COURT FILE NO.: CV-16-559684
MOTION HEARD: 20200902
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: TTC Insurance Company Limited and Toronto Transit Commission, Plaintiffs
AND:
MVD Law Professional Corporation, Meleni Vasanthy David, Namartha Gobikrishna, John Does 1 to 10, Jane Does 1 to 10 and Suhanthan Logeswaran, Defendants
BEFORE: Master Jolley
COUNSEL: Stephen Sargent, Counsel for the Moving Party Plaintiffs
Bronwyn Martin, Counsel for the Responding Party Defendants MVD Law Professional Corporation, Meleni Vasanthy David and Namartha Gobikrishna
HEARD: 2 September 2020
REASONS FOR DECISION
[1] The plaintiffs seek production of additional documents from the defendant Meleni David that were either refused or are sought through a further and better affidavit of documents. The documents fall into two broad categories: law firm financial records and other business records. The plaintiffs’ request runs to four pages and multiple subcategories.
Alleged Fraud Allegations
[2] The plaintiffs claim that they have been defrauded by the defendant lawyer Meleni David and her firm, the defendant MVD Law Professional Corporation (“MVD Law Firm”). In their wide-ranging statement of claim, they allege that Ms. David directed the forgery of numerous invoices in accident benefits claims where the defendants represented the claimants. The plaintiffs paid the allegedly forged invoices and Ms. David and the other defendants then improperly and illegally retained some or all of those funds.
[3] In particular, they allege that the defendants submitted false information and forged and/or duplicated signatures with respect to caregiving, housekeeping and other service providers as part of the accident benefits documents submitted on behalf of their clients. At present there are thirteen files where it is alleged the defendants submitted fraudulent invoices/supporting documentation. Certain of the relevant paragraphs of the amended statement of claim are set out as follows:
The plaintiffs seek compensation and damages flowing from claims for statutory accident benefits pursuant to the SABS paid to thirteen individuals covered by policies of insurance issued by the Plaintiffs. David represented these Claimants while the MVD Law Firm fabricated and submitted the false invoices to the Plaintiffs for payment. The thirteen claims involved include claims for housekeeping (HK), caregiving (CG) and attendant care (AC) expenses.
As a result of the TTCICL audit and investigation, a pattern of conduct within MVD Law Firm as it applied to the submission of caregiver, housekeeping and other services expenses to the TTCICL became apparent. It appeared that some of the initial forms submitted by clients of MVD Law Firm contained authentic signatures and information. However, after the first few invoices and forms were sent in by MVD Law Firm, it became apparent that the forms and invoices submitted by MVD Law Firm contained copied and forged signatures as well as false information. The time frame that the unlawful conduct had occurred in was from 2005 to 2016.
As part of its investigation, the TTCICL reviewed various claimant statements to determine whether they received the services as represented on invoices of caregivers, housekeepers and other service providers submitted by the MVD Law Firm. It appears that most claimants have stated that they did not receive most of the services that MVD Law Firm represented to TTCICL that they received.
As part of its investigation, the TTCICL also contacted various caregivers, housekeepers and other service providers whose invoices had been submitted by MVD Law Firm to the TTCICL for payment. It was reported to the TTCICL by some caregivers, housekeepers and other service providers that they had not performed the services for various claimants that MVD Law Firm represented to the TTCICL that they performed. It was also reported to the TTCICL by some caregivers, housekeepers and other service providers that they had not submitted the invoices attributed to them by MVD Law Firm that were submitted by MVD Law Firm to the TTCICL.
As a result of the audit and investigation of TTCICL, the only reasonable inference is that the creation of insurance forms and caregiver, housekeeper and other service provider invoices with false information and forged or copied signatures was taking place within MVD Law Firm. As this unlawful conduct was taking place within MVD Law Firm and due to the nature and frequency of these occurrences, the Plaintiffs allege that David herself was aware of the unlawful conduct, participated in it, and/or she permitted, encouraged and benefitted from a culture of dishonest reporting by her clients as claimants to the TTCICL.
The Plaintiffs plead that the Defendants jointly and severely [sic] represented that:
(a) Service providers hired by the Claimants were providing services when such service providers had in fact been chosen by or assigned by the Defendants or affiliated with the Defendants financially or otherwise;
(b) Services were provided that had not in fact been provided; and
(c) The invoices presented for payment were prepared honestly and accurately when they were not.
- The Plaintiffs rely [sic] upon the representations made by the individual Defendants and by the corporate Defendant and suffered damages as a result, namely monies paid to the Defendants for fraudulent claims.
[4] The plaintiffs plead that they have paid out $654,553 on the thirteen claims in question. They seek repayment of those funds, as well as damages equal to the cost they incurred to investigate the fraudulent accident benefit claims. The amended statement of claim makes allegations of conspiracy, negligence, negligent misrepresentation, vicarious liability, breach of trust, breach of solicitors’ undertaking, knowing assistance/knowing receipt and unlawful interference with economic relations.
Law Firm Financial Records
[5] The plaintiffs argue that these documents are relevant both to liability (i.e. to prove the alleged fraud) and to damages. As to liability, the plaintiffs argue that the records are relevant to demonstrate (a) whether there was fraud or a negligent misrepresentation, (b) the extent Ms. David and the other individual defendants profited from the alleged scheme, (c) whether the individual defendants knew or ought to have known of the fraud and (d) whether the individual defendants were simply engaged in representing the MVD Law Firm clients in accordance with a legitimate retainer, as they plead. On the damages issue, they have provided an affidavit of a forensic and investigative accountant who states that he requires the documentation set out in Exhibit “N” to his affidavit in order to assess the plaintiffs’ damages.
(a) Documents to be Produced on Consent
[6] Ms. David has agreed to produce certain documents within this category. In particular, she has agreed and I so order her to produce the following:
(a) with reference to Exhibit “N”:
a. Paragraph 7 – Ms. David advised that she has disclosed the account information for the thirteen files that demonstrates what was disbursed to the claimants and what was kept by the firm as fees. If any of those records (interim billings and final billings for the thirteen claimants) are incomplete, she is ordered to produce a complete set;
b. Paragraph 8 – Ms. David’s counsel has represented that he has produced all the files that his client has given him. While this is undoubtedly so, this falls short of ensuring that she makes full documentary disclosure. Ms. David has agreed to and is ordered to produce the entire client files, electronic and otherwise.
c. Paragraph 9 – the defendants confirm that they have produced all the invoices in question. Defendants’ counsel also notes that the plaintiffs already have all the invoices as they are the bases for the payments complained of. The plaintiffs have also had the opportunity to review the invoices at the offices of defence counsel. There is no evidence to suggest anything has been omitted and no further order shall be made.
d. Paragraph 10 – the defendants confirm that the Disability Certificates and related forms for the thirteen claimants have been produced and the plaintiffs have also reviewed those documents at the offices of defence counsel. There is no evidence otherwise and no further order shall be made.
(b) with reference to the Refusals:
a. Refusal 282 – Ms. David has agreed and I so order her to provide copies of the front and back of all the cheques that MVD Law sent to the thirteen specific clients.
b. Refusal 305 – Ms. David has agreed and I so order her to separately produce the final Settlement Information Form for each of the thirteen files if not contained in the files to be produced as part of Exhibit “N”, paragraph 8 or Refusal 435, below.
c. Refusal 435 – Ms. David has agreed and I so order her to provide the client file notes, including any electronic notes for each of the thirteen files (see also related information on Exhibit “N”, paragraph 8 above).
(b) Disputed Subcategory 1 – Law Firm Banking Records
[7] The plaintiffs seek production of banking documents for the period 2005-2016 inclusive for each of Ms. David’s personal account at Toronto Dominion Bank, Ms. David’s general account at CIBC, Ms. David’s general account at Bank of Nova Scotia, Ms. David’s trust account at Bank of Nova Scotia and the firm’s general account at Toronto Dominion Bank. For each account, the plaintiffs’ request includes, but is not limited to, details of the authorized person on the account, unredacted bank statements, copies of all cancelled cheques (front and back), drafts and wire transfer confirmations, deposit slips and all supporting documentation.
[8] They argue the records will demonstrate how much money went to the claimants and how much the defendants kept and are therefore relevant to the quantum of the fraud and the claim for disgorgement, breach of fiduciary duty, constructive trust, unjust enrichment and punitive damages.
[9] The amended statement of claim confirms that the plaintiffs are seeking return of all the money they advanced pursuant to the allegedly fraudulent invoices, whether or not it was kept by the defendants or sent to the claimants. The plaintiffs argue that the amount retained by the firm is still relevant to liability and will assist in proving which individual defendants knew of the fraud or should have known, depending on the extent the firm profited.
[10] The plaintiffs rely on the evidence they already have to demonstrate that cheques have been deposited into these various bank accounts. They assert that the bank account information is the only means they have to challenge or corroborate the defendants’ assertion that all of the funds intended for the accident benefits claimants were properly directed to them.
[11] It seems to me that the crux of the matter is the legitimacy of the invoices and services rendered. If the services were legitimately rendered, whether or not the client signed the cheques over to the firm or whether the firm deposited the funds into the trust account or a different account will not advance the plaintiffs’ claim. If the services were not provided and the defendants prepared and presented false invoices to the plaintiffs for payment, that in itself would demonstrate the fraud, even if the firm delivered all the funds to the claimants or deposited all of the funds initially into the proper trust account.
[12] If the plaintiffs are of the view that they need to prove the amounts retained by the MVD Law Firm and the amounts paid out, they will have the correspondence and notes from each file and also the Settlement Information Form which reflects the disbursement account for each of the clients in question. The request for this scope of banking records is not proportionate, given these other available means to obtain the information.
[13] The request for these banking records is denied.
(c) Disputed Subcategory 2 – Law Firm Records
[14] The plaintiffs seek production of the following firm documents specific to the thirteen clients in question – the retainer agreement, interim billings and final billings, correspondence, invoices for all caregiving, housekeeping, medical assessments and other services provided to them and disability certificates and other related forms prepared by the firm. They also seek written authorization to contact the firm’s external auditors. As noted above, Ms. David has agreed to produce the majority of these documents.
[15] The plaintiffs argue that the retainer agreements are relevant to determine whether the firm had authority to endorse the claimants’ cheques, as the firm’s purported endorsement of clients’ signatures otherwise appears to support the claim of financial fraud. The plaintiffs also argue that the retainer will shed light on why the claimants would sign over entire cheques to the firm.
[16] If the services were legitimately rendered, it is difficult to see the relevance of the terms of the retainer agreement vis a vis the plaintiffs. If the services were not provided, the retainer agreement would be equally immaterial to the plaintiffs’ assertion that it is entitled to recovery of funds they paid under false pretences.
[17] The retainer agreements need not be produced. I note that it will not be open to the defendants to assert that the disbursement of funds (or lack thereof) was in accordance with the retainer agreements if they have not produced those agreements.
[18] The plaintiffs have requested an accounting of where the funds that have been paid out on the thirteen files went (Refusal 283). While the plaintiffs argue that evidence of the quantum retained by the MVD Law Firm will go to damages, they have confirmed they seek repayment of the entire amounts paid, regardless of whether some or all of the money was sent to the claimants. I accept that the extent of the defendants’ benefit may go to the punitive damages claim. If the plaintiffs mean by Refusal 283 that they are seeking the disbursement history, that information should be available in the files Ms. David has agreed to produce and in the Settlement Information Forms. If it is not available, she shall provide that accounting of the funds received from the plaintiffs for each of the thirteen files.
[19] The plaintiffs also seek production of the firm’s trust account records for 2005 to 2016 as well as the trust accounts from a random selection of files. This is overly broad, even considering the allegations made. To the extent the plaintiffs wish to demonstrate that the funds went (or didn’t go) into these various accounts, they can do so from the information on the backs of the cheques, which Ms. David is to produce, from the Settlement Information Forms and from the accounting referenced above.
[20] The request for written authorization to contact MVD Law Firm’s external accountants/auditors is overly broad and is denied.
Other Business Records
[21] The plaintiffs seek numerous documents relating to Meleni Homes, a real estate development business carried out by Ms. David as well as documents relating to any other businesses she has. The records include financial statements, articles of incorporation, corporate tax returns, all notices of assessment, all accounting records, bank, credit card, line of credit and investment statements, copies of all contracts entered into and documents supporting all year end adjustments. They also seek information about whether there were other business ventures, how and where firm profits were invested, etc.
[22] The plaintiffs plead that the defendants used the proceeds they wrongfully received from the plaintiffs to fund Ms. David’s various business ventures, into which they now wish to trace the funds.
[23] In support of their documentary request, the plaintiffs rely on their claim for an accounting of all assets, effects and property of the defendants, including details of all financial transactions, and a declaration that the properties are subject to a constructive trust in favour of the plaintiffs. In addition, they seek an equitable tracing of all funds that the defendants received from the plaintiffs.
[24] Ms. David argues, firstly, that the request is overly broad. I agree. First, if such an order were granted for these records, it would be difficult to reject a request for a listing of every purchase made by the defendants since 2005 on the theory that some of the plaintiffs’ money was used to purchase those items. Second, while tracing is sought and breach of fiduciary duty, conspiracy negligence, unlawful interference with economic relations, etc. are pleaded, the claim at heart, is for damages equal to the amount wrongly paid, as demonstrated in paragraphs 35 et seq of the amended statement of claim, set out above.
[25] Secondly, Ms. David argues in the alternative that the request is premature. I also agree.
[26] In Cohen v Zagdanski 2006 CanLII 32067, the plaintiff was the former wife of one of the defendants. She alleged breach of his fiduciary duty to her, claimed conspiracy against him and the beneficiaries of his estate freeze and a constructive trust over all the defendants’ assets. In limiting the production of documents, Lane, J. held that:
“further exploration of transaction relating to these assets should be quite limited until Johanna has established the right to set the freezes aside and the further need to trace the relevant assets in aid of her equitable rights is established in the ultimate judgment…. Until the constructive trust is proved, disclosure for the purposes of tracing is inappropriate… Any tracing of profit, which is also claimed, is a post-trial activity as a means of effecting the remedies which the court may grant.” (paragraphs 27 and 28).
[27] The request for production of the other business records is denied.
[28] The plaintiffs submitted a draft order which I have amended in accordance with this endorsement. If the parties are unable to agree on costs, they may file costs submissions no more than three pages in length, along with a costs outline to me via my acting assistant trial co-ordinator at Jennifer.Mahase@ontario.ca.
Master Jolley
Date: 16 September 2020