COURT FILE NO.: CV-19-618175-00CL

DATE: 20190924

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: TRADE CAPITAL FINANCE CORP., Plaintiff

AND:

PETER COOK, also known as Peter William Cook, MARC D'AOUST, also known as Jean Marc D'Aoust, THOMAS BARKER, also known as Thomas Richard Barker (personally and carrying on business as LC Exchange, Global Medical and Greenlink Canada Group), ROCKY RACCA, BRUNO DIDIOMEDE, ALAN KEERY, also known as Alan John Keery, CHRIS BENNETT JR., also known as Chris Bennett also known as Christopher Bennett (personally and carrying on business as CJR Consulting), TODD CADENHEAD, DAYAWANSA WICKRAMASINGHE, BONNY LOKUGE, VIRTUCALL INC., VIRTUCALL INTERNATIONAL LLC, DEBT RESOLVE-MORTGAGE FUNDING SOLUTIONS INC., THE CASH HOUSE INC., 1160376 ONTARIO LIMITED, operating as THE CASH HOUSE, 2242116 ONTARIO INC., carrying on business as Superior Medical Services Inc. and Superior Medical Services, CARLO DE MARIA, also known as Carlo Vince De Maria also known as Carlo Vincent De Maria also known as Carlo Vincenzo De Maria, MATTEO PENNACCHIO , FRANK ZITO, also known as Francesco Zito, SIMONE SLADKOWSKI, JOBEC TRADE FINANCE INC., 1461350 ONTARIO INC., 2299430 ONTARIO INC., WF CANADA LTD., JOBEC INVESTMENTS RT LTD., GREEN LINK CANADA INC., 2339989 ONTARIO INC., 2252364 ONTARIO INC., 2224754 ONTARIO LTD., 6980023 CANADA INC., operating as Living Benefits, MILLWALK ENTERPRISES INC. and OAK HILLS WATER DURHAM INC., JOSHUA COOK, ELIZABETH COOK, REBECCA COOK, MARK PINTUCCI , MARCO SANTONATO, also known as Marc Santonato, NEW ERA RESOLUTIONS & CONSULTING INC., Defendants

BEFORE: Penny J.

COUNSEL: Peter Cary, Christopher Lee and Dylan O’Leary for the Plaintiff

Milton Davis and Hailey Abramsky for the Defendants, 1160376 Ontario Limited, operating as THE CASH HOUSE and Carlo Demaria, also known as Carlo Vince De Maria also known as Carlo Vincent De Maria also known as Carlo Vincenzo De Maria

HEARD: August 15 and 16, 2019

ENDORSEMENT

Overview

[1] In this matter, two days of argument were devoted to two motions:

(1) The defendants, Carlo De Maria and 1160376 Ontario Limited (the Defendants) move for an order setting aside a Mareva injunction granted against them in 2015. This is essentially on the basis of want of prosecution in that, over four years after the injunction was granted, the proceeding has still not made it to the discovery phase.

(2) In response, the plaintiff has brought a motion for summary judgment or, in the alternative, for an order striking out the Defendants’ defence.

[2] The plaintiff argues, in response to the Defendants’ motion, that the delay in prosecution of the action is the result of the Defendants’ conduct, not the plaintiff’s. The Defendants argue, in response to the plaintiff’s motion, that it is the Defendants who should be granted summary judgment dismissing the action against them.

[3] The plaintiff’s 84 page statement of claim alleges a large, complex and highly sophisticated fraud involving over 35 defendants. The plaintiff, Trade Capital, is a factoring company. Factoring is a financial transaction in which the factoring company buys invoices owing to a creditor at a discount and then collects the full amount of the invoice from the debtor. When collection is made, the factoring company pays the balance to the creditor after deducting commission and other charges.

[4] The defendant Cook was the President of the plaintiff and a shareholder. At the outset of its incorporation in 2011, Trade Capital purchased a portfolio of invoices from one of Cook’s companies. Cook was responsible for bringing in all of the other business as well. Through a series of internal investigations in 2013, Trade Capital became aware that it had been the victim of a systematic fraud, perpetrated by Mr. Cook and others. Most of the invoices Trade Capital factored were fraudulent. Mr. Cook confessed to his role in the fraud during an interview with other Trade Capital principals. Mr. Cook was ultimately convicted of fraud and is serving a penitentiary sentence.

[5] The plaintiff alleges that the Defendants and the Cash House Inc., a money services business that was owned from 2011 to 2013 by Mr. De Maria, knowingly received the money defrauded from the plaintiff and “laundered” the stolen money.

[6] The Defendants say that if they received stolen money, which is not admitted, it was in the normal course of operations of the Cash House’s business. Cash House, they say, was a legitimate money services company offering payday loans, third party cheque cashing and foreign exchange services. The Defendants say that they, and Cash House, had no knowledge of any fraud and that they received no benefit other than the usual transaction fees for performing money-related services.

Procedural Background

[7] A brief explanation of the procedural history of these motions is warranted. This is a Brampton action. The Mareva injunction was issued in Brampton. Procedural motions have, until now, been heard there and the action is being case managed there by Mr. Justice Emery.

[8] The Commercial List became peripherally involved when a financial institution which did business with Mr. De Maria, Buduchnist Credit Union (BCU), took enforcement proceedings against Mr. De Maria and several of his companies and properties. A receiver was appointed to investigate, market and sell a number of properties owned, directly or indirectly, by Mr. De Maria. One of these properties was his matrimonial home.

[9] Trade Capital intervened in the receivership proceedings, alleging that due to the Mareva order, it had an interest in Mr. De Maria’s assets.

[10] At the return of one of a number of motions by the receiver, Mr. De Maria’s counsel argued that Mr. De Maria’s financial difficulties were the result of the Mareva order and that, since he had been living under the constraints of the injunction for four years and there had still been no examinations for discovery, Mr. De Maria had instructed his counsel in this action to move to set aside the injunction. Thus, Mr. De Maria’s counsel in the receivership proceeding argued that Mr. De Maria’s home ought not to be sold until he had the opportunity to try to lift the injunction. I granted the receiver’s application but stayed it for 60 days to permit Mr. De Maria to bring his motion to set aside the injunction. As things transpired, Mr. De Maria brought the motion but when these proceedings blossomed into a responding motion for summary judgment, it became impossible for the Brampton court to accommodate this matter within a time frame contemplated by the receivership proceedings. As a result, with the blessing of the Brampton court, the parties asked if the motions could be scheduled for hearing on the Commercial List. I agreed to hear the motions.

[11] However, as I said in a prior endorsement dealing with a motion to strike out portions of the plaintiff’s supporting affidavit, the hoped-for expedition and efficiency of proceeding in this manner has not been achieved. The BCU was obliged to enter into a form of standstill arrangement with Mr. De Maria, given the length of time it has taken to have these motions scheduled and heard. In any event, the motions finally proceeded before me on August 15 and 16, 2019.

The Motion to Set Aside the Mareva Injunction

[12] The Mareva order in issue was granted by Mr. Justice Ricchetti on an ex parte basis on May 6, 2015. A motion to set aside the Mareva order was heard on a full record and subsequently dismissed by Ricchetti J. in an Endorsement of June 10, 2015. A further motion to vary the Mareva order was brought by the Defendants and The Cash House in December 2015. This too was dismissed by Ricchetti J. in an Endorsement of December 11, 2015. No appeals were taken from these decisions.

[13] The parties agree that the test on a motion to vacate a Mareva order is set out in the case of Jack Digital Productions Inc. v. Comex Foreign Exchange Inc., [2007] O.J. No. 3994 (Ont. S.C.J.), where the Court considered several factors including:

(a) whether there has been inordinate delay in advancing the claim;

(b) harm to the defendant;

(c) whether the present facts are substantially different from the facts upon which the original order was given; and

(d) the balance of convenience.

[14] A plaintiff who obtains a Mareva order is required to advance the case expeditiously to trial. As Justice Sharpe wrote in Injunctions and Specific Performance (Toronto: Thomson Reuter, 2017) at para. 2.940:

It has been said that a plaintiff who obtains a Mareva order is obliged to proceed as rapidly as possible with the action so that, if the defendant does succeed, the disadvantage will be minimized.

[15] Justice Himel also wrote in Jack Digital, however, that a motion to reopen, vary or dissolve a Mareva order is itself a request for extraordinary relief, the burden of proof of which is on the moving party.

[16] The Defendants argue that:

(a) there has been an inordinate delay in the prosecution of this action. The injunction was granted over four years ago and the plaintiff has still not even conducted discoveries;

(b) the Mareva order has had a “terrible effect” on the Defendants. It has brought an end to the Cash House business and to all of Mr. De Maria’s other (mostly real estate development) enterprises. It has resulted in the loss of several properties through the BCU receivership, including the De Maria family cottage, and threatens to bring about the loss of the De Maria matrimonial home;

(c) the facts are substantially different now, principally due to the 2019 forensic report of Froese Forensic Partners Ltd. In this report, FFP concludes, among other things, that:

(i) Cash House performed cheque cashing services for Trade Capital customers for a fee in the range of 2.5 to 3%;

(ii) Trade Capital customers were a small proportion of the Cash House business. The other customers of the Cash House were other money services businesses registered with FINTRAC or Western Union agents;

(iii) any loan receivables Cash House had with Trade Capital customers were the result of replacement NSF cheques;

(iv) the only cash retained by Cash House from specific transactions identified by Trade Capital as allegedly “fraudulent” was for cheque cashing fees of approximately 2.5% to 3% or for replacement NSF cheques. There is no evidence that Cash House or the Defendants received any other benefit from processing the allegedly stolen funds or that the Defendants or Cash House had reason to know any of the funds being handled were the result of a fraud perpetrated upon Trade Capital; and

(d) given all of the above, the balance of convenience favours setting aside the Mareva order on the basis that the harm suffered by the defendants if the Mareva order continues will be greater than the harm suffered by the plaintiffs if it does not.

Analysis

(a) Delay

[17] While it is true that over four years has gone by since the Mareva order was made, and limited progress in the action has been achieved, it is important to inquire into the reasons for this delay.

[18] A central issue in the claims against the Defendants and Cash House turns on what transactions took place between Trade Capital’s “customers” and Cash House and what became of those funds. There were four principal vehicles through which the fraud against Trade Capital was perpetrated:

Virtucall up to $770,000

Superior Medical Services up to $350,000

Greenlink up to $375,000

2329989 Ontario up to $245,000

Trade Capital obtained bank records for these entities through a Norwich order, from which Trade Capital was able to determine that about $1.5 million of this money was paid to Cash House and 116. Another $2.7 million was paid to Cash House by Virtucall but, due to the co-mingling of funds, it could not be determined whether these funds came from Trade Capital. In all, Trade Capital alleges it was defrauded of about CDN$5 million and USD$1.5 million.

[19] In the June 2015 motions before Ricchetti J. to set aside the Mareva order, a central focus was on the ownership and financial records of Cash House. Mr. De Maria maintained that he had sold the Cash House to Osman Khan and 2454904 Ontario Inc. (245) in 2015 (before the Mareva order was made) and that Cash House’s property (including its documents) was no longer under his direct or indirect control. The issue of the validity of that sale was front and centre during the motions. Ricchetti J. held that the sale of Cash House to Mr. Khan “had all the indicia of a fake transaction.”

[20] Trade Capital moved against Cash House and Mr. Khan for their refusal to produce Cash House financial records and for alleged breaches of the Mareva order by transferring frozen assets. Ultimately, a contempt motion was heard by MacKenzie J. Mr. Justice MacKenzie made findings of contempt and further disclosure orders against Mr. Khan and his company, 245, in respect of the Cash House records. Mr. Khan was given the opportunity to purge his contempt. He did not do so and was ultimately sentenced to 90 days in jail. The Cash House defence was struck out.

[21] Further, and more importantly in the present context, MacKenzie J. found that Mr. Khan and Cash House had 1,000 boxes of Cash House financial records. Mr. Khan was ordered to produce those documents. While an offer was made to the plaintiff’s counsel to come and look at the thousand boxes, MacKenzie J. found that this “dump truck” approach did not satisfy the Court-ordered production obligation.

[22] Mr. Khan’s appeal from these findings was dismissed by the Court of Appeal for Ontario with reasons on April 4, 2017. He sought leave to appeal to the Supreme Court of Canada which was dismissed in December 2017. I was advised that the plaintiff was about to turn its attention to the documentary and oral discovery of Mr. De Maria and 116 when the BCU receivership proceedings were instituted, leading, ultimately, to these motions.

[23] I would add that Ricchetti J. made findings on more than one occasion in the context of motions to vary or set aside the Mareva order, that Mr. De Maria’s documentary production and disclosure of his assets were seriously deficient.

[24] Additional relevant evidence has emerged more recently. I will focus on the two areas of greatest relevance to the Defendants’ motion to set aside the Mareva injunction. These are:

(1) evidence that access to Cash House documents was made available by Mr. De Maria to Mr. Froese of FFP in 2016; and

(2) evidence of post-Mareva-order encumbering of assets and transfers of funds in BCU accounts of corporations owned or controlled by Mr. De Maria; most particularly, between 2015 and 2018, involving transfers of Cash House funds to 245 (Mr. Khan’s company) and then in and out of an account of Vicar Homes Ltd., a corporation owned and controlled by Mr. De Maria.

Access to Cash House Financial Records

[25] As noted above, Mr. De Maria himself has already been found to have provided deficient affidavits of documents. He has produced no Cash House documents on the basis that he sold the Cash House to Mr. Khan – a deal found by Ricchetti J. to have all the indicia of a “fake transaction.” Mr. Khan breached court orders by refusing to produce Cash House documents and, among other things, went to jail on account of that breach. Yet, in 2016, Mr. De Maria was, through Grace Barbosa, a former employee at the Cash House, able to provide Mr. Froese, the expert forensic accountant retained by the Defendants, with access to electronic QuickBooks and MoneyMate records for Cash House as well as selected emails and documents. Mr. Froese testified that he was offered access to some “200 boxes” of Cash House records. It was on the basis of his access to at least some of these records that Mr. Froese was able to formulate his opinion that the receipt of Trade Capital funds by the Cash House was, from its perspective at least, entirely legitimate.

Encumbering Assets and Transferring Funds

[26] The evidence discloses, on at least a prima facie basis, that:

(a) in early 2016, 2321197 Ontario Inc. (1197) (a company owned directly or indirectly by Mr. De Maria) borrowed $2.2 million from BCU against a property it owned called Elm Grove. Mr. De Maria is the sole officer and director of 197;

(b) a BCU loan balance on a property called the Puccini property also increased by over 1.5 million after the Mareva order was served. This property is owned by 2321198 Ontario Inc. (1198). Mr. De Maria is the sole officer and director of 198. Mr. De Maria had signing authority on this account;

(c) another BCU loan balance on a property called the Woodland Property increased by over $1.2 million after the Mareva order. This was a loan account of Vicar Homes Ltd. Mr. De Maria is the sole officer and director of Vicar. Mr. DeMaria swore in May 2015 that he owned Vicar. Mr. De Maria has signing authority on the Vicar BCU account; and

(d) Vicar account statements produced by BCU in response to Trade Capital’s request to admit in the receivership proceedings show large sums of money flowing in and out of the Vicar account post-Mareva order. In particular, funds in excess of $9.5 million were transferred from Mr. Khan’s Cash House/245 account to Vicar between July 2015 and February 2016. Millions of dollars also appear to have been paid out of the Vicar account up to November 2018.

Conclusion

[27] This evidence, when put together with prior findings of the Superior Court in previous motions, satisfies me that Mr. De Maria retains sufficient power, possession or control over the Cash House and Cash House records, that he could cause Cash House records to be produced or made available when it suits his purpose to do so.

[28] The more recent evidence, including the receipt of substantial funds transferred by Mr. Khan to Mr. De Maria’s company, Vicar, supports, rather than detracts from Ricchetti J.’s conclusion that the Cash House transaction bears the indicia of a fake transaction. The provision of access to Cash House records to Mr. Froese at Mr. De Maria’s request makes it obvious that Mr. De Maria has access to these documents, if and when he wishes.

[29] In all the circumstances, I find the principal cause of delay in the prosecution of these proceedings has been Mr. De Maria’s persistent failure to cause the Cash House and other companies to make full production of documents. Thus, the bulk of any delay is the result of the Defendants’ conduct, not that of the plaintiff. This conclusion alone is a sufficient basis to deny the Defendant’s motion to set aside the Mareva order.

(b) Effect

[30] Mr. Maria has given evidence about the “terrible effect” of the Mareva order on his life and businesses. Even if I were to accept this at face value, it would remain only one of several factors to consider. There is, as discussed below, evidence that Mr. De Maria has in any event continued to have access to funds, apparently in breach of the Mareva order.

[31] In light of this evidence, the effect of the injunction on the Defendants is insufficient to overcome the other factors.

(c) Additional Evidence

[32] I have already mentioned some additional evidence in the context of dealing with the cause of delay.

[33] The Defendants rely heavily on the 2019 FFP Report, which provides the opinion that there was nothing untoward about the receipt of Trade Capital funds by Cash House from 2011 to 2013.

[34] I will return to this issue in the next section of this endorsement. For purposes of the motion to set aside the Mareva order, I will say only this. The conclusions of Mr. Froese in the FFP Report are stridently criticized in the affidavit of Mr. Carlucci, a forensic accountant at KPMG retained by the plaintiff. Although Mr. Carlucci has not prepared his own forensic report, this is because he maintains, among other things, that the evidentiary basis to do so is entirely lacking – for FFP as well as KPMG.

[35] As discussed below, the validity of the conclusions in the FFP Report is a hotly contested issue that will require the forensic machinery of a trial to resolve. For this reason, I am not satisfied that the FFP Report constitutes sufficient new evidence to warrant setting aside the Mareva order.

[36] In addition, there is evidence that the Mareva order has been breached by the encumbering of properties indirectly controlled by Mr. De Maria and the transfer of funds in and out of a BCU account of a company owned and controlled by Mr. De Maria.

[37] This is not a motion for contempt. The procedural apparatus of a contempt motion is, therefore, not in play. Nor is the burden of proof in this motion that required for a finding of contempt. It is sufficient, for present purposes, to conclude that there is at least prima facie evidence that the Defendants have breached the Mareva order. This too weighs heavily in support of denying the relief sought by the Defendants in their motion.

(e) Balance of Convenience

[38] In light of all the foregoing, it seems to me that the balance of convenience continues to weight strongly in favour of maintaining the Mareva order.

[39] For all these reasons, the Defendants’ motion to set aside the Mareva order is dismissed

The Motion for Summary Judgment

[40] To succeed on a motion for summary judgment, the moving party must establish that there is “no genuine issue requiring a trial.” The judge hearing the motion must be able to reach a fair and just determination on the merits from the record filed on the motion or, as discussed below, through the use of the “enhanced powers” provided under Rule 20 of the Rules of Civil Procedure, Hryniak v. Mauldin 2014 SCC 7.

[41] A conclusion that there is no genuine issue requiring a trial may be reached where the record on the motion:

(a) allows the judge to make the necessary findings of fact on a balance of probabilities;

(b) allows the judge to apply the law to the facts; and

(c) is a proportionate, more expeditious, less expensive means of achieving a just result.

The focus, therefore, is on a fair and just adjudication.

[42] When the record on a summary judgment motion allows the judge to find the necessary facts and finally resolve the dispute, proceeding to trial would generally not be proportionate, timely or cost-effective. By contrast, a process that does not give a judge confidence that he or she can make the necessary findings of fact and finally resolve the dispute can never be the proportionate way to resolve that dispute.

[43] I would add, to state the obvious, that the required level of certainty in the context of summary judgment is that required for a final determination on a balance of probabilities, not the threshold, for example, on an interlocutory motion.

[44] This motion presents the classic problem of a “trial in a box” (or, rather, in this case, five or six boxes). The 84-page statement of claim is lengthy and complex. There are over 35 defendants and many additional named and unnamed players in the alleged fraud. Among other things, the statement of claim alleges that:

(a) all of the defendants knowingly participated in, facilitated coordinated, organized and or benefited from the fraudulent scheme against Trade Capital, the full particulars of which are within the knowledge of the defendants;

(b) the participants in the fraudulence scheme, including the defendants, communicated with each other before, during and after the perpetration of the fraudulent scheme;

(c) in furtherance of the fraudulent scheme each of the defendants used accounts at financial institutions held by them and or an entity in which they had a direct or indirect interest to, among other things, receive and/or transfer the proceeds of the fraudulent scheme; and

(d) the participants in the fraudulent scheme, including the defendants, were recruited to participate in or assist with the fraudulent scheme through their social connections and family relationships.

[45] The affidavit of Darcy Thompson, filed on behalf of the plaintiff, is over 60 pages and, together with all the exhibits filed, fills three bankers’ boxes. Mr. Thompson, it is fair to say, has little personal knowledge of most aspects of the alleged fraud. His affidavit largely attaches documents and records of other proceedings and contains a good deal of hearsay (for example, out-of-court statements said to have been made to third parties by Mr. Cook) and, most of all, argument. The argumentative nature of the affidavit is almost entirely made up of the inferences Mr. Thompson feels should be drawn from certain facts. For example, in cross-examination, Mr. Thompson’s basis for his allegations against the Defendants was repeatedly stated to be “they got the money.” That said, the credibility of many of Mr. Thompson’s statements is also being challenged.

[46] Mr. DeMaria’s evidence is also subject to extensive credibility challenges. Almost all of what he says, the plaintiff argues, should not be believed.

[47] The evidence against the defendants is almost entirely circumstantial. This, of course, is not of itself a bar to a finding of liability, or even a finding of liability on a motion for summary judgment. The plaintiff is correct when it says most fraud cases involve circumstantial evidence because, by definition, fraud involves deceit and is usually not done out in the open. However, circumstantial evidence adds to the complexity of the analysis of the evidence because, unlike direct evidence, circumstantial evidence involves a logical gap between the proven fact and the fact sought to be proved. That logical gap must be filled by inference; that is, a further fact must be inferred on the basis that it logically and rationally follows from the fact proved. In the absence of a logical and rational connection, there is no permissible inference; there is only speculation.

[48] I make this point not to say inferences cannot be drawn on a motion for summary judgment – most certainly, they can. Rather, the point is that the assessment of the quality of the evidence, the degree it engages disputed issues of fact and credibility, and the extent to which the inferences sought to be drawn depend on a full appreciation of all of the evidence, becomes that much more important. In the end, in order to draw inferences in the context of a motion for summary judgment the judge must be satisfied it can be done fairly and justly on the paper record.

[49] Both sides have also filed evidence from two experts: (i) forensic accounting evidence going to the issue of whether the Cash House (or the Defendants) were parties to the fraud; and (ii) damages. As noted above, the FFP Report is subject to extensive criticism by KPMG as lacking sufficient documentary and analytical support. Similarly, the scope of the damage claims is the subject of huge controversy. Ernst & Young, retained by the plaintiff, concluded that the plaintiff’s loss is between $14.9 million and $16.2 million. Mr. Cohen of Cohen, Hamilton Steger & Co. (CHS), retained by the Defendants, concluded that Trade Capital’s total loss was between $5.9 million and $6.6 million. The largest contributor to the difference, as I understand it, is the “but for” question of what Trade Capital might have earned “but for” the fraud. That question is complicated in this case because, due to Mr. Cook’s involvement from the outset, Trade Capital never ran a business that was not based on factoring fraudulent invoices.

[50] The Court of Appeal for Ontario has repeatedly emphasized that while the motion for summary judgment is an important tool, it is not a tool to be applied in all, or even most, cases. There is no default to the summary judgment procedure; summary judgment is not the “new normal.”

[51] In Trotter v. Trotter 2014 ONCA 841 the Court wrote (at para 49) that “the fact that the new process of adjudication is well-intentioned and can be beneficial cannot impose an imperative on the court to use it in every case. There is a risk that, in an effort to dispose of the case, the evidence will not be properly analysed.” The principal goal must remain a fair process that results in a just adjudication of the dispute. The Court went on to say, at para 54, that:

It is not always a simple task to assess credibility on a written record. If it cannot be done, that should be a sign that oral evidence or a trial is required.

[52] In Baywood Homes Partnership v. Haditaghi, 2014 ONCA 450, 120 O.R. (3d) 438, Lauwers J.A. stated, at para 44:

Evidence by affidavit, prepared by a party’s legal counsel, which may include voluminous exhibits, can obscure the affiant’s authentic voice. This makes the motion judge’s task of assessing credibility and reliability especially difficult in a summary judgment and mini-trial context. Great care must be taken by the motion judge to ensure that decontextualized affidavit and transcript evidence does not become the means by which substantive unfairness enters, in a way that would not likely occur in a full trial where the trial judge sees and hears it all.

The evidence in this case was extensive and conflicting. The allegations were not bald and the motion could not be resolved on the basis that there was no genuine issue requiring trial on the face of the evidence alone. Rather, credibility assessments, a weighing of the evidence and possibly oral evidence were required.

And, in para 45, the Court went on to say that:

Judges are aware that the process of preparing summary judgment motion materials and cross-examinations, with or without a mini-trial, will not necessarily provide savings over an ordinary discovery and trial process, and might not “serve the goals of timeliness, affordability and proportionality” (Hryniak at para. 66). Lawyer time is expensive, whether it is spent in court or in lengthy and nuanced drafting sessions. I note that sometimes, as in this case, it will simply not be possible to salvage something dispositive from an expensive and time-consuming, but eventually abortive, summary judgment process. That is the risk, and is consequently the difficult nettle, that motion judges must be prepared to grasp, if the summary judgment process is to operate fairly.

[53] In Cook v. Joyce, 2017 ONCA 49 at para 92, the Court made the perhaps obvious point that “the more important credibility disputes are to determining key issues, the harder it will be to fairly adjudicate those issues solely on a paper record.”

[54] Having regard to these principles, I cannot help but feel, in trying to evaluate all this conflicting evidence and come to a decision, hamstrung by my inability to see the witnesses testify in their own words, not those drafted by their lawyers, to answer questions under oath in chief and in cross in the presence of the trier of fact and, importantly, asking my own questions of the witnesses (particularly the expert witnesses) to help clarify and understand the evidence.

[55] The evidence in this case is extensive and conflicting. The motion cannot be resolved on the basis that there is no genuine issue requiring trial on the face of the evidence alone. Rather, credibility assessments, a weighing of the evidence and oral evidence are required.

[56] I have, on the basis of these considerations, come to the conclusion that a paper record is insufficient to resolve the conflicting evidence, permissible inferences and complex forensic questions raised in this dispute. The difficulties raised by these questions in this case runs deep. I cannot see that the use of the “enhanced powers” available under Rule 20 would help. This is because the necessary deployment of a combination of these powers, applied to this case, would result in a procedure that would be indistinguishable from a traditional trial.

[57] Although the Defendants also ask for summary judgment, theirs is equally not a case for summary judgment. This is a case for a trial.

[58] For these reasons, I find that the threshold on a motion for summary judgment has not been met. The available record does not give me sufficient confidence that I can make the necessary findings of fact and finally resolve the dispute fairly and justly. The motion for summary judgment is, on this basis, dismissed.

[59] I am also concerned that Trade Capital’s motion is against these two Defendants only. The present motion is, by definition, therefore, a motion for partial summary judgment. If judgment against the Defendants were granted, the action would continue against other defendants.

[60] Karakatsanis J. touched on this problem in Hryniak. She observed, in the context of the “enhanced” powers under Rule 20, that it may not be in the interest of justice to use the new fact-finding power to grant summary judgment against a single defendant if the claims against the other parties will proceed to trial in any event. Granting partial summary judgment would run the risk of duplication of proceedings and inconsistent findings of fact.

[61] This was a problem also recognized in pre-Hryniak jurisprudence. In Corchis v. KPMG Peat Marwick Thorne, 2002 41811 (ON CA), [2002] O.J. No. 1437 (Ont. C.A.) the Court concluded that:

partial summary judgement ought only to be granted in the clearest of cases where the issue on which judgment is sought is clearly severable from the balance of the case. If this principle is not followed, there is a very real possibility of a trial result that is inconsistent with the result of the summary judgment motion on essentially the same claim.

[62] Post-Hryniak jurisprudence from the Court of Appeal analyzed this issue from the perspective of whether (i) there is a risk of duplicative or inconsistent findings at trial and whether (ii) granting partial summary judgment is advisable in the context of the litigation as a whole. In these cases, the Court of Appeal held that partial summary judgment was inadvisable in the circumstances, Baywood Homes Partnership v. Haditaghi, 2014 ONCA 450; Canadian Imperial Bank of Commerce v. Deloitte & Touche, 2016 ONCA 922.

[63] Partial summary judgment also raises further problems that are anathema to the stated objectives underlying Hryniak. These include overall delay, expense, judicial resources and the underlying, ever-present problem of the fact that, at trial the evidence is inevitably more expansive than the record on a motion, which can only serve to raise the risk of inconsistent findings, Butera v. Chown, Cairns LLP, 2017 ONCA 783.

[64] Here, it seems to me that each of these factors militates against the conclusion that partial summary judgment ought to be granted. This is not “the clearest of cases.” For these reasons as well, the motion for summary judgment is dismissed.

The Motion to Strike the De Maria Defence

[65] The remaining issue is Trade Capital’s alternative relief of striking out the Defendant’s statement of defence. This request is based on essentially two assertions:

(i) breach of the Mareva order; and

(ii) persistent refusal to produce documents and answer questions on cross-examination.

[66] Striking out a statement of defence is a severe remedy and ought not to be a remedy of first resort without at least providing the defaulting defendant with an opportunity to cure the default, Bell ExpressVu Ltd. Partnership v. Torroni, 2009 ONCA 85 at para 35.

[67] The plaintiff argues in this case there is no question of opportunity to cure the default because the Defendants have persistently and repeatedly refused to produce documents and answer questions on examination and have flouted the Mareva order by transferring millions of dollars through undisclosed BCU accounts.

[68] The cases cited by the plaintiff, however, are all in the context of imposing sanctions from findings of contempt or repeated breaches of court orders (see, for example, Vacca v. Banks 2005 CarswellOnt 146 at paras 20, 21 and 23 and iTrade Finance Inc. v. Webworx Inc. 2005 CarswellOnt 6366 at para 7).

[69] As noted above, this is not a motion for contempt. We are not dealing with sanctions on a finding of contempt. Significantly, although there now seems to be ample evidence that Mr. De Maria has access to Cash House records, no court order has ever been sought requiring Mr. De Maria to make those records available (as was done with respect to Mr. Khan). It seems to me that this remedy, at least, ought to be pursued before striking out a defence. Mr. Carey said repeatedly during oral submissions that ‘Mr. De Maria has never produced these documents and he never will.’ While the first part of that submission is correct, it is premature to make the second part of that submission, not having sought the order of the Court that Mr. De Maria produce the documents.

[70] The evidence of breach of the Mareva order came about as a result of a limited investigation of BCU accounts. It may well be that orders in the nature of Norwich orders made previously in respect of banking documents of the four Trade Capital “customers” could be made in respect of the Defendant’s accounts at BCU.

[71] On this less than complete record, however, I do not think the high threshold for striking out the statement of defence has been met. While the plaintiff may not be required to exhaust all possible other remedies first, further interlocutory orders ought to be sought specifically ordering production of documents or answering questions posed on examination. I am not prepared, on this record and the prevailing jurisprudence relating to this remedy, to strike out the Defendants statement of defence.

Conclusion

[72] In conclusion, the Defendants’ motion to set aside the Mareva order is dismissed. The plaintiff’s motion for summary judgement is dismissed. The plaintiff’s alternative motion to strike out the Defendants’ statement of defence is also dismissed.

Costs

[73] The parties filed bills of costs. Given divided success, I am inclined to order costs in the cause. However, anyone who wishes to argue for a different disposition may do so by filing a brief written submission not to exceed two typed, double-spaced pages, within seven days of the release of these Reasons. Anyone wishing to respond to such a request may do so by filing a responding submission, subject to the same page limit, within a further seven days.

Penny J.

Date: September 24, 2019