COURT FILE NO.: CV-15-539874
DATE: 20190801
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Peter Vignjevic, Dr. Peter M. Vignjevic Medicine Professional Corporation, John Bujan, Donna Aiken and Gayle Meehan
AND:
Scott Reeves, Reeves Financial Services Inc., Reeves Financial Advisors Ltd., Reeves Group Solutions Ltd., Reeves Portfolio Management Inc., Reeves Private Wealth Inc., Infinita Capital Management Corporation, and FundEx Investments Inc.
BEFORE: Mr. Justice Chalmers
COUNSEL: R. Promislow and E. Schiff for the Plaintiffs
D. DiPaolo, C. Sainsbury, and M. Doherty for the Defendant, FundEx Investments Inc.
M. Knapp for the Defendant, Jeffrey Davis
HEARD: May 1 and 2, 2019
ENDORSEMENT
overview
[1] The Plaintiffs bring this motion seeking the following relief:
(a) Default Judgment against their investment advisor, Scott Reeves (“Reeves”), and his companies Reeves Financial Services Inc., Reeves Financial Advisors Ltd., Reeves Group Solutions Ltd., Reeves Portfolio Management Inc., Reeves Private Wealth Inc. and Infinita Capital Management Corporation (“Reeves Corporate Defendants”);
(b) Summary Judgment against FundEx Investments Inc. (“FundEx”), on the basis that FundEx is vicariously liable for the acts of Reeves.
[2] With respect to the motion for Default Judgment, I am satisfied that based on the deemed admissions made by Reeves and the Reeves Corporate Defendants and the evidence filed in support of the motion, the Plaintiffs are entitled to Default Judgment as against Reeves and the Reeves Corporate Defendants, for the amounts claimed.
[3] The Plaintiffs take the position that Summary Judgment is appropriate to resolve all issues between the Plaintiffs and FundEx. The Plaintiffs argue that FundEx admits to the necessary evidence regarding Reeves’ broad authority as a FundEx agent, and that the evidence as to how Reeves used his authority to perpetrate the fraud is uncontested.
[4] FundEx argues that Summary Judgment is not appropriate because the claim raises factual issues that will turn on the credibility of the Plaintiffs with respect to the issues of vicarious liability and discoverability (the Limitations Act issue). FundEx also argues that Summary Judgment will not resolve all of the claims in the action and related actions and therefore would constitute partial Summary Judgment.
[5] For the reasons that follow, I am of the view that given the many disputed facts and credibility issues, I am unable to make the findings of fact necessary to reach a fair and just determination of the issues. I therefore dismiss the Plaintiffs’ motion for Summary Judgment.
BACKGROUND FACTS
[6] The facts in this case are not straightforward. The parties filed voluminous materials that included multiple affidavits, transcripts of Examinations for Discovery and Cross Examinations on the affidavits, and nine volumes of documents. The evidentiary record reveals multiple factual issues many of which involve issues of credibility.
The Parties
[7] The Plaintiffs, Dr. Peter Vignjevic, John Bujan, Donna Aiken and Gayle Meehan invested with FundEx through the agent Reeves. Dr. Vignjevic is the sole shareholder and director of Dr. Peter M. Vignjevic Medicine Professional Corporation (“Vignjevic Medicine”).
[8] Ms. Aiken and Ms. Meehan resolved their claims against FundEx. Accordingly, the Summary Judgment against FundEx is brought by Dr. Vignjevic, Vignjevic Medicine and Mr. Bujan.
[9] FundEx is licensed by the Mutual Fund Dealers Association (“MFDA”) to sell mutual funds and other financial products. FundEx provides mutual fund order processing and other administrative services to sponsored agents to sell financial products approved by FundEx.
[10] Reeves was registered with the MFDA as a representative with the applicable securities and self-regulatory authorities and was a sponsored agent with FundEx from January 2004 until the termination of his advisor agreement on May 9, 2014. On October 18, 2017, Reeves was convicted of criminal fraud based largely on the facts set out in this action. Reeves did not defend this action and was noted in default on October 6, 2016.
[11] The Defendant, Jeffrey Davis was the Regional Branch Manager of FundEx and was responsible for supervising Reeves. FundEx cross-claimed against Davis for contribution and indemnity. Davis is not a Respondent on the motion for Summary Judgment.
The Actions
[12] In addition to the claims advanced in the within action, the Plaintiffs brought additional claims related to the fraud committed by Reeves. The Plaintiffs brought an action against CIBC with respect to the CIBC principal protected notes (“PPNs”); Court File No.: CV-16-57907 (the “CIBC Action”). The Plaintiffs also brought a separate action against HSBC Bank of Canada (“HSBC”) with respect to the cheques and/or electronic transfers to purchase the fraudulent products sold by Reeves; Court File No.: CV-16-57932, (the “HSBC Action”).
[13] FundEx brought a separate action against HSBC for contribution and indemnity; Court File No.: CV-17-586160 (the “FundEx – HSBC Action”). HSBC brought a counterclaim in that action. FundEx also brought a separate action for contribution and indemnity against Ryan Dibbley, who as of 2012 was a branch manager and responsible for supervising Reeves, and Rudy Divic who was Dr. Vignevic’s accountant; Court File No.: CV-17-586141 (the “Divic and Dibbley Action”).
Reeves’ Authority as a FundEx Agent
[14] The relationship between Reeves and FundEx was initially governed by a written agreement known as an Associate Contract dated September 25, 2003. The Associate Contract was replaced by a Principal/Agent Agreement dated September 25, 2009. Reeves was an Approved Person pursuant to the MFDA, and his registration with the MFDA was sponsored through FundEx.
[15] Pursuant to his agreements with FundEx, Reeves was authorized to sell only FundEx approved products. He was prohibited from referring clients to third party products or service providers that were not approved by FundEx. The only outside activity Reeves was approved for by FundEx was the sale of insurance.
[16] FundEx concedes that Reeves was an agent of FundEx. As an agent for FundEx, Reeves was the sole point of contact with its customers. He was authorized to use the FundEx logo, letterhead, and business cards. He was authorized to sell FundEx approved products, to make recommendations regarding investment products and to explain to customers the FundEx forms including the order forms and portfolio summaries. He was required to comply with all policies and procedures of FundEx.
The “Other Investments”
[17] Dr. Vignjevic held various accounts at FundEx from in or about January 2004 to September 2014 in both his name and in the name of his professional corporation, Vignjevic Medicine. Mr. Bujan held various accounts with FundEx from March 2005 to September 2010. Reeves was the agent responsible for Dr. Vignjevic and Mr. Bujan’s accounts, and he provided advice to both Dr. Vignjevic and Mr. Bujan with respect to the purchase of investments.
[18] In or about January 2004, Reeves advised Dr. Vignjevic to purchase PPNs issued by CIBC. Reeves asked that Dr. Vignjevic pay for the notes by writing cheques directly to CIBC rather than to FundEx. The CIBC PPN was a fictitious product.
[19] In or about 2010, Reeves advised Dr. Vignjevic and Mr. Bujan to invest in a separately managed account (“SMA”) with Infinita Capital Management (“Infinita”). As in the case of the CIBC PPNs, Dr. Vignjevic was asked to make the cheques payable to Infinita and/or HSBC rather than FundEx. In addition to writing cheques to purchase the Infinita SMAs, Reeves advised Dr. Vignjevic to redeem holdings in the FundEx products to purchase the Infinita SMA. Infinita was a fictitious company.
[20] In 2012, Dr. Vignjevic was advised to transfer his Infinita holdings to an SMA with Adroit Investments/Canadian Western Bank (“Adroit”). Adroit was also a fictitious company.
[21] Dr. Vignjevic made over 200 separate transactions to purchase the CIBC PPNs, the SMAs with Infinita, and Adroit (the “Other Investments”).
[22] Throughout the period of their dealings with Reeves, Dr. Vignjevic and Mr. Bujan received portfolio statements from FundEx (the “FundEx Statements”). The FundEx Statements were sent annually until 2012 at which time the statements were sent quarterly. The FundEx Statements listed only the FundEx approved products, and did not include the Other Investments.
[23] In addition to the FundEx Statements, Dr. Vignjevic and Mr. Bujan also received portfolio statements that were prepared by Reeves (the “Reeves Statements”). The Reeves Statements used the FundEx logo. The Reeves Statements included both the FundEx investments and the Outside Investments.
Second Opinion
[24] In or around April 2012, Dr. Vignjevic wanted a second opinion with respect to his investment portfolio. He approached two investment advisors, one at Scotiabank and one at the Bank of Montreal (“BMO”).
[25] The advisor he met with at BMO was Tony D’Addario. Mr. D’Addario had questions about the Other Investments. He was not familiar with Infinita and could not find any information about the company on the internet or elsewhere. Mr. D’Addario suggested that Dr. Vignjevic request from Reeves the statements from CIBC and Infinita.
[26] Dr. Vignjevic sent an e-mail to Reeves on April 13, 2012 regarding the issues raised by Mr. D’Addario, and requested the statements from CIBC and Infinita. Dr. Vignjevic did not receive the statements from Reeves, or any further information regarding Infinita. By e-mail sent May 16, 2012, Reeves recommended moving the investments from Infinita to Adroit. Dr. Vignjevic agreed to transfer his investments from Infinita to Adroit.
Termination of Reeves’ Advisor Agreement
[27] In May 9, 2014 following a spot audit, FundEx terminated its Advisor Agreement with Reeves. On June 3, 2014, FundEx sent a letter to its customers advising that Reeves was no longer an authorized agent with FundEx. The letter attached a FundEx Statement. The FundEx Statement listed only FundEx approved products and did not include the Other Investments. FundEx asked that its customer review the statement and advise if they had engaged in any personal financial dealings with Reeves, or if Reeves offered any other external investments, such as guaranteed investment certificate products from other financial institutions. Dr. Vignjevic did not respond to the letter. He stated that he did not respond because he believed that all of his investments were supervised by FundEx.
[28] After being advised that Reeves was no longer associated with FundEx, Dr. Vignjevic continued to invest with Reeves. Dr. Vignjevic made an investment of $30,000 on June 6, 2014 into Adroit. Dr. Vignjevic knew when he purchased the Adroit product in June 2014 that Reeves was not associated with FundEx. Dr. Vignjevic is not advancing a claim against FundEx with respect to the investments made after Reeves was no longer an authorized agent of FundEx.
[29] Later in June 2014, Dr. Vignjevic and Mr. Bujan learned that Reeves had declared bankruptcy. They have taken the position that they discovered they had been defrauded by Reeves at that time.
THE ISSUES
[30] The following issues are relevant on this motion:
A. Are the Plaintiffs entitled to Default Judgment as against Reeves and the Reeves Corporate entities?
B. Are the Plaintiffs, Dr. Vignjevic, Vignjevic Medicine and Mr. Bujan entitled to Summary Judgment as against FundEx?
i) The Test for Summary Judgment;
ii) Can the issue of vicarious liability be determined on a motion for Summary Judgment?
iii) Can the issue of the limitation period be determined on a motion for Summary Judgment?
iv) Is this a Motion for Partial Summary Judgment?
ANALYSIS
A. Default Judgment Against Reeves and the Reeves Corporate Entities
[31] Reeves and the Reeves Corporate entities were properly served with the Statement of Claim. They did not deliver Statements of Defence and were noted in default. As a party in default, they are deemed to admit the truth of all allegations made in the Statement of Claim: R. 19.02(1)(a) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.
a) Liability
[32] At paragraph 33 of the Statement of Claim, the Plaintiffs claim that Reeves and the Reeves Corporate Defendants are jointly and severally liable to the Plaintiffs for fraud, fraudulent misrepresentation and fraudulent conversion. It is alleged that Reeves and/or the Reeves Corporate Defendants knowingly and deliberately converted the Plaintiffs’ investments for personal use, and deliberately tried to conceal the fraud. At paragraph 34, it is further alleged that the Plaintiffs did not receive the benefits of their purported investments and therefore suffered harm.
[33] The elements of civil fraud are as follows:
a) a false representation made by the defendant;
b) knowledge of the falsehood of the representation on the part of the defendant;
c) the false representation caused the plaintiff to act; and,
d) the plaintiff’s actions resulted in a loss: Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, at para. 87.
[34] Based on the deemed admissions made by Reeves and the Reeves Corporate Defendants, I find that the elements of civil fraud have been established.
[35] Reeves was a financial advisor to the Plaintiffs and therefore was in a fiduciary relationship: Hodgkinson v. Simms, 1994 CanLII 70 (SCC), [1994] 3 S.C.R. 377, at pp. 419-420. Based on the deemed admissions, I find that Reeves and the Reeves Corporate Defendants are liable to the Plaintiffs for breach of fiduciary duty.
b) Damages
[36] The Plaintiffs submitted the Affidavit of George Davies sworn October 2, 2018. Attached as an exhibit to that Affidavit is the Crown’s Forensic Accounting Report dated January 12, 2017, which was entered as an exhibit at Reeves’ criminal trial. The Report sets out the following losses:
Gayle Meehan - $279,000
Donna Aiken - $206,200
Dr. Vignjevic Medicine - $1,110,253.45
Dr. Vignjevic - $1,320,000
[37] Gayle Meehan filed an affidavit sworn October 3, 2018, in which she states that in addition to the amounts referenced in the Crown Forensic Accounting Report, she also paid $20,000 to Reeves on July 26, 2011. Reeves paid her $7,000 for a redemption she requested in March and April 2013 and as a result, her total damages are $292,000.
[38] Donna Aiken filed an affidavit sworn December 3, 2018, in which she states that in addition to the amounts referenced in the Crown Forensic Accounting Report she also paid $152,871.43 to Reeves between November 14, 2011 and January 22, 2013. As a result, her total damages are $359,071.43.
[39] Dr. Vignjevic filed an affidavit sworn October 3, 2018, in which he states that the amounts set out in the Crown Forensic Accounting Report did not include all of the moneys he and his personal company invested with Reeves. He retained Mike Savage of Ernst & Young to confirm the total amount of his loss.
[40] The Plaintiffs filed an affidavit of Mike Savage sworn September 27, 2018. Attached to his affidavit is his expert report dated September 10, 2018, in which he states that in addition to the amounts referenced in the Crown Forensic Accounting Report, Dr. Vignjevic also paid $390,000 in cheques and $20,000 in redemptions with respect to the Other Investments. Mr. Savage filed a supplementary affidavit sworn March 5, 2019. Attached to his affidavit is his supplementary report dated March 4, 2018, in which he states that in addition to the amounts identified in his report dated September 10, 2018, Dr. Vignjevic also paid $140,000 in cheques to Reeves.
[41] Dr. Vignjevic filed a supplementary affidavit sworn March 5, 2019, in which he states that with the additional amounts identified by Mr. Savage in his reports dated September 10, 2018 and March 4, 2018, the total scope of the fraud as against him and Vignjevic Medicine was $2,980,253.45.
[42] Mr. Bujan filed an affidavit sworn October 3, 2018, in which he confirmed that the total amount paid to Reeves was $48,456.32.
[43] I am satisfied that the Plaintiffs provided sufficient evidence to support the following damages:
Gayle Meehan - $292,000
Donna Aiken - $359,071.43
Dr. Vignjevic Medicine - $2,740,253.45
Dr. Vignjevic - $240,000
John Bujan - $48,456.32
[44] I therefore grant Default Judgment against Reeves and the Reeves Corporate Defendants in the amounts set out above.
[45] The Plaintiffs are seeking an award of compound pre-judgment and post-judgment interest, to reflect the lost profits that could have been earned from the investments. An award of compound interest is a discretionary remedy in equity and may be awarded if the breaches require “moral sanction” or where compound interest is consistent with expectation damages or is a necessary component of restitutionary damages: Boughner v. Greyhawk Equity Partners Limited Partnership (Millenium), 2013 ONSC 163, at para. 37.
[46] The amounts converted by Reeves were intended by the Plaintiffs to be used to purchase investments. If the amounts had not been converted by Reeves, the money would have been used to purchase legitimate investments and the Plaintiffs would have had the opportunity to earn interest on those investments. I am satisfied that, in the circumstances of this case, an award of compound pre-judgment and post-judgment interest is consistent with expectation damages. In addition, the conduct of Reeves requires a moral sanction. As a result, I award compound pre-judgment and post-judgment interest as against Reeves and the Reeves Corporate Defendants.
B. Summary Judgment Against FundEx
i) Test For Summary Judgment
[47] A court may grant Summary Judgment if satisfied, on the written record that there is no genuine issue requiring a trial: R. 20.04 of the Rules of Civil Procedure.
[48] A trial will not be required if the Summary Judgment process:
allows the judge to make the necessary findings of facts, including any necessary findings of credibility;
allows the judge to apply the law to those facts; and,
is a proportionate, more expeditious and less expensive means to achieve a just result: Hryniak v. Mauldin, at para. 49.
[49] In Hryniak, the court set out a two-part test for summary judgment. The first step is that the motion judge must determine whether there is a genuine issue requiring a trial based on the evidence contained in the motion record. There will be no genuine issue requiring a trial where the evidentiary record provides the judge with the evidence necessary to reach a fair and just determination, in a process that is timely, proportionate and affordable: Hryniak, at para. 24.
[50] The second step is activated when the judge finds that there is a genuine issue requiring a trial. The judge must then determine whether the issues can be decided using the powers set out in Rules 20.04(2.1) and (2.2) of the Rules of Civil Procedure. These powers may be used if they will lead to a fair and just result. The additional powers are not to be used if they do not serve the goals of timeliness, affordability and proportionality, in light of the litigation as a whole: Hryniak, at para. 66.
[51] The decision to use the additional fact-finding powers is within the discretion of the judge. The question of whether it is in the interest of justice to use the expanded fact-finding powers depends on the nature and complexity of the litigation, a comparison of the evidence that will be available at trial and on the motion, the proportional procedure considering the nature of the issues, as well as the size, complexity and cost of the dispute along with other contextual factors: Hryniak, at para. 68 and 82.
[52] In matters in which credibility is an issue, Summary Judgment may not be the more proportionate, expeditious or less expensive means to achieve a just result.
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 motions 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 all: Baywood Homes Partnership v. Haditaghi, 2014 ONCA 450, 120 O.R. (3d) 438, at para. 44.
[53] The Court of Appeal has provided further direction with respect to the use of the Summary Judgement procedure.
With respect, the cultural shift referenced in Hryniak is not as dramatic or as radical as the motion judge would have it. The shift recommended by Hryniak was away from the very restrictive use of summary judgment, that had developed, to a more expansive application of the summary judgment procedure. However, nothing in Hryniak detracts from the overriding principle that summary judgment is only appropriate where it leads to, “a fair process and just adjudication”: Hryniak at para. 33. Certainly there is nothing in Hryniak that suggests that trials are now to be viewed as the resolution option of last resort. Put simply, summary judgment remains the exception, not the rule: Mason v. Perras Mongenais, 2018 ONCA 978, at para. 44.
ii) Vicarious Liability of FundEx
[54] In Bazley v. Curry, 1999 CanLII 692 (SCC), [1999] 2 S.C.R. 534, the Supreme Court of Canada set out the principles to be considered in determining whether an employer is vicariously liable for an employee’s unauthorized intentional wrong.
[41] (1) They should openly confront the question of whether liability should lie against the employer, rather than obscuring the decision beneath the semantic discussions of “scope of employment” and “mode of conduct.”
(2) The fundamental question is whether the wrongful act is sufficiently related to conduct authorized by the employer to justify the imposition of vicarious liability. Vicarious liability is generally appropriate where there is a significant connection, between the creation or enhancement of a risk and the wrong that accrues therefrom, even if unrelated to the employer’s desires. Where this is so, vicarious liability will serve the policy considerations of provision of an adequate and just remedy and deterrence. Incidental connections to the employment enterprise, like time and place (without more), will not suffice. Once engaged in a particular business, it is fair that an employer be made to pay the generally foreseeable costs of that business. In contrast, to impose liability for costs unrelated to the risk would effectively make the employer an involuntary insurer.
(3) In determining the sufficiency of the connection between the employer’s creation or enhancement of the risk and the wrong complained of, subsidiary factors may be considered. These factors may vary with the nature of the case. When related to intentional torts, the relevant factors may include, but are not limited to, the following:
(a) the opportunity that the enterprise afforded the employee to abuse his or her power;
(b) the extent to which the wrongful act may have furthered the employee’s aims (and hence be more likely to have been committed by the employee);
(c) the extent to which the wrongful act was related to friction, confrontation or intimacy inherent in the employer’s enterprise;
(d) the extent of power conferred on the employee in relation to the victim;
(e) the vulnerability of potential victims to wrongful exercise of the employee’s power.
[55] In Bank Leu AG v. Gaming Lottery Corp. (2003), 2003 CanLII 28360 (ON CA), 231 D.L.R. (4th) 251 (Ont. C.A.) the Ontario Court Appeal considered the issue of the vicarious liability of an employer for the intentional tort of its employee. The Court of Appeal summarized the law of vicarious liability as follows:
[77] In determining whether an employer is vicariously liable for an employee’s intentional tort, the analysis proceeds in two steps. The first step is to determine if existing authorities are decisive. If so, the analysis stops there. If not, the Court then proceeds to determine whether vicarious liability should be imposed in light of a broader policy analysis based on whether the employer’s enterprise created or significantly enhanced the risk of harm that occurred. [citations omitted] There must be a strong connection between the employer’s enterprise and the risk of the harm that occurred, sufficient to justify imposing employer liability. [citation omitted] …
[79] Traditionally, an employer is liable for employees’ unauthorized acts only if they are so connected with authorized acts that they might be regarded as modes, although improper modes, of doing them. The employer is not responsible if the wrongful act of an employee is not so connected with that authorized by or within the scope of employment, as to be a mode of carrying out the employment. If the act can be viewed as an independent act of the employee, the employer will not be responsible. [citation omitted]
[80] Where the plaintiff deals with the employee in a personal capacity or enters into contracts with the employee in a personal capacity, the employer is not vicariously liable. [citation omitted]
[56] More recently, in Straus Estate v. Decaire, 2011 ONSC 1157, 84 C.C.L.T. (3d) 141, affirmed, 2012 ONCA 918, 300 O.A.C. 171, the Ontario Superior Court described the “modern approach” to vicarious liability as follows:
[41] The Supreme Court of Canada revisited the test for vicarious liability for tortious acts in a series of cases decided in the late 90s and early 2000s. These decisions established that vicarious liability must be evaluated in light of the underlying policy rationales of fairness and deterrence. The overarching assessment remained essentially the same, namely, a plaintiff had the onus of demonstrating that (1) the relationship between the wrongdoer and the employer was sufficiently close to warrant the imposition of vicarious liability; and (2) a nexus existed between the wrongful act and the risk created by the employer. …
[56] It bears repeating that the modern approach to the analysis of vicarious liability requires the court to consider these policy considerations in a search for the total relationship of the parties.
[57] As the cases set out above demonstrate, the determination as to whether the employer is vicariously liable for the wrongful acts of an employee requires a factual analysis into a number of issues, including the relationship between the wrongdoer and the employer, the conduct authorized by the employer, whether the wrongful act is sufficiently related to the authorized conduct, whether the wrongful act was an independent act of the employee, and whether the plaintiff was dealing with the employee in the employee’s personal capacity.
Plaintiffs’ Position
[58] It is the position of the Plaintiffs that the issue of vicarious liability is “well suited” to a motion for Summary Judgment. The Plaintiffs argue that based on the written record, there is evidence of a “straight-line connection” between the scope of Reeves’ authority and the manner in which the fraud was carried out and concealed by Reeves. As a result, the wrongful acts committed by Reeves were sufficiently related to his scope of authority which created the opportunity for fraud.
[59] With respect to the scope of Reeves’ authority, the Plaintiffs point to the fact that the business structure of FundEx, which has the agent as the sole point of contact, entails significant opportunity for abuse. As an authorized agent for FundEx, it was reasonable for the Plaintiffs to believe that the products offered by Reeves (including the Other Investments) were FundEx approved products, and that FundEx supervised all of Reeves’ activities.
[60] The Plaintiffs argue that Reeves used FundEx’s forms and letterhead to convince the Plaintiffs to purchase the Other Investments. The Plaintiffs argue that based on the broad authority provided by FundEx to Reeves, they believed that all products sold by Reeves, including the Other Investments, were FundEx approved products.
[61] The Plaintiffs also argue that the imposition of vicarious liability on FundEx, in the circumstances of this case would advance the policy rationales of fairness and deterrence. It is argued that it is fair to impose liability on FundEx because the FundEx business structure allows an agent an opportunity to abuse his or her authority and commit a fraud on its customers. Deterrence is served because FundEx has the capacity to control the activity that led to the fraud.
FundEx’s Position
[62] FundEx argues that the evidence on the motion does not allow the court to reach a fair and just determination of the issues and as a result, this case is not appropriate for Summary Judgement. FundEx argues that the determination of the issues of scope of authority and whether the wrongful act was sufficiently connected to the scope of authority involve factual issues in dispute and matters of credibility.
[63] FundEx argues that based on the evidence, there is no connection between the scope of Reeves’ authority and the fraud. FundEx argues that the fraud involved the sale of the Other Investments, which were not FundEx approved products, and that the Plaintiffs knew they were dealing with Reeves in his personal capacity when they purchased the Other Investments. If there is a finding that the Plaintiffs knew they were dealing with Reeves in his personal capacity, the wrongful act would not be “sufficiently connected” to the scope of authority.
[64] Although the Plaintiffs deny that they knowingly dealt with Reeves in his personal capacity, FundEx takes the position that their evidence is not credible on this point. FundEx notes that the Plaintiffs received the FundEx Statements that did not include the Other Investments, and the Reeves Statements that included the Other Investments. FundEx argues that as a result, the Plaintiffs knew that the Other Investments were not associated with FundEx. FundEx also argues that the fact the Plaintiffs did not advise FundEx of the discrepancy between the Statements is consistent with the Plaintiffs knowingly dealing with Reeves in his personal capacity with respect to the Other Investments.
[65] With respect to Dr. Vignjevic, FundEx also relies on the MFDA interview in October 2014 in which Dr. Vignjevic stated that he knew Reeves was only authorized to sell mutual fund products, and that the Infinita and Adroit products were not mutual funds. He also confirmed to the MFDA investigators that he moved his investments from his FundEx account to Infinita.
[66] FundEx argues that there is a conflict in the evidence as to whether there was a significant connection between the scope of Reeves’ authority and his wrongful acts. If in fact the Plaintiffs knew the Other Investments were not FundEx approved products and that they were dealing directly with Reeves in his personal capacity, then there would be no connection between the fraud and the authority provided to Reeves. FundEx argues that the Plaintiffs’ credibility is a significant issue on this point.
Summary
[67] The issue of whether FundEx is vicariously liable for the wrongful acts of Reeves requires a factual analysis into the scope of Reeves’ authority and whether there is a sufficient connection between the fraud and the scope of authority. Although the Plaintiffs argue that the facts necessary to establish vicarious liability can be determined on the written record, I disagree.
[68] The Plaintiffs argue that they believed the Other Investments were FundEx approved products and that they were at all times dealing with Reeves in his capacity as a FundEx agent. FundEx argues that the Plaintiffs’ explanation that they believed they were purchasing FundEx approved products is not credible, in light of the evidence referred to above.
[69] I am of the view that given the many disputed facts and the credibility issues in this case, I am unable to make the necessary factual findings based on the evidence before me. I therefore conclude that the issue of vicarious liability is a genuine issue that requires a trial.
iii) Limitation Period Defence
[70] The Statement of Claim was issued on November 4, 2015. FundEx, in its Statement of Defence, alleged that the claim was issued beyond the limitation period and therefore is statute-barred. It is the position of the Plaintiffs that the fraud was not discovered until May-June 2014, and therefore based on the discoverability principle, the claim is not out of time.
[71] The discoverability principle is set out in s. 5(1) of the Limitations Act, 2002, S.O. 2002, c. 24:
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).
5(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.
[72] Discoverability is a subjective test and is based on the plaintiff’s actual knowledge. Discoverability is also a “modified objective” test because it looks to what a reasonable person with the same abilities and in the same circumstances of the plaintiff, ought to have known: Independence Plaza 1 Associates, L.L.C. v. Figliolini, 2017 ONCA 44, 136 O.R. (3d) 202, at para. 74. Determining when the plaintiff knew, or when a reasonable person in similar circumstances ought to have discovered a claim, is a fact-based exercise: Masales v. Cole, 2016 ONSC 763, at paras. 60 and 73.
[73] Discoverability cases tend to be contentious and complex and as a result they may not be suitable for summary judgment: Mega International Commercial Bank (Canada) v. Yung, 2018 ONCA 429, 425 D.L.R. (4th) 439, at paras. 80, 88-89. If on the record, the motions court judge is unable to make the factual findings with the certainty required by Hryniak, then a genuine issue regarding a trial may exist: 1511419 Ontario Inc. v. KPMG, 2019 ONSC 228, at para. 52.
[74] The procedure that is required on a summary judgment motion that involves an issue of discoverability has been described as follows:
[34] In order for a motion judge to grant summary judgement dismissing a plaintiff’s action or, as occurred in the present case, to grant a declaration about when the limitation period began to run, the judge is required [to] make certain necessary finds of fact. Those necessary findings of fact concern one presumption and two dates, as set out in ss 5(1)(a), 5(1)(b) and 5(2) of the Act. …
[35] Accordingly, a typical summary judgment motion involving the basic limitation period requires the judge to determine whether the record enables making a series of findings of fact, with the certainty required by Hryniak, on the following matters: (i) the date the plaintiff is presumed to know the matters listed in ss. 5(1)(a)(i)-(iv), - namely, the date on which the act or omission on which the claim is based occurred; (ii) the date of actual knowledge under s. 5(1)(a), in the event the evidence proves the contrary of the presumptive date; (iii) the s. 5(1)(b) objective knowledge date, based on the reasonable person with similar abilities and circumstances analysis; and (iv) finally, which of the actual knowledge and objective knowledge dates is earlier, for that will be [the] day on which the plaintiff discovered the claim for purposes of applying the basis limitation period of two years. …
[39] I would simply reiterate that granting summary judgment, dismissing an action as statute-barred, or declaring when a claim was discovered, requires making specific findings of fact. Assumptions about the matters in ss. 5(1) and (2) of the Act are not analytical substitutes for findings of fact. If the record does not enable the summary judgment motion judge to make those findings with the certainty required by Hryniak, then a genuine issue regarding a trial may exist: Nasr Hospitality Services Inc. v. Intact Insurance, 2018 ONCA 725, 142 O.R. (3d) 561, at paras. 34, 35 and 39.
Plaintiffs’ Position
[75] The Plaintiffs argue that there is no genuine issue regarding discoverability that requires a trial. Although the Plaintiffs concede that the issue of discoverability involves a factual analysis, it is the Plaintiffs’ position that they are able to discharge their onus through the uncontested evidence of Reeves’ concealment of his fraud.
[76] The Plaintiffs argue that the equitable doctrine of fraudulent concealment prevents a limitation period from operating as an element of fraud: Rajmohan v. Norman H. Solmon Family Trust, 2014 ONCA 352, 96 E.T.R. (3d) 1, at para. 3. Reeves was successful in concealing his fraud and as a result, he would be unable to rely on his success in this regard to defeat the Plaintiffs’ claims. The Plaintiffs argue that FundEx finds itself in the same position as its agent Reeves, and therefore FundEx is also unable rely on the limitation period.
[77] The Plaintiffs note that there is no need to speculate as to when a reasonable person in the circumstances of the Plaintiffs would have discovered the fraud. The Plaintiffs refer to the fact that FundEx was also unaware of the fraud even though it was supervising Reeves and had access to his books and records. FundEx did not discover the fraud until it conducted an audit in May 2014.
FundEx’s Position
[78] FundEx argues that to determine the issue of discoverability, the court must assess when the Plaintiffs knew or ought to have known they had a claim against FundEx in connection with the Outside Investments. FundEx argues that the issues of discoverability and concealment involve findings of credibility which are not appropriate for determination by Summary Judgment.
[79] FundEx argues that there are several key material facts in dispute with respect to when the Plaintiffs knew or when a reasonable person in the circumstances of the Plaintiffs ought to have known of the cause of action as against FundEx. It argues that the facts with respect to the discoverability issue can only be resolved by assessing credibility at a trial.
[80] In particular, FundEx argues that Dr. Vignjevic’s evidence that did not know of a claim against FundEx until June 2014, is not credible. FundEx relies on the fact that Dr. Vignjevic was advised by Mr. D’Addario in 2012 that there were issues with respect to the Other Investments. FundEx argues that the “red flags” raised by Mr. D’Addario were sufficient to cause the Plaintiffs, or a reasonable person in the same position of the Plaintiffs to “discover” the cause of action.
Summary
[81] The issue of discoverability requires a factual analysis into what the Plaintiffs knew about the Other Investments and when they knew or ought to have known they had a claim against FundEx. The determination of the issue involves disputed facts and credibility issues.
[82] I am unable to make the necessary factual findings based on the evidence before me. I therefore conclude that the issue of discoverability is a genuine issue that requires a trial.
iv) Partial Summary Judgment
[83] The Plaintiffs argue that this is not a motion for partial Summary Judgment, and that if judgment is granted in favour of the Plaintiffs, all claims would be disposed of, including the claims brought by FundEx for contribution and indemnity.
[84] FundEx argues that even if Summary Judgment was granted in favour of the Plaintiffs, its crossclaim against Davis in the within action and its actions against HSBC, Dibbley and Divic for contribution and indemnity would continue. As a result, Summary Judgment will not resolve all of the matters in issue and there is a risk of inconsistent findings.
[85] As set out above, I must be satisfied that the Summary Judgment process is fair and just in the context of the litigation as a whole: Baywood Homes Partnership v. Haditaghi, at para. 33. Summary judgment will not be considered appropriate if there is a risk of duplicative proceedings or inconsistent findings in the surviving elements of the case: Canadian Imperial Bank of Commerce v. Deloitte Touche, 2016 ONCA 922, at para. 36-38.
[86] In the circumstances of this case, I am of the view that the Plaintiffs’ motion will not resolve all of the issues relating to the fraud committed by Reeves. FundEx will continue its claims for contribution and indemnity and therefore there will be a multiplicity of proceedings and the risk of inconsistent findings. I find that Summary Judgment will not advance the litigation as a whole and is not the most expeditious and cost-effective means of achieving a just result.
CONCLUSIONS
[87] For the reasons set out above, I conclude as follows:
A. Default Judgment
Reeves and the Reeves Corporate Defendants did not defend the action and therefore are deemed to have admitted the allegations contained therein. Based on the deemed admissions, I am satisfied that the Plaintiffs have established the constituent elements of civil fraud and breach of fiduciary duty as against Reeves and the Reeves Corporate Defendants;
The Plaintiffs are entitled to Default Judgment as against Reeves and the Reeves Corporate Defendants in the following amounts:
(i) Vignjevic Medicine $2,740,253.45;
(ii) Peter Vignjevic $240,000;
(iii) Donna Aiken $359,071.43;
(iv) Gayle Meehan $292,000; and,
(v) John Bujan $48,456.32.
- Judgment against Reeves and the Reeves Corporate Defendants shall include compound pre-judgment and post-judgment interest on the amounts set out above.
B. Summary Judgment
The issue of vicarious liability involves a factual analysis into the scope of the employee’s authority and whether the wrongful act is sufficiently connected to the authorized conduct to justify the imposition of vicarious liability;
The court will be required to make findings of credibility to determine whether the Plaintiffs were dealing with Reeves in his personal capacity and whether they knew the “Other Investments” were not FundEx approved products.
The discoverability issue also involves a factual analysis of disputed facts, into when the Plaintiffs knew or, a reasonable person with the same abilities and in the same circumstances as the Plaintiffs, ought to have discovered the claim.
The court will be required to make findings of credibility with respect to when each Plaintiff knew or ought to have known they had a cause of action against FundEx;
I am unable to make the necessary factual findings based on the evidence before me. I therefore conclude that the issues of vicarious liability and discoverability are genuine issues that require a trial.
Even if Summary Judgment was granted in favour of the Plaintiffs, FundEx’s claims for contribution and indemnity against Davis, HSBC, Dibbley and Divic would continue. As a result, there is risk of inconsistent findings, and therefore Summary Judgment will not advance the litigation as a whole and is not the most expeditious and cost-effective means of achieving a just result.
[88] I conclude that the evidentiary record on this motion does not allow me to make the necessary findings of fact including findings of credibility to reach a fair and just determination. I find that vicarious liability and discoverability are genuine issues that require a trial.
[89] Given the many disputed facts and credibility issues involved in this case, I find that the use of the fact-finding powers set out in Rules 20.04(2.1) and (2.2) of the Rules of Civil Procedure will not lead to a fair and just result. In my view, the parties would be better served by having the action now proceed to trial in the normal course. I note that the case is ready for trial.
[90] The Supreme Court in Hryniak, at para. 78, directs that I consider whether there are any compelling reasons that I not remain seized of the matter. I have made no findings of fact on the evidence beyond concluding there are genuine issues for trial with respect to both the vicarious liability and discoverability issues. I decline to remain seized of the matter.
DISPOSITION
[91] I allow the Plaintiffs’ motion with respect to the relief sought in paragraph 1(a) of the Notice of Motion, and grant Default Judgment as against Reeves and the Reeves Corporate Defendants as follows:
(1) Judgment in the following amounts;
(a) Vignjevic Medicine $2,740,253.45;
(b) Dr. Vignjevic $240,000;
(c) Donna Aiken $359,071.43;
(d) Gayle Meehan $292,000; and,
(e) Mr. Bujan $48,456.32;
(2) Compound pre-judgment and post-judgment interest on the amounts set out above.
[92] The Plaintiffs are entitled to their costs of the action as against Reeves and the Reeves Corporate Defendants. The Plaintiffs may make written submissions as to their costs of the action against Reeves and the Reeves Corporate Defendants, of no more than 3 pages in length (excluding the bill of costs and case law) within 21 days of the date of this endorsement.
[93] I dismiss the Plaintiffs’ motion with respect to the relief sought in paragraphs 1(b), (c) and (d) of the Notice of Motion.
[94] FundEx is presumptively entitled to its costs of the motion. If the parties cannot agree on costs, FundEx may make written submissions of no more than 3 pages in length (excluding bills of costs, and case law) within 21 days of the date of this endorsement. The Plaintiffs may make reply submissions on the same basis within 21 days of receiving the FundEx submissions.
[95] I dismiss the FundEx cross motion, without costs.
Chalmers J.
Date: August 1, 2019