COURT FILE NO.: 16635/86

DATE: 20200922

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: KARL HERMANNS, REGINA HERMANNS, FRANK HERMANNS, JORG HERMANNS, GERD HERMANNS by his Litigation Guardian, REGINA HERMANNS, HANNOVERIAN FARMS U.S. INC. and BARCREST FARMS OF AMERICA INC., Appellants/Plaintiffs

AND:

JOHN DWIGHT INGLE, NORTH CANADIAN INSCO GROUP LTD., and LANDO KRIEGER GOLDBERG INC. Trustee of the Estate of Barcrest Farms Inc., Respondents/Defendants

BEFORE: Paul B. Schabas J.

COUNSEL: Lorne Honickman, for the Appellants

John Ingle, in person

HEARD: August 28, 2020

Reasons for decision

[1] This is an appeal from a decision of Master Short dated November 8, 2019 denying the plaintiffs leave to examine non-parties in their efforts to trace funds and enforce a judgment obtained against the defendants over 20 years ago, in 1997. The plaintiffs also appeal the Master’s ruling that the defendants do not have to provide answers, or more complete answers, to questions that the Master previously ordered be answered on February 12, 2019. Essentially, the Master decided that too much time has passed, that the defendant John Ingle (“Ingle”) has done his best to answer questions put to him, he is elderly and unlikely to satisfy the judgment, and that enough is enough. Master Short’s decision may be found at Karl Hermanns v. John Dwight Ingle, 2019 ONSC 6468.

[2] In my view, the decision must be set aside. I conclude that the Master erred in law in invoking the doctrine of laches and in relying on the Limitations Act, 2002, S.O. 2002, c. 24, Sch. B., as a basis to refuse the examination of non-parties and bring the tracing efforts to an end. There is no limitation period on the enforcement of a judgment, and the plaintiffs should not have been prevented from pursuing appropriate steps to trace the proceeds of funds to which they were, and remain, entitled to pursue and recover. As to the responses by Ingle, I also conclude that the appeal should be allowed and that Ingle must comply with the Master’s February 12, 2019 Order.

Background

[3] The plaintiffs operated a horse farm, known as Wilkinson Farm, in the 1980s. In 1986, they made an assignment into bankruptcy. The defendant Ingle, through his corporate defendants, was appointed as receiver-manager of the bankrupt estate of the plaintiffs. Litigation ensued and, following a lengthy trial in 1996, on October 29, 1997 Justice Hawkins found, among other things, that Ingle acted for his own benefit to maximize fees he received throughout the bankruptcy proceeding and that he “displayed a total lack of comprehension of his duties as a receiver.” Hawkins J. ordered that the plaintiffs be credited with $1,051,788, and that an accounting of Ingle’s proceeds as a receiver of one of the plaintiff corporations, Barcrest Farms Inc., be referred to a Master: Hermanns v. Ingle, 1997 CarswellOnt 4299 (Ont. Gen. Div.)

[4] On December 4, 2002, Master Linton issued a Final Report (the “Linton Report”) regarding the accounting, in which he determined that Ingle and the corporate defendant, North Canadian Insco Group Ltd. (“Insco”), owed $7,970,869.81 to the plaintiffs. This accounting did not deal with a significant portion of the proceeds received by Ingle and companies he controlled, as Hawkins J. had solely ordered an accounting in relation to the disposition of one bankrupt entity, Barcrest Farms Inc.

[5] On April 2, 2002, the Court of Appeal upheld the judgment of Hawkins J., noting that Ingle had failed to account for profits he and Insco obtained upon the disposition of parts of the Wilkinson Farm in 1990 for $2,700,000, and in 1991 for $20,000: Hermanns v. Ingle, 2002 CarswellOnt 961 (Ont. C.A.). The Court of Appeal held that the plaintiffs were “entitled in equity to trace proceeds realized from the Wilkinson Farm through Ingle, Insco and the companies and individuals controlling such companies identified by the trial judge as being Ingle-related until such time as the property was sold to a bona fide third party purchaser.” The Court of Appeal also held that “Ingle and Insco should be required to account for and disgorge to the respondents any profits from the sale or other disposition of the Wilkinson Farm in which they have been involved in any way, and to reconvey to BFI [Barcrest Farms Inc.] any and all interest which Ingle and Insco, or either of them, may have in the Wilkinson Farm, directly or indirectly.” This broad order was made on the distinct issue of the defendants’ wrongdoing with respect to the Wilkinson Farm, and is separate from the findings and amounts addressed in the Linton Report.

[6] Ingle has been examined a number of times and has failed to account for the proceeds he received, including the proceeds of the Wilkinson Farm. Master Dash made an Order in March 2011 that Ingle answer a series of refusals and those were not answered. Following further refusals and having failed to provide an accounting, on February 12, 2019 Master Short ordered Ingle to provide “a documentary accounting and tracing of all funds received, on a best efforts basis.” That Order directed answers to specific questions, including questions relating to the disposition of the proceeds of the Wilkinson Farm for $2,720,000, the sale of several horses, and the receiver fees received by Ingle. Ingle’s answers, to the extent he answered at all, contained no new meaningful information and lacked any details as to expenses incurred or other uses of the funds. Ingle asserts that the documentary evidence relevant to complete an accounting is either lost or in the possession of the plaintiffs, and that he has done his best.

[7] The plaintiffs then brought a further motion to Master Short requiring further and better answers, and to obtain leave to examine certain relatives of Ingle, including beneficiaries of a trust that had owned the Wilkinson Farm, persons who operated a company that had owned the farm, and Ingle’s wife, pursuant to Rule 60.18(6) of the Rules of Civil Procedure. Master Short heard the motion on June 5, 2019, and released his decision dismissing the motion several months later, on November 8, 2019.

Issues

[8] This appeal raises the following issues:

a. whether the Master erred in refusing leave to examine non-parties due to the passage of time and his finding that the limitation period has passed with respect to any potential cause action against those non-parties; and

b. whether the Master erred in exercising his discretion based on incorrect principles in determining that only certain questions, and not others, should be answered, without providing any substantive reasons for making those determinations.

The Standard of Review

[9] A Master’s order will only be interfered with if the Master made an error of law or exercised his or her discretion on wrong principles or misapprehended the evidence such that there is a palpable and overriding error. Where a Master has erred in law, the standard of review is correctness. On a matter of fact, or mixed fact and law, or a matter within the discretion of the Master, the court will only interfere if the Master was clearly wrong or if he or she exercised discretion based on wrong principles or under a misapprehension of the facts such that there is a palpable and overriding error: Zeitoun v Economical Insurance Group, (2008), 2008 CanLII 20996 (ON SCDC), 91 O.R. (3d) 131 (Div. Ct.) at paras. 40-41, aff'd, (2009), 2009 ONCA 415, 96 O.R. (3d) 639 (C.A.).; Gomommy Software.com Inc. v Blackmont Capital Inc., 2014 ONSC 2478 [Gomommy] at paras 43 and 44

Analysis

[10] The Master relied on a court-produced case history report to conclude that the plaintiffs have not moved with “alacrity” in the matter over the course of two decades. However, a case history only records court filings, and does not provide information about other steps taken, including out of court examinations, communications with counsel, productions and other attempts to trace funds or obtain an accounting. The record discloses that the plaintiffs did take other steps that are not reflected in the Master’s summary at paragraphs 35-41 of his Reasons, which he titled “The Quiet Decades.” In my view it was unreasonable, on the basis of the court history, for the Master to have concluded that the plaintiffs had failed to take steps in the proceeding, and which led him to conclude that it was “hard to imagine a clearer case of Laches by the plaintiff.”

[11] The Master’s reliance on the doctrine of laches was also an error in law. Leaving aside whether the doctrine has any application to tracing funds in light of the existence of s. 16(1)(b) in the Limitations Act, 2002[^1] (see, on this issue, Intact Insurance Company of Canada v. Lombard General Insurance Company of Canada, 2015 ONCA 764 at paras. 39-56), mere delay is insufficient to trigger laches. As the Supreme Court stated in Manitoba Metis Federation Inc. v. Canada (Attorney General), 2013 SCC 14, [2013] 1 S.C.R. 623, at paras. 145-46:

The equitable doctrine of laches requires a claimant in equity to prosecute his claim without undue delay. It does not fix a specific limit, but considers the circumstances of each case. In determining whether there has been delay amounting to laches, the main considerations are (1) acquiescence on the claimant’s part; and (2) any change of position that has occurred on the defendant’s part that arose from reasonable reliance on the claimant’s acceptance of the status quo.

As La Forest J. put it in M.(K.), at pp. 76-77, citing Lindsay Petroleum Co. v. Hurd (1874), L.R. 5 P.C. 221, at pp. 239-40:

Two circumstances, always important in such cases, are, the length of the delay and the nature of the acts done during the interval, which might affect either party and cause a balance of justice or injustice in taking the one course or the other, so far as relates to the remedy.

[12] There must be a combination of delay and prejudice for laches to be invoked, and the Master only turned his mind to delay, and only appeared to rely on the case history.

[13] Although the Master cited s. 16(1)(b) of the Limitations Act, 2002, and recognized that “it may well be … that [Ingle] will continue to be liable for the amount found by the court in the last century,” he stated that a limitations defence would exist for the persons the plaintiffs now seek to examine which, he concluded, “would prevent any recovery at this stage,” and therefor it is “simply too late” to determine the propriety of any transfers that may have been made by Ingle to them. As the Master put it at para. 62 of his Reasons: “What is to be clearly stated is that, in my opinion, based on the law and the evidence before me and the history of this dispute, there is no basis upon which the plaintiffs could pursue Mr. Ingle’s family in any action commenced at this point in time.”

[14] In my view, this was not a valid basis to refuse the examination of the non-parties.

[15] First, as the Master observed, the plaintiffs seek to examine the non-parties under Rule 60.18(6). However, the purpose of an examination of a stranger to the litigation under Rule 60.18(6) is not limited to seeking evidence on which to pursue litigation against that person. This has been the law for many years, even pre-dating this very dated litigation: see Canadian Imperial Bank of Commerce v. Sutton, 1981 CarswellOnt 365 (Ont. C.A.) at para. 8. As Myers J. noted in the more recent decision of Zakhary v Age-less Dermal Therapy Inc., 2015 ONSC 5428, at para. 20, “Sutton has rendered obsolete the notion that the sole purpose of Rule 60.18(6) is to determine whether to sue a third-party.”

[16] That is not to say that the right to compel strangers to the litigation to be examined is unlimited. The Rule should not be used to “unduly harass” individuals and they “should not be ordered to be examined unless the judgment creditor has exhausted all means available before resorting to an application of this kind:” Sutton at para. 8.

[17] In this case, although the Master recognized the test of having exhausted all other means, he did not apply it, which is an error of law. Rather, at paras 59 – 62 of his Reasons, in an effort to distinguish this case from the decision of Myers J. in Zachary, he found that because the persons named were “not connected with” the defendants’ business they should not be examined. Leaving aside the fact that at least two of the people sought to be examined were connected to managing the Wilkinson Farm and two others were beneficiaries of a trust that owned it, this is not a valid basis to dismiss an application under Rule 60.18(6). As the Court of Appeal put it in Sutton, quoted with approval more recently in Royal Bank of Canada v. Trang, 2014 ONCA 883 at para. 78, the issue is that “the relatives of a judgment debtor or a stranger should not be ordered to be examined unless the judgment creditor has exhausted all means available before resorting to an application of this kind.” The Master erred in law in failing to apply this test for examination of persons under Rule 60.18(6). After years of getting insufficient information from Ingle, and recent answers that demonstrate further questioning of Ingle, at least at this stage, is unlikely to reveal new facts, this appears to be precisely the type of case in which such examinations should be permitted, and there are grounds to examine each of the non-parties.

[18] I also find that the Master erred in law in concluding that the Limitations Act, 2002 would bar any claim against the non-parties. That issue was not before Master Short. Further, as was the case in i Trade Finance Holdings Inc. v. Ramsackal, 2009 CarswellOnt 994, the discovery provisions of the Limitations Act, 2002 may apply and it was an error for the Master to have summarily concluded that any claims are barred.

[19] As to requiring Ingle to provide further and better answers, or answers at all, to the questions ordered answered in the Master’s first Order of February 12, 2019, it appears that the Master’s change of heart in the Order under appeal was due to his view that “[t]he time to draw the curtain on this case is fast approaching,” and that, in his view, Ingle’s “efforts to provide the information sought from him are well above that exhibited by many judgment debtors.”

[20] The Master has in fact directed Ingle to provide answers, or further and better answers, to a number of questions he has refused or failed to answer adequately, and to attend for a further examination in aid of execution to provide those answers and to answer any “proper follow-up questions.” However, he has not explained why some questions should be answered and not others – many of which would appear to be within Ingle’s knowledge.

[21] In my view, the Master’s failure to give reasons why some questions he determined to be relevant and proper earlier in 2019 should still be answered, but not others, prevents meaningful appellate review: Barbieri v. Mastronardi, 2014 ONCA 416 at para. 22. The Master does not explain why it is too long ago in December 2019 to insist on answers, but was not too long ago in February 2019 when he had ordered all the questions to be answered. While I recognize that the Master has discretion in making an order for further answers, which involves questions of fact and law, and therefore is ordinarily entitled to deference, on this issue his decision is unexplained and unreasonable and must be set aside.

Conclusion

[22] I conclude that the appeal must be allowed. Ingle shall provide further and better answers as set out in paragraphs 3 and 4 of the Notice of Appeal, and Ingle is to re-attend for further examination as set out in paragraph 8 of the Notice of Appeal. The Rule 68.18(6)(a) examinations requested by the plaintiffs in paragraphs 5, 6 and 7 of the Notice of Appeal are permitted. Although, like the Master, I am concerned about the passage of time as the action dates back over more than thirty years, the plaintiffs are entitled to continue to pursue the debtors and to exhaust all avenues in order to obtain satisfaction on their judgment.

[23] Should the parties be unable to agree on costs, the plaintiffs may provide me with written submissions not exceeding 2 pages double-spaced, not including supporting materials, within 21 days of the release of these Reasons, and the defendants may respond in similarly limited submissions 14 days after the receipt of the plaintiffs’ submissions.

Paul B. Schabas, J.

Date: September 22, 2020

[^1]: Section s. 16(1)(b) provides that “[t]here is no limitation period in respect of …(b) a proceeding to enforce an order of a court, or any other order that may be enforced in the same way as an order of a court.”