a reasonable person ought to have done so as per s. 5 of the Limitations Act, 2002. It is worth repeating that the Ridels have elected not to offer any evidence as to when they discovered the matters contained in s. 5(1)(a) notwithstanding the obligation to put their best foot forward on this motion as well as the prior decision of the Court of Appeal that referred this matter back to this court on the express instruction that it ought to be determined on a complete evidentiary record (see: Ridel v. Goldberg, 2017 ONCA 739).
64Based on Justice Pepall’s reasons I accept Mr. Goldberg’s submission that the Ridels became aware of the facts forming the claim against Mr. Goldberg in July 2006.
65In this regard I specifically rely upon paragraphs 231, 252-254, 259, and 263 of Justice Pepall’s reasons which read as follows:
[231] The Plaintiffs take the position that it was only in July 2006 that they learned that the manner in which Mr. Cassin operated their accounts was improper. Until then, they did not know that Mr. Cassin had written inaccurate investment objectives on the NCAFS for their accounts, engaged in high risk trading and had managed the accounts contrary to IDA requirements, industry practices and standards and in breach of duties of care and the contracts themselves. Nor, they submit, could they have been aware of Mr. Goldberg’s failure to supervise. [Emphasis Added]
[252] The Defendants plead that the Plaintiffs’ claims are barred by reason of the Limitations Act R.S.O. 1990, c. L. 15 as the events occurred some six years prior to the issuance of the Statement of Claim on December 12, 2006, and by the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B because the claims are based on acts or omissions that took place after January 1, 2004. Furthermore, the issue of the capital gains tax claim was first raised in the Further Amended Amended Statement of Claim, amended August 18, 2009 and therefore is also clearly barred.
[253] The Defendants argue that all of the trading resulting in the Plaintiffs’ losses was done prior to December 2000. The NCAFs were all completed prior to December 2000. The capital gains claim arose before then as well. As such, all of the alleged negligence took place prior to December 2000. The claims cannot be rescued on the grounds of discoverability.
[254] The Plaintiffs submit that all of the limitation issues raised are governed by the Limitations Act, 2002. The Plaintiffs did not discover the existence of their claims until July 2006 when Mr. Sandler advised them of the improper handling of their accounts. As such, the action which was started on December 13, 2006, was well within the applicable limitation period prescribed in s. 4 of the Limitations Act, 2002.
[259] The Plaintiffs were required to start their action within two years of the day on which their claims against the Defendants were discovered. As stated by Epstein J.A. in dissent in Ferrara v. Lorenzetti, Wolfe Barristers and Solicitors, 2012 ONCA 851 at para. 33, subsection 5(1)(a) of the Act contains a subjective test.
[263] The Plaintiffs did not have the requisite knowledge contemplated by section 5(1)(a) until Mr. Sandler informed them of the improper handling of their accounts. [Emphasis Added]
66The Ridels submit that this was not a finding demonstrating that the Ridels were aware of Mr. Goldberg’s failure to supervise. I disagree. As can be seen from paragraph 231 of her reasons, Justice Pepall specifically deals with the issue of Mr. Goldberg’s failure to supervise Mr. Cassin. In any event, given that the Ridels have personal knowledge of the contested facts and opted to submit no evidence, I am content to draw an adverse inference. While it is true that the Ridels could not have brought an action on behalf of e3m against Mr. Goldberg until the company’s bankruptcy, Justice Pepall’s reasons demonstrate that they were well aware of the material facts required to commence a claim against Mr. Goldberg as early as July 2006. They have submitted no evidence to the contrary. On this basis, I find that the Ridels discovered the claim as of July 2006. The current claim is therefore well out of time.
When did e3m (the predecessor) discover the matters in s. 5(1)(a)?
67Alternatively, even if the limitation period did not begin to run in July 2006 I accept Mr. Goldberg’s submission that the limitation period for e3m’s claim began to run on or around December 13, 2006 when it was served with the Statement of Claim in the Prior Action. In the alternative I find that the very latest that e3m discovered or ought to have discovered the claim was when Justice Pepall released her reasons on April 3, 2013 and e3m received a legal opinion on the potential of an appeal shortly thereafter.
Position of the Parties
68In this case, Mr. Goldberg submits that the latest that e3m discovered or ought to have discovered the claim was when the trial judgment was released. In addition, they point to the fact that the Ridels, who now have access to and power, possession and control over all of e3m’s records have failed to present any evidence of when the corporation knew of their claim. They submit that an adverse inference should be drawn here as well.
69The Ridels, relying on s. 5(1)(a)(iv) of the Limitations Act, 2002, argue that e3m could not have discovered that a civil proceeding was an appropriate remedy prior to the release of the 2014 appeal decision. Had e3m’s appeal been successful, it would have effectively overturned Justice Pepall’s decision. The corporation would have therefore suffered no damage, and there would therefore be no claim against Mr. Goldberg. In the Ridels’ submission, it was not until the appeal court confirmed Justice Pepall’s decision that e3m could have known that a proceeding against Mr. Goldberg was an appropriate remedy.
70In my opinion, e3m’s limitation period began to run as soon as the statement of claim was served on it in the Prior Action. I also find that the Ridels have failed to rebut the presumption that e3m did not discover the claim until appeal decision was released. The claim is therefore out of time.
71First, I accept this action against Mr. Goldberg is a claim for contribution and indemnity that triggers the application of s. 18. The action only exists because of Justice Pepall’s judgment against e3m in the Prior Action. It is not significant that the current action has been brought independently (see: Canncord Capital Corp. v. Roscoe, 2013 ONCA 378, at paras. 11-13, 20, and 24 (“Cannacord”)).
72I therefore agree that the limitations period for e3m’s claim presumptively started on the date that they were served with the Statement of Claim in the Prior Action. As demonstrated by Justice Pepall’s reasons, it was apparent that Mr. Goldberg’s conduct formed part of the factual background of the Prior Action. The Statement of Claim, dated December 13, 2006 stated:
[35] The defendant, e3m, failed to supervise Cassin’s handling of the plaintiffs’ accounts and to ensure that trading in them was suitable for the plaintiffs and complied with the investment objectives stated in their NCAFs. e3m also failed in its supervisory responsibilities with respect to the obligations of Goldberg when he assumed responsibility for these accounts. These failings were breaches of e3m’s fiduciary duty to and contracts with the plaintiffs, were negligent and contrary to requirements under the Securities Act and IDA rules.
[36] The defendant, e3m, is vicariously liable for Cassin’s and Goldberg’s handling of these accounts. (Emphasis Added.)
73Had e3m intended to add Mr. Goldberg to the proceedings, then it was well aware of the required material facts. It ought to have been done this as part of the Prior Action or at least within two years of the service of the statement of claim. This is the intention behind s. 18.
74In the alternative, I find that the latest that e3m discovered the claim was when Justice Pepall released her decision and the time period shortly thereafter. An email sent to Mr. Goldberg on April 26, 2013 and carbon copied to other investors stated: “it is our view that there is no serious prospect of succeeding in an appeal.” This email was based on a legal opinion sought and obtained from a specialized appeal counsel. The opinion was summarized for e3m in a “Shareholder Update” dated April 29, 2013 which stated that Justice Pepall’s reasoning “was certainly sufficient to withstand challenge at the CA.”
75I therefore find that e3m was alerted to the matters contained in s. 5(1)(a) as soon as it was served with the statement of claim. If this is insufficient, I find that the trial decision and the legal opinion that they received shortly thereafter alerted them to the potential claim against Mr. Goldberg. I therefore find that e3m had discovered all the material facts required for a potential claim as early as 2006, and at the latest 2013. As such, I find that the Ridels (through e3m) have not rebutted the presumption that e3m only discovered the required material facts within 2 years of commencing their claim.
76I also accept Mr. Goldberg’s submission that the fact that an appeal was undertaken by e3m does not extend the limitation period until the time that the Court of Appeal released its decision. In Waterloo Region District School Board v. CRD Construction Ltd., 2010 ONCA 838, the court emphasized that all claims arising out of a single transaction ought to be tried and heard together. At para. 28, the court stated:
Section 18 also signals that a defendant who wishes to claim contribution and indemnity should bring the claim not after judgment in the main action, but as part of it. Although in theory a defendant could commence a new action for contribution and indemnity within two years of being served with a statement of claim, the more likely procedure is to bring a cross-claim or third-party proceeding in the main action. Even if a new action were commenced, one could envision that, for reasons of economy and efficiency, the actions would likely be joined and tried together.
77On this basis I do not accept that the limitation period for the Ridels’ claim (as advanced through e3m) was suspended pending the final outcome of the litigation in the Prior Action.
78I also do not accept that e3m (or the Ridels for that matter) may rely on s. 5(1)(a)(iv) in order to argue that they did not discover that a proceeding was an appropriate remedy until the outcome of the appeal. This issue was resolved by the recent Court of Appeal decision in Tapak v. Non-Marine Underwriters, Lloyd’s of London, 2018 ONCA 168 (“Tapak”). In Tapak, the Court of Appeal held that s. 5(1)(a)(iv) does not suspend the operation of the limitations period pending the outcome of litigation. At para. 13, the court stated:
13 The second [argument advanced by the appellant] is to submit that the appeal against the other defendants, if successful, might have eliminated their losses and thus the appellants did not know that this action was “an appropriate means” to seek the remedy its losses until the appeal was dismissed, relying on s. 5(1)(a)(iv) of the Limitations Act, 2002 and Presidential MSH Corp. v. Marr, Foster & Co. LLP (2017), 135 O.R. (3d) 321, 2017 ONCA 325 (Ont. C.A.). In our view, s. 5(1)(a)(iv) is not intended to be used to parse claims as between different defendants and thus permit one defendant to be pursued before turning to another defendant. Rather, it is intended to address the situation where there may be an avenue of relief outside of a court proceeding that a party can use to remedy their “injury, loss or damage” – see, for example, 407 ETR Concession Co. v. Day, 2016 ONCA 709, 133 O.R. (3d) 762 (Ont. C.A.). (Emphasis added.)
79This undercuts the argument put forth by the Ridels. In particular, I agree with Mr. Goldberg that s. 5(1)(a)(iv) does not permit a potential plaintiff to sit back and wait for the appeal process to exhaust itself before turning to another potential defendant and launching a subsequent proceeding. As mentioned, e3m was well aware of the matters described in s. 5(1)(a) as it relates to a potential claim against Mr. Goldberg when it was served with the statement of claim in or around December 2006 or at the latest when Justice Pepall’s trial decision was released and they received a legal opinion shortly thereafter.
80Notwithstanding the decision in Tapak, the Ridels rely upon a cluster of cases [3] that they say stand for the proposition that it is unnecessary to commence an action where there is a legally appropriate way to remedy the harm short of litigation. The difficulty with the Ridels’ submissions in this regard is that all of those cases are distinguishable and Tapak is not. As can be seen they deal with cases in which there is alternative dispute resolution available to the parties, or involve foreign judgments, or in Brown, a medical malpractice case where the physician tried to cure the harm done by way of further medical treatment. These cases are all very different from the case at bar. The court in Tapak specifically dealt with, and distinguished, the Presidential and 407 ETR cases upon which the Ridels rely.
81I pause momentarily, again, to address the argument that e3m would not have sued Mr. Goldberg because this would have been against its own interest of presenting a common front in the Prior Action as well as the fact that it would have amounted to Mr. Goldberg suing himself. While I accepted earlier that this was a reason to dismiss Mr. Goldberg’s argument that the current action is an abuse of process, I do not find that it is relevant to the limitations period issue. In this regard I adopt the reasons of the Court of Appeal in Cannacord, at paras. 35-37.
82In conclusion, I find that the limitation period began in July 2006 when the Ridels knew, or a reasonable person in their position ought to have known, of the matters set out in s. 5(1)(a).
83Alternatively, e3m, or a reasonable person with its abilities and the circumstances with the claim, ought to have known they had a cause of action at the very latest when Justice Pepall released her reasons on April 17, 2013 and the legal opinion delivered shortly thereafter. This action was not commenced against Mr. Goldberg until October 25, 2016. It is well outside the two year limitation period and ought to be dismissed.
84Furthermore, I accept, and the Ridels concede, that s. 38 of the BIA does not restart the running of the limitation period so that the Ridels can claim that the limitation period starts from the time they obtained the s. 38 order. This issue is specifically dealt with the by the Court of Appeal in Indcondo Building Corporation v. Sloan et al., 2010 ONCA 890.
Disposition
85For the reasons above the plaintiff’s motion for summary judgment is dismissed and the defendant’s motion for summary judgment is granted.
86If the parties cannot agree on costs they can provide me with written submissions not to exceed five pages, excluding the bill of cost.
87Mr. Goldberg shall provide his submissions within 21 days and the Ridels 14 days thereafter.
Mr. Justice T. McEwen
Released: July 6, 2018
COURT FILE NO.: CV-16-11576-00CL DATE: 20180706 ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
JEAN-MARC RIDEL, NADINE SUZANNE JOSEPHINE RIDEL, and MARC H. RIDEL Plaintiffs – and – ROBERT GOLDBERG Defendant
REASONS FOR DECISION Mr. Justice T. McEwen Released: July 6, 2018
1Justice Pepall released her decision on April 7, 2013: Ridel v. Cassin, 2013 ONSC 2279.
2Ridel v. Cassin, 2014 ONCA 763
3Brown v. Baum, 2016 ONCA 325; 407 ETR Concession Company Limited v. Day, 2016 ONCA 709; and Presidential MSH Corp. v. Marr Foster & Co. LLP, 2017 ONCA 325; Pentilla v. Western Life Assurance Company, 2017 ONSC 6733.