COURT FILE NO.: CV-15-4343-00
DATE: 20201002
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: TRADERS GENERAL INSURANCE COMPANY
Plaintiff / Moving Party
AND:
LOUAY KAYES, MOHAMMED KAYES, HASSAN NAZIR KAISS, KHADYJAH KAISS, ALI KAISS, ALIYYAH KAISS, NOUR KAISS SHAHID, JOHN DOE, JOHN DOE NO. 2, AND ABC CORPORATION
Defendants / Responding Parties
BEFORE: Justice James Stribopoulos
COUNSEL: Mr. C. Lui and Mr. R. Tinney, on behalf of the Plaintiff
Mr. L. Kayes, on his own behalf
Mr. M. Kayes, on his own behalf
Mr. H.N. Kaiss, on his own behalf
HEARD: August 26, 2020, via Zoom videoconference
ENDORSEMENT
Introduction
[1] In this action, Traders General Insurance Company claims against the defendants for fraud and conspiracy. It alleges they were all participants in a scheme to defraud the insurer. Traders seeks damages to recoup what it lost because of the fraudulent scheme. It also claims for punitive damages.
[2] Traders moves for summary judgment against all of the defendants. However, during the hearing, given concerns that they did not have proper notice, Traders abandoned the motion against Khadyjah Kaiss, Ali Kaiss, Aliyyah Kaiss, and Nour Kaiss Shahid. As a result, the motion for summary judgment proceeded only against Louay Kayes, Mohammed Kayes and Hassan Nazir Kaiss.
[3] The defendants jointly filed a bare-bones statement of defence in which they denied the various claims levelled against them by Traders. Despite this, the defendants failed to file any responding materials on the motion.[^1] In support of its motion, however, Traders filed an affidavit sworn by Mohammed Kayes. In that affidavit, Mohammed Kayes denies any wrongdoing but implicates his father (Louay Kayes) and his uncle (Hassan Nazir Kaiss) as participants in the fraudulent scheme.
[4] Therefore, the evidence on the motion involving the claims against Louay Kayes and Hassan Nazir Kaiss stands uncontradicted. That evidence establishes their joint involvement in a scheme to defraud Traders. It also details the costs the insurer incurred because of the fraud.
[5] During the hearing of the motion, Louay Kayes and Hassan Nazir Kaiss, who are now both self-represented, acknowledged the fraud and their role in it. The thrust of their submissions related to the punitive damage claim. They insisted they were only small players in the fraudulent scheme, that others who were not parties to this action were more responsible, and that they had already paid a great deal for their "mistake." They asked the court to take all of that into account and exercise restraint in deciding whether to impose punitive damages against them.
[6] A brief description of the fraudulent scheme and the costs it has occasioned for Traders is necessary to explain the court's decision on the motion
The Fraudulent Scheme, Its Discovery, and What it Has Cost Traders
[7] On December 9, 2009, Mohammed Kayes was only 17 years old and did not have a driver's license. Late that afternoon, along with some friends, he took his mother's car without her permission. The vehicle was owned by his father and insured by Traders. A short time later, Mohammad Kayes was involved in a motor vehicle collision with another driver.
[8] After the accident, Mohammed Kayes telephoned his father (Louay Kayes) to tell him what had happened. Louay Kayes immediately attended at the accident scene, along with his brother, Hassan Nazir Kaiss. They arrived before the police attended.
[9] At the scene of the accident, a tow truck driver told Louay Kayes, Hassan Nazir Kaiss and the other driver involved in the collision that Mohammed Kayes would be in a lot of trouble because he did not have a licence. The tow truck driver counselled them to tell police that Louay Kayes had been driving the vehicle. At that point, Louay Kayes instructed his son, who was not privy to the conversation with the tow truck driver, to go home.
[10] When the police finally attended, Louay Kayes falsely reported that he had been driving the vehicle during the accident. Unfortunately, when speaking with the police, the other driver said nothing to correct the lie told by Louay Kayes. As a result, the Motor Vehicle Accident Report prepared by police incorrectly recorded that Louay Kayes had been driving the vehicle during the collision.
[11] Shortly after the accident, Louay Kayes began submitting claims to Traders, including for Accident Benefits for treatments due to "injuries" he said he sustained in the accident. In doing so, Louay Kayes falsely reported to Traders that he was driving the vehicle during the accident.
[12] Between December 2009 and December 2010, on behalf of Louay Kayes, two clinics (Metro Rehabilitation Centre and Assessment Direct Inc.) submitted various Treatment Plans and Requests for Assessment. Louay Kayes also submitted claims to Traders for housekeeping, home maintenance, caregiving, attendant care, and medical and prescription expenses.
[13] Ultimately, based on the various claims submitted by Louay Kayes, Traders paid out the following sums in connection with the accident:
$21,730.29 for invoices submitted by Metro Rehabilitation Centre;
$21,406.87 for invoices submitted by Assessment Direct Inc;
$38,689.76 to Louay Kayes for housekeeping, home maintenance, attendant care, medical expenses and prescription expenses;
$19,000.00 to Louay Kayes as a final settlement for his Accident Benefits Claims;
$8,278.19 to Louay Kayes for property damage to the insured vehicle.
[14] Therefore, Traders paid out $100,823.92 on account of the fraudulent Accident Benefits claims submitted by Louay Kayes, and it also paid him $8,278.19 for property damage to the insured vehicle.
[15] On November 25, 2011, Hassan Nazir Kaiss and his children (Khadyjah Kaiss, Ali Kaiss and Nour Kaiss Shahid) commenced a tort action against Louay Kayes. In that action, he sought $1 million in damages for injuries he falsely claimed to have suffered as a passenger in his brother's vehicle at the time of the accident. His children also claimed for damages under the Family Law Act, R.S.O. 1990, c. F.3, s. 61.
[16] To fulfill its obligation to Louay Kayes under its insurance contract with him, Traders retained a law firm to represent him against his brother's tort action. When Traders interviewed him, as part of its preparation to defend against that action, Louay Kayes maintained, falsely, that he was driving the vehicle during the accident and that his brother was seated in the front passenger seat. Louay Kayes repeated this false account, under oath, at his examination for discovery in the tort action.
[17] The tort action was scheduled for trial in November 2015. In the summer of 2014, claims investigators with Traders interviewed the other driver involved in the collision. During that interview, the other driver finally revealed the truth about the accident and the events in its immediate aftermath.
[18] On October 7, 2014, Traders wrote to Louay Kayes to advise that the insurer would not provide him with coverage. Further, the insurer informed him that the law firm it had retained to represent him in the tort action would no longer be acting for him. And, finally, Traders advised him that it was planning on commencing an action against him.
[19] On November 13, 2014, Lemon J. granted an order removing as solicitors of record the law firm retained by Traders to represent Louay Kayes in the tort action and adding Traders as a statutory third party to the tort action.
[20] On November 25, 2015, Traders served its Third Party Statement of Defence in the tort action. The insurer acknowledged an accident had taken place but pleaded that, at the time, Louay Kayes was not the driver, and Hassan Nazir Kaiss was not a passenger.
[21] In response, Hassan Nazir Kaiss attempted to discontinue the tort action. However, Traders would not agree to do so without an order for costs. Eventually, on January 5, 2015, the parties agreed to discontinue the tort action and adjudicate the issue of costs by way of a motion.
[22] On August 13, 2015, the date scheduled for the costs' motion, Louay Kayes and Hassan Nazir Kais consented to an order requiring them to pay, on a joint and several basis, the all-inclusive sum of $80,000.00 to Traders. That amount was for Traders' costs defending against the fraudulent tort action and for bringing the costs' motion. The order made clear that Traders was entitled to pursue claims against Louay Kayes and Hassan Nazir Kaiss for any other losses incurred by way of a separate action.
[23] The evidence on this motion also establishes that Traders spent $17,286.06 to investigate the fraudulent scheme, which was not part of the costs' order.
[24] To date, not including the $80,000.00 it spent on account of the fraudulent tort action, which is the subject of the costs’ order, the fraudulent scheme has cost Traders $118,109.98. That amount includes what Traders paid out due to Louay Kayes' fraudulent Accident Benefits claims and the insurer's costs to investigate the fraud.
Mohammed Kayes' Affidavit
[25] In May 2017, Mohammed Kayes, who, by then, was represented by his own lawyer, provided Traders with an affidavit. As mentioned, Traders filed Mohammed Kayes' affidavit on this motion.
[26] In his affidavit, Mohammed Kayes acknowledges that on December 9, 2009, along with some friends, he took his mother's vehicle without her permission. At the time, as an unlicenced and inexperienced driver, he admits being responsible for the collision that day. After the accident, he called his father to tell him what had happened. His father and uncle then came to the scene, and his father told him to go home and "that they would deal with the matter."
[27] Mohammed Kayes deposes that when his father eventually returned home that evening, he told him that everything "had been taken care of." According to Mohammed Kayes, his parents punished him for his actions, including by grounding him for a month, prohibiting him from playing video games or seeing friends, and requiring that he maintain a strict curfew.
[28] In his affidavit, Mohammed Kayes denies any involvement in the fraudulent scheme. He deposes that he only learnt about it in September or October 2015, when his father and uncle met with him and told him not to answer any questions if anyone approached him. Puzzled by this strange request, he pressed his father and uncle to explain, resulting in them finally telling him about the fraudulent claims they had advanced in the aftermath of the 2009 car accident.
[29] In his affidavit, Mohammed Kayes also explained the circumstances by which he came to sign a Will Say statement, in September 2014, which his uncle relied upon in the tort action.
[30] On September 3, 2014, Mohammed Kayes was at work at his uncle's restaurant when his uncle approached him and said he had to come with him to his lawyer's office to provide a statement. When he asked what the statement was for, his uncle told him it was regarding "a motor vehicle accident he had recently been involved in."
[31] Mohammed Kayes reports that his uncle's lawyer prepared the Will Say statement. At the lawyer's office, he read it. It described the restaurant, the work he did there, the number of employees and their responsibilities, and his uncle's role at the restaurant. In the Will Say statement, Mohammed Kayes reported that his uncle did not do heaving lifting at the restaurant and sometimes is unwell and unable to work due to pain.
[32] In his affidavit, Mohammed Kayes deposes that he signed the Will Say statement because "it was a full and honest account of my duties and observations at work."
[33] Given that Mohammed Kayes' affidavit furnishes the most compelling evidence available to substantiate Traders' claims of fraud and conspiracy against Louay Kayes and Hassan Nazir Kaiss, Traders, not surprisingly, filed it as part of its materials on the motion. However, Traders never cross-examined Mohammed Kayes on his affidavit.
Is Summary Judgment Appropriate?
[34] Rule 20.04(a) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 empowers the court to grant summary judgment if "satisfied that there is no genuine issue requiring a trial with respect to a claim or defence." In deciding whether there is a genuine issue requiring a trial, Rule 20.04(2.1) empowers the court to exercise fact-finding powers. The court may utilize these, "unless it is in the interest of justice for such powers to be exercised only at a trial": Rule 20.04(2.1).
[35] In Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, the Supreme Court of Canada clarified these rules and provided essential guidance on their operation. The Court interpreted both Rules 20.04(2)(a) and 20.04(2.1), explained their interrelationship, and gave direction regarding the proper approach to be employed by judges hearing summary judgment motions. In her reasons for the Court, Karakastanis J. set out the following helpful summary, writing, at para. 66:
On a motion for summary judgment under Rule 20.04, the judge should first determine if there is a genuine issue requiring trial based only on the evidence before her, without using the new fact-finding powers. There will be no genuine issue requiring a trial if the summary judgment process provides her with the evidence required to fairly and justly adjudicate the dispute and is a timely, affordable and proportionate procedure, under Rule 20.04(2)(a). If there appears to be a genuine issue requiring a trial, she should then determine if the need for a trial can be avoided by using the new powers under Rules 20.04(2.1) and (2.2). She may, at her discretion, use those powers, provided that their use is not against the interest of justice. Their use will not be against the interest of justice if they will lead to a fair and just result and will serve the goals of timeliness, affordability and proportionality in light of the litigation as a whole.
See also Bruno Appliance and Furniture, Inc. v. Hryniak, 2014 SCC 8, [2014] 1 S.C.R. 126, at para. 22.
[36] In Hryniak, the Supreme Court explained that there would be no genuine issue for trial when the summary judgment process "(1) allows the judge to make the necessary findings of fact, (2) allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result.": Hryniak, at para. 49.
[37] Even with the benefit of the fact-finding powers conferred by Rule 20.04(2.1), summary judgment is only appropriate if the motion record "gives the judge confidence that she can find the necessary facts and apply the relevant legal principles so as to resolve the dispute": Hryniak, at para. 50.
[38] On a motion for summary judgment, the focus is on both the pleadings and the evidence. That is because "[a] motion for summary judgment must be judged on the basis of the pleadings and materials actually before the judge, not on suppositions about what might be pleaded or proved in the future": Canada (Attorney General) v. Lameman, 2008 SCC 14, [2008] 1 S.C.R. 372, at para. 19; see also Deavitt v. Greenly, et al., 2017 ONSC 5674 (Div. Ct.), at para. 38.
[39] It follows that on a motion for summary judgment, the parties are expected to marshal the evidence capable of supporting their respective pleadings. The court is "entitled to assume that the record on a motion for summary judgment contains all the evidence the parties would present at trial": Sweda Farms Ltd. v. Egg Farmers of Ontario, 2014 ONSC 1200, at para. 27, affirmed 2014 ONCA 878; see also Da Silva v. Gomes, 2018 ONCA 610, at para. 18. In other words, each side must "put its best foot forward": 2212886 Ontario Inc. v. Obsidian Group Inc., 2018 ONCA 670, at para. 49.
[40] Turning to the pleadings and the evidence on this motion, it is apparent that this is an appropriate case for summary judgment against both Louay Kayes and Hassan Nazir Kaiss. The uncontradicted evidence demonstrates that, together, they participated in a scheme to defraud Traders. There are no triable issues concerning Traders' claims against both men for fraud (Bruno Appliances, at para. 21) and unlawful conduct conspiracy (Hunt v. Carey Canada Inc., [1990] 2 S.C.R. 959 at pp. 984–986). Further, the damages occasioned by the fraud and conspiracy are readily quantifiable.
[41] As a result, the court grants the motion for summary judgment concerning the claims against Louay Kayes and Hassan Nazir Kaiss. Traders is entitled to judgment for the amounts it paid on account of the fraudulent Accident Benefits claims, as well as its costs to investigate the fraudulent scheme - which total $118,109.98.
[42] Additionally, had he not lied to Traders about the accident, Louay Kayes, as the insured, would have been entitled to recover the cost of the damage to the insured vehicle from Traders. However, his lies to the insurer vitiate any entitlement he otherwise would have had under the insurance contract: see Insurance Act, R.S.O. 1990, c. I.8, s. 233(1). It follows that Louay Kayes was not entitled to receive the $8,278.19 that Traders paid him to repair the insured vehicle. Therefore, Traders is also entitled to judgment in its favour against Louay Kayes for that amount.
[43] In contrast, there are triable issues involving the claims of fraud and conspiracy against Mohammed Kayes. On the motion, Traders argued the court should employ its fact-finding powers to conclude that Mohammed Kayes was a participant in the fraudulent scheme involving his father and uncle. In that regard, Traders emphasizes that Louay Kayes and Hassan Nazir Kaiss are, respectively, Mohammed Kayes' father and uncle. Beyond their familial relationship, Traders also points to Mohammed Kayes' role in signing the Will Say statement that was later used by his uncle in his fraudulent tort action. Together, Traders argues these facts support a finding that Mohammed Kayes was a participant in the fraudulent scheme.
[44] In my view, the evidence on the motion falls far short of supporting a reasonable finding that Mohammed Kayes was a participant in the fraudulent scheme. To be sure, the evidence furnishes a basis for Traders to suspect Mohammed Kayes' potential involvement. However, Mohammed Kayes relationship with his father and uncle, and his signing of the Will Say statement, are not enough to sustain a reasonable inference of his involvement. There is a wide gap between the available evidence and a reasoned conclusion that Mohammed Kayes was in on the fraud.
[45] Traders' position also entirely ignores Mohammed Kayes' affidavit. In it, Mohammed Kayes denies any involvement in the fraudulent scheme, or any knowledge of it while it was underway. He also provides an entirely innocent and reasonable account of how he came to sign the Will Say statement later used by his uncle in the tort action. Importantly, Traders never cross-examined Mohammed Kayes on his affidavit. His evidence effectively went unchallenged. Accordingly, there is no basis for the court to reject the credibility of Mohammed Kayes' entirely innocent account of the relevant events.
[46] It follows that the court must dismiss Traders' motion for summary judgment against Mohammed Kayes.
Are Punitive Damages Appropriate?
[47] Compensatory damage awards serve to compensate a plaintiff for pecuniary and non-pecuniary losses suffered due to a defendant's conduct. In contrast, punitive damages serve a very different purpose; their objectives are retribution, deterrence and denunciation: see Fidler v. Sun Life Assurance Co. of Canada, 2006 SCC 30, [2006] 2 SCR 3, at para. 61; Whiten v. Pilot Insurance Co., 2002 SCC 18, at para. 43. Punitive damages are awarded in exceptional circumstances for "’malicious, oppressive and high-handed’ misconduct that ‘offends the court's sense of decency’”: Performance Industries Ltd. v. Sylvan Lake Golf & Tennis Club Ltd., 2002 SCC 19, [2002] 1 S.C.R. 678, at para. 79.
[48] The leading authority on the imposition of punitive damages remains the Supreme Court of Canada's decision in Whiten. In that decision, writing for the Court, Binnie J. provided a concise summary of the principles that should control when deciding whether to award punitive damages: see Whiten, at paras. 66-76.
[49] To be sure, some of the Whiten principles counsel towards awarding punitive damages in this case.
[50] First, Louay Kayes and Hassan Nazir Kaiss were involved in a calculated and prolonged scheme to defraud Traders. Their behaviour was deliberate and reprehensible. Insurance fraud costs the insurance industry, and by implication, all Canadians, through the increased insurance premiums we all pay because of it, billions of dollars each year. Unquestionably, courts must denounce and deter such behaviour, and hold those who engage in such fraud to account for their misconduct.
[51] Second, despite their fraudulent behaviour, somewhat inexplicably, Louay Kayes and Hassan Nazir Kaiss have never been charged with any crime. As a result, criminal prosecution and punishment have not already served the objectives of denunciation, deterrence and retribution in this case.
[52] That said, other considerations in this case also point away from making an award of punitive damages.
[53] First, it is readily apparent that Louay Kayes and Hassan Nazir Kaiss were not the architects of this fraud. To be sure, they played an instrumental role in it. Absent their opportunistic greed, the fraud, in this case, would not have occurred. Nevertheless, from the record, it is also apparent that others benefitted from the scheme and are likely more culpable for orchestrating it. For example, two different service providers billed Traders $21,730.29, and $21,406.87, respectively. Traders paid these sums directly to the service providers. There is no evidence that either Louay Kayes or Hassan Nazir Kaiss received any portion of these payments. One can only guess as to what possible services these companies could have been billing Traders for, given that Louay Kayes was not present in the vehicle during the accident and, therefore, could not possibly have been injured because of it.
[54] Second, the court's judgment requires Louay Kayes and Hassan Nazir Kaiss to make Traders whole for what it lost because of the fraud. That includes sums well above any financial benefit they derived from the scheme, including amounts paid to the two service providers ($43,137.16) by Traders, the insurer's costs to investigate the fraud ($17,286.06), and the costs for the discontinued tort action ($80,000). In short, Louay Kayes and Hassan Nazir Kaiss will pay a hefty premium for their fraudulent actions, well beyond any financial benefit they obtained.
[55] Mindful of all of the circumstances, I do not believe that an award of punitive damages is necessary to serve the objectives of denunciation, deterrence or retribution in this case. In short, the costs’ order from the tort action, along with the compensatory damages the court is ordering on this motion, will more than adequately serve to punish Louay Kayes and Hassan Nazir Kaiss for their misconduct.
Conclusion
[56] The court dismisses the motions for summary judgment against Mohammed Kayes.
[57] The court grants judgment in favour of the plaintiff against both Louay Kayes and Hassan Nazir Kaiss, on a joint and several basis, for $118,109.98 plus pre-judgment interest from September 22, 2015, at a rate of two percent per annum. The plaintiff is also entitled to post-judgment interest at the same rate.
[58] The court grants judgment in favour of the plaintiff against Louay Kayes, for $8,278.19 plus pre-judgment interest from September 22, 2015, at a rate of two percent per annum. The plaintiff is also entitled to post-judgment interest at the same rate.
[59] Traders is entitled to costs for this action and the summary judgment motion against Louay Kayes and Hassan Nazir Kaiss. It may file written costs’ submissions, no longer than three double-spaced pages, not including a Bill of Costs, by no later than October 30, 2020.
[60] Mohammed Kayes is also entitled to costs on the motion against Traders. He may file written costs’ submissions, no longer than three double-spaced pages, by no later than October 30, 2020.
[61] Any responding written submissions, by Louay Kayes, Hassan Nazir Kaiss, or Traders, shall not exceed two double-spaced pages and be filed by no later than November 13, 2020.
[62] None of the parties shall file reply submissions unless requested by the court.
Signed: Justice J. Stribopoulos
Released: October 2, 2020
[^1]: Initially, the motion was to be heard on October 24, 2018, before Justice Bloom. The hearing did not proceed that day. Justice Bloom ordered that the defendants pay the plaintiffs $8,400.00 within 30 days of that date for costs throwing away. Failing which, Justice Bloom also ordered that the defendants, except Mohammed Kayes, would not be entitled to file materials in response to the motion. If they paid the costs order, Justice Bloom set a deadline for the defendants to file responding materials. The defendants have not paid the outstanding costs order. Accordingly, they have not filed responding materials on the motion.